AN OPTION OUTSTANDING ON THE DATE HEREOF PURSUANT TO THE PURCHASER'S
OPTION ISSUED TO BIOVAIL LABORATORIES INCORPORATED WITH AN EXERCISE PRICE OF
$5.707 (THE "BIOVAIL OPTION"); AND (VII) 3,240,745 SHARES RESERVED FOR ISSUANCE
UPON EXERCISE OF THE WARRANTS.
SINCE THE DAY PRIOR TO EXECUTION OF THIS
AGREEMENT, THE COMPANY HAS NOT ISSUED ANY OPTIONS, WARRANTS OR CAPITAL STOCK
EXCEPT PURSUANT TO THE EXERCISE OF OPTIONS OR COMPANY WARRANTS OR THE CONVERSION
OF THE OUTSTANDING SERIES A PREFERRED OR THE CONVERTIBLE NOTE OUTSTANDING AS OF
SUCH DATE AND IN ACCORDANCE WITH THEIR TERMS.
THE COMMON STOCK TO BE ISSUED
UPON EXERCISE OF THE WARRANTS AND THE ADDITIONAL WARRANTS HAVE BEEN DULY
AUTHORIZED AND RESERVED FOR ISSUANCE AND, WHEN ISSUED UPON SUCH EXERCISE, WILL
BE VALIDLY ISSUED, FULLY PAID AND NON-ASSESSABLE.
THE SHARES OF COMMON STOCK
ISSUABLE UPON CONVERSION OF THE SERIES A PREFERRED REFERENCED IN CLAUSE (III)
ABOVE, HAVE BEEN DULY AUTHORIZED AND RESERVED FOR ISSUANCE AND UPON ISSUANCE
UPON CONVERSION OF THE SERIES A PREFERRED, WILL BE VALIDLY ISSUED, FULLY PAID
AND NON-ASSESSABLE.
ALL THE OUTSTANDING COMMON STOCK AND SERIES A PREFERRED
ARE, AND ALL SHARES OF COMMON STOCK WHICH MAY BE ISSUED PURSUANT TO THE EXERCISE
OF OUTSTANDING OPTIONS OR COMPANY WARRANTS OR THE OUTSTANDING BIOVAIL
CONDITIONAL OPTION OR THE OUTSTANDING BIOVAIL OPTION OR UPON CONVERSION OF THE
OUTSTANDING CONVERTIBLE NOTE HAVE BEEN DULY AUTHORIZED AND RESERVED FOR ISSUANCE
AND, WHEN ISSUED IN ACCORDANCE WITH THE RESPECTIVE TERMS THEREOF, WILL BE DULY
AUTHORIZED, VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE.
EXCEPT FOR THE
CONVERTIBLE NOTE, THERE ARE NO BONDS, DEBENTURES, NOTES OR OTHER INDEBTEDNESS
HAVING GENERAL VOTING RIGHTS (OR CONVERTIBLE INTO SECURITIES HAVING SUCH RIGHTS)
("VOTING DEBT") OF THE COMPANY ISSUED AND OUTSTANDING.
EXCEPT AS STATED ABOVE,
THERE ARE NO EXISTING OPTIONS, WARRANTS, CALLS, SUBSCRIPTIONS OR OTHER RIGHTS,
AGREEMENTS, ARRANGEMENTS OR COMMITMENTS OF ANY CHARACTER, RELATING TO THE ISSUED
OR UNISSUED CAPITAL STOCK OF THE COMPANY, OBLIGATING THE COMPANY TO ISSUE,
TRANSFER, SELL, REDEEM, PURCHASE, REPURCHASE OR OTHERWISE ACQUIRE OR CAUSE TO BE
ISSUED, TRANSFERRED, SOLD, REDEEMED, PURCHASED, REPURCHASED OR OTHERWISE
ACQUIRED ANY CAPITAL STOCK OR VOTING DEBT OF, OR
8
OTHER EQUITY INTEREST IN, THE COMPANY OR SECURITIES OR RIGHTS CONVERTIBLE INTO
OR EXCHANGEABLE FOR SUCH SHARES OR EQUITY INTERESTS OR OBLIGATIONS OF THE
COMPANY TO GRANT, EXTEND OR ENTER INTO ANY SUCH OPTION, WARRANT, CALL,
SUBSCRIPTION OR OTHER RIGHT, AGREEMENT, ARRANGEMENT OR COMMITMENT.
THE ISSUANCE
OF COMMON STOCK OR OTHER SECURITIES PURSUANT TO ANY PROVISION OF THIS AGREEMENT
OR THE WARRANTS OR ADDITIONAL WARRANTS WILL NOT GIVE RISE TO ANY PREEMPTIVE
RIGHTS OR RIGHTS OF FIRST REFUSAL ON BEHALF OF ANY PERSON OR RESULT IN THE
TRIGGERING OF ANY ANTI-DILUTION OR OTHER SIMILAR RIGHTS, OTHER THAN AS SET FORTH
IN SECTION 4.7 OF THE SCHEDULE OF EXCEPTIONS.
4.8
LITIGATION.
THERE IS NO PENDING OR, TO THE COMPANY'S KNOWLEDGE,
THREATENED, LEGAL, ADMINISTRATIVE OR GOVERNMENTAL ACTION, SUIT OR OTHER
PROCEEDING TO WHICH THE COMPANY IS A PARTY OR TO WHICH IT OR ITS PROPERTY OR
ASSETS ARE OR REASONABLY