Exhibit 10.51


 





 


	
   

  



 


 


Amended and Restated


2004 Stock Option Plan


 


	
   

  



 


 


June 25, 2004


 

















 


BIOVAIL
CORPORATION


 


AMENDED
AND RESTATED


2004
STOCK OPTION PLAN


 


ARTICLE
1

PURPOSE


 


1.1                               Purpose


 


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


 


ARTICLE
2

INTERPRETATION


 


2.1                               Definitions


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


3

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


“Plan” means this stock option plan;


 


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


 


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


 


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


 


“Termination Date” means:


 


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


 


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


 


“TSX” means the Toronto Stock Exchange; and


 


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


 


2.2                               Interpretation


 


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


 


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


 


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


 


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


 


ARTICLE
3

ADMINISTRATION


 


3.1                               Administration


 


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


 


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


 


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


 


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


 


(ii)          the Exercise Price;


 


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


 


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


 


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


 


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


 


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


 


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


 


3.2                               Delegation to Committee


 


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


 


6

















 


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


 


3.3                               Eligibility


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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3.4                               Total Common Shares Subject to
Options


 


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


 


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


 


3.5                               Option Agreements


 


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


 


3.6                               Non-transferability


 


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


 


ARTICLE
4

GRANT OF OPTIONS


 


4.1                               Grant of Options


 


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


 


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4.2                               Exercise Price


 


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


 


4.3                               Term of Options


 


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


 


4.4                               Exercise Period


 


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


 


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


 


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


 


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


 


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


 


9

















 


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


 


4.5                               Payment of Exercise Price


 


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


 


4.6                               Retirement, Death or
Disability of Optionee


 


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


 


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


 


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


 


4.7                               Termination of Employment or
Services


 


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


 


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


 


10














 


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


 


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


 


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


 


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


 


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


 


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


 


11

















 


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


 


4.8                               Discretion to Permit Exercise


 


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


 


4.9                               Change in Control


 


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


 


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


 


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


 


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


 


12

















 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


13

















 


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


 


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


 


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


 


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


 


4.10                        Conditions of Exercise


 


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


 


14

















 


ARTICLE 5

SHARE CAPITAL ADJUSTMENTS


 


5.1                               General


 


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


 


5.2                               Reorganization of Company’s
Capital


 


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


 


5.3                               Other Events Affecting the
Company


 


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


 


5.4                               Immediate Exercise of Options


 


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


 


5.5                               Issue by Company of Additional
Shares


 


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


 


15

















 


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


 


5.6                               Fractions


 


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


 


5.7                               Conditions of Exercise


 


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


 


ARTICLE 6

MISCELLANEOUS PROVISIONS


 


6.1                               Legal Requirement


 


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


 


6.2                               Optionee’s Entitlement


 


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


 


6.3                               Withholding Taxes


 


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


 


16

















 


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


 


6.4                               Rights of Participant/Optionee


 


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


 


6.5                               Termination; Amendment


 


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


 


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


 


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


 


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


 


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


 


6.6                               Indemnification


 


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


 


17

















 


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


 


6.7                               Quebec Stock Savings Plan


 


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


 


6.8                               Participation in the Plan


 


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


 


6.9                               Effective Date


 


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


 


6.10                        Governing Law


 


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


 


18

















 


SCHEDULE A


 


2004 STOCK OPTION PLAN OPTION AGREEMENT


 


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


 


Name of Optionee:


 


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


 


Date of Grant:


 


Total Number of Common Shares Subject to
Option:


 


Exercise Price:


 


Vesting:


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


10.                                 The Optionee hereby agrees
that:


 


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


 


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


 


A-2

















 


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


 


	
   

  	
  BIOVAIL CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  



 


 


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


 


 


	
   

  	
   

  	
   

  
	
  Date Accepted

  	
   

  	
  Optionee’s Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Optionee’s Name

  
	
   

  	
   

  	
  (PLEASE PRINT)

  



 


A-3

















 


SCHEDULE B


 


2004 STOCK OPTION PLAN EXERCISE NOTICE FORM - OPTIONS


 


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


 


2.                                                                                       I,                                                                                                      , hereby certify that:


(PRINT NAME)


 


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


 


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


 


	
   

  	
   

  	
   

  
	
  Date Accepted

  	
   

  	
  Optionee’s Signature