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                                                                    Exhibit 4.13




                               GALEN HOLDINGS PLC






                       THE RULES OF THE GALEN HOLDINGS PLC


                     APPROVED EXECUTIVE SHARE OPTION SCHEME

                                     AND THE

                    UNAPPROVED EXECUTIVE SHARE OPTION SCHEME




                ADOPTED BY THE BOARD OF DIRECTORS OF THE COMPANY

                                ON 9 OCTOBER 1996


             (AS AMENDED BY THE BOARD OF DIRECTORS ON 10 JUNE 1997)

          THE APPROVED SCHEME RECEIVED FORMAL APPROVAL UNDER SCHEDULE 9
                          TO THE INCOME AND CORPORATION
                  TAXES ACT 1988 BY THE BOARD OF INLAND REVENUE

                               ON 22 OCTOBER 1996

                             UNDER REFERENCE X18451




                                               Coopers & Lybrand
                                               Fanum House
                                               108 Great Victoria
                                               Street
                                               Belfast
                                               BT2 7AX


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                               GALEN HOLDINGS PLC

              APPROVED EXECUTIVE SHARE OPTION SCHEME

                                    CONTENTS

<TABLE>
<CAPTION>
                                                                        RULE
<S>                                                                 <C>
1      INTERPRETATION AND CONSTRUCTION

       Definitions                                                         (a)
       Construction                                                 (b) to (d)

2      LIMIT ON ORDINARY SHARE CAPITAL PLACED UNDER OPTION          (a) to (d)

3      ORDINARY SHARE CAPITAL

       Availability of authorised capital and Scheme Shares                (a)
       Variation of capital and adjustment of Options                      (b)

4      LIMITS ON AN EMPLOYEE'S PARTICIPATION

       Limit by reference to all approved executive share option
       schemes                                                             (a)
       [Limit by reference to all executive share option schemes          (b)]

5      GRANT OF AN OPTION

       General                                                             (a)
       Timing of grant                                             (b) and (c)
       Additional conditions                                               (d)
       Option Certificate                                                  (e)
       Renunciation of Options                                             (f)

6      NON TRANSFERABILITY OF OPTIONS

7      RIGHTS TO EXERCISE OPTIONS

       General                                                      (a) to (c)
       Transfer to another country                                         (d)
       Death                                                               (e)
       Cessation of employment in special circumstances            (f) and (g)
       Cessation of employment in other circumstances              (h) and (i)
       Discretion to extend exercise period                                (j)

8      LOSS OF OFFICE OR EMPLOYMENT                                 (a) to (c)

9      TAKEOVERS, RECONSTRUCTION, AMALGAMATION AND LIQUIDATION

       Change in Control of the Company - Acquiring Company         (a) to (d)
       Change in Control of the Company - Acquiring Person                 (e)
       Changes to Scheme Share class or rights                             (f)
       Liquidation                                                         (g)
</TABLE>

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<TABLE>
<S>                                                                 <C>
       Administration                                                      (h)
       Voluntary arrangement                                               (i)

10     EXERCISE OF OPTIONS AND LISTING OF SHARES

       Procedures on exercise                                      (a) and (b)
       Rights attaching to Scheme Shares                                   (c)
       Listing                                                             (d)

11     SCHEME AMENDMENTS AND TERMINATION

       Amendments                                                   (a) to (f)
       Termination                                                         (g)

12     ADMINISTRATION

       Notices and documents                                        (a) to (c)
       Disputes                                                            (d)
       Costs of the Scheme                                                 (e)
       Employee Trust                                                      (f)

SCHEDULE

RULES OF THE UNAPPROVED EXECUTIVE SHARE OPTION SCHEME
</TABLE>


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                               GALEN HOLDINGS PLC

                     APPROVED EXECUTIVE SHARE OPTION SCHEME

                                      RULES


1     INTERPRETATION AND CONSTRUCTION

DEFINITIONS

(a)   In the Rules of this Scheme and in the Schedule attached hereto unless the
      context otherwise requires the following words and expressions shall have
      the meanings set out below:


      Acquiring Company          Any company which:

                                 (a)    has obtained Control of the Company
                                        either:

                                        (i)   as a result of making a
                                              Takeover Offer; or

                                        (ii)  in pursuance of a Compromise;
                                              or

                                 (b)    becomes bound or entitled to acquire
                                        Scheme Shares on the terms of an offer
                                        contained in Article 422 Notice(s).

      Acquiring Person           Any person, not being an Acquiring
                                 Company, who:

                                 (a)    either alone or together with any person
                                        acting in concert with him has obtained
                                        Control of the Company as a result of
                                        making a Takeover Offer or otherwise; or

                                 (b)    having Control of the Company, makes a
                                        general offer to acquire the whole of
                                        the issued Ordinary Share Capital (other
                                        than that which is already owned by him
                                        and/or by any person acting in concert
                                        with him).

      Acquisition Price          The amount payable in relation to the
                                 exercise of an Option, being the amount
                                 (after any adjustment pursuant to Rule
                                 3(b)) of the Option Price multiplied by the
                                 number of Scheme Shares in respect of which
                                 the Option is exercised.

      the Act                    The Income and Corporation Taxes Act 1988.

      Adoption Date              The date on which this Scheme is adopted
                                 by the Directors.


                                       3
<PAGE>   5


      Appropriate Period         In relation to:

                                 (a)    a Takeover Offer, means the period of 6
                                        months beginning with the time when the
                                        person making the Takeover Offer has
                                        obtained Control of the Company and any
                                        condition subject to which the Takeover
                                        Offer is made is satisfied;

                                 (b)    a Compromise, means:

                                        (i)   where the Option is to be
                                              exercised the period permitted
                                              in the operation of Rules
                                              9(aa) to 9(ae); or

                                        (ii)  where the Option is to be
                                              Rolled-over, the period of 6
                                              months beginning with the time
                                              when the court sanctions the
                                              Compromise;

                                 (c)    an Article 422 Notice means the period
                                        during which the Acquiring Company is
                                        entitled and bound to acquire shares on
                                        the terms of the offer contained in such
                                        Article 422 Notice; and

                                 (d)    an Acquiring Person who obtains
                                        Control of the Company, or who
                                        having Control of the Company makes
                                        a general offer for the whole of the
                                        issued Ordinary Share Capital,
                                        (other than that which is already
                                        owned by him and/or any person
                                        acting in concert with him) means
                                        the period of 6 months beginning
                                        with the time when the Acquiring
                                        Person obtains Control or makes the
                                        offer as the case may be.

      Article 422 Notice         In relation to the Company, means a
                                 notice served by a person who has become
                                 entitled to serve such a notice on the
                                 shareholders of the Company under Article 422
                                 of the Companies Order.

      the Companies Order        The Companies (Northern Ireland) Order
                                 1986.

      the Company                Galen Holdings PLC.

      Compromise                 In relation to the Company, means a compromise
                                 or arrangement sanctioned or to be sanctioned
                                 by the court under Article 418 of the Companies
                                 Order.

      Control                    Control as defined in section 840 of the Act.


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<PAGE>   6


      Date                       of Grant The date on which an Option is granted
                                 to an Employee, which shall be the date
                                 specified on the Option Certificate.

      Directors                  The Board of Directors of the Company from time
                                 to time or a duly authorised committee thereof.

      Employee                   Either:


                                 (i)    an employee (other than a director)
                                        of a Group Company; or

                                 (ii)   a director (other than a non-executive
                                        director) of a Group Company who is
                                        contracted to work at least 25 hours per
                                        week, exclusive of meal breaks

                                 who in either case:


                                 (aa)   is required to devote substantially
                                        the whole of his working time to the
                                        business of the Group; and

                                 (ab)   is not precluded from participating in
                                        this Scheme by paragraph 8 of Schedule
                                        9.

      Employees' Share Scheme    An employees' share scheme as
                                 defined in Article 11 of the Companies Order.

      Flotation                  Flotation means the time when the ordinary
                                 shares of the Company is placed on the Official
                                 List of the London Stock Exchange or any other
                                 stock exchange which is recognised under the
                                 Financial Services Act 1986.

      Grantor                    Either:


                                 (i)    in relation to an Option granted by
                                        the Directors, the Directors; or

                                 (ii)   in relation to an Option granted by
                                        the Trustees, the Trustees.

      Group                      The Company and its Subsidiaries from time to
                                 time and the expression "member of the Group"
                                 shall be construed accordingly.

      Group Company              The Company, or a company which is for
                                 the time being a Subsidiary over which the
                                 Company has Control and which has been
                                 nominated by the Directors to participate for
                                 the time being in this Scheme.


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<PAGE>   7


      Market Value               (a)    In the case of Options granted
                                        under this Scheme, means:

                                        (i)   if at the relevant time shares
                                              which are of the same class as
                                              Scheme Shares are listed in
                                              the London Stock Exchange
                                              Daily Official List, an amount
                                              equal to the middle market
                                              quotation of a Scheme Share
                                              (as derived from that List) on
                                              the dealing day immediately
                                              preceding the Date of Grant
                                              or, if the Grantor so decides,
                                              an amount equal to the
                                              arithmetic average of the
                                              middle market quotations of a
                                              Scheme Share (as derived from
                                              that List) during the five
                                              dealing days immediately
                                              preceding the Date of Grant,
                                              or where the context requires
                                              the Option Rollover date or
                                              such other price as may be
                                              agreed in advance with the
                                              Board of Inland Revenue; or

                                        (ii)  if paragraph (i) above does not
                                              apply the market value of a Scheme
                                              Share as determined in accordance
                                              with Part VIII of the Taxation of
                                              Chargeable Gains Act 1992, and
                                              agreed in advance with the Board
                                              of Inland Revenue, on the Date of
                                              Grant or where the context
                                              requires, the Option Rollover date
                                              or such earlier date or dates as
                                              may be agreed with the Board of
                                              Inland Revenue; or

                                 (b)    in the case of options granted under
                                        any other share option scheme of the
                                        Company approved under the
                                        provisions of Schedule 9 (other than
                                        a savings related share option
                                        scheme), the market value of an
                                        ordinary share in the capital of the
                                        Company determined under the rules
                                        of such scheme for the purpose of
                                        the grant of each such option.

      Option                     A right to acquire Scheme Shares at the
                                 Acquisition Price granted to an Employee under
                                 the provisions of this Scheme and for the time
                                 being subsisting.

      Option Certificate         The certificate in respect of a
                                 grant of an Option which shall be issued to an
                                 Option-holder in accordance with Rule 5(e).


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<PAGE>   8


      Option-holder              Any person who holds an Option or (where the
                                 context admits) his legal personal
                                 representative(s).

      Option Price               The price per Scheme Share determined by
                                 the Grantor, being a price not less than
                                 the Market Value of a Scheme Share at the
                                 Date of Grant except when Scheme Shares are
                                 subscribed when the price shall not be less
                                 than the greater of:

                                 (i)    the nominal value of a Scheme Share;
                                        and

                                 (ii)   the Market Value of a Scheme Share.

      Option Rollover            In relation to an Option, means a release
                                 by an Option-holder with the consent of the
                                 Acquiring Company of his rights ("old
                                 rights") under this Scheme in consideration
                                 of the grant to him of rights ("new
                                 rights") which are equivalent to the old
                                 rights but which relate to shares in:

                                 (a)    the Acquiring Company; or

                                 (b)    a company which has Control of the
                                        Acquiring Company; or

                                 (c)    a company which either is, or has
                                        Control of, a company which is a member
                                        of a consortium within the meaning of
                                        paragraph 10 (c) of Schedule 9

                                 and the term "equivalent" shall be
                                 construed in accordance with Rule 9(c).

      Ordinary Share Capital     The ordinary share capital of the
                                 Company as defined in section 832(1) of the
                                 Act.

      Rolled-over                The action of effecting an Option Rollover or
                                 its completion.

      the Rules                  The rules for the time being governing this
                                 Scheme.

      Schedule 9                 Schedule 9 to the Act.

      this Scheme                The Galen Holdings PLC Approved
                                 Executive Share Option Scheme in its present
                                 form or as from time to time amended in
                                 accordance with the provisions hereof.

      Scheme Shares              Fully paid ordinary shares in the
                                 capital of the Company or any shares
                                 representing the same, which satisfy the
                                 conditions specified in paragraphs 10 to 14
                                 inclusive of Schedule 9.


                                       7
<PAGE>   9


      Subsidiary                 A company which is a subsidiary of the Company
                                 within the meaning of Article 4 of the
                                 Companies Order.

      Takeover Offer             In relation to the Company, means either:


                                 (a)    a general offer to acquire the whole of
                                        the issued Ordinary Share Capital which
                                        is made on a condition such that if it
                                        is satisfied the person making the offer
                                        will have Control of the Company; or

                                 (b)    a general offer to acquire all the
                                        shares in the Company of the same
                                        class as the Scheme Shares.

      Trustees                   The trustees of any trust created by the
                                 Company which complies with the requirements of
                                 Article 11 of the Companies Order.

CONSTRUCTION

(b)  Words or expressions used herein shall where appropriate:

     (i)  when denoting the masculine gender include the feminine and
          vice-versa;

     (ii) when denoting the singular include the plural and vice versa;

     (iii) unless the context otherwise requires have the same meanings as in
          Schedule 9 as amended from time to time;

     (iv) when referring to any enactment be construed as a reference to that
          enactment as for the time being amended or re-enacted and shall
          include any regulations made thereunder;

     (v)  when referring to Rules throughout this Scheme be taken to refer to
          the Rules of this Scheme; and

     (vi) be construed such that the headings and sub-headings are for ease of
          reference only, and not form part of the Rules.

(c)  For the purpose of any application of the provisions of this Scheme,
     following an Option Rollover:

     (i)  Rules 1,3,7,8, 9, 10, 12(a), 12(c), and 12(d), shall only in relation
          to the new rights be construed as if the following terms have the
          meaning assigned to them in this Rule 1(c) and not the meanings
          assigned to them in Rule 1(a):

          Company            the company in respect of whose
                             shares new rights have been granted;


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             Directors       the board of directors of the company in respect of
                             whose shares new rights have been granted or a duly
                             authorised committee thereof;

             Scheme          Shares fully paid ordinary shares in the capital of
                             the company for the time being over whose shares
                             new rights have been granted and which satisfy the
                             conditions specified in paragraphs 10 to 14
                             inclusive of Schedule 9.

(d)  Where under any of the provisions of these Rules it is provided that an
     Option shall lapse, that Option shall cease to be exercisable thereafter
     notwithstanding any other provision of these Rules.

2    LIMIT ON ORDINARY SHARE CAPITAL PLACED UNDER OPTION

(a)  The maximum nominal amount of Scheme Shares over which Options to subscribe
     for Scheme Shares may be granted after Flotation under this Scheme on any
     date shall be limited so that, when aggregated with the nominal amount of
     Ordinary Share Capital issued or remaining issuable in respect of options
     granted within the previous 10 years under this Scheme and any other share
     option scheme (other than a savings-related share option scheme) adopted by
     the Company, it shall not exceed 5 per cent of the Ordinary Share Capital
     in issue on the day preceding that date.

(b)  No Option to subscribe for Scheme Shares will be granted after Flotation
     during any period of 3 years while this Scheme remains in force if
     immediately after the grant of such Options the aggregate of:

     (i)  the nominal amount of Ordinary Share Capital issued or remaining
          issuable pursuant to options granted during such 3 year period under
          this Scheme and under any other share option scheme adopted by the
          Company; and

     (ii) the nominal amount of Ordinary Share Capital issued under any other
          Employees' Share Scheme of the Company during the same 3 year period

     would exceed 3 per cent of the nominal amount of Ordinary Share Capital in
     issue at that time.

(c)  After Flotation, on any Date of Grant falling within the period of 4 years
     commencing with the Adoption Date the maximum nominal amount of Scheme
     Shares over which Options to subscribe for Scheme Shares may be granted
     when aggregated with the nominal amount of Ordinary Share Capital issued or
     remaining issuable in respect of rights granted within that period under
     this Scheme and any other share option scheme (other than a savings-related
     share option scheme) adopted by the Company in general meeting shall not
     exceed 2 -1/2 per cent of the Ordinary Share Capital in issue on the day
     preceding that date.

(d)  The aggregate nominal amount of Ordinary Share Capital over which Options
     to subscribe for Scheme Shares may be granted on any date, when aggregated
     with:


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     (i)  the nominal amount of Ordinary Share Capital issued or remaining
          issuable pursuant to options granted in the previous 10 years under
          this Scheme and under any other share option scheme adopted by the
          Company; and

     (ii) the nominal amount of Ordinary Share Capital issued in the previous 10
          years under any other Employees' Share Scheme adopted by the Company

     shall not exceed 10 per cent of the nominal amount of Ordinary Share
     Capital in issue on the day preceding that date.

3    ORDINARY SHARE CAPITAL

AVAILABILITY OF AUTHORISED CAPITAL AND SCHEME SHARES

(a)  The Company shall at all times keep available sufficient authorised and
     unissued Scheme Shares or shall procure that sufficient Scheme Shares are
     available for transfer to satisfy the exercise to the full extent still
     possible of all Options which have neither lapsed nor been fully exercised
     taking account of any other obligations of the Company to provide shares of
     the same class as Scheme Shares.

VARIATION OF CAPITAL AND ADJUSTMENT OF OPTIONS

(b)  In the event of any capitalization issue or rights issue or rights offer or
     any reduction, sub-division, consolidation or other variation of the
     capital of the Company, the number of Scheme Shares comprised in any Option
     over Scheme Shares in the Company and/or the Option Price may be adjusted
     by the Directors (including retrospective adjustments where appropriate) in
     such manner as the Directors consider to be in their opinion fair and
     reasonable provided always that no adjustment shall have effect after the
     date of adjustment unless the Board of Inland Revenue has approved the
     adjustment. Except in the case of an Option over Scheme Shares already in
     issue, no adjustment shall be made which would cause the Option Price to be
     less than the nominal value of that Scheme Share. Notice of any adjustment
     shall be given to those Option-holders affected by such adjustment by the
     Directors who may call in Option Certificates for endorsement.

4    LIMITS ON AN EMPLOYEE'S PARTICIPATION

LIMIT BY REFERENCE TO ALL APPROVED EXECUTIVE SHARE OPTION SCHEMES

(a)  The number of Scheme Shares over which Options are granted by the Grantor
     to any Employee shall be limited and take effect so that the aggregate
     Market Value of those Scheme Shares when added to the Market Value of any
     other shares which he may acquire in respect of options granted to him
     under this Scheme or any other share option scheme (other than a
     savings-related share option scheme) approved under Schedule 9 and
     established by the Company or any associated company of the Company within
     the meaning of section 416 of the Act does not exceed L30,000 or such other
     limit as may be prescribed from time to time in paragraph 28 of Schedule 9.


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LIMIT BY REFERENCE TO ALL EXECUTIVE SHARE OPTION SCHEMES

(b)  An Employee shall not be granted an Option after Flotation which would at
     the proposed Date of Grant cause the aggregate of the Market Value of the
     shares which he has or might have subscribed or may in future subscribe or
     might in future have subscribed in respect of options granted in the ten
     years preceding such Date of Grant on the exercise of an option granted
     under this and any other share option scheme established by the Company
     (other than a savings-related share option scheme) but excluding any Option
     which has lapsed and any Option which was granted prior to Flotation (and
     to the extent that the Option to be granted at such Date of Grant is a
     replacement Option also excluding any Option which has been exercised) to
     exceed four times the greater of:-

     (i)  the annual rate of the Employee's total remuneration (exclusive of
          bonuses, commissions and benefits-in-kind) from the Group as at the
          day immediately preceding the Date of Grant of that Option; or

     (ii) the total remuneration (inclusive of bonuses and commissions but
          exclusive of benefits-in-kind) payable to the Employee by the Group in
          the 12 months ending on the last day of the month immediately
          preceding the month in which the Date of Grant falls; or

     (iii) the total remuneration (inclusive of bonuses and commissions but
          exclusive of benefits-in-kind) payable to the Employee by the Group
          for any 12 month period in which the Date of Grant occurs.

5    GRANT OF AN OPTION

GENERAL

(a)  Subject to statutory restrictions and subject to the Rules of this Scheme
     the Grantor may grant any Employee an Option over such number of Scheme
     Shares as the Grantor may determine.

TIMING OF GRANT

(b)  Subject to (c) below Options shall only be granted:

     (i)  except during a prescribed period mentioned in (iii) below, at any
          time immediately succeeding the date on which this Scheme is approved
          by the Board of Inland Revenue until Flotation; and thereafter

     (ii) except during a prescribed period mentioned in (iii) below, at any
          time within the period of 6 weeks immediately succeeding the
          announcement of the Company's annual or interim results provided
          always that no Option shall be granted the Market Value of which would
          fall to be determined by reference to a dealing day or days preceding
          any such announcement; or

    (iii) at any other time if the Grantor considers that exceptional
          circumstances exist to justify the grant at such other time provided
          always that no Option shall be granted the Market Value of which would
          fall to be determined by reference to a dealing day

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<PAGE>   13

          or days within a period (which restricts directors and certain
          employees and those connected with them from dealing in the Company's
          shares when in possession of unpublished price sensitive information)
          whether as prescribed by the Model Code of The London Stock Exchange,
          the provisions of the Criminal Justice Act 1993, the Company's code on
          insider dealing or otherwise.

(c)  No Option shall be granted more than 10 years after the Adoption Date or to
     any Employee if the Date of Grant is less than two years before his normal
     retirement date under his contract of employment. If the Employee's normal
     retirement date is uncertain the Grantor may determine his normal
     retirement date for the purposes of the Scheme.

ADDITIONAL CONDITIONS

(d)  The Grantor when granting any Option may in their absolute discretion
     impose any conditions and limitations (additional to any conditions and
     limitations contained in any other of these Rules) upon the exercise of
     such Option provided that such additional conditions and limitations
     shall:-

     (i)  be objective, specified at the date of Grant and set out in full in,
          or details given with, the Option Certificate; and

     (ii) be such that rights to exercise such Option after the fulfilment or
          attainment of any conditions and limitations so specified shall not be
          dependent upon the further discretion of any person; and

    (iii) not be capable of amendment, variation or waiver unless an event
          occurs which causes the Committee to consider that a waived, varied or
          amended condition would be a fairer measure of performance and would
          be no more difficult to satisfy.

OPTION CERTIFICATE

(e)  Upon the grant of an Option each Option-holder shall be issued with a
     certificate which shall be executed by the Company in such manner so as to
     take effect in law as a deed specifying the Date of Grant, the number of
     Scheme Shares the subject of the Option, the Option Price, the Acquisition
     Price and any conditions and limitations which may have been imposed in
     accordance with Rule 5(d).

RENUNCIATION OF OPTIONS

(f)  Any Option may be renounced in whole or in part by the Option-holder by
     deed to the Company received not later than 30 days after the Date of Grant
     of that Option in which case the Option shall for all purposes to that
     extent be deemed never to have been granted.

6    NON TRANSFERABILITY OF OPTIONS

Save as provided in Rule 7(e) no Option nor any right thereunder shall be
capable of being transferred, assigned or charged. Any such purported transfer,
assignment or charge shall result in the cancellation of the Option.


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<PAGE>   14


7     RIGHTS TO EXERCISE OPTIONS

GENERAL

(a)  Save as provided in Rules 7(d) to 7(g) and 9 an Option:

     (i)  shall not be exercisable before the expiry of 3 years from its Date of
          Grant; and

     (ii) shall not be exercisable until any additional conditions and
          limitations imposed on the Option (and which have not been waived) in
          accordance with Rule 5(d) have been fulfilled; but

    (iii) subject to Rules 7(b) and 7(c) may thereafter be exercised in whole
          or in part at any time or from time to time provided that, unless the
          Directors determines otherwise, the exercise would not be at a time
          when the acquisition or disposal of Scheme Shares by a director or
          employee of a Group Company would be in contravention of the Model
          Code of the London Stock Exchange, the provisions of the Criminal
          Justice Act 1993, the Company's code on insider dealing or otherwise
          (which restricts directors and certain employees and those connected
          with them from dealing in the Company's shares when in possession of
          unpublished price sensitive information).

(b)  No Option is exercisable later than 10 years from its Date of Grant.

(c)  No Option may be exercised by an Option-holder at any time when he is
     precluded by paragraph 8 of Schedule 9 from participating in this Scheme.

TRANSFER TO ANOTHER COUNTRY

(d)  If an Option-holder, while continuing to hold an office or employment
     within the Group is to be transferred to work in another country and the
     Directors are satisfied that as a result of that transfer either:

     (i)  he will suffer a tax disadvantage upon exercising his Option(s); or

     (ii) he will become subject to restrictions on his ability to exercise his
          Option(s) or to deal in the Scheme Shares obtained upon exercise of
          his Option(s)

     the Option-holder may subject to Rules 7(b) and 7(c) exercise all or any of
     his Options in whole or in part in the period commencing three months
     before and ending three months after the date of the transfer (but so that
     any exercise before the date of transfer shall be conditional upon such
     transfer taking place). Upon the expiry of such period any Option, to the
     extent unexercised, shall cease to be exercisable under this Rule 7(d) and
     shall be exercisable at such other time as provided in these Rules.

DEATH

(e)  If an Option-holder dies, his legal personal representatives may exercise
     all or any of his Options in whole or in part within 12 months of his death
     and at the expiry thereof his Options shall, to the extent unexercised,
     lapse.


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<PAGE>   15


CESSATION OF EMPLOYMENT IN SPECIAL CIRCUMSTANCES

(f)  If an Option-holder shall cease to be employed within the Group by reason
     of:

     (i)  injury or disability (evidenced to the satisfaction of the Directors)
          or redundancy within the meaning of the Employment Protection
          (Consolidation) Act 1978; or

     (ii) retirement on reaching his normal retirement age under his contract of
          employment

     he may, subject to Rules 7(b) and 7(c) exercise all or any of his Options
     in whole or in part during the period ending 6 months after the date of
     such cessation.

(g)  If an Option-holder shall cease to be employed within the Group solely by
     reason that the company by which he is for the time being employed then
     ceases to be a member of the Group or by reason of the transfer of the
     undertaking or part of the undertaking in which the Option-holder is
     employed to a transferee which is not in the Group, then, he may, subject
     to Rules 7(b) and 7(c), exercise all or any of his Options in whole or in
     part during the period ending 6 months after the date of such cessation or
     transfer as the case may be.

CESSATION OF EMPLOYMENT IN OTHER CIRCUMSTANCES

(h)  If an Option-holder gives notice to terminate his employment such that he
     shall cease to be employed within the Group for a reason not falling within
     Rules 7(f) or 7(g) all his Options shall cease to be exercisable and shall
     lapse on the date such employment ceases save that the Directors may in
     their absolute discretion, but subject to Rules 7(a) to 7(c), prior to the
     cessation of employment consent to the exercise of any such Option in whole
     or in part to the extent determined by the Directors during the period
     within 6 months (or such other period as may be determined by the
     Directors) after such cessation and at the expiry of which any such Option
     shall, to the extent unexercised, lapse.

(i)  If an Option-holder is given notice terminating his employment such that he
     shall cease to be employed within the Group in circumstances not involving
     misconduct or impropriety on his part and for a reason not falling within
     Rules 7(f) or 7(g), he may, subject to Rules 7(a) to 7(c) exercise all or
     any of his Options in whole or in part during the period within 6 months
     after such cessation or such longer period as may be determined by the
     Directors acting fairly and reasonably, provided that the period so
     determined shall not exceed the maximum period permitted by Rule 7(j), and
     at the expiry of the said period any Option(s) shall, to the extent
     unexercised, lapse.

DISCRETION TO EXTEND EXERCISE PERIOD

(j)  The Directors may in their absolute discretion but subject to Rules 7(b)
     and 7(c) extend the periods of 6 months specified in Rules 7(f) to 7(i), to
     such longer period as they may determine not exceeding a period which
     expires 3 years and 6 months after the Date of Grant or, if longer, 3 years
     and 6 months after the last occasion on which the Option-holder exercised
     an Option in circumstances qualifying for relief from income tax under
     section 185 of the Act. At the expiry of the period specified in Rules 7(f)
     to 7(i), as the case may be or such longer period as may have been
     determined under this Rule 7(j) any Options held by the Option-holder
     concerned shall, to the extent unexercised, lapse.


                                       14
<PAGE>   16
8     LOSS OF OFFICE OR EMPLOYMENT

(a)  The grant of an Option does not form part of the Option-holder's
     entitlement to remuneration or benefits pursuant to his contract of
     employment nor does the existence of a contract of employment between an
     Employee and any company give such Employee any right or entitlement to
     have an Option granted to him in respect of any number of Scheme Shares or
     any expectation that an Option might be granted to him whether subject to
     any conditions or at all.

(b)  The rights and obligations of an Option-holder under the terms and
     conditions of his office or employment shall not be affected by his
     participation in the Scheme or any right he may have to participate in the
     Scheme.

(c)  An individual who participates in the Scheme waives all and any rights to
     compensation or damages in consequence of the termination of his office or
     employment with any company for any reason whatsoever in so far as those
     rights arise, or may arise, from his ceasing to have rights under or be
     entitled to exercise any Option under the Scheme as a result of such
     termination or from the loss or diminution of value of such rights or
     entitlements. If necessary, the Option-holder's terms of employment shall
     be varied accordingly.

9     TAKEOVERS, RECONSTRUCTION, AMALGAMATION AND LIQUIDATION

CHANGE IN CONTROL OF THE COMPANY - ACQUIRING COMPANY

(a)  If after the Adoption Date and subject to Rules 9(aa) to 9(ae), a company
     has become an Acquiring Company the Directors shall as soon as practicable
     thereafter notify every Option-holder accordingly and each Option-holder
     may subject to Rules 7(b) and 7(c), within the Appropriate Period:

     (i)  exercise all or any of his Options to acquire Scheme Shares (as the
          case may be) in whole or in part (but in the case of a Compromise
          Rules 9(aa) to 9(ae) shall apply); and

     (ii) to the extent that an Option to acquire Scheme Shares (as the case may
          be) is not or has not been exercised, execute, with the consent of the
          Acquiring Company, an Option Rollover by a notice in writing in a form
          prescribed by the directors of the Acquiring Company.

(aa) Where a Compromise is proposed between the Company and its members:

     (i)  Options to acquire Scheme Shares which prior to the date of any
          general meeting of the members ordered by the court have become
          exercisable pursuant to the Rules of this Scheme excluding Rule 9(ab)
          shall, subject to Rules 9(ac) to 9(ae), remain exercisable and may at
          the election of the Option-holder be exercised on the basis set out in
          Rule 9(ab); and

     (ii) Rule 9(ab) shall apply to any Option to acquire Scheme Shares not
          falling within Rule 9(aa)(i).


                                       15
<PAGE>   17


(ab) Options to which this Rule 9(ab) applies shall become exercisable from the
     date of the meeting of the members ordered by the court on terms that
     exercise is conditional on the court sanctioning the Compromise and where
     exercise is permitted under this Rule 9(ab):

     (i)  notice of exercise shall be in such form as may be prescribed by the
          Directors; and

     (ii) notwithstanding any other provision in this Scheme, the date of
          exercise of all Options exercised conditionally pursuant to this Rule
          9(ab) shall be the date on which the court sanctions the Compromise.

(ac) Notwithstanding any other Rule in this Scheme, unless the Directors
     determine otherwise, no notice of exercise of an Option shall be effective
     if received on or after the day on which it is anticipated that the court
     will sanction the Compromise.

(ad) If after six months from the date of the meeting ordered by the court to
     consider the Compromise referred to in Rule 9(aa) the court has not
     sanctioned the Compromise, the conditional exercise of Options under Rule
     9(ab) shall be of no effect and Rules 9(aa) and 9(ac) shall cease to apply
     in relation to that Compromise.

(ae) Upon the Compromise becoming effective, any Options, to the extent
     unexercised, shall lapse.

(b)  To the extent that any Option which has become exercisable and/or capable
     of being Rolled-over, pursuant to Rule 9(a)(i) or 9(a)(ii), has not been
     exercised and/or Rolled-over at the expiry of the Appropriate Period it
     shall thereupon continue to subsist unless shares cease to be Scheme Shares
     or the Directors determine otherwise provided always that such
     determination shall apply to all subsisting Options to acquire Scheme
     Shares. Options which continue to subsist shall be subject to the same
     terms and conditions that applied before the date of the change of Control
     or service of the Section 429 Notice (as the case may be). Where the
     Directors have determined otherwise they shall notify all Option-holders to
     whom such determination applies.

(c)  For the purposes of an Option Rollover the new rights shall only be
     regarded as equivalent to the old rights if:

     (i)  the shares to which they relate satisfy the conditions of paragraphs
          10 to 14 of Schedule 9; and

     (ii) the new rights are exercisable in the same manner as the old rights
          and subject to the provisions of this Scheme as it had effect
          immediately before an Option Rollover; and

    (iii) the total Market Value of Scheme Shares subject to an Option which is
          being Rolled-over is equal immediately before such Option Rollover to
          the total market value (determined in accordance with Part VIII of the
          Taxation of Chargeable Gains Act 1992) of the shares in respect of
          which an Option-holder's new rights are being granted immediately
          after such Option Rollover; and


                                       16
<PAGE>   18


     (iv) the total amount payable in respect of the exercise in full of an
          Option following an Option Rollover is equal to the total Acquisition
          Price immediately preceding such Option Rollover.

(d)  For the purposes of any application of the provisions of this Scheme,
     following an Option Rollover any new rights granted pursuant to Rule 9(a)
     shall be regarded as having been granted at the time the corresponding old
     rights were granted. With effect from the Option Rollover, the new rights
     shall be subject to the provisions of the Scheme as it had effect in
     relation to the Options which have been released, except that Rule 11 shall
     not apply.

CHANGE IN CONTROL OF THE COMPANY - ACQUIRING PERSON

(e)  If after the Adoption Date, a person has become an Acquiring Person the
     Directors shall, as soon as practicable thereafter, notify every
     Option-holder accordingly and each Option-holder may, subject to Rules 7(b)
     and 7(c), within the Appropriate Period exercise all or any of his Options
     to acquire Scheme Shares in whole or in part and to the extent that any
     Option which has become exercisable pursuant to this Rule 9(e) has not been
     exercised at the expiry of the Appropriate Period it shall thereupon
     continue to subsist to the extent unexercised unless the Scheme Shares
     cease to exist or the Directors determine otherwise. Options which continue
     to subsist shall be subject to the same terms and conditions which applied
     before the change of Control or the general offer was made or the Section
     429 Notice was served (as the case may be). When the Directors have
     determined otherwise, it shall notify all Option-holders to whom such
     determination applies.

CHANGES TO SCHEME SHARE CLASS OR RIGHTS

(f)  If notice is duly given of a general meeting of the Company at which a
     resolution will be proposed whereby:

     (i)  the class of shares for the time being constituting Scheme Shares will
          be altered; or

     (ii) the rights attaching to shares which for the time being constitute
          Scheme Shares will be altered

     so that such shares will cease to be Scheme Shares an Option to acquire
     Scheme Shares shall, subject to Rules 7(b) and 7(c) be exercisable in whole
     or in part (but so that any exercise hereunder shall be conditional upon
     such resolution being passed) at any time thereafter until such resolution
     is duly passed or defeated or the general meeting concluded or adjourned,
     sine die, whichever shall first occur. If such a resolution is passed, an
     Option shall, to the extent unexercised, thereupon lapse.

LIQUIDATION

(g)  If notice is duly given of a general meeting at which a resolution will be
     proposed for the voluntary winding-up of the Company, except for the
     purposes of reconstruction or amalgamation, an Option to acquire Scheme
     Shares shall, subject to Rules 7(b) and 7(c), be exercisable in whole or in
     part (but so that any exercise hereunder shall be conditional upon such
     resolution being passed) at any time thereafter until the resolution is
     duly passed or defeated or the general meeting concluded or adjourned sine
     die, whichever shall first occur.

                                       17
<PAGE>   19

     If such resolution is passed the relevant Option shall, to the extent
     unexercised, thereupon lapse.

ADMINISTRATION

(h)  If an administration order is made in relation to the Company, each
     Option-holder shall, subject to Rules 7(b) and 7(c), be entitled to
     exercise his Option to acquire Scheme Shares in that company in whole or in
     part within 6 weeks after the date of the administration order, provided
     that the issue of Scheme Shares pursuant to such exercise is authorised by
     the administrator(s) or the court.

VOLUNTARY ARRANGEMENT

(i)  If a voluntary arrangement is proposed in relation to the Company pursuant
     to Part II of the Insolvency (Northern Ireland) Order 1989, each
     Option-holder shall, subject to Rules 7(b) and 7(c), be entitled to
     exercise his Option to acquire Scheme Shares in that company in whole or in
     part within 14 days after the date of despatch of any notices of meetings
     summoned under Article 16 of the Insolvency (Northern Ireland) Order 1989
     in relation to such proposal.

10   EXERCISE OF OPTIONS AND LISTING OF SHARES

PROCEDURES ON EXERCISE

(a)  Exercise of an Option, or of new rights under this Scheme shall be effected
     by a notice of exercise in writing in a form prescribed from time to time
     by the Directors lodged with the Secretary of the Company or at its office
     specifying the number of Scheme Shares in respect of which the Option is
     being exercised and accompanied by payment in full of the Acquisition Price
     for the Scheme Shares concerned. Payment may be made by banker's draft or
     cheque provided that if the cheque is not cleared the Employee shall be
     deemed never to have exercised his Option and the Company will be under no
     obligation to provide any Scheme Shares for him. Notwithstanding anything
     to the contrary therein contained such notice shall (Other than in the
     circumstances mentioned in the immediately preceding proviso and/or in Rule
     9(g) above) take effect upon receipt of notice and payment in full and such
     day shall constitute for all purposes the date of exercise of such Option
     and , unless otherwise agreed between the Company and the Option-holder the
     Secretary to the Company shall procure that the relevant Scheme Shares in
     respect of an Option shall be transferred (or issued as the case may be)
     within 28 days thereafter. The Option Certificate should also be lodged but
     failure to do so will not invalidate the exercise of the Option. The
     Company will keep a suitable form of notice available, so that an
     Option-holder desirous of exercising an Option may obtain copies thereof
     from the Secretary of the Company. In the case of a partial exercise of an
     Option, the Company shall deliver an Option Certificate in relation to the
     balance.

(b)  All transfers and all allotments of Scheme Shares shall be subject to any
     necessary consents of HM Treasury or other authorities in the United
     Kingdom or elsewhere under enactments or regulations for the time being in
     force and it shall be the responsibility of the Option-holder to comply
     with any requirements to be fulfilled in order to obtain or obviate the
     necessity for any such consent.


                                       18
<PAGE>   20


RIGHTS ATTACHING TO SCHEME SHARES

(c)  Scheme Shares transferred pursuant to the Scheme will be transferred
     without the benefit of any rights attaching thereto by reference to a
     record date preceding the date of exercise. Save as regards rights
     attaching to Scheme Shares by reference to a record date prior to the date
     on which the Scheme Shares are allotted and issued, Scheme Shares issued
     upon the exercise of Options to acquire Scheme Shares shall be identical
     and rank pari passu in all respects with the shares of the same class then
     in issue.

LISTING

(d)  At any time when the Scheme Shares are listed on The Stock Exchange, the
     Company shall use its best endeavours to ensure that as soon as practicable
     after the allotment of any Scheme Shares under this Scheme the same shall
     be admitted to the Official List of the Council of The London Stock
     Exchange or any other appropriate investment exchange recognised for the
     purposes of the Financial Services Act 1986.

11   SCHEME AMENDMENTS AND TERMINATION

AMENDMENTS

(a)  Notwithstanding the provisions of Rules 11(b) to 11(f) and 12(b), the
     Directors may at any time make such alterations (including additions) to
     the Rules as are necessary to secure that the Rules receive initial
     approval from the Board of Inland Revenue under Schedule 9 and continue to
     be so approved.

(b)  Subject to Rule 11(d) and 11(e) the Directors may from time to time at
     their absolute discretion amend any of the Rules provided that after
     Flotation except with the prior approval of the shareholders of the Company
     in general meeting no amendment to the advantage of Option-holders (present
     or future) shall be made to the Rules relating to:-

      (i)  the persons to whom Options may be granted;

     (ii)  the limitations on the grant of Options;

    (iii)  the determination of the price at which Scheme Shares may be acquired
           on the exercise of Options;

     (iv)  the adjustment of Options;

      (v)  the restrictions on the exercise of Options;

     (vi)  the rights to be attached to Scheme Shares issued upon the exercise
           of Options;

    (vii)  the rights of Option-holders on a winding-up of the Company;

   (viii)  the transferability of Options; and

     (ix)  this Rule 11.


                                       19
<PAGE>   21


(c)  No amendment waiver or replacement to or of this Scheme (or any Rule) shall
     be made to the extent to which it would have the effect of abrogating or
     altering adversely any of the subsisting rights of Option-holders except
     with such consent on their part as would be required by the provisions of
     the relevant company's Articles of Association if the Scheme Shares to be
     issued on the exercise of the Options already granted and still subsisting
     were so issued and constituted a separate class of share capital and if
     such provisions applied mutatis mutandis thereto.

(d)  So long as this Scheme remains approved under Schedule 9 no amendment to
     this Scheme shall have effect after the date of alteration unless the Board
     of Inland Revenue has approved the amendment. The Company shall notify the
     Board of Inland Revenue in writing as soon as practicable after the date of
     alteration in respect of each such amendment.

(e)  Rule 11(b) shall not apply to any amendment which the Directors consider is
     necessary or desirably to comply with or take account of the provisions of
     any proposed or existing legislation including overseas securities
     legislation, or to take advantage of any changes to legislation, or to take
     account of any of the events mentioned in Rule 9, or to obtain or maintain
     favourable exchange control taxation or regulatory treatment of the
     Company, any Subsidiary or any Option-holder provided any such alteration
     does not affect the basic principles of the Scheme or the limits contained
     in Rule 2.

(f)  The Directors shall have the power from time to time to make or vary
     regulations for the administration of this Scheme and to amend the terms or
     impose further conditions on the grant and exercise of Options to take
     account of overseas taxation, and securities or exchange control laws
     provided always that such regulations, terms and conditions shall not be
     inconsistent with the provisions of this Scheme and shall not cause any of
     the provisions of Schedule 9 relevant to this Scheme to cease to be
     satisfied.

TERMINATION

(g)  Notwithstanding the provision contained in Rule 5(c) the Company by
     ordinary resolution or the Directors may at any time resolve that no
     further Options be granted under this Scheme, and in such event no further
     Options will be granted but in all other respects the provisions of this
     Scheme shall remain in full force and effect.

12   ADMINISTRATION

NOTICES AND DOCUMENTS

(a)  Option-holders not otherwise entitled thereto may be sent copies of notices
     and other documents sent by the Company to its ordinary shareholders
     generally.

(b)  Written notice of any amendment made in accordance with Rule 11 shall be
     given to those Option-holders affected by such amendment.

(c)  Any notice or other document required to be given hereunder to any
     Option-holder shall be delivered to him or sent by First Class pre-paid
     post to him at his home address according to the records of the Company or
     such other address as may appear to the Company to be appropriate. Any
     notice or other document required to be given to the Company, the Directors
     or the Grantor shall be delivered to them or sent by First Class pre-paid
     post to

                                       20
<PAGE>   22

     them at the Company's registered office or such other address as may be
     determined by the Company to be appropriate. Notices sent by post shall be
     deemed to have been given on the fifth day following the date of posting.

DISPUTES

(d)  The decision of the Directors in any dispute or question relating to any
     Option shall be final and conclusive subject to the terms of this Scheme.

COSTS OF THE SCHEME

(e)  The costs of introducing and administering this Scheme shall be borne by
     the Company.

EMPLOYEE TRUST

(f)  The Company or any subsidiary may provide money to the Trustees or to any
     other person to enable them or him to acquire shares to be held for the
     purposes of the Scheme or enter into any guarantee or indemnity for those
     purposes, to the extent permitted by Article 163 of the Companies Order.





                                       21
<PAGE>   23



                                    SCHEDULE

                         RULES OF THE GALEN HOLDINGS PLC
                    UNAPPROVED EXECUTIVE SHARE OPTION SCHEME

1    This Schedule to the Approved Executive Share Option Scheme ("the Scheme")
     sets out the Rules of the Unapproved Executive Share Option Scheme ("the
     Unapproved Scheme").

2    The Unapproved Scheme shall not be approved by the United Kingdom Board of
     Inland Revenue under Schedule 9 to the Act.

3    The Rules of the Scheme as from time to time amended shall be incorporated
     and form part of the rules of the Unapproved Scheme with the following
     modifications:-

     (a)  reference throughout the Scheme to the words "this Scheme" shall be
          taken as reference to "this Unapproved Scheme";

     (b)  adjustments under Rule 3(b) will not require the approval of the Board
          of Inland Revenue;

     (c)  Rules 4(a), 7(c), 11(d) in Rule 1(a) shall have no effect;.

     (d)  there shall be no requirement for the Scheme Shares to comply with
          paragraphs 10 to 14 inclusive of Schedule 9 to the Act;

     (e)  The definition of "Employee" in Rule 1(a) shall be deleted and the
          following substituted

          "Employee    A director (other than a non executive director) or a
                       bona fide employee of any company (whether he is taxed in
                       the United Kingdom or overseas) within the Group who, in
                       either case, is required to devote substantially the
                       whole of his working time to the business of the Group".

4    Where in relation to Options granted under the Unapproved Scheme the
     Company or a participating company is liable under any statute or
     regulation or otherwise to account to any revenue or other authority for
     sums in respect of tax or social security then the Company may impose such
     conditions upon the exercise of Options as are necessary or desirable to
     ensure that the requisite cash funds may be recovered from the
     Option-holder, including if necessary a condition that no exercise may take
     place unless the Company or a participating company has been provided by
     the Option-holder with cash funds sufficient to meet any liability for PAYE
     pursuant to section 203B of the Act or otherwise.




                                       22
<PAGE>   24



                              FORM OF RENUNCIATION

To:

I, the undersigned, being the Option-holder mentioned in this certificate,
hereby renounce the Option as herein represented, as provided by Rule 5(f) of
the Rules of the Scheme.

SIGNED and delivered as a deed by


_________________________________         __________________________________
                                          (optionholder signature)


in the presence of:

Witness signature:                __________________________________________


Witness name (print):             __________________________________________


Address:                          __________________________________________

                                  __________________________________________

                                  __________________________________________

                                  __________________________________________


Occupation:                       __________________________________________





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