**Exhibit 10.1**STOCK APPRECIATION RIGHTS AGREEMENT (EMPLOYEE)     This document sets forth the terms of a grant of stock appreciation rights (the “Award”)granted by Noven Pharmaceuticals, Inc., a Delaware corporation (the “Company”), pursuant to aCertificate of Stock Appreciation Rights (“Certificate”) displayed at the website of Smith BarneyStock Plan Services. The Certificate, which specifies the person to whom the award is granted(“Grantee”) and other specific details of the grant, and the electronic acceptance of theCertificate at the website of Smith Barney Stock Plan Services are incorporated herein byreference.BACKGROUND A. Grantee is an employee of the Company.  B. In consideration of services to be performed, Company desires to affordGrantee an opportunity to acquire shares of its common stock in accordance withCompany’s 1999 Long-Term Incentive Plan (the “Plan”) as hereinafter provided.  C. Any capitalized terms not otherwise defined herein shall have the meaningaccorded them under the Plan.     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for othergood and valuable consideration, the parties, hereto, intending to be legally bound, agree asfollows:     1. Grant of Award. Subject to the terms and conditions of the Plan and this Grant,Company hereby grants to Grantee the number of stock appreciation rights (the “Rights”) specifiedon the Certificate, with each Right bearing the reference price (the “Reference Price”) specifiedon the Certificate. The Rights are granted in respect of the Common Stock, par value $.0001 pershare (“Common Stock”) of the Company.     2. Award Period. The Award may be exercised in accordance with the provisions ofParagraphs 3, 4 and 5 hereof during the Award Period, which shall begin on the “Award Date”specified in the Certificate and shall end on the Expiration Date (as defined in paragraph 4). Allrights to exercise the Award shall terminate on the Expiration Date.     3. Exercisability. Subject to the limitations of the Plan and this Award, the Awardshall be exercisable according to the vesting schedule specified on the Certificate. An installmentof this Award shall not become exercisable on the otherwise applicable vesting date if theGrantee’s Date of Termination (as defined in paragraph 8) occurs on or before such vesting date.Notwithstanding the foregoing provisions of this paragraph 3,
 

 
the Award shall become exercisable with respect to all of the Rights (to the extent it is notthen otherwise exercisable) as follows: A. The Award shall become fully exercisable upon the Grantee’s Date ofTermination, if the Grantee’s Date of Termination occurs by reason of the Grantee’sdeath or Disability.  B. The Award shall become fully exercisable upon a Change in Control (as definedin the Plan), if the Grantee’s Date of Termination does not occur on or before theChange in Control.  C. The Option may be exercised on or after the Date of Termination only as tothat portion of the Rights as to which it was exercisable immediately prior to theDate of Termination, or as to which it became exercisable on the Date of Terminationin accordance with this paragraph 3.     4. Expiration. The Award Period shall terminate and this Award shall be exercisableafter the Company’s close of business on the last business day that occurs prior to the ExpirationDate. The “Expiration Date” shall be the earliest to occur of: A. the Expiration Date specified on the Certificate;  B. if the Grantee’s Date of Termination occurs by reason of death, Disability orRetirement, the one-year anniversary of such Date of Termination;  C. the Grantee’s Date of Termination, if the Grantee’s Date of Terminationoccurs as a result of a termination by the Company by reason of Grantee engaging inany activity in violation of any non-competition, confidentiality or other duty orobligation Grantee has to the Company, or that is otherwise inimical, contrary orharmful to the interests of the Company, including, but not limited to: (i) conductrelated to Grantee’s employment which could result in either criminal or civilpenalties against Grantee or the Company, (ii) violation of the Company’s policies,including, without limitation, the Company’s insider trading policy, (iii) Grantee’saccepting employment with or serving as a consultant, advisor or in any other capacityto any other person or entity without Company’s prior written consent, other thanserving in an advisory capacity without compensation during Grantee’s personal time toor for any entity qualified under Section 501(c)(3) of the Code or any bona fidecandidate for public office which or who is not in competition with or known toGrantee to be acting against the interests of Company, or (iv) proposing, whetherpublicly or otherwise, or engaging in (whether as a member of a group or otherwise)any of the activities specified in clauses (b) through (j) of Item 4 of Schedule 13Dunder the Exchange Act without the prior written consent of Company; or
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 D. if the Grantee’s Date of Termination occurs for reasons other than death,Disability, Retirement, or the reasons specified in C above, the 90-day anniversary ofsuch Date of Termination.     5. Method of Exercise. Subject to this Agreement and the Plan, the Award may beexercised in whole or in part by complying with such procedures as the Committee may establish or,if no such procedure is established, then by filing a written notice with the Secretary of theCompany at its corporate headquarters prior to the Company’s close of business on the ExpirationDate. Such notice shall specify the number of Rights the Grantee elects to exercise. The Awardshall not be exercisable if and to the extent the Company determines that such exercise wouldviolate applicable state or Federal securities laws or the rules and regulations of any securitiesexchange on which the Common Stock is traded. If the Company makes such a determination, it shalluse all reasonable efforts to obtain compliance with such laws, rules or regulations. In making anydetermination hereunder, the Company may rely on the opinion of counsel for the Company. Subjectto the withholding of applicable payroll, withholding and other taxes in accordance with Section 6below, upon the exercise of Rights (or as promptly thereafter as practicable), the Company shallissue to the Grantee a number of shares of Common Stock (rounded down to nearest whole number)equal to the product of (i) the number of Rights exercised multiplied by (ii) the differencebetween the Fair Market Value on the date of exercise and the Reference Price.     6. Withholding. All deliveries and distributions under this Agreement are subject towithholding of all applicable taxes. At the election of the Grantee, and subject to such rules andlimitations as may be established by the Committee from time to time, such withholding obligationsmay be satisfied through the surrender of shares of Common Stock which the Grantee already owns, orto which the Grantee is otherwise entitled under the Plan.     7. Transferability. Except as otherwise provided in the Plan or this paragraph 7, theRights are not transferable other than as designated by the Grantee by will or by the laws ofdescent and distribution, and during the Grantee’s life, may be exercised only by the Grantee.However, the Grantee, with the approval of the Committee, may transfer the Rights for noconsideration to or for the benefit of the Grantee’s Immediate Family (including, withoutlimitation, to a trust for the benefit of the Grantee’s Immediate Family or to a partnership orlimited liability company of which only one or more members of the Grantee’s Immediate Family holdan interest), subject to such limits as the Committee may establish, and the transferee shallremain subject to all the terms and conditions applicable to the Rights prior to such transfer. Theforegoing right to transfer the Rights shall apply to the right to consent to amendments to thisAgreement and, in the discretion of the Committee, shall also apply to the right to transferancillary rights associated with the Rights. The term “Immediate Family” shall mean the Grantee’sspouse, parents, children, sisters, brothers and grandchildren (whether by blood, marriage oradoption) and, for this purpose, shall also include the Grantee.
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     8. Definitions. For purposes of this Agreement, the terms used in this Agreement shallbe subject to the following: A. Date of Termination. The Grantee’s “Date of Termination” shall be the firstday occurring on or after the Grant Date on which the Grantee is not employed by theCompany or any Subsidiary, regardless of the reason for the termination of employment;provided that a termination of employment shall not be deemed to occur by reason of(a) a transfer of the Grantee between the Company and a Subsidiary or between twoSubsidiaries; (b) the Grantee taking a leave of absence from the Company or aSubsidiary approved by the Grantee’s employer, or (c) Grantee ceasing to be employedby the Company or any of its Subsidiaries but continuing to serve the Company withoutinterruption as an Outside Director of the Company; provided, however, that in thecase of this clause c, if Grantee thereafter ceases to serve as an Outside Director ofthe Company without immediately resuming service as an employee of the Company or anyof its Subsidiaries then Grantee’s “Date of Termination” shall be the first day onwhich Grantee no longer serves as an Outside Director. If, as a result of a sale orother transaction, the Grantee’s employer ceases to be a Subsidiary (and the Grantee’semployer is or becomes an entity that is separate from the Company), the occurrence ofsuch transaction shall be treated as the Grantee’s Date of Termination caused by theGrantee being discharged by the employer.  B. Disability. Except as otherwise provided by the Committee, the Grantee shallbe considered to have a “Disability” during the period in which the Grantee is unable,by reason of a medically determinable physical or mental impairment, to engage in theduties of Grantee’s employment with the Company, which condition has, or, in theopinion of an independent physician selected by the Committee, is expected to have, aduration of not less than 180 days.  C. Retirement. “Retirement” of the Grantee shall mean, with the approval of theCommittee, the occurrence of the Grantee’s Date of Termination on or after the datethe Grantee attains age 55.  D. Plan Definitions. Except where the context clearly implies or indicates thecontrary, a word, term, or phrase used in the Plan is similarly used in thisAgreement.     9. Forfeiture Provisions. A. Forfeiture of gain and unexercised rights in certain circumstances. If (a)Grantee’s Date of Termination occurs for any of the reasons specified in clause C ofparagraph 4 of this Award during the twelve months following any exercise of all orany portion of the Rights, or (b) during the eighteen
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   months after Grantee’s Date of Termination Grantee violates any non-competition,confidentiality or other duty or obligation Grantee has to the Company then (1)this Award shall and all Rights be deemed to have terminated effective as of theearlier of (A) the Grantee’s Date of Termination and (B) the date on which Granteeentered into such activity, unless terminated sooner by operation of another termor condition of this Award or the Plan, and (2) Grantee shall pay to Company theamount of any gain realized or payment received as a result of the exercise of thisAward during such eighteen month period, as applicable. B. Right of Set-Off. By accepting this agreement, Grantee consents to adeduction from any amounts the Company owes Grantee from time to time (includingamounts owed to Grantee as wages or other compensation, fringe benefits, or vacationpay, as well as any other amounts owed to Grantee by the Company), to the extent ofthe amounts Grantee owes the Company under paragraph A above. Whether or not theCompany elects to make any set-off in whole or in part, if the Company does notrecover by means of set-off the full amount Grantee owes it, calculated as set forthabove, Grantee agrees to pay immediately the unpaid balance to the Company.  C. Committee Discretion. Grantee may be released from its obligations underparagraphs A and B above only if the Committee (or its duly appointed agent)determines in its sole discretion that such action is in the best interests of theCompany.     10. Heirs and Successors. This Agreement shall be binding upon, and inure to thebenefit of, the Company and its successors and assigns, and upon any person acquiring, whether bymerger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’sassets and business. If any rights exercisable by the Grantee or benefits deliverable to theGrantee under this Agreement have not been exercised or delivered, respectively, at the time of theGrantee’s death, such rights shall, subject to the terms and conditions of the Plan and this Award,be exercisable by the Designated Beneficiary, and such benefits shall be delivered to theDesignated Beneficiary, in accordance with the provisions of this Agreement and the Plan. The“Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Grantee in awriting filed with the Committee in such form and at such time as the Committee shall require. If adeceased Grantee fails to designate a beneficiary, or if the Designated Beneficiary does notsurvive the Grantee, any rights that would have been exercisable by the Grantee and any benefitsdistributable to the Grantee shall be exercised by or distributed to the legal representative ofthe estate of the Grantee. If a deceased Grantee designates a beneficiary but the DesignatedBeneficiary dies before the Designated Beneficiary’s exercise of all rights under this Agreement orbefore the complete distribution of benefits to the Designated Beneficiary under this Agreement,then any rights that would have been exercisable by the Designated Beneficiary shall be exercisedby the legal representative of the estate of the Designated Beneficiary, and any
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benefits distributable to the Designated Beneficiary shall be distributed to the legalrepresentative of the estate of the Designated Beneficiary.     11. Administration. The authority to manage and control the operation andadministration of this Agreement shall be vested in the Committee, and the Committee shall have allpowers with respect to this Agreement as it has with respect to the Plan. Any interpretation ofthe Agreement by the Committee and any decision made by it with respect to the Agreement is finaland binding on all persons.     12. Plan Governs. Notwithstanding anything in this Agreement to the contrary, theterms of this Agreement shall be subject to the terms of the Plan, a copy of which may be obtainedby the Grantee from the office of the Secretary of the Company; and this Agreement is subject toall interpretations, amendments, rules and regulations promulgated by the Committee from time totime pursuant to the Plan. By accepting this Agreement, the Grantee acknowledges receipt of a copyof the Plan and of the most recent Prospectus relating to the Plan.     13. Not An Employment Contract. The Award will not confer on the Grantee any rightwith respect to continuance of employment or other service with the Company or any Subsidiary, norwill it interfere in any way with any right the Company or any Subsidiary would otherwise have toterminate or modify the terms of such Grantee’s employment or other service at any time.     14. Notices. Any written notices provided for in this Agreement or the Plan shall bein writing and shall be deemed sufficiently given if either hand delivered or if sent by fax orovernight courier, or by postage paid first class mail. Notices sent by mail shall be deemedreceived three business days after mailed but in no event later than the date of actual receipt.Notices shall be directed, if to the Grantee, at the Grantee’s address indicated by the Company’srecords, or if to the Company, at the Company’s principal executive office.     15. No Fractional Shares. In accordance with Section 5 of the Award, shares of CommonStock to be issued upon exercise of Rights will be determined by rounding down to the nearest wholenumber. Except as otherwise determined in writing by the Committee, no fractional amounts, whetherin the form of shares of Common Stock or cash, will be issued upon exercise of the Rights.     16. No Rights As Shareholder. The Grantee shall not have any rights of a shareholderwith respect to the Rights or any shares of Common Stock issued in respect thereof, until a stockcertificate has been duly issued following exercise of the Rights as provided herein.     17. Amendment. This Agreement may be amended by written agreement of the Grantee andthe Company, without the consent of any other person.
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     18. Law Governing. This Award shall be governed in accordance with and governed by theinternal laws of the State of Florida.     19. Receipt of Plan. Grantee acknowledges receipt of a copy of the Plan and representsthat he or she is familiar with the terms and provisions thereof, and hereby accepts this Awardsubject to all of the terms and provisions thereof. Grantee has reviewed the Plan and this Awardin their entirety, has had an opportunity to obtain the advice of counsel and Grantee’s tax advisorprior to accepting this Award, and fully understands all provisions of the Plan and this Award.     20. Acknowledgement of Grantee. As a material inducement to Company to grant the Awardto Grantee, Grantee represents and warrants to the Company that Grantee is not now in violation andhas not at any time violated any non-competition, confidentiality or other duty or obligationGrantee has to the Company.     IN WITNESS WHEREOF, the Company has caused these presents to be executed in its name and onits behalf, all as of the Grant Date.      NOVEN PHARMACEUTICALS, INC.