Exhibit 10.40

BIOVAIL CORPORATION
EXECUTIVE EMPLOYMENT AGREEMENT

THIS AGREEMENT is made by and between Biovail Corporation (hereinafter the “Corporation”) and Margaret Mulligan (hereinafter the “Executive”).

ARTICLE ONE – GENERAL DUTIES AND TERM

Scope of Employment / Duties

1.01               The Corporation will employ the Executive as Senior Vice President & Chief Financial Officer.  The Executive will serve as an officer of the Corporation.  During the Employment Term (as defined below), the Executive will devote substantially all of the Executive’s business efforts and time to the Corporation.  The Executive agrees, during the Employment Term, not to actively engage in any other employment, occupation or consulting activity for any direct or indirect compensation without the prior approval of the Chief Executive Officer of the Corporation (the “CEO”); provided, however, that the Executive may (a) serve on the boards of directors of other companies (subject to reasonable approval of the CEO) and boards of trade associations or charitable organizations; (b) engage in charitable activities and community affairs; and (c) manage the Executive’s personal investments and affairs, as long as such activities do not violate Section 4.02 and do not materially interfere with the Executive’s duties and responsibilities for the Corporation.

1.02               The Corporation reserves the right to establish the employment relationship with the Executive directly with the Corporation or with any of its affiliates or subsidiaries, or to change such employment relationship over time, as it deems necessary or appropriate to comply with legal requirements or for ease of administration of employee benefits programs or other matters.

1.03               Notwithstanding 1.02, the Corporation acknowledges and agrees that the Executive’s principal residence is and shall remain Mississauga, Ontario, Canada.

Term of Agreement

1.04               The Corporation hereby agrees to employ the Executive and the Executive hereby accepts employment, in accordance with the terms and conditions of this Agreement, commencing on September 3, 2008 (the “Employment Commencement Date”).  The period of the Executive’s employment under this Agreement will be referred to as the “Employment Term.”  Subject to the Corporation’s obligation to provide severance benefits and the parties’ obligation to provide a Notice of Termination (as defined below), the Executive and the Corporation acknowledge that this employment relationship may be terminated at any time and for any or no cause or reason at the option of either the Executive or the Corporation.

ARTICLE TWO – COMPENSATION

Base Salary

2.01               As of the Employment Commencement Date, the Executive’s annualized base salary will be $410,000 (USD), payable in accordance with the Corporation’s normal payroll practices for employees generally, and will be subject to annual review in accordance with the Corporation’s normal review process for other similarly situated senior executives.  The Executive’s base salary shall be converted and paid in Canadian currency.  The conversion into Canadian currently shall be made at the beginning of every quarter at a rate equal to the average exchange rate for the previous quarter (as furnished by the Controller of the Corporation).

Incentive Compensation

2.02               The Executive will be eligible to participate in the Corporation’s short term annual incentive compensation plan as such plan may be amended from time to time (the “Short Term Incentive Plan”) in accordance with the terms of the Short Term Incentive Plan.  For the Executive’s year of hire, the Executive’s target will be fifty percent (50%) of the Executive’s annual base salary.

Equity Compensation

2.03               Eligibility and Terms.

The Executive will be eligible to participate in the Corporation’s equity compensation plan, as such plan may be amended from time to time (the “Equity Compensation Plan”), in accordance with the terms of the Equity Compensation Plan, except as may be otherwise indicated in this Agreement.  The Executive’s annual target under the Equity Compensation Plan shall be 75,000 stock options and 6,250 Restricted Share Units (“RSUs”), or a substantially equivalent award. The ECP awards for the 2008 plan year will not be prorated.

Employee Benefits

2.04               During the Employment Term, the Executive will be eligible to participate in employee benefit plans and programs that are offered to the Corporation’s other similarly-situated senior executives in accordance with the terms of such plans as they may change from time to time.  Nothing in this Agreement shall preclude the Corporation or any affiliate of the Corporation from terminating or amending any employee benefit plan or program from time to time after the Employment Commencement Date.

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Expenses

2.05               The Executive shall be reimbursed for reasonable out of pocket business expenses, including travel and entertainment expenses, actually and properly incurred by the Executive in the course of performing the Executive’s services hereunder, upon furnishing to the Corporation reasonable supporting statements and vouchers; provided, however, that in any financial year in which the Corporation has provided to the Executive an approved budget, such expenses must not exceed the amount so budgeted without the prior written approval from the CEO.

Vacation

2.06               The Executive will be eligible for five (5) weeks of vacation annually, to be taken in accordance with the terms of the Corporation’s Vacation Policy, without regard to any lesser amount of vacation time set forth therein.  Notwithstanding the foregoing, the Executive’s eligibility for vacation in the year of hire will be pro-rated in the manner specified in the Corporation’s Vacation Policy.

ARTICLE THREE – TERMINATION AND RESIGNATION

Involuntary Termination - Either By The Corporation Without Cause or By The Executive For Good Reason

3.01               If the Executive incurs an involuntary termination from employment with the Corporation on account of a termination by the Corporation without Cause or by the Executive for Good Reason, then, in addition to any benefits or compensation accrued, earned and due to the Executive but not yet paid as of the date that is designated by the Corporation or the Executive, as applicable, as the last day of the Executive’s employment or term of office with the Corporation (the “Termination Date”), the Executive will be eligible for the severance payments and benefits as described in this Section 3.01; provided that (i) the Executive continues to comply with the Restrictive Covenants (as defined below); and (ii) the Executive executes, and does not revoke, a written waiver and release of all claims, demands and causes of action against the Corporation and related parties in a form prescribed by the Corporation, as limited by Section 3.09 (“Release”):

(a)                      The Executive will be paid a lump sum severance payment within 60 days of the Executive’s Termination Date, equal to one (1) times the Executive’s base salary (calculated using the Executive’s highest annual base salary in the three years prior to the Executive’s Termination Date) plus one (1) times the Executive’s target level of annual incentive compensation for the year prior to the year in which the Executive’s Termination Date occurs;

(b)                     The Executive will be entitled to a pro-rated portion of the Executive’s target level of annual incentive compensation () for the year in which the Executive’s Termination Date occurs, based on the number of months (rounded to the next highest number for a partial month) of the calendar year elapsed prior to the Executive’s

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Termination Date and calculated and paid in accordance with the terms of the Corporation’s Short Term Incentive Plan; and

(c)                      Until the earlier of (i) the end of the one (1) year period following the Executive’s Termination Date, or (ii) the date, or dates, the Executive is eligible to receive benefits under the same type of plan of a subsequent employer (the “Benefit Period”), the Corporation will pay to the Executive a monthly payment on the first payroll date of each month equal to the cost of continued medial and dental coverage for the Executive and the Executive’s covered dependents under the medical and dental plans of the Corporation less the amount that the Executive would be required to contribute for medical and dental coverage if the Executive were an active employee.  These payments will commence on the Corporation’s first payroll date after the Executive’s Termination Date and will continue until the end of the Benefit Period (but not longer than the Benefit Period).

Involuntary Termination By The Corporation For Cause Or Voluntary Resignation Without Good Reason

3.02               If the Executive is involuntarily terminated by the Corporation for Cause or the Executive voluntarily resigns from employment without Good Reason, then the Executive will forfeit the Executive’s right to receive any salary, Short Term Incentive Plan compensation, Equity Compensation Plan compensation or other compensation that has not been fully accrued at the time the Executive’s employment terminates; provided, however, that the Executive will be entitled to receive any benefits or compensation accrued, earned and due to the Executive but not yet paid as of the Executive’s Termination Date.

Death or Disability

3.03               The Executive’s employment will terminate automatically upon the Executive’s death.  The Corporation may terminate the Executive’s employment if illness, disease, or physical or mental incapacity render the Executive generally incapable of performing the Executive’s duties or unfit to advance or represent the Corporation on a daily basis for a period of twelve (12) consecutive months and within such twelve (12) months, the Executive fails to produce to the Corporation a medical opinion indicating a reasonable time for the return of the Executive to the full-time assumption of the Executive’s past duties and responsibilities.  Nothing herein is intended to circumvent or abridge the Corporation’s short-term disability policy or long-term disability plan.  In the event of termination pursuant to the terms of this Section 3.03, the Executive or the Executive’s estate, as applicable, will be entitled to receive any salary, benefits or other amounts accrued, earned and due to the Executive but not yet paid as of the Executive’s Termination Date.

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Cause

3.04               For purposes of this Agreement, Cause includes:

(a)                      conviction of the Executive, or entering of a guilty plea or a plea of no contest by the Executive, 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 Corporation or any of its affiliates;

(b)                     any act of fraud, misappropriation, material dishonesty, embezzlement or similar conduct involving the Corporation or any affiliates;

(c)                      a material breach by the Executive of the Executive’s 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 the Executive or which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Corporation;

(d)                     a material breach by the Executive of the Executive’s duties hereunder (other than as a result of incapacity due to physical or mental impairment), except as identified in Section 3.04(c) above, which breach is not remedied by the Executive within 30 days after receipt of written notice from the Corporation specifying such breach; or

(e)                      the Executive’s failure to comply in any material way with any of the provisions of this Agreement.

Good Reason

3.05               For purposes of this Agreement, a voluntary resignation by the Executive will be deemed to be a termination for Good Reason if:

(a)                      The Corporation makes:  (i) any assignment to the Executive of any duties which are materially inconsistent with the Executive’s position; (ii) any material reduction in the Executive’s authority, responsibilities or status; or (iii) a material reduction to the Executive’s base salary;

(b)                     The Executive notifies the Corporation in writing of the Executive’s belief that the Corporation has taken an action identified in Section 3.05(a) within thirty (30) days of the event at issue;

(c)                      The Corporation has not remedied the situation within thirty (30) days after receipt of written notice from the Executive; and

(d)                     The Executive provides a Notice of Termination within thirty (30) days after the Corporation’s opportunity to remedy the situation has expired.

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Change in Control

3.06                         (a)                                    The Corporation shall provide the payments and benefits described in Section 3.06(b) below only if:  (i) the Executive continues to comply with the Restrictive Covenants (as such term is defined below); and (b) the Executive executes, and does not revoke, a Release (as defined above).

(b)                                 Upon a Change in Control (as defined below), and an involuntary termination of the Executive’s employment either by the Corporation without Cause or by the Executive for Good Reason, which termination occurs within a period of twelve (12) months following the Change in Control, the Corporation shall provide to the Executive, in addition to any benefits or compensation accrued, earned and due to the Executive but not yet paid as of the Executive’s Termination Date, but in lieu of any payments or benefits to which the Executive may be entitled under Section 3.01 above, (a) a lump sum severance payment of two (2) times the Executive’s base salary (calculated using the Executive’s highest annual base salary in the three years prior to the Executive’s Termination Date) plus two (2) times the Executive’s target level of annual incentive compensation under the Short Term Incentive Plan for the year prior to the year in which the Executive’s Termination Date occurs, payable within thirty (30) days of the Executive’s Termination Date and, (b) any unvested equity compensation awards held by the Executive shall automatically accelerate and become one hundred percent (100%) vested and, as applicable, exercisable, as of the Executive’s Termination Date.

(c)                                  For the purpose of this Section 3.06, “Change in Control” means the happening of any of the following events:

(i)                      the completion of a transaction pursuant to which (A) the Corporation goes out of existence or (B) any person, or any Associate (as such terms defined in National Instrument 45-106 - Prospectus and Registration Exemptions, as amended from time to time, or such other successor rules, instruments or policies from time to time of Canadian provincial securities regulatory authorities which may govern trades of securities to employees, officers, directors or consultants (“NI45-106”)) or Related Entity (as such term is defined in NI45-106) of such person (other than the Corporation, any trustee or other fiduciary holding securities under any employee benefit plan of the Corporation or a Related Entity, or any company owned, directly or indirectly, by the shareholders of the Corporation in substantially the same proportions as their ownership of common shares of the Corporation) hereafter acquires the direct or indirect “beneficial ownership” (as defined by the Canada Business Corporations Act) of securities of the Corporation representing 50% or more of the aggregate voting power of all of the Corporation’s then issued and outstanding securities;

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(ii)                   the lease, exchange, license, sale or other similar disposition of all or substantially all of the Corporation’s assets in one transaction or a series of related transactions to a person, or any Associate or Related Entity of such person (other than an Associate or Related Entity of the Corporation, any trustee or other fiduciary holding securities under any employee benefit plan of the Corporation or a Related Entity, or any company owned, directly or indirectly, by the shareholders of the Corporation in substantially the same proportions as their ownership of common shares of the Corporation);

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

(iv)               during any period of 24 consecutive months beginning on or after the date of the Equity Compensation 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 or the board of directors of any successor to the Corporation, provided that any director who was not a director as of the date of the Equity Compensation 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 Corporation with any other corporation other than a merger, amalgamation, arrangement or consolidation that would result in the voting securities of the Corporation 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 Corporation 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 Corporation (or similar transaction) in which no person (other than those covered by the exceptions in (i) above) acquires more than 50% of the combined

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voting power of the Corporation’s then outstanding securities shall not constitute a Change in Control.

Notice of Termination

3.07               Any termination of employment by the Corporation or by the Executive shall be communicated by notice of termination to the other party hereto given in accordance with Section 5.09 (a “Notice of Termination”).  For purposes of this Agreement, Notice of Termination means a written notice which (a) identifies the specific termination provision in the Agreement relied upon, and (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision identified, and (c)(i) in the case of a termination by the Corporation, specifies the Executive’s Termination Date which shall not be less than fifteen (15) nor more than sixty (60) days after the giving of such notice; or (ii) in the case of a termination by the Executive without Good Reason, shall not be less than ninety (90) days after the giving of such notice.

Payments After Termination of Employment

3.08               Payments made by the Corporation to the Executive pursuant to this Agreement after the Executive’s Termination Date will be made by courier delivery service to the last address provided for notices to the Executive pursuant to Section 5.09 of this Agreement.

Release

3.09               The Release