Document:

Exhibit 10.37

 

CHAIRMAN AGREEMENT

 

THIS
CHAIRMAN AGREEMENT (the “Agreement”),
is entered into as of May 1, 2008 by and between Biovail Corporation (the “Company”) and Douglas John Paul Squires, Ph.D (“Dr. Squires”).

 

BACKGROUND

 

WHEREAS,
the Board of Directors of the Company (the “Board”)
has appointed Dr. Squires as Chairman of the Board effective May 1,
2008; and

 

WHEREAS,
the parties now wish to enter into this Agreement to evidence the terms of Dr. Squires’
role as Chairman of the Board.

 

NOW,
THEREFORE, in consideration of the mutual promises
hereinafter set forth, and intending to be legally bound hereby, the Company
and Dr. Squires hereby agree as follows:

 

1.             Term. 
The term of this Agreement shall begin on May 1, 2008 and shall
continue until June 1, 2009, unless terminated sooner pursuant to Section 7
below, or extended by mutual agreement of the parties (the “Term”).

 

2.             Services to be Provided.  During the Term, Dr. Squires shall serve
as the Chairman of the Board and among Dr. Squires’ duties shall be
presiding over meetings of the Board, calling special meetings of the Board,
receiving Board and officer resignations, and such other specific duties that
are normal and customary to such position and as may reasonably be assigned to
the Chairman from time to time by the Board. 
The scope of Dr. Squires’ activities and his committee memberships
shall be determined by the Board, acting in its sole discretion.  Dr. Squires shall report to the Board
and coordinate his activities with the Board and the Company.  The foregoing duties of Dr. Squires as
Chairman of the Board shall be referred to for purposes of this Agreement as
the “Services.”  In addition, in connection with the Company’s
retention of a new Chief Executive Officer, Dr. Squires has agreed to
perform such reasonable transition services as shall be mutually agreed upon by
Dr. Squires and the Chief Executive Officer (the “Transition
Services”).

 

3.             Compensation; Benefits.

 

(a)           Compensation.  As compensation for Dr. Squires’
performance of the Services under this Agreement during the Term, (i) following
the commencement of the Term, the Company shall pay to Dr. Squires a
payment of US $23,014.00, representing the prorated amount of the annual
retainer payment (described in (ii) below) due to Dr. Squires for
Services to be provided during the period between May 1, 2008 and June 25,
2008 (the scheduled date for the Company’s annual general meeting of
shareholders), to be paid in a lump sum within 30 days of the date of this
Agreement; and (ii) following Dr. Squires’ election to the Board at
the Company’s annual general meeting of shareholders to be held on June 25,
2008, the Company shall pay to Dr. Squires an annual retainer payment of
US $150,000.00, to be paid in a lump sum within 30 days of the date of such
annual meeting.  In addition, in
connection with Dr. Squires’ performance of the Transition Services, the
Company shall pay to Dr. Squires a fee of $282,740.00, to be paid within
30 days of the date of this Agreement. 
The Company shall 

 

 

reimburse Dr. Squires for all reasonable expenses
incurred by Dr. Squires in connection with the performance of the Services
in accordance with the Company’s expense reimbursement policies for directors.

 

(b)           Equity Compensation. 
In addition to the annual retainer payments described above, Dr. Squires
shall also be entitled to grants of deferred share units (“DSUs”)
as compensation for Dr. Squires’ performance of the Services under this
Agreement during the Term, as follows: (i) within 30 days of the date of this Agreement, the Company shall
grant to Dr. Squires DSUs representing a number of shares of common stock
of the Company equivalent in value to US $23,014.00 as of the date of grant,
representing the prorated amount of the annual DSU grant (described in (ii) below)
due to Dr. Squires for Services to be provided during the period between May 1,
2008 and June 25, 2008 (the scheduled date for the Company’s annual
general meeting of shareholders); and (ii) following Dr. Squires’
election to the Board at the Company’s annual general meeting of shareholders
to be held on June 25, 2008,  the
Company shall grant to Dr. Squires DSUs representing a number of shares of
common stock of the Company equivalent in value to US $150,000.00 as of the
date of grant.  The DSUs granted to Dr. Squires
shall be governed by the terms of the Deferred Share Unit Plan  for US Directors.

 

(c)           Office, Secretarial Support and Corporate Aircraft. To
assist Dr. Squires in providing the Transition Services and the Services,
an office and secretarial support will be provided in the Company offices in
Bridgewater, New Jersey and Mississauga, Ontario for the Term. The corporate
aircraft will reasonably be made available for transport between New
Jersey/Toronto/Barbados and other locales as requested by the Chief Executive
Officer.

 

(d)           No Additional Compensation. Other than the compensation set
out above in Sections 3(a), 3(b) and 3(c), Dr. Squires shall not be
entitled to any other compensation in respect of his service as Chairman or
member of the Board during the Term, unless otherwise agreed to by the parties.
For greater certainty, Dr. Squires shall not be entitled to receive
meeting fees, committee retainers or other payments made by the Company to its
non-management directors to the extent they differ from the amounts set out
herein.

 

(e)           Independent Contractor Status.  This
Agreement is not an employment agreement. 
With the exception of the equity compensation referenced in Section 3(b) above,
the items referenced in Section 3(c) above and any and all benefit
plans from time to time in effect for members of the Board generally, Dr. Squires
is not entitled, as Chairman, to any of the benefits that the Company provides
to its employees.  In the event that the
Director is reclassified as an employee of the Company, Dr. Squires shall
not be eligible for any form of employee benefits unless and until the Company
expressly provides for such participation.

 

(f)            Tax Reporting.  Dr. Squires shall be solely
responsible for taxes and other wage deductions incurred as a result of
performing Services or Transition Services under this Agreement. Unless
required to do so by applicable law, the Company shall not pay or withhold
federal, state or foreign government payroll taxes of any kind, including but not
limited to FICA and FUTA, with respect to its payments to Dr. Squires.

 

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4.             Restrictive Covenants.

 

(a)           Confidentiality.  Dr. Squires
acknowledges and agrees that he has read and understands and agrees that he
remains bound by the terms of the confidentiality agreement (the “Confidentiality Agreement”) dated December 5, 2007,
which Confidentiality Agreement has been read, understood and executed by Dr. Squires
and is attached hereto as Schedule A and which is incorporated by
reference into this Agreement.

 

(b)           Restrictive Covenants.  Dr. Squires acknowledges and agrees that
he remains bound by the terms of Article Four of that certain amended
and restated executive employment agreement by
and between the Company and Dr. Squires effective as of September 1,
2007 and executed December 5, 2007 (the “Employment Agreement”).

 

(c)           Standards of Business
Conduct.  Dr. Squires
acknowledges and agrees that he has read and understands and agrees that he
remains bound by the Company’s Standards of Business Conduct, which are
attached hereto as Schedule B.

 

5.             Return of Company Property.  Promptly upon the expiration or sooner
termination of the Term, and earlier if requested by the Company at any time, Dr. Squires
shall promptly deliver to the Company all copies and embodiments, in whatever
form or medium, of all Confidential Information or Intellectual Property
(within the meaning of such terms under the Confidentiality Agreement and Article Four
of the Employment Agreement) in Dr. Squires’ possession or within his
control (including written records, notes, photographs, manuals, notebooks,
documentation, program listings, flow charts, magnetic media, disks, diskettes,
tapes and all other materials containing any Confidential Information or
Intellectual Property) irrespective of the location or form of such material
and, if requested by the Company, shall provide the Company with written
confirmation that to the best of his knowledge all such materials have been
delivered to the Company.  This provision
shall not prevent Dr. Squires from retaining his personal property,
including his personal information contained on any electronic device.

 

6.             Indemnification.  The Company agrees to indemnify and hold Dr. Squires
harmless to the fullest extent permitted by applicable law, as in effect at the
time of the subject act or omission.  In
connection therewith, Dr. Squires shall be entitled to the protection of
any insurance policies which the Company elects to maintain generally for the
benefit of the Company’s directors and officers, against all costs, charges and
expenses whatsoever incurred or sustained by Dr. Squires in connection
with any action, suit or proceeding to which he may be made a party by reason
of his being or having been a director, officer or employee of the
Company.  This provision shall survive
any termination of Dr. Squires’ service hereunder.

 

7.             Termination.  Notwithstanding the provisions of Section 3,
the Company may terminate the Term (a) for any reason upon 60 days’ prior
written notice to Dr. Squires, and (b) immediately upon written
notice to Dr. Squires, in the event of termination for Cause.  Dr. Squires may terminate the Term for
any reason upon 60 days’ prior written notice to the Company.  The Term shall automatically terminate if Dr. Squires
is not elected to the Board at the Company’s annual general meeting of
shareholders scheduled to be held on June 25, 2008. In the event of any
termination of the Term, the Company shall only be responsible for any incurred
but unreimbursed expenses and any accrued but unpaid payments, subject to the
terms set forth in Section 3.  For
greater certainty, if Dr. Squires is not elected to the Board at the
Company’s 

 

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annual general meeting scheduled to be held on June 25,
2008, then the Company shall not be responsible for the annual retainer payment
described in Section 3(a)(ii) above or the annual DSU grant described
in Section 3(b)(ii) above. For purposes of this Agreement, the term “Cause” includes:

 

(i)            Dr. Squires’
conviction, or his entering of a guilty plea or a plea of no contest, with
respect to a felony, any crime involving fraud, larceny or embezzlement or any
other crime involving moral turpitude which subjects, or if generally known,
would damage the business interests or reputation of the Company or any of its
affiliates;

 

(ii)           any
act of fraud, misappropriation, material dishonesty, embezzlement or similar
conduct committed by Dr. Squires involving the Company or any affiliates;

 

(iii)          a
material breach by Dr. Squires of his duties hereunder (other than as a
result of incapacity due to physical or mental impairment) which is
demonstrably willful and deliberate on the part of Dr. Squires or which is
committed in bad faith or without reasonable belief that such breach is in the
best interests of the Company;

 

(iv)          a
material breach by Dr. Squires of his duties hereunder (other than as a
result of incapacity due to physical or mental impairment), except as identified
in Section 7(iii)  above, which breach is not remedied by Dr. Squires
within 30 days after receipt of written notice from the Company specifying such
breach; or

 

(v)           Dr. Squires’
failure to comply in any material way with any of the provisions of this
Agreement.

 

8.             Entire Agreement, Amendment and Assignment.  This Agreement (including the schedules
hereto) is the sole agreement between Dr. Squires and the Company with
respect to the Services to be performed hereunder and it supersedes all prior agreements
and understandings with respect thereto, whether oral or written, except that
certain Confidential Separation Agreement and General Release by and between
the Company and Dr. Squires to be dated as of May 6, 2008 and Article Four of the Employment
Agreement.  No modification to any
provision of this Agreement shall be binding unless in writing and signed by
both Dr. Squires and the Company. 
No waiver of any rights under this Agreement shall be effective unless
in writing signed by the party to be charged. 
All of the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective heirs,
executors, administrators, legal representatives, successors and assigns of the
parties hereto, except that the duties and responsibilities of Dr. Squires
hereunder are of a personal nature and shall not be assignable or delegable in
whole or in part by Dr. Squires.

 

9.             Governing Law.  This Agreement shall be deemed to have been
made in and shall be construed in accordance with the laws of the State of New
Jersey and all legal proceedings contemplated in this Agreement shall be
brought in, and be governed by, the laws of the State of New Jersey, without
regard to principles of conflicts of law.

 

10.           Notices.  All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, two (2) business days after the date when
sent to the recipient by reputable express courier service (charges prepaid) or
four (4) business days after the date when mailed to the recipient by
certified or registered mail, return receipt 

 

4

 

requested and postage prepaid.  Such notices, demands and other
communications shall be sent to Dr. Squires and to the Company at the
addresses set forth below,

 

	
  If to Dr. Squires:

  	
  To the last
  address delivered to the Company by Dr. Squires in the manner set forth
  herein.

  
	
   

  	
   

  
	
  If to the Company:

  	
  Biovail Corporation

  
	
   

  	
  7150 Mississauga Road

  
	
   

  	
  Mississauga, Ontario L59 8M5

  
	
   

  	
  Attn:
  General Counsel

  

 

or to such other address or to the attention
of such other person as the recipient party has specified by prior written
notice to the sending party.

 

11.           Counterparts.  This Agreement shall become binding when any
one or more counterparts hereof, individually or taken together, shall bear the
signatures of Dr. Squires and the Company. 
This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original as against any party whose signature
appears thereon, but all of which together shall constitute but one and the
same instrument.

 

12.           Severability.  If any provision of this Agreement or
application thereof to anyone or under any circumstances is adjudicated to be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect any other provision or application of this
Agreement which can be given effect without the invalid or unenforceable
provision or application and shall not invalidate or render unenforceable such
provision or application in any other jurisdiction.

 

13.           Survival.  Sections 5 through 14 shall survive and
continue in full force in accordance with their terms notwithstanding any
termination of the Term, and the Agreement shall otherwise remain in full force
to the extent necessary to enforce any rights and obligations arising hereunder
during the Term.

 

14.           Application of Section 409A.

 

(a)           This
Agreement is intended to comply with the applicable provisions of section 409A
of the Code and shall be interpreted to avoid any penalty sanctions under
section 409A of the Code.  If any payment
or benefit cannot be provided or made at the time specified herein without
incurring sanctions under section 409A of the Code, then such benefit or
payment shall be provided in full at the earliest time thereafter when such
sanctions shall not be imposed.  In no
event shall Dr. Squires, directly or indirectly, designate the calendar
year of payment.

 

(b)           All
reimbursements and in kind benefits provided under this Agreement shall be made
or provided in accordance with the requirements of section 409A of the Code,
including, where applicable, the requirement that (i) any reimbursement is
for expenses incurred during Dr. Squires’ lifetime (or during a shorter
period of time specified in this Agreement), (ii) the amount of expenses
eligible for reimbursement, or in kind benefits provided, during a calendar
year may not affect the expenses eligible for reimbursement, or in kind
benefits to be provided, in any other calendar year, (iii) the
reimbursement of an eligible expense shall be made on or before the last day of
the calendar year following the year in which the expense is incurred, and (iv) the

 

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right to reimbursement or in kind benefits is not
subject to liquidation or exchange for another benefit.

 

15.           Independent Legal Advice.  Dr. Squires agrees to the terms and
conditions of this Agreement having had the opportunity to receive independent
legal advice.  The legal fees for the
independent advice shall be reimbursed by the Company.

 

[SIGNATURE
PAGE FOLLOWS]

 

6

 

IN WITNESS
WHEREOF, the undersigned, intending to be legally
bound, has duly executed this Agreement as of the date first above written.

 

	
   

  	
  BIOVAIL
  CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Wendy Kelley

  
	
   

  	
  Name:

  	
  Wendy Kelley

  
	
   

  	
  Title:

  	
  Senior
  Vice-President, General Counsel and

  
	
   

  	
   

  	
  Corporate
  Secretary

  

 

 

IN WITNESS WHEREOF,
the undersigned, intending to be legally bound, has duly executed this
Agreement as of the date first above written.

 

	
  CHAIRMAN

  	
   

  	
  SIGNED, SEALED AND
  DELIVERED

  
	
   

  	
   

  	
  in the presence of:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Douglas John Paul Squires

  	
   

  	
  /s/ Mark A. Durham

  
	
  Douglas John
  Paul Squires, Ph.D

  	
   

  	
  Witness

  

 

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SCHEDULE A

 

CONFIDENTIALITY
AGREEMENT

 

 

BIOVAIL CORPORATION

(and its Subsidiaries, Divisions, and
Affiliates)

 

CONFIDENTIALITY
AGREEMENT

 

As an employee of Biovail Corporation (the “Corporation”), I
acknowledge that I may acquire or have disclosed to me by the Corporation or by
any affiliate, associate, or technology partner of the Corporation, either
directly or indirectly, in writing, conversation, or through observation,
various information about the business of the Corporation which is not in the public
domain and which the Corporation does not wish to be divulged to other persons,
companies, or third parties.  I further
understand that the Corporation’s Confidential Information (as defined below)
is essential to its competitive advantage and to its ability to be financially
viable.  I further understand that the
unauthorized disclosure of such Confidential Information may cause the
Corporation irreparable injury that may not be rectified in the future.

 

Therefore, as a condition and in consideration of my employment with
the Corporation, I understand and agree that while employed with the
Corporation and thereafter (as more particularly described below), I am
required to hold confidential and not to disclose to anyone without the written
authority from the Corporation any knowledge, information, or facts concerning
the Corporation’s:

 

·                  research and development activities

·                  technological plans, advances,
applications and inventions

·                  technical specifications, designs and
plans

·                  materials and sources of supply

·                  discoveries, inventions, trade
secrets, patents

·                  financial affairs, contracts,
licensing agreements, customer lists,

pricing practices, marketing strategies

·                  any other information regarding the
Corporation, its products and their development which is not in the public
domain

 

All of the foregoing shall hereinafter collectively be referred to as
the “Confidential Information”.

 

I shall keep confidential any and all Confidential Information which
has been disclosed to me in writing or through oral communications and shall
not divulge in any manner whatsoever any such information to any person, firm,
corporation, partnership or similar entities without the Corporation’s written
authority.

 

Should I breach or threaten to breach this Agreement, I shall be liable
to the Corporation in equity and/or in law for damages that may be suffered by
the Corporation as a result of the breach or threatened breach.  I understand that a breach of this Agreement
may result in irreparable harm to the Corporation such as to warrant the
entitlement by the Corporation to an interlocutory and/or

 

 

permanent injunction or other equitable relief against me, and an award
of damages including punitive, exemplary and aggravated damages, together with
legal costs and expense and I specifically agree that I will not argue the
adequacy of damages or the Corporation’s ability to seek equitable relief in
any such proceeding.

 

All Confidential Information
supplied by the Corporation to me during the course of my employment and any
rights related thereto, including but not limited to rights of know how,
patent, trademark and copyright, with respect to existing products or those
that are developed during or after my employment, are and remain the exclusive
and absolute property of the Corporation.

 

I shall not, except as and to
the extent required to enable me to carry out my duties with the Corporation,
make any copies or reproduce the Confidential Information nor shall I remove
or cause to have removed from the premises of the Corporation during my
employment any Confidential Information unless required to do so in order to
fulfill my duties with the Corporation.  Such copies or reproductions
shall be strictly subject to the terms and conditions of this Agreement.  I shall take such steps as are necessary to
restrict access to and protect the confidentiality of such copies or
reproductions of the Confidential Information. Any such copies or reproductions
made shall become the exclusive and absolute property of the Corporation.

 

Upon
request of the Corporation, I agree to immediately surrender to the Corporation
all documentation and information - notes, drawings, recordings, manuals,
letters, correspondence, computer data and programs, records, books or any
other materials relating to the Confidential Information which is in my
possession without my retaining any copies or duplicates thereof.

 

I agree that this Agreement shall be construed in accordance with the
laws of the Province of Ontario and I agree that the applicable courts of the
Province of Ontario shall have exclusive jurisdiction with respect to any
dispute or breach herein and I hereby attorn to the exclusive jurisdiction of
the courts of the Province of Ontario.

 

This Agreement shall enure to the benefit of and shall be binding upon
my successors, heirs and attorneys.

 

The
disclosure or divulging of any Confidential Information contrary to this
Agreement, or the violation of this Agreement in any way shall result in my
immediate termination of employment, in addition to which I may be subject to
criminal prosecution and civil liability.

 

2

 

I acknowledge and agree
that I have executed this Agreement freely and with the benefit of independent
legal advice and the terms herein are fair and reasonable.

 

I acknowledge
and agree to the foregoing.

 

 

	
  Employee
  Signature: 

  	
  /s/ Douglas
  John Paul Squires

  	
   

  	
  Date: 

  	
  December 5,
  2007

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Witness
  Signature: 

  	
  /s/ Michelle
  Garraway

  	
   

  	
  Date: 

  	
  December 5,
  2007

  
						

 

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SCHEDULE B

 

STANDARDS OF BUSINESS CONDUCT

 

 

 

BIOVAIL CORPORATION

(and its Subsidiaries, Divisions, and
Affiliates)

 

STANDARDS OF BUSINESS CONDUCT

 

Biovail Corporation (“Biovail”), together
with its subsidiaries, divisions and affiliates, places great importance on
conducting its business activities in an ethical and appropriate manner.  Each employee, officer and director is a
reflection of Biovail, and as such, the activities and actions of every
individual within Biovail must be undertaken in accordance with a high standard
of ethics and integrity.  As such,
Biovail expects each employee, officer and director to comply with, and adhere
to, these Standards of Business Conduct (the “Standards”).

 

CONFLICTS
OF INTEREST

 

Employees,
officers and directors of Biovail must avoid situations where their private
interests could conflict with, or even appear to conflict with, the interests
of Biovail and its stockholders.

 

Conflicts
of interest arise when an individual’s position or responsibilities with
Biovail present an opportunity for personal gain apart from the normal rewards
of employment.  They also arise when the
private interests of an employee, officer or director are inconsistent with
those of Biovail or create conflicting loyalties.  Such conflicting loyalties can cause an
employee, officer or director to give preference to private interests in
situations where corporate responsibilities should come first.  Employees, officers and directors must
perform the responsibilities of their positions on the basis of what is in the
best interests of Biovail and free from the influence of personal
considerations and relationships.

 

In
the event that any potential conflict of interest arises, the individual
involved must immediately notify his or her immediate supervisor.    If such individual is an officer or
director of Biovail, the Executive Chairman (“Chairman”), Chief Executive
Officer (“CEO”) and the General Counsel, or in the absence of a General Counsel
the Vice President, Associate General Counsel (“SLO”) of Biovail must also be
immediately notified and no further action may be taken unless authorized in
writing by the Chairman and/or the CEO.

 

While
it is not possible to detail every situation where conflicts of interest may
arise, the following policies cover the areas that have the greatest potential
for conflict:

 

A.                                    Trading in Biovail Securities and Use of
Inside Information

 

There
are numerous laws in Canada and the United States (federal, provincial and
state laws), to regulate transactions in corporate securities (stocks and
bonds) and the securities industry. 
Violation of these laws may lead to civil and criminal actions against
the individual and Biovail.

 

 

i.                              Any employee, officer, director
or other insider or anyone (family member, etc.) who knows of any material
information (as defined below) about Biovail that has not been disclosed to the
public (commonly known as “insider information”) may not engage in any
transaction in Biovail’s securities until such information is disclosed to the
public (whether or not there is a formal trading “black out” in place).  This rule applies equally to
transactions in securities of other companies. 
In addition, employees, officers and directors must not provide insider
information to others (“tippees”) who may trade in either the securities of
Biovail or the securities of other companies.

 

“Material information” is any information
relating to the business and affairs of Biovail that would reasonably be
expected to result in a change in the market price or value of Biovail’s
securities.  Generally speaking, material
information is a matter to which an average prudent investor should be
reasonably informed before a decision is made to buy or sell the security
involved.  Examples of such information
would include annual or quarterly financial results; significant changes in
management; significant shifts in operating or financial circumstances, such as
major write-offs and changes in earnings projections; borrowing of a
significant amount of funds; acquisitions of, or mergers with, other companies;
significant new contracts or loss of business; and major new products, services
or patents.  This list provides examples
only; many other matters may be considered material information.

 

Employees, officers, directors and other
insiders who have questions that relate to the sale or purchase of a security
under circumstances where these laws and regulations might apply should consult
with the SLO, who may refer them to outside legal counsel.

 

ii.         In addition to the prohibition against the use of “insider”
information which applies to all employees, officers and directors, the various
securities laws that apply in the jurisdiction and countries in which Biovail
does business place definite restrictions on the manners in which employees,
officers and directors of Biovail, and their family members, their associates,
etc., may engage in transactions involving the securities of Biovail.
Employees, officers and directors shall comply with all laws, rules and
regulations that prohibit or restrict insider trading.

 

Whenever there is any doubt as to whether any
transactions involving Biovail’s securities would violate securities laws,
employees, officers and directors should consult the SLO of Biovail.  Within the framework of the foregoing
policies and laws, the final decision of each employee, officer or director,
with respect to securities transactions, must be his or her own.

 

iii.        Employees, officers, directors and other insiders shall
maintain the confidentiality of information entrusted to them by Biovail or its
customers (except where disclosure is authorized or legally mandated) and shall
not, without proper authority, give or release to anyone not employed by
Biovail, data or information of a confidential nature concerning Biovail.  Disclosure of confidential information can be
harmful to Biovail and could be the basis for legal action against Biovail and
the individual disclosing the information. 
Confidential information includes all non-public information that might
be of use to competitors, or harmful to Biovail or its customers, if disclosed.

 

2

 

iv.        Employees, officers, directors and other insiders shall not
acquire any property, security or any business interest that they know Biovail
has an interest in acquiring.  Moreover,
based on such advance information, employees, officers and directors shall not
acquire any property, security or business interest for speculation or
investment.

 

v.                          Employees, officers, directors
and other insiders must follow Biovail policies regarding “Blackout Periods”
when Biovail’s stock may not be traded. 
Such policies will be communicated by the SLO from time to time and must
be adhered to by all employees, officers and directors.

 

B.                                    Personal Financial Interest

 

Employees,
officers and directors should avoid any outside financial interests that might
influence decisions or actions they have been empowered to make on behalf of
Biovail.  An employee, officer or
director performing duties in conformity with this policy shall not have a
financial interest in, indebtedness to, or a personal contract or understanding
with any concern with which he or she does business on behalf of Biovail.

 

i.          Employees, officers or directors whose corporate duties bring
them into business dealings with an organization in which they, or a member of
their family, have a financial interest or to which they, or a member of their
family, have any indebtedness, or a business employing a relative or close
friend, must immediately notify their immediate supervisor. The employee,
officer or director, in turn, cannot complete a transaction on behalf of
Biovail with this organization unless properly authorized in writing from their
supervisor after full disclosure of the relationship.

 

ii.                           An employee, officer or director
may not perform work or services, outside the course of their normal employment
by Biovail, for an organization doing or seeking to do business with Biovail
without appropriate prior written approval of their supervisor or the Board of
Directors.  An employee, officer or
director may not be a director, officer, partner or consultant of an
organization doing or seeking to do business with Biovail, nor may any of them
permit their names to be used in any way indicating a business connection with
such an organization, without appropriate prior written approval of their
supervisor or the Board.

 

iii.        An employee, officer or director shall not accept for
himself or herself, or for the benefit of any relative or friend, any payments,
loans, services, favors involving more than ordinary social amenity, or gifts
of more than nominal value from any organization doing or seeking to do
business with Biovail.

 

iv.                       The requirement of freedom from
conflict of interest applies with equal force to the spouse, children and other
close relatives of each employee, officer and director.  This policy applies to all employees,
officers and directors of Biovail with respect to all of the affairs of Biovail.

 

3

 

v.                          Employees,
officers and directors shall not (a) take for themselves personally
opportunities that are discovered through the use of corporate property,
information or position; (b) use corporate property, information, or
position for personal gain; (c) compete with Biovail. Employees, officers
and directors owe a duty to Biovail to advance its legitimate interests when
the opportunity to do so arises.

 

vi.                       Biovail may
not make loans to any employee, officer or director.

 

C.                                    Outside Activities

 

Employees,
officers and directors should avoid outside employment or activities which
would impair the effective performances of their responsibilities to Biovail,
either because of excessive demands on their time, or because the outside
commitments can be contrary to their obligations to Biovail

 

D.                                    Protection and Proper Use of Biovail’s
Assets

 

All
employees, officers and directors should protect Biovail’s assets and ensure
their efficient use.  Theft, carelessness
and waste have a direct impact on Biovail’s profitability.  All of Biovail’s assets should be used only
for legitimate business purposes.

 

E.                                      Fair Dealing

 

Each employee, officer and director shall
endeavor to deal fairly with Biovail’s customers, suppliers, competitors and
employees. None should take unfair advantage of anyone through manipulation,
concealment, abuse of privileged information, misrepresentation of material
facts, or any other unfair-dealing practice.

 

2.              COMPETITIVE PRACTICES

 

The management of Biovail firmly believes
that fair competition is fundamental to continuation of the free-enterprise
system.  Biovail complies with, and
supports, laws of all countries that prohibit restraints of trade, unfair
practices, or abuse of economic power.

 

Biovail
will not enter into arrangements that unlawfully restrict its ability to
compete with other businesses, or the ability of any other business
organization to compete freely with Biovail. 
Biovail policy also prohibits employees, officers and directors from
entering into, or even discussing, any unlawful arrangement or understanding
which may affect its pricing policies, terms upon which its products and
services are sold, or which might be construed as dividing customers or sales
territories with a competitor.

 

These
principles of fair competition are basic to all Biovail operations.  They are integral parts of the following
sections that cover Biovail’s dealings with suppliers, customers and public
officials.

 

4

 

3.              DEALING WITH SUPPLIERS

 

Biovail
is a valuable customer for many suppliers of goods, services and
facilities.  People who want to do
business, or to continue to do business, with Biovail must understand that all
purchases by Biovail will be made in accordance with its purchasing policy and
exclusively on the basis of price, quality, service and suitability to Biovail’s
needs.

 

A.                                    Reciprocity

 

Biovail considers
reciprocity a harmful practice and a hindrance to assuring purchase of the best
available materials or services at the lowest possible prices.  It will not be practiced or allowed.

 

Suppliers of goods and
services to Biovail will not be asked to buy goods and services from Biovail in
order to become or continue as a supplier.

 

Biovail
will not attempt to influence its suppliers to purchase from customers of
Biovail.  When Biovail makes purchases it
will not favor firms who are customers of Biovail or any of its affiliates.

 

B.                                    “Kickbacks” and Rebates

 

Purchases or sales of
goods and services by Biovail must not lead to employees, officers or
directors, or their families, receiving any type of personal kickbacks or
rebates.  Employees, officers, directors,
and their families, must not accept any form of “under-the-table” payment.

 

C.                                    Receipt of Gifts and Entertainment

 

Even when gifts and
entertainment are exchanged out of the purest motives of personal friendship,
they can be misunderstood.  They can
appear to be attempts to bribe Biovail’s employees, officers or directors into
directing business of Biovail to a particular supplier.  To avoid both the reality and the appearance
of improper relations with suppliers or potential suppliers, the following
standards will apply to the receipt of gifts and entertainment by employees,
officers and directors of Biovail:

 

Gifts

 

i)                 Employees,
officers and directors are prohibited from soliciting gifts, gratuities, or any
other personal benefit or favor of any kind from suppliers or potential
suppliers.  Gifts include not only
merchandise and products but also personal services, and tickets to theatrical
and sports events.  Employees, officers
and directors should exercise good judgment when accepting unsolicited
gifts.  Employees, officers and directors
are prohibited from accepting gifts of money.

 

ii)              Employees,
officers and directors may accept unsolicited non-money gifts provided:

 

(1)          They are items of nominal
intrinsic value; or

 

(2)          They are advertising and
promotional materials, clearly marked with Biovail or brand names of the giver.

 

5

 

iii)           Any gift of
more than nominal intrinsic value must be reported to the SLO to determine
whether it can be accepted.  Some gifts
may be perishable so as to make their return impractical.  Supervisors can permit acceptance of such
gifts, but should require employees, officers and directors to tactfully inform
givers that such gifts are discouraged.

 

iv)          In the
transaction of some international business, it is lawful and customary for
business leaders in some countries to give unsolicited gifts to employees,
officers or directors of Biovail.  These
gifts can be of more than nominal value. 
Moreover, under the circumstances, returning the gifts or payment for
them may constitute an affront to the giver. 
In such cases, the gift must be reported to the SLO who may permit the
retaining of the gifts.

 

v)             In all other
instances where gifts cannot be returned or may adversely affect Biovail’s
continuing business relationships, the SLO must be notified.  They can require employees, officers and
directors to transfer ownership of such gifts to Biovail.

 

Entertainment

 

i)               Employees,
officers and directors shall not encourage or solicit entertainment from any
individual or company with whom Biovail does business.  Entertainment includes, but is not limited
to, activities such as dinner parties, theater parties, and sporting events.

 

ii)            From time to
time employees, officers and directors may accept unsolicited entertainment,
but only under the following conditions:

 

(1)          The entertainment occurs
infrequently;

 

(2)          It arises out of the ordinary
course of business;

 

(3)          It involves reasonable, not
lavish expenditures (the amounts involved should be ones employees, officers
and directors are accustomed to normally spending for their own business or
personal entertainment); and

 

(4)          The entertainment takes place in
settings that also are reasonable, appropriate, and fitting to employees,
officers and directors, their hosts, and their business at hand.

 

6

 

4.              DEALINGS WITH CUSTOMERS AND
POTENTIAL CUSTOMERS

 

Employees, officers and
directors must keep all dealings with customers and potential customers fair
and above board.  Biovail gets business
and keeps it because of the quality of its goods and services.  Biovail does not give unethical or illegal
rebates, kickbacks, under-the-table payments, or other similar improper favors
to customers or their representatives.

 

The
boundary line between ethical and unethical competition, or legal and illegal
conduct, is not always well defined, particularly in international activities
where differing local laws, customs, and practices come into play. Therefore,
the following standards will serve as guides:

 

a)              All employees, officers and
directors should make themselves aware of and fully comply with all laws, rules and
regulations, whether federal, state, local or foreign, including laws governing
relations with customers as well as competitors.

 

b)             All employees, officers and
directors engaged in negotiations and contracts with foreign governments, the
United States or any political subdivision thereof must also know and abide by
the specific rules and regulations covering relations with such
governments and their agencies.

 

c)              Employees, officers and
directors may not give gifts to customers except items of nominal value, which
fit the legal, normal, and customary pattern of Biovail’s sales efforts for a
particular market.  Exceptions to this
policy can occur in international trades where it can be legal, customary, and
appropriate business practice to exchange gifts with customers.  Only the CEO can authorize the giving,
receiving, or exchanging of such gifts. 
Any gifts received by employees, officers or directors in such an
exchange must be reported to the CEO for determination as to the disposition of
the gifts.

 

d)             Entertainment for any customer
must fit regular business practices.  The
place and type of entertainment and the money spent must be reasonable and
appropriate.

 

5.              DEALING WITH PUBLIC
OFFICIALS

 

Domestic
and foreign laws and regulations require Biovail to be in contact with public
officials on a wide variety of matters. 
Employees, officers and directors who regularly make these contacts have
special responsibilities for upholding Biovail’s good name.  The following standards relate to these
special responsibilities:

 

a)              All employees, officers and
directors who contact public officials must be familiar with lobbying laws and
public disclosure requirements, particularly those that apply to registrations
and filings.

 

b)             No employee shall make any form
of payment, direct or indirect, to any public official as an inducement to
procuring or keeping business or having a law or regulation enacted, defeated,
or violated.  This is bribery, pure and
simple.  It will not be tolerated.

 

7

 

It should be acknowledged that inherent in
the current health-care regulatory environment, the definition of “form of
payment” may include seemingly trivial gifts and/or favors (e.g. buying
lunches, coffee, etc.).

 

c)              When not prohibited by law,
employees, officers and directors are allowed to give to public officials gifts
where the presentation and acceptance of gifts is an established custom and a
normal business practice.  All such gifts
shall be of reasonable value and the presentation approved in advance by the
CEO.  Moreover, such gifts must be
presented in a manner that clearly identifies Biovail and the occasion that
warrants the presentation.

 

d)             Employees, officers and
directors are also allowed to give public officials gifts in the form of
product models and pictures provided the models and pictures are part of
Biovail’s general marketing and public relations programs (except as noted in
clause (b) above).

 

e)              On special ceremonial occasions,
officers of Biovail may publicly give gifts of more than nominal value to
public institutions and public bodies. 
Such gifts can commemorate special events or milestones in Biovail’s
history.

 

These may be transmitted through public
officials but the gifts are given to the public institutions and public groups
they represent, not to the officials personally.

 

f)                From time to time employees,
officers and directors may entertain public officials, but only under the
following conditions:

 

i.                                  It is legal and permitted by the
entity represented by the official;

 

ii.                             The entertainment is not
solicited by the public official;

 

iii.                          The entertainment occurs
infrequently;

 

iv.                           It arises out of the ordinary
course of business;

 

v.                              It does not involve lavish
expenditures, considering the circumstances;

 

vi.                           The settings and types of
entertainment are reasonable, appropriate and fitting to our employees,
officers or directors, their guests, and the business at hand.

 

6.              POLITICAL ACTIVITIES AND
CONTRIBUTIONS

 

A.                                    Canada and the United States

 

Employees,
officers and directors who participate in partisan political activities must
make every effort to ensure that they do not leave the impression that they
speak or act for Biovail.

 

Biovail
encourages its employees, officers and directors to participate in political
activities in their own time and at their sole expense.  No corporate action, direct or indirect, will
be allowed

 

8

 

that
infringes on the right of any employee individually to decide whether, to whom,
and in what amount, they will make personal political contributions.  The same is true of volunteer political
donations of personal service time, so long as it does not interfere with the
working status of employees, officers or directors.

 

B.                                    Outside Canada and the United States

 

No employees, officers
and directors are permitted to use Biovail’s funds, facilities, or other
assets, to support either directly or indirectly any political candidates or
political parties, without advance authorization in writing from their
immediate supervisor and the General Counsel. 
The policy of Biovail is that employees, officers and directors and employees
should not participate in political activities in countries of which they are
not nationals.  However, such persons, of
course, are free to participate in political activities in countries of which
they are nationals in their own time and at their own expense.

 

7.              DISCLOSURE

 

Biovail
has formed a Disclosure Committee to promote consistent practices aimed at
informative, timely and broadly disseminated disclosure of Material Information
to the market, external stakeholder groups and employees in accordance with all
applicable legal, regulatory and stock-exchange requirements.

 

It
is essential that the Disclosure Committee be fully apprised of all material
corporate developments to be able to determine whether there is information
that should be publicly disclosed, and what the appropriate timing is for
release of that information.  In some
cases, the Disclosure Committee may determine that the information should
remain confidential. If that is the case, the Disclosure Committee will
determine how that information will be controlled so that it is not
inadvertently released.  Therefore any
employee who becomes aware of information that he/she believes might be
material to Biovail and/or any of its affiliates and subsidiaries he/she should
advise their manager or supervisor or a member of the Disclosure
Committee.  Current membership of the
Disclosure Committee is posted on the Biovail.com website.

 

This
applies throughout the year, but is particularly critical when annual or
quarterly financial statements and Management Discussion and Analysis (MD&A)
or regulatory filings are being prepared (e.g. regulatory filings, such as the
U.S. Securities and Exchange Commission, Form 20-F).

 

8.              PUBLIC COMMUNICATIONS

 

Given the importance placed on confidentiality and the appropriate
disclosures of information regarding Biovail, it is important for employees,
officers and directors to ensure that care be taken with any communication
regarding Biovail or its activities outside of Biovail.

 

9

 

A.                                    Designated
Spokespersons

 

Biovail has
designated official spokespersons who are authorized to speak on behalf of
Biovail, and answer questions from the news media and the investment community,
about Biovail and its activities. Employees, officers and directors who have
not been designated as spokespersons for Biovail are not permitted to speak on
behalf of the Company to the news media or to the investment community.

 

B.                                    Media or Analyst Inquiries

 

Any employee who is approached by any person
asking for comment on the activities of Biovail must direct any and all such
inquiries to a member of the Disclosure Committee or to a member of the Company’s
Stakeholder Relations team (Corporate Communications, Investor Relations) so
that an appropriate spokesperson can respond to the inquiry on behalf of
Biovail.

 

C.            Conferences

 

The Disclosure Committee should be advised of
any request to present at any conference or public meeting. Certain materials
prepared for any such presentation may be required to be reviewed by the
Company’s Stakeholder Relations group.

 

D.                                    Electronic Communications

 

Care must be taken in all instances in the
use of e-mail, and other devices (e.g., Blackberrys) in communications relating
to Biovail’s business.  While users tend
to resort to shorthand communication using these kinds of tools, those
communications do form a record of those communications that may be subject to
later review and disclosure.  A more
fulsome policy regarding electronic communications is in place (found in the
Human Resources Management System Policy Binder) and should be adhered to by
all employees, officers and directors.

 

E.                                      The Internet

 

Biovail has
instituted policies regarding the use of, and access to the Internet by
employees, officers and directors.  These
policies include a prohibition against anyone participating in any chat rooms
dedicated to Biovail or its operations or the industry at large.  If any employee, officer or director becomes
aware that any such chat room exists, they are asked to report the address of
such site to the SLO so that it may be monitored and appropriate action may be
taken.

 

9.              EQUAL OPPORTUNITY

 

Biovail
supports the principle that every individual must be accorded an equal
opportunity to participate in the free-enterprise system and to develop their
ability to achieve their full potential within that system.

 

There
shall be no discrimination against any employee or applicant because of race,
religion, color, sex, age, sexual orientation, national or ethnic origin, or
disability (as required by law) or any other consideration prohibited by local
law.  All employees, officers and
directors will be treated with equality during their employment without regard
to their race, religion, color, sex, age, national or ethnic origin, or
physical handicap, in all matters, including employment, upgrading, promotion,
transfer, layoff, termination, rates of pay, selection for training and

 

10

 

recruitment.  Biovail will maintain a work environment free
of discriminatory practice of any kind.

 

No employee shall have
any authority to engage in any action or course of conduct or to condone any
action or course of conduct by any other person which shall in any manner,
directly or indirectly, discriminate or result in discrimination in the course
of one’s employment, termination of employment, or any related matter where
such discrimination is, directly or indirectly, based upon race, religion,
color, sex, age, sexual orientation, national or ethnic origin, disability, or
any other consideration prohibited by law.

 

10.                               HEALTH, SAFETY,
AND ENVIRONMENTAL PROTECTION

 

It
is Biovail’s policy to pay due regard to the health and safety of its
employees, officers, directors and others, and to the state of the
environment.  There are federal,
provincial, state and local workplace safety and environmental laws which
through various governmental agencies regulate both physical safety of
employees, officers and directors and their exposure to conditions in the
workplace.  Should you be faced with an
environmental health issue or have a concern about workplace safety, you should
contact your Health and Safety Committee representative or notify Biovail
management immediately.

 

Many
countries and their regional and local governments now have complex legislation
to protect the health and safety of employees, or the general public, and to
prevent pollution and protect the environment. 
In case of violation, these laws often provide penalties for both the company
involved and its executive personnel. 
Biovail’s SLO should always be consulted when necessary to understand or
comply with such laws.

 

11.                               WORK
ENVIRONMENT

 

Employees,
officers and directors must treat each other with professional courtesy and
respect at all times. Employees, officers and directors shall not subject any
other employee to unwelcome sexual advances, requests for sexual favors or
other verbal or physical conduct which might be construed as sexual in nature,
or harass others on the basis of race, disability, gender, sexual orientation
or any other consideration prohibited by law. 
Such conduct may constitute sexual harassment or harassment under
federal, provincial and state law and may be the basis for legal action against
the offending employee and/or Biovail.

 

Employees
are encouraged to report all conduct that they believe in good faith to be
violations of local anti-harassment policies. 
To the extent permissible under local law the identity of the employees,
officers or directors involved will be kept strictly confidential, and will not
be revealed by Biovail’s management without the employee’s permission.  The alleged harassment will be thoroughly
investigated by Biovail and appropriate action will be taken.  Biovail has an appropriate policy to protect
employees against discrimination or retaliation as a result of such a
complaint.

 

11

 

12.                               INTEGRITY OF
RECORDS AND FINANCIAL REPORTS

 

It is of critical
importance that Biovail’s filings with the appropriate regulatory authorities
(e.g. U.S. Securities and Exchange Commission) be accurate and timely.
Depending on their position with Biovail, an employee, officer or director may
be called upon to provide necessary information to ensure that Biovail’s public
reports are complete, fair and understandable. Biovail expects employees,
officers and directors to take this responsibility very seriously and to
provide prompt accurate answers to inquiries related to Biovail’s public
disclosure requirements.

 

The
integrity of Biovail’s record keeping systems will be respected at all
times.  Employees, officers and directors
are forbidden to use, authorize, or condone the use of “off-the-books”
bookkeeping, secret accounts, unrecorded bank accounts, “slush” funds,
falsified books, or any other devices that could be utilized to distort records
or reports of Biovail’s true operating results and financial conditions or
could otherwise result in the improper recordation of funds or transactions.

 

13.                               USE OF AGENTS
AND NON-EMPLOYEES, OFFICERS AND DIRECTORS

 

Agents or other
non-employees cannot be used to circumvent the law.  Employees, officers and directors will not
retain agents or other representatives to engage in practices that run contrary
to the Standards of Business Conduct or applicable laws.

 

14.                               INTERNATIONAL
OPERATIONS

 

Employees,
officers and directors operating outside of Canada and the United States have a
special responsibility to know and obey the laws and regulations of countries
where they act for Biovail.  Customs vary
throughout the world, but all employees, officers and directors must uphold the
integrity of Biovail in other nations diligently.

 

15.                               STANDARDS OF
BUSINESS CONDUCT

 

A.                                    Initial Distribution

 

i.          Employees, officers and directors designated to receive
these Standards will receive their copies immediately after publication.

 

ii.         Future employees, officers and directors designated to
receive these Standards will receive their copies at the time they are hired.

 

12

 

B.                                    Initial Verification

 

Upon receiving their
copy of the Standards, employees, officers and directors current and future
will:

 

i.                              Become thoroughly familiar with
the Standards.

 

ii.                           Resolve any doubts or questions
about the Standards with their supervisors.

 

iii.        Inform their supervisors of any existing holdings or
activities that might be, or appear to be, inconsistent with, or in violation
of, the Standards.

 

iv.                       Prepare written disclosures of
such information, if requested, by supervisors.

 

v.                          Take steps to correct existing
situations and bring holdings and activities into full compliance with the
Standards.  Such steps will be approved
in writing by supervisors and will be based on the written disclosure submitted
by employees, officers or directors.

 

vi.                       Sign the verification and return
it to their supervisors who will make it part of employee’s permanent corporate
records.

 

C.                                    Maintaining Compliance

 

i.                              Employees, officers and
directors have the responsibility to maintain their understanding of the
Standards of Business Conduct and for following them.

 

ii.         Supervisors have the
responsibility to maintain an awareness on the part of their employees,
officers and directors of the importance of their adhering to the Standards of
Business Conduct and for reporting deviations to Management.

 

iii.                        As requested by the Board of
Directors or senior management, employees, officers and directors will be asked
to re-verify their understanding of the Standards of Business Conduct and their
compliance with them every year as a part of Biovail’s annual reporting.

 

iv.                       Employees, officers and
directors must inform their supervisors of any changes in their holdings or
activities that might be, or appear to be in non-compliance with the Standards
of Business Conduct.

 

v.                          Employees, officers and
directors must prepare written disclosure of such information, if requested, by
supervisors.

 

vi.                       Employees, officers and
directors must take steps to correct any such changes, if necessary, to bring
holdings and activities into full compliance. 
Such steps will be approved in writing by supervisors and Management and
will be based on the written disclosures submitted by employees, officers and
directors.

 

13

 

D.                                    Audits of Compliance

 

Regular audits of
Biovail will include procedures to test compliance with the Standards of
Business Conduct.

 

16.                               VIOLATIONS OF
STANDARDS

 

Employees, officers and directors must
immediately report any violations of the Standards or any violation of any
applicable law, rule or regulation. 
Failure to do so can have serious consequences for the employees,
officers or directors and for Biovail.

 

Employees, officers and directors, should
report violations to their supervisors and/or to the Human Resources department
and to the SLO or to any secure reporting hotline the company may have
contracted with.  When in doubt,
employees should talk to their supervisors or other appropriate personnel to
determine the best course of action in a particular situation.

 

Supervisors and the Human Resources group
have the responsibility to promptly and thoroughly investigate all reports, and
to report violations to the SLO.

 

After a violation is investigated,
appropriate action will be taken promptly. 
Management has the right to determine the appropriate disciplinary
action for a violation up to and including termination of employment.  All proposed disciplinary action is subject
to review by senior Management, Human Resources and the SLO.

 

Employees, officers and directors should be
aware that, in addition to any disciplinary action taken by Biovail, violations
of certain Standards may require restitution and may lead to civil or criminal
action against individual employees, officers and directors and any corporation
involved.

 

Supervisors have the responsibility of taking
remedial steps to correct any operating procedures that may contribute to
violations of Standards.

 

Retaliation in any form against an individual
who reports a violation of these Standards of Business Conduct or of any law, rule or
regulation in good faith, or who assists in the investigation of a reported
violation, is itself a serious violation of this policy.  Acts of retaliation will be disciplined
appropriately and should be reported immediately to your supervisor or Human
Resources.

 

17.                               CONTINUANCE OF
EXISTING PERSONNEL POLICIES, RULES AND PERFORMANCE STANDARDS

 

Biovail
has codified numerous personnel policies, rules and standards of employee
performance, which continue in force. 
These Standards of Business Conduct are intended to supplement and
amplify those established personnel policies, rules and standards.

 

14

 

It
continues to be the responsibility of all employees to comply with all such
policies, rules and performance standards. 
Additionally, all members of management are to continue making certain
that employees reporting to them are made aware of established policies, rules and
performance standards and comply with them.

 

18.                               AMENDMENT,
MODIFICATION AND WAIVER

 

Biovail
will periodically review these Standards of Business Conduct.  These Standards may be amended, modified or
waived by the Board of Directors and waivers may also be granted by the
Nominating & Governance Committee, subject to the disclosure and other
provisions of the Securities Exchange Act of 1934, and the rules there
under and the applicable rules of the Toronto Stock Exchange/New York
Stock Exchange.  Employees, officers and
directors will be fully informed of any revisions to the Standards of Business
Conduct.

 

Any
waiver of these Standards for any employee other than a director or an
executive officer, may only be made by the Executive Chairman or the CEO.  Any waiver of these Standards for director or
an executive officer may be made only the Board of Directors or the
Compensation, Nominating and Corporate Governance Committee and will be
promptly disclosed to Biovail’s stockholders.

 

15

 

VERIFICATION AND RECEIPT OF UNDERSTANDING

 

I have received a copy of Standards of Business Conduct for BIOVAIL
CORPORATION and its subsidiaries, divisions and affiliates.  I understand how the Standards apply to
me.  I acknowledge that my receiving the
Standards obligates me to follow them and I agree to abide by their conditions.

 

 

	
  May 6, 2008

  	
   

  	
  Douglas John Paul Squires

  
	
  Date

  	
   

  	
  Name

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Douglas John Paul Squires

  
	
   

  	
   

  	
  Signature

  

 

16Exhibit 10.38

 

CONFIDENTIAL SEPARATION AGREEMENT
AND GENERAL RELEASE

 

This
Confidential Separation Agreement and General Release (this “Agreement”) is
made and entered into by and between Biovail Corporation (“Biovail” or the
Company”) and Douglas John Paul Squires, Ph.D (“Dr. Squires”).

 

WHEREAS, Dr. Squires has been employed by Biovail
as its Chief Executive Officer pursuant to the terms of that certain amended
and restated executive employment agreement effective as of September 1,
2007 and executed December 5, 2007 (the “Employment Agreement”); and

 

WHEREAS, Dr. Squires also served as interim
Chairman of the Board of Directors of Biovail (the “Board”); and

 

WHEREAS, in connection with Biovail’s retention of a
new Chief Executive Officer, effective as of May 1, 2008, Dr. Squires
ceased to serve as Chief Executive Officer of the Company and effective as of May 6,
2008 (the “Termination Date”), Biovail involuntarily terminated Dr. Squires’
employment without cause in accordance with the applicable provisions of the
Employment Agreement; and

 

WHEREAS, in connection with Biovail’s termination of Dr. Squires’
employment he is entitled to certain separation payment and benefits pursuant
to the terms of his Employment Agreement, and in addition, Biovail desires to
provide Dr. Squires with certain additional benefits with respect to his
equity compensation awards, in each case, subject to Dr. Squires’
continued compliance with the restrictive covenants set forth in Article Four
of the Employment Agreement and his execution and 

 

 

non-revocation of a
written waiver and release of all claims, demands and causes of action against
Biovail, as limited in paragraph 3 hereof; and

 

WHEREAS, although Dr. Squires’ employment has
been terminated, Dr. Squires was appointed by the Board as Chairman of the
Board effective May 1, 2008.

 

IT IS HEREBY AGREED, by and between Dr. Squires
and Biovail, as follows:

 

1.             In consideration of Dr. Squires’ execution and
non-revocation of this Agreement, Dr. Squires’ agreement to be legally bound
by its terms, and Dr. Squires’ undertakings as set forth herein, Biovail
agrees, in accordance with the terms of the Employment Agreement, to provide Dr. Squires
the following payments and benefits, subject to Dr. Squires’ continued
compliance with the restrictive covenants set forth in Article Four of the
Employment Agreement and Dr. Squires’ execution and non-revocation of this
Agreement:

 

(a)           a
lump sum payment of US $2,869,622.00 (which amount represents twenty-four (24)
months of the Executive’s base salary plus two (2) times Dr. Squires’
target level of annual compensation under Biovail’s Short Term Incentive Plan for
2007) minus applicable withholdings and deductions, within sixty (60) days of
the Termination Date (subject to the requirements of Section 10(f) below);

 

(b)           a
lump sum payment of US $352,500.00 (which amount represents a pro-rated portion
of the Executive’s target level of annual incentive compensation under the
Short Term Incentive Plan for 2008 based on his employment for the period January 1,
2008 through May 6, 2008 (rounded to the next highest number for a partial
month)), minus applicable withholdings and deductions, within thirty (30) days
of the Termination Date (subject to the requirements of Section 10(f) below).

 

2

 

(c)           until the earlier of (i) the end of the
two (2) year period following Dr. Squires’ Termination Date or (ii) the
date, or dates, Dr. Squires is eligible to receive benefits under the same
type of plan of a subsequent employer (the “Benefit Period”), the Company shall pay to Dr. Squires (minus
applicable withholdings and deductions),
on the first payroll date of each month, the amount of the COBRA premium less
the amount of the active employee contribution for such coverage for the
Benefit Period.   The foregoing payments shall begin on the first payroll date following
the Termination Date and shall continue until the end of the Benefit Period.

 

(d)           With
respect to the restricted stock unit (“RSU”) grants held by Dr. Squires
immediately prior to the Termination Date that vest based upon the attainment
of performance criteria as listed on Schedule A (the “Performance
RSUs”), in connection with Dr. Squires’ termination of employment, 40,000 of
such Performance RSUs shall remain outstanding and shall vest on November 26,
2012 (the original vesting date for such Performance RSUs), as if Dr. Squires
had remained employed by the Company through that date, subject to the
attainment of the applicable performance criteria, as set out in the
Performance RSU agreement evidencing the terms of such Performance RSUs.  The remaining amount of such Performance RSUs
shall be cancelled and forfeited on the Termination Date.  Notwithstanding any provision of the
Performance RSU agreement evidencing the terms of such Performance RSUs or
Biovail’s 2007 Equity Compensation Plan (the “2007 Equity Compensation Plan”)
to the contrary, in no event shall Dr. Squires be entitled to dividend
equivalents under Section 5.5 of the 2007 Equity Compensation Plan, nor shall
any of the provisions of Sections 5.7, 5.8 or 5.9 of the 2007 Equity
Compensation Plan apply to the Performance RSUs described in this subparagraph
(d).  

 

3

 

Except as provided in
this subparagraph (d), the Performance RSUs shall remain subject to the terms
of the 2007 Equity Compensation Plan in all respects.

 

(e)           With respect to the RSU grants held
by Dr. Squires immediately prior to the Termination Date that vest based
upon the passage of time as listed on Schedule A (the “Time-Based RSUs”),
in connection with Dr. Squires’ termination of employment, the Board shall
cause all outstanding Time-Based RSUs to become fully vested as of the
Termination Date and such Time-Based RSUs shall be paid within 30 days of the
Termination Date in accordance with the terms of the 2007 Equity Compensation
Plan and the Time-Based RSU agreements evidencing the terms of such Times-Based
RSUs.

 

(f)            All outstanding options held by Dr.
Squires immediately prior to the date of this Agreement as listed on Schedule
A hereto (the “Options”) shall remain outstanding and shall continue to be
governed by the terms of the Option agreements evidencing their terms and the
terms of the Option plan pursuant to which they were granted.  Notwithstanding anything to the contrary in
such Option agreements and such Option plans, in connection with Dr. Squires’
termination of employment, the Board has caused (i) all outstanding Options that
would have vested during the period beginning on the Termination Date through
June 1, 2010 to become fully vested and exercisable as of the Termination Date,
(ii) Dr. Squires to be treated as having “retired” (within the meaning of such
term under the applicable Option plan pursuant to which the Options were
granted) as of the Termination Date and (iii) the post-termination exercise
period under the Options to extend from the Termination Date through June 1,
2010.  Any 

 

4

 

Options that are not vested
as of the Termination Date in accordance with the foregoing provisions of this
paragraph 1(f) shall be forfeited.

 

2.             Except
as set forth in this paragraph 2 and except for payments and benefits to which
he is entitled as set forth in paragraph 1 above, Dr. Squires expressly
agrees that he has been paid all remuneration owed to him as a result of Dr. Squires’
employment with Biovail, or the termination of that employment.  Whether or not Dr. Squires executes this
Agreement, Dr. Squires shall be paid for any accrued but unused vacation
days, and for previously submitted un-reimbursed business expenses (in
accordance with usual Company guidelines and practices), to the extent not
theretofore paid.  In addition, following
the Termination Date, Dr. Squires shall be entitled to receive vested
amounts payable to him under the Company’s 401(k) plan and other
retirement and deferred compensation plans, if any, in accordance with the
terms of such plans and applicable law. 
Except as specifically set forth herein, Dr. Squires’ participation
in all Biovail employee benefit plans and programs shall remain subject to the
terms and conditions of such plans as in effect from time to time and Dr. Squires
agrees that such terms and conditions are binding on himself and Biovail.

 

3.             Dr. Squires,
on behalf of himself, and Dr. Squires’ heirs, executors, administrators,
and/or assigns, does hereby RELEASE AND FOREVER
DISCHARGE Biovail,
together with its parents, subsidiaries, affiliates, predecessors, and
successor corporations and business entities, past, present and future, and its
and their agents, directors, members, officers, employees, shareholders,
insurers and reinsurers, and employee benefit plans (and the trustees,
administrators, fiduciaries, insurers, and reinsurers of such plans) past,
present and future, and their heirs, executors, 

 

5

 

administrators,
predecessors, successors, and assigns (collectively, the “RELEASEES”),
of and from any and all legally waivable claims, causes of actions, suits,
lawsuits, debts, and demands whatsoever in law or in equity, known or unknown,
suspected or unsuspected, which Dr. Squires ever had, now has or which Dr. Squires’
heirs, executors administrators, or assigns hereafter may have from the
beginning of time to the date Dr. Squires executes this Agreement, and
including, without limitation, any claims arising from or relating to Dr. Squires’
employment relationship with Biovail, and the termination of such relationship,
including, without limitation, any claims arising under the Age Discrimination
in Employment Act (“ADEA”), Title VII of the Civil Rights Act of 1964 (“Title
VII”), the Americans with Disabilities Act (“ADA”), the Employee Retirement
Income Security Act (“ERISA”), the Family and Medical Leave Act (“FMLA”), Section 806
of the Sarbanes-Oxley Act (“SOX”), the New Jersey Law Against Discrimination (“NJLAD”),
the Conscientious Employee Protection Act (“CEPA”), the New Jersey Family Leave
Act, the New Jersey Equal Pay Act, the New Jersey Wage and Hour Law, the New
Jersey Wage Payment Act, the New Jersey Constitution, the common law of the
State of New Jersey, and any and all other federal, state, provincial or local
constitutional, statutory, regulatory, or common law causes of action now or
hereafter recognized, and any claims for attorneys’ fees and costs; provided
that the foregoing release shall not apply to any claims Dr. Squires may
have to enforce his rights under this Agreement and may have to indemnification
as an officer, director or employee of Biovail (or any affiliate thereof)
pursuant to the articles of incorporation or by-laws (or other governing
instruments) of Biovail (or any affiliate thereof) or any vested benefits to
which Dr. Squires may be entitled under any employee benefit plan of 

 

6

 

Biovail
(or any affiliate thereof).  Nothing in
this Agreement shall waive rights or claims that may arise after the date this
Agreement is executed by Dr. Squires.

 

4.             Dr. Squires hereby agrees and recognizes that Dr. Squires’
employment relationship with Biovail has been completely severed as of the
Termination Date, and that neither Biovail nor the Releasees has any
obligation, contractual or otherwise, to hire, rehire or re-employ Dr. Squires
in the future.  The parties acknowledge
that the Board has appointed Dr. Squires as Chairman of the Board.

 

5.             Dr. Squires represents that Dr. Squires does
not have any lawsuits, claims, or charges pending against any of the
Releasees.  This Agreement is expressly
conditioned upon and contingent on the truth of Dr. Squires’
representations in this Agreement.

 

6.             Dr. Squires agrees and acknowledges that this
Agreement is not, and shall not be construed to be, an admission of any
violation of any federal, state, provincial or local statute, ordinance or
regulation, or of any duty owed by Releasees to Dr. Squires, or of any
wrongdoing to Dr. Squires by Releasees.

 

7.             Except as set forth herein, Dr. Squires
agrees not to make written or oral statements about Biovail or Releasees that
are negative or disparaging.  Nothing in
this Agreement shall preclude Dr. Squires from communicating or testifying
truthfully (a) to the extent required or protected by law, (b) to any
federal, state, provincial or local governmental agency, (c) in response
to a subpoena to testify issued by a court of competent jurisdiction, or (d) in
any action to challenge or enforce the terms of this Agreement.

 

7

 

8.             Dr. Squires agrees, covenants
and promises that Dr. Squires has not communicated or disclosed, and shall
not hereafter communicate or disclose, the terms of this Agreement, or the
terms of the negotiations leading up to this Agreement, to any persons with the
exception of:  (a) members of Dr. Squires’
immediate family, Dr. Squires’ attorneys, accountants, tax, or financial
advisors, each of whom shall be informed of this confidentiality obligation and
shall agree to be bound by its terms; (b) to the Internal Revenue Service
or state or local taxing authority; (c) as is expressly required or
protected by law; or (d) in any action to challenge or enforce the terms
of this Agreement provided that such disclosure is protected from public
disclosure by an appropriate confidentiality order to the maximum extent
permitted by applicable authority.  Dr. Squires
agrees to be liable for any breach of this Paragraph by the individuals
identified in clause (a) above.  In
the event that Dr. Squires is required to disclose information protected
by this Paragraph pursuant to clause (c) above, Dr. Squires agrees to
notify via facsimile and U.S. Mail, and to provide a copy of any subpoena,
order or written inquiry to, Biovail, 7150 Mississauga Road, Mississauga,
Ontario, L5N 8M5, Attn: General Counsel, within three (3) business days of
becoming aware of the need for such disclosure.

 

9.             This Agreement
constitutes the entire agreement between Dr. Squires and Biovail with
respect to the subject matter hereof and supersedes all prior negotiations and
agreements, whether written or oral, relating to the subject matter hereof
including the Employment Agreement, except for that certain Standards of
Business Conduct Agreement by and between Biovail and Dr. Squires dated December 5,
2007, that certain Confidentiality Agreement by and between Biovail and Dr. Squires
dated December 5, 

 

8

 

2007,
the Chairman Agreement between Biovail and Dr. Squires dated as of May 1,
2008 and Article Four of the Employment Agreement, which Dr. Squires
hereby acknowledges and agrees survive the termination of the Employment
Agreement and his employment with Biovail. 
Dr. Squires acknowledges that neither Biovail, the Releasees, nor
their agents or attorneys have made any promise, representation or warranty
whatsoever, express or implied, written or oral, other than the express written
representations herein.  Dr. Squires
agrees that this Agreement may not be altered, amended, modified, or otherwise
changed in any respect except by another written agreement signed by both Dr. Squires
and Biovail.

 

10.           Dr. Squires
further certifies and acknowledges that:

 

(a)          Dr. Squires has
read the terms of this Agreement and understands its terms and effects,
including the fact that Dr. Squires has agreed to RELEASE AND FOREVER
DISCHARGE the RELEASEES from any and all claims as set forth in Paragraph 3;

 

(b)         Dr. Squires has
signed this Agreement voluntarily and knowingly in exchange for the
consideration described herein, which Dr. Squires acknowledges is adequate
and satisfactory;

 

(c)          the payments, benefits,
promises and undertakings performed, and to be performed, as set forth herein
exceed and are greater than the payments and benefits, if any, to which Dr. Squires
would have been entitled had Dr. Squires not executed this Agreement;

 

(d)         Releasees have advised Dr. Squires,
through this document, to consult with an attorney concerning this Agreement
prior to signing this Agreement;

 

9

 

(e)           Dr. Squires has
the right to consider this Agreement for a period of twenty-one (21) days from
receipt prior to entering into this Agreement and Dr. Squires has signed
on the date indicated below after concluding that the Agreement is satisfactory;
and

 

(f)            Dr. Squires has
the right to revoke this Agreement for a period of seven (7) calendar days
following Dr. Squires’ execution of this Agreement by giving written
notice to Biovail, 7150 Mississauga Road, Mississauga, Ontario, L5N 8M5, Attn:
General Counsel, and that this Agreement shall not be effective or enforceable
until this seven-day period has expired.  
In the event that Dr. Squires revokes this Agreement pursuant to
the terms of this Section 10(f), Dr. Squires shall be required to repay
to Biovail any amounts paid to Dr. Squires pursuant to Sections 1(a) and
(b) within five (5) business days of the date Dr. Squires
revokes this Agreement.

 

11.           This Agreement is intended to comply
with the applicable provisions of section 409A of the Code and shall be
interpreted to avoid any penalty sanctions under section 409A of the Code.  If any payment or benefit cannot be provided
or made at the time specified herein without incurring sanctions under section
409A of the Code, then such benefit or payment shall be provided in full at the
earliest time thereafter when such sanctions shall not be imposed.  For purposes of section 409A of the Code, all
payments to be made upon a termination of employment under this Agreement may
only be made upon a “separation from service” under section 409A of the Code,
each payment made under this Agreement shall be treated as a separate payment
and the right to a series of installment payments under this Agreement shall be
treated as a right to a series of 

 

10

 

separate payments.  In no event shall Dr. Squires, directly
or indirectly, designate the calendar year of payment.

 

Notwithstanding the
provisions of paragraph 1 above, if at the time of the Squires’ “separation
from service” (as such term is defined in section 409A of the Code) the Company
has securities which are publicly-traded on an established securities market
and Dr. Squires is a “specified employee” (as such term is defined in
section 409A of the Code) and it is necessary to postpone the commencement of
any severance payments otherwise payable pursuant to this Agreement as a result
of such separation from service to prevent any accelerated or additional tax
under section 409A of the Code, then the Company shall postpone the
commencement of the payment of any such payments or benefits hereunder (without
any reduction in such payments or benefits ultimately paid or provided to Dr. Squires)
that are not otherwise
paid within the “short-term deferral exception” under Treas. Reg.
section 1.409A-1(b)(4) and/or the “separation pay exception” under Treas.
Reg. section 1.409A-1(b)(9)(iii), until the first payroll date that occurs
after the date that is six (6) months following Dr. Squires’
separation from service with the Company. 
If any payments are postponed due to such requirements, such postponed
amounts shall be paid in a lump sum to Dr. Squires, and any installment
payments due to Dr. Squires shall recommence, on the first payroll date that occurs after the date that
is six (6) months following the Dr. Squires’ “separation from service”
with the Company.  If Dr. Squires
dies during the postponement period prior to the payment of the postponed
amount, the amounts postponed on account of section 409A of the Code shall be
paid to the personal representative of Dr. Squires’ estate within sixty
(60) days after the date of the Dr. Squires’ death.

 

11

 

All reimbursements and in
kind benefits provided under this Agreement shall be made or provided in
accordance with the requirements of section 409A of the Code, including, where
applicable, the requirement that (i) any reimbursement is for expenses
incurred during Dr. Squires’ lifetime (or during a shorter period of time
specified in this Agreement), (ii) the amount of expenses eligible for
reimbursement, or in kind benefits provided, during a calendar year may not
affect the expenses eligible for reimbursement, or in kind benefits to be
provided, in any other calendar year, (iii) the reimbursement of an
eligible expense shall be made on or before the last day of the calendar year
following the year in which the expense is incurred, and (iv) the right to
reimbursement or in kind benefits is not subject to liquidation or exchange for
another benefit.

 

[SIGNATURE
PAGE FOLLOWS]

 

12

 

IN WITNESS WHEREOF, and
intending to be legally bound hereby, Biovail hereby executes the foregoing
Confidential Separation Agreement and General Release.

 

	
  BIOVAIL CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Wendy Kelley

  	
   

  
	
  Name:

  	
  Wendy Kelley

  	
   

  
	
  Title:

  	
  Senior Vice-President,
  General

  	
   

  
	
   

  	
  Counsel and Corporate
  Secretary

  	
   

  
	
   

  	
   

  	
   

  
	
  Date:

  	
  May 6, 2008

  	
   

  

 

IN WITNESS WHEREOF, and
intending to be legally bound hereby, Dr. Squires hereby executes the
foregoing Confidential Separation Agreement and General Release.

 

 

	
   

  	
   

  	
  SIGNED, SEALED AND DELIVERED

  
	
   

  	
   

  	
  in the presence of:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Douglas
  John Paul Squires

  	
   

  	
  /s/
  Mark A. Durham

  
	
  Douglas John Paul
  Squires

  	
   

  	
  Witness

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date: 

  	
  May 6, 2008

  	
   

  	
  Date: 

  	
  May 6, 2008

  
					

 

13

 

SCHEDULE A

 

LIST OF
PERFORMANCE RSUs, TIME-BASED RSUs AND OPTIONS

 

Performance RSUs
– 129,174 outstanding

 

Time-Based RSUs
– 9,688 outstanding

 

Options
– 612,550 outstanding

 

14

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