Exhibit 10.1


                       INDENTURE OF TRUST UNDER QMED, INC.
                       2003 OUTSIDE DIRECTORS EQUITY PLAN


         (a) This Agreement made this 8th day of August, 2003 by and between
QMed, Inc., a Delaware corporation (the "Company") and American Stock Transfer &
Trust Company, of 59 Maiden Lane, Plaza Level New York, NY 10038 (the
"Trustee");

         (b) WHEREAS, on May 12, 2003, the Company's stockholders approved the
QMed, Inc. 2003 Outside Directors Equity Plan (the "Plan") annexed hereto as
Appendix A;

         (c) WHEREAS, the Company has incurred or expects to incur liability
under the Plan with respect to the individuals set forth in Appendix B, as may
be amended from time to time ("Participants") who are designated to be
participants under the Plan;

         (d) WHEREAS, the Company wishes to establish a trust (the "Trust") and
to contribute to the Trust assets that shall be held therein, subject to the
claims of the Company's creditors in the event of the Company's Insolvency, as
herein defined, until paid to the participants and their beneficiaries in such
manner and at such times as specified in the Plan;

         (e) WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as unfunded arrangements maintained for the purpose of providing deferred
compensation for a select group of outside directors for purposes of Title I of
the Employee Retirement Income Security Act of 1974;

         (f) WHEREAS, it is the intention of the Company to make contributions
to the Trust in the form of shares of the Company's common stock under the Plan;

         NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:

                        Section 1. Establishment of Trust

         (a) The Company hereby deposits with Trustee in trust $10.00 which,
together with additional amounts and securities hereafter deposited by the
Company with Trustee pursuant to the Plan, shall become the principal of the
Trust to be held, administered and disposed of by Trustee as provided in this
Trust Agreement.

         (b) The Trust hereby established shall be irrevocable.

         (c) The Trust is intended to be a grantor trust of which Company is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended and shall be
construed accordingly.

         (d) The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of participants and general creditors of the Company
as herein set forth. Participants and their beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plan and this Trust instrument shall be mere
unsecured contractual rights of Plan participants and their beneficiaries
against the Company. Any assets held by the Trust will be subject to the claims
of the Company's general creditors under federal and state law in the event of
Insolvency, as defined in Section 3(a) herein.

         (e) The Company, in its sole discretion, may at any time, or from time
to time, make additional deposits of cash or other property in trust with
Trustee to augment the principal to be held, administered and disposed of by
Trustee as provided in this Trust instrument. Neither Trustee nor any
participant or beneficiary shall have any right to compel such additional
deposits.

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                             Section 2. Payments to
                      Participants and Their Beneficiaries

         (a) The Company shall deliver to Trustee from time to time all
necessary instructions as to the amounts payable to or in respect of each
participant (and his beneficiaries) in form and substance acceptable to Trustee
for determining the amounts to payable, the form in which such amount is to be
paid (as provided in the Plan), and the time of payment of such amounts. Trustee
may conclusively rely on such instructions, including without limitation the
designation of the beneficiaries entitled to receive distributions in the event
of the death of a participant. Except as otherwise provided herein, Trustee
shall make payments to the participants and their beneficiaries in accordance
with such instructions. The Trustee shall make provision for the reporting and
withholding of any federal, state, or local taxes that may be required to be
withheld wit respect to the payment of benefits pursuant to the terms of the
Plan and shall pay amounts withheld to the appropriate taxing authorities unless
Trustee determines that such amounts have been reported, withheld, and paid by
the Company.

         (b) The entitlement of a participant or his or her beneficiaries to
benefits under the Plan shall be determined by the Company or such party as the
Company shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.

         (c) The Company may make payment of benefits directly to Plan
participants or their beneficiaries as they become due under the terms of the
Plan. The Company shall notify Trustee of its decision to make payment of
benefits directly prior to the time amounts are payable by Trustee to
participants or their beneficiaries. In addition, if the principal of the Trust,
and any earnings thereon, are not sufficient to make payments of benefits in
accordance with any instructions issued to Trustee by Company, Trustee shall
notify the Company that principal and earnings are not sufficient.


          Section 3. Trustee Responsibility Regarding Payments to Trust
                     Beneficiary When Company is Insolvent.

         (a) Trustee shall make no payment to participants or their
beneficiaries at a time when the Company is Insolvent. The Company shall be
considered "Insolvent" for purposes of this Trust Agreement if (i) the Company
is unable to pay its debts as they become due, or (ii) Company is subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.

         (b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.

         1. The Chief Executive Officer of the Company shall have the duty to
inform Trustee in writing of the Company's Insolvency. If a person claiming to
be a creditor of the Company alleges in writing to Trustee that the Company has
become Insolvent, Trustee shall determine whether Company is Insolvent and,
pending such determination, Trustee shall discontinue payment of benefits to
participants or their beneficiaries.

         2. Unless Trustee has actual knowledge of the Company's Insolvency, or
has received notice from the Company or a person claiming to be a creditor
alleging that the Company is Insolvent, Trustee shall have no duty to inquire
whether Company is Insolvent. Trustee may in all events rely on such evidence
concerning Company's solvency as may be furnished to Trustee and that provides
Trustee with a reasonable basis for making a determination concerning the
Company's solvency.

         3. If at any time Trustee has determined that the Company is Insolvent,
Trustee shall make no payments to participants or their beneficiaries and shall
hold the assets of the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any rights of
participants or their beneficiaries to pursue their rights as general creditors
of the Company with respect to benefits due under the Plan or otherwise.

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<PAGE>

         4. Trustee shall make payment so participants or their beneficiaries in
accordance with Section 2 of this Trust Agreement only after Trustee has
determined that Company is no longer Insolvent.


                       Section 4. Payments to the Company.

         Except as provided in Section 3 hereof, after the Trust has become
irrevocable, the Company shall have no right or power to direct Trustee to
return to the Company or to divert to others any of the Trust assets before all
payments have been made to participants and their beneficiaries pursuant to the
terms of the Plan.


                        Section 5. Investment Authority.

         (a) In addition to the powers conferred by Section 8(d) hereof, Trustee
is authorized and empowered to invest in securities (including stock or rights
to acquire stock) or obligations issued by the Company and shall do so if
directed by the Company, without regard to principles of diversification or
other legal principles that might otherwise apply to investments by trustees.
All rights associated with assets of the Trust shall be exercised by Trustee or
the person designated by Trustee and shall in no event be exercisable by or rest
with participants. The Trustee also shall have the power to invest in
interest-bearing bank accounts, daily-interest funds or accounts, checking
accounts, or in obligations of the United States or bank certificates of deposit
maturing within six (6) months of the date of the investment. Notwithstanding
the foregoing, the Trustee shall invest all or any portion of the trust property
as directed in writing by the Company, and Trustee shall have no responsibility
or liability for any loss ever sustained with respect to any investment so
directed.

         (b) Trustee shall exercise all voting rights with respect to any and
all capital stock issued by the Company and held in this Trust in the manner
directed in writing by the Company from time to time.

         (c) The Company shall have the right at any time and from time to time
in its sole discretion to substitute assets of equal fair market value of any
asset held by the Trust. This right is exercisable by the Company in a
non-fiduciary capacity without the approval or consent of any person in a
fiduciary capacity.


                        Section 6. Disposition of Income

         During the term of this Trust, all income received by the trust, net of
expenses and taxes, shall be accumulated and reinvested.

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<PAGE>

                        Section 7. Accounting by Trustee.

         Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and Trustee. Trustee shall keep a separate account for each participant.
Within 30 days following the close of each calendar year and within 30 days
after the removal or resignation of Trustee, Trustee shall deliver to the
Company a written account of its administration of the Trust during such year or
during the period from the close of the last preceding year to the date of such
removal or resignation, setting forth all investments, receipts, disbursements
and other transactions effected by it, including a descriptions of all
securities and investments purchased and sold with the cost or net proceeds of
such purchases or sales (accrued interest paid or receivable being shown
separately), and showing all cash, securities and other property held in the
trust at the end of such year or as of the date of such removal or resignation,
as the case may be.


                      Section 8. Responsibility of Trustee.

         (a) Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company which is contemplated by,
and in conformity with, the terms of the Plan or this Trust and is given in
writing by the Company. In the event of a dispute between the Company and a
party, Trustee may apply to a court of competent jurisdiction to resolve the
dispute.

         (b) Trustee shall have no responsibility to undertake or defend any
litigation arising in connection with this Trust unless and until indemnified to
Trustee's satisfaction by the Company or otherwise.

         (c) Trustee may consult with legal counsel (who may also be counsel for
the Company generally) with respect to any of its duties or obligations
hereunder.

         (d) Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein.

         (e) Notwithstanding any powers granted to Trustee pursuant tot his
Trust Agreement or to applicable law, Trustee shall not have nay power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.


                Section 9. Compensation and Expenses of Trustee.

         All Trustee's fees and other administrative expenses shall be paid by
the Company. The Trustee's fees shall be $200 per month. In addition, the
Company will indemnify and hold the Trustee harmless for all cost and liability
it incurs as Trustee hereunder, except for willful misconduct or gross
negligence.


                 Section 10. Resignation and Removal of Trustee

         (a) Trustee may resign at any time by written notice to the Company,
which shall be effective 10 days after receipt of such notice unless the Company
and Trustee agree otherwise.

         (b) Trustee may be removed by the Company on 10 days notice or upon
shorter notice accepted by Trustee.

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<PAGE>

         (c) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be completed within 10 days after receipt of notice
of resignation, removal or transfer, unless the Company extends the time limit.

         (d) If Trustee resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date of resignation or
removal under paragraph(s) (a) or (b) of this section. If no such appointment
has been made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.


                      Section 11. Appointment of Successor.

         If Trustee resigns or is removed in accordance with Section 10(a) or
(b) hereof, the Company may appoint any third party, such as a bank trust
department or other party that may be granted corporate trustee powers under
state law, as a successor to replace Trustee upon resignation or removal. The
appointment shall be effective when accepted in writing by the new Trustee, who
shall have all of the rights and powers of the former Trustee, including
ownership rights in the Trust assets. The former Trustee shall execute any
instrument necessary or reasonably requested by the Company or the successor
Trustee to evidence the transfer.


                      Section 12. Amendment or Termination.

         (a) This Trust Agreement may be amended by a written instrument
executed by Trustee and the Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan or shall make the Trust
revocable after it has become irrevocable in accordance with Section 1(b)
hereof.

         (b) The Trust shall not terminate until the date on which participants
and their beneficiaries are no longer entitled to benefits pursuant to the terms
of the Plan.

         (c) Upon written approval of participants or beneficiaries entitled to
payment of benefits pursuant to the terms of the Plan, the Company may terminate
this Trust prior to the time all payments to participants and their
beneficiaries under the Plan have been made. All assets in the trust upon such
termination shall be distributed to the Company.


                            Section 13. Miscellaneous

         (a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.

         (b) Benefits payable to participants and their beneficiaries under this
Trust Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy
execution or other legal or equitable process.

         (c) This Trust Agreement shall be governed by and construed in
accordance with the laws of New York.

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<PAGE>

                           Section 14. Effective Date

         The effective date of this Trust Agreement shall be August 11, 2003.


                                QMED, INC.



                                By: /s/ Michael W. Cox
                                   --------------------------------------
                                    Michael W. Cox, President


                                AMERICAN STOCK TRANSFER & TRUST COMPANY, Trustee



                                By: /s/ Herbert J. Lemmes
                                   --------------------------------------
                                Name: Herbert J. Lemmes
                                Title:Vice President

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<PAGE>

                                                                      Appendix A


                                   QMED, INC.
                       2003 OUTSIDE DIRECTORS EQUITY PLAN


1.       PURPOSE

         The loyal and dedicated service of "outside" directors is essential to
the growth and progress of any public company. Accordingly, the Outside
Directors Equity Plan (the "Plan") of QMed, Inc. (the "Company") has been
adopted to better enable the Company to retain and attract qualified outside
directors to serve on the Company's Board of Directors, while reducing the
Company's cash outlay of director's fees. The Plan is also designed to provide a
stronger nexus between the contributions made to the Company by its outside
directors and the value of the compensation they receive.

2.       ADMINISTRATION

         The Plan will be administered by the Executive Evaluation and
Compensation Committee of the Board of Directors (or successor thereto) (the
"Committee"). Awards of the Company's Common Stock, par value $.001 per share
("Stock"), and options to purchase the Stock ("Options"), and the amount and
nature of the Stock and Options so awarded, will be automatic, as provided in
Sections 5 and 6 of the Plan. All questions of interpretation of the Plan will
be determined by the Committee. Such determinations will be final and binding
upon all persons having an interest in the Plan.

3.       PARTICIPATION IN THE PLAN

         Directors who are not employees of the Company or any subsidiary of the
Company are eligible to participate in the Plan.

4.       STOCK SUBJECT TO THE PLAN

         4.1. Total Shares Available. Up to two hundred fifty thousand (250,000)
shares (subject to adjustment under Section 11 of the Plan) of Stock are
authorized for issuance under the Plan. Such shares of Stock may be issued (i)
outright, pursuant to deferred elections set forth in Section 5 of the Plan, or
(ii) upon the exercise of Options. The total number of shares of Stock awarded
under (i) and (ii) shall not exceed 250,000. The Company may issue authorized
but unissued shares of its Stock, may repurchase shares in the open market or in
private transactions, or may otherwise make a sufficient number of shares
available under the Plan. The Company shall not be required to reserve or
otherwise set aside funds or shares of Stock for the payment of its obligations
hereunder. The Company shall make available as and when required a sufficient
number of shares of Stock to meet the needs of the Plan.

         4.2. Unexercised or Expired Options. Upon the expiration or termination
of any Option under the Plan, the Stock allocable to the unexercised or
surrendered portion of such Option will revert to the Plan's pool of Stock, and
may thereupon become subject to Stock and Options subsequently awarded under the
Plan.

5.       AWARDS OF STOCK

         5.1. Fair Market Value of Stock. "Fair Market Value" means, as of any
given date, the closing price of the Stock on such date on the Nasdaq Stock
Market, Inc. (NASDAQ) National Market System or Small Cap Market, or if not then
traded or listed on that system, on the securities trading system or stock
exchange on which the Stock is then primarily traded or listed; or if the stock
is not traded or listed on an exchange the average of the reported bid and ask
price on such date.

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<PAGE>

         5.2. Election. Awards of Stock will be made to each eligible director
who has submitted to the Committee a written election to receive Stock in lieu
of all or any part of the compensation which is not being deferred under any
other plan and which otherwise would have been payable currently for services
rendered as a director (including the director's retainer, committee and meeting
fees) and, where applicable, as Chairman, specified as a percentage of such
fees. An initial election shall be made 30 days after the effective date of this
plan. In the case of a new director, such election may be effective immediately
if received within a reasonable time after the director's election. Each such
election shall be effective until revoked by a later written election, but no
such later election or modified shall become effective until the first calendar
year to begin at least 5 days after the later election is received by the
Company.

         5.3. Stock Awards and Formula. On each date of payment of directors
fees, a director who has previously submitted an appropriate election to receive
Stock in accordance with Section 5.2 above shall receive Stock, as deferred
compensation, calculated to the nearest one-thousandth of a share, determined in
accordance with the following formula:

         Directors Compensation  x  Percentage Deferred               Number
    Fair Market Value of Stock On the Day Preceding Payment   =      of Shares
                                                                      of Stock

         5.4 Payment Dates. The date of payment for annual director, chairman
and committee fees shall be the date of the first meeting of the Company's board
of directors following the company's annual meeting of shareholders. Payment
dates for board and committee meetings shall be the date of such meetings.

         5.5 Deemed Investments. All amounts deferred for a calendar year shall
be treated as having been invested in shares of Common Stock, and the directors
account shall be adjusted as set forth below. Each such director's account shall
be expressed in shares of Common Stock. In the event any director ceases to be a
director during a calendar year, any unearned fees and retainers which were
deferred in such calendar year shall be forfeited at the then current Fair
Market Value of the Common Stock. Such forfeitures shall not be credited to any
other director's account, but shall be kept in a suspense account to be used for
the deemed investment of deferrals in subsequent calendar years.

         There shall be credited to each director's account an amount equal to
dividends or other distributions with respect to Common Stock at the time such
dividends or other distributions are paid or made. With respect to cash amounts
so paid, such amounts shall be treated as having been invested in shares of
Common Stock.

         No director may acquire under the Plan more than one (1%) percent of
the shares of Common Stock outstanding on the date the Plan was adopted, and
together with all plans of the Company (other than plans for which shareholder
approval is not required) more than five (5%) percent of the Common Stock
outstanding on the date the Plan was adopted.

         5.6 Distribution. The Common Stock that each director shall be deemed
to have invested in shall be distributed to such director upon the earlier to
occur of:

                  (a) Death of the director;

                  (b) Disability of the director preventing continued service on
the Board;

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                  (c) A Change in Control as hereinafter defined; or

                  (d) A date specified by the director or, if no date is so
specified, the date of termination of service as a director.

         Upon the occurrence of an event specified above, a director or his
beneficiary will receive any amounts credited to his or her account in a single
lump sum payment, or, if elected at least one year prior to the event,
installment payments as determined by the director. A director may elect to
change an election to defer payments pursuant to paragraph (d) above if such
election is made at least one year prior to the event, and provided that any
date specified pursuant to paragraph (d) shall not be earlier than the date n
which the director is then entitled to payment of the amounts credited to the
director's account. The last election of the time and form of distribution will
govern all payments unless such election is made within one year of the date of
distribution. All distributions shall be made in the form of Common Stock. If
payment is made in installments, the account shall continue to be invested in
accordance with the provisions of Section 5.5. A director shall have the right
to designate a beneficiary in the event of the director's death, or in the
absence of any such designation, the beneficiary shall be the director's estate.

         5.7 Share Certificates, Voting and Other Rights. Any Common Stock held
on behalf of a director prior to distribution shall be held in a rabbi trust
subject to the claims of the Company's general creditors in the event of the
Company's insolvency. Prior to distribution no director shall be entitled to any
voting, dividend or distribution rights, however, the trustee of the rabbi trust
shall have all such rights with respect to all such shares. No certificates for
Common Stock shall be issued to a director until a distribution event occurs as
provided in Section 5.6 above. Upon distribution, the certificates for shares
issued hereunder shall be issued in the name of such director.

         5.8 Fractions of Shares. The Company shall not issue fractions of
shares. Whenever the terms of the Plan a fractional share would otherwise be
required to be issued, the director shall be issued full share in lieu of such
fractional share based upon the same Fair Market Value which was utilized to
determine the number of shares to be issued on the relevant payment date.

         5.9 Change in Control. "Change in Control" means a change in control of
the Company of a nature that would be required to be reported in response to
Item 1(a) of the Current Report on Form 8-K, as in effect on the effective date
of the Plan, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act"); provided that, without limitation, such a "Change in
Control" shall be deemed to have occurred if:

                  (a) A third person, including a "group" as such term is used
in Section 13(d)(3) of the Exchange Act, other than the trustee of a Company
employee benefit plan, becomes the beneficial owner, directly or indirectly, of
20 percent or more of the combined voting power of the Company's outstanding
voting securities ordinarily having the right to vote for the election of
directors of the Company;

                  (b) During any period of 24 consecutive months individuals
who, at the beginning of such consecutive 24-month period, constitute the Board
of the Company cease for any reason (other than retirement upon reaching normal
retirement age, disability, or death) to constitute at least a majority of the
Board; provided that any person becoming a director subsequent to the effective
date of the Plan whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board (other than an election or nomination of any
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the Directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be, for purposes of this Plan, considered as
though such person were a member of the Incumbent Board; or

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                  (c) The Company shall cease to be a publicly owned corporation
having its outstanding stock listed on the or quoted in the NASDAQ National
Market System, NASDAQ Small Cap Market or national securities exchange.

         5.10 General Restrictions. The issuance of shares or the delivery of
certificates for such shares to director share under shall be subject to the
requirement that, if at any time the general counsel of the Company shall
reasonably determine, in his discretion, that the listing, registration or
qualification of such shares upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental body, is necessary
or desirable as a condition of, or in connection with, such issuance or delivery
thereunder, such issuance or delivery shall not take place unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not reasonably acceptable to the general
counsel.

6.       AWARDS OF OPTIONS

         All Options awarded under the Plan will be "non-statutory options," and
therefore are not entitled to special tax treatment under Section 422 of the
Internal Revenue Code of 1986, as it may be amended from time to time (the
"Code"). Each Option awarded under the Plan will be evidenced by a written
agreement, grant certificate or electronic notice in such form as the Committee
may from time to time approve, consistent with and subject to the following
terms and conditions:

         6.1. Exercise Price of Options. The exercise price of Options to be
awarded with respect to any calendar quarter shall be one hundred percent (100%)
of the Fair Market Value of the Stock on the day preceding.

         6.2. Option Awards and Formula. Following stockholder approval of this
Plan, each eligible director shall receive 2,500 Options on the date of the
first meeting of the Board of Directors immediately following each annual
meeting of the Company's stockholders during the term of the Plan.

         6.3. Exercise of Options. Options may be exercised at any time
commencing one year after their grant. To exercise an Option in whole or in
part, the holder of an Option ("Optionee") shall give written or approved
electronic notice of exercise to the Company's Stock Option Administrator
specifying the number of shares as to which the Option is being exercised,
accompanied by payment in full of the Option Price for such shares either in
cash or in such other consideration as approved by the Committee in its sole
discretion including, but not limited to, (i) shares of previously owned Common
Stock held by the Optionee for at least six (6) months, or (ii) in the event of
hardship and with the advance approval of the Committee, the Company's retention
of shares of Common Stock otherwise issuable to the Optionee upon exercise.
Shares of Stock used to make payments under subsections (ii) and (iii) shall be
valued at Fair Market Value on the date such notice is received by the Stock
Option Administrator (or if unavailable on such date, on the next preceding
trading date), and the number of shares to be required for payments under (ii)
or (iii) shall be rounded to the nearest whole share so that no cash payment
shall be required by reason of any fractional amount.

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<PAGE>

         6.4. Termination of Options.

                  (a) Options awarded pursuant to the Plan may not be exercised
after the tenth anniversary of the date of grant. Any Options which have not
been exercised on or before such tenth anniversary shall thereupon expire.

                  (b) Any Option granted hereunder shall terminate if the
director, prior to the first anniversary of the date of grant, ceases to serve
as such for any reason, except death or retirement.

                  (c) Any Option awarded a director under the Plan and
unexercised, in whole or in part, on the date of his death may be exercised by
the personal representative of the deceased director's estate, or by any heir,
devisee, or other taker who, by will or operation of law, is entitled to said
Option or any portion thereof. In each such case, such Option(s) may be
exercised at any time on or before the third anniversary of the director's death
or the tenth anniversary of the date of grant, whichever shall be earlier.

         6.5. No Shareholder Rights By Reason of Options. A director does not
have any rights whatsoever as a shareholder with respect to any unexercised
Option until the date of the issuance to that director of a stock certificate(s)
for shares to be issued upon the proper exercise of said Option. No adjustment
will be made for dividends or other rights with respect to which the record date
occurs prior to the date such certificate is issued.

         6.6. Options Not Assignable Or Transferable. Options awarded under the
Plan are not assignable or transferable other than by will or by the laws of
intestate succession. During the lifetime of a director, Options awarded under
the Plan will be exercisable only by that director.

7.       LIMITATION OF RIGHTS

         7.1. No Right to Continue as a Director. Neither the Plan, the awarding
of any Stock or Option, nor any other action taken pursuant to the Plan
constitutes or is evidence of any agreement or understanding, express or
implied, that the Company will retain a director for any period of time or at
any particular rate of compensation.

         7.2. No Rights to Receive Stock or Options After Eligibility Ceases. A
director has no rights to receive Stock or Options under the Plan, and will not
receive any Stock or Options for any calendar quarter, or part thereof, once he
or she: (i) becomes an employee of the Company or any subsidiary of the Company;
or (ii) ceases to be a director.

         7.3. Limitation on Rights of Optionee. Except as expressly provided in
Section 9, an Optionee shall have no rights by reason of the issuance of (i)
shares of Stock pursuant to this Plan, (ii) additional shares of Stock, (iii)
any other security or debenture convertible into Stock, (iv) or any other equity
security, including issuance pursuant to a plan of merger, consolidation, or
statutory share exchange, and no adjustment by reason thereof shall be made with
respect to the number of shares of Stock subject to an Option or the exercise
price.

         7.4. Rights of the Company. The grant of an Option pursuant to the Plan
shall not affect in any way the right or power of the Company to issue
additional shares of stock; to make adjustments, reclassifications,
reorganizations or changes in its capital or business structure; to participate
in a merger, consolidation, or share exchange with another corporation; or to
dissolve, liquidate, or sell or transfer all or any part of its business or
assets.

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<PAGE>

8.       ADJUSTMENTS

         In the event any change is made to the Stock by reason of merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure or
otherwise, including but not limited to any change whereby the Stock is
converted into or exchanged for another class of shares or shares of another
entity, appropriate and comparable adjustments will be made to the number and
kind of shares subject to the Plan, and to the number and kind of shares and
price per share of Stock subject to outstanding Options issued pursuant to the
Plan, and the prices of Stock used in calculating the Fair Market Value of the
Stock under Section 5.1. All such adjustments will be made in such a manner as
avoids dilution or enlargement of the rights of directors under the Plan.

9.       AMENDMENT OF THE PLAN

         The Board of Directors of the Company may suspend or terminate the Plan
or revise or amend it in any respect whatsoever; provided that, without approval
of the shareholders of the Company, no revision or amendment may change the
number of shares subject to the Plan (except as provided in Section 9 of the
Plan) or materially increase the benefits accruing to participants under the
Plan, and provided further that no revision or amendment or termination shall,
without the consent of the affected director(s), impair the rights of any
director under any Option previously awarded.

10.      LEGAL RESTRICTIONS

                  (a) The Company will not be obligated to issue shares of Stock
if counsel to the Company determines that such issuance would violate any law or
regulation of any governmental authority or any agreement between the Company
and any national securities exchange upon which the Stock is listed. In
connection with any stock issuance or transfer, the person acquiring the shares
shall, if requested by the Company, give assurances satisfactory to counsel by
the Company regarding such matters as the Company may deem desirable to assure
compliance with all legal requirements. The Company shall in no event be obliged
to take any action in order to cause the exercise of any Option.

                  (b) Of the 250,000 shares subject to the Plan, no single
director may acquire from these new shares more than 145,110 shares, which is
one percent of the shares outstanding as of February 4, 2003.

11.      RULE 16b-3 COMPLIANCE

         11.1. Six-Month Holding Period. Unless an Optionee could otherwise
dispose of equity securities, including derivative securities, acquired under
the Plan without incurring liability under Section 16(b) of the Exchange Act,
equity securities acquired under the Plan must be held for a period of six
months following the date of such acquisition, provided that this condition
shall be satisfied with respect to a derivative security if at least six months
elapse from the date of acquisition of the derivative security to the date of
disposition of the derivative security (other than upon exercise or conversion)
or its underlying equity security.

         11.2. Other Compliance Provisions. The Committee shall implement
transactions under the Plan and administer the Plan in a manner that will ensure
that each transaction by an Optionee is exempt from liability under Rule 16b-3,
except that Optionees may be permitted to engage in a non-exempt transaction
under the Plan if written notice has been given to the Optionee regarding the
non-exempt nature of the transaction. The Committee may authorize the Company to
repurchase any Option or shares of Stock acquired under the Plan in order to
prevent an Optionee from incurring liability under Section 16(b). Unless
otherwise specified by the Optionee, equity securities, including derivative
securities, acquired under the Plan which are disposed of by an Optionee shall
be deemed to be disposed of in the order acquired by the Optionee.

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<PAGE>

12.      GOVERNING LAW

         The Plan will be governed, and its provisions construed, in accordance
with the laws of the State of Delaware and applicable federal law, without
regard to conflicts of law.


_____________________________________________________

Approved by the Board of Directors February 10, 2003.

Approved by the Stockholders May 12, 2003.


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                                                                      Appendix B

Plan Participants:


                              John J. Gargana, Jr.
                            766 Ocean Avenue, Unit 5
                              Sea Bright, NJ 07760


A. Bruce Campbell
39 Meadow Ridge
Avon, CT  06001


Bruce F. Wesson
Galen Associates
610 Fifth Avenue, 5th Floor
New York, NY  10020


David Feldman
3 Tall Oaks Drive
Warren, NJ  07059


Herbert H. Sommer
Sommer & Schneider LLP
595 Stewart Avenue, Suite 710
Garden City, NY  11530



                                   QMED, INC.



                                                       By: /s/ Michael W. Cox
                                                          ----------------------
                                                          Michael W. Cox,
                                                          President

                                                       Dated: August 4, 2003



                                      B-1