UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-10615
EMISPHERE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3306985
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(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
15 Skyline Drive 10532
Hawthorne, New York -----------
------------------------ (Zip Code)
(Address of principal
executive offices)
(914) 347-2220
(Registrant s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $.01 par value
Preferred Stock Purchase Rights
Indicate by check mark whether the Registrant (1) has filed all
reports required to be files by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that Registrant was required to file such reports) and
(2) has been subject to such filing requirements for at least the past
90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.045 of this
chapter) is not contained herein, and will not be contained, to the
best of registrant s knowledge, in definitive proxy or information
statements incorporated be reference in Part III of this Form 10-K or
any amendment to this Form 10-K. [ ]
As of October 10, 1996 the aggregate market value of registrant s
common stock held by non-affiliates was approximately $157,400,000
based on a closing sale price of $16.875 per share. The number of
outstanding shares of the registrant s common stock as of October 10,
1996 was 9,464,754.
DOCUMENTS INCORPORATED BY REFERENCE
None
Part I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under the captions "Business" and
"Management s Discussion and Analysis of Financial Conditions and
Results of Operations" and elsewhere in this report on Form 10-K
constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act").
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different
from any future results, performance, or achievements expressed or
implied by such forward-looking statements. Such factors include,
among others, the following: uncertainties related to future
testing results and viability of the Company's products; the Company s
dependence on partnerships with pharmaceutical and other companies to
develop, manufacturer and commercialize products using the Companys
drug delivery technologies; the need to obtain regulatory approval for the
Companys products; the Company's dependence on the success of its joint
venture with Elan Corporation for the development and commercialization of
an oral heparin product; the risk of technological obsolescence in a
highly competitive industry; the Company's dependence on patents and
proprietary rights; the Company's absence of profitable operations and
need for additional capital; the availability, terms and deployment of
capital the risk of product liability and policy limits of product
liability insurance; potential iability for human clinical trials; the
Company's dependence on key personnel; the quality, judgement and strategic
decisions of management and oter personnel; uncertain availability of
third-party reimbursement for commercial medical products; general
business and economic conditions; and other factors referenced in this
report on Form 10-K.
Item 1. Business
Overview
Emisphere Technologies, Inc. ( Emisphere or the Company ) is a
drug delivery company focused on the discovery and application of
proprietary synthetic chemical compounds ( carriers ) that enable the
oral delivery of therapeutic macromolecules and other compounds that
are not currently deliverable by oral means. The Company's proprietary
technologies are based on the Company's ability to design and
synthesize carriers to allow the transport of therapeutic molecules
through biological membranes, including intestinal, nasal, sublingual,
transdermal, subcutaneous, intramuscular and intraocular membranes.
The Company has designed and synthesized a library of potential
carriers and evaluated them for their ability to enable the oral
delivery of therapeutic compounds. The Company has used its carriers
to deliver heparin orally in humans and to deliver orally in animals
a v ariety of compounds, including insulin, calcitonin, human
p a r a thyroid hormone, human growth hormone, interferon alpha,
desferroxamine and cromolyn.
On September 5, 1996, the Company announced the completion of its
double-blind, controlled Phase I clinical trial of the oral delivery
of heparin using one of Emisphere's proprietary carriers. Analysis of
the clinical data indicated that the formulation was tolerated and
that no adverse drug reactions were reported. Moreover, there was
evidence of the oral delivery of clinically relevant levels of
heparin. The trial involved 30 human subjects and approximately 100
exposures, and consisted of three parts: (1) escalating doses of
carrier only; (2) escalating doses of carrier with a fixed dose of
heparin; and (3) escalating doses of heparin with a fixed dose of the
carrier. Oral delivery was measured by testing all of the limited
number of subjects who participated in part 3 who received heparin and
measured by blood clotting times (activated partial thromboplastin
t i me or APTT), serum levels of anti-factor IIa and Xa, and
lipoprotein-associated coagulation inhibitor (LACI) assays. The
heparin activity in this trial occurred at a substantially lower
relative dose of administered heparin than predicted by previous
animal testing.
On September 26, 1996, the Company and Elan Corporation plc
(Elan) finalized the formation of a joint venture (the Elan Joint Venture),
pursuant to a letter of intent entered into in October 1995, to
combine Elan s drug delivery and formulation capabilities with the
Company s carrier technologies to research, develop and market oral
formulations of heparin and heparinoids. The Company and Elan are
sharing the financial benefits and expense obligations of the Elan
Joint Venture on a 50-50 basis and they have equal representation on
the Board of Directors of the joint venture company (the JV
Company ). As of September 27, 1996, Elan has provided $7,500,000
to the project of which $4,500,000 has been provided to the
Company. In addition, in connection with the October 1995 letter of
intent, an affiliate of Elan purchased 600,000 shares of common stock
of the Company ( Common Stock ) and warrants to purchase 250,000
additional shares of Common Stock at an exercise price of $16.25 per
share for total consideration of $7,500,000 (the 1995 Elan Affiliate
Purchase ).
The Drug Delivery Industry
Companies involved in drug delivery are seeking to enhance the
use of therapeutic agents by expanding the available dosage forms.
Traditional drug delivery companies develop technologies that control
the release of drugs. Examples of products in this category include
transdermal patches, and tablets for drugs that can be taken once-a-
day versus multiple daily dosing.
There is an emerging group of drug delivery companies, including
the Company, developing novel technologies that offer alternatives to
such dosage forms. These companies are seeking technologies to
i n c r ease the potential for therapeutics that have not been
commercially developed, used effectively or successfully marketed
because of limited practical means of administration. For example,
macromolecules such as proteins or other poorly absorbed therapeutics
currently are mainly administered by injection.
Oral Drug Delivery
The Company believes that the market for orally administered
p h armaceuticals represents the largest product segment of the
pharmaceutical industry and that the potential market for many drugs
could be significantly expanded if novel delivery systems are
developed for therapeutics that are currently available only as
injectable drugs. The Company believes that oral administration would
represent the preferred modality of delivery for many pharmaceuticals,
including a broad range of biotechnology derived therapeutics and
drugs that require chronic dosing.
The three main barriers to effective oral drug delivery for
humans are:
(i) Degradation of Drugs by Acid and Enzymes: The high acid
content and the enzyme activity of the digestive tract
can degrade some drugs well before they reach the site of
absorption into the bloodstream. All natural and
recombinant peptides, as well as certain compounds with
carbohydrate and lipid components, are susceptible to
this degradation, limiting the commercial potential for
these compounds.
(ii) Poor Absorption of Drugs Through Epithelium Tissue: Many
macromolecules and polar compounds cannot effectively
traverse the cells of the epithelium in the small
intestine to reach the bloodstream. Thus, some drugs
with beneficial medicinal properties are often limited to
injectable formulations, which may not be commercially
viable for the treatment of chronic disease because of
poor patient compliance. Development and
commercialization of many macromolecules and other poorly
absorbed compounds may become practical with an effective
new delivery system.
(iii) Transition of Drugs to Insoluble Form at Acidic pH:
M a n y drugs become insoluble at the low pH
encountered in the digestive tract. Since only the
soluble form of the drug can be absorbed into the
bloodstream, the transition of the drug to the
insoluble form can significantly reduce the amount
absorbed.
The Company's Drug Delivery Technologies
The core of the Company's delivery technology is the design and
synthesis of compounds that maximize the transport of drugs across
b i ological membranes. The Company's technologies exploit the
properties of supramolecular complexes, which are formed when two or
more compounds are held together in a discrete geometry by relatively
weak molecular interactions. A supramolecular complex will have a
n u m ber of properties that are measurably different from its
constituent parts. Many of the drugs that are currently used to treat
diseases must be administered by injection due to their inability to
survive the environment of the gastrointestinal tract and/or to be
transported from the gastrointestinal tract. The Company believes
t h at the supramolecular complexes formed when its proprietary
compounds are formulated with many injectable drugs renders them
transportable from the gastrointestinal tract to the blood in
quantities that are clinically useful and commercially attractive.
The Company believes that certain conformations of some drugs appear
to render them transportable across biological membranes. The Company
believes that an effective carrier significantly increases the
population of naturally occurring transportable conformations of the
drug to be delivered. The Company has identified characteristics of
supramolecular complexes that it believes correlate with in vivo
performance.
The Company has synthesized a library of well-defined,
proprietary carrier compounds that are single molecular entities which
can form supramolecular complexes with a diverse array of injectable
therapeutics. These "carrier" molecules vary widely in their chemical
s t r ucture, solubility, hydrophobicity, electrostatic and other
physical/chemical properties. The Company believes that, in many
cases, an individual therapeutic agent will require its own unique
carrier for optimal oral delivery. Based upon an individual
therapeutic's characteristics, the Company seeks to identify the
optimal carrier by in vitro and in vivo screening of the Company's
ever expanding library of carrier compounds. The Company believes
that technologies are available that could allow high throughput
synthesis and in vitro screening of carrier compounds, thereby
reducing the time required for identifying the optimal carrier for a
given injectable therapeutic.
On the basis of the clinical and preclinical trials to date, the
Company believes that its oral drug delivery technologies have the
potential to achieve the key properties essential for an effective
oral drug delivery, including: (i) absorption of the drug in an
effective manner, (ii) consistent release of the drug so that the drug
enters the bloodstream in a reproducible manner, (iii) lack of
toxicity and (iv) maintenance of the biological effects of the drug.
The Company believes that the supramolecular complex formed by
the Company's carriers and certain therapeutic compounds may have
applications in the delivery of drugs through other biological
membranes, including nasal, buccal, sublingual, transdermal,
subcutaneous, intramuscular and intraocular membranes.
Key Characteristics of the Company's Technologies
The Company believes that its oral delivery approach may have
potential competitive advantages, including:
(i) Broad applicability: The Company's carriers are
a p p licable across a diverse group of molecules
(proteins, carbohydrates, and peptides and other poorly
absorbed compounds).
(ii) Stand-alone delivery approach: Oral drug delivery
using the Company's carriers does not rely upon
addition of other agents that can have adverse effects
on the intestinal membranes or digestion process.
(iii) Versatility of formulation: The Company has
formulated a number of therapeutic compounds with
its carriers into a dry powder. The Company
believes that oral formulations including
suspensions, tablets and capsules can be created.
(iv) Ease of manufacture: The Company believes that the
technology and equipment currently exists to produce
its carrier material and the final drug product.
Product Development
Therapeutic Macromolecules
Heparin. Emisphere has completed a Phase I clinical trial with
an oral heparin preparation. Heparin is an anticoagulant and
antithrombotic agent used in a number of cardiovascular indications
which currently can be dosed only by subcutaneous injection or
intravenous infusion. The Company believes there is a strong market
need for additional oral anticoagulant and antithrombotic agents.
On March 25, 1996, the Company submitted an investigational new drug
application for an oral formulation of heparin to the U.S. Food and
Drug Administraion for review. In order to prepare the IND, the Company
engaged in preclinical testing which included, among other things, (i)
maximum tolerated dosingexperiments, (ii) acute and subacute toxicity
testing, (iii) a pharmacological screen, (iv) mutagenicity testing,
(v) dosing preparation stability analysis, and (vi) absorption,
distribution, metabolism, excretion (ADME) studies. The results of these
tests demonstrated, in part, that the carriers dosed at quantities
substantially greater than the quantities that the Company proposed to
administer to humans (i) caused no damage to intestinal tissue,
(ii) produced no pharmacological activity on its own, (iii) was not
s e q uestered in any body tissue, and (iv) caused no genetic
alterations. The IND was prepared based on the compilation of these
preclinical testing results.
After the required thirty day waiting period had expired, the
Company began its double-blind, controlled Phase I clinical trial.
The trial involved 30 human subjects and approximately 100 exposures,
and consisted of three parts: (1) escalating doses of carrier only;
(2) escalating doses of carrier with a fixed dose of heparin; and (3)
escalating doses of heparin with a fixed dose of the carrier. Oral
delivery was measured by testing all of the limited number of subjects
who participated in part 3 who received heparin and measured by blood
clotting times, (activated partial thromboplastin time or APTT), serum
l e v els of anti-factor IIa and Xa, and lipoprotein-associated
coagulation inhibitor (LACI) assays. The heparin activity in this
trial occurred at a substantially lower relative dose of administered
heparin than predicted by previous animal testing. In collaboration
with the Company and with input from the FDA, Garret FitzGerald,
M.D.Robinette Professor of Cardiovascular Medicine, Director of the
Center for Experimental Therapeutics and the Clinical Research Center
at the University of Pennsylvania and a specialist in anticoagulation
and antithrombotic therapy, designed the Phase I clinical trial, and
his laboratory performed the heparin activity assays. Dr. FitzGerald,
is a member of the Company's Development Advisory Board. See
Development Advisory Board .
With the completion of the Phase I clinical trial, the Company is
currently preparing a formulation development program to produce a
dosage form of the carrier that is intended for additional clinical
trials including Phase II and Phase III testing; however, there is no
assurance that the FDA will approve such testing. Additionally, there
can be no assurance that the test results are predictive of further
results. Substantial additional testing will be required. The
Company also has initiated a conceptual design and site selection
program to engineer a manufacturing facility for the production of the
carrier compound. Fluor Daniel, a leading engineering design and
construction company, has been retained to conduct these studies for
the Company.
Therapeutic Protein and Peptide Products
Among the protein and peptide products to which the Company is
seeking to apply its carriers are insulin, calcitonin, human growth
hormone and parathyroid hormone analogues. all of these products,
with the exception of the parathyroid hormone analogues (in clinical
development), currently being marketed as injectable products.
Insulin. Recent studies have shown that serious complications to
diabetes can be reduced if patients better control their blood
glucose levels. However, a patient needs to inject insulin several
times per day to properly regulate his glucose. This level of
compliance is difficult to achieve with an injectable formulation of
insulin and the Company believes an oral formulation would increase
compliance. Emisphere has demonstrated that its lead carrier for
insulin is able to achieve therapeutic utility in a diabetic rat model
that are comparable to those obtained following subcutaneous injection
of the compound in the same model. However, there can be no assurance
that the results achieved in rodents are predictive of future test
results in humans. Substantial additional testing will be required.
Human Parathyroid Hormone. Osteoporosis is a disease that
afflicts many post-menopausal women and older men. Currently, a
number of pharmaceutical companies are in various stages of clinical
testing to determine whether certain analogues of human parathyroid
hormone (hPTH) are effective in reducing the bone fractures which are
associated with osteoporosis.
Emisphere initiated an oral delivery program for hPTH analogues
in response to the interest expressed by various pharmaceutical
companies to deliver orally hPTH analogues for the treatment of
osteoporosis. The Company has demonstrated oral delivery of three
different hPTH analogues in primates to date. There can be no
assurance that the results of tests in primates are predictive of
results in humans. Substantial additional testing will be required.
Calcitonin. Calcitonin is also used to treat osteoporosis as an
injectionable solution or oral spray. The Company has demonstrated
the oral delivery of Calcitonin in primates. There can be no
assurance that test results achieved in primates are predictive of
future results in humans. Substantial additional testing will be
required.
Human Growth Hormone. While a number of new indications are
being explored, the majority of Human Growth Hormone sold is used to
treat children with growth deficiencies. The current preferred dosing
regimen in children entails daily injections for up to 10 years or
more.
The Company's lead carrier for recombinant human growth hormone
has been tested in rodents and primates and the tests indicated
delivery of therapeutic drug levels is achievable in these animals.
I n addition, growth studies conducted in animal models have
demonstrated that the drug is active after delivery to the blood when
the drug is dosed with the Company's carrier into the gastrointestinal
tract when compared to subcutaneous delivery. There can be no
assurance that test results achieved in rodents and primates are
predictive of future results in humans. Substantial additional
testing will be required.
Poorly absorbed organic compounds
The majority of pharmaceutical products are small organic
molecules. Pharmaceutical companies often identify biologically
active compounds that cannot be delivered orally.
Desferroxamine. Desferroxamine ("DFO") is the only approved iron
chelator for use in treating iron overload resulting from frequent
blood transfusions in the treatment of illnesses such as beta
thalassemia and sickle cell anemia. Currently dosing involves a 12-
hour subcutaneous infusion 5 days per week. The Company has
demonstrated oral delivery of therapeutic levels of DFO in primates.
There can be no assurance that test results achieved in primates are
predictive of future results in humans. Substantial additional
testing will be required.
Cromolyn. Cromolyn is a mast cell stabilizer used in the
treatment of asthma and allergies. The Company demonstrated Cromolyn
absorption in rodents. There can be no assurance, however, that
such results are predictive of results in humans. Substantial
additional testing will be required.
Vaccines
The Company is exploring the applicability of its carriers for
humans and animals in the field of vaccines. The Company has
conducted experiments with a number of antigens. The results of
dosing rodents orally with antigens combined with the Company's
carriers were an increased secretory Immunoglobulin A (sIgA) response,
increased Immunoglobulin G (IgG) response and CD4 T-cell
proliferation. These results indicate that oral vaccination may be
possible using the Company s carriers. There can be no assurance
that test results achieved in rodents are predictive of future results
in humans. Substantial additional testing will be required.
Collaboration Agreements
The Company's strategy is to facilitate the development of
products utilizing its drug delivery technologies by entering into
c o l laboration agreements with pharmaceutical and biotechnology
companies that have the financial, scientific and marketing resources
to fund development of specific products through clinical trials, to
obtain regulatory approval, to manufacture the final products in
commercially viable quantities and to market the products through
their sales and marketing organizations.
The Company is currently having discussions with a number of
pharmaceutical companies regarding potential applications of the
Company's drug delivery technologies for their proprietary drugs.
There can be no assurance, however, that any agreements will be
consummated as a result of these discussions, that any resulting
agreements will yield revenues to the Company, that any such companies
will pursue product development until a commercial product is achieved
or that, once achieved, any pharmaceutical company will continue to
produce and sell the product and pay royalties to the Company.
Elan Corporation plc. On September 26, 1996, the Company
finalized the formation of the Elan Joint Venture to combine Elan's
drug delivery and formulation capabilities with the Company's carrier
technologies to research, develop and market oral formulations of
heparin and heparinoids. The Company believes that there are
significant synergies between Emisphere's novel technologies and Elan's
development and formulation expertise. As of September 27, 1996, Elan
has provided $7,500,000 to the project of which $4,500,000 has been
paid to Emisphere.
The JV Company is an Irish corporation, the equity of which is
owned 50% by the Company and 50% by Elan. The Company and Elan have
equal representation on the Board of Directors of the JV Company.
The key provisions of the Elan Joint Venture structure include:
(i) the grant by the Company to the JV Company of an exclusive, world-
wide license of the Company's carrier technology for new dosage forms
of heparin and heparinoids (the "Field"); (ii) the grant by Elan to
the JV Company of an exclusive, world-wide license of its formulation
technology for the Field; (iii) the grant by the Company to the JV
Company of a right of first refusal to license the Company's carrier
technology to commercialize additional anticoagulant compounds other
than heparin and heparinoids; (iv) the grant by the Company and Elan
to the JV Company of exclusive royalty-free licenses to use their
respective trademarks in connection with products in the Field;
(v) the requirement for the Company and Elan to make distributions in
equal portions to the extent needed to fund the JV Company's
commercial development efforts; and (vi) the sharing by the Company
and Elan of the financial benefits and expense obligations of the Elan
Joint Venture on a 50/50 basis. Althought there are certain limited
circumstances under which Elan would have a $4,500,000 limited preference
over the Company in returns from the Elan Joint Venture.
Whenever commercially or technically feasible, the JV Company
will contract with the Company or Elan to perform research and
development services on behalf of the JV Company. The Company and
Elan will be reimbursed by the JV Company for all such research and
development work at the conclusion of each stage of the research and
development program.
If the JV Company elects to proceed with commercialization with
any product, the parties anticipate that the Company will enter into a
supply agreement pursuant to which it will sell carriers to the JV
Company and that Elan or one of its affiliates will enter into a
supply agreement with the JV Company for the commercial production of
the products by Elan on behalf of the JV Company. Such supply
agreements would be on customary commercial terms and negotiated in
good faith by the parties. The Company shall also supply the JV
Company with such carriers as are required by the JV Company for its
research and development programs. Unless otherwise agreed by Elan
and the Company, the supply of the carriers for the research and
development programs shall be at cost so long as the Company holds at
least a 45% equity interest in the JV Company.
Upon the occurrence of an event of default in the Elan Joint
Venture agreement, the non-defaulting shareholder will be entitled to
make an offer to purchase the defaulting shareholder's interest in the
JV Company. The defaulting shareholder will then be obliged to sell
its interest to the non-defaulting shareholder at the offered price or
to make a counteroffer to purchase the non-defaulting shareholder's
interest at a price that is at least 10% higher than the previous
offer. Each side may make one additional counteroffer provided its
offer is at least 10% higher, as adjusted, than the previous offer.
P u r s uant to an agreement between the Company and Elan
International Services Ltd. ("Elan International"), the affiliate of
Elan that purchased 600,000 shares of Common Stock and warrants to
acquire 250,000 additional shares of Common Stock pursuant to the 1995
Elan Affiliate Purchase, Elan International has agreed, subject to
certain exceptions, not to acquire additional shares of the Company's
voting securities until September 26, 2001. During the term of such
agreement, Elan International has the opportunity, in the event the
Company issues and sells voting securities, to purchase newly issued
voting securities in an amount that would enable Elan International to
own the same percentage of the Company's voting securities as it owned
before such issuance and sale.
Patents
The Company's strategy is to apply for patent protection on all
aspects of its proprietary chemical and pharmaceutical delivery
technologies, including materials and compositions of matter for both
the carrier and complexes of a carrier with a pharmaceutical or
chemical agent, processes for manufacturing the carrier, new carriers,
uses of the carriers and improvements on its core technology that are
important for the success of the Company's business.
The Company has patents or patent applications for carriers
currently used by the Company to deliver heparin, insulin, calcitonin,
human parathyroid hormone, human growth hormone, interferon alpha,
desferroxamine and cromolyn. The Company has been granted ten patents
on its drug delivery technologies in the United States which will
expire between 2007 and 2014, and has certain patents issued or
applications pending in various countries around the world. The
Company has 24 patent applications relating to its drug delivery
technologies pending in the United States, including an application
relating to its heparin carrier, and has or expects to have
corresponding patent applications pending around the world. The
Company has applied to have one of its granted U.S. patents reissued
in an attempt to obtain certain broader claims to which the Company
believes it was entitled in the original patent grant.
Although the Company has patents for some of its products and has
applied for additional patents, there can be no assurance that patents
applied for will be granted, that patents granted to or acquired by
the Company now or in the future will be valid and enforceable and
provide the Company with meaningful protection from competition or
that the Company will possess the financial resources necessary to
enforce any of its patents. There can also be no assurance that any
products developed by the Company (or a licensee) will not infringe
upon any patent or other intellectual property right of a third party.
Manufacturing
An important step in taking a pharmaceutical product from
preclinical research to the marketplace is scaling up the process
required to produce commercial quantities. This process frequently
entails custom design and engineering that can add significantly to
the costs of goods. The primary raw materials used in making the
carriers currently under consideration by the Company for its new
formulations are amino acids and other organic compounds. The Company
currently produces these carriers in batch sizes of up to two hundred
grams. The Company has no internal capability for the production of
any of these carriers in larger batch sizes. A third-party
manufacturer with a GMP facility was recently successful in scaling up
production of the Company's carrier for its heparin trial.
The Company is conducting feasibility studies for engineering and
location of its own manufacturing facility. The Company believes that
there are multiple sources for the raw materials used to synthesize
its carriers. Numerous commercial manufacturers with GMP facilities
having the capability of producing the carriers have been identified.
The Company will continue to manufacture carriers on small scale for
research purposes and contract out with third party producers for
clinical testing. Once the engineering studies for the Company's
production facility are completed, the Company would be in a position
to decide whether to make or buy the carriers for future needs.
Competition
The biotechnology and pharmaceutical fields are rapidly evolving
and significant developments are expected to continue at a rapid pace.
The Company's success depends upon maintaining a competitive position
in the development of products and technologies in its areas of focus.
T h e Company is in competition with other pharmaceutical and
biotechnology companies, research organizations, individual scientists
and non-profit organizations engaged in the development of alternative
drug delivery technologies or new drug research and testing, as well
as with entities producing and developing injectable drugs. Many of
these companies and entities have substantially greater research and
development capabilities, experience and marketing, financial and
managerial resources, and represent significant competition for the
Company. Acquisitions of competing biotechnology companies by large
p h a rmaceutical companies could enhance competitors' financial,
marketing and other resources. Accordingly, the Company's competitors
may succeed in developing competing technologies and obtaining
governmental approval for products more rapidly than the Company.
There can be no assurance that developments by others will not render
the Company's products or technologies noncompetitive or obsolete.
With respect to the Company's drug delivery technologies, the
Company competes with both pharmaceutical companies developing their
own drug delivery technologies for drugs they currently produce in
injectable forms (including enhanced injectable forms) and independent
companies developing competitive alternative technologies such as
intranasal delivery systems, pulmonary systems, transdermal systems
and buccal absorption systems for use with a broad range of different
pharmaceuticals.
Government Regulation
The Company's products under development are subject to extensive
regulation by the FDA and other governmental authorities in the United
States and other governmental authorities in other countries.
The duration of the governmental approval process for marketing
new pharmaceutical substances, from the commencement of preclinical
testing to the receipt of a governmental final letter of approval for
marketing a new substance, varies with the nature of the product and
with the country in which such approval is sought. For entirely new
drugs, the approval process could take five years or more; however,
for reformulations of existing drugs, the process is typically
s h orter. In either case, the procedures required to obtain
governmental approval to market new drug products is a costly and
time-consuming process requiring rigorous testing of the new drug
product. There can be no assurance that even after such time and
expenditures, regulatory approval will be obtained for any products
developed by the Company. The steps required before a new human
pharmaceutical product can be marketed or shipped commercially in the
United States include, in part, preclinical testing, the filing of an
IND, the conduct of clinical trials and the filing with the FDA of
either a New Drug Application ("NDA") for drugs or a Product License
Application ("PLA") for biologics.
In order to conduct the clinical investigations necessary to
obtain eventual regulatory approval, an applicant must file an IND
with the FDA to permit the shipment and use of the drug for
investigational purposes. The IND sets forth, in part, the results of
preclinical (laboratory and animal) toxicology and efficacy testing
and the applicant's plans for clinical (human) testing. If the FDA
does not deny the exemption to ship or use the investigative drug or
place a "hold" on clinical testing within 30 days of the submission of
the IND, it becomes effective and clinical testing may begin.
Under the FDA's regulations, the clinical testing program
required for marketing approval of a new drug typically involves a
three-phase process. In Phase I, safety studies are conducted on
normal, healthy human volunteers to determine the maximum dosages and
side effects associated with increasing doses of the substance being
tested. In Phase II, studies are conducted on small groups of
patients afflicted with a specific disease to gain preliminary
evidence of efficacy and to determine the common short-term side
effects and risks associated with the substance being tested. Phase
III involves large-scale studies conducted on disease-afflicted
patients to provide statistical evidence of efficacy and safety and to
provide an adequate basis for physician labeling. Frequent reports
are required in each phase and, if unwarranted hazards to subjects are
found, the FDA may request modification or discontinuance of clinical
testing until further preclinical work has been done. Additional
testing (Phase IV) may be conducted after FDA approval and would be
designed to evaluate alternative utilizations of drug products prior
to their being marketed for such additional utilizations. Phase IV
testing is often similar to Phase II evaluation of efficacy testing
using a carefully selected clinical population.
Once clinical testing has been completed pursuant to an IND, the
applicant files an NDA or PLA with the FDA seeking approval for
marketing the drug product. The FDA reviews the NDA or PLA to
determine if the drug is safe and effective, and adequately labeled,
and if the applicant can demonstrate proper and consistent manufacture
of the drug. The time required for FDA action on an NDA or PLA varies
considerably, depending on the characteristics of the drug, whether
the FDA needs more information than is originally provided in the NDA
or PLA and whether the FDA finds problems with the evidence submitted.
The facilities of each company involved in the manufacturing,
processing, testing, control and labeling must be registered with and
approved by the FDA. Continued registration requires compliance with
GMP regulations. The FDA conducts periodic establishment inspections
to confirm continued compliance with its regulations.
The Company is subject to the regulation of the United States
Department of Labor, Occupational Safety and Health Administration
("OSHA"). In a recent OSHA audit of the Company, the Company was
cited for violations of OSHA regulations involving storage of
materials, training and documentation of policies and procedures. In
addition, numerous matters (not amounting to violations) were noted
which require additional attention by the Company. As a result the
Company was fined a small amount which was not material to the
Company. The Company has since taken steps to ensure compliance with
all applicable OSHA regulations and believes that its current
operations and procedures comply in all material respects with OSHA
regulations.
The Company is also subject to various federal, state and local
laws, regulations and recommendations relating to such matters as
laboratory and manufacturing practices and the use, handling and
disposal of hazardous or potentially hazardous substances used in
connection with the Company's research and development work. Although
the Company believes it is in compliance with these laws and
regulations in all material respects, there can be no assurance that
the Company will not be required to incur significant costs to comply
with environmental and other laws or regulations in the future.
Scientific Advisory Board
The Company's scientific advisors consult with the Company on
developments relating to current and future forms of drug delivery
t e chnology, chemistry, gastro-intestinal physiology and protein
structure. As a group, the scientific advisors possess substantial
experience in biomaterials, controlled release and polymeric delivery
s y stems, proteins, liposomes, microencapsulation, pharmaceutics,
analytical techniques and immunology. The scientific advisors also
consult with the Company on aspects of drug delivery product planning
and feasibility studies and assist Company scientists in establishing
research priorities, provide guidance for the Company's clinical
evaluation programs, advise Company scientists of new developments and
alert the Company to potential collaborators. In addition, the
Company has funded various research projects and collaborations with a
number of its Scientific Advisory Board members and it intends to
continue to expand its scientific collaborations with current and
future Scientific Advisory Board members. None of the scientific
advisors are employees of the Company. Scientific advisors devote
only a small portion of their time to the affairs of the Company and
have other commitments to, or consulting or advisory contracts with,
other institutions which may compete with their obligations to the
Company. The Company requires each of its scientific advisors to
execute a confidentiality agreement upon the commencement of his or
her relationship with the Company. The agreements generally provide
that all confidential information made known to the individual during
the term of the relationship shall be the exclusive property of the
Company and shall be kept confidential and not disclosed to third
parties except in specified circumstances. Scientific advisors
receive annual compensation, are reimbursed for their expenses for
each meeting attended and are granted stock options on a case-by-case
basis.
Set forth below are the names, positions and areas of expertise
of individuals on the Company's Scientific Advisory Board.
Name and Position Area of Expertise
Raymond J. Bergeron, Ph.D. Drug design, polyamines and
chemotherapeutics
Professor of Chemistry,
Department of Medicinal
Chemistry, College of Pharmacy
University of Florida
Mark I. Greene, M.D., Ph.D. Monoclonal antibodies,
immunology
Professor of Medicine,
Department of Pathology,
School of Medicine
University of Pennsylvania
Raphael M. Ottenbrite, Ph.D. Synthesis and structure of
polymers
Professor of Chemistry
Department of Chemistry and
High Technology Materials
Division, Virginia
Commonwealth University
Joseph R. Robinson, Ph.D. Mucoadhesives, pharmaceutics
and gastrointestinal physiology
Professor, School of Pharmacy
University of Wisconsin
Ernest Freire, Ph.D. Protein chemistry, analytical
techniques and calorimetry
Professor
Johns Hopkins University
Development Advisory Board
In October 1994, the Company established a Development Advisory
Board to help guide the Company's efforts to move oral formulations
into human trials. The Company has funded various research projects
and collaborations with a number of its Development Advisory Board
members and it intends to continue to expand its collaborations with
current and future Development Advisory Board members. None of the
development advisors are employees of the Company and they devote only
a small portion of their time to the affairs of the Company and have
other commitments to, or consulting or advisory contracts with, other
institutions that may compete with their obligations to the Company.
Development advisors receive annual compensation, are reimbursed for
their expenses for each meeting attended and are granted stock options
on a case-by-case basis.
Set forth below are the names, positions and areas of expertise
of individuals on the Company's Development Advisory Board.
Name and Position Area of Expertise
William N. Charman, Ph.D. Protein conformation; physical
pharmacy
Senior Lecturer in
Pharmaceutics
Victorian College of Pharmacy
Donald C. Monkhouse, Ph.D. Product development
formulation
Consultant
formerly with Smithkline
Beecham
Hans Schreir, Ph.D. Formulation research; drug
delivery
Founder and Principal
Scientist
Advanced Therapeutics, Inc.
Garret FitzGerald, M.D. Ph.D. Clinical protocols and
clinical studies;
Professor and Director anticoagulation
School of Medicine
University of Pennsylvania
Employees
As of October 11, 1996, the Company had 49 employees, 37 engaged
in scientific research and technical functions and 10 performing
administrative and clerical functions. Of the 47 employees, 16 hold
Ph.D. or M.D. degrees. The Company believes that its relationship
with its employees is good.
To complement its own expertise, the Company has been assisted in
its activities by scientists, physicians and academicians, most of
whom are affiliated with universities or other medical research
centers, who serve as consultants as requested by the Company in
connection with the research and development of new drugs as well as
clinical testing procedures and applications. Such scientists,
physicians and consultants, including members of the advisory boards,
were paid aggregate fees of approximately $102,000 for their services
for the fiscal year ended July 31, 1996. The Company intends to hire
and/or collaborate with scientists, physicians and academicians who
have an expertise in areas complementary to the Company's drug
delivery technologies. Certain of these scientific collaborators will
be retained on a regular basis and others on a project-by-project
basis. The Company's contracts with such scientific collaborators,
most of which are renewable by the Company on a year-to-year basis,
call for payments during the 1997 fiscal year of approximately $36,000
in the aggregate. The terms of the Company's agreements with
scientific collaborators are determined on an arms' length basis, and
depend on such factors as the nature and expense of the study to be
done by the scientific collaborator and the budget for that study, the
expertise of a collaborator and the extent and importance of the
contributions to the Company expected from a collaborator.
ITEM 2. PROPERTIES
The registrant currently leases 21,500 square feet of office
space at 11 and 15 Skyline Drive, Hawthorne, New York for use as
executive offices and laboratories. No difficulty is anticipated in
negotiating renewals as the current leases expire or in finding
satisfactory space at a reasonable cost if the existing space becomes
u n a vailable or additional space is needed to meet expansion
requirements.
ITEM 3. LEGAL PROCEEDINGS
The Company is not party to any litigation that is expected to have a
material effect on the operations or business of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET REGISTRANT S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Companys Common Stock is traded on the over-the-counter
market and prices are quoted on the National Market System on the
(Nasdaq) under the symbol EMIS.
The following sets forth the range of high and low sale prices
for the common stock for the periods indicated, as reported by Nasdaq.
Fiscal Year
Ended July 31, High Low
-------------- ---- -----
1995
----
First quarter 4 1/2 2 7/16
Second quarter 4 2 1/8
Third quarter 3 5/8 1 1/8
Fourth quater 7 3/4 1 1/2
1996
----
First quarter 11 1/8 6 1/4
Second quarter 9 7/8 5 1/8
Third quarter 13 3/4 9 1/2
Fourth quarter 16 1/2 6 1/4
As of October 10, 1996 there were 392 stockholders of record and
9,464,754 shares of the Companys Common Stock outstanding. The
closing price for the Company s Common Stock on October 10, 1996 was
$16.875.
The Company has never paid cash dividends and does not intend to
pay cash dividends in the foreseeable future. The Company intends to
retain earnings, if any, to finance the growth of its business.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data should be read in
conjunction with the financial statements and related notes which
appear elsewhere herein. The financial data for each of the five
years in the period ended July 31, 1996 have been derived from audited
financial statements.
<TABLE>
Fiscal Year Ended July 31,
1992 1993 1994 1995 1996
-- -- -- -- --
(in thousands, except per share
amounts)
Statement of Operations Data:
<S> <C> <C> <C> <C> <C>
Revenue (1) $ 177 $ 292 $ 85 $ 33 $ 3,131
--------- --------- --------- --------- ---------
Costs and expenses:
Research and development 4,495 5,521 5,855 5,802 6,605
General and administrative 2,490 2,025 2,619 2,404 3,337
--------- --------- --------- --------- ---------
Total costs and expenses 6,985 7,546 8,474 8,206 9,942
Operating loss (6,808) (7,254) (8,389) (8,173) (6,811)
Other income:
Interest and dividend income 464 571 608 389 703
Miscellaneous income 60 33 90 - -
--------- --------- --------- --------- ---------
Net loss $ (6,284) $ (6,650) $ (7,691) $ (7,784) $ (6,108)
========= ========= ========= ========= =========
Net loss per share $ (1.17) $ (0.99) $ (1.01) $ (1.03) $ (0.72)
========= ========= ========= ========= =========
Weighted average number of
shares outstanding 5,362 6,706 7,607 7,588 8,457
========= ========= ========= ========= =========
</TABLE>
As of July 31,
1992 1993 1994 1995 1996
------ ------- ------- ------- -------
Balance Sheet Data: (in thousands)
Cash, cash equivalents and
marketable securities $7,579 $20,254 $12,694 $ 5,620 $18,237
Working capital 7,268 19,939 12,597 5,173 17,799
Total assets 10,790 22,837 15,210 7,549 20,039
Long-term liabilities 0 85 87 55 45
Accumulated deficit (14,503) (21,153) (28,844) (36,628) (42,736)
Stockholders' equity 10,215 22,171 14,674 6,899 19,267
(1) Revenue consists of research and development contract revenue, including for
fiscal year 1996, a payment of $3,000,000 from Elan.
ITEM 7. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
Emisphere is a drug delivery company focused on the discovery and
application of proprietary synthetic chemical compounds that enable
the oral delivery of macromolecules and other compounds that are not
currently deliverable by oral means. Since its inception in 1986, the
Company has devoted substantially all of its efforts and resources to
research and development conducted on its own behalf and through
c o l l aborations with corporate partners and academic research
institutions. The Company has had no product sales to date. The
major sources of the Company's working capital have been proceeds from
its initial public offering in 1989, a second public offering in
February 1993, private equity financing, the latest of which occurred
in October 1995, reimbursement of expenses and other payments from
corporate partners, the registered sale of one million shares of
Common Stock to two institutional investors in April 1996, and income
earned on the investment of available funds. The Company's operations
are not significantly affected by inflation or seasonality.
Results of Operations
The Company has since its inception generated significant losses
from operations. The Company does not expect to achieve profitability
in the foreseeable future. Profitability will ultimately depend on the
Company's ability to develop its lead product, an oral formulation of
heparin, in conjunction with the Elan Joint Venture or to develop
other products in conjunction with other partners. There can be no
assurance that the development will be completed or if completed, any
regulatory agency will approve the final product. Even if final
products are developed and approved, there is no assurance that sales
will be sufficient to achieve profitability. If development of such
products is not achieved or approval not granted, the Company's
prospects will be materially affected.
The ability of the Company to reduce its operating losses in the
near term will be dependent upon, among other things, its ability to
attract new pharmaceutical and other companies who are willing to
provide funding to the Company for a portion of the Company's research
and development with respect to specific projects. While the Company
is constantly engaged in discussions with pharmaceutical and other
companies, there can be no assurance that the Company will enter into
any additional agreements or that the agreements will provide research
and development revenues to the Company.
Fiscal 1996 Compared to Fiscal 1995
Revenue increased by approximately $3,098,000. The 1996 revenue
consisted of a payment of $3,000,000 from Elan to reimburse the
Company for certain research and development costs, and payments from
two other pharmaceutical companies for which the Company performed
feasibility studies. The recognition of the revenue from Elan was for
work Emisphere performed on development of an oral formulation of
heparin.
Total operating expenses for the fiscal year ended July 31, 1996
increased by approximately $1,735,000 or 21%, as compared to fiscal
1995. The details of the increase are as follows:
R e search and development costs increased by approximately
$803,000, or 14%, in fiscal 1996 as compared to fiscal 1995. The
increase is mainly attributable to the Company's clinical development
program for heparin. The clinical development program consisted of
work performed to file an investigational new drug application ("IND
Application") with the FDA for the commencement of a Phase I clinical
t r ial, and the performance of a double-blind controlled dose
escalation study in humans, as well as other studies undertaken to
support the development of an oral formulation of heparin. The higher
costs associated with the clinical development program relating to
heparin were partially offset by a decrease in funding of outside
consultants and universities, not associated with the clinical
program, engaged to conduct studies to help advance the Company's
scientific research efforts. The Company also experienced a decrease
in personnel and related expenses due, in part, to a staff reduction
in May 1995. The Company believes that this level of research and
development spending will continue for the foreseeable future and may
increase if operations are expanded.
General and administrative expenses increased by approximately
$933,000, or 39%, in fiscal 1996 as compared to fiscal 1995. This
increase is primarily attributable to an increase in expenses relating
to services provided by outside business consultants. The Company
recorded expenses of approximately $730,000 in connection with the
granting of stock and options as compensation to business consultants
for assisting the Company in discussions and negotiations with
pharmaceutical companies. The Company also experienced an increase in
legal and other professional fees incurred in connection with, among
other things, the settlement of a class action lawsuit and the Elan
Joint Venture.
As a result of these factors, the Company's operating loss
decreased by approximately $1,362,000, or 17%, from fiscal 1995 to
fiscal 1996. The Company does not expect to generate an operating
profit, and may possibly generate larger operating losses, in the
foreseeable future.
T h e Company's other income for fiscal 1996 increased by
approximately $314,000, or 81%, from fiscal 1995. This was primarily
due to a larger investment portfolio as a result of recent equity
financing and research and development revenues of $3,000,000 received
from Elan.
Based on the above, the Company's net loss for fiscal 1996 was
$6,108,000, a 22% decrease over fiscal 1995's loss of $7,784,000.
Fiscal 1995 Compared to Fiscal 1994
Revenue decreased by approximately $52,000 or 61%. The 1995
revenues consisted of an initial payment under the Company's agreement
with Pasteur Merieux to study the applicability of one of the
Company's drug delivery technologies for the delivery of a flu
antigen. There were no other revenues during fiscal 1995 from the
Company's other partners under their respective agreements with the
Company. In comparison, fiscal 1994 revenues consisted of a final
payment under the Company's agreement with Sandoz Pharmaceutical
Corporation.
Total operating expenses for the fiscal year ended July 31, 1995
decreased by $267,000, or 3%, as compared to fiscal 1994. The details
of the decrease are as follows:
Research and development costs decreased by approximately
$53,000, or 1%, in fiscal 1995 as compared to fiscal 1994. The
reduced cost was attributable to decreased funding of outside
consultants and universities engaged to conduct studies to help
advance the Company's scientific research effort and a decrease in
usage of laboratory supplies as a result of a reduction in the number
of projects on which the Company was actively working. The reduction
was partially offset by an increase in personnel and related expenses
during the first ten months of the year, as the Company pursued its
c l inical development program for oral heparin. In addition,
depreciation and amortization expense increased by approximately
$15,000 in fiscal 1995, resulting from purchases of laboratory
equipment and furniture placed in service subsequent to July 31, 1994.
General and administrative expenses decreased by approximately
$214,000, or 8%, in fiscal 1995 as compared to fiscal 1994. The
decrease in expenses was attributable to a decrease in personnel and
related expenses due, in part, to a staff reduction in May 1995,
reduced payments to outside consultants engaged as financial advisors
w h o se purpose was to assist the Company in discussions and
negotiations, and a decrease in supplies purchased during the fiscal
year. The reduction was partially offset by an increase in insurance
costs for directors' and officers' insurance and for protection of the
Company's assets, and professional fees paid to seek patent protection
for the Company's proprietary inventions.
As a result of these factors, the Company's operating loss
decreased by approximately $216,000, or 3%, from fiscal 1994 to fiscal
1995.
T h e Company's other income for fiscal 1995 decreased by
approximately $309,000, or 44%, from fiscal 1994. This was primarily
the result of net losses of approximately $36,000 incurred on the sale
of marketable securities and decreased interest income on the
Company's smaller investment portfolio as the Company expended funds
on operations and fixed asset additions. Also included in other
income in fiscal 1994 was collections of approximately $88,000 on
loans which had previously been fully reserved.
Based on the above, the Company's net loss for fiscal 1995 was
$7,784,000, a 1% increase over fiscal 1994's net loss of $7,691,000.
Liquidity and Capital Resources
As of July 31, 1996 the Company had working capital of
a p p roximately $17,799,000. Total cash, cash equivalents and
marketable securities were approximately $18,237,000, an increase of
$12,618,000 compared to the Company's position at July 31, 1995. The
increase in the Company's cash, cash equivalents and marketable
securities in was primarily due to the receipt of $7,500,000 in
proceeds from the sale of Common Stock and warrants in connection with
the 1995 Elan Affiliate Purchase, $10,000,000 in proceeds from the
sale of 1,000,000 shares of Common Stock to two institutional
investors in April 1996 and $3,000,000 from Elan to reimburse the
Company for certain research and development costs, partially offset
by cash used to fund operations in fiscal 1996.
Elan and the Company finalized the terms and provisions of the
Elan Joint Venture on September 26, 1996. In connection with the Elan
Joint Venture, Elan has provided $4,500,000 to the JV Company of which
$1,500,000 has been paid to the Company. The remaining $3,000,000
will be applied by the JV Company primarily for future research and
development expenses. After expenditure of such $3,000,000, Emisphere
will be responsible for one-half of the JV Company's cash needs upon
the JV Company's request. The Company and Elan are sharing the
financial benefits and expense obligations of the Elan Joint Venture
on a 50/50 basis and they have equal representation on the Board of
Directors of the JV Company. See "Business Collaboration Agreements".
The Company expects to incur substantial research and development
expenses associated with the development of the Company's oral drug
delivery system. As a result of the ongoing research and development
efforts of the Company, management believes that the Company will
continue to incur operating losses and that, potentially, such losses
could increase. The Company expects to need substantial resources to
continue its research and development efforts. Under present
operating assumptions, the Company expects that cash, cash equivalents
and marketable securities will be adequate to meet its liquidity and
capital requirements through the second quarter of fiscal 1998.
Thereafter, the Company would need to seek additional funds, primarily
in the public and private equity markets, and to the extent necessary
and available, through debt financing. The Company has no firm
agreements with respect to any additional financing and there can be
no assurance that the Company would be able to obtain adequate funds
on acceptable terms. If adequate funds were not available, the
Company would be required to delay, scale back, or eliminate one or
more of its research or development programs, or obtain funds, if
available, through arrangements with collaborative partners or others
that may require the Company to relinquish rights to certain of its
technologies, product candidates, or products that the Company would
not otherwise relinquish. The Company does not maintain any credit
lines with financial institutions.
Impact of The Adoption of Recently Issued Accounting Standards
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment
of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
( SFAS 121 ) in March 1995. SFAS 121 requires companies to review
t h e i r long-lived assets and certain identifiable intangibles
(collectively, "Long-Lived Assets") for impairment whenever events or
changes in circumstances indicate that the carrying value of a Long-
Lived Asset may not be recoverable. Impairment is measured using the
lower of a Long-Lived Asset's book value or fair value, as defined.
The Company is not required to adopt the provisions of SFAS 121 until
the beginning of the fiscal year ending July 31, 1997. The Company
believes that, based upon current operations and prospects, the future
adoption of SFAS 121 will not have a material impact on the Company's
financial position or results of operations.
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation ("SFAS 123") in October 1995. SFAS 123 requires
companies to estimate the fair value of common stock, stock options,
or other equity instruments ("Equity Instruments") issued to employees
using pricing models which take into account various factors such as
current price of the common stock, volatility and expected life of the
Equity Instrument. SFAS 123 permits companies to either provide pro
forma note disclosure or adjust operating results for the amortization
of the estimated value of the Equity Instrument, as compensation
expense, over the vesting period of the Equity Instrument. The
Company has elected to provide pro forma note disclosure which will
appear in its financial statements for the year ending July 31, 1997
and, therefore, there will be no effect on the Company's financial
position or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and financial statement schedule are set
forth starting on page F-1 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors and Executive Officers
Set forth below is certain information regarding the directors
and executive officers of the Company.
Name Age Position with the Company
Michael M. Goldberg, M.D. 37 Chairman of the Board of
Directors and Chief
Executive Officer
Sam J. Milstein, Ph.D. 47 Director, President, Chief
Scientific Officer and
Secretary
Robert A. Baughman, Jr., 47 Senior Vice President and
Pharm. D., Ph.D. Director of Development
Lewis H. Bender, MBA 37 Vice President and Director
of Business Development
Howard M. Pack 79 Director
Jere E. Goyan, Ph.D. 67 Director
Peter Barton Hutt, Esq. 62 Director
Mark I. Greene, M.D., Ph.D. 48 Director
Michael M. Goldberg, M.D. has served as Chairman of the Board of
Directors since November 1991 and as Chief Executive Officer and a
director of the Company since August 1990. In addition, Dr. Goldberg
served as President from August 1990 to October 1995. In February
1990, Dr. Goldberg founded Montaur Capital Corporation, a health care
investment banking firm. Prior thereto he was a vice president of The
First Boston Corporation and was a founding member of the firm's
health care banking group. Pursuant to an Employment Agreement dated
as of October 6, 1995 between Dr. Goldberg and the Company, Dr.
Goldberg is to serve as Chairman of the Board and Chief Executive
Officer until July 31, 2000, and the Company is obligated to use its
best efforts to elect Dr. Goldberg as a director.
Sam J. Milstein, Ph.D. has been with the Company since September
1990, as a director and Chief Scientific Officer since November 1991,
as President since October 1995, as Secretary since December 1990 and
as a Co-Director of Science and of Research and Development prior to
November 1991. In addition, Dr. Milstein served as Executive Vice
President from November 1990 to October 1995. Prior to September
1990, Dr. Milstein served as President of Mortar & Pestle Consulting,
Inc., a consulting firm. Pursuant to an Employment Agreement dated as
of October 6, 1995 between Dr. Milstein and the Company, Dr. Milstein
is to serve as President and Chief Scientific Officer until July 31,
2000, and the Company is obligated to use its best efforts to elect
Dr. Milstein as a director.
Robert A. Baughman, Jr., Pharm.D., Ph.D. has been with the
Company since September 1991, as Senior Vice President since September
1993, Director of Operations and Development since June 1994, Vice
President and Director, Research and Development of the Company prior
thereto. Prior to joining the Company, he was with Cholestech Corp.
as Director, Preclinical Development starting in September 1990, with
Penederm, Inc. as Group Leader, R&D and Project Manager from August
1989 to September 1990 and with Genentech, Inc. as Project Team Leader
and Scientist prior to August 1989.
Lewis H. Bender, MS, MA, MBA, has been with the Company since
June 1993, as Director of Business Development, receiving the title
of Vice President in October 1995. Prior thereto, he was product
manager for the specialty chemicals division at Metaux Precieux S.A.
Metalor in Neuchatel, Switzerland, general manager for Handy and
Harman s Chemical Products Center and production planning specialist
for Roche in Basel, Switzerland.
Howard M. Pack has served as a director of the Company since
its inception in April 1985 and served as Executive Vice President of
Finance from the Company's inception until October 1988. For more
than five years until November 1992, Mr. Pack served as Chairman of
the Board for Seatrain Lines, Inc., a cargo company that filed a
consent to an involuntary petition for reorganization under the
Federal Bankruptcy Code in February 1981 and a plan of complete
liquidation under Chapter 7 thereof in November 1992.
Jere E. Goyan, Ph.D., is President, Chief Operating Officer, and a
director of Alteon, Inc., a development stage pharmaceutical company,
where he started as Senior Vice President Research and Development in
January 1993. Prior thereto he was a Professor of Pharmacy and
Pharmaceutical Chemistry and the Dean of the School of Pharmacy at the
University of California, San Francisco, and has served in various
other academic, administrative and advisory positions, including that
of Commissioner of the Food and Drug Administration. He currently
serves as a director of Atrix Corporation, SciClone Pharmaceuticals
and Boeringer Ingelheim.
Peter Barton Hutt, Esq., has for more than the past five years
been a partner at the law firm of Covington & Burling in Washington,
D.C., where he specializes in the practice of food and drug law. He
currently serves as a director of IDEC Pharmaceuticals, Inc., Cell
Genesys, Inc., Interneuron Pharmaceuticals, Inc., Vivus Inc. and
Sparta Pharmaceuticals, Inc.
Mark I. Greene, M.D., Ph.D. has been Professor of Medicine,
Department of Pathology, School of Medicine at the University of
Pennsylvania for more than the past five years.
In addition to the Company's directors and executive officers, the
Company has the following individual as part of its management team:
Joseph D. Poveromo, CPA, Controller and Chief Accounting Officer
since July of 1994 has been with the Company since 1993. Prior
thereto, he was Controller of Lick Your Chops, Inc., a pet food
company, and held senior accounting positions with Marshall Granger &
Company and Rayfield & Licata.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information regarding the aggregate
compensation paid by the Company for the three fiscal years ended July
31, 1996 to the Company's Chief Executive Officer and other executive
officers whose total compensation exceeded $100,000 during the last
fiscal year:
SUMMARY COMPENSATION TABLE
Annual Stock
Name and Principal Fiscal Compensation Option Grant Other
Position Year (1) (2)
------------------------ ----- ------------ -------------- -------
Michael M. Goldberg, M.D. 1996 $335,349 756,749 shares $4,620
Chairman of the Board 1995 227,605 16,567 shsres 4,497
and Chief Executive 1994 237,500 --- 4,122
Officer
Sam J. Milstein, Ph.D. 1996 $287,683 555,903 shares $3,850
President, Chief 1995 202,187 10,792 shares 3,850
Scientific Officer 1994 192,500 --- 3,850
and Secretary
Robert A. Baughman, Jr., 1996 $180,154 3,664 shares $ 3,175
Pharm. D., Ph.D. 1995 165,641 8,131 shares 3,175
Senior Vice President 1994 156,002 65,000 shares 2,910
Director of Development
Lewis H. Bender 1996 $120,125 77,396 shares $ 2,032
Vice President,Director
of Business Development
(3)
(1) Annual compensation consists solely of base salary except that Dr.
Goldberg was also paid $25,349 in lieu of earned vacation during
the 1996 fiscal year. Such payments were also made to Dr.
Milstein in the amounts of $14,808 and $33,873, and to Dr.
Baughman in the amounts of $12,308 and $20,154, during the 1995
and 1996 fiscal years, respectively. As to each individual named,
the aggregate amounts of all perquisites and other personal
benefits, securities and property not included in the summary
compensation table above or described below do not exceed the
lesser of $50,000 or 10% of the annual compensation. During a
portion of the 1995 fiscal year, the executive officers and
certain other employees of the Company agreed to forgo a portion
of cash compensation in return for an option to purchase a number
of shares of the Common Stock determined by dividing the amount of
cash compensation forgone by the fair market value of the Common
Stock on the date of grant of the option.
(2) Other compensation consists solely of matching contributions made
by the Company under a defined contribution plan introduced during
the 1994 fiscal year for substantially all employees.
(3) Mr. Bender became an executive officer of the Company in October
1995
The following table sets forth certain information relating to
stock option grants to the executive officers named above during the
fiscal year ended July 31, 1996:
<TABLE>
STOCK OPTION GRANTS DURING THE FISCAL YEAR ENDED JULY 31, 1996
<CAPTION>
Potential Realizable
Value at Assumed
Percent Annual Rates
Numbers Of Total Option of Stock
Shares Shares Appreciation for
Underlying Granted To Exercise Expir- Option Term
Options Employees Price Per ation
Name Granted (1) (2) Share Date 5% 10%
========================= ========== ============ ========= ======= ======= =========
<S> <C> <C> <C> <C> <C> <C>
Michael M. Goldberg, M.D. 1,918 (3) $6.63 2/1/96 $2,242 $2,242
1,944 (3) 7.38 5/1/96 2,530 2,530
1,919 (3) 6.06 8/1/96 2,050 2,050
968 (4) (3) 12.00(4) 11/1/96 2,049 2,049
750,000 47.0% 8.63 10/6/05 4,068,162 10,309,521
Sam J. Milstein, P.D. 1,856 (3) $6.63 2/1/96 $2,170 2,170
1,719 (3) 7.38 5/1/96 2,237 2,237
1,547 (3) 6.06 8/1/96 1,653 1,653
781 (4) (3) 12.00(4) 11/1/96 1,653 1,653
550,000 34.5% 8.63 10/6/05 2,983,318 7,560,315
Robert A. Baughman, Ph.D. 1,361 (3) $6.63 2/1/96 $1,591 $1,591
813 (3) 7.38 5/1/96 1,058 1,058
990 (3) 6.06 8/1/96 1,058 1,058
500 (4) (3) 12.00(4) 11/1/96 1,058 1,058
Lewis H. Bender 597 (3) $6.63 2/1/96 $697 $697
635 (3) 7.38 5/1/96 826 826
774 (3) 6.06 8/1/96 827 827
390 (4) (3) 12.00(4) 11/1/96 825 825
75,000 4.7% 8.63 10/6/05 406,816 1,030,952
</TABLE>
(1) Options that expired or will expire in 1996 were all granted
under the Company's Employee Stock Purchase Plan or Non-Qualified
Employee Stock Purchase Plan at exercise prices equal to the
lower of the fair market value on the date of grant or 85% of the
fair market value on the date of exercise. Options expiring in
2005 and 2006 were all granted under the Company's 1991 Stock
Option Plan and 1995 Non-Qualified Stock Option Plan at prices
equal to the fair market value on the date of grant
(2) The total option shares granted during the 1996 fiscal year to
employees includes 49,952 shares under the Company's Employee
Stock Purchase Plan or Non-Qualified Employee Stock Purchase
Plan, 245,024 shares under the Company's 1991 Stock Option Plan
and 1,300,000 shares under the Company s 1995 Non-Qualified Stock
Option Plan.
(3) Less than 0.15%
(4) The number of shares and exercise price per share set forth with
respect to this option assumes that the fair market value of the
Common Stock on the date of exercise will be not lower than
$14.12 per share.
The following table sets forth information as to the unexercised
options held by the executive officers named above as of July 31,
1996:
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
<TABLE>
Number of
Exercises Shares Underlying Value of Unexercised In
During the Fiscl Year Unexercisable Options the Money Options (1)
---------------------- --------------------- -----------------------
Number
of Shares Value Exer- Unexer- Exer- Unexer-
Name Acquired Realized cisable cisable cisable cisable
-------------------------- ----------- -------- --------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Michael M. Goldberg, M.D. 1,900 $7,719(2) 1,040,384(6) 600,000 $26,682 ---
4,948 33,399(3)
1,918 7,432(4)
1,944 9,477(5)
Sam J. Milstein, Ph.D. 1,539 6,252(2) 550,085 440,000 22,429 ---
5,491 37,064(3)
1,280 7,192(4)
684 8,380(5)
Robert A. Baughman, Ph.D. 1,673 6,797(2) 94,491 22,267 13,065 ---
3,333 22,498(3)
857 7,713(4)
1,098 5,274(4)
813 3,963(5)
Lewis H. Bender 2,290 15,458(3) 7,940 85,200 21,760 $44,100
597 2,313(4)
635 3,096(5)
</TABLE>
(1) Based on a closing price of $7.50 on July 31, 1996 on the NASDAQ
National Market System.
(2) Based on a closing price of $7.188 on August 1, 1995, the date of
exercise, on the NASDAQ National Market System.
(3) Based on a closing price of $8.25 on November 1, 1995, the date of
exercise, on the NASDAQ National Market System.
(4) Based on a closing price of $10.50 on February 1, 1996, the date
of exercise, on the NASDAQ National Market System.
(5) Based on a closing price of $12.25 on May 1, 1996, the date of
exercise, on the NASDAQ National Market System.
(6) Includes 130,000 shares with respect to which Dr. Goldberg has
transferred options to members of his family and with respect to
which Dr. Goldberg disclaims beneficial interest.
Employment Agreements
The Company has entered into employment agreements with Michael M.
Goldberg, M.D. and Sam J. Milstein, Ph.D., expiring on July 31, 2000.
Pursuant to the agreements, Dr. Goldberg is to serve as Chairman and
Chief Executive Officer of the Company at an annual salary of $310,000
to increase at 6% per year, Dr. Milstein is to serve as President and
Chief Scientific Officer at an annual salary of $250,000 to increase
at 6% per year and both are to be nominated to serve as members of the
Board of Directors. The agreements also provide for the grant of an
option to purchase 750,000 shares of the Common Stock with respect to
Dr. Goldberg and an option to purchase 550,000 shares with respect to
Dr. Milstein. The options have an exercise price of $8.625 per share
and they expire on October 5, 2005. The options become fully
exercisable on August 1., 2005 except that they become earlier
exercisable if the Company achieves certain milestones, with the rate
in no event being greater than either 25% of the shares for each
milestone achieved or 20% of the shares in any employment year. The
Company milestones required for exercisability of the options are (i)
execution of a collaboration agreement providing for the
commercialization of a product utilizing the Company s drug delivery
technology and the payment of a royalty to the Company, (ii) one or
more financings by the Company that provide aggregate net proceeds of
at least $15,000,000 and (iii) any subsequent such collaboration
agreement or such financing.
The agreements provide that, upon (i) termination by the Company
either without cause or for any reason following a Change of Control
(as defined in the agreements) or (ii) termination by Dr. Goldberg or
Dr. Milstein, as the case may be, following an uncured breach or
bankruptcy by the Company, the Company will make severance payments
equal to the greater of (i) the compensation payable under the
agreements from the date of termination to July 31, 2000 or (ii) one
year's compensation under the agreements.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Based solely on a review of the reports and representations
furnished to the Company during the last fiscal year, the Company
believes that each of the persons required to file reports under
Section 16(a) of the Exchange Act is in compliance with all applicable
filing requirements.
Compensation of Directors
Directors receive no cash compensation in their capacity as
directors. Directors who are not employees of the Company receive,
pursuant to the Company's Stock Option Plan for Outside Directors (the
"Directors Plan"), an option to purchase 70,000 shares of Common
Stock on the date of his or her initial election or appointment to
the Board of Directors. The exercise price per share for the options
is the fair market value of the Common Stock on the date of grant and
the options expire ten years from the date of grant with respect to
20,000 shares and eleven years from the date of grant with respect to
50,000 shares. The option becomes fully vested with respect to 16,666
shares on the first anniversary of the date of grant, 16,667 shares on
each of the second and third anniversaries and 10,000 shares on each
of the fourth and fifth anniversaries. In the event an option holder
ceases to serve as a director of the Company, fully vested options may
be exercised within six months thereafter and all unvested options
terminate immediately.
Pursuant to the Directors Plan, Dr. Goyan and Messrs. Hutt and
Pack have each been granted an option to purchase 70,000 shares of
Common Stock for $13.00 per share and Dr. Greene has been granted an
option to purchase 70,000 shares of Common Stock for $8.625 per share.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information, as of October
10, 1996, except as noted, regarding the beneficial ownership of the
Common Stock by (i) each person or group known to the Company to be
the beneficial owner of more than 5% of the outstanding Common Stock,
(ii) each director and nominee for director of the Company, (iii) each
executive officer of the Company named below and (iv) all directors
and executive officers of the Company as a group. Except as otherwise
specified, the named beneficial owner has sole voting and investment
power over the shares listed.
Amount and
Nature of Percent
Name and Address of Beneficial Beneficial of
Owner (1) Ownership (2) Class
------------------------------------ ------------- --------
Amerindo Investment Advisors Inc(3) 1,317,500 13.9%
and Affiliates
One Embarcardero Center, Suite 2300
San Francisco, California 94111-3162
Elan International Services Ltd 850,000 8.7%
102 St. James Court
Flatts Smiths FL04
Bermuda
Invesco Funds Group, Inc 520,000 5.5%
7800 East Union Avenue
Denver, Colorado 80237
Michael M. Goldberg, M.D. 940,745(4) 9.1%
Sam J. Milstein, Ph.D. 555,631 5.5%
Howard M. Pack 153,383(5) 1.5%
Jere E. Goyan, Ph.D. 60,000 *
Peter Barton Hutt, Esq 60,000 *
Mark I. Greene, M.D., Ph.D. 33,666 *
Robert A. Baughman, Jr., Pharm.D., Ph.D. 117,490 1.2%
Lewis H. Bender 25,488 *
All directors and executive officers as
a group 1,946,403 (4)(5) 17.7%
*Less than 1%
(1) Unless otherwise specified, the address of each beneficial owner
is c/o the Company, 15 Skyline Drive, Hawthorne, New York 10532.
(2) The number of shares set forth for each director and executive
officer of the Company includes the following number of shares
with respect to which such individual has the right, exercisable
within 60 days, to acquire beneficial ownership upon exercise of
options granted by the Company:
Number of
Shares
---------
Elan International Services Ltd 250,000
Dr. Goldberg 908,465
Dr. Milstein 548,538
Mr. Pack 60,000
Dr. Goyan 60,000
Mr. Hutt 60,000
Dr. Greene 33,666
Dr. Baughman 115,168
Mr. Bender 22,226
All directors and executive officers as a group 1,808,063
(3) Based on a Schedule 13D/A dated April 26, 1996, Amerindo
Investment Advisors Inc., a California corporation, Amerindo
Investment Advisors, Inc., a Panama corporation, Alberto W. Vilar
and Gary A. Tanaka share voting and dispositive power with
respect to 1,317,500 shares.
(4) Does not include 130,000 shares with respect to which members of
Dr. Goldberg's family have the right to acquire beneficial
ownership upon exercise of options and with respect to which Dr.
Goldberg disclaims beneficial ownership.
(5) Does not include 439,040 shares beneficially owned by various
members of Mr. Pack's family, with respect to which Mr. Pack
disclaims beneficial ownership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Any information required by this Item is included in Item 11 and
is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
10-K
(a) A list of the financial statements and financial statement
schedule filed as a part of this report is set forth on page F-1
hereof. A list of the exhibits filed as a part of this report is set
forth in the Exhibit Index starting after page F-19 hereof.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the registrant during
the last quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EMISPHERE TECHNOLOGIES, INC.
By: /s/ Michael M. Goldberg
-----------------------
Michael M. Goldberg, M.D.
Chairman of the Board and
Chief Executive Officer
Date: October 10, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
/s/ Michael M. Goldberg Director, Chairman of the October 10, 1996
- ------------------------- Board and Chief Executive Officer
Michael M. Goldberg, M.D.
/s/ Jere E. Goyan Director October 10, 1996
- ------------------------
Jere E. Goyan, Ph.D.
/s/ Peter Barton Hutt Director October 10, 1996
- ------------------------
Peter Barton Hutt
/s/ Sam J. Milstein Director, President, Chief October 10, 1996
- ------------------------ Scientific Officer and Secretay
Sam J. Milstein, Ph.D.
/s/ Howard M. Pack Director October 10, 1996
- ------------------------
Howard M. Pack
/s/ Mark I. Greene Director October 10, 1996
- ------------------------
Mark I. Greene
/s/ Joseph D. Poveromo Controller and Chief Accounting October 10, 1996
- ------------------------ Office (Principal Financial and
Joseph D. Poveromo CPA Accounting Officer)
EMISPHERE TECHNOLOGIES, INC.
INDEX
------
Report of Independent Accountants
Financial Statements:
Balance Sheets as of July 31, 1995
and 1996
Statements of Operations for the
years ended July 31, 1994, 1995 and 1996
Statements of Stockholders Equity
for the years ended July 31, 1994, 1995 and 1996
Statements of Cash Flows for the
years ended July 31, 1994, 1995 and 1996
Notes to Financial Statements
Financial Statement Schedule:
Schedule II - Valuation and
Qualifying Accounts
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Emisphere Technologies, Inc.:
We have audited the financial statements and financial statement
schedule of EMISPHERE TECHNOLOGIES, INC. (the Company ) listed in the
index on Page F-1 of this Form 10-K. These financial statements and
the financial statement schedule are the responsibility of the
Company s management. Our responsibility is to express an opinion on
these financial statements and the financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the
Company as of July 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the
period ended July 31, 1996, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included
therein.
COOPERS & LYBRAND L.L.P.
New York, New York
October 4, 1996
EMISPHERE TECHNOLOGIES, INC.
BALANCE SHEETS
July 31, 1995 and 1996
Assets: 1995 1996
---------- ------------
Current assets:
Cash and cash equivalents $2,226,156 $ 11,904,674
Marketable securities 3,393,395 6,332,817
Prepaid expenses and other current
assets 148,469 289,769
---------- ------------
Total current assets 5,768,020 18,527,260
Equipment and leasehold improvements, at cost,
net of accumulated depreciation and
amortization 1,704,309 1,450,862
Other assets 76,243 61,243
---------- -----------
Total assets $7,548,572 $ 20,039,365
========== ============
Liabilities and Stockholders Equity:
Current liabilities:
Accounts payable $ 234,917 $ 191,038
Accrued compensation 203,145 211,826
Accrued professional fees 145,000 263,000
Accrued expenses 11,711 61,923
---------- ------------
Total current
liabilities 594,773 727,787
Deferred lease liability 55,100 44,823
---------- ------------
Total liabilities 649,873 772,610
---------- ------------
Commitments and contingencies (Note 5)
Stockholders equity:
Preferred stock, $.01 par value;
1,000,000 shares authorized, none
issued and outstanding
Common stock, $.01 par value; 20,000,000
shares authorized;
7,687,304 shares issued (7,643,804
outstanding) in 1995;
9,450,760 shares issued (9,407,260
outstanding) in 1996 76,873 94,508
Additional paid-in capital 43,626,657 62,129,161
Accumulated deficit (36,628,209) (42,735,810)
Net unrealized gain (loss) on marketable
securities 16,191 (28,291)
---------- ----------
7,091,512 19,459,568
Less, common stock held in treasury, at
cost; 43,500 shares in 1995 and 1996 (192,813) (192,813)
---------- -----------
Total stockholders
Equity 6,898,699 19,266,755
---------- ----------
Total liabilities and
stockholders equity $7,548,572 $20,039,365
========== ===========
See accompanying notes to financial statements
EMISPHERE TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
For the years ended July 31, 1994, 1995 and 1996
1994 1995 1996
--------- -------- ---------
Contract revenues (1996
included $3 million from Elan
Corporation plc) $ 85,000 $ 33,333 $3,130,893
--------- --------- ----------
Costs and expenses:
Research and development 5,855,494 5,802,453 6,605,031
General and administrative
expenses 2,618,517 2,404,166 3,336,910
--------- --------- ---------
8,474,011 8,206,619 9,941,941
--------- --------- ---------
Operating Loss (8,389,011) (8,173,286) (6,811,048)
--------- --------- ---------
Other income:
Investment income 608,484 389,027 703,447
Other income 89,915
--------- --------- ---------
698,399 389,027 703,447
--------- --------- ---------
Net Loss $(7,690,612) $(7,784,259) $(6,107,601)
=========== ============ ============
Net loss per share $ (1.01) $ (1.03) $ (0.72)
========= ========= =========
Weighted average number of
shares outstanding 7,607,329 7,588,447 8,457,438
========= ========= =========
See accompanying notes to financial statements
<TABLE>
EMISPHERE TECHNOLOGIES, INC.
STATEMENTS OF STOCKHOLDERS EQUITY
For the years ended July 31, 1994, 1995 and 1996
Net Unrealized
Accumulated
Common Stock Additional Gain(Loss) on Held In Treasury
--------------- Paid-In Accumulated Marketable -----------------
Shares Amount Capital Deficit Securities Shares Amount Total
--------- -------- ----------- ------------ ------------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, July 31, 1993 7,585,483 $75,855 $43,248,012 $(21,153,338) $22,170,529
Exercise of options 29,759 297 263,522 263,819
Treasury stock purchase 15,000 $ (69,375) (69,375)
Net loss ( 7,690,612) ( 7,690,612)
--------- ------ ---------- ------------ ------ ------- ----------
Balance, July 31, 1994 7,615,242 76,152 43,511,534 (28,843,950) 15,000 (69,375) 14,674,361
Sale of common stock under
employee stock purchase plan 72,062 721 115,123 115,844
Treasury stock purchase 28,500 (123,438) (123,438)
Net unrealized gain on
marketabe securities $ 16,191 16,191
Net loss ( 7,784,259) ( 7,784,259)
--------- ------ ---------- ----------- --------- -------- --------- -----------
Balance, July 31, 1995 7,687,304 76,873 43,626,657 (36,628,209) 16,191 43,500 (192,813) 6,898,699
Sale of common stock under
employee stock purchase
plans and exercise of
option 125,956 1,260 427,735 428,995
Issuance of common stock
and warrants to Elan
International Services
Ltd., net of expenses 600,000 6,000 7,457,000 7,463,000
Issuance of common stock in
connection with a public
offering, net of expenses 1,000,000 10,000 9,888,456 9,898,456
Issuance of common stock and
stock options in exchange
for services rendered 37,500 375 729,313 729,688
Change in net unrealized
gain (loss) on marketable
securities (44,482) (44,482)
Net loss (6,107,601) (6,107,601)
--------- ------- ---------- ------------- ------------- --------- --------- ----------
Balance, July 31, 1996 9,450,760 $94,508 $62,129,161 $(42,735,810) $(28,291) 43,500 $(192,813) $19,266,755
========= ======= ========== ============ ============= ========= ========= ============
</TABLE>
See accompanying notes to financial statements
<TABLE>
EMISPHERE TECHNOLOGIES, INC
STATEMENTS OF CASH FLOWS
For the years ended July 31, 1994, 1995 and 1996
Increase (Decrease) in Cash and Cash Equivalents
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating
activities
Net loss $(7,690,612) $(7,784,259) $(6,107,601)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation and
amortization 510,137 524,863 571,485
Net realized loss (gain)
on sale of marketable
securities 36,015 (25,562)
Bad debts recoveries (70,470)
Increase (decrease) in
defferred lease liability 2,471 (32,431) (10,277)
Non cash compensation in
connection with the
issuance of equity securities 729,688
Changes in assets and
liabilities:
Prepaid expenes and other
current assets (85,597) 203,578 (141,300)
Other assets (50) 5,000
Accounts payable and accured
expenses (133,278) 146,571 133,014
---------- ---------- ----------
Total adjustments 223,213 878,596 1,262,048
---------- ---------- ----------
Net cash used in operating
activities (7,467,399) (6,905,663) (4,845,553)
Cash flows from investing
activities:
Capital expenditures (357,837) (140,920) (318,038)
Purchases of marketable
securities (9,801,028) (12,402,830) (14,701,266)
Proceeds from sales of
marketable securities 16,515,268) 21,410,556 11,742,924
Other 70,470 10,000
---------- ----------- -----------
Net cash provided by
(used in) investing
activities 6,426,873 8,866,806 (3,266,380)
--------- --------- ----------
Cash flows from financing
activities:
Net proceeds from issuance of
common stock and warrants to
Elan Internationa Services Ltd. 7,463,000
Net proceeds from issuance of
common stock in a public
offering 9,898,456
Proceeds from exercise of
options and employee stock
purchases 263,819 115,844 428,995
Purchases of treasury stock (69,375) (123,438)
--------- ----------- ----------
Net cash provided by
(used in) financing
activities 194,444 (7,594) 17,790,451
--------- ----------- ----------
Net (decrease) increase
in cash and cash
equivalents (846,082) 1,953,549 9,678,518
Cash and cash equivalents,
beginning of year 1,118,689 272,607 2,226,156
--------- --------- ----------
Cash and cash equivalents
end of year $ 272,607 $2,226,156 $11,904,674
========= ========= ==========
</TABLE>
For noncash transactions, see Notes 2 and 9.
See accompanying notes to financial statements
EMISPHERE TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Business:
Emisphere Technologies, Inc. (the Company ), is developing a
novel technology for the oral drug delivery of pharmaceuticals
that are currently effectively administered only by injection.
To date the Company has no product sales.
The Company has limited capital resources and recurring net
operating losses. The Company is dependent upon receipt of
additional capital investment or other financing to fund its
long-term planned research activities. Assuming that the
Company can obtain sufficient financing to complete development
of its oral drug delivery technology, the Company will need to
a t t ract pharmaceutical companies willing to enter into
commercialization agreements with the Company to produce and
market their drugs utilizing the Company s drug delivery
technology. In addition to the normal risks associated with a
new business venture, there can be no assurance that the
Company s research and development will be successfully
completed or that the Company s drug delivery technology will
be commercially viable. In addition, the Company operates in
an environment of rapid change in technology, and is dependent
upon the services of its employees and its consultants.
2. Summary of Significant Accounting Policies:
Equipment and Leasehold Improvements:
-------------------------------------
Equipment and leasehold improvements are stated at cost.
Depreciation and amortization are provided for on the straight-
line basis over the estimated useful life of the asset.
Leasehold improvements are amortized over the life of the lease
or of the improvements, whichever is shorter. Expenditures for
maintenance and repairs which do not materially extend the
useful lives of the respective assets are charged to expense as
i n c u r red. The cost and accumulated depreciation or
amortization of assets retired or sold are removed from the
respective accounts and any gain or loss is recognized in
operations.
Cash and Cash Equivalents:
--------------------------
The Company considers all highly liquid, interest-bearing, debt
instruments which, when acquired, have a maturity of three
months or less to be cash equivalents. The carrying amount
reported in the balance sheet for cash and cash equivalents
approximates its fair value (see Note 3 for fair value of
marketable securities).
Patent Costs:
-------------
As a result of research and development efforts conducted by
the Company, it has received, applied for, or is in the
process of applying for, a number of patents to protect
proprietary inventions. Costs incurred in connection with
patent applications have been expensed as incurred.
Revenue Recognition:
--------------------
The Company is currently engaged in research and development of
its proprietary technology. Revenue derived from feasibility
studies is recognized ratably over the contract period.
Certain contracts also contain provisions whereby the Company
may receive additional payments for services rendered if
certain test objectives are achieved. Such amounts will be
recognized as income when received.
The Company received $3 million from Elan Corporation plc
( Elan ). Such amount was recognized as income during the year
ended July 31, 1996 and represented Elan s reimbursement of
certain costs incurred by the Company prior to December 31,
1995 in connection with the development of a product under
joint development (see Note 14).
Loss per Share:
---------------
Net loss per share is computed based on the loss for the period
divided by the weighted average number of shares of common
stock outstanding during the period. The loss per share for
all periods presented excludes the number of common shares
issuable upon the exercise of outstanding options and warrants,
since such inclusion would be anti-dilutive.
Income Taxes:
-------------
The Company accounts for income taxes in accordance with
S t a t e ment of Financial Accounting Standards No. 109,
Accounting for Income Taxes ( SFAS 109"). SFAS 109 requires
recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been
included in the financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined
on the basis of the difference between the tax basis of assets
and liabilities and their respective financial reporting
amounts ( temporary differences ) at enacted tax rates in
effect for the year in which the temporary differences are
expected to reverse.
Concentration of Credit Risk:
-----------------------------
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of cash equivalents and
marketable securities. The Company generally invests its
excess funds in obligations of the U.S. government and its
agencies, bank deposits, mortgage backed securities, and
investment grade debt securities issued by corporations and
financial institutions. The Company holds no collateral for
these financial instruments.
Use of Estimates:
-----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Statement of Cash Flows:
------------------------
Supplemental disclosure of noncash investing and financing
activities:
During April 1996, the Company issued a total of 37,500 shares
of common stock to two individuals as compensation for services
rendered to the Company. The fair market value of such shares
at the date of issuance was approximately $530,000. (Also see
Note 9.)
Reclassifications:
------------------
Certain reclassifications have been made to the financial
statements for 1994 and 1995 in order to conform with the
current year s presentation.
Impact of the Future Adoption of Recently Issued Accounting
Standards:
------------------------------------------------------------
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of ( SFAS 121") in March 1995. SFAS 121 requires
companies to review their long-lived assets and certain
identifiable intangibles (collectively, Long-Lived Assets )
for impairment whenever events or changes in circumstances
indicate that the carrying value of a Long-Lived Asset may not
be recoverable. Impairment is measured using the lower of a
Long-Lived Asset s book value or fair value, as defined. The
Company is not required to adopt the provisions of SFAS 121
until the beginning of the fiscal year ending July 31, 1997.
The Company believes that, based upon current operations and
prospects, the future adoption of SFAS 121 will not have a
material impact on the Company s financial position or results
of operations.
The Financial Accounting Standards Board issued Statement of
F i nancial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123") in October 1995. SFAS
123 requires companies to estimate the fair value of common
stock, stock options, or other equity instruments ("Equity
Instruments") issued to employees using pricing models which
take into account various factors such as current price of the
common stock, volatility and expected life of the Equity
Instrument. SFAS 123 permits companies to either provide pro
forma note disclosure or adjust operating results for the
amortization of the estimated value of the Equity Instrument,
as compensation expense, over the vesting period of the Equity
Instrument. The Company has elected to provide pro forma note
disclosure which will appear in its financial statements for
the year ending July 31, 1997 and, therefore, there will be no
effect on the Company s financial position or results of
operations.
3. Marketable Securities:
T h e Company considers its marketable securities to be
available-for-sale , as defined by Statement of Financial
A c c ounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities and, accordingly,
u n r ealized holding gains and losses are excluded from
operations and reported as a net amount in a separate component
of stockholder s equity. The following tables summarize the
amortized cost basis and aggregate fair value of marketable
securities, and the gross unrealized holding gains and losses,
at July 31, 1995 and 1996, respectively.
<TABLE>
<S> <C> <C> <C> <C> <C>
Amortized Fair Unrealized Holding
Cost Basis Value Gains (Losses) Net
----------- ----------- ------- -------- -------
1995
----
Maturities within one year:
U.S. Government Securities $ 2,778,563 $ 2,781,514 $ 4,612 $ (1,661) $ 2,951
Maturities between one and
two years:
U.S. Government Securities 598,641 611,881 13,240 13,240
----------- ----------- ------- --------- ---------
$ 3,377,204 $ 3,393,395 $17,852 $ (1,661) $16,191
=========== =========== ======= ========= =========
1996
----
Maturities within one year:
Corporate debt securities $ 2,982,918 $ 2,983,544 $ 626 $ 626
Maturities between one and
two years:
U.S. Government securities 1,397,601 1,378,314 $(19,287) (19,287)
Mortgage backed securities 1,980,589 1,970,959 (9,630) (9,630)
----------- ----------- -------- --------- ---------
$ 6,361,108 $ 6,332,817 $ 626 $(28,917) $(28,291)
=========== =========== ======== ========= ==========
</TABLE>
The aggregate net unrealized gain (loss) of $16,191 and
($28,291) has been included as a component of stockholders
equity at July 31, 1995 and 1996, respectively.
Realized gains and losses are included as a component of
investment income. For the years ended July 31, 1995 and 1996,
gross realized losses were approximately $46,000 and $22,000,
respectively, while gross realized gains were approximately
$10,000 and $48,000, respectively. For the year ended July 31,
1994, gross realized gains and losses were not significant. In
computing realized gains and losses, the Company determines the
cost of its marketable securities on a specific identification
basis. Such cost includes the direct costs to acquire the
securities, adjusted for the amortization of any discount or
premium. The fair value of marketable securities has been
estimated based on quoted market prices.
4. Equipment and Leasehold Improvements:
Equipment and leasehold improvements consist of the following:
Useful
Lives 1995 1996
in Years
-------- ---------- ----------
Equipment 5-7 $2,508,628 $2,826,666
Leasehold improvements Life of lease 1,214,567 1,214,567
---------- ----------
3,723,195 4,041,233
Less, Accumulated
depreciation and amortization 2,018,886 2,590,371
---------- ----------
$1,704,309 $1,450,862
========== ==========
5. Commitments and Contingencies:
(a) The Company leases office and laboratory space under
n o ncancelable leases expiring in various years
through 2002. The leases provide for rental holidays
and escalations of the minimum rent during the lease
term as well as additional rent based upon increases
in real estate taxes and common maintenance charges
( Additional Charges ).
As of July 31, 1996, future minimum rental payments are
as follows:
Minimum
Years Ending Rental
July 31 Payments
------------ -----------
1997 $267,000
1998 267,000
1999 267,000
2000 234,000
2001 169,000
Thereafter 84,000
----------
$1,288,000
==========
The Company records rent expense from leases with rental
holidays and escalations using the straight-line method,
thereby prorating the total rental commitment over the term
of the leases. Under this method, the deferred lease
liability represents the difference between the minimum cash
rental payments and the rent expense computed on a straight-
line basis.
Rent expense for the years ended July 31, 1994, 1995 and 1996
w a s a pproximately $268,000, $256,000 and $256,000
respectively. Additional Charges, as defined above, were not
material for these periods.
(b) The Company, for the years ended July 31, 1994, 1995 and
1 9 96 made research agreement payments totaling
approximately $515,000, $319,000 and $426,000
r e spectively, to seven universities and a research
organization ( entities ). Certain members of the
Company s Scientific Advisory Board are affiliated with
these entities.
Under various consulting agreements, as amended, the Company
is obligated to pay minimum fees totaling approximately
$713,000 during the two year period ending July 31, 1998.
6. Research and Development Contracts:
The Company enters into research and development contracts with
pharmaceutical companies ( customers ). These contracts
provide for, among other things, the services the Company is to
perform and the related fee and payment terms. Certain
contracts contain provisions whereby the Company may be
required to perform additional services in consideration for
amounts defined in the respective agreements. In certain
instances, the Company is entitled to the receipt of additional
payments in the event certain testing results are achieved. In
addition, the contracts contain provisions which require the
Company to negotiate, with the customer, the terms of a
licensing agreement. These licensing agreements contemplate
the exclusive worldwide use of the Company s proprietary
technology with the specific product under contract.
7. Stockholders Equity:
The Company s certificate of incorporation provides for the
issuance of one million shares of preferred stock with the
rights, preferences, qualifications and terms to be determined
by the Company s Board of Directors. As of July 31, 1996,
there were no shares of preferred stock outstanding (see Note
8).
In connection with an underwriting agreement associated with
the Company s 1989 public offering, the Company issued 20,000
warrants, each to purchase one share of the Company s common
stock at $8.25 per share. During the year ended July 31, 1996,
these warrants expired unexercised.
8. Stockholders Rights Plan:
On February 23, 1996, the Company s Board of Directors (the
Board ) declared a dividend of one preferred share purchase
right (a Right ) for each outstanding share of common stock.
Each Right entitles the registered holder to purchase from the
Company one one-hundredth of a share of Series A Junior
Participating Cumulative Preferred Stock ( A Preferred Stock )
at an exercise price of $80.
The Rights are not exercisable, or transferable apart from the
common stock, until the earlier to occur of (i) ten days
following a public announcement that a person or group of
affiliated or associated persons have acquired beneficial
ownership of 20% or more of the outstanding common stock of the
Company or (ii) ten business days (or such later date, as
defined) following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership
be a person or group of 20% or more of the outstanding common
stock of the Company. Furthermore, if the Company enters into
consolidation, merger, or other business combination, as
defined, each Right would entitle the holder upon exercise to
receive, in lieu of shares of A Preferred Stock, that number of
shares of common stock of the acquiring company having a value
of two times the exercise price of the Right, as defined. The
Rights contain antidilutive provisions, are redeemable at the
Company's option, subject to certain defined restrictions, for
$.01 per Right, and expire on February 23, 2006.
As a result of the Rights dividend, the Board designated
200,000 shares of preferred stock as A Preferred Stock. A
Preferred Stockholders will be entitled to a preferential
cumulative quarterly dividend of the greater of $1.00 per share
or 100 times the per share dividend declared on the Company s
common stock. The A Preferred shares have a liquidation
preference, as defined. In addition, each share will have 100
votes and will vote together with the common shares.
9. Stock Option and Employee Stock Purchase Plans:
(a) On January 21, 1992, the stockholders of the Company
approved the adoption of the 1991 Stock Option Plan (the
1991 Plan ). The 1991 Plan, as amended, permits the
Company to grant employees and consultants the option to
purchase an aggregate of 1.2 million shares of the
Company s common stock. The terms of the 1991 Plan
provide for the grant of either incentive stock options
( ISOs ), as defined by the Internal Revenue Code, or
options which do not qualify as ISOs ( non ISOs ). The
options are awarded by an independent committee of the
Board who determine the vesting period. Generally, the
options expire within a five to ten-year period as
determined by the committee and as defined by the 1991
Plan. As of July 31, 1996, 638,418 stock options were
outstanding under the 1991 Plan and shares available for
future grants amounted to 524,473.
On April 19, 1993, the stockholders of the Company approved a
stock option plan for outside directors (the Outside
Directors Plan ). The Outside Directors Plan, as amended,
provides for the Company to grant to directors, who are
neither officers nor consultants and who do not own 5% or
more of the Company s common stock, options to purchase
70,000 shares of the Company s common stock on the date of
initial election or appointment to the Board ( Director s
Grant ). The Directors Grants vest over a five year period,
as defined, with 20,000 options expiring ten years from the
date of grant and the balance expiring eleven years from the
date of grant. As of July 31, 1996, a total of 280,000
options were outstanding at exercise prices of either $8.63
or $13.00 per share.
On February 6, 1996, the stockholders of the Company approved
the adoption of the 1995 Non-Qualified Stock Option Plan (the
1995 Plan ). The terms of the 1995 Plan provide for the
granting to officers and other key employees the option to
purchase up to an aggregate of 1.8 million shares of the
Company s common stock. The number and terms of each grant
will be determined by an independent committee of the Board
who will determine option exercise price, termination date,
vesting and expiration date. During the year ended July 31,
1996, the Company granted 1.3 million options from the 1995
Plan. These options have an exercise price of $8.63 per
share and vest on August 1, 2005; however, in the event the
Company achieves certain defined milestones, the options vest
earlier, subject to per year limitations, as defined. The
options expire on October 5, 2005.
During April 1996, the Company granted 50,000 immediately
exercisable non-plan options to a financial consultant which
were compensatory. Accordingly, the Company recognized
compensation expense of approximately $200,000, related to
the issuance of these options, during the year ended July 31,
1996.
As of July 31, 1996, the Company has outstanding a total of
3,732,271 options. Such amount includes the options issued
from stock option plans noted above plus 43,000 options
issued under the Company s 1988 Stock Option Plan (as the
result of the adoption of the 1991 Plan, no additional awards
will be awarded from this plan), 1,455,853 non-plan options
( Non-Plan Options ), which includes the 50,000 stock options
noted in the preceding paragraph, and 15,000 options issued
to the Emisphere Charitable Foundation, Inc. (see Note 13).
Non-Plan Options include 909,031 options granted during 1992
to two senior executive officers ( Executives ) in connection
with their respective employment agreements. Each option
entitles the holder to purchase one share of the Company s
common stock at an exercise price per share of $12.38. These
options were exercisable as of July 31, 1996 and had an
original expiration date of July 31, 1997. On August 27,
1996, the Board agreed to cancel and regranted these options
with all terms and provisions remaining the same except that
the option expiration date was extended to July 31, 2002. In
addition, 409,031 of these options were deemed to be granted
from the 1991 Plan; the balance were deemed to be granted
from the 1995 Plan. The fair market value of the Company s
common stock on August 27, 1996 was below the exercise price
of these options. The respective employment agreements for
the Executives also contain provisions whereby the Executives
are allowed to borrow defined amounts from the Company in
connection with exercise of options. Outstanding loans bear
interest at rates as defined.
Transactions involving stock options during the years ended
July 31, 1993, 1994 and 1995 are summarized as follows:
Number of Exercise Price
Shares Range
---------- ------------------
Balance, July 31, 1993 2,161,948 $ 8.25 - $23.25
Granted 274,050 $ 4.00 - $10.75
Exercised (29,759) $ 8.00 - $11.25
Canceled (111,572) $ 8.25 - $19.75
----------
Balance, July 31, 1994 2,294,667 $ 4.00 - $23.25
Granted 134,023 $ 1.50 - $ 4.40
Canceled (158,576) $ 2.63 - $19.75
----------
Balance, July 31, 1995 2,270,114 $ 1.50 - $23.25
Granted 1,671,024 $ 3.63 - $11.38
Exercised (35,609) $ 1.50 - $ 6.63
Epired/Cancelled (173,258) $ 1.50 - $19.75
----------
Balance, July 31, 1996 3,732,271 $ 1.50 - $23.25
==========
As of July 31, 1996, 2,157,815 options were exercisable. The
balance of outstanding options are exercisable at various
times through June 2001.
(b) On December 20, 1994, the Company s stockholders approved
the adoption of two employee stock purchase plans (the
Purchase Plans ): the Emisphere Technologies, Inc.
Employee Stock Purchase Plan (the Qualified Plan ) and
the Emisphere Technologies, Inc. Non-Qualified Employee
Stock Purchase Plan (the Non-Qualified Plan ). The terms
and provisions of the Qualified Plan provide for all
employees, excluding employees who control 5% or more of
the Company, to receive a grant ( Grant ) of up to 15% of
their compensation, as such percentage is determined by
the Board prior to the date of grant not to exceed
quarterly limits as defined. Each Grant, upon exercise,
entitles the employee to purchase shares of the Company s
common stock at a price per share equal to the lesser of
the fair market value of the Company s common stock on the
date of grant or 85% of the fair market value on the date
the Grant is exercised, as defined. Grants expire six
months from the date of issuance. The terms and provisions
of the Non-Qualified Plan are identical to the Qualified
Plan except that excluded employees, as defined above, are
permitted to acquire shares of common stock and there are
no quarterly limitations which would limit the total
number of shares which may be purchased. At the inception
of the Purchase Plans, the number of shares of common
stock available for issuance under the Qualified Plan and
Non-Qualified Plan were 500,000 and 100,000, respectively.
Purchases of common stock during the years ended July 31,
1995 and 1996 are summarized as follows:
Qualified Plan Nonqualified Plan
------------------------ ------------------------
Shares Shares
Purchased Price Range Purchased Price Range
--------- ------------- --------- -------------
1995 66,982 $1.13 - $3.13 5,080 $1.43
1996 72,975 $1.50 - $9.00 17,372 $1.50 - $7.38
At July 31, 1996, shares reserved for future purchases under
the Qualified and Non-Qualified Plans were 360,043 and
77,548, respectively.
10. Major Customers:
During each of the years ended July 31, 1994 and 1995, all
revenue from research and development contracts was derived
from a single customer. During the year ended July 31, 1996,
approximately 96% of the revenue from research and development
contracts was derived from Elan.
11. Income Taxes:
There is no provision (benefit) for federal or state income
taxes for the years ended July 31, 1994, 1995 and 1996, since
the Company has incurred operating losses and has established a
valuation allowance equal to the total deferred tax asset.
The tax effect of temporary differences, net operating loss
carry-forwards and research and experimental tax credit carry-
forwards as of July 31, 1995 and 1996 was as follows:
1995 1996
---------- ---------
Deferred tax assets and valuation
allowance:
Accrued liabilities $ 107,688 $ 105,483
Equipment and leasehold
improvements 41,959 157,672
Net operating loss carry-forwards 14,303,952 16,529,182
Research and experimental
tax credit carry-forwards 1,902,150 1,902,150
Valuation allowance (16,355,749) (18,694,487)
----------- ----------
--- ---
=========== ==========
As of July 31, 1996, the Company has available, for tax
reporting purposes, unused net operating loss carry-forwards of
approximately $40 million which will expire in various years
from 2001 to 2011. The Company s research and experimental tax
credit carry-forwards expire in various years from 2001 to
2 0 1 0. Future ownership changes may limit the future
utilization of these net operating loss and research and
development tax credit carry-forwards as defined by the
Internal Revenue Code.
12. Retirement Plan:
The Company, effective August 1, 1993, adopted the provisions
of a defined contribution retirement plan (the Plan ). The
terms of the Plan, as amended, allow eligible employees who
have met certain age and service requirements to participate by
electing to contribute to the Plan, a percentage of their
compensation to be set aside to pay their future retirement
benefits as defined by the Plan. The Company has agreed to
make discretionary contributions to the Plan. For the years
e n d ed July 31, 1994, 1995 and 1996 the Company made
contributions to the Plan totaling approximately $50,000,
$46,000 and $36,000, respectively.
13. The Emisphere Charitable Foundation, Inc.:
During July 31, 1993, the Board authorized the incorporation
o f The Emisphere Charitable Foundation, Inc. (The
Foundation ). The Foundation has since been incorporated and
intends to seek tax exempt status under section 501(c)(3) of
the Internal Revenue Code. The Foundation s charitable purpose
is to grant financial assistance to pay expenses incurred by
persons or their families who are suffering from serious,
debilitating or prolonged illnesses. The Company intends to
make contributions to the Foundation in the form of cash and
Company stock options. Three officers of the Company are
directors of the Foundation. During the year ended July 31,
1994, the Company granted the Foundation 15,000 options to
acquire an equal number of shares of the Company s common stock
at an exercise price, per share, of $9.75.
14. Joint Venture with Elan Corporation plc:
During October 1995, the Company and Elan reached agreement
which provided for, among other things, the formation of an
equally owned joint venture ("JV") to jointly research, develop
and market products. The terms of the agreement provide for
Elan to initially finance the JV, with the Company and Elan
both contributing technology. It is anticipated that future
financing needs of the JV will be shared equally by the Company
and Elan. The agreement also provided for Elan to reimburse the
Company $3 million for certain research and development costs
incurred prior to December 1995.
The Company also entered into a Purchase Agreement with Elan
International Services Ltd., an affiliate of Elan, during 1995.
Pursuant to the Purchase Agreement, the Company sold 600,000
shares of its common stock and issued 250,000 warrants to
purchase shares of the Company's common stock at $16.25 per
share for total consideration of $7.5 million. The warrants
contain antidilutive provisions, are exercisable upon issuance,
and expire on October 18, 2000.
On September 26, 1996, the Company and Elan finalized the
formation of the JV and entered into a license agreement. The
license agreement provides for the JV to license certain
technology from the Company and for the Company to perform
certain research and development on behalf of the JV in
consideration for defined amounts. In connection with the
license agreement, the Company is also entitled to royalty
income based on future sales of licensed products by the JV, as
defined.
<TABLE>
EMISPHERE TECHNOLOGIES, INC.
VALUATION and QUALIFYING ACCOUNTS and RESERVES
For years ended July 31, 1994, 1995 and 1996
Col. A Col. B Col. C Col. D Col. E
--- --- --- --- ---
Additions
----------------
Charged Charged
Balance to Costs to other Balance at
Beginning and Accounts Deductions- End of
Description of Period Expenses Describe Describe Period
-------------------------------- --------- --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C>
For the year ended July 31, 1994
Allowance for Bad Debts -
CTA Bio Services, Inc. $180,000 $ 70,470 (1) $ 109,530
For the year ended July 31, 1995
Allowance for Bad Debts -
CTA Bio Services, Inc. $109,530 $109,530 (2) $ -0-
For the year ended July 31, 1996
Allowance for Bad Debts -
CTA Bio Services, Inc. $ -0- $ -0-
</TABLE>
(1) In October 1993, CTA Bio Services, Inc. made cash payments
to the Company against their loan totaling $70,470.
(2) In February 1995, CTA Bio Services, Inc. ceased operations.
The loan was declared uncollectible and written off.
EXHIBIT INDEX
Incorporated by
Exhibit Reference (1)
(3) -Certificate of Incorporation of Company, as A,B,C
amended
-Certificate of Designations of Series A
Junior Participating Cumulative Preferred Stock
-By-Laws of the Company A
(4) -Rights Agreement dated as of Febuary 23, 1996 E
between the Company and Continental Stock
Transfer & Trust company
(10)-1991 Stock Option Plan, as amended* D
-Stock Option Plan for Outside Directors, as
amended*
-Employee Stock Purchase Plan* D
-Non-Qualified Employee Stock Purchase Plan* D
-1995 Non-Qualified Stock Option Plan*
-Employment Agreement dated as of October 6, D
1995 between Michael M.Goldberg and the Company*
-Stock Option Agreements dated as of January B,D*
1, 1991, February 15, 1991, December 1, 1991,
August 1, 1992 and October 6,1995 between
Michael M.Goldberg and the Company*
-Employment Agreement dated as of October 6, D
1995 between Sam J. Milstein and the Company*
-Stock Option Agreements dated as of January B,D*
1, 1991, February 15, 1991, December 1, 1991,
August 1, 1992 and October 6,1995 between
Sam J. Milstein and the Company*
-Purchase Agreement dated as of October 18, D
1995 by and between the Company and Elan
International Services Limited
- Letter Agreement dated as of September 26,
1996 amending said Purchase Agreement
-Warrant Agreement dated as of October 18, D
1995 by and between the Company and
Elan International Services Limited
-Registration Rights Agreement dated as of D
October 18, 1995 by and between the
Company and Elan International Services
Limited
-Joint Venture Agreement dated as of September
26, 1996 by and among Elan Corporation plc,
the Company and Ebbisham Limited
-License Agreement dated as of September 26,
1996 by and between Ebbisham Limited and
Elan Corporation plc
-License Agreement dated as of September 26,
1996 by and between Ebbisham Limited and the
Company
-Stock Instrument dated as of September 26,
1996 by and between Ebbisham Limited and Elan
Corporation plc
-Memorandum and Articles of Association of
Ebbisham Limited
-Letter Agreement dated as of September 26,
1996 by and among Elan Corporation plc,
the Company and Ebbisham Limited
(11)-Statement re computation of per share earnings
(23)-Consent of Coopers & Lybrand L.L.P.
(27)-Financial Data Schedule
___________________
* Management contract or compensatory plan or arrangement
(1) Filed with a corresponding exhibit number as an exhibit to the
document referred to be letter as follows:
A. Registration Statement of the Company on Form S-18, as
declared effective by the Commission February 9, 1989, No. 33-
25759.
B. Registration Statement of the Company on Form S-1, as
declared effective by the Commission on May 31, 1991, No. 33-
40061.
C. Registration Statement of the Company on Form S-3, as
declared effective by Commission on February 9, 1993, No. 33-
53676
D. Annual Report on Form 10-K for the fiscal year ended July
31, 1995
E. Form 8-K dated March 5, 1996
(2) Omitted in part pursuant to Instruction 2 of Item 601 of
Regulation S-K.
- -----------------------------------------------------------------------------
EXHIBIT 3
Certificate of Designation of Series A
Junior Participating Cumulative Preferred Stock
- -----------------------------------------------------------------------------
CERTIFICATE OF DESIGNATIONS
of
SERIES A JUNIOR PARTICIPATING CUMULATIVE PREFERRED STOCK
of
EMISPHERE TECHNOLOGIES, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
____________
Emisphere Technologies, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware
(hereinafter called the "Corporation"), hereby certifies that the
following resolution was adopted by the Board of Directors of the
Corporation as required by Section 151 of the General Corporation
Law at a meeting of the Board of Directors duly held on February 23,
1996:
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of this Corporation (hereinafter called
the "Board of Directors" or the "Board") in accordance with the
provisions of the Certificate of Incorporation, the Board of
Directors hereby creates a series of Preferred Stock, par value $.01
per share (the "Preferred Stock"), of the Corporation and hereby
states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
Series A Junior Participating Cumulative Preferred Stock:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series A Junior
Participating Cumulative Preferred Stock" (the "Series A Preferred
Stock"). The number of shares initially constituting the Series A
Preferred Stock shall be 200,000; provided, however, that if more
than a total of 200,000 shares of Series A Preferred Stock shall be
issuable upon the exercise of Rights (the "Right") issued pursuant
to the Rights Agreement dated as of February 23, 1996, between the
Corporation and Continental Stock Transfer & Trust Company, as
Rights Agent (the "Rights Agreement"), the Board of Directors of the
Corporation, pursuant to Section 151(g) of the General Corporation
Law of the State of Delaware, shall direct by resolution or
resolutions that a certificate be properly executed, acknowledged,
filed and recorded, in accordance with the provisions of Section 103
thereof, providing for the total number of shares of Series A
Preferred Stock authorized to be issued to be increased (to the
extent that the Certificate of Incorporation then permits) to the
largest number of whole shares (rounded up to the nearest whole
number) issuable upon exercise of such Rights. Such number of
shares may be decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of
Series A Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance
upon the exercise of outstanding options, rights or warrants or upon
t h e conversion of any outstanding securities issued by the
Corporation convertible into Series A Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and
superior to the Series A Preferred Stock with respect to dividends,
the holders of shares of Series A Preferred Stock, in preference to
the holders of Common Stock, par value $.01 per share (the "Common
Stock"), of the Corporation, and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the first day of March, June, September
and December in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share
or fraction of a share of Series A Preferred Stock, in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $1
or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a
dividend payable in shares of Common Stock or a subdivision of the
o u t standing shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately
preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of
any share or fraction of a share of Series A Preferred Stock. In
the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the amount to which holders of
shares of Series A Preferred Stock were entitled immediately prior
to such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of
w h ich is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) The Corporation shall declare a dividend or distribution on
the Series A Preferred Stock as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common
Stock); provided that, in the event no dividend or distribution
shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1 per share on the
Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such
shares, unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the
payment thereof, and shall be the same as the record date for any
corresponding dividend or distribution on the Common Stock.
(D) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends or other distributions shall be declared,
paid or distributed, or set aside for payment or distribution, on
the Common Stock unless, in each case, the dividend required by this
Section 2 to be declared on the Series A Preferred Stock shall have
been declared.
(E) The holders of the shares of Series A Preferred Stock shall
not be entitled to receive any dividends or other distributions
except as provided herein.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the
holder thereof to 100 votes on all matters submitted to a vote of
the stockholders of the Corporation. In the event the Corporation
shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock into a greater or lesser number
of shares of Common Stock), then in each such case the number of
votes per share to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of
w h ich is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) E x c e pt as otherwise provided herein, in any other
Certificate of Designations creating a series of Preferred Stock or
any similar stock, or by law, the holders of shares of Series A
Preferred Stock and the holders of shares of Common Stock and any
other capital stock of the Corporation having general voting rights
shall vote together as one class on all matters submitted to a vote
of stockholders of the Corporation.
(C) If, at the time of any annual meeting of stockholders for
the election of directors, the equivalent of six quarterly dividends
(whether or not consecutive) payable on any share or shares of
Series A Preferred Stock are in default, the number of directors
constituting the Board of Directors of the Corporation shall be
increased by two. In addition to voting together with the holders
of Common Stock for the election of other directors of the
Corporation, the holders of record of the Series A Preferred Stock,
voting separately as a class to the exclusion of the holders of
Common Stock, shall be entitled at said meeting of stockholders (and
at each subsequent annual meeting of stockholders), unless all
dividends in arrears have been paid or declared and set apart for
payment prior thereto, to vote for the election of two directors of
the Corporation, the holders of any Series A Preferred Stock being
entitled to cast that number of votes per share of Series A
Preferred Stock as specified in clause (A) of this Section 3. Until
the default in payments of all dividends which permitted the
election of said directors shall cease to exist, any director who
shall have been so elected pursuant to the next preceding sentence
may be removed at any time, either with or without cause, only by
the affirmative vote of the holders of the shares of Series A
Preferred Stock at the time entitled to cast a majority of the votes
entitled to be cast for the election of any such director at a
special meeting of such holders called for that purpose, and any
vacancy thereby created may be filled by the vote of such holders.
If and when such default shall cease to exist, the holders of the
Series A Preferred Stock shall be divested of the foregoing special
voting rights, subject to revesting in the event of each and every
subsequent like default in payments of dividends. Upon the
termination of the foregoing special voting rights, the terms of
office of all persons who may have been elected directors pursuant
to said special voting rights shall forthwith terminate, and the
number of directors constituting the Board of Directors shall be
reduced by two. The voting rights granted by this Section 3(C)
shall be in addition to any other voting rights granted to the
holders of the Series A Preferred Stock in this Section 3.
(D) Except as set forth herein, or as otherwise provided by law,
holders of Series A Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent
they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 4. Certain Restrictions.
(A) W h e n ever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not declared, on
shares of Series A Preferred Stock outstanding shall have been paid
in full, the Corporation shall not:
(i) d e c l a r e or pay dividends, or make any other
distributions, on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock;
(ii) d e clare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, except dividends paid ratably on the
Series A Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;
(iii) r e d eem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Preferred Stock; or
(iv) r e d eem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or any shares
of stock ranking on a parity with the Series A Preferred Stock,
except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders
of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could,
under paragraph (A) of this Section 4, purchase or otherwise acquire
such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred
Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and
canceled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares
of Preferred Stock and may be reissued as part of a new series of
Preferred Stock subject to the conditions and restrictions on
issuance set forth herein, in the Certificate of Incorporation, or
in any other Certificate of Designations creating a series of
Preferred Stock or any similar stock or as otherwise required by
law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of
the Corporation, no distribution shall be made (1) to the holders of
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred
Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received $100 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, provided that
the holders of shares of Series A Preferred Stock shall be entitled
to receive an aggregate amount per share, subject to the provision
for adjustment hereinafter set forth, equal to 100 times the
aggregate amount to be distributed per share to holders of shares of
Common Stock, or (2) to the holders of shares of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except distributions
made ratably on the Series A Preferred Stock and all such parity
stock in proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or
winding up. In the event the Corporation shall at any time declare
or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation of
the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock)
into a greater or lesser number of shares of Common Stock, then in
each such case the aggregate amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such
event under the proviso in clause (1) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation
shall enter into any consolidation,
merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case
each share of Series A Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share, subject to
the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount of stock, securities, cash and/or any
property (payable in kind), as the case may be, into which or for
which each share of Common Stock is changed or exchanged. In the
event the Corporation shall at any time declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or
lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the
exchange or change of shares of Series A Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the numerator of
w h ich is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event. In the event both this Section 7 and Section 2
appear to apply to a transaction, this Section 7 shall control.
Section 8. No Redemption. The shares of Series A Preferred
Stock shall not be redeemable; provided,
however, that the Corporation may purchase or otherwise acquire
outstanding shares of Series A Preferred Stock in the open market or
by offer to any holder or holders of shares of Series A Preferred
Stock.
Section 9. Rank. The Series A Preferred Stock shall rank, with
respect to the payment of dividends and
the distribution of assets, junior to all series of any other class
of the Corporation's Preferred Stock, unless the Board of Directors
shall specifically determine otherwise in fixing the powers,
preferences and relative, participating, optional and other special
rights of the shares of such series and the qualifications,
limitations and restrictions thereof.
Section 10. Fractional Shares. The Series A Preferred Stock
shall be issuable upon exercise of the
Rights issued pursuant to the Rights Agreement in whole shares or in
any fraction of a share that is one one-hundredths (1/100ths) of a
share or any integral multiple of such fraction which shall entitle
the holder, in proportion to such holder's fractional shares, to
r e c e i ve dividends, exercise voting rights, participate in
distributions and to have the benefit of all other rights of holders
of Series A Preferred Stock. In lieu of fractional shares, the
Corporation, prior to the first issuance of a share or a fraction of
a share of Series A Preferred Stock, may elect (l) to make a cash
payment as provided in the Rights Agreement for fractions of a share
other than one one-hundredths (1/100ths) of a share or any integral
multiple thereof or (2) to issue depository receipts evidencing such
authorized fraction of a share of Series A Preferred Stock pursuant
to an appropriate agreement between the Corporation and a depository
selected by the Corporation; provided that such agreement shall
provide that the holders of such depository receipts shall have all
the rights, privileges and preferences to which they are entitled as
holders of the Series A Preferred Stock.
Section 11. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any
m a n ner which would materially alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as
to affect them adversely without the affirmative vote of the holders
of at least two-thirds of the outstanding shares of Series A
Preferred Stock, voting together as a single class.
IN WITNESS WHEREOF, this Certificate of Designations is executed
on behalf of the Corporation by its Chief Executive Officer and
attested by its Secretary this 5th day of March, 1996.
EMISPHERE TECHNOLOGIES, INC.
By: /s/ Michael M. Goldberg
-------------------------
Michael M. Goldberg, M.D.
C h airman and Chief Executive
Officer
Attest:
/s/ Sam J. Milstein
------------------------
Sam J. Milstein, Ph.D.
President, Chief Scientific
Officer and Secretary
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EXHIBIT 10
Stock Option Plan for outside Directors, as amended
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EMISPHERE TECHNOLOGIES, INC.
STOCK OPTION PIAN FOR OUTSIDE DIRECTORS
1. Purpose
The purpose of this Stock Option Plan for Outside Directors (the
"Plan") of Emisphere Technologies, Inc. (the "Corporation") is to
enable the Corporation to compensate eligible directors of the
Corporation and to encourage the highest level of performance by
p r oviding such persons with a proprietary interest in. the
corporation's success and progress by granting them shares of the
Corporation's Common Stock, par value $.0l per share ("Common
Stock").
2. Administration of the Plan
The Plan shall be administered by a committee (the "Committee")
of the Board of Directors of the Corporation (the "Board"), which
shall consist of one or more members of the Board, appointed by the
Board, who are outside directors (as defined below) or by The Board.
The interpretation and construction by the Committee of any
provisions of the Plan or of any other matters related to the Plan
shall be final. The Committee may from time to time adopt such
rules and regulations for carrying out the Plan as it may deem
advisable. No member of the Board or the Committee shall be liable
for any action or determination made in good faith with respect to
the Plan. The Plan shall be interpreted and implemented such that
the eligible outside directors will not fail, by reason of the Plan
or its implementation, to be "disinterested persons" within the
meaning of Rule 16b-3 of the Securities Exchange Act of 1934 (the
"Exchange Act"), as such Rule and such Act may be amended.
3. Eligibility and Issuances
(a) Eligibility. Directors of the Corporation who (i) are
neither officers nor employees nor consultants of the Corporation or
any of its subsidiaries, (ii) do not beneficially own five percent
or more of the Corporation's outstanding Common Stock on the date of
grant and (iii) are not affiliated with any person referred to in.
(i) or (ii) above ("outside directors") shall be eligible to receive
options to purchase Common Stock under the Plan.
(b) Stock Option Grants
(i) Each outside director shall be granted an option to
purchase 70,000 shares of the Corporation's Common Stock on the
date (the "Initial Grant Date") that is the later of (i) the
date of his or her initial election or appointment to the Board
or (ii) April 29, 1992, the date of the Plan's adoption by the
Board, such option to be on the following terms:
(a) The exercise price per share for such option shall be
the Fair Market Value (as defined below) of the Common Stock
as of the Initial Grant Date.
(b) Except as provided herein, such option shall expire
ten years from the Initial Grant Date with respect to 20,000
shares and eleven years from the Initial Grant Date with
respect to 50,000 shares.
(iv) "Fair Market Value" shall mean, for each Initial
Grant Date, (A) if the Common Stock is listed or admitted to
trading on the New York Stock Exchange (the "NYSE") or the
American Stock Exchange (the "ASE'), the low sale price of the
Common Stock on such date or, if no sale takes place on such
date, the lowest closing asked prices of the Common Stock on
such exchange as of such date, in each case as officially
reported on the NYSE or the ASE, or (B) if no shares of Common
Stock are then listed or admitted to trading on the NYSE or the
ASE, the low sales price of the Common Stock on such date on the
NASDAQ National Market System or, if no shares of Common Stock
are then quoted on the NASDAQ National Market System, the
closing bid price of the Common Stock on such date on NASDAQ or,
if no shares of Common Stock are then quoted on NASDAQ, the
lowest asked price of the Common Stock on such date as reported
on the over-the-counter system. If no closing bid and lowest
asked prices thereof are then so quoted or publish in the over-
the-counter market, "Fair Market Value" shall mean the higher of
(x) the book value per share of the Common Stock (assuming for
the purposes of the calculation the economic equivalence of all
shares of all classes of capital stock) as determined on a fully
diluted basis in accordance with generally accepted accounting
principles by a firm of independent public accountants of
recognized standing (which may be the Corporation's regular
auditors) selected by the Board as of the last day of any month
ending within 60 days preceding the date as of which the
determination is to be made or (y) the fair value per share of
Common Stock (assuming for the purposes of this calculation the
economic equivalence of all shares of classes of capital stock),
as determined on a fully diluted basis in good faith by the
Board, as of a date which is 15 days preceding the Initial Grant
Date.
(v) Options granted hereunder shall not "incentive stock
options" within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended.
4. Regulatory Compliance and Listing
The. issuance or delivery of any Option may be postponed by the
Corporation, and an Option shall not be exercisable, for such period
as may be required to comply with the Federal securities laws, state
"blue sky" laws, any applicable listing requirements of any
applicable securities exchange and any other law or regulation
applicable to the issuance, delivery or exercise of such Options and
the Corporation shall not be obligated to issue or deliver any
Options or shares of Common Stock if the issuance or delivery of
such Options or shares would constitute a violation of any law or
a n y regulation of any governmental authority or applicable
securities exchange.
S. Restrictions on Exercisability
(a) Except as provided in Section 5(b) below, options granted
under the Plan on the Initial Grant Date may be exercised as to
16,666 shares on the first anniversary of the Initial Grant
Date, as to 16,667 shares on each of the second and third
anniversaries of the Initial Grant Date and as to 10,000 shares
on each of the fourth and fifth anniversaries of the Initial
Grant Date.
(b) If any event constituting a "Change in Control of the
Corporation" shall occur, all options granted under the Plan,
which are outstanding at the time a Change of Control of the
Corporation shall occur, shall immediately become exercisable.
A "Change in Control of the Corporation" shall be deemed to
occur if (i) there shall be consummated (x) any consolidation or
merger of the Corporation in which the Corporation is not the
continuing or surviving corporation or pursuant to which shares
of the Corporation's Common Stock would be converted into cash,
securities or other property, other than a merger of the
Corporation in which the holders of the Corporation's Common
S t o c k immediately prior to the merger have the same
proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (y) any sale,
lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of
the assets of the Corporation, or (ii) the stockholders of the
Corporation shall approve. any plan or proposal for liquidation
or dissolution of the Corporation, or (iii) any person (as such,
term is used in Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), shall
become the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of 40% or more of the Corporation's
outstanding Common Stock other than pursuant to a plan or
arrangement entered in by such person and the Corporation, or
(iv) during any period of two consecutive years, individuals who
at the beginning of such period constitute the entire Board
shall cease for any reason to constitute a majority thereof
unless the election, or the nomination for election by the
Corporation's stockholders, of each new director was approved by
a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period.
6. Cessation as Director
In the event that the holder of an Option granted pursuant to
the Plan shall cease to be a director of the Corporation for any
reason, such holder may exercise any portion of the Option that is
exercisable by him at the time he ceases to be a director of the
Corporation, but only to the extent such Option is exercisable as of
such date, within six months after the date he ceases to be a
director of the Corporation.
7. Death
In the event that a holder of an Option granted pursuant to the
Plan shall die, his estate, personal representative or beneficiary
may exercise any portion of the Option that was exercisable by the
deceased Optionee at the time of his death, but only to the extent
such Option is exercisable as of such date, within twelve months
after the date of his death.
8. Stock Splits, Mergers, etc.
In the event of any stock split, stock dividend or similar
transaction which increases or decreases the number of 'outstanding
shares of Common Stock, appropriate adjustment shall be made by the
Board, whose determination shall be final, to the number and option
exercise price per share of Common Stock which may be purchased
u n der any outstanding Options. In the case of a merger,
consolidation or similar transaction which results in a replacement
of the Corporation's Common Stock and stock of another corporation
but does not constitute a Change in Control of the Corporation, the
Corporation will make a reasonable effort, but shall not be
required, to replace any outstanding Options granted under the Plan
with comparable options to purchase the stock of such other
c o rporation, or will provide for immediate maturity of all
outstanding Options, with all Options not being exercised within the
time period specified by the Board of Directors being terminated.
9. Transferability
Options are not assignable or transferable, except by will or
the laws of descent and distribution to the extent set forth in
Section 7 and during a director's lifetime may be exercised only by
him.
10. Exercise of Options
An optionholder electing to exercise an Option shall give
written notice to the Corporation of such election and of the number
of shares of Common Stock that he has elected to acquire. An
optionholder shall have no rights of a stockholder with respect to
shares of Common Stock. covered by his Option until after the date
of issuance of a stock certificate to him upon partial or complete
exercise of his option.
11. Payment
The option exercise price shall be payable in cash, check or in
shares of Common Stock upon the exercise of the Option. If the
shares of Common Stock are tendered as payment of the Option
exercise price, the value of such shares shall be the Fair Market
Value as of the date of exercise. If such tender would result in
the issuance of fractional s area of Common Stock, the Corporation
shall instead return the difference in cash or by check to the
employee.
12. Term of Plan
The Plan shall terminate on April 28, 2002, and no Option shall
be granted pursuant to the Plan after that date.
13. Obligation to Exercise Option
The granting of an Option shall impose no obligation on the
director to exercise such Option.
14. Continuance as Director
Nothing in the Plan shall be deemed to create any obligation on
the part of the Board to nominate any director for reelection by the
Corporation's stockholders.
15. Effectiveness of the Plan
The Plan shall become effective on April 29, 1992, the date of
its adoption by the Board of Directors, but subject, nevertheless,
to (1) approval, within twelve (12) months thereof, by the
affirmative vote of the majority of shares present in person or
represented. by proxy at a meeting at which a quorum is present and
entitled to vote thereon, or by such greater percentage as may from
time to time be required under the laws of the State of Delaware,
and applicable rules or regulations under Rule 16b-3 of the Exchange
Act and (2) such approvals as may be required by any other public
authorities. Options granted under the Plan may not be exercised
unless and until the stockholders of the Company approve the Plan.
16. Amendment of the Plan
The Board may at any time and from time to time alter, amend,
suspend or terminate the Plan in, whole or in part, provided,
however, that (i) any amendment which must be approved by the
stockholders of the Company in order to maintain the continued
qualification of the Plan under Rule 16b-3 under the Exchange Act or
any successor provision, or the approval of which is otherwise
required by law, shall not be effective unless and until such
stockholder approval has been obtained in compliance with such rule
or law and (ii) provisions of the Plan which govern the amount,
price or timing of the award of an Option shall not be amend d more
than once every six months, other, than to comply with changes in
the Internal Revenue Code of 1986, as amended, the Employee Income
Retirement Security Act, or the rules thereunder.
17. Withholding of taxes
The Company shall have the right, prior to the delivery of any
certificate evidencing shares of Common Stock to be issued pursuant
to an Option, to require the exercising outside director to remit to
the Company an amount in cash sufficient to satisfy any Federal,
state, or local tax withholding requirements.
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EXHIBIT 10
Letter Agreement dated as of
October 18, 1996 amending said Purchase Agreement
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ELAN INTERNATIONAL SERVICES LTD.
102 St. James Court
Flatts Smith
SL-04 Bermuda
26th September 1996
Emisphere Technologies, Inc.
15 Skyline Drive
Hawthorne, New York 10532
Attention: Michael M. Goldberg, M.D.
Chairman and CEO
Ladies and Gentlemen:
We refer to the Purchase Agreement entered into between Emisphere
Technologies, Inc. and Elan International Services Ltd. dated as of
October 18, 1995 (the "Agreement"). Capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to such
terms in the Agreement.
The parties agree that the Agreement shall be amended as follows:
1. The "Standstill Period" as defined in Section 5.3(a) of the
Agreement shall be amended so that the termination date of the
Purchaser's obligations pursuant to Section 5.3(a) shall be
September 26, 2001.
2. Section 5.3 of the Agreement is hereby amended by deleting
paragraph (b) in its entirety and inserting the following new
paragraphs (b) and (c) as follows:
(b) The Purchaser and its Affiliates may acquire Voting
Securities without regard to the foregoing limitation if any of
the following events shall occur: (A) a tender or exchange
offer is made by any Person or 13D Group (as hereinafter
defined) (other than the Purchaser or an Affiliate of, or any
Person acting in concert with, the Purchaser or any of its
Affiliates) (which Person or 13D Group has the financial
wherewithal to consummate such a transaction) to acquire Voting
Securities in an amount which, together with Voting Securities
(if any) already owned by such Person or 13D Group, would
represent more than 20% of the total combined voting power of
all Voting Securities then outstanding; (B) it is publicly
disclosed that Voting Securities representing more than 20% of
the total combined voting power of all Voting Securities then
outstanding have been acquired subsequent to the Closing Date
by any Person or 13D Group (as hereinafter defined) (other than
the Purchaser or an Affiliate of, or any Person acting in
concert with, the Purchaser or any of its Affiliates); or (C)
any Person or 13D Group (other than the Purchaser or an
Affiliate of, or any Person acting in concert with, the
Purchaser or any of its Affiliates) (which Person or 13D Group
has the financial wherewithal to consummate such a transaction)
shall undertake an action contemplated by Section 5.3(a)(ii) of
this Agreement the effect of which would be to result in a
Change of Control of the Company. Notwithstanding the
provisions of clause (B) of this Section 5.3(b), it is
understood and agreed that the limitation imposed by Section
5 . 3(a) of this Agreement on the acquisition of Voting
Securities by the Purchaser and its Affiliates shall remain
unchanged if the Person or 13D Group (other than the Purchaser
or an Affiliate of, or any Person acting in concert with, the
Purchaser or any of its Affiliates) which has acquired more
than 20% of the total combined voting power of all Voting
Securities then outstanding are any of the persons, namely
Amerindo Investment Advisors, Inc., a California corporation,
Amerindo Investment Advisors, Inc., a Panama corporation,
Alberto W. Vilar and Gary A. Tanaka, which executed, and any
other persons named (or who or which may be named from time to
time by amendment) in Item 2 of, the Statement on Schedule 13-
D/A, dated April 26, 1996, relating to the Common stock and
filed with the Commission pursuant to the Exchange Act, and any
of their respective Affiliates (collectively, "Amerindo") or is
a Person or 13D Group (other than the Purchaser or an Affiliate
of, or any Person acting in concert with, the Purchaser or any
of its Affiliates) which is an investor similarly situate with
respect to its investment in the Company to Amerindo and which
is reasonably satisfactory to the Purchaser. In any case where
clause (C) of this Section 5.3(b) is applicable, the Purchaser
and its Affiliates (acting not in concert with the Person or
13D Group and their Affiliates identified in such clause (C))
shall additionally be entitled to undertake the actions
described in clauses (ii), (iii), (iv), (vii) and (viii) (and,
with respect to such clauses, clause (xi)) of Section 5.3(a) of
this Agreement. As used herein, the term "13D Group" shall
mean any group of Persons formed for the purpose of acquiring,
holding, voting or disposing of Voting Securities which would
be required under Section 13(d) of the Exchange Act and the
rules and regulations thereunder (as now in effect) to file a
statement on Schedule 13D with the Securities and Exchange
Commission as a "person" within the meaning of Section 13(d)(3)
of the Exchange Act if such group beneficially owned Voting
Securities representing more than 5% of the total combined
voting power of all Voting Securities then outstanding.
(c)(i) Notwithstanding the limitations set forth in
Section 5.3(a) and for so long as such limitations remain in
effect, if at any time the Company issues and sells Voting
Securities in a private placement, or proposes to issue and
sell Voting Securities in a public offering, to a Person or
Persons other than the Purchaser or its Affiliates (excluding
issuances pursuant to stock option and employee benefit plans
o r the exercise of rights, options, warrants or other
s e c urities convertible into or exchangeable for Voting
Securities outstanding on September 26, 1996), the Company
shall offer the Purchaser and its Affiliates the opportunity to
purchase, at the same price (in the case of a private
placement) or at the public offering price (in the case of a
public offering), and on substantially the same terms and
conditions otherwise applicable to such issuance and sale,
Voting Securities in an amount that, together with the Voting
Securities already owned by the Purchaser and such Affiliates,
would represent the same percent of the total combined voting
power of all Voting Securities (after giving effect to the
issuance and sale of Voting Securities to the third party or
parties and to the Purchaser and its Affiliates) as the
Purchaser and its Affiliates owned immediately prior to such
issuance and sale. It is understood and agreed, however, that,
in any instance where the closing of the issuance and sale of
Voting Securities by the Company would permit the Purchaser and
its Affiliates to acquire Voting Securities by virtue of clause
(B) of Section 5.3(b) of this Agreement, the Company shall be
under no obligation to offer to the Purchaser and its
A f f iliates the opportunity, and the Purchaser and its
Affiliates shall not have the right, to purchase Voting
Securities from the Company as otherwise contemplated by this
Section 5.3(c)(i). For purposes of calculating voting power as
contemplated by this Section 5(c)(i), Voting Securities shall
include only shares in fact owned by and issued to the
Purchaser and its Affiliates and shall not include shares
subject to Warrants.
(ii) If the Company has issued and sold, or intends to
issue and sell, Voting Securities as described in Section
5.3(c)(i), the Company shall give written notice to the
Purchaser and its Affiliates setting forth, in the case of a
private placement, the terms and conditions (including the
actual price) on which such issuance and sale has taken place,
and, in the case of a public offering, the anticipated terms
and conditions (including the estimated price) on which such
issuance and sale will take place. Such notice shall be given,
in the case of a private placement, within 10 days after the
closing of such private placement, and, in the case of a public
offering, as soon as reasonably practicable but in any event no
fewer than 20 days prior to the closing of such public
offering. The Purchaser and its Affiliates shall notify the
Company in writing within 10 days after receipt of such notice
from the Company whether the Purchaser and its Affiliates
intends to purchase Voting Securities in accordance with such
notice. Failure to reply within such 10 day period shall be
deemed an election by the Purchaser and its Affiliates not to
purchase any Voting Securities. If the Purchaser or its
Affiliates elects to purchase any Voting Securities, the
closing shall occur, in the case of any such purchase following
a private placement, within five days after Purchaser's written
notice of its election to purchase and, in the case of a
purchase pursuant to a public offering, simultaneously with the
closing of such public offering.
(iii) The provisions of this Section 5.3(c) shall be
deemed terminated and of no further force and effect upon the
occurrence of any of the following events: (A) the Purchaser
and its Affiliates sell, whether in a single transaction or a
series of related transactions, to any Person or Persons other
than the Purchaser or any Affiliate, 20% or more of the
aggregate amount of Voting Securities owned by the Purchaser
and its Affiliates immediately prior to such sale or the first
in the series of related sales; (B) the Purchaser and its
Affiliates elect on two occasions not to exercise the right to
purchase Voting Securities pursuant to Section 5.3(c)(i)
following receipt of any notice from the Company pursuant to
Section 5.3(c)(ii); or (C) Elan, the Purchaser or any other
Person controlled by Elan which is the holder, directly or
indirectly, of the securities of the Purchaser ("Intermediate
Holding Company") experiences a change of control. For
purposes of this Section 5.3(c)(iii), a "change of control"
shall be deemed to have occurred if, in the case of Elan, any
Person or 13D Group or, in the case of the Purchaser or any
Intermediate Holding Company, any Person or group of Persons
that would constitute a 13D Group if the securities of the
Purchaser or such Intermediate Holding Company were registered
pursuant to Section 12 of the Exchange Act, acquired ordinary
shares or other securities entitled to vote generally in the
e l e c tion of directors of Elan, the Purchaser or any
Intermediate Holding Company, as the case may be, in an amount
which, together with any such shares already owned by such
Person, 13D Group or other group, would represent more than 20%
of the total combined voting power of all such shares and other
securities then outstanding.
3. Other than as set forth above, the Agreement shall remain in
full force and effect as originally stated.
Please sign a copy of this letter, thereby indicating your agreement
to the foregoing amendments to the Agreement.
ELAN INTERNATIONAL SERVICES LTD.
By /s/ Thomas G. Lynch
------------------------
Thomas G. Lynch
Director
Accepted and Agreed:
EMISPHERE TECHNOLOGIES, INC.
By /s/ Michael M. Goldberg, M.D.
----------------------------------
Michael M. Goldberg, M.D.
Chairman and CEO
ELAN CORPORATION PLC ("Elan"), the beneficial owner of all
the outstanding stock of Elan International Services Ltd., by its
signature below hereby agrees to be bound by all the terms,
conditions and obligations of Article V of the Purchase Agreement
e n t ered into between Emisphere Technologies, Inc. and Elan
International Services Ltd. dated as of October 18, 1995, including
the amendments thereto effected by the above letter agreement, as if
Elan had been an original party thereto.
ELAN CORPORATION PLC
By /s/ Thomas G. Lynch
-------------------------
- -----------------------------------------------------------------------------
EXHIBIT 10
Joint Venture Agreement dated as of
September 26, 1996 by and among Elan Corporation plc,
The Company and Ebbisham Limited
- -----------------------------------------------------------------------------
JOINT VENTURE AGREEMENT
ELAN CORPORATION PLC
AND
EMISPHERE TECHNOLOGIES, INC.
AND
EBBISHAM LIMITED
McCann FitzGerald
Solicitors
2 Harbourmaster Place
Custom House Dock
Dublin 1
INDEX
Clause Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
THE COMPANY'S BUSINESS . . . . . . . . . . . . . . . . . . . . . 8
MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE COMPANY . . . . . . 9
WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
COMPLETION . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SUBSCRIPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
DIRECTION OF RESEARCH AND DEVELOPMENT . . . . . . . . . . . . . . 12
PROPERTY OWNERSHIP RIGHTS . . . . . . . . . . . . . . . . . . . . 13
PATENT RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . 16
EQUIPMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
EXPLOITATION OF PRODUCTS . . . . . . . . . . . . . . . . . . . . 17
RIGHTS OF FIRST REFUSAL . . . . . . . . . . . . . . . . . . . . . 19
TECHNICAL SERVICES AND ASSISTANCE . . . . . . . . . . . . . . . . 21
SUPPLY ARRANGEMENTS . . . . . . . . . . . . . . . . . . . . . . . 22
AUDITORS; BANKERS; REGISTERED OFFICE;
ACCOUNTING REFERENCE DATE; SECRETARY . . . . . 22
SHARE RIGHTS AND DIRECTORS . . . . . . . . . . . . . . . . . . . 23
PROCEEDINGS OF DIRECTORS AND CHAIRMAN . . . . . . . . . . . . . . 23
MATTERS REQUIRING SHAREHOLDERS' APPROVAL . . . . . . . . . . . . 24
THE BUSINESS PLAN AND REVIEWS . . . . . . . . . . . . . . . . . . 26
DISPUTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
REALISATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
NAME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . 31
SHAREHOLDERS' CONSENT . . . . . . . . . . . . . . . . . . . . . . 33
DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . 34
SHAREHOLDERS BOUND . . . . . . . . . . . . . . . . . . . . . . . 34
ADDITIONAL FINANCING . . . . . . . . . . . . . . . . . . . . . . 34
COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SCHEDULE 1
ELAN LICENSE AGREEMENT . . . . . . . . . . . . . . . . . . . . . 41
SCHEDULE 2
EMISPHERE LICENSE AGREEMENT . . . . . . . . . . . . . . . . . . . 42
THIS AGREEMENT made this day of September 1996
BETWEEN:
(1) ELAN CORPORATION PLC a public limited company incorporated
under the laws of Ireland and having its registered office at
Monksland, Athlone, County Westmeath, Ireland ("Elan").
(2) EMISPHERE TECHNOLOGIES, INC. a corporation duly incorporated
and validly existing under the laws of the State of Delaware
and having its principal place of business at 15 Skyline
Drive, Hawthorne NY, USA 10532 ("Emisphere").
(3) EBBISHAM LIMITED a private limited company incorporated under
the laws of Ireland and having its registered office at 2
Harbourmaster Place, Custom House Dock, Dublin 1 ("the
Company").
RECITALS:
A. T h e Company is a private company limited by shares
incorporated on the 11th day of March 1996 under the Companies
Acts.
B. Elan is beneficially entitled to the use of certain patents
which have been granted or are pending in relation to drug
specific dosage forms for pharmaceutical products and Elan has
d e v e loped various drug delivery technologies and
pharmaceutical products derived therefrom having improved
pharmaceutical, biopharmaceutical or other characteristics.
C. Emisphere is knowledgeable in the discovery of compounds which
can interact with therapeutic agents in a manner to improve
the transport of such therapeutic agents through biological
membranes.
D. E l a n and Emisphere have agreed to co-operate in the
establishment and management of a business for the development
o f specific pharmaceutical compounds incorporating the
technologies developed and to be developed by Elan and
Emisphere and their sale and supply throughout the world
through the medium of the Company and for this purpose have
agreed to participate as shareholders in the Company for the
purposes and on the terms set out in this Agreement.
E. Elan and Emisphere have agreed to enter into this Agreement
for the purpose of recording the terms and conditions of the
Joint Venture and of regulating their relationship with each
other and certain aspects of the affairs of and their dealings
with the Company.
NOW IT IS HEREBY AGREED AS FOLLOWS:
CLAUSE 1
DEFINITIONS
1.1 In this Agreement, the following expressions shall, where not
inconsistent with the context, have the following meanings
respectively.
"A" Directors" means the Directors appointed by the "A"
Shareholder pursuant to Clause 5.2 (ii) and holding office for
the time being and unless otherwise stated includes their duly
appointed alternates;
"Additional Compounds" means any compound other than the
Compounds utilising the Emisphere Technology and/or the
Emisphere Programme Technology and/or the Company Programme
Technology, whether or not in conjunction with the Elan
Technology and/or Elan Programme Technology, having as its
primary effect an anti-coagulant related therapeutic effect
and including anticoagulant compounds which are proprietary to
an Independent Third Party;
"Affiliate" means any corporation or entity, other than the
Company, controlling, controlled or under the common control
of Elan or Emisphere, as the case may be. For the purposes of
this definition and Clause 22.1(vii), "control" shall mean
direct or indirect ownership of fifty percent (50%) or more of
the stock or shares entitled to vote for the election of
directors;
"Agreed" means agreed by all Parties and confirmed in writing;
"Agreement" means this agreement (which expression shall be
deemed to include the Recitals and the Schedules hereto);.
"A" Shareholder" means the holder for the time being of the
"A" Shares;
"A" Shares" means the "A" Ordinary Shares in the capital of
the Company;
"B" Directors" means the Directors appointed by the "B"
Shareholder pursuant to Clause 5.2(iii) and holding office for
the time being and unless otherwise stated includes their duly
appointed alternates;
"B" Shareholder" means the holder for the time being of the
"B" Shares;
"B" Shares" means the "B" Ordinary Shares in the capital of
the Company;
"Business" means the business of the Company as described in
Clause 2 and such other business as the Parties may agree from
time to time in writing should be carried on by the Company;
"Business Plan" means the plans to be prepared and approved by
the Directors pursuant to Clause 19, in conjunction with the
Research and Development Programmes, for the conduct of the
Business of the Company for each Financial Year for the
duration of this Agreement which shall include, in particular,
details of the planned research and development expenses to be
incurred in that Financial Year, which of the Shareholders
shall be responsible for the relevant research and development
expenditure, and how such expenses shall be funded;
"Carriers" means agents that are used to facilitate transport
through membranes including oral, nasal, buccal, intraocular,
sublingual, subcutaneous, intramuscular and pulmonary delivery
of the Compounds utilising the Emisphere Technology and/or the
Emisphere Programme Technology. These agents can include, but
are not limited to proteinoids and other chemicals;
"Companies Acts" means the Companies Acts, 1963 to 1990, of
Ireland;
"Company Programme Technology" has the meaning assigned to it
in Clause 8.5;
"Completion" means the performance by the Parties hereto of
their respective obligations under Clause 5;
"Compounds" means Heparin and/or Heparinoids;
"Directors" means the "A" Directors and the "B" Directors from
time to time;
"Effective Date" means 1 May, 1996;
"Elan License Agreement" means the License Agreement referred
to in Clause 5.2(xi);
"Elan Programme Technology" has the meaning assigned to it in
the License Agreements;
"Elan Technology" has the meaning assigned to it in the
License Agreements;
"Emisphere License Agreement" means the License Agreement
referred to in Clause 5.2(xii);
"Emisphere Programme Technology" has the meaning assigned to
it in the License Agreements;
"Emisphere Technology" has the meaning assigned to it in the
License Agreements;
"FDA" means the United States Food and Drug Administration or
any successors or agency, the approval of which is necessary
to market a product in the United States of America or any
other relevant regulatory authority the approval of which is
necessary to market a product in any other country in the
Territory;
"Financial Year" means initially, 1 May 1996 to 31 December
1996 and thereafter each year commencing on 1 January and
expiring on 31 December of each year;
"Field" means the research, development and optimisation of
the Compounds utilising one or more Carriers for all medical
ailments or indications, whatever the mode of administration,
as well as the manufacture, use, promotion, distribution,
marketing and sale of the Products;
" H e parin" means naturally occurring forms of Heparin,
including Heparin USP, BP and EP as well as smaller molecular
fractions thereof;
"Heparinoids" means various sulphated polysaccharides that
have anti-coagulant activity resembling that of Heparin;
"Independent Third Party" means any Person other than Elan,
Emisphere, the Company and/or any of their Affiliates;
"INDA" means any Investigational New Drug Application in
relation to a Product filed by any Party with the FDA or a
similar application filed in another jurisdiction;
"Improvements" means inventions, discoveries, developments and
indications relating to the Emisphere Technology which can
usefully be applied to the Field, the Emisphere Programme
Technology, the Elan Programme Technology or the Company
Programme Technology which were first reduced to practice
during the term of this Agreement by Emisphere, Elan or the
Company, whether or not such modification adds any benefit to
the Field, the Emisphere Programme Technology, the Elan
Programme Technology or the Company Programme Technology;
"Joint Venture" means the joint venture constituted by this
Agreement, the Memorandum and Articles of Association, the
License Agreements, the Supply Agreements and such other
agreements as the Shareholders and the Company may enter from
time to time with respect to the Business;
"License Agreements" means the Elan License Agreement and the
Emisphere License Agreement;
"Loan" means any loan(s) advanced from time to time by either
o f the Shareholders to the Company, other than loans
represented by or referred to in the Loan Stock Instrument;
"Loan Stock Instrument" means the Loan Stock Instrument to be
entered into by the Company and Elan pursuant to which Elan
will subscribe for subordinated loan stock in the Company;
"Memorandum and Articles of Association" means the Memorandum
and Articles of Association to be adopted by the Company on
Completion, as amended from time to time;
"Net Sales" means the invoiced sales price of Products shipped
by the Company or on behalf of the Company in respect of bona
fide arms length sales of the Products to Independent Third
Parties exclusively for money less a maximum reserve of five
percent (5%) for uncollectible accounts and less the ordinary
and customary trade discounts and commissions, excise taxes,
withholding tax, other consumption taxes, and credits or
allowances actually granted on account of rejection or return
of the Products. In the case of any sale or disposal of
Products otherwise than in such a bona fide arms length sale
to Independent Third Parties exclusively for money, "Net
Sales" shall mean the invoiced sales price of Products;
"Party" means Elan, Emisphere or the Company, as the case may
be, and "Parties" means all three together;
"Person" shall mean an individual, partnership, corporation,
l i mited liability company, business trust, joint stock
company, trust, unincorporated association, joint venture, or
other entity of whatever nature;
"Prime" means the London Interbank Offer Rate for United
States Dollars for a one year period as determined by
reference to the average of the rates quoted on the "LIBO"
page of the Reuters Screen;
"Product(s)" means depending on the context one or more
formulations of the Compound(s) in conjunction with one or
more of the Carriers that complies with the Specifications;
"Research and Development Programme" means, depending on the
context, one or more programmes of research and development
work being conducted or to be conducted by, inter alia,
Emisphere and Elan for and on behalf of the Company which have
been devised by the Research Committee and approved by the
Management Committee;
"Specifications" means the specifications for each of the
Carriers or Products as approved by the FDA, as well as
such other specifications which may be agreed upon by the Parties
in writing or by the Research Committee (as defined in Clause 7.2);
"Shares" means all the "A" Shares and the "B" Shares;
"Shareholder" means the "A" Shareholder or the "B" Shareholder
for the time being, as the case may be, and "Shareholders"
means each of the Shareholders together;
"Subsidiary" means any company which is a subsidiary of the
Company within the meaning of the Companies Acts;
"Supply Agreements" means the supply agreements to be entered
into by Elan, Emisphere and the Company pursuant to Clause 14
to facilitate the commercial development and exploitation of
Product(s);
"Territory" means all of the countries of the world; and
"United States Dollar" and "US$" means the lawful currency for
the time being of the United States of America;
1.2 Words importing the singular shall include the plural and vice
versa.
1.3 Unless the context otherwise requires, reference to a recital,
article, paragraph, provision, clause or schedule is to a
recital, article, paragraph, provision, clause or schedule of
or to this Agreement.
1.4 Reference to a statute or statutory provision includes a
reference to it as from time to time amended, extended or re-
enacted.
1.5 The headings in this Agreement are inserted for convenience
only and do not affect its construction.
1.6 Unless the context or subject otherwise requires, references
to words in one gender include references to the other
genders.
CLAUSE 2
THE COMPANY'S BUSINESS
2.1 The primary object of the Company and any Subsidiaries is to
c a r r y on the business of the development, testing,
registration, manufacture, commercial realisation and
marketing of Products in the Field in the Territory and to
achieve the objectives set out in this Agreement.
2.2 Except as the Shareholders may otherwise agree in writing and
save as may be provided in this Agreement, the Business Plan,
t h e License Agreements or the Supply Agreements, the
Shareholders shall exercise their powers in relation to the
Company so as to ensure that the Business is carried on in a
proper and prudent manner.
2.3 Each Shareholder shall use all reasonable and proper means at
its disposal and within its power to maintain, extend and
improve the Business of the Company, within the limits of this
Agreement, and to further the reputation and interests of the
Company.
2.4 The central management and control of the Company shall be
exercised in Ireland and shall be vested in the Directors and
such persons as they may delegate the exercise of their powers
in accordance with the Memorandum and Articles of Association.
The Shareholders shall use their best endeavours to ensure
that the Company is treated as resident for taxation purposes
in Ireland and that the right to use the Elan or Emisphere
Patents and the ownership of the Elan Programme Patents or
Emisphere Programme Patents shall, to the maximum extent
possible, be owned and held by the Company, an Affiliate of
the Company or a designee of the Company.
2.5 Each Shareholder hereby confirms that in the event of a
dispute arising between the Company and a Shareholder, the
Directors appointed by that Shareholder shall vote in favour
of any action or proceedings which is required to be taken or
initiated by the Company against that Shareholder to protect
t h e C ompany's rights under any agreement with that
Shareholder.
CLAUSE 3
MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE COMPANY
3.1 In the event of any ambiguity or conflict arising between the
terms of this Agreement and those of the Company's Memorandum
and Articles of Association, the terms of this Agreement shall
prevail;
3.2 Subject to Clause 3.1 above, each of the Parties hereto
undertakes with each of the other Parties to fully and
promptly observe and comply with the provisions of the Clauses
to the intent and effect that each and every provision thereof
shall be enforceable by the Parties hereto.
CLAUSE 4
WARRANTIES
4.1 Elan warrants to Emisphere that, as of the date hereof, the
Recitals are true and correct in every respect insofar as they
relate to the Company and that the Company has neither traded
nor incurred any liabilities or obligations of any nature
whatsoever other than those imposed on the Company by virtue
of its incorporation.
4.2 Elan and Emisphere each warrants and undertakes to the other
that the Shares acquired by it in the Company will be acquired
for its own absolute beneficial ownership and not on behalf of
any other Person.
4.3 Elan and Emisphere each warrant and undertake to the other
that except as disclosed in writing to each other prior to the
execution of this Agreement:
(i) it is duly incorporated under the laws of its place of
incorporation;
(ii) it has full authority and capacity to enter into and
perform its obligations under this Agreement (having
obtained all requisite corporate and governmental
approvals);
(iii) it is not engaged in any litigation or arbitration, or
in any dispute or controversy reasonably likely to lead
to litigation, arbitration or any other proceeding,
which would materially affect the validity of this
Agreement, the Party's fulfilment of its respective
obligations under this Agreement or the business of the
Company as contemplated herein; and
(iv) this Agreement has been fully authorised, executed and
delivered by it and it has full legal right, power and
authority to enter into and perform this Agreement,
which constitutes a valid and binding agreement between
the Parties.
CLAUSE 5
COMPLETION
5.1 C o mpletion shall take place at the offices of McCann
FitzGerald, Solicitors at 2 Harbourmaster Place, Dublin 1
i m m ediately after the execution of this Agreement on
Wednesday, 18 September 1996 at 2.30p.m. and such other
places, if any, as the Parties may agree.
5.2 On Completion, each of the Shareholders shall take or (to the
extent that the same is within its powers) cause to be taken
the following steps at Directors and Shareholders meetings of
the Company, or such other meetings, as appropriate:
(i) the adoption by the Company of the Memorandum and
Articles of Association;
(ii) the appointment of Seamus C. Mulligan, John G. Devane,
and Paulette E. Setler as "A" Directors of the Company;
(iii) the appointment of Michael M. Goldberg, Lewis H.
Bender, and Sam J. Milstein as "B" Directors of the
Company;
(iv) the resignation of all Directors and the Secretary of
the Company holding office prior to the execution of
this Agreement and delivery of written confirmation
under seal by each Person so resigning that he has no
claim or right of action against the Company and that
the Company is not in any way obligated or indebted to
him;
(v) the transfer to Emisphere of the full legal and
beneficial interest of the Share registered in the name
of MFSD Holdings Limited;
(vi) the transfer to Elan of the full legal and beneficial
interest of the Share registered in the name of MFSD
Nominees Limited;
(vii) the allotment against appropriate subscription
arrangements to Elan of 9,998 A shares;
(viii) the allotment against appropriate subscription
arrangements to Emisphere of 9,998 B shares;
(ix) the transfer to the Company of the share register;
(x) the delivery of the appropriate share certificates to
Elan and Emisphere subject to the presentation of duly
stamped share transfer forms to the Company;
(xi) the execution by Elan and the Company of a License
Agreement pursuant to which Elan shall, inter alia,
grant the Company certain license rights and shall,
inter alia, agree to provide research and development
services for and on behalf of the Company, in the form
annexed as Schedule 1; and
(xii) the execution by Emisphere and the Company of a License
Agreement, pursuant to which Emisphere shall, inter
alia, grant the Company certain license rights and
shall, inter alia, agree to provide research and
development services for and on behalf of the Company,
in the form annexed as Schedule 2.
5.3 If all or any of the events referred to in Article 5.2 and
Clause 6.2 have not taken place within thirty days after
execution hereof, the Agreement shall be of no further effect
and neither Elan nor Emisphere shall have any claim against,
or liability to the other hereunder, save for any breach of
any of the obligations contained in Article 5.2.
5.4 Elan and Emisphere shall procure that any documents which
require filing with the Registrar of Companies shall be filed
within the prescribed time limits.
CLAUSE 6
SUBSCRIPTIONS
6.1 The Shareholders acknowledge and agree that the financial
requirements of the Company will be borne by the Shareholders
on an equal basis, or such other basis as may be agreed,
whether by way of providing cash or technical know-how.
6.2 Elan hereby agrees to provide US$4.5 million to the Company on
Completion by subscribing for subordinated loan stock to be
issued by the Company pursuant to the Loan Stock Instrument in
order to fund such research and development as may be approved
of by the Management Committee.
6.3 The Shareholders agree that any further financing of the
Company required in respect of any research and development
expenditure to be incurred by the Company in excess of Elan's
subscription for subordinated loan stock pursuant to Clause
6 . 2 shall be provided by the Shareholders equally in
accordance with the provisions of Clause 28.
CLAUSE 7
DIRECTION OF RESEARCH AND DEVELOPMENT
7.1 The Directors shall appoint a management committee (the
" M a nagement Committee") to perform certain operational
f u n ctions, such delegation to be consistent with the
Directors' right to delegate powers pursuant to the Memorandum
and Articles of Association. The Management Committee will
consist of four people, two of whom shall be nominated by the
"A" Directors and two of whom shall be nominated by the "B"
Directors. A majority of the "A" Directors and a majority of
the "B" Directors shall be entitled to remove any of their
nominees to the Management Committee and appoint a replacement
in place of any nominees so removed. The number of people on
the Management Committee can be altered if agreed to by the
Directors.
7.2 The Management Committee shall appoint a research committee
(the "Research Committee") which need not consist of members
of the Management Committee. The Research Committee shall
consist of up to 8 people, with an equal number being
nominated by the nominees of the "A" Directors on the
Management Committee and by the nominees of the "B" Directors
on the Management Committee. The nominees of the "A" Directors
or the nominees of the "B" Directors shall be entitled to
remove any of their nominees to the Research Committee and
appoint a replacement in place of any nominees so removed.
The number of people on the Research Committee can be altered
if agreed to by the Management Committee.
7.3 The Management Committee shall be responsible for, inter alia,
devising, implementing and reviewing strategy for the Business
and, in particular, devising the Company's strategy for
research and development in relation to the Field and to
monitor and supervise the implementation of the Company's
strategy for research and development.
7.4 T h e Management Committee shall report all significant
developments to the Directors on the occurrence thereof and,
in addition, shall report at quarterly intervals to the
Directors. Any dispute or deadlock among the members of the
Management Committee shall be referred by it to the Directors.
7.5 T h e Research Committee shall be responsible for the
implementation of the Research and Development Programmes for
the Company and shall meet at regular intervals to monitor the
progress of the research and development programmes and to
report on its progress to the Management Committee. In the
event of any dispute amongst the Research Committee, the
Research Committee shall refer such dispute to the Management
Committee whose decision on the dispute shall be binding on
the Research Committee.
7.6 Emisphere and Elan shall provide such research and development
services as may reasonably be required by the Company in
accordance with the provision of the License Agreements.
7.7 The Company shall pay Elan and Emisphere for any research and
development work carried out by them on behalf of the Company
at the termination of each stage of the Research and
Development Programme, subject to the proper vouching of
research and development work and expenses. The payments by
the Company to Elan and Emisphere shall be calculated by
reference to the estimated costs to be incurred by Elan and
Emisphere in carrying out such research and development work,
on a fully allocated basis.
CLAUSE 8
PROPERTY OWNERSHIP RIGHTS
8.1 The Company shall own the legal and equitable title to the
E m i sphere Programme Technology and the Elan Programme
Technology. Emisphere and Elan shall be entitled to an
exclusive license to the Emisphere Programme Technology and/or
the Elan Programme Technology outside the Field pursuant to
and in accordance with the provisions of Clauses 8.3. to 8.8.
The foregoing rights of Emisphere are subject to the rights of
first refusal set out in Clause 12 and any agreement entered
into pursuant to such right of first refusal.
8.2 Emisphere shall own the legal and equitable title to the
Emisphere Technology. Such rights of Emisphere shall be
subject to the License Agreements and to the rights of first
refusal set out in Clause 12 and any agreement entered into
pursuant to such right of first refusal. Elan shall own the
legal and equitable title to the Elan Technology. Such rights
of Elan shall be subject to the License Agreements.
8.3 Emisphere shall be entitled to exploit Emisphere Technology
outside the Field and Elan shall be entitled to exploit Elan
Technology outside the Field in accordance with and subject to
the provisions of Clauses 8.3 to 8.8. Emisphere or Elan, as
the case may be, shall be entitled to exploit the Emisphere
Programme Technology or the Elan Programme Technology outside
the Field (which entitlement is subject to the provisions of
Clause 8.6) where the Emisphere Programme Technology or the
E l a n Programme Technology, as the case may be, is
significantly based upon or derived from the Emisphere
Technology or the Elan Technology, as the case may be. In the
event that the Emisphere Programme Technology or the Elan
Programme Technology is not so based, then the provisions of
Clause 8.5 shall apply.
8.4 For the purposes of this Clause 8.4, "Emisphere Technology" or
"Elan Technology", as the case may be, shall be determined by
reference to the Shareholders' respective patents, patent
applications and other relevant evidence of the Parties
intellectual property such as laboratory notebooks (including,
prima facie, the work conducted by Emisphere or Elan pursuant
to the Research and Development Programmes) as of the date
that one of the Parties wishes to exploit the Emisphere
Programme Technology or the Elan Programme Technology outside
the Field. Prima facie, and subject to the provisions of
Clause 8.5, work conducted by Emisphere pursuant to the
Research and Development Programmes (and thereby constituting
Emisphere Programme Technology) will constitute Emisphere
Technology and work conducted by Elan pursuant to the Research
and Development Programmes (and thereby constituting Elan
Programme Technology) will constitute Elan Technology.
8.5 D u e to the collaborative nature of the research and
development work being conducted by Elan and Emisphere
pursuant to the Research and Development Programmes and
further given the participation by Emisphere and Elan in the
R e s earch Committee and the Management Committee, work
c o n d u c ted by Emisphere or Elan will frequently be
collaborative in nature and although constituting Emisphere
Programme Technology or Elan Programme Technology, as the case
may be, will reflect the substantive and collaborative efforts
of both Shareholders. Furthermore certain research and
development work conducted by the Parties pursuant to the
Research and Development Programmes may not constitute either
Emisphere Technology or Elan Technology. In such event it is
inappropriate to regard such Emisphere Programme Technology or
Elan Programme Technology as either Emisphere Technology or
Elan Technology. In addition, research and development work
conducted by an Independent Third Party for and on behalf of
the Company (the "Company Programme Technology") shall not
constitute either Emisphere Technology or Elan Technology. In
such circumstances the provisions of Clause 8.4 shall not
apply and Elan or Emisphere shall negotiate in good faith with
the Company as to the terms on which Elan, Emisphere or the
Company, as the case may be, shall exploit the Emisphere
Programme Technology, Elan Programme Technology or the Company
Programme Technology outside the Field.
8.6 For the avoidance of doubt, the Shareholders confirm that the
Company shall be entitled to exploit the Emisphere Programme
Technology, the Elan Programme Technology, or the Company
Programme Technology outside the Field where the foregoing
does not constitute Emisphere Technology or Elan Technology,
but rather constitutes a serendipity invention, that is,
where the Emisphere Programme Technology, the Elan Programme
Technology or the Company Programme Technology has application
without utilising Emisphere Technology and/or Elan Technology.
A serendipity invention shall also be deemed to have arisen
where work conducted by Elan and/or Emisphere results in a
m a t e rial and unforeseen improvement to the Emisphere
Technology or Elan Technology, as the case may be, for
example, if a Carrier is found to have direct therapeutic
effect, or an Elan Technology is discovered to have "Carrier"
like properties.
8.7 In the event that Emisphere or Elan wish to exploit the
E m i s phere Programme Technology or the Elan Programme
Technology outside the Field in accordance with the provisions
of Clause 8.4, and at any time in its reasonable business
judgement it believes that the use of such technology is
likely to obtain a commercial return, Emisphere or Elan, as
the case may be, shall advise the Company of this in writing.
The Parties shall negotiate a license agreement in good faith
pursuant to which the Company shall grant Emisphere or Elan,
as the case may be, a license to the relevant portion of the
E m i s phere Programme Technology or the Elan Programme
Technology on a product by product basis, unless the Parties
otherwise agree. The financial terms of the said license
agreement shall have regard, inter alia, to:
(i) the amount of monies expended by the Company in
developing the Emisphere Programme Technology or the
Elan Programme Technology which Emisphere or Elan, as
the case may be, wishes to license;
(ii) the materiality of the contribution of the Emisphere
Programme Technology or the Elan Programme Technology
by comparison to the further research and development
work to be conducted, and the pre-existing Emisphere
Technology or Elan Technology, as the case may be; and
(iii) the financial return likely to be earned by Emisphere
or Elan, as the case may be, from the proposed
exploitation outside the Field.
8.8 The following provisions shall apply upon the termination of
either or both of the License Agreements:
(i) if the Emisphere License Agreement is terminated, other
than pursuant to a breach by Emisphere, in which
circumstance, Emisphere shall not be entitled to
terminate the Emisphere License Agreement, Emisphere
shall continue to own the rights to the intellectual
property relating to the Emisphere Technology;
(ii) if the Elan License Agreement is terminated, other than
pursuant to a breach by Elan, in which circumstance,
Elan shall not be entitled to terminate the Elan
License Agreement, Elan shall continue to own the
rights to the intellectual property relating to the
Elan Technology;
(iii) the Company shall continue to own the rights to the
i n t ellectual property relating to the Emisphere
Programme Technology, the Elan Programme Technology
and/or the Company Programme Technology; and
(iv) the Shareholders shall be permitted to purchase from
the Company the rights to the intellectual property
relating to the Emisphere Programme Technology, the
Elan Programme Technology and/or the Company Programme
Technology at a fair market price to be negotiated in
good faith by the Shareholders.
CLAUSE 9
PATENT RIGHTS
9.1 The rights and obligations of the Shareholders and the Company
in respect of any patents arising out of the Field are
governed by the provisions of the License Agreements.
CLAUSE 10
EQUIPMENT
10.1 Any equipment or other assets purchased by Emisphere and/or
Elan which are funded by the Company shall belong to the
Company. In the event that such equipment or assets are
p u r chased, the Parties shall conclude the appropriate
arrangements as regards marking of goods, insurance and
bailment provisions.
CLAUSE 11
EXPLOITATION OF PRODUCTS
11.1 The Company will have an exclusive entitlement to develop
and/or exploit the Field and any Products. In order to
commercialise the Products, the Company shall use commercially
reasonable efforts to obtain marketing approval in such
countries in the Territory as is determined by the Business
Plan. It may be necessary to file an INDA and perform
clinical testing in more than one country. The conduct of
such clinical trials and the obtaining of regulatory approvals
shall be regulated in the License Agreements.
11.2 In the event that the Company decides that it does not wish to
pursue the research and development and/or commercialisation
of a Product, and either Elan or Emisphere wishes to pursue
such research and development and/or commercialisation, the
Company shall grant a license agreement in respect of such
Product to Elan or Emisphere, as the case may be, provided
t h at such Product does not or will not constitute a
significant and material competitor to the Company. The
Company and the relevant Shareholder shall negotiate the terms
of such a license agreement in good faith.
11.3 The strategy for the registration and the commercialisation of
the Products shall be determined by the Management Committee.
In determining how best to commercialise one or more of the
Products, the Management Committee shall take into account
whether any product which competes with the Product is being
developed by Elan and if so whether such other product is
likely to effect the active commercialisation by Elan of the
Product for and on behalf of the Company. In such event, the
Company shall determine how, in the best interests of the
Company, the Product should best be commercialised. In the
event of a dispute over such strategy, the provisions of
Clause 21 shall apply.
11.4.1 In the event that Elan is developing a product which is
likely to compete with a Product which is the subject
of a Research and Development Programme or a proposed
Research and Development Programme and Elan informs the
Company that it wants to discontinue an existing
Research and Development Programme or does not agree
that a proposed Research and Development Programme
should proceed, Elan shall, subject to any
c o nfidentiality requirements which may have been
entered into with any Independent Third Party (and Elan
agrees to use all reasonable endeavours to limit such
r e q uirements to the maximum extent commercially
possible), be obliged to inform the Company of such
competing product. In the event that the Company or
Emisphere maintains that the foregoing is not in the
interests of the Company, Elan and Emisphere shall,
without prejudice to the provisions of Clause 21
relating to disputes and the rights of the Parties
thereunder, refer the said dispute to an expert (who,
in default of agreement as to the person who should be
the expert, or the terms of his appointment, shall be
appointed in the same manner as an Expert pursuant to
Clause 21.3) to determine whether or not it is in the
best interests of the Company to commence or to
continue such Research and Development Programme. The
said expert shall take into account, inter alia, the
l i k e ly costs of research and development, the
likelihood of success of the Research and Development
Programme and the market potential for the Product.
The referral shall be made to the expert within thirty
(30) days of the dispute arising and the Parties shall
use their reasonable endeavours to ensure that the
expert issues his determination within a further thirty
(30) days.
11.4.2 In the event that the expert appointed pursuant to
Clause 11.4.1 determines that it is not in the best
interests of the Company to commence or continue such
Research and Development Programme, the Company shall
cease work on such Research and Development Programme.
11.4.3 In the event that the expert appointed pursuant to
Clause 11.4.1 determines that it is in the best interests of
the Company to commence or continue such Research and
Development Programme, such funding as the Company has
available to it which has not already been allocated for other
purposes shall be used for the commencement or continuation of
such Research and Development Programme. The Company shall
continue to support and fund such Research and Development
Programme subject to and in accordance with the provisions of
this Agreement (provided always that the continuation of such
Research and Development Programme is subject to the ongoing
determination of the Management Committee).
11.4.4 If, notwithstanding the determination of the expert
appointed pursuant to Clause 11.4.1. that it is in the best
interests of the Company to commence or continue such Research
and Development Programme, Elan is of the opinion that such
Research and Development Programme should not commence or
continue, Emisphere may, if the Company is not proceeding with
such Research and Development Programme using unallocated
funding which it has available to it, enter into good faith
n e gotiations with the Company and Elan to obtain the
appropriate license to the Elan Technology, the Emisphere
Programme Technology, the Company Programme Technology and the
Elan Programme Technology to enable Emisphere to commence or
continue with such programme on its own behalf. Emisphere
shall be entitled to a royalty free license to the Emisphere
Programme Technology and the Elan Programme Technology insofar
as the foregoing constitutes Emisphere Technology (as defined
in Article 8.4) for the purpose of commencing or continuing
such programme.
CLAUSE 12
RIGHTS OF FIRST REFUSAL
12.1 Emisphere hereby grants the Company a right of first refusal
t o l i cense the use of the Emisphere Technology to
commercialise the Additional Compounds utilising the Emisphere
Technology, whether used in conjunction with the Emisphere
Programme Technology, the Elan Technology, the Elan Programme
Technology, the Company Programme Technology or otherwise.
The grant of this right by Emisphere to the Company shall not
be limited to the duration of this Agreement or the continued
ownership by Emisphere of Shares, but shall continue for the
duration of the Emisphere License Agreement.
12.2 For the duration of the Emisphere License Agreement and while
the grant of the right of first refusal set out in Clause 12.1
shall continue in force, Emisphere shall disclose on an
ongoing basis to the Company the Emisphere Technology,
including the Improvements and all additional knowledge,
information and expertise from time to time developed by,
owned by, acquired by or in the possession of Emisphere, which
c a n be shown to be relevant to the development and
commercialisation of the Additional Compounds ("Additional
Emisphere Know-How"). In the event that the Additional
Compound is proprietary to an Independent Third Party,
Emisphere shall, subject to such confidentiality requirements
as such Independent Third Party may impose (which Emisphere
agrees to use all reasonable endeavours to limit to the
maximum extent commercially possible), disclose details of its
discussions with such Independent Third Party to enable the
Company, inter alia, to evaluate the likely commercial terms
to be negotiated with the said Independent Third Party.
Emisphere shall deliver a notice to the Company describing the
Additional Emisphere Know-How together with such documentation
and data as may be appropriate to enable the Company to
properly evaluate the Additional Emisphere Know-How. On
receipt of the notice containing details of the Additional
Emisphere Know-How and the appropriate documentation and data,
the Research Committee shall evaluate the Additional Emisphere
Know-How and shall report to the Management Committee. The
Management Committee shall determine whether or not the
C o mpany wishes to initiate a Research and Development
Programme or to continue with the relevant Research and
Development Programme and where appropriate shall discuss with
Emisphere how best negotiations should be conducted with the
Independent Third Party.
12.3 In the ninety (90) days following the determination in writing
of the Management Committee pursuant to Clause 12.2. above,
Emisphere and the Company shall attempt in good faith to
conclude an appropriate development and license agreement.
The Shareholders shall in good faith agree an extension to the
said period if such extension is required to conclude an
agreement with an Independent Third Party. The terms of the
agreement between the Parties shall be analogous to the
relevant terms set out in the Emisphere License Agreement and
this Agreement insofar as it relates to the Field, save and
e x c ept that the Company shall bear all research and
development expenditure.
12.4 If Emisphere and the Company do not reach agreement on the
terms of such a development and license agreement for the
Additional Compound within the said ninety (90) day period or
any extension agreed pursuant to the provisions of Clause
12.3., Emisphere shall be free to offer an Independent Third
Party terms to develop, manufacture, purchase, license,
distribute, co-market, or co-promote such product on terms
which, when taken as a whole, are no less favourable to
Emisphere than the principal terms of the last written
proposal offered to Emisphere by the Company. Prior to
entering into such an agreement with an Independent Third
Party, Emisphere shall promptly notify the Company, in writing
and in confidence, of the principal terms of such agreement.
If the Company notifies Emisphere within ten (10) business
days of such notice that the terms offered to such Independent
Third Party, when taken as a whole, are less favourable to
Emisphere than those previously offered by the Company, then
Emisphere and the Company shall have an additional ten (10)
business days to discuss why such terms are or are not less
favourable. If Emisphere and the Company do not agree within
such ten (10) business day period that such terms are or are
not less favourable then, without prejudice to the rights of
the Parties pursuant to Clause 21, such issue shall be
immediately referred to an independent certified public
accounting firm and/or firm of investment bankers acceptable
to both Shareholders which shall resolve such disagreement
within thirty (30) days of the referral to said firm. If
Emisphere and the Company agree, or it is determined by the
independent certified public accounting firm and/or firm of
investment bankers, that the terms, when taken as a whole, are
less favourable to Emisphere than the Company's proposal to
Emisphere, then Emisphere, at its option, shall either re-
negotiate with such Independent Third Party such that the
terms are not less favourable to Emisphere, or accept the
initial terms which the Company finally proposed to Emisphere
which the Company shall have five (5) days to finally accept
or reject. If accepted by the Company, Emisphere and the
Company shall negotiate in good faith a final agreement.
CLAUSE 13
TECHNICAL SERVICES AND ASSISTANCE
13.1 Whenever commercially and technically feasible, the Company
shall contract with Emisphere or Elan, as the case may be, to
perform such other services as the Company may require, other
than those specifically dealt with in Clauses 6 and 8 of the
Emisphere License Agreement and Clauses 6 and 8 of the Elan
License Agreement. In determining which party should provide
such services, the Management Committee shall take into
account the respective infrastructure and experience of Elan
and Emisphere.
13.2 The Company shall if appropriate conclude an administrative
support agreement with Elan and/or Emisphere on such terms as
the parties thereto shall in good faith negotiate. The
management services required shall include one or more of the
following management services which shall be requested by the
Company:
(i) accounting, financial and other services;
(ii) tax services;
(iii) insurance services;
(iv) human resources services;
(v) legal and company secretarial services;
(vi) patent and related intellectual property services; and
(vii) all such other services consistent with and of the same
type as those services to be provided pursuant to this
Agreement, as may be required.
The foregoing list of services shall not be deemed exhaustive
and may be changed from time to time upon written request by
the Company.
13.3.1 If Elan or Emisphere so requires Emisphere or Elan, as
the case may be, shall receive, at times and for
periods mutually acceptable to the parties, employees
of the other party (such employees to be acceptable to
the receiving party in the matter of qualification and
competence) for instruction in respect of the Elan
Technology or the Emisphere Technology, as the case may
be, as is necessary to further the Research and
Development Programmes.
13.3.2 The employees received by Elan or Emisphere, as the
case may be, shall be subject to obligations of
confidentiality no less stringent than those set out in
Clause 24 and such employees shall observe the rules,
regulations and systems adopted by the Party receiving
the said employees for its own employees or visitors.
CLAUSE 14
SUPPLY ARRANGEMENTS
14.1 If the Company elects to finance, develop and/or exploit the
commercial production of a Product, it is the expectation of
the Parties that Emisphere shall enter into a Supply Agreement
with Elan for the sale by Emisphere to Elan of Carriers. It
is also the expectation of the Parties that the Company shall
enter into a Supply Agreement with Elan or any Affiliate of
Elan to allow for the commercial production of such Product by
Elan on behalf of the Company. The Supply Agreements shall be
negotiated and agreed by the Parties not later than the date
of termination of Phase III (as such term is commonly used in
c o nnection with FDA applications) of the Research and
Development Programme. The terms of the Supply Agreements
shall be on normal commercial terms, as well as in accordance
with the terms of Clause 7 of the License Agreements and shall
be negotiated in good faith by the Parties thereto.
CLAUSE 15
AUDITORS; BANKERS; REGISTERED OFFICE;
ACCOUNTING REFERENCE DATE; SECRETARY; COUNSEL.
15.1 Unless otherwise agreed by the Shareholders and save as may be
provided to the contrary herein:
(i) the auditors of the Company shall be KPMG or such other
auditors as may be chosen by Elan. Emisphere shall
retain the right to have an audit conducted for their
own internal purposes using another accounting firm;
(ii) the bankers of the Company shall be the Bank of Ireland
or such other bank as may be mutually agreed from time
to time;
(iii) the registered office of the Company shall be at
Monksland, Athlone, Co. Westmeath;
(iv) the accounting reference date of the Company shall be
31 December in each Financial Year;
(v) the secretary of the Company shall be Colin Sainsbury
or such other Person as may be appointed by the
Directors from time to time; and
(vi) the Company's corporate counsel shall be a reputable
firm of lawyers selected by Emisphere, who shall ensure
that such counsel shall not have a conflict on any
matter on which they are to advise the Company.
CLAUSE 16
SHARE RIGHTS AND DIRECTORS
16.1 The Shareholders agree that the "A" Shares and the "B" Shares
shall be separate classes of shares but shall rank pari passu
and carry the respective voting rights, rights to appoint and
remove Directors, rights to dividends and be subject to the
restrictions on the transfer and distribution of assets
provided in the Memorandum and Articles of Association and as
set forth in this Agreement.
CLAUSE 17
PROCEEDINGS OF DIRECTORS AND CHAIRMAN
17.1 Elan may appoint one of the "A" Directors to be the Chairman
of the Company on Completion.
17.2 The Chairman appointed under Clause 17.1 shall retire as
Chairman at the first Annual General Meeting of the Company to
be held no later than 30 August, 1997. Thereafter, each
Shareholder, beginning with Emisphere, shall have the right,
exercisable alternatively, of nominating one of the Directors
to be Chairman of the Company for a period of one year. The
Chairman shall hold office until the termination of the next
Annual General Meeting following his appointment. If the
Chairman is unable to attend any meeting of the Board, the
Directors of the same designation shall be entitled to appoint
another Director to act as Chairman in his place at the
meeting.
17.3 In the case of an equality of votes at a meeting of the Board
of the Company, the Chairman shall not be entitled to a second
or casting vote.
17.4 Any Shareholder removing a Director shall be responsible for
and shall indemnify the other Shareholder and the Company
against any claim by such Director arising from such removal.
17.5 The "A" Shareholders shall be entitled by notice in writing to
the Company to appoint three Directors and by like notice to
remove any of such Directors, at any time and from time to
time, and by like notice to appoint any other Person to be a
Director in the place of the Director so removed. Any
Director so appointed shall be an "A" Director.
17.6 The "B" Shareholders shall be entitled by notice in writing to
the Company to appoint three Directors and by like notice to
remove any of such Directors, at any time and from time to
time, and by like notice to appoint any other Person to be a
Director in the place of the Director so removed. Any
Director so appointed shall be a "B" Director.
17.7 The Directors shall meet not less than once in the Financial
Year ending 31 December 1996 and not less than three times in
each other Financial Year and all Directors' meetings shall,
unless the Shareholders otherwise agree, be held in Ireland.
At any such meeting, the votes of each of the "A" Directors
and each of the "B" Directors shall be cast by any one "A"
Director or "B" Director respectively on behalf of any other
"A" Director or "B" Director not attending. The quorum for
each such meeting shall be two Directors being at least one
"A" and at least one "B" Director. In the event of any
meeting being inquorate the meeting shall be adjourned for a
period of seven days. A notice shall be sent to each of the
"A" and "B" Directors specifying the date and time and place
where such adjourned meeting is to be held and reconvened. At
such adjourned meeting, the Directors present shall constitute
the quorum required; provided always that such quorum shall
include at least one "A" Director and one "B" Director.
CLAUSE 18
MATTERS REQUIRING SHAREHOLDERS' APPROVAL
18.1 Unless otherwise agreed between the Shareholders in writing
(and the Shareholders agree that they shall review the
following matters from time to time), the Shareholders shall
exercise all voting rights and other powers of control
available to them in relation to the Company to procure
(insofar as they are able by the exercise of such rights and
such powers) that neither the Company nor any Subsidiary of
the Company shall without the prior approval of a Resolution
of the Directors, of which an "A" Director and a "B" Director
voted in favour, or if a written resolution of the Directors
signed by both an "A" Director and a "B Director:
(i) engage in any activity other than the Business;
(ii) sell the principal assets, undertaking or Business of
the Company;
(iii) appoint or dismiss a Director except in accordance with
the rights conferred on the Shareholders under Clause
17 to appoint and remove a Director;
(iv) create any fixed or floating charge, lien (other than a
lien arising by operation of law) or other encumbrance
over the whole or any part of the undertaking, property
or assets of the Company or of any Subsidiary, except
for the purpose of securing the indebtedness of the
Company to its bankers for sums borrowed in the
ordinary and proper course of the Business;
(v) borrow any sum (except from the Company's bankers in
the ordinary and proper course of the Business) in
excess of a maximum aggregate sum outstanding at any
time of US$15,000;
(vi) make any loan or advance or give any credit (other than
normal trade credit) in excess of US$15,000 to any
Person, except for the purpose of making deposits with
bankers;
(vii) g i v e any guarantee or indemnity to secure the
liabilities or obligations of any Party other than
those which it is usual to give in the ordinary course
of a business similar to the Business;
(viii) sell, transfer, lease, assign, or otherwise dispose of
part of the undertaking, property and/or assets other
than stock or assets (or any interest therein) which
are surplus to the requirements of the Company or any
Subsidiary , or contract so to do where the value of
the undertaking property and/or assets exceed
US$15,000;
(ix) enter into any contract, arrangement or commitment
i n volving expenditure on capital account or the
realisation of capital assets if the amount or the
aggregate amount of such expenditure or realisation by
the Company and all of the Subsidiaries of the Company
would exceed US$50,000 in any one year or in relation
to any one project, and for the purpose of this
paragraph the aggregate amount payable under any
agreement for hire, hire purchase or purchase on credit
sale or conditional sale terms shall be deemed to be
capital expenditure incurred in the year in which such
agreement is entered into;
(x) issue any unissued Shares or create or issue any new
shares, except as expressly permitted by the Memorandum
and Articles of Association;
(xi) alter any rights attaching to any class of share in the
capital of the Company or alter the Memorandum and
Articles of Association of the Company;
(xii) consolidate, sub-divide or convert any of the Company's
share capital or in any way alter the rights attaching
thereto;
(xiii) create, acquire or dispose of any Subsidiary or of any
shares in any Subsidiary;
(xiv) enter into any partnership or profit sharing agreement
with any Person other than arrangements with trade
representatives and similar Persons in the ordinary
course of business;
(xv) do or permit or suffer to be done any act or thing
w h e r eby the Company may be wound up (whether
v o l untarily or compulsorily), save as otherwise
expressly provided for in this Agreement;
(xvi) issue any debentures or other securities convertible
into shares or debentures or any share warrants or any
options in respect of Shares;
(xvii) enter into any contract or transaction except in the
ordinary and proper course of the Business on arm's
length terms;
(xviii) acquire, purchase or subscribe for any shares,
debentures, mortgages or securities (or any
interest therein) in any company, trust or other
Person;
(xix) adopt any employee benefit programme or incentive
schemes;
(xx) engage any new employee at remuneration which could
exceed the rate of US$60,000 per annum; and
(xxi) pay any remuneration to Directors by virtue of holding
such office other than Directors who hold executive
office.
CLAUSE 19
THE BUSINESS PLAN AND REVIEWS
19.1 The Directors shall meet together as soon as reasonably
practicable after the date hereof and thereafter prior to the
accounting reference date specified in Clause 15 in any
Financial Year to agree and approve the Business Plan for the
following Financial Year, or any amendment or modification to
the Business Plan.
19.2 The Shareholders agree that the Management Committee shall
submit to the Directors on 15th May, 15th August, 15th
N o vember, and 15th February or as soon as reasonably
practicable thereafter in each Financial Year a report on the
performance of the business activities of the Company and the
Directors shall hold such meeting as may be necessary to
review the performance of the Company against the Business
Plan for the relevant year of trading.
CLAUSE 20
TRANSFER OF OR CHARGING OF SHARES
20.1 No Shareholder shall transfer any of its legal and/or
beneficial interest in its Shares or Loans to any other Person
without the prior written consent of the other.
20.2 No Shareholder shall, except with the prior written consent of
the other Shareholder, create or permit to subsist any pledge,
lien or charge over, or grant any option or other rights or
dispose of any interest in, all or any of the Shares held by
it (other than by a transfer of such Shares in accordance with
the provisions of this Agreement) or in any Loans (or part
thereof) made by it to the Company unless any Person in whose
favour any such pledge, lien, or charge is created or
permitted to subsist or such option or rights are granted or
such interest is disposed of shall be expressly subject to and
bound by all the limitations and provisions which are embodied
in this Agreement.
CLAUSE 21
DISPUTES
21.1 Should any dispute or difference arise between Elan and
Emisphere, or between Elan or Emisphere and the Company,
during the period that this Agreement is in force, then any
Party may forthwith give notice to the other Parties that it
wishes such dispute or difference to be referred to the chief
executive officers of the Shareholders.
21.2 In any event of a notice being served in accordance with
Clause 21.1, each of the Shareholders shall within fourteen
(14) days of the service of such notice cause its appointees
on the board of Directors to prepare and circulate to the
chief executive officer of each Shareholder a memorandum or
other form of statement setting out its position on the matter
in dispute and its reasons for adopting that position. Each
memorandum or statement shall be considered by the chief
executive officers of the Shareholders who shall endeavour to
resolve the dispute. If the chief executive officers of the
Shareholders agree upon a resolution or disposition of the
matter, they shall each sign a statement which sets out the
terms of their agreement. The Shareholders agree that they
shall exercise the voting rights and other powers available to
them in relation to the Company to procure that the agreed
terms are fully and promptly carried into effect.
21.3 The chief executive officers of the Shareholders shall, if
they are unable to resolve a dispute or difference when it is
referred to them under Clause 21.1, refer the matter to an
expert (the "Expert"). The Expert shall be selected by the
chief executive officers or if they are unable to agree, by
the President for the time being of the Incorporated Law
Society of Ireland or, if he should have a conflict of
interest, by such other Person as such President shall select,
having assured himself as to such Person's independence. In
each case, the Expert shall be selected having regard to his
suitability to determine the particular dispute or difference
on which he is being requested to determine. Unless otherwise
agreed between the chief executive officers, the following
rules shall apply to the appointment of the Expert. The
Expert shall act as an expert and not as an arbitrator. The
fees of the Expert shall be shared equally between the Parties
in dispute. The Expert shall be entitled to inspect and
examine all documentation and any other material which he may
consider to be relevant to the dispute. He shall afford each
Party a reasonable opportunity (in writing or orally) of
stating reasons in support of such contentions as each Party
may wish to make relative to the matters under consideration.
The Expert shall give notice in writing of his determination
to the Parties within such time as may be stipulated in his
terms of appointment or in the absence of such stipulation as
soon as practicable but in any event within four (4) weeks
from the reference of the dispute or difference to him. Any
determination by the Expert of a dispute or difference shall
not be final and binding on the Parties.
CLAUSE 22
REALISATION
22.1 For the purpose of this Clause 22, a "Relevant Event" is
committed or suffered by a Shareholder if:
(i) it commits a material breach of its obligations under
this Agreement and, in the case of a breach capable of
remedy, fails to remedy it within thirty (30) days of
being specifically required in writing to do so by the
other Shareholder;
(ii) a distress, execution, sequestration or other process
is levied or enforced upon or sued out against a
material part of its property which is not discharged
or challenged within twenty (20) days;
(iii) it is unable to pay its debts in the normal course of
business;
(iv) it ceases or threatens to cease wholly or substantially
to carry on its business, otherwise than for the
purpose of a reconstruction or amalgamation, without
the prior written consent of the other Shareholder
(such consent not to be unreasonably withheld);
(v) t h e appointment of a liquidator, receiver,
administrator, examiner, trustee or similar officer of
such Shareholder or over all or a substantial part of
i t s a s sets under the law of any applicable
jurisdiction, including without limit, the United
States of America;
(vi) an application or petition for bankruptcy, corporate
r e - o rganisation, composition, administration,
examination, arrangement or any other procedure similar
to any of the foregoing under the law of any applicable
jurisdiction, including without limit, the United
States of America, is filed, and is not discharged
within thirty (30) days, or a Shareholder applies for
o r consents to the appointment of a receiver,
administrator, examiner or similar officer of it or of
all or a material part of its assets, rights or
revenues or the assets and/or the business of a
Shareholder are for any reason seized, confiscated or
condemned; or
(vii) a Person other than an Affiliate acquires Control of
that Shareholder.
22.2.1 If either Shareholder commits or suffers a Relevant
Event, the other Shareholder shall be entitled, within
three months of its becoming aware of the occurrence of
t h e Relevant Event, to require the defaulting
Shareholder (the "Recipient Shareholder") to sell to
t h e non defaulting Shareholder (the "Proposing
Shareholder") all (but not some only) of the Shares and
o t her financing made available by the Recipient
S h a reholder to the Company, expressly excluding
subordinated loan stock provided by Elan pursuant to
the Loan Stock Instrument, but including, without
limit, financing made by the Shareholders to the
C o m p any pursuant to Clause 28, (together, the
"Financings"), held or beneficially owned by the
Recipient Shareholder.
22.2.2 In the case of Clause 22.2.1, the Proposing Shareholder
shall notify the Recipient Shareholder of the exercise
of this option by delivering written notice to the
Recipient Shareholder stating that the option is
e x ercised and the price at which the Proposing
Shareholder is willing to purchase the Financings which
have been made available by the Recipient Shareholder
to the Company.
22.2.3 The Recipient Shareholder will be obliged within sixty
(60) days of receipt of such offer to either (a)
accept such offer or (b) make a written counter offer
in which the Relative Price for the Financings must be
at least ten per cent (10%) higher than in the offer
received from the Proposing Shareholder. The counter
offer must be an offer to purchase all (but not part
only) of the Financings of the Proposing Shareholder.
"Relative Price" for the purposes of this Clause 22
means, in any case where the Proposing Shareholder owns
more or less Shares then the Recipient Shareholder, the
Proposing Shareholder's offer price multiplied by the
fraction which results when the number of Shares owned
by the Proposing Shareholder is the numerator and the
number of shares owned by the Recipient Shareholder is
the denominator.
22.2.4 The Proposing Shareholder will be obliged within seven
days from the date on which it receives the counter
offer to either (a) accept the counter offer or (b)
make a written second counter offer in which the
Relative Price for the Financings must be at least ten
per cent (10%) higher than the Relative Price in the
counter offer received from the Recipient Shareholder.
The second counter offer must be an offer to purchase
all (but not part only) of the Financings of the
Recipient Shareholder.
22.2.5 The Recipient Shareholder will be obliged within seven
days from the date on which it receives the second
counter offer to either (a) accept the second counter
offer, or (b) purchase all of the Financings of the
Proposing Shareholder for an amount which is ten per
cent (10%) higher than the Relative Price for the
Financings at which the Proposing Shareholder offered
to purchase the Financings of the Recipient Shareholder
in the second counter offer.
22.2.6 Time shall be of the essence and a failure to respond
to an offer or any counter offer within the permitted
time period shall be deemed to constitute acceptance of
such offer or counter offer.
22.2.7 The Shareholder who has accepted or is deemed to have
accepted an offer or counter offer made pursuant to the
provisions of this Clause 22 shall, upon full payment
of the agreed price for the Financings, deliver to the
other Shareholder within thirty (30) days of the date
of acceptance or deemed acceptance (or three days
following the issuance of any regulatory consent
required to effect such sale) a duly executed transfer
of all its Shares in favour of the other Shareholder
(or as it may direct) and a duly executed and
enforceable assignment of Loans or other financial
assistance made by such Shareholder to the Company or,
at the option of the other Shareholder, provide any
consents or other non financial assistance which may be
required for such Loans or other subscriptions to be
repaid by the Company, which repayment shall be deemed
to form part of the payment to be made to the
S h a reholder who has accepted an offer for the
Financings. The Shareholders shall each use their best
e n deavours to procure the issuance of any such
regulatory consents as soon as possible.
22.2.8 It is expressly agreed between the Parties that in the
event of the purchase by one Shareholder of the
F i nancings of the other Shareholder, an express
contractual right of set off shall apply in respect of
any Loan by either Shareholder to the other Shareholder
in respect of Excess Expenditure (as defined in Clause
28.2) with the intent that the price payable for
F i nancings pursuant to this Clause 22 shall be
increased or decreased, as the case may be, to take
account of any such Loans.
22.2.9 The Financings so transferred shall be sold by the
transferor as beneficial owner with effect from the
date of such transfer free from any lien, charge or
encumbrance with all rights attaching thereto.
22.3 In the alternative to the procedure set out in Clauses 22.2.1
to 22.2.9, if either Shareholder commits or suffers a Relevant
Event, the other Shareholder shall be entitled within three
months of its becoming aware of the occurrence of the Relevant
Event, to serve a written notice ("Warning Notice") on the
other Shareholder stating that it intends to serve a Winding-
Up Notice (as hereinafter defined) on the Company. A Warning
Notice may be withdrawn before the expiry of sixty days after
it has been served (the "Warning Period"). Within thirty days
of the expiry of the Warning Period during which period the
relevant warning notice shall not have been withdrawn, the
Party serving the Warning Notice may at any time serve a
further written notice (the "Winding-Up Notice") on the other
Shareholder requiring that the Company be wound up, whereupon
the Shareholders shall be bound to take all such steps as may
be necessary to wind up the Company forthwith and in an
orderly and efficient manner.
CLAUSE 23
NAME
23.1 If the name of the Company or any Affiliate includes the name
"Elan" or any name or any part of a name used by Elan, the
permission given to the Company to use such a name is
conditional upon the continuance and existence of the Company
and of Elan being the sole beneficial and legal owner of the
"A" Shares. In the event that either of the aforementioned
conditions shall cease, the permission shall cease and the
Company shall forthwith take such action as may be necessary
to alter its name and shall forthwith cease to use the name
"Elan" in any form whatsoever.
23.2 If the name of the Company or any Affiliate includes the name
of "Emisphere" or any name or part of a name used by
Emisphere, the permission given to the Company to use such a
name is conditional upon the continuance and existence of the
Company and of Emisphere being the sole beneficial and legal
owner of the "B" Shares. In the event that either of the
aforementioned conditions shall cease, the permission shall
cease and the Company shall forthwith take such action as may
be necessary to alter its name and shall forthwith cease to
use the name "Emisphere" in any form whatsoever.
CLAUSE 24
CONFIDENTIALITY
24.1 The Shareholders and the Company acknowledge that it may be
necessary, from time to time, to disclose to each other
confidential and proprietary information, including without
limitation, inventions, works of authorship, trade secrets,
specifications, designs, data, know-how and other information,
relating to the Field, the Products, processes, and services
of the disclosing Party.
24.2 The Shareholders and the Company agree that the information to
be disclosed by Emisphere and Elan to the Company may include
trade secrets, know-how and other proprietary information and
data regarding the Carriers or Emisphere Technology, Elan
Technology or the Company Programme Technology, as the case
may be. It is agreed that the information to be disclosed by
the Company to Emisphere and Elan may include trade secrets,
know-how and other proprietary information and data regarding
the Compounds or the Products. The foregoing shall be
referred to collectively as "Confidential Information". Any
Confidential Information revealed by a Party to another Party
shall be used by the receiving Party exclusively for the
purposes of fulfilling the receiving Party s rights and
obligations under this Agreement, and for no other purpose.
24.3 Each Party agrees to disclose Confidential Information of
another Party only to those employees, representatives and
agents requiring knowledge thereof in connection with their
duties directly related to the fulfilling of the Party s
obligations under this Agreement. Each Party further agrees
to inform all such employees, representatives and agents of
the terms and provisions of this Agreement and their duties
hereunder and to obtain their consent hereto as a condition of
receiving Confidential Information. Each Party agrees that it
will exercise the same degree of care, but in no event less
than a reasonable degree, and protection to preserve the
proprietary and confidential nature of the Confidential
Information disclosed by a Party, as the receiving Party would
exercise to preserve its own proprietary and confidential
information. Each Party agrees that it will, upon request of
a Party, return all documents and any copies thereof
containing Confidential Information belonging to or disclosed
by, such Party.
24.4 Any breach of this Clause 24 by any of the Persons informed by
one of the Parties is considered a breach by the Party itself.
Confidential Information shall be deemed not to include:
(i) information that is in the public domain;
(ii) information which is made public by the disclosing
Party;
(iii) information which is independently developed by a
Party;
(iv) information that is published or otherwise becomes part
of the public domain without any disclosure by a Party,
or on the part of a Party s directors, officers,
agents, representatives or employees;
(v) information that becomes available to a Party on a non-
confidential basis, whether directly or indirectly,
from a source other than another Party, which source,
to the best of the Party s knowledge, did not acquire
this information on a confidential basis; or
(vi) information which the receiving Party is required to
disclose pursuant to a valid order of a court or other
governmental body or any political subdivision thereof
or otherwise required by law.
24.5 The provisions relating to confidentiality in this Clause 24
shall remain in effect during the term of this Agreement and
for a period of seven (7) years following the expiration or
earlier termination of this Agreement but shall not apply to
any information which a Party is required to file or otherwise
disclose in accordance with requirements which are legally
binding on it.
24.6 The Shareholders agree that the obligations of this Clause 24
a r e necessary and reasonable in order to protect the
Shareholders respective businesses, and each Party expressly
agrees that monetary damages would be inadequate to compensate
a Party for any breach by the other Party of its covenants and
agreements set forth herein. Accordingly, the Shareholders
agree and acknowledge that any such violation or threatened
violation will cause irreparable injury to a Party and that,
in addition to any other remedies that may be available, in
law and equity or otherwise, any Party shall be entitled to
obtain injunctive relief against the threatened breach of the
provisions of this Clause 24, or a continuation of any such
breach by the other Party, specific performance and other
equitable relief to redress such breach together with its
damages and reasonable counsel fees and expenses to enforce
its rights hereunder, without the necessity of proving actual
or express damages.
CLAUSE 25
SHAREHOLDERS' CONSENT
25.1 Where this Agreement provides that any particular transaction
or matter requires the consent, approval or agreement of any
Shareholder, such consent, approval or agreement may be given
subject to such terms and conditions as that Shareholder may
impose and to which the other Shareholder shall agree and any
breach of such terms and conditions by any Persons subject
thereto shall ipso facto be deemed to be a breach of the terms
of this Agreement.
CLAUSE 26
DIVIDEND POLICY
26.1 The Parties recognise that, subject to the provisions of
Clause 28 or as may be otherwise specified in this Agreement,
the Shareholders are obliged to provide financial assistance
equally to the Company and that as a consequence they shall be
entitled to benefit equally from the success of the Company.
This benefit need not necessarily be made available to the
Shareholders in the same manner having regard to their
different circumstances but the principle of equal benefit for
each of the Shareholders shall be taken into account in all
dealings between the Parties. Without prejudice to the
foregoing, the Shareholders shall procure that the full amount
of the Company's profits available for distribution in respect
of each Financial Year are distributed by the Company to the
Shareholders by way of dividend, unless the Shareholders
otherwise agree that, having regard to the Company's current
and prospective obligations, it is prudent to retain earnings
to assist financing such obligations.
26.2 In deciding whether in respect of any Financial Year the
Company has profits available for distribution, the Parties
shall procure that the auditors shall certify whether such are
available and the amount thereof, which sum shall constitute
the profit available for distribution. The said sum shall be
subject to the retention of such sums which are required for
further investment in the Company.
CLAUSE 27
SHAREHOLDERS BOUND
27.1 The Company undertakes with each of the Shareholders to be
bound by and comply with the terms and conditions of this
Agreement insofar as the same relate to the Company.
27.2 Each Shareholder undertakes with the other to exercise its
part in relation to the Company so as to ensure that the
Company fully and promptly observes, performs and complies
with its obligations under this Agreement.
CLAUSE 28
ADDITIONAL FINANCING
28.1 Each Shareholder shall use its reasonable endeavours to
p r ocure that the requirements of the Company and its
subsidiaries for working capital to finance the Business are
provided equally by the Shareholders in a manner to be agreed
between the Shareholders.
28.2 Either Shareholder (a "Refusing Shareholder") may refuse to
make any financial assistance available to the Company, in
excess of the subordinated loan stock provided by Elan
pursuant to Clause 6.2, to the extent that the Refusing
Shareholder's fifty percent (50%) share of such excess
expenditure (the "Excess Expenditure") exceeds one-third of
the Refusing Shareholder's entire research and development
budget for the period in question. The other Shareholder (the
"Providing Shareholder") may agree to fund the Refusing
S h areholder's fifty percent (50%) share of the Excess
Expenditure by making a loan to the Refusing Shareholder which
shall be advanced directly to the Company by the Providing
Shareholder. As between the Shareholders such loan shall
c o n stitute a simple contract loan from the Providing
Shareholder to the Refusing Shareholder and as between the
Refusing Shareholder and the Company it shall constitute
financial assistance from the Refusing Shareholder to the
Company. The Refusing Shareholder shall, subject to the
provisions of Clause 22, repay to the Providing Shareholder an
amount equal to its fifty percent (50%) share of the Excess
Expenditure within four (4) years of the advance by the
Providing Shareholder of such amount, together with simple
interest calculated at Prime plus three percent (3%) on such
amount payable semi-annually in arrears. The repayment by the
Refusing Shareholder of the fifty percent (50%) share of the
Excess Expenditure shall be discharged, in the first instance,
out of royalties and dividends payable by the Company to the
Refusing Shareholder which the Company shall and is hereby
directed to pay directly to the Providing Shareholder until
such fifty percent (50%) share of the Excess Expenditure is
repaid to the Providing Shareholder in full. Such payment by
t h e Company, as between the Company and the Refusing
Shareholder, shall constitute payment of the relevant royalty
or dividend, as the case may be, and as between the Refusing
Shareholder and the Providing Shareholder, shall constitute
repayment or partial repayment, as the case may be, of the
loan advanced to fund the Refusing Shareholder's fifty percent
(50%) share of the Excess Expenditure.
28.3 Each Shareholder's financial assistance shall rank for payment
ahead of the subordinated loan stock issued pursuant to the
Loan Stock Instrument and unless otherwise agreed by the
Shareholders shall be repaid prior to the declaration or
making of any dividend to the Shareholders.
28.4 The Shareholders agree that to the extent that the Company's
assets are insufficient to repay the financial assistance made
available by each of the Shareholders in the event that the
Company is wound up or goes into liquidation then any
deficiency shall be borne by them in equal proportions.
28.5 I f it is not possible to obtain sufficient financial
assistance from the Shareholders, the Company can obtain
borrowings or other funding from financial institutions and
other similar sources on the most favourable terms reasonably
obtainable as to interest, repayment and security.
CLAUSE 29
COSTS
29.1 Each Shareholder shall bear its own legal and other costs
i n curred in relation to preparing and concluding this
Agreement and the related agreements and other documents.
29.2 All costs, legal fees, registration fees and other expenses,
including the costs and expenses incurred in relation to the
incorporation of the Company, shall be borne by the Company.
CLAUSE 30
GENERAL
30.1 Good Faith
Each of the Parties hereto undertakes with the others to do all
things reasonably within its power which are necessary or desirable
to give effect to the spirit and intent of this Agreement.
30.2 Further Assurance
The Parties hereto shall use their respective reasonable endeavours
to procure that any necessary third party shall do, execute and
perform all such further deeds, documents, assurances, acts and
things as any of the Parties hereto may reasonably require by notice
in writing to the others to carry the provisions of this Agreement
into full force and effect.
30.3 No Representation
Each of the Parties hereto hereby acknowledges that in entering into
this Agreement it has not relied on any representation or warranty
save as expressly set out herein or in any document referred to
herein.
30.4 Exercise of Powers
Where either Shareholder is required under this Agreement to
exercise its powers in relation to the Company to procure a
particular matter or thing, such obligation shall be deemed to
include an obligation to exercise its powers both as a Shareholder
and as a Director (where applicable) of the Company and to procure
that any Director appointed by it (whether alone or jointly with any
other Person) shall procure such matter or thing.
30.5 Force Majeure
Neither Party to this Agreement shall be liable for delay in the
performance of any of its obligations hereunder if such delay
results from causes beyond its reasonable control, including,
without limitation, acts of God, fires, strikes, acts of war, or
intervention of any relevant government authority, but any such
delay or failure shall be remedied by such Party as soon as
practicable.
30.6 Relationship of the Shareholders
Nothing contained in this Agreement is intended or is to be
construed to constitute Elan and Emisphere as partners, or Elan as
an employee of Emisphere, or Emisphere as an employee of Elan. No
Party hereto shall have any express or implied right or authority to
assume or create any obligations on behalf of or in the name of
another Party or to bind another Party to any contract, agreement or
undertaking with any third party.
30.7 Counterparts
This Agreement may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and all
of which when taken together shall constitute this Agreement.
30.8 Notices
Any notice to be given under this Agreement shall be sent in writing
by registered or recorded delivery post or telecopied to:
- Elan at
Elan Corporation plc
Monksland, Athlone, County Westmeath, Ireland
Attention: Company Secretary
Telephone: 353 902 95000
Telefax: 353 902 92427
- Emisphere at
Emisphere Technologies, Inc.
15 Skyline Drive, Hawthorne NY, USA 10532.
Attention: Vice President, Business Development
Telephone: 914.347.2220
Telefax: 914.347.2498
- the Company at
Ebbisham Limited
Monksland, Athlone, County Westmeath, Ireland
Attention: Company Secretary
Telephone: 353 902 95000
Telefax: 353 902 92427
or to such other address(es) as may from time to time be notified by
any Party to the others hereunder.
Any notice sent by mail shall be deemed to have been delivered
within seven (7) working days after dispatch and any notice sent by
telecopy shall be deemed to have been delivered within twenty-four
(24) hours of the time of the dispatch. Notices of change of
address shall be effective upon receipt.
30.9 Governing Law and Disputes
This Agreement shall be governed by and construed in accordance with
the laws of Ireland and the Parties agree to submit to the
jurisdiction of the state and federal courts located in the State of
New York and the courts of Ireland for the resolution of disputes
hereunder.
30.10 Severability
If any provision in this Agreement is agreed by the Parties to be,
deemed to be or becomes invalid, illegal, void or unenforceable
under any law that is applicable hereto, (i) such provision will be
deemed amended to conform to applicable laws so as to be valid and
enforceable or, if it cannot be so amended without materially
altering the intention of the Parties, it will be deleted, with
effect from the date of such agreement or such earlier date as the
P a r t i e s may agree, and (ii) the validity, legality and
enforceability of the remaining provisions of this Agreement shall
not be impaired or affected in any way.
30.11 Amendments
No amendment, modification or addition hereto shall be effective or
binding on any Party unless set forth in writing and executed by a
duly authorised representative of all Parties.
30.12 Waiver
No waiver of any right under this Agreement shall be deemed
effective unless contained in a written document signed by the Party
charged with such waiver, and no waiver of any breach or failure to
perform shall be deemed to be a waiver of any future breach or
failure to perform or of any other right arising under this
Agreement.
30.13 Headings
The section headings contained in this Agreement are included for
convenience only and form no part of the agreement between the
Parties. Save as otherwise provided herein, references to recitals,
articles, paragraphs, clauses and appendices are to those contained
in this Agreement.
30.14 Assignment
None of the Parties may assign their rights and obligations
hereunder without the prior written consent of the other Parties.
Elan and/or Emisphere shall have the right to subcontract all or any
portion of their duties hereunder by assignment to their Affiliates
provided that Elan or Emisphere, as the case may be, guarantees the
performance by such Affiliate of the obligations of Elan or
Emisphere, as the case may be, under this Agreement.
30.15 No Effect on Other Agreements
No provision of this Agreement shall be construed so as to negate,
modify or affect in any way the provisions of any other agreement
between any of the Parties unless specifically referred to, and
solely to the extent provided, in any such other agreement. In the
event of a conflict between the provisions of this Agreement and the
provisions of the License Agreements or the Supply Agreements the
terms of this Agreement shall prevail unless the License Agreements
or the Supply Agreements specifically provide otherwise.
30.16 Successors
This Agreement shall be binding upon and enure to the benefit of the
Parties hereto, their successors and permitted assigns.
IN WITNESS whereof, the Parties hereto have executed this Agreement
in triplicate on the day first set forth above.
SIGNED BY
for and on behalf of
ELAN CORPORATION PLC
in the presence of:-
SIGNED BY
for and on behalf of
EMISPHERE TECHNOLOGIES, INC.
in the presence of:-
SIGNED BY
for and on behalf of
EBBISHAM LIMITED
in the presence of:-
SCHEDULE 1
ELAN LICENSE AGREEMENT
SCHEDULE 2
EMISPHERE LICENSE AGREEMENT
- -----------------------------------------------------------------------------
EXHIBIT 10
License Agreement dated as of September 26, 1996
by and between Ebbishman limited and Elan Corp plc
- -----------------------------------------------------------------------------
This Agreement is made the day of September 1996
BY AND BETWEEN
Ebbisham Limited
An Irish company, of 2 Harbourmaster Place, Custom House Dock,
Dublin 1
AND
Elan Corporation plc.
An Irish company of Monksland, Athlone, Co. Westmeath, Ireland.
LICENSE AGREEMENT
TABLE OF CONTENTS
Section Page
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 2
2. GRANT OF RIGHTS . . . . . . . . . . . . . . . . . . . . . . 9
3. IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . . . 10
4. [LEFT INTENTIONALLY BLANK] . . . . . . . . . . . . . . . . 11
5. INTELLECTUAL PROPERTY RIGHTS . . . . . . . . . . . . . . . 11
6. RESEARCH AND DEVELOPMENT . . . . . . . . . . . . . . . . . 11
7. SUPPLY OF PRODUCT(S) . . . . . . . . . . . . . . . . . . . 12
8. EXPLOITATION OF LICENSED TECHNOLOGY . . . . . . . . . . . . 15
9. FINANCIAL PROVISIONS . . . . . . . . . . . . . . . . . . . 16
10. RIGHT OF AUDIT AND INSPECTION . . . . . . . . . . . . . . . 19
11. PATENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 19
12. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . 24
13. TRADEMARKS . . . . . . . . . . . . . . . . . . . . . . . . 25
14. TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . 27
15. WARRANTIES/INDEMNITIES . . . . . . . . . . . . . . . . . . 30
16. REGULATORY APPROVALS . . . . . . . . . . . . . . . . . . . 32
17. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . 33
18. IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE . . . . . . . 34
19. SETTLEMENT OF DISPUTES; PROPER LAW . . . . . . . . . . . . 34
20. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . 34
21. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . 35
22. MISCELLANEOUS CLAUSES . . . . . . . . . . . . . . . . . . . 36
WHEREAS
A. Elan is beneficially entitled to the use of various patents,
including the Elan Patent Rights which have been granted or
a r e pending under various international conventions in
relation to the Elan Technology.
B. Emisphere is knowledgeable in the discovery of compounds which
can interact with therapeutic agents in a manner to improve
the transport of such therapeutic agents through biological
membranes.
C. E l a n is knowledgeable in the research, development,
manufacture and marketing of pharmaceutical formulations
capable of delivering drugs. Elan owns and possesses patented
and controlled release systems and technologies.
D. Simultaneously herewith, Elan and Emisphere are entering into
the Joint Venture Agreement for the purpose of recording the
terms and conditions of the joint venture and of regulating
their relationship with each other and certain aspects of the
affairs of and their dealings with Ebbisham.<PAGE>
E. Under the Joint Venture Agreement, Ebbisham shall own all
rights in technology which has been developed pursuant to
certain Research and Development programmes being conducted or
to be conducted by Ebbisham or by Emisphere, Elan or an
Independent Third Party on behalf of Ebbisham, including the
C o m p any Programme Technology, the Emisphere Programme
Technology and the Elan Programme Technology.
F. Ebbisham desires to enter into this Agreement with Elan so as
to (a) permit Ebbisham to utilize the Elan Patents, the Elan
Know-How and the Elan Trademarks in the research, development,
manufacture, distribution and sale of the Products and other
products in the Field and (b) to permit Elan to utilise the
Emisphere Programme Technology, the Elan Programme Technology
and the Company Programme Technology in connection with (i)
Elan's research and development work on behalf of Ebbisham and
(ii) Elan's manufacturing and supplying Ebbisham or its
designee(s) with the products and other components.
G. Simultaneously herewith, Ebbisham and Emisphere are entering
into a similar license agreement relating to Ebbisham's use of
t h e Emisphere Patents, the Emisphere Know-How and the
Emisphere Trademarks and Emisphere's use of the Emisphere
Programme Technology, the Elan Programme Technology and the
Company Technology.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS
1.1 In this present Agreement, including the Recitals, Schedules
and Appendices, the following definitions shall prevail unless
the context otherwise requires:
"Acquired" means a transfer of intellectual property or
information from an Independent Third Party
to Elan to the extent to which there are no
o b l igations or restrictions as to or
c o nfidentiality in respect of that
information which prohibit disclosure to or
use by Ebbisham;<PAGE>
"Affiliate" means any corporation or entity other than
Ebbisham controlling, controlled or under
the common control of Emisphere or Elan, as
the case may be. For the purpose of this
definition, control shall mean direct or
indirect ownership of fifty percent (50%) or
more of the stock or shares entitled to vote
for the election of directors;
"Agreement" means this agreement (which expression shall
be deemed to include the Recitals, the
Schedules and Appendices hereto);
"Carriers" means agents that are used to facilitate
transport through membranes, including oral,
n a sal, buccal, intraocular, sublingual,
subcutaneous, intramuscular and pulmonary
delivery of the Compounds utilising the
Emisphere Technology and/or the Emisphere
Programme Technology. These agents can
include, but are not limited to proteinoids
and other chemicals;
"Company Programme shall have the meaning ascribed to it in the
Joint
Technology" Venture Agreement;
"Compounds" means Heparin and/or Heparinoids;
"Cost" means, depending upon the context, one of
the following:
In the case of the supply of Product(s),
Cost shall comprise direct labour, materials
and attributable overhead excluding any
element of corporate overhead.
In the case of research and development,
Cost will be calculated in accordance with
Elan s internal accounting system and will
exclude any element of corporate overhead.
In the case of materials purchased from an
Independent Third Party, Cost will comprise
the amount actually paid, including import
duties, transport and handling costs and
other directly attributable costs.
"Ebbisham" means Ebbisham Limited;
"Effective Date" means 1st May 1996;
"Elan" m e a ns Elan Corporation plc, its
Affiliates, successors and permitted
assigns other than Ebbisham;
"Elan Know-How" m e a ns all trade secrets, confidential
s c ientific, technical and medical
information and expertise, technical data
and marketing information, studies and data
f r om time to time developed, produced
created or Acquired by or on behalf of Elan,
whether before the Effective Date or during
the term of this Agreement (other than Elan
P r ogramme Know-How) including, but not
limited to, unpatented inventions,
discoveries, theories, plans, ideas (whether
or not reduced to practice) relating to the
research and development, manufacture,
registration for marketing, use or sale of
t h e P r o d uct(s), toxicological,
pharmacological, analytical and clinical
data, bioavailability studies, product forms
and formulations, control assays and
specifications, methods of preparation and
stability data;
"Elan Patents" means all and any patents and any
applications therefor in the Territory
(other than the Elan Programme
Patents) that are or subsequently may
be owned or acquired by or assigned or
licensed to Elan (including any and
a l l divisions, continuations,
continuations-in-part, extensions,
a d ditions or reissues thereto or
thereof) and that would be infringed
by the development, manufacture, use,
disposal, sale, offer of disposal or
sale, or importation of the Product(s)
in the Territory and/or relate to the
Field;
"Elan Programme m e a ns all trade secrets, confidential
scientific,
Know-How" t e c hnical and medical information and
expertise, technical data and marketing
information, studies and data from time to
time developed, produced created or Acquired
by or on behalf of Elan, pursuant to one or
m o r e of the Research and Development
Programmes including, but not limited to,
u n p atented inventions, discoveries,
theories, plans, ideas or designs (whether
or not reduced to practice) relating to the
manufacture, registration for marketing, use
or sale of the Product(s), toxicological,
pharmacological, analytical and clinical
data, bioavailability studies, product forms
and formulations, control assays and
specifications, methods of preparation and
stability data;
"Elan Programme means all and any patents and applications
therefor
Patents" in the Territory (including any and all
d i v i s i o n s, continuations-in-part,
extensions, additions or reissues thereto or
t h ereof) on or for any inventions or
discoveries that have been or subsequently
may be conceived or made by employees or
agents of Elan pursuant to one or more of
the Research and Development Programmes
( r e gardless of when or by whom such
inventions and/or discoveries are reduced to
practice);
"Elan Programme means the Elan Programme Patents and/or
Technology" the Elan Programme Know-How;
"Elan Supply means the agreement to be entered into
Agreement" between Elan and Emisphere (or Emisphere's
designee) regarding supply of Product(s) and
other chemical or formulation components;
"Elan Technology" means the Elan Patents and/or the Elan Know-
How;
"Elan Trademarks" means, depending on the context, one or more
of the trademarks owned by, Acquired by,
assigned or licensed to Elan which are
relevant to the Elan Technology or the
Product(s);
"Emisphere" means Emisphere Technologies, Inc., its
Affiliates, successors and permitted assigns
other than Ebbisham;
"Emisphere Know-How" m e a ns all trade secrets, confidential
s c ientific, technical and medical
information and expertise from time to time
developed, produced, created or Acquired by
or on behalf of Emisphere, whether before
the Effective Date or during the term of
this Agreement (other than Emisphere
P r ogramme Know-How) including, but not
limited to, unpatented inventions,
d i scoveries, theories, plans, ideas or
designs (whether or not reduced to practice)
relating to the research and development,
registration for marketing, use or sale of
the Carriers or the Product(s), chemical
compounds and use expertise, needed relevant
data on the Carriers, preclinical toxicity
and manufacturing data for the Carriers and
p r o t otype products, toxicological,
pharmacological, analytical and clinical
data, bioavailability studies, formulations,
control assays and specifications, methods
of preparation and stability data;
"Emisphere License means the agreement of even date
entered into
Agreement" between Emisphere and Ebbisham;
"Emisphere Patents" means all and any patents and any
applications therefor in the Territory
(other than the Emisphere Programme
Patents) that are or subsequently may
be owned or Acquired by, or assigned
or licensed to Emisphere (including
any and all divisions, continuations,
continuations-in-part, extensions,
a d ditions or reissues thereto or
thereof) and that would be infringed
by the development, manufacture, use,
disposal, sale, offer of disposal or
sale, or importation of the Product(s)
in the Territory and/or relate to the
Field. The Emisphere Patents as of
the date hereof are listed on Schedule
1;
"Emisphere Programme m e a ns all trade secrets, confidential
scientific,
Know-How" t e c hnical and medical information and
expertise from time to time developed,
produced, created or Acquired by or on
behalf of Emisphere pursuant to one or more
of the Research and Development Programmes
(other than Emisphere Know-How) including,
but not limited to, unpatented inventions,
d i scoveries, theories, plans, ideas or
designs (whether or not reduced to practice)
relating to the research and development,
registration for marketing, use or sale of
the Carriers or the Product(s), chemical
compounds and use expertise, needed relevant
data on the Carriers, preclinical toxicity
and manufacturing data for the Carriers and
p r ototype Product(s), toxicological,
pharmacological, analytical and clinical
data, bioavailability studies, formulations,
control assays and specifications, methods
of preparation and stability data;
"Emisphere Programme means all and any patents and applications
therefor
Patents" in the Territory (including any and all
d i v i s i o n s, continuations-in-part,
extensions, additions or reissues thereto or
t h ereof) on or for any inventions or
discoveries that have been or subsequently
may be conceived or made by employees or
agents of Emisphere pursuant to one or more
of the Research and Development Programmes
( r e gardless of when or by whom such
inventions and/or discoveries are reduced to
practice);
"Emisphere Programme means the Emisphere Programme Patents and/or
Technology" the Emisphere Programme Know-How;
"Emisphere Supply means the agreement to be entered into
Agreement" b e tween Ebbisham and Emisphere (or
Emisphere's designee) regarding supply of
Carriers;
"Emisphere Technology" means the Emisphere Patents and/or the
Emisphere Know-How;
"Emisphere Trademarks" means, depending on the context, one or more
o f the trademarks CADDSYS', EMIS-DOS',
PODDS' and any other relevant trademark
owned by, Acquired by, assigned or licensed
to Emisphere;
"Expert" means any expert selected and appointed
pursuant to Clause 21 of the Joint Venture
Agreement;
"Ex Works" shall have the meaning as such term is
d e f i ned in the ICC Incoterms, 1990,
International Rules for the Interpretation
of Trade Terms, ICC Publication No. 460;
"Field" means the research, development and
optimisation of the Compounds utilising one
or more Carriers for all medical ailments or
indications whatever the mode of
administration as well as the manufacture,
use, promotion, distribution, marketing and
sale of the Product(s);
"FDA" means the United States Food and Drug
Administration or any successors or agency
the approval of which is necessary to market
a product in the United States of America or
any other relevant regulatory authority the
approval of which is necessary to market a
p r o duct in any other country of the
Territory;
"Heparin" means naturally occurring forms of Heparin,
including Heparin USP, BP and EP as well as
smaller molecular fractions thereof;
"Heparinoids" m e a n s v a r ious sulphated
polysaccharides that have anti-
coagulant activity resembling that of
Heparin;
"Improvements" means inventions, discoveries, developments
a n d indications relating to the Elan
Technology that can usefully be applied to
the Field, the Elan Programme Technology or
the Emisphere Programme Technology, or the
Company Programme Technology and that which
were first reduced to practice during the
term of this Agreement by Elan whether or
not such modification adds any benefit to
the Field, the Elan Programme Technology,
the Emisphere Programme Technology or the
Company Programme Technology;
"INDA" m e ans any Investigational New Drug
Application in relation to a Product(s)
filed by any Party with the FDA or a similar
application filed in another jurisdiction;
"Independent Third means any person other than Elan,
Party" Ebbisham, Emisphere or any of their
Affiliates;
"Joint Venture means the agreement of even date entered
into
Agreement" between Elan, Emisphere and Ebbisham;
"Management m e ans the management committee
appointed
Committee" by the directors of Ebbisham pursuant to the
Joint Venture Agreement;
"NDA" means any New Drug Application in relation
to a Product(s) filed by any Party with the
FDA or a similar application filed in
another jurisdiction;
"Net Revenues" means any proceeds received by Ebbisham in
relation to the Product(s), other than Net
Sales, including but not limited to license
royalties and development royalties;
"Net Sales" means the invoiced sales price of
Products shipped by Ebbisham, or on
behalf of Ebbisham, in respect of bona
f i d e arms length sales of the
Product(s) to Independent Third
Parties exclusively for money, less a
maximum reserve of five percent (5%)
for uncollectible accounts, and less
ordinary and customary trade discounts
a n d commissions, excise taxes,
withholding tax, other consumption
t a xes, and credits or allowances
actually granted on account of
rejection or return of the Product(s).
In the case of any sale or disposal of
the Product(s) otherwise than in such
a bona fide arms length sale to
Independent Third Parties, exclusively
for money, "Net Sales" shall mean the
invoiced sales price of Products;
"Parties" means Elan and Ebbisham;
"Person" m e ans an individual, partnership,
c o rporation, limited liability company,
business trust, joint stock company, trust,
unincorporated association, joint venture,
or other entity of whatever nature;
"Product(s)" means depending on the context one or
more formulations of the Compound(s)
in conjunction with one or more of the
C a r riers that complies with the
Specifications;
"Research and means, depending on the context, one or more
Development Programmes" programmes of research and development work
being conducted or to be conducted by, inter
alia, Elan and Emisphere for and on behalf
of Ebbisham which have been devised by the
Research Committee and approved by the
Management Committee;
"Specifications" means the specifications for each of the
Carriers or Product(s) as approved by the
FDA, as well as such other specifications
which may be agreed upon by the Parties in
writing or by the Research Committee;
"Territory" means all the countries of the world;
and
"United States Dollars" means the lawful currency for the time being
and "US$" of the United States of America.
1.2 In this Agreement
1.2.1 The singular includes the plural and vice versa, the
masculine includes the feminine and vice versa.
1.2.2 Any reference to a Clause or Schedule shall, unless
otherwise specifically provided, be to a Clause or
Schedule of this Agreement.
1.2.3 The headings of this Agreement are for ease of reference
o n l y and shall not affect its construction or
interpretation.
2. GRANT OF RIGHTS
2.1 In consideration of the payment by Ebbisham to Elan of one
United States Dollar (US$1), the receipt and adequacy of which
is hereby acknowledged by Elan, Elan hereby grants to Ebbisham
for the term of this Agreement a non-exclusive license to use
(a) the Elan Patents for the Field, and (b) the Elan Know-How
for the Field. All proprietary rights and rights of ownership
with respect to the Elan Technology shall at all times remain
solely with Elan. Ebbisham shall not have any rights to use
the Elan Technology other than insofar as they relate directly
to the Field and are expressly granted herein.
2.2 Subject to any restriction in any licenses or other agreements
pursuant to which Elan licenses any of the Elan Trademarks,
Elan hereby grants Ebbisham for the term of this Agreement an
e x clusive, royalty-free, fully paid-up license (or, if
applicable, sublicense) to use the Elan Trademarks upon or in
relation to the promotion, marketing, advertising, sale or
offering for sale of the Product(s).
2.3 Ebbisham hereby grants to Elan for the term of this Agreement
a non-exclusive, royalty-free fully paid-up license to use the
Elan Programme Technology, Emisphere Programme Technology and
the Company Programme Technology, and subject to the terms and
conditions of the Emisphere Licence Agreement, a royalty-free
sublicense to use the Emisphere Technology, insofar as is
necessary, in each case, to permit Elan to perform its
obligations pursuant to this Agreement, the Joint Venture
Agreement and the Elan Supply Agreement, including, without
limitation, (a) conducting research and development pursuant
t o t he Research and Development Programmes, and (b)
developing, manufacturing and supplying the Product(s) and any
other chemical or formulation components. All rights of
ownership with respect to the Elan Programme Technology and
the Emisphere Programme Technology shall at all times remain
solely with Ebbisham.
2.4 In the event that Elan is entitled to exploit the Emisphere
Programme Technology or the Elan Programme Technology outside
t h e Field in accordance with the provisions of Clause
8.3 of the Joint Venture Agreement, Ebbisham shall grant
E l a n a non-exclusive, royalty-free, fully paid-up licence
to use the Emisphere Programme Technology and/or the Elan
Programme Technology for the p u r p o s e of evaluating
whether a n y such use is likely to produce a commercial
return and for this purpose to conduct research and development.
In the event that Elan wishes to exploit t h e Emisphere
Programme Technology and/or the Elan Programme Technology
outside the Field in accordance with the provisions of Clause
8.3 of the Joint Venture Agreement other than for the
purposes set out above, the Parties shall negotiate a
licence for the further use of such technology pursuant to the
provisions of Clause 8.7 of the J o i n t Venture Agreement.
2.5 Ebbisham shall have the right to sublicense the rights granted
to it by Elan pursuant to this Agreement, including the right
to grant a royalty-free sublicense to the Elan Technology to
Emisphere to enable Emisphere to fulfil its obligations
pursuant to the Emisphere License Agreement, the Joint Venture
Agreement and the Emisphere Supply Agreement. Insofar as the
obligations owed by Ebbisham to Elan are concerned, Ebbisham
shall remain responsible for all acts and omissions of any
sub-licensee, including Emisphere as if they were by Ebbisham.
Ebbisham shall forthwith notify Elan of any sub-license (and
the terms thereof) granted by Ebbisham, which such sub-license
shall be approved by the Management Committee. In the event
of a termination of this Agreement due to a breach by
Ebbisham, Elan shall have the right but not the obligation to
assume any such sub-license.
2.6 Elan hereby covenants with Ebbisham that for the duration of
the Joint Venture Agreement it will not grant a license of the
Elan Technology for the Field to any Independent Third Party.
3. IMPROVEMENTS
3.1 If Elan shall develop or have developed by an Independent
Third Party any Improvements during the term of this Agreement
( o t her than pursuant to the Research and Development
Programmes which constitute Elan Programme Technology), Elan
shall, to the extent that it is not prohibited by any
undertaking given to any Independent Third Party (provided
that Elan shall use its commercially reasonable efforts to
exclude or minimise the extent of any such limitations or
restrictions which prevent or limit disclosure to or use by
Ebbisham), communicate to Ebbisham such Improvements and shall
provide to Ebbisham such rights, licenses, information and
explanations as Ebbisham may reasonably require to be able
effectively to utilise the Improvements for the life of this
Agreement. Such disclosed Improvements shall automatically on
disclosure to Ebbisham become part of the Elan Know-How or
Elan Patents, as the case may be, and shall be subject to the
provisions of this Agreement.
4. [LEFT INTENTIONALLY BLANK]
5. INTELLECTUAL PROPERTY RIGHTS
5.1 The respective intellectual property ownership rights of Elan,
Ebbisham and Emisphere shall be regulated by the provisions of
Clause 8 of the Joint Venture Agreement.
6. RESEARCH AND DEVELOPMENT
6.1 Whenever commercially and technically feasible, Ebbisham shall
contract with Elan or Emisphere, as the case may be, to
perform research development and experimentation activities
for the purpose of developing the Field and the Product(s).
6.2 Elan shall provide such research and development services in
the Field as may reasonably be required by Ebbisham. The
research and development work conducted by Elan for Ebbisham
shall be in accordance with the Research and Development
Programme devised by the Research Committee as approved by the
M a n agement Committee. Elan shall use its reasonable
endeavours to conduct its portion of the Research and
Development Programmes in accordance with the timetable set
out in the Research and Development Programmes. Elan shall in
accordance with the terms and conditions set forth in this
Agreement undertake reasonably diligent efforts, as would be
deemed commensurate with the achievement of its own business
aims for a similar product of its own, to conduct its part of
the Research and Development Programme.
6.3 The Research and Development Programmes shall be directed by
the Research Committee and subject to the strategic direction
of the Management Committee. In conducting the Research and
Development Programmes, Elan shall co-operate fully with the
Research Committee and the Management Committee and with
Emisphere. Elan shall maintain the facilities used by it for
the performance of the Research and Development Programme in
compliance with the applicable requirements of the FDA and
o t h er regulatory authorities, including cGMP and cGLP
standards.
6.4 Ebbisham may evaluate the reports and other data furnished by
Elan for the purpose, inter alia, of deciding whether or not
to proceed with all or part of the Research and Development
Programme.
6.5 Elan and Ebbisham shall agree on a budget in connection with
the activities to be undertaken by Elan during the Research
and Development Programme, which budget shall form part of the
Research and Development Programme. In the event that as a
result of additional activities to be undertaken by Elan upon
the request of Ebbisham the budget needs to be revised, the
Parties will agree on such revision prior to Elan commencing
any such additional development activities.
6.6 Elan will keep accurate records consistent with its normal
business practices of the efforts expended by it under the
Research and Development Programmes for which it is charging
Ebbisham, which will include the time spent by each person
working on the Research and Development Programmes. Each
quarter Elan will send reports to Ebbisham in order to enable
Ebbisham to monitor Elan's level of effort to assure Ebbisham
that the committed level of effort is being applied.
7. SUPPLY OF PRODUCT(S)
7.1 Except as otherwise herein provided in this Agreement or in
the Emisphere Supply Agreement, Elan shall produce and supply
to Ebbisham its entire requirements of the Product(s) as are
required by Ebbisham and any other chemical or formulation
components required to make use of the Elan Technology or the
Elan Programme Technology in the Field. Elan shall ensure
that supplies of the Product(s) are produced in accordance
with the delivery schedules agreed between Elan and Ebbisham
and deliver the Product(s) to Ebbisham on the same basis as
arms-length commercial customers of Elan. For the purposes of
Clause 7.8. and Clause 7.9., Ebbisham may qualify a second
site for the manufacture of the Product(s).
7.2 Elan shall deliver the Product(s) to Ebbisham and/or any Party
designated by Ebbisham in appropriate packaging so as to
permit safe storage and transport.
7.3 In the event that Elan appoints a third party to manufacture
the Product(s) (which appointment shall be subject to the
agreement of Ebbisham not to be unreasonably withheld,
conditioned or delayed), Elan shall be solely responsible and
l i a b le to Ebbisham for the performance of the said
manufacturer. Elan shall ensure that the said manufacturer s
facility is an FDA - approved facility and that such facility
complies with all relevant FDA and other relevant governmental
and regulatory requirements and that all accepted practises of
cGMP are adhered to.
7.4 Ebbisham shall provide adequate notice to Elan so that Elan
may produce or obtain the necessary quantities of the
Product(s) and any other chemical or formulation components of
the Elan Technology or the Elan Programme Technology. The
Parties agree that in the normal course of events, three
months notice shall be sufficient. However, until agreed
capacity levels for the supply of Product(s) are established,
Ebbisham acknowledges and accepts that the lead time for
larger than anticipated orders of Product(s) may be longer
than three months and the Parties will negotiate and agree in
good faith the necessary extension to the lead time for such
orders.
7.5 T h e Parties hereby confirm that Elan's manufacturing
obligations and Ebbisham s purchasing obligations shall only
arise on receipt of firm purchase orders by Elan for the
Product(s) or on the agreement of the Management Committee.
Elan will use its reasonable efforts to fulfil Ebbisham s
requirements in excess of forecasted amounts, but shall not be
obliged to meet such requirements if it is not commercially
practicable to do so provided that Elan shall treat Ebbisham
on no less favourable terms than other customers for the
Product(s) and shall supply the Product(s) so ordered but not
immediately available as soon thereafter as commercially
practicable.
7.6 The quality and form of the Product(s) delivered by Elan
hereunder shall conform in all material aspects to the
Specifications and all prevailing legislative and regulatory
requirements of the countries where the Product(s) are
manufactured and to be used. All claims for failure of any
shipment of the Product(s) to conform to Specifications must
be made by Ebbisham to Elan in writing within forty-five (45)
days following delivery. Failure to make timely claims in the
manner prescribed shall constitute acceptance of the shipment.
Product(s) which have been delivered and which have been shown
within the designated period not to conform to Specifications
shall be replaced at Elan s cost within ninety (90) days of
the receipt by Ebbisham or Ebbisham's designee of the non-
conforming Product(s). In the event of an unresolved dispute
as to conformity with Specifications of the Product(s), the
Parties shall nominate an independent first class laboratory
to undertake the relevant testing. Such laboratory's findings
shall be conclusive and binding upon the Parties. All costs
relating to this process shall be borne exclusively by the
unsuccessful Party. Should the Parties fail to agree upon a
mutually acceptable independent laboratory then, an Expert
shall be entrusted with appointing such an independent
laboratory.
7.7 Save as otherwise agreed between the Parties, delivery of
consignments of the Product(s) shall be made by Elan Ex Works,
or any other manufacturing facility designated by Elan and all
r i s ks therein shall pass to Ebbisham when each such
consignment of the Product(s) is loaded onto the vehicle of
Ebbisham's agent on which it is to be despatched from Elan's
designated facility. Ebbisham shall fully insure or procure
the insurance of all consignments of the Product(s) when risk
p a s ses as aforesaid and shall produce such insurance
documentation supporting same as and when requested by Elan.
7.8 In the event that (a) Elan fails to supply the Product(s)
which have been ordered by Ebbisham for a period exceeding
three (3) months after the mutually agreed upon delivery date,
or there are repeated and serious failures, inabilities or
delays in filling orders, (unless any such failure, inability
or delay in filling orders is caused by the supplier of the
active ingredient or other raw material, or (b) Ebbisham can
obtain a regular and guaranteed source of supply of Product(s)
of equivalent quality from an Independent Third Party at a
price at least fifteen percent (15%) cheaper than Elan as
provided for in Clause 7.10 below, Elan shall:
7.8.1 grant to Ebbisham a license in the Territory so that
Ebbisham may manufacture or have manufactured the
relevant Product(s) without infringing any of Elan's
patent and/or any other intellectual property rights.
Any such license shall apply only in regard to the
relevant Product(s) as well as to the applications of
technology derived from the Elan Technology related to
its use with such Product(s). Ebbisham may sublicense
the said production license to an Independent Third
Party provided that Elan approves such an Independent
Third Party, such approval not to be unreasonably
withheld. As a condition of Elan's approval, Elan may
r e quire such Independent Third Party to sign an
agreement not to disclose the Elan Technology and to
only use such information provided to it for the purpose
of the aforesaid production license;
7.8.2 provide Ebbisham with any technical data necessary for
the carrying of such license into effect. To this end,
Elan shall impart to Ebbisham, subject to appropriate
confidentiality provisions, such documentation as is
necessary to provide the required material support,
including practical performance advice, shop practice,
specifications as to materials to be used and control
methods; and
7.8.3 at Ebbisham's reasonable request, assist Ebbisham in the
working up and use of the technology necessary to
manufacture the relevant Product(s) as well as for the
training of Ebbisham's personnel. For this purpose,
Elan shall receive Ebbisham's scientific staff in its
premises for reasonable periods and at reasonable times,
the timing and duration of which shall be decided by
common consent.
7.9 In the event that the Parties shall agree on a reasonable
period of time within which said transfer to an alternative
supplier is to be made, Elan shall continue to supply Ebbisham
with the Product(s) until such transfer is fully effected and
until Ebbisham receives all necessary regulatory approvals so
that Ebbisham's supply of the Product(s) shall be continuous
and uninterrupted .
7.10 In the event that Ebbisham can obtain a secure source of
supply of Product(s) of equivalent quality from an Independent
Third Party at a price at least fifteen percent (15%) cheaper
than Elan, Ebbisham shall be entitled to enter into a supply
agreement with the said Independent Third Party to manufacture
the Product(s), provided that the said Independent Third Party
is not a technological competitor of Elan. In the event that
an Independent Third Party shall manufacture the Product(s),
Ebbisham and Elan shall negotiate in good faith as to the
information, data and other documentation which needs to be
furnished by Elan to Ebbisham to enable the Product(s) to be
manufactured by such an Independent Third Party, and the
charges to be made by Elan for its services in connection
therewith. In such an event Ebbisham shall enter into an
agreement (an "Independent Third Party Product(s) Supply
Agreement") in good faith with the Independent Third Party
which agreement shall, inter alia, regulate use by such
Independent Third Party of Elan's Technology. Ebbisham shall
not enter into any Independent Third Party Product(s) Supply
Agreement in circumstances where the price at which the
Independent Third Party is prepared to make Product(s)
available, is offered for the purposes of procuring or
attempting to induce the entry by Ebbisham or Emisphere into
other arrangements with such Independent Third Parties.
7.11 Notwithstanding anything herein to the contrary, in the event
that Elan shall resolve to Ebbisham's reasonable satisfaction
a n y failures, inabilities or delays in filling orders
specified in Clause 7.8 or shall be in a position to provide a
regular and guaranteed source of supply of Product(s) of
equivalent quality at a price no more than fifteen percent
(15%) more expensive than an Independent Third Party, Ebbisham
and Elan shall negotiate in good faith an agreement on
substantially the same terms as this Agreement for Elan to
supply Product(s) and other chemical or formulation components
to Ebbisham and each Independent Third Party Product(s) Supply
Agreement shall anticipate and facilitate this eventuality.
8. EXPLOITATION OF LICENSED TECHNOLOGY
8.1 E x cept as provided for in this Agreement, Ebbisham s
obligations to exploit the Elan Technology shall be regulated
by Clause 11 of the Joint Venture Agreement.
8.2 Ebbisham shall exert its reasonable efforts to commercialise
the Product(s) in each country of the Territory consistent
with the market potential for the Product(s) in each country
of the Territory determined in a commercially reasonable
manner and with a view to achieving maximum benefit to the
Parties.
8.3 Ebbisham will be solely responsible for ensuring that the
manufacture, promotion, distribution, marketing and sale of
the Product(s) within each country of the Territory is in
s t r i ct accordance with all the legal and regulatory
requirements of each country of the Territory.
8.4 All advertising, promotional materials and marketing costs
needed to exploit the Product(s) are to be paid by Ebbisham.
Any packaging for the Product(s) shall contain information to
the effect that the Product(s) has been developed by Elan in
conjunction with Emisphere and is to be agreed upon by Elan in
advance. Such acknowledgement shall take into consideration
regulatory requirements and Ebbisham's reasonable commercial
requirements. Ebbisham shall submit copies of all trade
package cartons and labels and other printed materials to Elan
f o r approval before commercial sale of the Product(s)
commences. In the event that, if a change in such materials
from that initially approved which would require regulatory
approval or filing or any other material change is proposed,
all such package cartons and labels and printed materials
shall be resubmitted for approval before commercial use
thereof. It shall be presumed that Elan approved of such use
unless Elan provides written notice of disapproval of such use
to Ebbisham within thirty (30) days of delivery of such
materials to Elan, such approval not to be unreasonably
withheld.
9. FINANCIAL PROVISIONS
9.1 I n consideration of the research and development work
conducted by Elan for and on behalf of Ebbisham pursuant to
the Research and Development Programmes, Ebbisham shall pay
Elan the sums agreed by the Management Committee at the
termination of each stage of the Research and Development
Programme and subject to the proper vouching of research and
development work and expenses. The sums payable shall be
calculated by reference to Cost incurred by Elan and in
accordance with the provisions of Clause 6.
9.2 The price of the Product(s) to be supplied by Elan to Ebbisham
shall be discussed and agreed upon between the Parties in good
faith and subject to Clause 9.5 shall be supplied at Cost or
such other sum as may be agreed between the Parties from time
to time, provided, however, that in the event of a change in
control of Ebbisham such that Elan holds less than forty five
percent (45%) equity interest in Ebbisham, the Parties shall
negotiate in good faith an increase in the price of such
Product(s) above Cost on the basis that for every one percent
(1%) reduction in the equity interest held by Elan in
Ebbisham below forty five percent (45%), the price of the
Product(s) shall increase by such amount as is equal to five
percent (5%) of the difference between the Cost of such
Product(s) and the arms length commercial sales price of such
Product(s) provided however, that once Elan holds less than
twenty five percent (25%) of equity interest in Ebbisham, the
price for the supply of Product(s) shall be at the full
commercial arms length sales price. In the event that the
Parties do not agree on such a modified price, the matter
shall be referred for determination by an Expert.
9.3 Once agreed, the price of the Product(s) shall, subject to the
provisions of this Clause 9.3, remain in force for twelve
calendar months (12) months. The price of the Product(s)
shall be reviewed by the Parties on a twelve (12) calendar
month basis and shall take into account the increases in Cost,
increases in the appropriate price indices and extraordinary
items of expenditure which are incurred by Elan. In the event
that Elan incurs extraordinary items of expenditure or there
is significant inflation in any particular country, the price
of the Product(s) may be reviewed by the Parties on a second
occasion within the relevant twelve month period. Elan shall
provide to Ebbisham documentation substantiating increases in
Cost and extraordinary items of expenditure or significant
inflation in any particular country.
9.4 Payment for Product(s) so supplied shall be made by Ebbisham
within thirty (30) days of receipt of an invoice therefor.
9.5 In consideration of the license of the Elan Technology to
Ebbisham, Ebbisham shall pay a royalty on Net Revenues and/or
on Net Sales of the Product(s) at a rate of ten percent (10%)
on Net Revenues and at a rate of ten percent (10%) on Net
Sales. Notwithstanding anything herein to the contrary, no
royalty shall be paid for the license of the Elan Patents on
Net Revenues or Net Sales of the Product(s) in any given
jurisdiction after the expiration or invalidation of the last
patent issued in such jurisdiction that is covered under the
terms of such license if the continued payment of such
royalties is prohibited in such jurisdiction.
9.6 In the event of a change of control of Ebbisham such that Elan
holds less than forty five percent (45%) equity interest in
Ebbisham and for each subsequent reduction in the equity
interest in Ebbisham held by Elan, the Parties shall negotiate
an adjustment in the royalties, such adjustment to be agreed
between the Parties.
9.7 Payment of royalties shall be made quarterly within thirty
(30) days after the expiry of the calendar quarter. The
method of payment shall be by way of wire transfer to an
account specified by Elan. Each payment made to Elan shall be
accompanied by a written report, prepared and signed by a
senior financial officer of Ebbisham. In addition the report
shall clearly show the Net Revenue and Net Sales for the
months of the calendar quarter for which payment is being made
on a country by country basis. In the event that no royalty
is due to Elan for any Quarter period, the senior financial
officer shall so report. In addition to the written reports
accompanying each payment, Ebbisham shall notify Elan within
two weeks of the end of each calendar quarter, of the Net
Revenues and Net Sales of the Product(s) for that preceding
quarter on a country by country basis.
9.8 Ebbisham shall maintain and keep clear, detailed, complete,
accurate and separate records so:
9.8.1 as to enable any royalties on Net Revenues or Net Sales
of the Product(s) which shall have accrued hereunder to
be determined; and
9.8.2 that any deductions made in arriving at the Net Revenues
or the Net Sales can be determined.
9.9 All payments due hereunder shall be made in United States
Dollars. Payments due on Net Revenues and Net Sales of the
Product(s) made in a currency other than United States Dollars
shall first be calculated in the foreign currency and then
converted to United States Dollars on the basis of the
exchange rate in effect for the purchase of United States
Dollars with such foreign currency quoted in the Wall Street
Journal (or comparable publication if not quoted in the Wall
Street Journal) with respect to the currency of the country of
origin of such payment for the day prior to the date on which
the payment by Ebbisham is being made.
9.10 Subject to the provisions of Clauses 9.11 and 9.13 of this
Agreement, Ebbisham shall pay all royalties at full rate.
9.11 If, at any time, legal restrictions in the Territory prevent
the prompt payment of running royalties or any portion
thereof, the Parties shall meet to discuss suitable and
reasonable alternative methods of reimbursing Elan the amount
of such running royalties. In the event that Ebbisham is
prevented from making any payment under this Agreement by
virtue of the statutes, laws, codes or government regulations
of the country from which the payment is to be made, then such
payments may be paid by depositing them in the currency in
which they accrue to Elan s account in a bank acceptable to
Elan in the country the currency of which is involved or as
otherwise agreed by the Parties.
9.12 Elan and Ebbisham agree to co-operate in all respects
necessary to take advantage of any double taxation agreements
or similar agreements as may, from time to time, be available.
9.13 Any taxes payable by Elan on any payment made to Elan pursuant
to this agreement shall be for the account of Elan. If so
required by applicable law any payment made pursuant to this
Agreement shall be made by Ebbisham after deduction of the
appropriate withholding tax in which event the Parties shall
co-operate to obtain the appropriate tax clearance as soon as
is practicable. On receipt of such clearance, Ebbisham shall
forthwith procure that the amount so withheld is paid to Elan.
10. RIGHT OF AUDIT AND INSPECTION
10.1 On not more than two times in each calendar year, Ebbisham
shall permit Elan or its duly authorised representatives upon
reasonable notice and at any reasonable time during normal
business hours to have access to inspect and audit the
accounts and records of Ebbisham and any other book, record,
voucher, receipt or invoice relating to the calculation of the
royalty payments on Net Revenues and Net Sales submitted to
Elan. Any such inspection of Ebbisham's records shall be at
the expense of Elan, except that if any such inspection
reveals a deficiency in the amount of the running royalty
actually paid to Elan hereunder in any calendar quarter of
five percent (5%) or more of the amount of any running royalty
actually due to Elan hereunder, then the expense of such
inspection shall be borne solely by Ebbisham. Any amount of
deficiency shall be paid promptly to Elan. If such inspection
reveals a surplus in the amount of running royalty actually
paid to Elan by Ebbisham, Elan shall reimburse Ebbisham the
surplus.
10.2 On not more than two times in each calendar year, Elan shall
permit Ebbisham or its duly authorised representative on
reasonable notice and at any reasonable time during normal
business hours to have access to inspect and audit the
accounts and records of Elan and any other book, record,
voucher, receipt or invoice relating to the calculation or the
Cost of the Research and Development Programmes or for the
supply of the Product(s) and to the accuracy of the reports
which accompanied them. Any such inspection of Elan's records
shall be at the expense of Ebbisham, except that if any such
inspection reveals an overpayment in the amount of the Costs
paid to Elan for the Research and Development Programmes
and/or the Product(s) supplied by Elan hereunder in any
calendar quarter of five percent (5%) or more of the amount of
the Costs actually due to Elan hereunder, then the expense of
such inspection shall be borne solely by Elan instead of by
Ebbisham. Any surplus over the Costs properly payable by
Ebbisham to Elan shall be paid promptly to Ebbisham. If such
inspection reveals a deficit in the amount of the Costs
properly payable to Elan by Ebbisham, Ebbisham shall pay the
deficit to Elan.
10.3 In the event of any unresolved dispute regarding any alleged
deficiency or overpayment of royalty payments hereunder, the
matter will be referred to an independent firm of Chartered
Accountants for a resolution of such dispute. Any decision by
the said firm of Chartered Accountants shall be binding on the
Parties.
11. PATENTS
11.1 Ebbisham shall permanently mark or otherwise cause Emisphere
or any third party to permanently mark all Product(s) and/or
the packaging therefor with such license or patent notices and
in such manner as Elan may reasonably request in writing prior
to the sale or commercial use thereof.
11.2 Elan shall be obliged to disclose promptly to Ebbisham
inventions made by or on behalf of Elan in connection with the
performance of the Research and Development Programmes, any
patentable inventions and discoveries within the Elan Know-How
that relate to the Field, the Elan Programme Know-How and any
patentable Improvements developed by or on behalf of Elan
(other than pursuant to one or more of the Research and
Development Programmes).
11.3 The Parties shall discuss in good faith all material issues
relating to filing, prosecution and maintenance of Elan
Patents (insofar as the Elan Patents are of relevance to the
Field), the Elan Programme Patents, any patentable inventions
and discoveries within the Elan Know-How that relate to the
Field, and any patentable Improvements developed by or on
behalf of Elan (other than pursuant to one or more of the
Research and Development Programmes. Subject to agreement to
the contrary the following provisions shall apply:
11.3.1 Elan at its expense shall make a good faith effort
(a) to secure the grant of any patent applications
within the Elan Patents; (b) to file and prosecute
patent applications on patentable inventions and
discoveries within the Elan Know-How and
patentable Improvements developed by or on behalf
of Elan (other than pursuant to one or more of the
Research and Development Programmes); (c) to
defend all such applications against third party
oppositions; and (d) to maintain in force any
issued letters patent within the Elan Patents
(including any letters patent that may issue
covering any such Improvements). Elan shall have
t h e sole right in its reasonable business
discretion to control such filing, prosecution,
defence and maintenance; provided however, that
Ebbisham, at its request, shall be provided with
copies of all documents relating to such filing,
p r osecution, defence, and maintenance in
sufficient time to review such documents and
comment thereon, if desired by Ebbisham, prior to
filing.
11.3.2 In the event that Elan informs Ebbisham that it
does not intend to file patent applications on
patentable inventions and discoveries within the
E l an Know-How that relate to the Field or
patentable Improvements developed by or on behalf
of Elan (other than pursuant to one or more of the
Research and Development Programmes in one or more
countries in the Territory or fails to file such
an application within a reasonable period of time,
but in no event less than four (4) months after
disclosure to Ebbisham pursuant to Clause 11.2,
Ebbisham shall have the right, but not the
obligation, at Ebbisham's sole expense to file and
prosecute such patent application(s) in the joint
names of Elan and Ebbisham and Elan upon written
request from Ebbisham shall execute all documents,
forms and declarations and to do all things as
shall be reasonably necessary to enable Ebbisham
to exercise such option and right.
11.3.3 In relation to Elan Programme Patents, Ebbisham at
its expense shall have the right but shall not be
obligated (a) to secure the grant of any patent
applications within the Elan Programme Patents;
(b) to file and prosecute patent applications on
patentable inventions and discoveries within the
Elan Programme Know-How; (c) to defend all such
applications against third party oppositions; and
(d) to maintain in force any issued letters patent
within the Elan Programme Patents including any
Patents that issue on patentable inventions and
discoveries within the Elan Programme Know-How).
Ebbisham shall have the right to control such
filing, prosecution, defence and maintenance;
provided however Elan and Emisphere at their
request shall be provided with copies of all
documents relating to such filing, prosecution,
defence, and maintenance in sufficient time to
review such documents and comment thereon, if
desired by Elan and Emisphere, prior to filing.
11.3.4 In the event that Elan informs Ebbisham that it
does not intend to file patent applications on
patentable inventions and discoveries within the
Elan Programme Know-How outside the Field or the
Emisphere Programme Know-How outside the Field or
fails to file such an application within a
reasonable period of time, but in no event less
than four (4) months after disclosure to Ebbisham
pursuant to Clause 11.2 hereof, or Clause 11.2 of
the Emisphere Licence Agreement Ebbisham shall
have the right, insofar as it is necessary to
enable Elan to exploit the Elan Programme Know-How
or Emisphere Programme Know-How outside the Field
pursuant to Clause 2.4 of this Agreement or Clause
8.3 of the Joint Venture Agreement, but not the
obligation at Ebbisham's sole expense to file and
prosecute such patent application(s) in Ebbisham's
name and Elan upon written request from Ebbisham
s h all execute all documents, forms and
declarations and to do all things as shall be
r e a sonably necessary to enable Ebbisham to
exercise such option and right. Notwithstanding
anything herein to the contrary, the Parties agree
that Elan shall own all right, title and interest
in such patent applications and any patents that
m a y issue thereon (including any and all
divisions, continuations, continuations-in-part,
extensions, additions or reissues thereto or
thereof), provided, however, that such
applications and patents shall be deemed subject
to the license to be granted to Elan under Clause
8.1 of the Joint Venture Agreement.
11.4 Elan and Ebbisham shall promptly inform the other in writing
of any alleged infringement of any patents within the Elan
Patents or the Elan Programme Patents or the Company Programme
Technology or any alleged misappropriation of trade secrets
within the Elan Know-How, the Elan Programme Know-How and the
Company Technology by a third party of which it becomes aware
and provide the other with any available evidence of such
infringement or misappropriation.
11.4.1 During the term of this Agreement, Ebbisham shall
have the right to prosecute at its own expense and
for its own benefit any alleged infringements of
the Elan Patents or misappropriation of the Elan
K n o w -How insofar as such infringements or
misappropriations relate to the Field. In the
event that Ebbisham takes such action, Ebbisham
shall do so solely at its own cost and expense.
At Ebbisham's request, Elan will co-operate with
such action insofar as the said action relates to
the Field, at Ebbisham's sole cost and expense.
S h o uld Ebbisham decide not to pursue such
infringers within a reasonable period but in any
event within sixty (60) days after receiving
written notice of such alleged infringement or
misappropriation, or if such alleged infringement
or misappropriation do not relate to the Field,
E l a n may in its discretion initiate such
proceedings in its own name, at its own expense
and for its own benefit, and at Elan's request,
Ebbisham will co-operate with such action, at
Elan's sole cost and expense. In the alternative,
t h e P arties may agree to institute such
proceedings in their joint names and shall reach
agreement as to the proportion in which they will
share the proceeds of any such proceedings, and
the expense of any costs not recovered, or the
costs or damages payable to the third party. If
the infringement of the Elan Patents affects the
Field as well as other products being developed or
commercialised by Elan or its commercial partners,
the Parties shall agree as to the manner in which
the proceedings should be instituted and shall
reach agreement as to the proportion in which they
will share the proceeds of any such proceedings,
and the expense of any costs not recovered, or the
costs or damages payable to the third party.
11.4.2 During the term of this Agreement, Ebbisham shall
have the first right but not the obligation to
bring suit or otherwise take action against any
alleged infringement of the Elan Programme Patents
or the Emisphere Programme Patents or alleged
misappropriation of the Elan Programme Know-How or
Emisphere Programme Know-How. In the event that
Ebbisham takes such action, Ebbisham shall do so
solely at its own cost and expense and all damages
and monetary award recovered in or with respect to
such action shall be the property of Ebbisham. At
Ebbisham's request, Elan will co-operate with any
such action at Ebbisham's sole cost and expense.
In the event that Ebbisham decides not to take
such action against such infringement or
misappropriation or fails to do so within a
reasonable period but in any event within sixty
(60) days after receiving written notice of such
alleged infringement or misappropriation and such
Elan Programme Technology or Emisphere Programme
Technology would be subject to the license to Elan
in Clause 8.1 of the Joint Venture Agreement, Elan
may in its discretion initiate such proceedings in
its own name (or in Ebbisham's name if required by
law; provided, however, that Elan identifies
itself as the real Party in interest and does not
take any action that would expose Ebbisham to
liability of any kind). In the event that Elan
initiates such action, it shall do so solely at
its sole cost and expense and all damages and
monetary award recovered in or with respect to
such action shall be the property of Elan. At
Elan's request, Ebbisham agrees to cooperate with
Elan in any such proceeding at Elan's sole cost
and expense. In the alternative, the Parties may
agree to institute such proceedings in their joint
n a mes and shall reach agreement as to the
proportion in which they will share the proceeds
of any such proceedings, and the expense of any
costs not recovered, or the costs or damages
payable to the third party.
11.5 In the event that a claim or proceedings are brought against
Ebbisham by a third party alleging that the sale, distribution
or use of the Product(s) in the Territory solely because of
E b b i sham's use of the Elan Technology infringes the
intellectual property rights of such a third party, Ebbisham
shall promptly advise Elan of such threat or suit. Elan shall
indemnify Ebbisham against such a claim in the event that Elan
should as of the date of execution of this Agreement have
reasonably been aware of such third party intellectual
property rights and provided that Ebbisham shall not (a)
acknowledge to the third party or to any other Person the
validity of the patent rights of such a third party or (b)
compromise or settle any claim or proceedings relating thereto
without the prior written consent of Elan. At its option,
Elan may elect to take over the sole conduct and control of
such proceedings from Ebbisham and, at Elan's request,
Ebbisham agrees to cooperate with Elan in any such proceeding
at Elan's sole cost and expense.
11.6 In the event that a claim or proceedings are brought against
Ebbisham by a third party alleging that the sale, distribution
or use of the Product(s) in the Territory solely because the
use of the Elan Technology infringes the patent rights of such
a third party and Elan should not reasonably have been aware
at the date of the execution of the Agreement of such third
party intellectual property rights, Ebbisham and Elan shall
meet to discuss in what manner the said proceedings should be
defended and, the manner in which any award for damages, costs
and expenses incurred in respect of or arising out of such a
claim or proceedings should be borne as between Elan and
Ebbisham.
11.7 Except as provided in Clause 11.5, Elan shall have no
liability to Ebbisham whatsoever or howsoever arising for any
losses incurred by Ebbisham as a result of having to cease
selling Product(s) or having to defer the launch of selling
Product(s) as a result of any infringement proceedings.
12. CONFIDENTIAL INFORMATION
12.1 The Parties acknowledge that it may be necessary, from time to
time, to disclose to each other confidential and proprietary
information, including without limitation, inventions, works
of authorship, trade secrets, specifications, designs, data,
know-how and other information, relating to the Field, the
Products, processes, and services of the disclosing Party.
12.2 The Parties agree that the information to be disclosed by
Emisphere and Elan to the Company may include trade secrets,
know-how and other proprietary information and data regarding
the Carriers or Emisphere Technology, Elan Technology or the
Company Programme Technology, as the case may be. It is
agreed that the information to be disclosed by the Company to
Emisphere and Elan may include trade secrets, know-how and
other proprietary information and data regarding the Compounds
or the Products. The foregoing shall be referred to
collectively as "Confidential Information". Any Confidential
Information revealed by a Party to another Party shall be used
by the receiving Party exclusively for the purposes of
fulfilling the receiving Party s obligations under this
Agreement, the Joint Venture Agreement and the Elan Supply
Agreement and for no other purpose.
12.3 Each Party agrees to disclose Confidential Information of
another Party only to those employees, representatives and
agents requiring knowledge thereof in connection with their
duties directly related to the fulfilling of the Party s
obligations under this Agreement. Each Party further agrees
to inform all such employees, representatives and agents of
the terms and provisions of this Agreement and their duties
hereunder and to obtain their consent hereto as a condition of
receiving Confidential Information. Each Party agrees that it
will exercise the same degree of care, but in no event less
than a reasonable degree, and protection to preserve the
proprietary and confidential nature of the Confidential
Information disclosed by a Party, as the receiving Party would
exercise to preserve its own proprietary and confidential
information. Each Party agrees that it will, upon request of
a Party, return all documents and any copies thereof
containing Confidential Information belonging to or disclosed
by, such Party.
12.4 Any breach of this Clause 12 by any of the Persons informed by
one of the Parties is considered a breach by the Party itself.
Confidential Information shall not be deemed to include:
(i) information that is in the public domain;
(ii) information which is made public by the disclosing
Party;
(iii) information which is independently developed by a Party;
(iv) information that is published or otherwise becomes part
of the public domain without any disclosure by a Party,
or on the part of a Party s directors, officers, agents,
representatives or employees;
(v) information that becomes available to a Party on a non-
confidential basis, whether directly or indirectly, from
a source other than a Party, which source, to the best
o f the Party s knowledge, did not acquire this
information on a confidential basis; or
(vi) information which the receiving Party is required to
disclose pursuant to a valid order of a court or other
governmental body or any political subdivision thereof
or otherwise required by law.
12.5 The provisions relating to confidentiality in this Clause 12
shall remain in effect during the term of this Agreement, and
for a period of seven (7) years following the expiration or
earlier termination of this Agreement but shall not apply to
any information which a Party is required to file or otherwise
disclose in accordance with requirements which are legally
binding on it.
12.6 The Parties agree that the obligations of this Clause 12 are
necessary and reasonable in order to protect the Parties'
respective businesses, and each Party expressly agrees that
monetary damages would be inadequate to compensate a Party for
any breach by the other Party of its covenants and agreements
set forth herein. Accordingly, the Parties agree and
acknowledge that any such violation or threatened violation
will cause irreparable injury to a Party and that, in addition
to any other remedies that may be available, in law and equity
or otherwise, any Party shall be entitled to obtain injunctive
relief against the threatened breach of the provisions of this
Clause 12, or a continuation of any such breach by the other
Party, specific performance and other equitable relief to
redress such breach together with its damages and reasonable
counsel fees and expenses to enforce its rights hereunder,
without the necessity of proving actual or express damages.
13. TRADEMARKS
13.1 Ebbisham undertakes that all Product(s) and all materials
u t i lised in connection with the provision, marketing,
distribution, advertising and/or marketing thereof shall be of
a consistent and high standard of quality, commensurate with
the prestige of the Elan Trademarks and that its use of the
Elan Trademarks shall conform to such reasonable standards as
Elan shall from time to time specify. Ebbisham shall
cooperate fully with the reasonable instructions of Elan with
respect to the maintenance of such standards.
13.2 Ebbisham shall:
13.2.1 subject to the agreement of Ebbisham s commercial
p a r tner such as a sub-licensee, favourably
consider promoting and using the Elan Trademarks
in each country of the Territory and provide proof
of use of the Elan Trademarks if requested by
Elan;
13.2.2 use the Elan Trademarks strictly in compliance
with any applicable trademark and other laws and
regulations and to use such legends, markings and
notices in connection therewith as are required by
law or otherwise reasonably required by Elan to
protect Elan's rights therein;
13.2.3 do nothing to mislead the public as to the nature
or quality of any Product(s) on which the Elan
Trademarks are affixed nor use it on advertising
or display materials which are unethical, immoral
or offensive to good taste;
13.2.4 at Elan's reasonable request supply samples of the
Product(s) and any materials utilized in
connection with the distribution, advertising
and/or marketing thereof that bear or incorporate
the Trademarks for inspection by Elan;
13.2.5 not adopt or seek to register any trademark,
design or logo confusingly similar to the Elan
Trademarks; and
13.2.6 promptly notify Elan in writing if any alleged
infringement or unauthorized use of the Elan
Trademarks comes to Ebbisham's attention.
13.3 Ebbisham undertakes to use the Elan Trademarks in relation
only to the Product(s) (or materials for advertising and
promotion thereof), and in accordance with any reasonable
specifications and directions given by Elan from time to time.
In particular, but without limitation, Ebbisham agrees to
state on the Product(s) or materials for the advertising or
promotion thereof that the Elan Trademarks is used under
license from Elan.
13.4 Ebbisham shall take no action which could prejudice the
validity, re-registration or reputation of the Elan Trademarks
or which could impair the reputation, business standing or
prestige of Elan.
13.5 Elan shall remain the owner of the Elan Trademarks and the
goodwill associated with the same and Ebbisham agrees not to
assert any ownership interest in the Elan Trademarks or the
goodwill associated therewith. Ebbisham shall own and retain
all right, title, and interest in and to any trademark or
trademarks (other than the Elan Trademarks and the Emisphere
Trademarks) used in the Territory in connection with the sale
of the Product(s).
13.6 Elan shall have the exclusive right to take such action in
r e spect of the registration, defence, infringement and
maintenance of the Elan Trademarks as Elan in its reasonable
business judgement deems appropriate. Ebbisham shall provide
all such assistance and co-operation, including the furnishing
of documents and information and the execution of registered
user documentation or the like, as may be required to give
effect to any action as may be taken, or required to be taken,
by Elan. In taking any such action, Elan shall consider the
legitimate commercial interests of Ebbisham.
13.7 New trademarks used in relation to the Elan Programme
Technology, the Emisphere Programme Technology, the Company
Programme Technology, or the Product(s) and all registrations
t h e reof and applications therefor shall be owned and
registered by Ebbisham. New trademarks used in relation to
t h e Elan Technology and all registrations thereof and
applications therefor shall be owned and registered by Elan
and shall constitute Elan Trademarks.
14. TERM OF AGREEMENT
14.1 Subject to the rights of earlier termination set out in
Clauses 14.3 and 14.4 and the provisions regarding the payment
of royalties in Clauses 9.5 and 9.6 this Agreement is
concluded for a period commencing as of the Effective Date and
expiring on a Product(s) by Product(s) basis and on a country
by country basis on the last to occur of:
14.1.1 10 (ten) years starting from the date of the
launch of the Product(s) in the country concerned;
or
14.1.2 the last to expire patent included in the Elan
Patents and/or the Elan Programme Patents and/or
the Emisphere Programme Patents.
14.2 At the end of the term as specified in Clause 14.1 above (the
"Initial Period"), the Agreement shall continue automatically
for an additional period or periods of three (3) years, unless
the Agreement has been terminated by Ebbisham or Elan on
serving two (2) years' written notice on the other prior to
the end of the Initial Period or any additional three (3) year
period.
14.3 In addition to the rights of early or premature termination
provided for elsewhere in this Agreement, in the event that
any of the terms or provisions hereof are incurably breached
by either Party, the non-breaching Party may immediately
terminate this Agreement by written notice. Subject to the
other provisions of this Agreement, in the event of any other
breach, the non-breaching Party may terminate this Agreement
by giving written notice to the breaching Party that this
Agreement will terminate on the sixtieth (60th) day from
notice unless cure is sooner effected. If the breaching Party
has proposed a course of action to rectify the breach and is
acting in good faith to rectify same but has not cured the
breach by the sixtieth (60th) day, the said period shall be
extended by such period as is reasonably necessary to enable
the breach to be cured.
14.4.1 As used in this Clause 14.4.1, the term Event of
Bankruptcy relating to either Party shall mean:
(a) t h e appointment of a liquidator, receiver,
administrator, examiner, trustee or similar officer of
either Party or over all or a substantial part of its
assets under the law of any applicable jurisdiction,
including without limit, the United States of America;
or
(b) an application or petition for bankruptcy, corporate re-
organisation, composition, administration, examination,
arrangement or any other procedure similar to any of the
foregoing under the law of any applicable jurisdiction,
including without limit, the United States of America,
is filed, and is not discharged within thirty (30) days,
or if either Party applies for or consents to the
appointment of a receiver, administrator, examiner or
similar officer of it or of all or a material part of
its assets, rights or revenues or the assets and/or the
business of either Party are for any reason seized,
confiscated or condemned.
14.4.2 If at any time during the term of this Agreement, an
Event of Bankruptcy (as defined above) relating to
Elan occurs, Ebbisham shall have, in addition to all
other legal and equitable rights and remedies available
hereunder, the option to terminate this Agreement upon
thirty (30) days written notice, given within sixty
(60) days following the date that Ebbisham becomes aware
of the Event of Bankruptcy. Upon such termination by
Ebbisham, Ebbisham shall be entitled to solely continue
the activities conducted or to be conducted pursuant to
this Agreement but for the Event of Bankruptcy.
14.4.3 If at any time during the term of this Agreement, an
Event of Bankruptcy (as defined above) relating to
Ebbisham occurs, other than in circumstances where:
(a) the Event of Bankruptcy arises directly or indirectly as
a result of a dispute between Elan and Emisphere and it
is unlikely that the Event of Bankruptcy would have
arisen if Elan and Emisphere had been in agreement,
rather than in dispute; or
(b) neither Elan nor Emisphere purchases the interest of the
other in Ebbisham, in accordance with the provision of
Clause 22 of the Joint Venture Agreement;
Elan shall have, in addition to all other legal and equitable
rights and remedies available hereunder, the option to
terminate this Agreement upon thirty (30) days written
notice, given within sixty (60) days following the date that
Elan becomes aware of the Event of Bankruptcy.
14.5 Upon exercise of those rights of termination as specified in
Clause 14.1 to Clause 14.4 inclusive or elsewhere within the
A g reement, this Agreement shall, subject to the other
provisions of the Agreement, automatically terminate forthwith
and be of no further legal force or effect.
14.6 Upon expiration or termination of the Agreement:
14.6.1 any sums that were due from Ebbisham to Elan on
Net Revenues or Net Sales in the Territory or in
such particular country or countries in the
Territory, as the case may be, prior to the
expiration or termination of this agreement as set
forth herein shall be paid in full within sixty
(60) days of the expiration or termination of this
Agreement for the Territory or for such particular
country or countries in the Territory, as the case
may be;
14.6.2 all confidentiality provisions set out herein
shall remain in full force and effect;
14.6.3 all responsibilities and warranties shall insofar
as are appropriate remain in full force and
effect;
14.6.4 the rights of inspection and audit set out in
Clause 10 shall continue in force for a period of
one year;
14.6.5 except as expressly provided for under Clause
1 4 .6.6 all rights, licenses and sublicenses
granted in and pursuant to this Agreement shall
cease for the Territory or for such particular
country or countries in the Territory, as the case
may be. Following such expiration or termination,
Ebbisham may not thereafter, except as expressly
p r ovided for in Clause 14.6.6, use in the
T e rritory or in such particular country or
countries in the Territory, as the case may be,
(a) any valid and unexpired Elan Patents, (b) any
E l a n Know-How that remains confidential or
otherwise proprietary to Elan, and/or (c) any Elan
Trademarks; and
14.6.6 Ebbisham shall promptly make an accounting to Elan
of the inventory of the Product(s) which it has in
the Territory or for such particular country or
countries in the Territory, as the case may be, if
any, as of the date of such termination and
Ebbisham shall thereafter have the right for a
period of six (6) months after said expiration or
t e r mination to sell such inventory of the
Product(s) in the Territory or in such particular
country or countries in the Territory, as the case
may be, or, if appropriate and legally
p e rmissible, to transport such inventory of
P r o duct(s) for sale in another country or
countries in the Territory within such six month
period; provided that the Net Sales thereof shall
be subject to the royalty provisions of Clause 9
and so payable to Elan. Thereafter, any remaining
inventory of Product(s) shall be disposed of by
mutual agreement of the Parties in accordance with
regulatory requirements.
15. WARRANTIES/INDEMNITIES
15.1 Elan represents and warrants that it has the sole, exclusive
and unencumbered right to grant the licenses and rights herein
granted to Ebbisham, and that it has not granted any option,
license, right or interest in or to the Elan Technology or the
Product(s) to any third party which would conflict with the
rights granted by this Agreement.
15.2 Ebbisham represents and warrants that it has the sole,
exclusive and unencumbered right to grant the licenses and
rights herein granted to Elan and that it has not granted any
option, license, right or interest in or to the Elan Programme
Technology, Emisphere Programme Technology or the Company
Programme Technology to any third party which would conflict
with the rights granted by this Agreement.
15.3 Elan represents and warrants that to the best of its
knowledge, the true inventors of the subject matter claimed
are named in the Elan Patents and all such inventors have
irrevocably assigned all their rights and interests therein to
Elan.
15.4 Elan represents and warrants that it is not aware of any
information material to the examination of the Elan Patents
that was not disclosed to the United States Patent Office.
15.5 Elan and Ebbisham represent and warrant for the benefit for
each other that the execution of this Agreement by them and
the full performance and enjoyment of the rights of them under
this Agreement will not breach the terms and conditions of any
l i c ense, contract, understanding or agreement, whether
express, implied, written or oral between them and any third
party.
15.6 Elan and Ebbisham represent and warrant for the benefit of
each other that as of the date of executing this Agreement, to
the best of their knowledge no patents, trade secrets or any
other proprietary rights of any third party would be infringed
by the manufacture, use or sale of the Product(s).
15.7 Elan represents and warrants that with respect to all
regulatory filings to obtain NDA approvals, to the best of
E l a n's knowledge, the data and information in Elan's
submission(s) are and shall be free from fraud or material
falsity, that the NDA approvals have not been and will not be
obtained either through bribery or the payment of illegal
g r a t uities, that the data and information in Elan's
submissions are and shall be accurate and reliable for
purposes of supporting approval of the submissions, and that
the NDA approvals are and shall be obtained without illegal or
unethical behaviour of any kind.
15.8 Elan represents and warrants that the Product(s) supplied to
Ebbisham by Elan under this Agreement shall conform to the
Specifications and in accordance with all regulations and
requirements of the FDA including the then current Good
Manufacturing Practice (cGMP) regulations which apply to the
manufacture and supply of the Product(s). Elan represents
and warrants that the Product(s) supplied to Ebbisham shall
not be adulterated or mis-branded as defined by the US Federal
Food, Drug and Cosmetic Act, and shall not be a product which
would violate any section of such Act if introduced in
interstate commerce. EXCEPT AS EXPRESSLY STATED IN THIS
CLAUSE 15.8, ALL OTHER WARRANTIES, CONDITIONS AND
REPRESENTATIONS, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE,
INCLUDING A WARRANTY AS TO THE QUALITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OF THE PRODUCT(S) ARE HEREBY EXCLUDED AND
ELAN SHALL NOT BE LIABLE IN CONTRACT, TORT OR OTHERWISE FOR
ANY LOSS, DAMAGE, EXPENSE OR INJURY OF ANY KIND WHATSOEVER,
CONSEQUENTIAL OR OTHERWISE, ARISING OUT OF OR IN CONNECTION
WITH THE PRODUCT(S) OR ANY DEFECT IN THE PRODUCT(S) OR FROM
ANY OTHER CAUSE.
15.9 Elan is fully cognisant of all applicable statutes, ordinances
a n d regulations of the Territory with respect to the
manufacture of the Product(s) including, but not limited to,
the U.S. Federal Food, Drug and Cosmetic Act and regulations
thereunder, Good Laboratory Practices and Good Manufacturing
P r a ctices. Elan shall manufacture the Product(s) in
conformance with the Specifications and the Drug Master File
and in a manner which fully complies with such statutes,
ordinances, regulations and practices.
15.10 In addition to any other indemnifications provided for herein,
Elan shall indemnify and hold harmless Ebbisham and its
Affiliates and their respective employees, agents, partners,
officers and directors from and against any claims, losses,
liabilities or damages (including reasonable attorney's fees
and expenses) incurred or sustained by Ebbisham arising out of
or in connection with any (a) breach of any representation,
covenant, warranty or obligation by Elan hereunder, or (b) any
act or omission on the part of Elan or any of its agents or
employees in the performance of this Agreement.
15.11 In addition to any other indemnifications provided for herein,
Ebbisham shall indemnify and hold harmless Elan and its
Affiliates and their respective employees, agents, partners,
officers and directors from and against any claims, losses,
liabilities or damages (including reasonable attorney's fees
and expenses) incurred or sustained by Elan arising out of or
in connection with any (a) breach of any representation,
covenant, warranty or obligation by Ebbisham hereunder, or (b)
any act or omission on the part of Ebbisham or any of its
agents or employees in the performance of this Agreement.
15.12 Ebbisham shall assume the sole and entire responsibility and
shall indemnify and save harmless Elan from any and all
claims, liabilities, expenses, including reasonable attorney's
fees, responsibilities and damages by reason of any claim,
proceedings, action, liability or injury arising out of any
faults of the Product(s) resulting from the transport,
packaging, storage, handling, distribution, marketing or sale
of the Product(s) by Ebbisham, to the extent that it was
caused by the negligence or wrongful acts or omissions on the
part of Ebbisham.
15.13 As a condition of obtaining an indemnity in the circumstances
set out above, the Party seeking an indemnity shall:
15.13.1 fully and promptly notify the other Party of any
claim or proceeding, or threatened claim or
proceeding;
15.13.2 permit the indemnifying Party to take full care
and control of such claim or proceeding;
15.13.3 cooperate in the investigation and defence of such
claim or proceeding;
15.13.4 not compromise or otherwise settle any such claim
or proceeding without the prior written consent of
the other Party, which consent shall not be
unreasonably withheld conditioned or delayed; and
15.13.5 take all reasonable steps to mitigate any loss or
l i ability in respect of any such claim or
proceeding.
15.14 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT,
ELAN AND EBBISHAM SHALL NOT BE LIABLE TO THE OTHER BY REASON
OF ANY REPRESENTATION OR WARRANTY, CONDITION OR OTHER TERM OR
ANY DUTY OF COMMON LAW, OR UNDER THE EXPRESS TERMS OF THIS
AGREEMENT, FOR ANY CONSEQUENTIAL OR INCIDENTAL LOSS OR DAMAGE
(WHETHER FOR LOSS OF PROFIT OR OTHERWISE) AND WHETHER
OCCASIONED BY THE NEGLIGENCE OF THE RESPECTIVE PARTIES, THEIR
EMPLOYEES OR AGENTS OR OTHERWISE.
16. REGULATORY APPROVALS
16.1 During the INDA registration procedure, each Party shall keep
the other Parties promptly and fully advised of such Party's
registration activities, progress and procedures. Each Party
shall inform the other Parties of any dealings such Party has
with the FDA and shall furnish the other Parties with copies
of all correspondence. The Parties shall collaborate in
relation to obtaining the approval of the FDA for final
approved labelling.
16.2 Any and all INDAs and other applications for regulatory
approval filed hereunder for the Product(s) shall remain the
property of Ebbisham, provided that Ebbisham shall allow the
other Parties access thereto to enable those Parties to fulfil
their obligations and exercise their rights under this
Agreement, the Emisphere Supply Agreement and the Elan Supply
Agreement, the Emisphere License and the Elan License.
Ebbisham shall maintain such INDAs at its own cost.
16.3 Save as otherwise outlined in this Agreement, the costs and
expenses of any filings and proceedings made by Ebbisham to
the FDA, including post approval studies required by the FDA
in respect of the Product(s), and to maintain the FDA approval
hereunder shall be paid by Ebbisham.
16.4 Each Party shall indemnify and hold harmless the other
Parties, its agents and employees from and against all claims,
damages, losses, liabilities and expenses to which Ebbisham,
its agents, and employees may become subject related to or
a r ising out of Elan's bad faith, gross negligence or
intentional misconduct in connection with the filing or
maintenance or failure to file or maintain or prosecute the
NDA.
16.5 Subject to the provisions of Clause 16.4, it is hereby
acknowledged that there are inherent uncertainties involved in
the registration of pharmaceutical products with the FDA
i n s o far as obtaining approval is concerned and such
uncertainties form part of the business risk involved in
undertaking the form of commercial collaboration as set forth
in this Agreement. Therefore, save for using its reasonable
efforts, Elan shall have no liability to Ebbisham solely as a
result of any failure of the Product(s) to achieve the
approval of the FDA, or any other regulatory body in the
Territory.
17. INSURANCE
17.1 Elan shall maintain comprehensive general liability insurance,
including product liability insurance on the Product(s)
manufactured and/or sold by Elan in such prudent amount as
shall be determined by the Management Committee for the
duration of this Agreement and for a period of two (2) years
thereafter. Elan shall provide Ebbisham with a certificate
from the insurance company verifying the above and undertakes
to notify Ebbisham directly at least thirty (30) days prior to
the expiration or termination of such coverage. Elan shall
also provide Ebbisham with a vendor's certificate
substantially in a form to be agreed between the Parties.
17.2 E b bisham shall maintain comprehensive general liability
insurance, including product liability insurance on Product(s)
m a n ufactured and/or sold by Ebbisham that incorporate
intellectual property licensed hereunder by Elan in such
prudent amount as shall be determined by the Management
Committee for the duration of this Agreement and three (3)
years thereafter. Ebbisham shall provide Elan with a
certificate from the insurance company verifying the above and
undertakes to notify Elan thirty (30) days prior to the
expiration or termination of such coverage.
18. IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE
18.1 Neither Party to this Agreement shall be liable for delay in
the performance of any of its obligations hereunder if such
delay results from causes beyond its reasonable control,
including, without limitation, acts of God, fires, strikes,
acts of war, or intervention of a government authority, non
availability of raw materials, but any such delay or failure
shall be remedied by such Party as soon as practicable.
19. SETTLEMENT OF DISPUTES; PROPER LAW
19.1 The Parties will attempt in good faith to resolve any dispute
arising out of or relating to this Agreement promptly by
negotiation between executives of the Parties. In the event
that such negotiations do not result in a mutually acceptable
resolution, the Parties agree to consider other dispute
resolution mechanisms including mediation. Subject to the
provisions of Clause 19.2, in the event that the Parties fail
t o agree on a mutually acceptable dispute resolution
mechanism, any such dispute shall be finally settled by the
courts of competent jurisdiction. The Parties hereby submit
to the jurisdiction of the state and Federal courts located in
the state of New York and the courts of Ireland and the
Parties hereby waive any and all defences of improper venue or
that the Forum is inconvenient.
19.2 Where under any provision of this Agreement any matter is to
be determined by an Expert, the provisions of Clause 21 of the
Joint Venture Agreement shall apply.
19.3 T h is Agreement shall be governed by and construed in
accordance with the laws of Ireland.
20. ASSIGNMENT
20.1 This Agreement may not be assigned by either Party without the
prior written consent of the other, which consent shall not be
unreasonably withheld, conditioned or delayed, save that
either Party may assign this Agreement to its Affiliate
without such consent, provided that such assignment does not
have any adverse tax consequences on the other Party. Elan
and Ebbisham will discuss any assignment by either Party to an
Affiliate prior to its implementation in order to avoid or
reduce any additional tax liability to the other Party
resulting solely from different tax law provisions applying
after such assignment to an Affiliate. For the purpose
hereof, an additional tax liability shall be deemed to have
occurred if either Party would be subject to a higher net tax
on payments made hereunder after taking into account any
applicable tax treaty and available tax credits than such
Party was subject to before the proposed assignment.
21. NOTICES
21.1 Any notice to be given under this Agreement shall be sent in
writing in English by registered airmail or telefaxed to the
following addresses:
If to Ebbisham:
Ebbisham Limited
Monksland
Athlone
County Westmeath
Ireland
Attention: Company Secretary
Telephone: 353 902 95000
Telefax: 353 902 92427
If to Elan:
Elan Corporation plc
Monksland
Athlone
Co Westmeath
Ireland
Attention: Vice President, General Counsel, Elan
Pharmaceutical Technologies
Telephone: 353 902 94666
Telefax : 353 902 92427
with a copy to Emisphere at:
Emisphere Technologies, Inc.<PAGE>
15 Skyline Drive
Hawthorne
New York
USA 10532
Attention: Vice President Business Development
Telephone: (914) 347 2220
Telefax: (914) 347 2498
or to such other address(es) and telefax numbers as may from
time to time be notified by either Party to the other
hereunder.
21.2 Any notice sent by mail shall be deemed to have been delivered
within seven (7) working days after despatch and any notice
sent by telex or telefax shall be deemed to have been
delivered within twenty four (24) hours of the time of the
despatch. Notice of change of address shall be effective upon
receipt.
22. MISCELLANEOUS CLAUSES
22.1 No waiver of any right under this Agreement shall be deemed
effective unless contained in a written document signed by the
Party charged with such waiver, and no waiver of any breach or
failure to perform shall be deemed to be a waiver of any other
breach or failure to perform or of any other right arising
under this Agreement.
22.2 If any provision in this Agreement is agreed by the Parties to
be, or is deemed to be, or becomes invalid, illegal, void or
unenforceable under any law that is applicable hereto, (i)
such provision will be deemed amended to conform to applicable
laws so as to be valid and enforceable or, if it cannot be so
amended without materially altering the intention of the
Parties, it will be deleted, with effect from the date of such
agreement or such earlier date as the Parties may agree, and
( i i) the validity, legality and enforceability of the<PAGE>
remaining provisions of this Agreement shall not be impaired
or affected in any way.
22.3 The Parties shall use their respective reasonable endeavours
to ensure that the Parties and any necessary third party shall
do, execute and perform all such further deeds, documents,
assurances, acts and things as any of the Parties hereto may
reasonably require by notice in writing to the other Party or
such third party to carry the provisions of this Agreement.
22.4 This Agreement shall be binding upon and enure to the benefit
of the Parties hereto, their successors and permitted assigns
and sub-licenses.
22.5 No provision of this Agreement shall be construed so as to
negate, modify or affect in any way the provisions of any
other agreement between the Parties unless specifically
referred to, and solely to the extent provided, in any such
other agreement. In the event of a conflict between the
provisions of this Agreement and the provisions of the Joint
Venture Agreement, the terms of the Joint Venture Agreement
shall prevail unless this Agreement specifically provides
otherwise.
22.6 No amendment, modification or addition hereto shall be
effective or binding on either Party unless set forth in
writing and executed by a duly authorised representative of
each Party.
22.7 This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute
this Agreement.
22.8 Each of the Parties undertake to do all things reasonably
within its power which are necessary or desirable to give
effect to the spirit and intent of this Agreement.
22.9 Each of the Parties hereby acknowledges that in entering into
this Agreement it has not relied on any representation or
warranty save as expressly set out herein or in any document
referred to herein.
22.10 Nothing contained in this Agreement is intended or is to be
construed to constitute Elan and Ebbisham as partners, or Elan
as an employee of Ebbisham, or Ebbisham as an employee of
Elan. Neither Party hereto shall have any express or implied
right or authority to assume or create any obligations on
behalf of or in the name of the other Party or to bind the
other Party to any contract, agreement or undertaking with any
third party.
IN WITNESS THEREOF the Parties hereto have executed this Agreement
in duplicate.
SIGNED BY
For and on behalf of
ELAN CORPORATION PLC.
in the presence of:
SIGNED BY
For and on behalf of
EBBISHAM LIMITED
in the presence of:
- -----------------------------------------------------------------------------
EXHIBIT 10
License Agreement dated September 26, 1996 by and
between Ebbisham Limited and the Company
- -----------------------------------------------------------------------------
This Agreement is made the day of September 1996
BY AND BETWEEN
Ebbisham Limited
An Irish company, of 2 Harbourmaster Place, Custom House Dock,
Dublin 1
AND
Emisphere Technologies, Inc.
A Delaware corporation, of 15 Skyline Drive, Hawthorne, NY 10595 US
LICENSE AGREEMENT
TABLE OF CONTENTS
Section Page
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 2
2. GRANT OF RIGHTS . . . . . . . . . . . . . . . . . . . . . . 10
3. IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . . . 11
4. RIGHTS OF FIRST REFUSAL . . . . . . . . . . . . . . . . . . 11
5. INTELLECTUAL PROPERTY RIGHTS . . . . . . . . . . . . . . . 12
6. RESEARCH AND DEVELOPMENT . . . . . . . . . . . . . . . . . 12
7. SUPPLY OF CARRIERS . . . . . . . . . . . . . . . . . . . . 13
8. EXPLOITATION OF LICENSED TECHNOLOGY . . . . . . . . . . . . 16
9. FINANCIAL PROVISIONS . . . . . . . . . . . . . . . . . . . 17
10. RIGHT OF AUDIT AND INSPECTION . . . . . . . . . . . . . . . 20
11. PATENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 21
12. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . 25
13. TRADEMARKS . . . . . . . . . . . . . . . . . . . . . . . . 27
14. TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . 28
15. WARRANTIES/INDEMNITIES . . . . . . . . . . . . . . . . . . 31
16. REGULATORY APPROVALS . . . . . . . . . . . . . . . . . . . 34
17. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . 35
18. IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE . . . . . . . 36
19. SETTLEMENT OF DISPUTES; PROPER LAW . . . . . . . . . . . . 36
20. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . 36
21. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . 37
22. MISCELLANEOUS CLAUSES . . . . . . . . . . . . . . . . . . . 38
WHEREAS
A. E m isphere is knowledgeable in the discovery, research,
development, manufacture and marketing of Compounds that can
interact with therapeutic agents so as to improve the
transportation of such therapeutic agents through biological
m e mbranes. Emisphere owns (i) certain patent rights,
including the Emisphere Patents, and (ii) certain trade
secrets, know-how and other proprietary information, including
t h e Emisphere Know-How, relating to such technology.
Emisphere also owns and uses certain trade marks in connection
with the manufacture, marketing and sale of such compounds,
including the Emisphere Trademarks.
B. Elan is knowledgeable in the discovery, research, development,
manufacture and marketing of pharmaceutical formulations
capable of delivering drugs. Elan owns (i) certain patent
rights, including the Elan Patents, and (ii) certain trade
secrets, know-how and other proprietary information, including
the Elan Know-How, relating to such technology. Elan also
owns and uses certain trade marks in connection with the
manufacture, marketing and sale of such compounds, including
the Elan Trademarks.
C. E l a n and Emisphere have agreed to co-operate in the
establishment and management of Ebbisham, the business of
which will be to research and develop certain Products
i n c orporating the technologies developed and/or to be
developed by Elan and Emisphere and to distribute and sell
such Products throughout the world. For this purpose, Elan
and Emisphere have agreed to subscribe for shares in Ebbisham
which shall thereafter carry on business as a joint venture
company.
D. Simultaneously herewith, Elan and Emisphere are entering into
the Joint Venture Agreement for the purpose of recording the
terms and conditions of the joint venture and of regulating
their relationship with each other and certain aspects of the
affairs of and their dealings with Ebbisham.
E. Under the Joint Venture Agreement, Ebbisham shall own all
rights in technology which has been developed pursuant to
certain Research and Development programmes being conducted or
to be conducted by Ebbisham or by Emisphere, Elan or an
Independent Third Party on behalf of Ebbisham, including the
C o m p any Programme Technology, the Emisphere Programme
Technology and the Elan Programme Technology.
F. Ebbisham desires to enter into this Agreement with Emisphere
so as to (a) permit Ebbisham to utilize the Emisphere Patents,
the Emisphere Know-How and the Emisphere Trademarks in the
research, development, manufacture, distribution and sale of
the Products and other products in the Field and (b) to permit
Emisphere to utilise the Emisphere Programme Technology, the
Elan Programme Technology and the Company Programme Technology
in connection with (i) Emisphere's research and development
work on behalf of Ebbisham and (ii) Emisphere's manufacturing
and supplying Ebbisham or its designee(s) with the Carriers
and other components.
G. Simultaneously herewith, Ebbisham and Elan are entering into a
similar license agreement relating to Ebbisham's use of the
Elan Patents, the Elan Know-How and the Elan Trademarks and
Elan's use of the Emisphere Programme Technology, the Elan
Programme Technology and the Company Technology.
NOW IT IS HEREBY AGREED AS FOLLOWS:
1. DEFINITIONS
1.1 In this present Agreement, including the Recitals, Schedules
and Appendices, the following definitions shall prevail unless
the context otherwise requires:
"Acquired" means a transfer of intellectual property or
information from an Independent Third Party to
Emisphere to the extent to which there are no
o b l i gations or restrictions as to or
confidentiality in respect of that information
which prohibit disclosure to or use by Ebbisham;
"Additional Compounds" means any compound other than the Compounds
utilising the Emisphere Technology and/or
the Emisphere Programme Technology, and/or
the Company Technology, whether or not in
conjunction with the Elan Technology and/or
Elan Programme Technology, having as its
primary effect an anti-coagulant related
therapeutic effect and including compounds
which are proprietary to an Independent
Third Party;
"Affiliate" m e ans any corporation or entity other than
Ebbisham controlling, controlled or under the
common control of Elan or Emisphere as the case
may be. For the purpose of this definition,
control shall mean direct or indirect ownership
of fifty percent (50%) or more of the stock or
shares entitled to vote for the election of
directors;
"Agreement" means this agreement (which expression shall be
deemed to include the Recitals, the Schedules and
Appendices hereto);
"Carriers" means agents that are used to facilitate transport
through membranes, including oral, nasal, buccal,
i n t r a o cular, sublingual, subcutaneous,
i n tramuscular and pulmonary delivery of the
C o mpounds utilising the Emisphere Technology
and/or the Emisphere Programme Technology. These
agents can include, but are not limited to
proteinoids and other chemicals;
"Company Programme shall have the meaning ascribed to it in the
Joint
Technology" Venture Agreement;
"Compounds" means Heparin and/or Heparinoids;
"Cost" means, depending upon the context, one of
the following:
In the case of the supply of Carrier, Cost
shall comprise direct labour, materials and
attributable overhead excluding any element
of corporate overhead.
In the case of research and development,
Cost will be calculated in accordance with
Emisphere s internal accounting system and
w i ll exclude any element of corporate
overhead.
In the case of materials purchased from an
Independent Third Party, Cost will comprise
the amount actually paid, including import
duties, transport and handling costs and
other directly attributable costs.
"Ebbisham" means Ebbisham Limited;
"Effective Date" means 1st May 1996;
"Elan" m e a ns Elan Corporation plc, its
Affiliates, successors and permitted
assigns other than Ebbisham;
"Elan License means the agreement of even date
entered into
Agreement" between Elan and Ebbisham;
"Elan Know-How" m e a ns all trade secrets, confidential
s c ientific, technical and medical
information and expertise, technical data
and marketing information, studies and data
f r om time to time developed, produced
created or Acquired by or on behalf of Elan,
whether before the Effective Date or during
the term of this Agreement (other than Elan
P r ogramme Know-How) including, but not
limited to, unpatented inventions,
discoveries, theories, plans, ideas (whether
or not reduced to practice) relating to the
research and development, manufacture,
registration for marketing, use or sale of
the Product, toxicological, pharmacological,
a n a l y t ical and clinical data,
bioavailability studies, product forms and
f o r mulations, control assays and
specifications, methods of preparation and
stability data;
"Elan Patents" m e a n s all and any patents and any
a p plications therefor in the Territory
(other than the Elan Programme Patents) that
are or subsequently may be owned or acquired
b y o r assigned or licensed to Elan
( i n cluding any and all divisions,
c o n t inuations, continuations-in-part,
extensions, additions or reissues thereto or
thereof) and that would be infringed by the
development, manufacture, use, disposal,
s a l e, offer of disposal or sale, or
importation of the Products in the Territory
and/or relate to the Field;
"Elan Programme m e a ns all trade secrets, confidential
scientific,
Know-How" t e c hnical and medical information and
expertise, technical data and marketing
information, studies and data from time to
time developed, produced created or Acquired
by or on behalf of Elan, pursuant to one or
m o r e of the Research and Development
Programmes including, but not limited to,
u n p atented inventions, discoveries,
theories, plans, ideas or designs (whether
or not reduced to practice) relating to the
manufacture, registration for marketing, use
or sale of the Product, toxicological,
pharmacological, analytical and clinical
data, bioavailability studies, product forms
and formulations, control assays and
specifications, methods of preparation and
stability data;
"Elan Programme means all and any patents and applications
therefor
Patents" in the Territory (including any and all
d i v i s i o n s, continuations-in-part,
extensions, additions or reissues thereto or
t h ereof) on or for any inventions or
discoveries that have been or subsequently
may be conceived or made by employees or
agents of Elan pursuant to one or more of
the Research and Development Programmes
( r e gardless of when or by whom such
inventions and/or discoveries are reduced to
practice);
"Elan Programme means the Elan Programme Patents and/or the
Elan
Technology" Programme Know-How;
"Elan Supply means the agreement to be entered into
Agreement" b e t ween Ebbisham and Elan (or Elan's
designee) regarding supply of Products and
other chemical or formulation components;
"Elan Technology" means the Elan Patents and/or the Elan Know-
How;
"Elan Trademarks" means, depending on the context, one or more
of the trademarks owned by, Acquired by,
assigned or licensed to Elan which are
relevant to the Elan Technology or the
Products;
"Emisphere" means Emisphere Technologies, Inc., its
Affiliates, successors and permitted assigns
other than Ebbisham;
"Emisphere Know-How" m e a ns all trade secrets, confidential
s c ientific, technical and medical
information and expertise from time to time
developed, produced, created or Acquired by
or on behalf of Emisphere, whether before
the Effective Date or during the term of
this Agreement (other than Emisphere
P r ogramme Know-How) including, but not
limited to, unpatented inventions,
d i scoveries, theories, plans, ideas or
designs (whether or not reduced to practice)
relating to the research and development,
registration for marketing, use or sale of
the Carriers or the Products, chemical
compounds and use expertise, needed relevant
data on the Carriers, preclinical toxicity
and manufacturing data for the Carriers and
p r o t otype products, toxicological,
pharmacological, analytical and clinical
data, bioavailability studies, formulations,
control assays and specifications, methods
of preparation and stability data;
"Emisphere Patents" means all and any patents and any
applications therefor in the Territory
(other than the Emisphere Programme
Patents) that are or subsequently may
be owned or Acquired by, or assigned
or licensed to Emisphere (including
any and all divisions, continuations,
continuations-in-part, extensions,
a d ditions or reissues thereto or
thereof) and that would be infringed
by the development, manufacture, use,
disposal, sale, offer of disposal or
sale, or importation of the Products
in the Territory and/or relate to the
Field. The Emisphere Patents as of
the date hereof are listed on Schedule
1;
"Emisphere Programme m e a ns all trade secrets, confidential
scientific,
Know-How" t e c hnical and medical information and
expertise from time to time developed,
produced, created or Acquired by or on
behalf of Emisphere pursuant to one or more
of the Research and Development Programmes
(other than Emisphere Know-How) including,
but not limited to, unpatented inventions,
d i scoveries, theories, plans, ideas or
designs (whether or not reduced to practice)
relating to the research and development,
registration for marketing, use or sale of
the Carriers or the Products, chemical
compounds and use expertise, needed relevant
data on the Carriers, preclinical toxicity
and manufacturing data for the Carriers and
p r o t otype Products, toxicological,
pharmacological, analytical and clinical
data, bioavailability studies, formulations,
control assays and specifications, methods
of preparation and stability data;
"Emisphere Programme means all and any patents and applications
therefor
Patents" in the Territory (including any and all
d i v i s i o n s, continuations-in-part,
extensions, additions or reissues thereto or
t h ereof) on or for any inventions or
discoveries that have been or subsequently
may be conceived or made by employees or
agents of Emisphere pursuant to one or more
of the Research and Development Programmes
( r e gardless of when or by whom such
inventions and/or discoveries are reduced to
practice);
"Emisphere Programme means the Emisphere Programme Patents and/or
Technology" the Emisphere Programme Know-How;
"Emisphere Supply means the agreement to be entered into
Agreement" b e tween Emisphere and Elan (or Elan's
designee) regarding supply of Carriers and
other chemical or formulation components;
"Emisphere Technology" means the Emisphere Patents and/or the
Emisphere Know-How;
"Emisphere Trademarks" means, depending on the context, one or more
o f the trademarks CADDSYS', EMIS-DOS',
PODDS' and any other relevant trademark
owned by, Acquired by, assigned or licensed
to Emisphere;
"Expert" means any expert selected and appointed
pursuant to Clause 21 of the Joint Venture
Agreement;
"Ex Works" shall have the meaning as such term is
d e f i ned in the ICC Incoterms, 1990,
International Rules for the Interpretation
of Trade Terms, ICC Publication No. 460;
"Field" means the research, development and
optimisation of the Compounds utilising one
or more Carriers for all medical ailments or
indications whatever the mode of
administration as well as the manufacture,
use, promotion, distribution, marketing and
sale of the Products;
"FDA" means the United States Food and Drug
Administration or any successors or agency
the approval of which is necessary to market
a product in the United States of America or
any other relevant regulatory authority the
approval of which is necessary to market a
p r o duct in any other country of the
Territory;
"Heparin" means naturally occurring forms of Heparin,
including Heparin USP, BP and EP as well as
smaller molecular fractions thereof;
"Heparinoids" m e a n s v a r ious sulphated
polysaccharides that have anti-
coagulant activity resembling that of
Heparin;
"Improvements" means inventions, discoveries, developments
and indications relating to the Emisphere
Technology that can usefully be applied to
t h e Field, the Emisphere Programme
Technology, the Elan Programme Technology or
the Company Programme Technology and that
which were first reduced to practice during
the term of this Agreement by Emisphere
whether or not such modification adds any
b e n e fit to the Field, the Emisphere
Programme Technology, the Elan Programme
Technology or the Company Programme
Technology;
"INDA" m e ans any Investigational New Drug
Application in relation to a Product filed
by any Party with the FDA or a similar
application filed in another jurisdiction;
"Independent Third means any person other than Emisphere,
Party" E b b isham, Elan or any of their
Affiliates;
"Joint Venture means the agreement of even date entered
into
Agreement" between Emisphere, Elan and Ebbisham;
"Management m e ans the management committee
appointed
Committee" by the directors of Ebbisham pursuant to the
Joint Venture Agreement;
"NDA" means any New Drug Application in relation
to a Product filed by any Party with the FDA
or a similar application filed in another
jurisdiction;
"Net Revenues" means any proceeds received by Ebbisham in
relation to the Product, other than Net
Sales, including but not limited to license
royalties and development royalties;
"Net Sales" means the invoiced sales price of
Products shipped by Ebbisham, or on
behalf of Ebbisham, in respect of bona
fide arms length sales of the Products
to Independent Third Parties
exclusively for money, less a maximum
reserve of five percent (5%) for
uncollectable accounts, and less the
ordinary and customary trade discounts
a n d commissions, excise taxes,
withholding tax, other consumption
t a xes, and credits or allowances
actually granted on account of
rejection or return of the Products.
In the case of any sale or disposal of
the Products otherwise than in such a
b o n a fide arms length sale to
Independent Third Parties exclusively
for money, "Net Sales" shall mean the
invoiced sales price of Products;
"Parties" means Emisphere and Ebbisham;
"Person" m e ans an individual, partnership,
c o rporation, limited liability company,
business trust, joint stock company, trust,
unincorporated association, joint venture,
or other entity of whatever nature;
"Product(s)" means depending on the context one or
more formulations of the Compound(s)
in conjunction with one or more of the
C a r riers that complies with the
Specifications;
"Research and means depending on the context, one or more
Development Programmes" programmes of research and development work
being conducted or to be conducted by, inter
alia, Emisphere and Elan for and on behalf
of Ebbisham which have been devised by the
Research Committee and approved by the
Management Committee;
"Specifications" means the specifications for each of the
Carriers or Products as approved by the FDA,
as well as such other specifications which
may be agreed upon by the Parties in writing
or by the Research Committee (as defined in
the Joint Venture Agreement);
"Territory" means all the countries of the world;
and
"United States Dollar" means the lawful currency for the time
being of the and "US$" United States of America.
1.2 In this Agreement
1.2.1 The singular includes the plural and vice versa, the
masculine includes the feminine and vice versa.
1.2.2 Any reference to a Clause or Schedule shall, unless
otherwise specifically provided, be to a Clause or
Schedule of this Agreement.
1.2.3 The headings of this Agreement are for ease of reference
o n l y and shall not affect its construction or
interpretation.
2. GRANT OF RIGHTS
2.1 In consideration of the payment by Ebbisham to Emisphere of
one United States Dollar (US$1), the receipt and adequacy of
which is hereby acknowledged by Emisphere, Emisphere hereby
grants to Ebbisham for the term of this Agreement an exclusive
license to use (a) the Emisphere Patents for the Field and (b)
the Emisphere Know-How for the Field. All proprietary rights
and rights of ownership with respect to the Emisphere
Technology shall at all times remain solely with Emisphere.
Ebbisham shall not have any rights to use the Emisphere
Technology other than insofar as they relate directly to the
Field and are expressly granted herein.
2.2 Subject to any restriction in any licenses or other agreements
pursuant to which Emisphere licenses any of the Emisphere
Trademarks, Emisphere hereby grants Ebbisham for the term of
this Agreement an exclusive, royalty-free, fully paid-up
license (or, if applicable, sublicense) to use the Emisphere
Trademarks upon or in relation to the promotion, marketing,
advertising, sale or offering for sale of the Products.
2.3 Ebbisham hereby grants to Emisphere for the term of this
Agreement a non-exclusive, royalty-free fully paid-up license
to use the Emisphere Programme Technology, Elan Programme
Technology and the Company Programme Technology, and, subject
to the terms and conditions of the Elan License Agreement, a
royalty-free sublicense to use the Elan Technology insofar as
is necessary, in each case, to permit Emisphere to perform its
obligations pursuant to this Agreement, the Joint Venture
Agreement and the Emisphere Supply Agreement, including,
without limitation, (a) conducting research and development
pursuant to the Research and Development Programmes, and (b)
developing, manufacturing and supplying the Carriers and any
other chemical or formulation components. All rights of
ownership with respect to the Emisphere Programme Technology
and the Elan Programme Technology shall at all times remain
solely with Ebbisham.
2.4 In the event that Emisphere is entitled to exploit the
E m i s phere Programme Technology or the Elan Programme
Technology outside the Field in accordance with the provisions
of Clause 8.3 of the Joint Venture Agreement, Ebbisham shall
grant Emisphere a non-exclusive, royalty-free fully paid-up
licence to use the Emisphere Programme Technology and/or the
Elan Programme Technology for the purpose of evaluating
whether any such use is likely to produce a commercial return
and for this purpose to conduct research and development. In
the event that Emisphere wishes to exploit the Emisphere
Programme Technology and/or the Elan Programme Technology
outside the Field, in accordance with the provisions of Clause
8.3 of the Joint Venture Agreement, other than for the
purposes set out above, the Parties shall negotiate a licence
for the further use of such technology pursuant to the
provisions of Clause 8.7 of the Joint Venture Agreement.
2.5 Ebbisham shall have the right to sublicense the rights granted
to it by Emisphere pursuant to this Agreement, including the
right to grant a royalty-free sublicense to the Emisphere
Technology to Elan to enable Elan to fulfil its obligations
pursuant to the Elan License Agreement, the Joint Venture
Agreement and the Elan Supply Agreement. Insofar as the
obligations owed by Ebbisham to Emisphere are concerned,
Ebbisham shall remain responsible for all acts and omissions
of any sub- licensee, including Elan, as if they were by
Ebbisham. Ebbisham shall forthwith notify Emisphere of any
sub-license (and the terms thereof) granted by Ebbisham, which
s u c h sub-license shall be approved by the Management
Committee. In the event of a termination of this Agreement
due to a breach by Ebbisham, Emisphere shall have the right
but not the obligation to assume any such sub-license.
2.6 Subject to the provisions of Clause 11 of the Joint Venture
Agreement, Emisphere shall not, directly or indirectly,
market, sell or develop or assist in the development for the
use, manufacture, distribution or sale of another product
which competes with the Product without the prior written
consent of Ebbisham. Save as otherwise specifically provided
h e rein Emisphere agrees that during the term of this
A g r e ement, Emisphere shall not license the Emisphere
Technology for use in connection with the Field to an
Independent Third Party in the Territory without the prior
written consent of Ebbisham.
3. IMPROVEMENTS
3.1 If Emisphere shall develop or have developed by an Independent
Third Party any Improvements during the term of this Agreement
( o t her than pursuant to the Research and Development
Programmes which constitute Emisphere Programme Technology),
Emisphere shall, to the extent that it is not prohibited by
any undertaking given to any Independent Third Party (provided
that Emisphere shall use its commercially reasonable efforts
to exclude or minimise the extent of any such limitations or
restrictions which prevent or limit disclosure to or use by
Ebbisham), communicate to Ebbisham such Improvements and shall
provide to Ebbisham such rights, licenses, information and
explanations as Ebbisham may reasonably require to be able
effectively to utilise the Improvements for the life of this
Agreement. Such disclosed Improvements shall automatically on
disclosure to Ebbisham become part of the Emisphere Know-How
or Emisphere Patents (as the case may be) and shall be subject
to the provisions of this Agreement.
4. RIGHTS OF FIRST REFUSAL
4.1 The Parties acknowledge that pursuant to the provisions of
Clause 12 of the Joint Venture Agreement, Emisphere is
granting Ebbisham a right of first refusal which shall
continue notwithstanding any termination or expiration of the
Joint Venture Agreement, to a license to use the Emisphere
T e c hnology to research, develop and commercialise the
Additional Compounds, whether used in conjunction with the
E m i s phere Programme Technology, the Company Programme
Technology, the Elan Technology, the Elan Programme Technology
or otherwise.
5. INTELLECTUAL PROPERTY RIGHTS
5.1 The respective intellectual property ownership rights of
Emisphere, Ebbisham and Elan shall be regulated by the
provisions of Clause 8 of the Joint Venture Agreement.
6. RESEARCH AND DEVELOPMENT
6.1 Whenever commercially and technically feasible, Ebbisham shall
contract with Emisphere or Elan, as the case may be, to
perform research, development and experimentation activities
for the purpose of developing the Field and the Products.
6.2 Emisphere shall provide such research and development services
in the Field as may reasonably be required by Ebbisham. The
research and development work conducted by Emisphere for
Ebbisham shall be in accordance with the Research and
Development Programme devised by the Research Committee as
approved by the Management Committee. Emisphere shall use its
reasonable endeavours to conduct its portion of the Research
and Development Programme in accordance with the timetable set
out in the Research and Development Programme. Emisphere
shall in accordance with the terms and conditions set forth in
this Agreement undertake reasonably diligent efforts, as would
be deemed commensurate with the achievement of its own
business aims for a similar product of its own, to conduct its
part of the Research and Development Programme.
6.3 The Research and Development Programme(s) shall be directed by
the Research Committee and subject to the strategic direction
of the Management Committee. In conducting the Research and
Development Programme(s), Emisphere shall co-operate fully
with the Research Committee and the Management Committee and
with Elan. Emisphere shall maintain the facilities used by it
for the performance of the Research and Development Programme
in compliance with the applicable requirements of the FDA and
o t h er regulatory authorities, including cGMP and cGLP
standards.
6.4 Ebbisham may evaluate the reports and other data furnished by
Emisphere for the purpose, inter alia, of deciding whether or
not to proceed with all or part of the Research and
Development Programme.
6.5 Emisphere and Ebbisham shall agree on a budget in connection
with the activities to be undertaken by Emisphere during the
Research and Development Programme, which budget shall form
part of the Research and Development Programme. In the event
that as a result of additional activities to be undertaken by
Emisphere upon the request of Ebbisham the budget needs to be
revised, the Parties will agree on such revision prior to
Emisphere commencing any such additional development
activities.
6.6 Emisphere will keep accurate records consistent with its
normal business practices of the efforts expended by it under
the Research and Development Programme for which it is
charging Ebbisham, which will include the time spent by each
person working on the Research and Development Programme.
Each quarter Emisphere will send reports to Ebbisham in order
to enable Ebbisham to monitor Emisphere's level of effort to
assure Ebbisham that the committed level of effort is being
applied.
7. SUPPLY OF CARRIERS
7.1 Except as otherwise herein provided in this Agreement or in
the Elan Supply Agreement, Emisphere shall produce and supply
to Ebbisham its entire requirements of the Carriers as are
r e quired by Ebbisham for the Research and Development
Programme and any other chemical or formulation components
required to make use of the Emisphere Technology or the
Emisphere Programme Technology in the Field. Emisphere shall
e n sure that supplies of the Carriers are produced in
a c c ordance with the delivery schedules agreed between
Emisphere and Ebbisham and deliver the Carriers to Ebbisham on
t h e same basis as arms-length commercial customers of
Emisphere. For the purposes of Clause 7.8. and Clause 7.9.
Ebbisham may qualify a second site for the manufacture of the
Carriers.
7.2 Emisphere shall deliver the Carriers to Ebbisham and/or any
Party designated by Ebbisham in appropriate packaging so as to
permit safe storage and transport.
7.3 In the event that Emisphere appoints a third party to
manufacture the Carriers (which appointment shall be subject
to the agreement of Ebbisham not to be unreasonably withheld,
conditioned or delayed), Emisphere shall be solely responsible
and liable to Ebbisham for the performance of the said
m a n u facturer. Emisphere shall ensure that the said
manufacturer s facility is an FDA - approved facility and that
such facility complies with all relevant FDA and other
relevant governmental and regulatory requirements and that all
accepted practises of cGMP are adhered to.
7.4 Ebbisham shall provide adequate notice to Emisphere so that
Emisphere may produce or obtain the necessary quantities of
the Carriers and any other chemical or formulations components
of the Emisphere Technology or the Emisphere Programme
Technology. The Parties agree that in the normal course of
events, three months notice shall be sufficient. However,
until agreed capacity levels for the supply of Carrier are
established, Ebbisham acknowledges and accepts that the lead
time for larger than anticipated orders of Carriers may be
longer than three months and the Parties will negotiate and
agree in good faith the necessary extension to the lead time
for such orders.
7.5 The Parties hereby confirm that Emisphere s manufacturing
obligations and Ebbisham s purchasing obligations shall only
arise on receipt by Emisphere of firm purchase orders for the
Carriers or on the agreement of the Management Committee.
Emisphere will use its reasonable efforts to fulfil Ebbisham s
requirements in excess of forecasted amounts, but shall not be
obliged to meet such requirements if it is not commercially
practicable to do so provided that Emisphere shall treat
Ebbisham on no less favourable terms than other customers for
the Carrier and shall supply the Carrier so ordered but not
immediately available as soon thereafter as commercially
practicable.
7.6 The quality and form of the Carriers delivered by Emisphere
hereunder shall conform in all material aspects to the
Specifications and all prevailing legislative and regulatory
r e q uirements of the countries where the Carriers are
manufactured and to be used. All claims for failure of any
shipment of the Carriers to conform to Specifications must be
made by Ebbisham to Emisphere in writing within forty-five
(45) days following delivery. Failure to make timely claims
in the manner prescribed shall constitute acceptance of the
shipment. Carriers which have been delivered and which have
been shown within the designated period not to conform to
Specifications shall be replaced at Emisphere s cost within
ninety (90) days of the receipt by Ebbisham or Ebbisham's
designee of the non-conforming Carrier. In the event of an
unresolved dispute as to conformity with Specifications of the
Carrier, the Parties shall nominate an independent first class
l a b o ratory to undertake the relevant testing. Such
laboratory's findings shall be conclusive and binding upon the
Parties. All costs relating to this process shall be borne
exclusively by the unsuccessful Party. Should the Parties
f a i l to agree upon a mutually acceptable independent
laboratory, then an Expert shall be entrusted with appointing
such an independent laboratory.
7.7 Save as otherwise agreed between the Parties, delivery of
consignments of the Carriers shall be made by Emisphere Ex
Works, or any other manufacturing facility designated by
Emisphere and all risks therein shall pass to Ebbisham when
each such consignment of the Carriers is loaded onto the
vehicle of Ebbisham s agent on which it is to be despatched
from Emisphere's designated facility. Ebbisham shall fully
insure or procure the insurance of all consignments of the
Carriers when risk passes as aforesaid and shall produce such
insurance documentation supporting same as and when requested
by Emisphere.
7.8 In the event that (a) Emisphere fails to supply the Carriers
which have been ordered by Ebbisham for a period exceeding
three (3) months after the mutually agreed upon delivery date,
or there are repeated and serious failures, inabilities or
delays in filling orders (unless any such failure, inability
or delay in filling orders is caused by the supplier of the
active ingredient or other raw material, or (b) Ebbisham can
obtain a regular and guaranteed source of supply of Carriers
of equivalent quality from an Independent Third Party at a
price at least fifteen percent (15%) cheaper than Emisphere as
provided for in Clause 7.10 below, Emisphere shall:
7.8.1 grant to Ebbisham a license in the Territory so that
Ebbisham may manufacture or have manufactured the
relevant Carriers without infringing any of Emisphere's
patent and/or any other intellectual property rights.
Any such license shall apply only in regard to the
relevant Carriers as well as to the applications of
technology derived from the Emisphere Technology related
to its use with such Carriers. Ebbisham may sublicense
the said production license to an Independent Third
P a r t y provided that Emisphere approves such an
Independent Third Party, such approval not to be
unreasonably withheld. As a condition of Emisphere's
approval, Emisphere may require such Independent Third
Party to sign an agreement not to disclose the Emisphere
Technology and to only use such information provided to
it for the purpose of the aforesaid production license;
7.8.2 provide Ebbisham with any technical data necessary for
the carrying of such license into effect. To this end,
E m i s phere shall impart to Ebbisham, subject to
a p p ropriate confidentiality provisions, such
documentation as is necessary to provide the required
m a t erial support, including practical performance
advice, shop practice, specifications as to materials to
be used and control methods; and
7.8.3 at Ebbisham's reasonable request, assist Ebbisham in the
working up and use of the technology necessary to
manufacture the relevant Carriers as well as for the
training of Ebbisham's personnel. For this purpose,
Emisphere shall receive Ebbisham's scientific staff in
its premises for reasonable periods and at reasonable
times, the timing and duration of which shall be decided
by common consent.
7.9 In the event that the Parties shall agree on a reasonable
period of time within which said transfer to an alternative
supplier is to be made, Emisphere shall continue to supply
Ebbisham with the Carriers until such transfer is fully
effected and until Ebbisham receives all necessary regulatory
approvals so that Ebbisham s supply of the Carriers shall be
continuous and uninterrupted.
7.10 In the event that Ebbisham can obtain a secure source of
supply of Carriers of equivalent quality from an Independent
Third Party at a price at least fifteen percent (15%) cheaper
than Emisphere, Ebbisham shall be entitled to enter into a
supply agreement with the said Independent Third Party to
manufacture the Carriers, provided that the said Independent
Third Party is not a technological competitor of Emisphere.
In the event that an Independent Third Party shall manufacture
the Carriers, Ebbisham and Emisphere shall negotiate in good
faith as to the information, data and other documentation
which needs to be furnished by Emisphere to Ebbisham to enable
the Carriers to be manufactured by such Independent Third
Party, and the charges to be made by Emisphere for its
services in connection therewith. In such an event Emisphere
shall enter into an agreement (an "Independent Third Party
Carrier Supply Agreement") in good faith with the Independent
Third Party which Independent Third Party Carrier Supply
Agreement shall, inter alia, regulate use by such Independent
Third Party of Emisphere's Technology. Ebbisham shall not
e n ter into any Independent Third Party Carrier Supply
Agreement in circumstances where the price, at which the
Independent Third Party is prepared to make Carriers available
to Ebbisham, is offered for the purposes of procuring or
attempting to induce the entry by Ebbisham or Elan into other
arrangements with such Independent Third Party.
7.11 Notwithstanding anything herein to the contrary, in the event
t h a t Emisphere shall resolve to Ebbisham's reasonable
satisfaction any failures, inabilities or delays in filling
orders specified in Clause 7.8 or shall be in a position to
provide a regular and guaranteed source of supply of Carriers
of equivalent quality at a price no more than fifteen per cent
(15%) more expensive than an Independent Third Party, Ebbisham
and Emisphere shall negotiate in good faith an agreement on
substantially the same terms as this Agreement for Emisphere
t o supply Carriers and other chemical or formulation
components to Ebbisham and each Independent Third Party
Carrier Supply Agreement shall anticipate and facilitate this
eventuality.
8. EXPLOITATION OF LICENSED TECHNOLOGY
8.1 E x cept as provided for in this Agreement, Ebbisham s
obligations to exploit the Emisphere Technology shall be
regulated by Clause 11 of the Joint Venture Agreement.
8.2 Ebbisham shall exert its reasonable efforts to commercialise
the Product in each country of the Territory consistent with
the market potential for the Product in each country of the
Territory determined in a commercially reasonable manner and
with a view to achieving maximum benefit to the Parties.
8.3 Ebbisham will be solely responsible for ensuring that the
manufacture, promotion, distribution, marketing and sale of
the Products within each country of the Territory is in strict
accordance with all the legal and regulatory requirements of
each country of the Territory.
8.4 All advertising, promotional materials and marketing costs
needed to exploit the Products are to be paid by Ebbisham.
Any packaging for the Products shall contain information to
the effect that the Product has been developed by Emisphere in
conjunction with Elan and is to be agreed upon by Emisphere in
advance. Such acknowledgement shall take into consideration
regulatory requirements and Ebbisham s reasonable commercial
requirements. Ebbisham shall submit copies of all trade
package cartons and labels and other printed materials to
Emisphere for approval before commercial sale of the Product
commences. In the event that, if a change in such materials
from that initially approved which would require regulatory
approval or filing or any other material change is proposed,
all such package cartons and labels and printed materials
shall be resubmitted for approval before commercial use
thereof. It shall be presumed that Emisphere approved of such
use unless Emisphere provides written notice of disapproval of
such use to Ebbisham within thirty (30) days of delivery of
s u ch materials to Emisphere, such approval not to be
unreasonably withheld.
9. FINANCIAL PROVISIONS
9.1 I n consideration of the research and development work
conducted by Emisphere for and on behalf of Ebbisham pursuant
to the Research and Development Programmes, Ebbisham shall pay
Emisphere the sums agreed by the Management Committee at the
termination of each stage of the Research and Development
Programme and subject to the proper vouching of research and
development work and expenses. The sums payable shall be
calculated by reference to Cost incurred by Emisphere and in
accordance with the provisions of Clause 6.
9.2 The price of the Carriers to be supplied by Emisphere to
Ebbisham shall be discussed and agreed upon between the
Parties in good faith and subject to Clause 9.5 shall be
supplied at Cost or such other sum as may be agreed between
the Parties from time to time, provided, however, that in the
event of a change in control of Ebbisham such that Emisphere
holds less than forty five percent (45%) equity interest in
Ebbisham, the Parties shall negotiate in good faith an
increase in the price of such Carriers above Cost on the basis
that for every one percent (1%) reduction in the equity
interest below forty five percent (45%) held by Emisphere in
Ebbisham, the price of the Carriers shall increase by such
amount as is equal to five percent (5%) of the difference
between the Cost of such Carriers and the arms length
commercial sales price of such Carriers provided however, that
once Emisphere holds less than twenty-five percent (25%) of
equity interest in Ebbisham, the price for the supply of
Carriers shall be at the full commercial arms length sales
price. In the event that the Parties do not agree on such a
modified price, the matter shall be referred for determination
by an Expert.
9.3 Once agreed, the price of the Carriers shall subject to the
provisions of this Clause 9.3 remain in force for twelve
calendar months (12) months. The price of the Carriers shall
be reviewed by the Parties on a twelve (12) calendar month
basis and shall take into account the increases in Cost,
increases in the appropriate price indices and extraordinary
items of expenditure which are incurred by Emisphere. In the
event that Emisphere incurs extraordinary items of expenditure
or there is significant inflation in any particular country,
the price of the Carriers may be reviewed by the Parties on a
second occasion within the relevant twelve month period.
E m i sphere shall provide to Ebbisham documentation
substantiating increases in Cost and extraordinary items of
e x penditure or significant inflation in any particular
country.
9.4 Payment for Carriers so supplied shall be made by Ebbisham
within thirty (30) days of receipt of an invoice.
9.5 In consideration of the license of the Emisphere Patents to
Ebbisham, Ebbisham shall pay a royalty on Net Revenues and/or
on Net Sales of the Product(s) at a rate of five percent (5%)
on Net Revenues and at a rate of five percent (5%) on Net
Sales. In addition, upon Ebbisham achieving profitability as
determined by the Management Committee ("the Profitability
Date"), Ebbisham shall pay to Emisphere an additional royalty
of two point two five percent (2.25%) on the first one hundred
million United States Dollars (US$100,000,000) of Net Sales
and Net Revenues subsequent to the Profitability Date.
Notwithstanding anything herein to the contrary, no royalty
shall be paid for the license of the Emisphere Patents on Net
Revenues or Net Sales of the Product(s) in any given
jurisdiction after the expiration or invalidation of the last
patent issued in such jurisdiction that is covered under the
terms of such license if the continued payment of such
royalties is prohibited in such jurisdiction.
9.6 In consideration of the license of the Emisphere Know-How to
Ebbisham, Ebbisham shall pay a royalty on Net Revenues at a
rate of five percent (5%) and on Net Sales of the Product(s)
at a rate of five percent (5%). In addition, Ebbisham shall
pay to Emisphere an additional royalty of two point two five
percent (2.25%) on the first one hundred million United States
Dollars (US$100,000,000) of Net Sales and Net Revenues
subsequent to the Profitability Date.
9.7 In the event of a change of control of Ebbisham such that
Emisphere holds less than forty five percent (45%) equity
interest in Ebbisham and for each subsequent change, if any,
in the equity interest held in Ebbisham by Emisphere, the
Parties shall negotiate an adjustment in the royalties payable
pursuant to Clauses 9.5 and 9.6, such adjustment to be agreed
between the Parties.
9.8 Payment of royalties shall be made quarterly within thirty
(30) days after the expiry of the calendar quarter. The
method of payment shall be by way of wire transfer to an
account specified by Emisphere. Each payment made to Emisphere
shall be accompanied by a written report, prepared and signed
by a senior financial officer of Ebbisham. In addition the
report shall clearly show the Net Revenue and Net Sales for
the months of the calendar quarter for which payment is being
made on a country by country basis. In the event that no
royalty is due to Emisphere for any Quarter period, the senior
financial officer shall so report. In addition to the written
reports accompanying each payment, Ebbisham shall notify
Emisphere, within two weeks of the end of each calendar
quarter, of the Net Revenues and Net Sales of the Product(s)
for that preceding quarter on a country by country basis.
9.9 Ebbisham shall maintain and keep clear, detailed, complete,
accurate and separate records so:
9.9.1 as to enable any royalties on Net Revenues or Net Sales
of the Product which shall have accrued hereunder to be
determined; and
9.9.2 that any deductions made in arriving at the Net Revenues
or the Net Sales can be determined.
9.10 All payments due hereunder shall be made in United States
Dollars. Payments due on Net Revenues and Net Sales of the
Product made in a currency other than United States Dollars
shall first be calculated in the foreign currency and then
converted to United States Dollars on the basis of the
exchange rate in effect for the purchase of United States
Dollars with such foreign currency quoted in the Wall Street
Journal (or comparable publication if not quoted in the Wall
Street Journal) with respect to the currency of the country of
origin of such payment for the day prior to the date on which
the payment by Ebbisham is being made.
9.11 Subject to the provisions of Clauses 9.12 and 9.14 of this
Agreement, Ebbisham shall pay all royalties at full rate.
9.12 If, at any time, legal restrictions in the Territory prevent
the prompt payment of running royalties or any portion
thereof, the Parties shall meet to discuss suitable and
reasonable alternative methods of reimbursing Emisphere the
amount of such running royalties. In the event that Ebbisham
is prevented from making any payment under this Agreement by
virtue of the statutes, laws, codes or government regulations
of the country from which the payment is to be made, then such
payments may be paid by depositing them in the currency in
which they accrue to Emisphere s account in a bank acceptable
to Emisphere in the country the currency of which is involved
or as otherwise agreed by the Parties.
9.13 Emisphere and Ebbisham agree to co-operate in all respects
necessary to take advantage of any double taxation agreements
or similar agreements as may, from time to time, be available.
9.14 Any taxes payable by Emisphere on any payment made to
Emisphere pursuant to this Agreement shall be for the account
of Emisphere. If so required by applicable law any payment
made pursuant to this Agreement shall be made by Ebbisham
after deduction of the appropriate withholding tax in which
event the Parties shall co-operate to obtain the appropriate
tax clearance as soon as is practicable. On receipt of such
clearance, Ebbisham shall forthwith procure that the amount so
withheld is paid to Emisphere.
10. RIGHT OF AUDIT AND INSPECTION
10.1 On not more than two times in each calendar year, Ebbisham
shall permit Emisphere or its duly authorised representatives
upon reasonable notice and at any reasonable time during
normal business hours to have access to inspect and audit the
accounts and records of Ebbisham and any other book, record,
voucher, receipt or invoice relating to the calculation of the
royalty payments on Net Revenues and Net Sales submitted to
Emisphere. Any such inspection of Ebbisham's records shall be
at the expense of Emisphere, except that if any such
inspection reveals a deficiency in the amount of the running
royalty actually paid to Emisphere hereunder in any calendar
quarter of five percent (5%) or more of the amount of any
running royalty actually due to Emisphere hereunder, then the
expense of such inspection shall be borne solely by Ebbisham.
Any amount of deficiency shall be paid promptly to Emisphere.
If such inspection reveals a surplus in the amount of running
royalty actually paid to Emisphere by Ebbisham, Emisphere
shall reimburse Ebbisham the surplus.
10.2 On not more than two times in each calendar year, Emisphere
shall permit Ebbisham or its duly authorised representative on
reasonable notice and at any reasonable time during normal
business hours to have access to inspect and audit the
accounts and records of Emisphere and any other book, record,
voucher, receipt or invoice relating to the calculation or the
Cost of the Research and Development Programme or for the
supply of the Carriers and to the accuracy of the reports
which accompanied them. Any such inspection of Emisphere's
records shall be at the expense of Ebbisham, except that if
any such inspection reveals an overpayment in the amount of
the Costs paid to Emisphere for the Research and Development
Programme and/or the Carriers supplied by Emisphere hereunder
in any calendar quarter of five percent (5%) or more of the
amount of the Costs actually due to Emisphere hereunder, then
the expense of such inspection shall be borne solely by
Emisphere instead of by Ebbisham. Any surplus over the Costs
properly payable by Ebbisham to Emisphere shall be paid
promptly to Ebbisham. If such inspection reveals a deficit in
the amount of the Costs properly payable to Emisphere by
Ebbisham, Ebbisham shall pay the deficit to Emisphere.
10.3 In the event of any unresolved dispute regarding any alleged
deficiency or overpayment of royalty payments hereunder, the
matter will be referred to an independent firm of chartered
accountants for a resolution of such dispute. Any decision by
the said firm of chartered accountants shall be binding on the
Parties.
11. PATENTS
11.1 Ebbisham shall permanently mark or otherwise cause Elan or any
third party to permanently mark all Products and/or the
packaging therefor with such license or patent notices and in
such manner as Emisphere may reasonably request in writing
prior to the sale or commercial use thereof.
11.2 Emisphere shall be obliged to disclose promptly to Ebbisham
inventions made by or on behalf of Emisphere in connection
w i t h the performance of the Research and Development
Programme, any patentable inventions and discoveries within
the Emisphere Know-How that relate to the Field, the Emisphere
Programme Know-How and any patentable Improvements developed
by or on behalf of Emisphere (other than pursuant to one or
more of the Research and Development Programmes).
11.3 The Parties shall discuss in good faith all material issues
relating to filing, prosecution and maintenance of Emisphere
Patents (insofar as the Emisphere Patents are of relevance to
the Field), the Emisphere Programme Patents, any patentable
inventions and discoveries within the Emisphere Know-How that
relate to the Field, and any patentable Improvements developed
by or on behalf of Emisphere (other than pursuant to one or
more of the Research and Development Programmes). Subject to
agreement to the contrary the following provisions shall
apply:
11.3.1 Emisphere at its expense shall make a good faith
effort (a) to secure the grant of any patent
applications within the Emisphere Patents; (b) to
f i l e and prosecute patent applications on
patentable inventions and discoveries within the
Emisphere Know-How and patentable Improvements
developed by or on behalf of Emisphere (other than
pursuant to one or more of the Research and
Development Programmes); (c) to defend all such
applications against third party oppositions; and
(d) to maintain in force any issued letters patent
w i thin the Emisphere Patents (including any
letters patent that may issue covering any such
Improvements). Emisphere shall have the sole
right in its reasonable business discretion to
control such filing, prosecution, defence and
maintenance; provided however, that Ebbisham, at
its request, shall be provided with copies of all
documents relating to such filing, prosecution,
defence, and maintenance in sufficient time to
review such documents and comment thereon, if
desired by Ebbisham, prior to filing.
11.3.2 In the event that Emisphere informs Ebbisham that
it does not intend to file patent applications on
patentable inventions and discoveries within the
Emisphere Know-How that relate to the Field or
patentable Improvements developed by or on behalf
of Emisphere (other than pursuant to one or more
of the Research and Development Programmes) in one
or more countries in the Territory or fails to
file such an application within a reasonable
period of time, but in no event less than four (4)
months after disclosure to Ebbisham pursuant to
Clause 11.2, Ebbisham shall have the right, but
not the obligation, at Ebbisham's sole expense to
file and prosecute such patent application(s) in
the joint names of Ebbisham and Emisphere and
Emisphere upon written request from Ebbisham shall
execute all documents, forms and declarations and
to do all things as shall be reasonably necessary
to enable Ebbisham to exercise such option and
right.
11.3.3 In relation to the Emisphere Programme Patents,
Ebbisham at its expense shall have the right but
shall not be obligated (a) to secure the grant of
any patent applications within the Emisphere
Programme Patents; (b) to file and prosecute
patent applications on patentable inventions and
discoveries within the Emisphere Programme Know-
How; (c) to defend all such applications against
third party oppositions; and (d) to maintain in
f o rce any issued letters patent within the
Emisphere Programme Patents (including any patents
that issue on patentable inventions and
discoveries within the Emisphere Programme Know-
How). Ebbisham shall have the right to control
such filing, prosecution, defence and maintenance;
provided however Emisphere and Elan at their
request shall be provided with copies of all
documents relating to such filing, prosecution,
defence, and maintenance in sufficient time to
review such documents and comment thereon, if
desired by Emisphere and Elan, prior to filing.
11.3.4 In the event that Ebbisham informs Emisphere that
it does not intend to file patent applications on
patentable inventions and discoveries within the
Emisphere Programme Know-How outside the Field or
the Elan Programme Know-How outside the Field or
fails to file such an application within a
reasonable period of time, but in no event less
than four (4) months after disclosure to Ebbisham
pursuant to Clause 11.2 hereof or Clause 11.2 of
the Elan License Agreement, Emisphere shall,
insofar as it is necessary to enable Emisphere to
exploit the Emisphere Programme Know-How or Elan
Programme Know-How outside the Field pursuant to
Clause 2.4 of this Agreement or Clause 8.3 of the
Joint Venture Agreement, have the right, but not
the obligation at Emisphere's sole expense to file
a n d prosecute such patent application(s) in
Ebbisham's name and Ebbisham upon written request
from Emisphere shall execute all documents, forms
and declarations and to do all things as shall be
r e asonably necessary to enable Emisphere to
exercise such option and right. Notwithstanding
anything herein to the contrary, the Parties agree
that Ebbisham shall own all right, title and
interest in such patent applications and any
patents that may issue thereon (including any and
all divisions, continuations, continuations-in-
part, extensions, additions or reissues thereto or
thereof), provided, however, that such
applications and patents shall be deemed subject
to the license to be granted to Emisphere under
Clause 8.1 of the Joint Venture Agreement.
11.4 Emisphere and Ebbisham shall promptly inform the other in
writing of any alleged infringement of any patents within the
Emisphere Patents or the Emisphere Programme Patents or the
Company Programme Technology or any alleged misappropriation
of trade secrets within the Emisphere Know-How, the Emisphere
Programme Know-How and the Company Technology by a third party
of which it becomes aware and provide the other with any
available evidence of such infringement or misappropriation.
11.4.1 During the term of this Agreement, Ebbisham shall
have the right to prosecute at its own expense and
for its own benefit any such alleged infringements
of the Emisphere Patents or misappropriation of
the Emisphere Know-How, insofar as such
infringements or misappropriation relate to the
Field. In the event that Ebbisham takes such
action, Ebbisham shall do so at its own cost and
expense. At Ebbisham's request, Emisphere will
co-operate with such action insofar as the said
action relates to the Field at Ebbisham's sole
cost and expense. Should Ebbisham decide not to
pursue such infringers, within a reasonable period
but in any event within sixty (60) days after
receiving written notice of such alleged
infringement or misappropriation, or if such
alleged infringement or misappropriation does not
r e late to the Field, Emisphere may in its
discretion initiate such proceedings in its own
name, at its expense and for its own benefit, and
at Emisphere's request, Ebbisham will co-operate
with such action at Emisphere's sole cost and
expense. In the alternative, the Parties may
agree to institute such proceedings in their joint
n a mes and shall reach agreement as to the
proportion in which they will share the proceeds
of any such proceedings, and the expense of any
costs not recovered, or the costs or damages
payable to the third party. If the infringement
of the Emisphere Patents affects the Field as well
a s o ther products being developed or
commercialised by Emisphere or its commercial
partners, the Parties shall agree as to the manner
in which the proceedings should be instituted and
shall reach agreement as to the proportion in
which they will share the proceeds of any such
proceedings, and the expense of any costs not
recovered, or the costs or damages payable to the
third party.
11.4.2 During the term of this Agreement, Ebbisham shall
have the first right but not the obligation to
bring suit or otherwise take action against any
alleged infringement of the Emisphere Programme
Patents or the Elan Programme Patents or alleged
misappropriation of the Emisphere Programme Know-
How or Elan Programme Know-How. In the event that
Ebbisham takes such action, Ebbisham shall do so
solely at its own cost and expense and all damages
and monetary award recovered in or with respect to
such action shall be the property of Ebbisham. At
Ebbisham's request, Emisphere will co-operate with
any such action at Ebbisham's sole cost and
expense. In the event that Ebbisham decides not
to take such action against such infringement or
misappropriation or fails to do so within a
reasonable period but in any event within sixty
(60) days after receiving written notice of such
alleged infringement or misappropriation and such
Emisphere Programme Technology or Elan Programme
Technology would be subject to the license to
Emisphere in Clause 8.1 of the Joint Venture
A g r eement, Emisphere may in its discretion
initiate such proceedings in its own name (or in
Ebbisham's name if required by law; provided,
however, that Emisphere identifies itself as the
real Party in interest and does not take any
action that would expose Ebbisham to liability of
any kind). In the event that Emisphere initiates
such action, it shall do so solely at its sole
cost and expense and all damages and monetary
award recovered in or with respect to such action
s h a l l be the property of Emisphere. At
Emisphere's request, Ebbisham agrees to cooperate
w i t h Emisphere in any such proceeding at
Emisphere's sole cost and expense. In the
alternative, the Parties may agree to institute
such proceedings in their joint names and shall
reach agreement as to the proportion in which they
will share the proceeds of any such proceedings,
and the expense of any costs not recovered, or the
costs or damages payable to the third party.
11.5 In the event that a claim or proceedings are brought against
Ebbisham by a third party alleging that the sale, distribution
or use of the Product in the Territory solely because of
Ebbisham's use of the Emisphere Technology infringes the
intellectual property rights of such a third party, Ebbisham
shall promptly advise Emisphere of such threat or suit.
Emisphere shall indemnify Ebbisham against such a claim in the
event that Emisphere should as of the date of execution of
this Agreement have reasonably been aware of such third party
intellectual property rights and provided that Ebbisham shall
not (a) acknowledge to the third party or to any other Person
the validity of the patent rights of such a third party or (b)
compromise or settle any claim or proceedings relating thereto
without the prior written consent of Emisphere. At its
option, Emisphere may elect to take over the sole conduct and
control of such proceedings from Ebbisham and, at Emisphere's
request, Ebbisham agrees to cooperate with Emisphere in any
such proceeding at Emisphere's sole cost and expense.
11.6 In the event that a claim or proceedings are brought against
Ebbisham by a third party alleging that the sale, distribution
or use of the Product in the Territory solely because the use
of the Emisphere Technology infringes the patent rights of
such a third party and Emisphere should not reasonably have
been aware at the date of the execution of the Agreement of
such third party intellectual property rights, Ebbisham and
Emisphere shall meet to discuss in what manner the said
proceedings should be defended and the manner in which any
award for damages, costs and expenses incurred in respect of
or arising out of such a claim or proceedings should be borne
as between Emisphere and Ebbisham.
11.7 Except as provided in Clause 11.5, Emisphere shall have no
liability to Ebbisham whatsoever or howsoever arising for any
losses incurred by Ebbisham as a result of having to cease
selling Product or having to defer the launch of selling
Product as a result of any infringement proceedings.
12. CONFIDENTIAL INFORMATION
12.1 The Parties acknowledge that it may be necessary, from time to
time, to disclose to each other confidential and proprietary
information, including without limitation, inventions, works
of authorship, trade secrets, specifications, designs, data,
know-how and other information relating to the Field, the
P r oducts, the Carriers, processes and services of the
disclosing Party.
12.2 The Parties agree that the information to be disclosed by
Emisphere and Elan to the Company may include trade secrets,
know-how and other proprietary information and data regarding
the Carriers or Emisphere Technology, Elan Technology or the
Company Programme Technology, as the case may be. It is
agreed that the information to be disclosed by the Company to
Emisphere and Elan may include trade secrets, know-how and
other proprietary information and data regarding the Compounds
or the Products. The foregoing shall be referred to
collectively as "Confidential Information". Any Confidential
Information revealed by a Party to another Party shall be used
by the receiving Party exclusively for the purposes of
fulfilling the receiving Party s obligations under this
Agreement, the Joint Venture Agreement and the Emisphere
Supply Agreement and for no other purpose.
12.3 Each Party agrees to disclose Confidential Information of
another Party only to those employees, representatives and
agents requiring knowledge thereof in connection with their
duties directly related to the fulfilling of the Party s
obligations under this Agreement. Each Party further agrees
to inform all such employees, representatives and agents of
the terms and provisions of this Agreement and their duties
hereunder and to obtain their consent hereto as a condition of
receiving Confidential Information. Each Party agrees that it
will exercise the same degree of care, but in no event less
than a reasonable degree, and protection to preserve the
proprietary and confidential nature of the Confidential
Information disclosed by a Party, as the receiving Party would
exercise to preserve its own proprietary and confidential
information. Each Party agrees that it will, upon request of
a Party, return all documents and any copies thereof
containing Confidential Information belonging to or disclosed
by, such Party.
12.4 Any breach of this Clause 12 by any of the Persons informed by
one of the Parties is considered a breach by the Party itself.
Confidential Information shall not be deemed to include:
(i) information that is in the public domain;
(ii) information which is made public by the disclosing
Party;
(iii) information which is independently developed by a Party;
(iv) information that is published or otherwise becomes part
of the public domain without any disclosure by a Party,
or on the part of a Party s directors, officers, agents,
representatives or employees;
(v) information that becomes available to a Party on a non-
confidential basis, whether directly or indirectly, from
a source other than a Party, which source, to the best
o f the Party s knowledge, did not acquire this
information on a confidential basis; or
(vi) information which the receiving Party is required to
disclose pursuant to a valid order of a court or other
governmental body or any political subdivision thereof
or otherwise required by law.
12.5 The provisions relating to confidentiality in this Clause 12
shall remain in effect during the term of this Agreement, and
for a period of seven (7) years following the expiration or
earlier termination of this Agreement but shall not apply to
any information which a Party is required to file or otherwise
disclose in accordance with requirements which are legally
binding on it.
12.6 The Parties agree that the obligations of this Clause 12 are
necessary and reasonable in order to protect the Parties
respective businesses, and each Party expressly agrees that
monetary damages would be inadequate to compensate a Party for
any breach by the other Party of its covenants and agreements
set forth herein. Accordingly, the Parties agree and
acknowledge that any such violation or threatened violation
will cause irreparable injury to a Party and that, in addition
to any other remedies that may be available, in law and equity
or otherwise, any Party shall be entitled to obtain injunctive
relief against the threatened breach of the provisions of this
Clause 12, or a continuation of any such breach by the other
Party, specific performance and other equitable relief to
redress such breach together with its damages and reasonable
counsel fees and expenses to enforce its rights hereunder,
without the necessity of proving actual or express damages.
13. TRADEMARKS
13.1 Ebbisham undertakes that all Products and all materials
u t i lised in connection with the provision, marketing,
distribution, advertising and/or marketing thereof shall be of
a consistent and high standard of quality, commensurate with
the prestige of the Emisphere Trademarks and that its use of
the Emisphere Trademarks shall conform to such reasonable
standards as Emisphere shall from time to time specify.
Ebbisham shall cooperate fully with the reasonable
instructions of Emisphere with respect to the maintenance of
such standards.
13.2 Ebbisham shall:
13.2.1 subject to the agreement of Ebbisham s commercial
p a r tner such as a sub-licensee, favourably
c o n sider promoting and using the Emisphere
Trademarks in each country of the Territory and
provide proof of use of the Emisphere Trademarks
if requested by Emisphere;
13.2.2 use the Emisphere Trademarks strictly in
compliance with any applicable trademark and other
laws and regulations and to use such legends,
markings and notices in connection therewith as
are required by law or otherwise reasonably
required by Emisphere to protect Emisphere's
rights therein;
13.2.3 do nothing to mislead the public as to the nature
or quality of any Product on which the Emisphere
Trademarks are affixed nor use it on advertising
or display materials which are unethical, immoral
or offensive to good taste;
13.2.4 at Emisphere's reasonable request supply samples
of the Products and any materials utilized in
connection with the distribution, advertising
and/or marketing thereof that bear or incorporate
the Trademarks for inspection by Emisphere;
13.2.5 not adopt or seek to register any trademark,
d e s ign or logo confusingly similar to the
Emisphere Trademarks; and
13.2.6 promptly notify Emisphere in writing if any
alleged infringement or unauthorized use of the
E m isphere Trademarks comes to Ebbisham's
attention.
13.3 Ebbisham undertakes to use the Emisphere Trademarks in
relation only to the Products (or materials for advertising
and promotion thereof), and in accordance with any reasonable
specifications and directions given by Emisphere from time to
time. In particular, but without limitation, Ebbisham agrees
to state on the Products or materials for the advertising or
promotion thereof that the Emisphere Trademarks is used under
license from Emisphere.
13.4 Ebbisham shall take no action which could prejudice the
validity, re-registration or reputation of the Emisphere
Trademarks or which could impair the reputation, business
standing or prestige of Emisphere.
13.5 Emisphere shall remain the owner of the Emisphere Trademarks
and the goodwill associated with the same and Ebbisham agrees
not to assert any ownership interest in the Emisphere
Trademarks or the goodwill associated therewith. Ebbisham
shall own and retain all right, title, and interest in and to
a n y trademark or trademarks (other than the Emisphere
Trademarks and the Elan Trademarks) used in the Territory in
connection with the sale of the Products.
13.6 Emisphere shall have the exclusive right to take such action
in respect of the registration, defence, infringement and
maintenance of the Emisphere Trademarks as Emisphere in its
reasonable business judgement deems appropriate. Ebbisham
shall provide all such assistance and co-operation, including
the furnishing of documents and information and the execution
of registered user documentation or the like, as may be
required to give effect to any action as may be taken, or
required to be taken, by Emisphere. In taking any such
action, Emisphere shall consider the legitimate commercial
interests of Ebbisham.
13.7 New trademarks used in relation to the Emisphere Programme
T e chnology, the Elan Programme Technology, the Company
Programme Technology, or the Products and all registrations
t h e reof and applications therefor shall be owned and
registered by Ebbisham. New trademarks used in relation to
the Emisphere Technology and all registrations thereof and
applications therefor shall be owned and registered by
Emisphere and shall constitute Emisphere Trademarks.
14. TERM OF AGREEMENT
14.1 Subject to the rights of earlier termination set out in
Clauses 14.3 and 14.4, and the provisions regarding the
payment of royalties in Clauses 9.5 and 9.6 this Agreement is
concluded for a period commencing as of the Effective Date and
expiring on a Product by Product basis and on a country by
country basis on the last to occur of:
14.1.1 10 (ten) years starting from the date of the
launch of the Product in the country concerned; or
14.1.2 t h e last to expire patent included in the
Emisphere Patents and/or the Emisphere Programme
Patents and/or the Elan Programme Patents.
14.2 At the end of the term as specified in Clause 14.1 above (the
"Initial Period"), the Agreement shall continue automatically
for an additional period or periods of three (3) years, unless
the Agreement has been terminated by Ebbisham or Emisphere on
serving two (2) years' written notice on the other prior to
the end of the Initial Period or any additional three (3) year
period.
14.3 In addition to the rights of early or premature termination
provided for elsewhere in this Agreement, in the event that
any of the terms or provisions hereof are incurably breached
by either Party, the non-breaching Party may immediately
terminate this Agreement by written notice. Subject to the
other provisions of this Agreement, in the event of any other
breach, the non-breaching Party may terminate this Agreement
by giving written notice to the breaching Party that this
Agreement will terminate on the sixtieth (60th) day from
notice unless cure is sooner effected. If the breaching Party
has proposed a course of action to rectify the breach and is
acting in good faith to rectify same but has not cured the
breach by the sixtieth (60th) day, the said period shall be
extended by such period as is reasonably necessary to enable
the breach to be cured.
14.4.1 As used in this Clause 14.4, the term Event of
Bankruptcy relating to either Party shall mean:
(a) t h e appointment of a liquidator, receiver,
administrator, examiner, trustee or similar officer of
either Party or over all or a substantial part of its
assets under the law of any applicable jurisdiction,
including without limit, the United States of America;
or
(b) an application or petition for bankruptcy, corporate re-
organisation, composition, administration, examination,
arrangement or any other procedure similar to any of the
foregoing under the law of any applicable jurisdiction,
including without limit, the United States of America,
is filed, and is not discharged within thirty (30) days,
or if either Party applies for or consents to the
appointment of a receiver, administrator, examiner or
similar officer of it or of all or a material part of
its assets, rights or revenues or the assets and/or the
business of either Party are for any reason seized,
confiscated or condemned.
14.4.2 If at any time during the term of this Agreement, an
Event of Bankruptcy (as defined above) relating to
Emisphere occurs, Ebbisham shall have, in addition to
all other legal and equitable rights and remedies
available hereunder, the option to terminate this
Agreement upon thirty (30) days written notice, given
within sixty (60) days following the date that Ebbisham
becomes aware of the Event of Bankruptcy. Upon such
termination, Ebbisham shall be entitled to solely
continue the activities conducted or to be conducted
pursuant to this Agreement but for the Event of
Bankruptcy.
14.4.3 If at any time during the term of this Agreement, an
Event of Bankruptcy (as defined above) relating to
Ebbisham occurs, other than in circumstances where:
(a) the Event of Bankruptcy arises directly or indirectly as
a result of a dispute between Elan and Emisphere and it
is unlikely that the Event of Bankruptcy would have
arisen if Elan and Emisphere had been in agreement,
rather than in dispute; or
(b) neither Elan nor Emisphere purchases the interest of the
other in Ebbisham, in accordance with the provision of
Clause 22 of the Joint Venture Agreement;
Emisphere shall have, in addition to all other legal and
equitable rights and remedies available hereunder, the option
to terminate this Agreement upon thirty (30) days written
notice, given within sixty (60) days following the date that
Emisphere becomes aware of the Event of Bankruptcy.
14.5 Upon exercise of those rights of termination as specified in
Clause 14.1 to Clause 14.4 inclusive or elsewhere within the
A g reement, this Agreement shall, subject to the other
provisions of the Agreement, automatically terminate forthwith
and be of no further legal force or effect.
14.6 Upon expiration or termination of the Agreement:
14.6.1 any sums that were due from Ebbisham to Emisphere
on Net Revenues or Net Sales in the Territory or
in such particular country or countries in the
Territory (as the case may be) prior to the
expiration or termination of this agreement as set
forth herein shall be paid in full within sixty
(60) days of the expiration or termination of this
Agreement for the Territory or for such particular
country or countries in the Territory (as the case
may be);
14.6.2 all confidentiality provisions set out herein
shall remain in full force and effect;
14.6.3 all responsibilities and warranties shall insofar
as are appropriate remain in full force and
effect;
14.6.4 the rights of inspection and audit set out in
Clause 10 shall continue in force for a period of
one year;
14.6.5 except as expressly provided for under Clause
1 4 .6.6 all rights, licenses and sublicenses
granted in and pursuant to this Agreement shall
cease for the Territory or for such particular
country or countries in the Territory (as the case
may be). Following such expiration or
termination, Ebbisham may not thereafter, except
as expressly provided for in Clause 14.6.6, use in
the Territory or in such particular country or
countries in the Territory (as the case may be)
(a) any valid and unexpired Emisphere Patents, (b)
any Emisphere Know-How that remains confidential
or otherwise proprietary to Emisphere, and/or (c)
any Emisphere Trademarks; and
14.6.6 Ebbisham shall promptly make an accounting to
Emisphere of the inventory of the Product which it
has in the Territory or for such particular
country or countries in the Territory (as the case
m a y be), if any, as of the date of such
termination and Ebbisham shall thereafter have the
right for a period of six (6) months after said
expiration or termination to sell such inventory
of the Product in the Territory or in such
particular country or countries in the Territory
(as the case may be) or, if appropriate and
legally permissible, to transport such inventory
o f Product for sale in another country or
countries in the Territory within such six month
period; provided that the Net Sales thereof shall
be subject to the royalty provisions of Clause 9
and so payable to Emisphere. Thereafter, any
remaining inventory of Product shall be disposed
o f by mutual agreement of the Parties in
accordance with regulatory requirements.
15. WARRANTIES/INDEMNITIES
15.1 Emisphere represents and warrants that it has the sole,
exclusive and unencumbered right to grant the licenses and
rights herein granted to Ebbisham, and that it has not granted
any option, license, right or interest in or to the Emisphere
Technology or the Products to any third party which would
conflict with the rights granted by this Agreement.
15.2 Ebbisham represents and warrants that it has the sole,
exclusive and unencumbered right to grant the licenses and
rights herein granted to Emisphere and that it has not granted
any option, license, right or interest in or to the Emisphere
Programme Technology, Elan Programme Technology or the Company
Programme Technology to any third party which would conflict
with the rights granted by this Agreement.
15.3 Emisphere represents and warrants that to the best of its
knowledge, the true inventors of the subject matter claimed
are named in the Emisphere Patents and all such inventors have
irrevocably assigned all their rights and interests therein to
Emisphere.
15.4 Emisphere represents and warrants that it is not aware of any
information material to the examination of the Emisphere
Patents listed in Schedule 1 that was not disclosed in writing
to the United States Patent Office.
15.5 Emisphere and Ebbisham represent and warrant for the benefit
for each other that the execution of this Agreement by them
and the full performance and enjoyment of the rights of them
under this Agreement will not breach the terms and conditions
of any license, contract, understanding or agreement, whether
express, implied, written or oral between them and any third
party.
15.6 Emisphere and Ebbisham represent and warrant for the benefit
of each other that as of the date of executing this Agreement,
to the best of their knowledge no patents, trade secrets or
any other proprietary rights of any third party would be
infringed by the manufacture, use or sale of the Product.
15.7 Emisphere represents and warrants that with respect to all
regulatory filings to obtain NDA approvals, to the best of
Emisphere's knowledge, the data and information in Emisphere's
submission(s) are and shall be free from fraud or material
falsity, that the NDA approvals have not been and will not be
obtained either through bribery or the payment of illegal
gratuities, that the data and information in Emisphere's
submissions are and shall be accurate and reliable for
purposes of supporting approval of the submissions, and that
the NDA approvals are and shall be obtained without illegal or
unethical behaviour of any kind.
15.8 Emisphere represents and warrants that the Carrier supplied to
Ebbisham by Emisphere under this Agreement shall conform to
the Specifications and in accordance with all regulations and
requirements of the FDA including the then current Good
Manufacturing Practice (cGMP) regulations which apply to the
manufacture and supply of the Carrier. Emisphere represents
and warrants that the Carrier supplied to Ebbisham shall not
be adulterated or mis-branded as defined by the US Federal
Food, Drug and Cosmetic Act, and shall not be a product which
would violate any section of such Act if introduced in
interstate commerce. EXCEPT AS EXPRESSLY STATED IN THIS
CLAUSE 15.8, ALL OTHER WARRANTIES, CONDITIONS AND
REPRESENTATIONS, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE,
INCLUDING A WARRANTY AS TO THE QUALITY OR FITNESS FOR ANY
PARTICULAR PURPOSE OF THE CARRIER ARE HEREBY EXCLUDED AND
EMISPHERE SHALL NOT BE LIABLE IN CONTRACT, TORT OR OTHERWISE
F O R ANY LOSS, DAMAGE, EXPENSE OR INJURY OF ANY KIND
WHATSOEVER, CONSEQUENTIAL OR OTHERWISE, ARISING OUT OF OR IN
CONNECTION WITH THE CARRIER OR ANY DEFECT IN THE CARRIER OR
FROM ANY OTHER CAUSE.
15.9 Emisphere is fully cognisant of all applicable statutes,
ordinances and regulations of the Territory with respect to
the manufacture of the Carrier including, but not limited to,
the U.S. Federal Food, Drug and Cosmetic Act and regulations
thereunder, Good Laboratory Practices and Good Manufacturing
Practices. Emisphere shall manufacture the Carrier in
conformance with the Specifications and the Drug Master File
and in a manner which fully complies with such statutes,
ordinances, regulations and practices.
15.10 In addition to any other indemnifications provided for herein,
Emisphere shall indemnify and hold harmless Ebbisham and its
Affiliates and their respective employees, agents, partners,
officers and directors from and against any claims, losses,
liabilities or damages (including reasonable attorney's fees
and expenses) incurred or sustained by Ebbisham arising out of
or in connection with any (a) breach of any representation,
covenant, warranty or obligation by Emisphere hereunder, or
(b) any act or omission on the part of Emisphere or any of its
agents or employees in the performance of this Agreement.
15.11 In addition to any other indemnifications provided for herein,
Ebbisham shall indemnify and hold harmless Emisphere and its
Affiliates and their respective employees, agents, partners,
officers and directors from and against any claims, losses,
liabilities or damages (including reasonable attorney's fees
and expenses) incurred or sustained by Emisphere arising out
of or in connection with any (a) breach of any representation,
covenant, warranty or obligation by Ebbisham hereunder, or (b)
any act or omission on the part of Ebbisham or any of its
agents or employees in the performance of this Agreement.
15.12 Ebbisham shall assume the sole and entire responsibility and
shall indemnify and save harmless Emisphere from any and all
claims, liabilities, expenses, including reasonable attorney's
fees, responsibilities and damages by reason of any claim,
proceedings, action, liability or injury arising out of any
faults of the Carrier resulting from the transport, packaging,
storage, handling, distribution, marketing or sale of the
Carrier by Ebbisham, to the extent that it was caused by the
negligence or wrongful acts or omissions on the part of
Ebbisham.
15.13 As a condition of obtaining an indemnity in the circumstances
set out above, the Party seeking an indemnity shall:
15.13.1 fully and promptly notify the other Party of any
claim or proceeding, or threatened claim or
proceeding;
15.13.2 permit the indemnifying Party to take full care
and control of such claim or proceeding;
15.13.3 cooperate in the investigation and defence of such
claim or proceeding;
15.13.4 not compromise or otherwise settle any such claim
or proceeding without the prior written consent of
the other Party, which consent shall not be
unreasonably withheld conditioned or delayed; and
15.13.5 take all reasonable steps to mitigate any loss or
l i ability in respect of any such claim or
proceeding.
15.14 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT,
EMISPHERE AND EBBISHAM SHALL NOT BE LIABLE TO THE OTHER BY
REASON OF ANY REPRESENTATION OR WARRANTY, CONDITION OR OTHER
TERM OR ANY DUTY OF COMMON LAW, OR UNDER THE EXPRESS TERMS OF
THIS AGREEMENT, FOR ANY CONSEQUENTIAL OR INCIDENTAL LOSS OR
DAMAGE (WHETHER FOR LOSS OF PROFIT OR OTHERWISE) AND WHETHER
OCCASIONED BY THE NEGLIGENCE OF THE RESPECTIVE PARTIES, THEIR
EMPLOYEES OR AGENTS OR OTHERWISE.
16. REGULATORY APPROVALS
16.1 During the INDA registration procedure, each Party shall keep
the other Parties promptly and fully advised of such Party's
registration activities, progress and procedures. Each Party
shall inform the other Parties of any dealings such Party has
with the FDA and shall furnish the other Parties with copies
of all correspondence. The Parties shall collaborate in
relation to obtaining the approval of the FDA for final
approved labelling.
16.2 Any and all INDAs and other applications for regulatory
approval filed hereunder for the Product shall remain the
property of Ebbisham, provided that Ebbisham shall allow the
other Parties access thereto to enable those Parties to fulfil
their obligations and exercise their rights under this
Agreement, the Elan Supply Agreement and the Emisphere Supply
Agreement, the Elan License and the Emisphere License.
Ebbisham shall maintain such INDAs at its own cost.
16.3 Save as otherwise outlined in this Agreement, the costs and
expenses of any filings and proceedings made by Ebbisham to
the FDA, including post approval studies required by the FDA
in respect of the Product, and to maintain the FDA approval
hereunder shall be paid by Ebbisham.
16.4 Each Party shall indemnify and hold harmless the other
Parties, its agents and employees from and against all claims,
damages, losses, liabilities and expenses to which Ebbisham,
its agents, and employees may become subject related to or
arising out of Emisphere's bad faith, gross negligence or
intentional misconduct in connection with the filing or
maintenance or failure to file or maintain or prosecute the
NDA.
16.5 Subject to the provisions of Clause 16.4, it is hereby
acknowledged that there are inherent uncertainties involved in
the registration of pharmaceutical products with the FDA
i n s o far as obtaining approval is concerned and such
uncertainties form part of the business risk involved in
undertaking the form of commercial collaboration as set forth
in this Agreement. Therefore, save for using its reasonable
efforts, Emisphere shall have no liability to Ebbisham solely
as a result of any failure of the Product to achieve the
approval of the FDA, or any other regulatory body in the
Territory.
17. INSURANCE
17.1 Emisphere shall maintain comprehensive general liability
insurance, including product liability insurance on the
Carriers manufactured and/or sold by Emisphere in such prudent
amount as shall be determined by the Management Committee for
the duration of this Agreement and for a period of two (2)
years thereafter. Emisphere shall provide Ebbisham with a
certificate from the insurance company verifying the above and
undertakes to notify Ebbisham directly at least thirty (30)
days prior to the expiration or termination of such coverage.
E m isphere shall also provide Ebbisham with a vendor's
certificate substantially in a form to be agreed between the
Parties.
17.2 E b bisham shall maintain comprehensive general liability
insurance, including product liability insurance on Carriers
m a n ufactured and/or sold by Ebbisham that incorporate
intellectual property licensed hereunder by Emisphere in such
prudent amount as shall be determined by the Management
Committee for the duration of this Agreement and three (3)
years thereafter. Ebbisham shall provide Emisphere with a
certificate from the insurance company verifying the above and
undertakes to notify Emisphere thirty (30) days prior to the
expiration or termination of such coverage.
18. IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE
18.1 Neither Party to this Agreement shall be liable for delay in
the performance of any of its obligations hereunder if such
delay results from causes beyond its reasonable control,
including, without limitation, acts of God, fires, strikes,
acts of war, or intervention of a government authority, non
availability of raw materials, but any such delay or failure
shall be remedied by such Party as soon as practicable.
19. SETTLEMENT OF DISPUTES; PROPER LAW
19.1 The Parties will attempt in good faith to resolve any dispute
arising out of or relating to this Agreement promptly by
negotiation between executives of the Parties. In the event
that such negotiations do not result in a mutually acceptable
resolution, the Parties agree to consider other dispute
resolution mechanisms including mediation. Subject to the
provisions of Clause 19.2, in the event that the Parties fail
t o agree on a mutually acceptable dispute resolution
mechanism, any such dispute shall be finally settled by the
courts of competent jurisdiction. The Parties hereby submit
to the jurisdiction of the state and federal courts located in
the state of New York and the courts of Ireland and the
Parties hereby waive any and all defences of improper venue or
that the Forum is inconvenient.
19.2 Where under any provision of this Agreement any matter is to
be determined by an Expert, the provisions of Clause 21 of the
Joint Venture Agreement shall apply.
19.3 T h is Agreement shall be governed by and construed in
accordance with the laws of Ireland.
20. ASSIGNMENT
20.1 This Agreement may not be assigned by either Party without the
prior written consent of the other, which consent shall not be
unreasonably withheld, conditioned or delayed, save that
either Party may assign this Agreement to its Affiliate
without such consent, provided that such assignment does not
have any adverse tax consequences on the other Party.
Emisphere and Ebbisham will discuss any assignment by either
Party to an Affiliate prior to its implementation in order to
avoid or reduce any additional tax liability to the other
Party resulting solely from different tax law provisions
applying after such assignment to an Affiliate. For the
purpose hereof, an additional tax liability shall be deemed to
have occurred if either Party would be subject to a higher net
tax on payments made hereunder after taking into account any
applicable tax treaty and available tax credits than such
Party was subject to before the proposed assignment.
21. NOTICES
21.1 Any notice to be given under this Agreement shall be sent in
writing in English by registered airmail or telefaxed to the
following addresses:
If to Ebbisham:
Ebbisham Limited
Monksland
Athlone
County Westmeath
Attention: Company Secretary
Telephone: 353 902 95000
Telefax: 353 902 92427
with a copy to Elan at
Elan Corporation plc
Monksland
Athlone
Co Westmeath
Ireland
Attention: V i ce President, General Counsel Elan
Pharmaceutical Technologies
Telephone: 353 902 94666
Telefax : 353 902 92427
If to Emisphere
Emisphere Technologies, Inc.
15 Skyline Drive
Hawthorne
New York
USA 10532
Attention: Vice President Business Development
Telephone: (914) 347 2220
Telefax: (914) 347 2498
or to such other address(es) and telefax numbers as may from
time to time be notified by either Party to the other
hereunder.
21.2 Any notice sent by mail shall be deemed to have been delivered
within seven (7) working days after despatch and any notice
sent by telex or telefax shall be deemed to have been
delivered within twenty four (24) hours of the time of the
despatch. Notice of change of address shall be effective upon
receipt.
22. MISCELLANEOUS CLAUSES
22.1 No waiver of any right under this Agreement shall be deemed
effective unless contained in a written document signed by the
Party charged with such waiver, and no waiver of any breach or
failure to perform shall be deemed to be a waiver of any other
breach or failure to perform or of any other right arising
under this Agreement.
22.2 If any provision in this Agreement is agreed by the Parties to
be, or is deemed to be, or becomes invalid, illegal, void or
unenforceable under any law that is applicable hereto, (i)
such provision will be deemed amended to conform to applicable
laws so as to be valid and enforceable or, if it cannot be so
amended without materially altering the intention of the
Parties, it will be deleted, with effect from the date of such
agreement or such earlier date as the Parties may agree, and
( i i) the validity, legality and enforceability of the
remaining provisions of this Agreement shall not be impaired
or affected in any way.
22.3 The Parties shall use their respective reasonable endeavours
to ensure that the Parties and any necessary third party shall
do, execute and perform all such further deeds, documents,
assurances, acts and things as any of the Parties hereto may
reasonably require by notice in writing to the other Party or
such third party to carry the provisions of this Agreement.
22.4 This Agreement shall be binding upon and enure to the benefit
of the Parties hereto, their successors and permitted assigns
and sub-licenses.
22.5 No provision of this Agreement shall be construed so as to
negate, modify or affect in any way the provisions of any
other agreement between the Parties unless specifically
referred to, and solely to the extent provided, in any such
other agreement. In the event of a conflict between the
provisions of this Agreement and the provisions of the Joint
Venture Agreement, the terms of the Joint Venture Agreement
shall prevail unless this Agreement specifically provides
otherwise.
22.6 No amendment, modification or addition hereto shall be
effective or binding on either Party unless set forth in
writing and executed by a duly authorised representative of
each Party.
22.7 This Agreement may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute
this Agreement.
22.8 Each of the Parties undertake to do all things reasonably
within its power which are necessary or desirable to give
effect to the spirit and intent of this Agreement.
22.9 Each of the Parties hereby acknowledges that in entering into
this Agreement it has not relied on any representation or
warranty save as expressly set out herein or in any document
referred to herein.
22.10 Nothing contained in this Agreement is intended or is to be
construed to constitute Emisphere and Ebbisham as partners, or
Emisphere as an employee of Ebbisham, or Ebbisham as an
employee of Emisphere. Neither Party hereto shall have any
express or implied right or authority to assume or create any
obligations on behalf of or in the name of the other Party or
to bind the other Party to any contract, agreement or
undertaking with any third party.
IN WITNESS THEREOF the Parties hereto have executed this Agreement
in duplicate.
SIGNED BY
For and on behalf of
EMISPHERE TECHNOLOGIES, INC
in the presence of:-
SIGNED BY
For and on behalf of
EBBISHAM LIMITED
in the presence of:-
SCHEDULE 1
EMISPHERE PATENTS
ISSUED PATENTS
--------------
PATENT NO. TITLE DATE ISSUED
4,925,673 Delivery System For Pharmacological 05/15/90
Agents Encapsulated with Proteinoids
4,895,725 Microencapsulation of Fish Oils 01/23/90
4,983,402 Orally Administerable ANF 02/08/91
4,976,968 Anhydrous Delivery System For 12/11/90
Pharmacological Agents
4,446,138 Method and Composition for Reducing 05/01/84
Weight
5,443,841 Proteinoid Microspheres and Methods 06/22/95
for the Preparation of Use Thereof
5,401,516 Modified Hydrolyzed Vegetable Protein 03/28/95
Microspheres and Methods for Preparation
and Use Thereof
5,451,410 Modified Amino Acids for Encapsulating 09/19/95
Active Agents
5,447,728 Modified Amino Acids for Encapsulating 09/05/95
Active Agents
In 1992 the Company changed its name from Clinical Technologies
Associates to Emisphere Technologies, Inc.
PENDING PATENTS
---------------
SERIAL NO. TITLE DATE FILED
08/252,979 Delivery System For Pharmacological 06/02/94
Agents Encapsulated with Proteinoids
08/437,705 Proteinoid Microspheres and Methods 05/09/95
for the Preparation and Use Thereof
08/076,803 Stabilized Protein Microspheres and Methods 06/14/93
for the Preparation and Use Thereof
08/437,698 Proteinoid Microspheres and Methods 05/09/95
for Preparation of Use Thereof
08/484,293 Fragrances and Flavorants 06/07/95
08/342,900 Modified Hydrolyzed Vegetable Protein 11/21/94
Microspheres and Methods for Preparation
and Use Thereof
08/233,281 Modified Hydrolyzed Vegetable Protein 04/25/94
Microspheres and Methods for Preparation
and Use Thereof
Desferrioxamine Oral Delivery System
Insulin Oral Delivery System
08/372,208 Compositions for the Delivery of Antigens 01/13/95
08/460,265 Modified Amino Acids for Drug Delivery 06/02/95
08/231,622 Modified Amino Acids for Drug Delivery 04/22/94
08/475,887 Method of Solubilizing and Encapsulating 06/07/95
Intraconazole
08/475,882 Spray Drying Method and Apparatus 06/07/95
08/205,511 Oral Drug Delivery Compositions and Methods 03/02/94
08/231,623 Acids and Acid Salts and Their Use In Delivery
Systems 04/22/94
08/315,200 Diketopiperazine-Based Delivery Systems 09/29/94
08/316,404 Carbon-Substituted Diketopiperazine Delivery 09/30/94
08/335,148 Compounds and Compositions for Delivering 10/25/94
Active Agents
08/328,932 Active Agent Transport Systems 10/25/94
08/438,644 Compositions for the Delivery of Antigens 05/10/95
08/475,885 Proteinoid Emulsions and Methods for Preparation 06/07/95
and Use Thereof
08/430,491 Bis-Amide-Dicarboxylic Acids 04/28/95
08/424,654 Compounds and Compositions for Delivering 03/31/95
Active Agents
60/003,111 Compounds and Compositions for Delivering 09/01/95
Active Agents
60/003,508 Practical Synthesis of N-Aminoalkanoic Acid 09/11/95
Derivatives
Oligopeptides-Heparin Interaction
Cycloalkyl Diamids Acids
In 1992 the Company changed its name from Clinical Technologies
Associates to Emisphere Technologies, Inc.
- -----------------------------------------------------------------------------
Exhibit 10
Stock Instrument dated September 26, 1996 by
and between Ebbisham Limited and the Company
- -----------------------------------------------------------------------------
Dated September 1996
EBBISHAM LIMITED
AND
ELAN CORPORATION PLC
STOCK INSTRUMENT
constituting US$4,500,000
Subordinated Loan Stock
McCann FitzGerald
Solicitors
2 Harbourmaster Place
Custom House Dock
Dublin 1
Contents
Clause Page
1. Definitions and Interpretation . . . . . . . . . . . . . . . 1
2. Representations and Warranties . . . . . . . . . . . . . . . 2
3. The Stock . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Subordination of Stock Repayment . . . . . . . . . . . . . . 4
5. The Certificate and Terms and Conditions . . . . . . . . . . 4
6. Repayment . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 5
8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 6
9. General . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. Jurisdiction and Governing Law . . . . . . . . . . . . . . . 6
THIS INSTRUMENT entered into on September 1996 between
EBBISHAM LIMITED, ("Ebbisham"), whose registered office is at 2
H a rbourmaster Place, Custom House Dock, Dublin 1, and ELAN
CORPORATION PLC ("Elan"), whose registered office is at Monksland,
Athlone, Co. Westmeath.
NOW THIS INSTRUMENT WITNESSETH:
1. Definitions and Interpretation
1.1 In this Instrument unless the context or subject otherwise
requires, the following expressions shall have the following
meanings:
"Business Day" means any day (other than a Saturday or
Sunday) on which banks are open for business in Ireland;
" C e r t ificate" means a certificate for Stock in or
substantially in the form set out in Schedule 1;
"Companies Acts" means the Companies Acts, 1963 to 1990;
"Event of Default" means the events set out in clause 6.2;
"Joint Venture Agreement" means the Joint Venture Agreement
between Elan, Emisphere Technologies, Inc. and Ebbisham of
even date with this Instrument;
"Party" means Ebbisham or Elan and "Parties" means Ebbisham
and Elan together;
"Person" means an individual, partnership, corporation,
limited liability company, business trust, joint stock
company, trust, unincorporated association, joint venture, or
other entity of whatever nature;
"Regulatory Authority" means the Central Bank of Ireland, the
Revenue Commissioners, and any regulatory authority in or of
Ireland or of any federation, community, association or
organisation wherever established of which Ireland is for the
time being a member;
"Security Interest" means any mortgage, trust, debenture,
p l e dge, lien, hypothecation, security interest, any
assignment with a provision for re-assignment, charge or
encumbrance of any kind or any other agreement or arrangement
having the effect of security;
"Stock" means the US$4,500,000 subordinated loan stock issued
to Elan on payment of US$4,500,000 from Elan to Ebbisham, as
the context or subject admits, or the amount of such stock
for the time being issued and outstanding;
"tax" means any present or future tax, levy, impost,
withholding, duty or other charge of a similar nature
(including, without limitation, any penalty, charge or
interest payable in connection with any failure to pay or any
delay in paying any of the same);
"Instrument" means this Stock Instrument and any Certificates
as modified from time to time in accordance with the
provisions herein contained, including, without limitation,
any supplemental instrument executed in accordance with the
provisions herein contained; and
"US$" means the lawful currency for the time being of the
United States of America.
1.2 In this Instrument:
(i) words and expressions defined in the Companies Acts
shall, unless the context or subject otherwise requires,
have the same meanings in this Instrument; (ii) words
importing the singular shall include the plural and vice
versa;
(iii) unless the context otherwise requires, reference
to a clause or schedule is to a clause or
schedule of this Instrument;
(iv) reference to a statute or statutory provision shall
include a reference to it as from time to time amended,
extended or re-enacted; and
(v) the headings in this Instrument are inserted for
convenience only and do not affect its construction;
(vi) unless the context or subject otherwise requires,
references to words in one gender include references to
the other genders.
2. Representations and Warranties
2.1 Ebbisham hereby represents and warrants to and for the
benefit of Elan that at the date hereof:
(i) Ebbisham is duly incorporated under the laws of Ireland;
(ii) Ebbisham has full authority and capacity to enter into
and perform its obligations under this Instrument
( h aving obtained all requisite corporate and
governmental approvals);
(iii) Ebbisham is not engaged in any litigation or
arbitration, or in any dispute or controversy
r e a sonably likely to lead to litigation,
arbitration or any other proceeding, which would
materially affect the validity of this
Instrument, or its fulfilment of its obligations
under this Instrument; and
(iv) this Instrument has been fully authorised, executed and
delivered by it and it has full legal right, power and
authority to enter into and perform this Instrument.
3. The Stock
3.1 The Stock shall be known as Subordinated Loan Stock. The
amount of the Stock is limited to US$4,500,000. The Stock as
and when issued shall constitute direct, unconditional and
unsecured obligations of Ebbisham.
3.2 Ebbisham shall comply with the terms and conditions of this
Instrument and the Stock shall be held subject to and with
the benefit of such terms and conditions all of which shall
be binding on Ebbisham and Elan and all persons claiming
through or under them, respectively.
3.3 Interest on the Stock shall be payable annually by Ebbisham
to Elan on the last Business Day of each Financial Year (as
defined in the Joint Venture Agreement) provided that no
interest shall be due or payable for any financial year
unless Ebbisham shall have accumulated distributable reserves
and shall have earned a profit after tax in the preceding
Financial Year of not less than US$100,000. The rate of
interest applicable for each such financial year shall be as
follows:
(i) 5% if profits after tax for that financial year exceed
US$100,000 but do not exceed US$5,000,000;
(ii) 10% if profits after tax for that financial year exceed
US$5,000,000 but do not exceed US$10,000,000;
(iii) 15% if profits after tax for that financial year
exceed US$10,000,000.
4. Subordination of Stock Repayment
In a liquidation, winding-up or other bankruptcy of Ebbisham,
the right of Elan to payment by Ebbisham of the full amount
of the Stock shall be subordinated and postponed in the right
of payment, satisfaction and discharge by Ebbisham to the
prior payment, satisfaction and discharge by Ebbisham of the
claims of all other creditors of Ebbisham.
Provided that:
(i) the right of Elan to be repaid by Ebbisham the full
amount of the Stock in a liquidation, winding-up or
other bankruptcy of Ebbisham shall rank:
(a) above and in preference to the rights of any
holder of share capital in Ebbisham; and
(b) pari passu, equally and rateably with the rights
of other creditors of Ebbisham whose debts or
claims rank equally and rateably with the Stock
in respect of Ebbisham's obligation to repay the
full amount thereof on a winding-up, liquidation
or other bankruptcy of Ebbisham.
(ii) The subordination and postponement of the right of Elan
to the payment by Ebbisham of the principal amount of
the Stock provided for in this Clause 4 shall only
affect the ranking, for priority purposes, of Elan's
rights in a liquidation, winding-up or other bankruptcy
of Ebbisham and shall not in any way whatsoever prevent
or postpone any amount payable by Ebbisham in respect of
Stock from falling due for payment as provided for in
Clause 6 or otherwise in this Instrument.
5. The Certificate and Terms and Conditions
5.1 The Certificate shall be executed under the common seal of
Ebbisham which shall be affixed and witnessed in accordance
with its Articles of Association.
5.2 Elan shall be entitled to receive one or more Certificates
for the Stock held by it.
5.3 The Certificate shall be:
(i) in the form or substantially in the form set out in
Schedule 1; and
(ii) issued subject to the terms and conditions applicable to
Stock under this Instrument.
6. Repayment
6.1 The Stock together with any interest due and outstanding
shall be repaid on the tenth anniversary of this Instrument.
6.2 The Stock shall become immediately due by Ebbisham if an
order is made or an effective resolution is passed for the
liquidation, winding up or other bankruptcy of Ebbisham or
any analogous or similar event shall happen by reference to
the laws of any applicable jurisdiction.
6.3 On repayment of the Stock, the Stock shall be immediately
redeemed and cancelled by Ebbisham.
7. Notices
Any notice to be given under this Agreement shall be sent in
writing by registered or recorded delivery post or telecopied
to:
- Elan at
Elan Corporation plc
Monksland, Athlone, County Westmeath, Ireland
Attention: Company Secretary
Telephone: 353 902 95000
Telefax: 353 902 92427
- Ebbisham at
Ebbisham Limited
Monksland, Athlone, County Westmeath, Ireland
Attention: Company Secretary
Telephone: 353 902 95000
Telefax: 353 902 92427
with a copy to
Emisphere Technologies, Inc. ("Emisphere")
15 Skyline Drive, Hawthorne NY, USA 10532
Attention: Vice President
Business Development
Telephone: 1 913 347 2220
Telefax: 1 913 347 2498
or to such other address(es) as may from time to time be
notified by either Party or Emisphere to the other hereunder.
Any notice sent by mail shall be deemed to have been
delivered within seven (7) working days after dispatch and
any notice sent by telecopy shall be deemed to have been
delivered within twenty-four (24) hours of the time of the
dispatch. Notices of change of address shall be effective
upon receipt.
8. Assignment
8.1 This Instrument and the Stock issued pursuant hereto may be
assigned by Elan together, but not without the prior written
consent of Ebbisham, such consent not to be unreasonably
withheld or delayed.
9. General
9.1 If at any time any one or more of the provisions in this
Instrument is or becomes invalid, illegal or unenforceable in
any respect under any law or regulation, the validity,
legality and enforceability of the remaining provisions of
this Instrument shall not be in any way affected or impaired
thereby.
9.2 This Instrument may be executed in any number of counterparts
on separate counterparts, each of which, when executed and
d e livered, shall constitute an original, but all the
counterparts shall together constitute but one and the same
instrument.
10. Jurisdiction and Governing Law
10.1 For the benefit of Elan, Ebbisham agrees that the courts of
Ireland are to have jurisdiction to settle disputes which may
arise under or in connection with this Instrument. This
provision shall not restrict or prevent Elan or Ebbisham from
taking any legal action, suit or proceeding under or in
connection with this Instrument in the courts of any other
competent jurisdiction.
10.2 This Instrument shall be governed by and construed in
accordance with the laws of Ireland and the Parties agree to
submit to the jurisdiction of the state and federal courts
located in the State of New York and the courts of Ireland
for the resolution of disputes hereunder.
IN WITNESS WHEREOF the Parties have executed this Instrument in
duplicate on the day first set forth above.
SIGNED BY
for and on behalf of
ELAN CORPORATION PLC
in the presence of:-
SIGNED BY
for and on behalf of
EBBISHAM LIMITED
in the presence of:-
Schedule 1
[Form of Certificate]
Ebbisham Limited
US$4,500,000 SUBORDINATED LOAN STOCK
[Serial No.] [Amount of Stock]
The issue of the Stock was authorised by a resolution of the board
o f directors of Ebbisham Limited, incorporated in Ireland,
registered number [ ] ("Ebbisham") passed on 1996.
THIS IS TO CERTIFY that Elan Corporation Plc is the registered
holder(s) of [ ] (US dollars) in amount of
Stock which is constituted by a Stock Instrument entered into by
Ebbisham on [ ] 1996 (the "Instrument"). The Stock
is issued subject to the provisions and conditions contained in the
Instrument.
IN WITNESS whereof, this Certificate has been executed under the
Common Seal
of Ebbisham Limited.
SEAL
--------------------------
Authorised Person
--------------------------
Authorised Person
Dated [ ]
- -----------------------------------------------------------------------------
EXHIBIT 10
Memorandum and Articles of Association of Ebbisham Limited
- -----------------------------------------------------------------------------
THE COMPANIES ACTS, 1963 to 1990
COMPANY LIMITED BY SHARES
MEMORANDUM AND ARTICLES OF ASSOCIATION
OF
EBBISHAM LIMITED
(As adopted by members special resolution dated 26 September 1996)
McCann FitzGerald
Solicitors
2 Harbourmaster Place
Custom House Dock
Dublin 1
CONTENTS
Clause Page No.
Memorandum of Association
NAME OF COMPANY . . . . . . . . . . . . . . . . . . . . . . . 1
OBJECTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . 1
LIABILITY OF THE MEMBERS . . . . . . . . . . . . . . . . . . . 5
SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . 6
Articles of Association
INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . 8
PRIVATE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . 10
SHARE CAPITAL AND VARIATION OF RIGHTS . . . . . . . . . . . . . 10
LIEN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
CALLS ON SHARES . . . . . . . . . . . . . . . . . . . . . . . . 15
FORFEITURE OF SHARES . . . . . . . . . . . . . . . . . . . . . . 16
TRANSFER OF SHARES . . . . . . . . . . . . . . . . . . . . . . . 17
INCREASE OF CAPITAL . . . . . . . . . . . . . . . . . . . . . . 18
ALTERATION OF CAPITAL . . . . . . . . . . . . . . . . . . . . . 18
GENERAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . 19
NOTICE OF GENERAL MEETINGS . . . . . . . . . . . . . . . . . . . 19
PROCEEDINGS AT GENERAL MEETINGS . . . . . . . . . . . . . . . . 20
VOTES OF MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . 21
BODY CORPORATES ACTING BY REPRESENTATIVES . . . . . . . . . . . 23
DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
BORROWING POWERS . . . . . . . . . . . . . . . . . . . . . . . . 25
POWERS AND DUTIES OF DIRECTORS . . . . . . . . . . . . . . . . . 25
PROCEEDINGS OF DIRECTORS . . . . . . . . . . . . . . . . . . . . 27
SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
THE SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
AUTHENTICATION OF DOCUMENTS . . . . . . . . . . . . . . . . . . 30
DIVIDENDS AND RESERVE . . . . . . . . . . . . . . . . . . . . . 30
ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
CAPITALISATION OF PROFITS . . . . . . . . . . . . . . . . . . . 32
AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
WINDING UP . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
COMPANIES ACTS, 1963 TO 1990
COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
EBBISHAM LIMITED
1. Name of Company is: EBBISHAM LIMITED
2. The objects for which the Company is established are:
(a) To carry on all or any of the businesses of manufacturers,
buyers, sellers, and distributing agents of and dealers in
all kinds of patent, pharmaceutical, medicinal, and
medicated preparations, patent medicines, drugs, herbs,
perfumes, creams, unguents, hairdressings, washes,
pomades, dyes, cosmetics, skin preparations, soaps, oils,
oleaginous and vaporaceous substances, beauty specialties,
preparations and accessories of every description, and of
and in pharmaceutical, medicinal, proprietary and
industrial preparations, compounds, and articles of all
kinds, chemists, druggists, and chemical manufacturers,
merchants and dealers; and to manufacture, make up,
prepare, buy, sell, and deal in all articles, substances,
and things commonly or conveniently used in or for making
up, preparing, or packing any of the products in which the
Company is authorised to deal, or which may be required by
customers of or persons having dealings with the Company.
(b) To establish, maintain and operate laboratories and shops
for the purpose of carrying on chemical, physical and
other research in medicine, chemistry, pharmacy,
dentistry, industry or other unrelated or related fields.
(c) To carry on any other business except the issuing of
policies of insurance, which may seem to the Company
capable of being conveniently carried on in connection
with the above, or calculated directly or indirectly to
enhance the value of or render profitable any of the
Company's property or rights.
(d) As an object of the Company and as a pursuit in itself or
otherwise, and whether for the purpose of making a profit
or avoiding a loss or for any other purpose whatsoever, to
engage in currency exchange and interest rate transactions
and any other financial or other transactions of whatever
nature, including (without limiting the foregoing) any
transaction for the purpose of, or capable of being for
the purposes of, avoiding, reducing, minimising, hedging
against or otherwise managing the risk of any loss, cost,
expense of liability arising, or which may arise, directly
or indirectly, from a change or changes in any interest
rate or currency exchange rate or in the price or value of
any property, asset, commodity, index or liability or for
any other risk or factor affecting the Company's business,
including but not limited to dealings, whether involving
purchases, sales or otherwise, in foreign and Irish
currency, spot and forward exchange rate contracts,
forward rate agreements, caps, floors and collars,
futures, options, swaps, and any other currency interest
rate and other hedging arrangements and such other
instruments as are similar to, or derivatives of, any of
the foregoing.
(e) To invest any monies of the Company in such investments
(including shares in the Company) and in such manner as
may from time to time be determined, and to hold, sell or
deal with such investments and generally to purchase, take
on lease or in exchange or otherwise acquire any real and
personal property and rights or privileges.
(f) To acquire by purchase, exchange, lease, fee farm grant or
otherwise, either for an estate in fee simple or for any
lesser estate or other estate or interest, whether
immediate or reversionary and whether vested or
contingent, any lands, tenements or hereditaments of any
tenure, whether subject or not to any charges or
incumbrances, and to hold, farm, work and manage and to
let, sublet, mortgage or charge land and buildings of any
kind, reversions, interests, annuities, life policies, and
any other property real or personal, movable or immovable,
either absolutely or conditionally, and either subject or
not to any mortgage, charge, ground rent or other rents or
incumbrances.
(g) Incidentally to the objects aforesaid, but not as a
primary object, to sell, exchange, mortgage (with or
without power of sale), assign turn to account or
otherwise dispose of and generally deal with the whole or
any part of the property, shares, stocks, securities,
estates, rights or undertakings of the Company, real,
chattel real or personal, movable or immovable either, in
whole or in part, upon whatever terms and whatever
consideration the Company shall think fit.
(h) To take part in the management, supervision, or control of
the business or operations of any company, or undertaking,
and for that purposes to appoint and remunerate any
Directors, accountants, or other experts or agents to act
as consultants, supervisors and agents of other companies
or undertakings and to provide managerial, advisory,
technical, design, purchasing and selling services.
(i) To make, draw, accept, endorse, negotiate, issue, execute,
discount and otherwise deal with bills of exchange,
promissory notes, letters of credit, circular notes, and
other negotiable or transferable instruments.
(j) To redeem, purchase, or otherwise acquire in any manner
permitted by law and on such terms and in such manner as
the Company may think fit any shares in the Company's
Capital.
(k) To guarantee support or secure whether by personal
covenant or by mortgaging or charging all or any part of
the undertaking property and assets (present and future)
and uncalled capital of the Company or such methods the
performance of the obligations of, and the repayment or
payment of the principal amounts of and the premiums
interest and dividends on any security of any person firm
or company including (without prejudice to the generality
of the foregoing) any company which is for the time being
the Company's holding company or subsidiary as defined by
Section 155 of the Companies Act 1963 or another
subsidiary as defined by the said Section of the Company's
holding company or otherwise associated with the Company
in business, and without prejudice to the foregoing, to
issue indemnities in respect of the obligations of third
parties or otherwise and to give any form of security in
connection therewith), notwithstanding the fact that the
Company may not receive any consideration, advantage or
benefit, direct or indirect, from entering into such
guarantee and/or indemnity or other arrangement or
transaction contemplated herein.
(l) To lend the funds of the Company with or without security
and at interest or free of interest and on such terms and
conditions as the Directors shall from time to time
determine.
(m) To raise or borrow or secure the payment of money in such
manner and on such terms as the Directors may deem
expedient and in particular by way of subordinated loans
and by the issue of bonds, debentures or debenture stock,
perpetual or redeemable , or by mortgage, charge,lien or
pledge upon the whole or any part of the undertaking,
property, assets and rights of the Company, present or
future, including its uncalled capital and generally in
any other manner as the Directors shall from time to time
determine and to guarantee the liabilities of the Company
or any other person and any debentures, debenture stock or
other securities may be issued at a discount, premium or
otherwise, and with any special privileges as to
redemption, surrender, transfer, drawings, allotments of
shares, attending and voting at general meetings of the
Company, appointment of Directors and otherwise.
(n) To accumulate capital for any of the purposes of the
Company, and to appropriate any of the Company's assets to
specific purposes, either conditionally or
unconditionally, and to admit any class or section of
those who have any dealings with the Company to any share
in the profits thereof or in the profits of any particular
branch of the Company's business or to any other special
rights, privileges, advantages or benefits.
(o) To reduce the Share Capital of the Company in any manner
permitted by law.
(p) To make gifts or grant bonuses to officers or other
persons who are or have been in the employment of the
Company and to allow any such persons to have the use and
enjoyment of such property, chattels or other assets
belonging to the Company upon such terms as the Company
shall think fit.
(q) To establish and maintain or procure the establishment and
maintenance of any pension or superannuation fund (whether
contributory or otherwise) for the benefit of an to give
or procure the giving of donations, gratuities, pensions,
annuities, allowances, emoluments or charitable aid to any
persons who are or were at any time in the employment or
service of the Company or any of its predecessors in
business, or of any company which is a subsidiary of the
Company or who may be or have been Directors or officers
of the Company or of any such other company as aforesaid,
or any persons in whose welfare the Company or any such
other company as aforesaid may be interested and the
wives, widows, children, relatives and dependants of any
such persons and to make payments towards insurance and
assurance and to form and contribute to provident and
benefit funds for the benefit of such person and to
remunerate any person, firm or company rendering services
to the Company, whether by cash payment, gratuities,
pensions, annuities, allowances, emoluments or by the
allotment of shares or securities of the Company credited
as paid up in full or in part or otherwise.
(r) To employ experts to investigate and examine into the
conditions, prospects, value, character and circumstances
of any business concerns, undertakings, assets, property
or rights.
(s) To insure the life of any person who may, in the opinion
of the Company, be of value to the Company, as having or
holding for the Company interests, goodwill, or influence
or otherwise and to pay the premiums on such insurance.
(t) To distribute either upon a distribution of assets or
division of profits among the Members of the Company in
kind any property of the Company, and in particular any
shares, debentures, or securities of other companies
belonging to the Company or of which the Company may have
the power of disposing.
(u) To do and carry out all or any of the foregoing objects in
any part of the world and either as principals, agents,
contractors, trustees or otherwise, and either by or
through agents, trustees or otherwise and either alone or
in partnership or in conjunction with any other company,
firm or person, provided that nothing herein contained
shall empower the Company to carry on the businesses of
assurance or insurance within the meaning of the Insurance
Acts 1909 to 1964.
(v) To apply for, purchase or otherwise acquire any patents,
brevets d'invention, licences, trade marks, industrial
designs, know-how, concessions and other forms of
intellectual property rights and the like conferring any
exclusive or non-exclusive or limited or contingent rights
to use, or any secret or other information as to any
invention or process of the Company, or the acquisition of
which may seem calculated directly or indirectly to
benefit the Company, and to use, exercise, develop, or
grant licences in respect of, or otherwise turn to account
the property, rights or information so acquired.
(w) To enter into partnership or into any arrangements for
sharing profits, union of interests, co-operation, joint
venture, reciprocal concession or otherwise with any
person or company carrying on or engaged in or about to
carry on or engage in any business or transaction which
the Company is authorised to carry on or engage in or any
business or transaction capable of being conducted so as
directly or indirectly to benefit the Company.
(x) To acquire and undertake the whole or any part of the
undertaking business, property and liabilities of any
person or company carrying on any business which the
Company is authorised to carry on or which is capable of
being conducted so as to benefit the Company directly or
indirectly or which is possessed of assets suitable for
the purposes of the Company.
(y) To amalgamate with, merge with or otherwise become part of
or associated with any other company or association in any
manner permitted by law.
(z) To do and carry out all such other things as may be deemed
by the Company to be incidental or conductive to the
attainment of the above objects or any of them or
calculated to enhance the value of or render profitable
any of the Company's properties or rights.
And it is hereby declared that the word "company" in this
clause, except where used in reference to this Company, shall
be deemed to include any person, partnership or other body of
persons whether incorporated or not incorporated and whether
domiciled in the State or elsewhere and that the objects of the
Company as specified in each of the foregoing paragraphs of
this clause (except paragraph (g) and except otherwise only if
and so far as otherwise expressly provided in any such
paragraph) shall be separate and distinct objects and shall not
be in anywise limited or restricted by reference to or
inference from the terms of any other paragraph or the name of
the Company.
3. The liability of the Members is limited.
4. The Share Capital of the Company is US$10,000,000 divided into
5,000,000 "A" Ordinary Shares and 5,000,000 "B" Ordinary Shares
of US$1 each.
We, the several persons whose names and addresses are
subscribed, wish to be formed into a Company in pursuance of
this Memorandum of Association, and we agree to take the number
of shares in the Capital of the Company set opposite our
respective names.
----------------------------------------------------------------
NAMES, ADDRESSES AND DESCRIPTIONS Number of Shares
OF SUBSCRIBERS
taken by each Subscriber
----------------------------------------------------------------
MFSD Nominees Limited One
2 Harbourmaster Place
Custom House Dock
Dublin 1
Limited Company
------------------------
Director
MFSD Holdings Limited One
2 Harbourmaster Place
Custom House Dock
Dublin 1
Limited Company
------------------------
Director
---------------------------------------------------------------
Total Shares Taken: Two
----------------------------------------------------------------
Dated the 8 day of February 1996
Witness to the above signature:-
Alan Fitzpatrick
2 Harbourmaster Place
Custom House Dock
Dublin 1
Secretarial Assistant
----------------------------------------------------------------
COMPANIES ACTS, 1963 to 1990
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
-of-
EBBISHAM LIMITED
INTERPRETATION
1. The regulations contained in Table A in the First Schedule to
the Companies Act, l963, shall not apply to the Company.
2. In these Articles the following words or symbols shall have the
following meanings unless such meanings are inconsistent with the
subject or context:
the Act the Companies Act, 1963; but where a
reference is made to a particular
section or sections of the Act the
reference shall be to such section
or sections of the Act as the same
may be from time to time amended or
replaced;
the Acts the Companies Acts, 1963 to 1990 and
every statutory extension
modification and re-enactment
thereof from time to time in force;
the l983 Act the Companies (Amendment) Act, l983;
the 1990 Act the Companies Act, 1990;
the Directors the Directors for the time being and
from time to time of the Company or
the Directors present at a meeting
of the Board of Directors
the Office the Registered Office for the time
being and from time to time of the
Company;
the Register the Register of Members to be kept
as required by section 116 of the Act;
these Articles these Articles of Association, as
originally framed, or as varied from
time to time by special resolution;
the Seal the common seal of the Company;
the Secretary shall include an assistant or an
acting secretary for the time being;
Class Meeting meeting of holders of one class of
shares in the Company;
"A" Director any person appointed an "A" Director
pursuant to Article 71(1) or deemed
to have been so appointed pursuant
to Article 76;
"B" Director any person appointed a "B" Director
pursuant to Article 71(2) or deemed
to have been so appointed pursuant
to Article 76;
the State the Republic of Ireland;
Dividend dividend and/or bonus;
Month calendar month;
Paid up paid up or credited as paid up;
Year calendar year;
IR Irish Pounds; and
US$ United States Dollars.
Expressions referring to writing shall, unless the contrary
intention appears, be construed as including reference to printing,
lithography, photography, and any other means of reproducing or
representing words in visible form.
Words importing the singular number only shall include the plural
number and vice versa, and words importing the masculine gender
shall include the feminine gender.
Words importing persons shall include corporations.
Unless the contrary intention appears, words or expressions
contained in these Articles shall bear the same meanings as in the
Acts as in force at the date on which these Articles become binding
on the Company.
PRIVATE COMPANY
3. The Company is a private company, and accordingly:
(a) the right to transfer shares is restricted in the manner
hereinafter prescribed;
(b) the number of members of the Company (exclusive of persons
who are in the employment of the Company and of persons
who, having been formerly in the employment of the
Company, were while in such employment, and have continued
after the determination of such employment to be members
of the Company) is limited to fifty; so however that
where two or more persons hold one or more shares in the
Company jointly they shall for the purposes of this
Article be treated as a single member;
(c) any invitation to the public to subscribe for any shares
or debentures of the Company is prohibited;
(d) the Company shall not have power to issue share warrants
to bearer.
SHARE CAPITAL AND VARIATION OF RIGHTS
4(1) The share capital of the Company is US$10,000,000 divided
as follows:
(a) 5,000,000 "A" Shares of US$1 each;
(b) 5,000,000 "B" Shares of US$1 each;
(2) The "A" Shares and "B" Shares shall each enjoy the rights
specified below:
(a) the holders of the "A" Shares and the "B" Shares (the
"A Shareholders" and "B Shareholders" respectively)
shall have the right to receive notice of and attend,
speak and vote at general meetings of the Company;
(b) the aggregate annual dividend and final distribution
on the winding up of the Company which is payable on
the "A" Shares shall equal the aggregate annual
dividend payable on the "B" Shares regardless of the
number of "A" Shares or "B" Shares as the case may be
then in issue;<PAGE>
(c) except as otherwise provided in these Articles the
"A" Shares and "B" Shares rank pari passu in all
respects.
5(1) Without prejudice to any special rights previously
conferred on the holders of any shares or class of shares in the
Company, any share in the Company may be issued with such preferred,
deferred or other special rights or restrictions, whether in regard
to dividend, voting, return of capital or otherwise, as the Company
may from time to time by special resolution determine.
(2) Subject to the provisions of Part XI of the 1990 Act the
Company may:
(a) issue shares which are to be redeemed or are liable
to be redeemed at the option of the Company or the
holder on such terms and in such manner as shall be
provided by the Articles of Association of the
Company provided always that the nominal value of the
issued share capital which is not redeemable shall
not at any time, be less than one tenth of the
nominal value of the total issued share capital of
the Company;
(b) purchase its own shares;
(c) cancel any of its own shares following purchase;
(d) re-designate any of its own shares following purchase
as treasury shares provided always that the nominal
value of any treasury shares held by the Company, may
not, at any one time, exceed ten per cent. of the
nominal value of the issued share capital of the
Company.
(For so long as the Company holds shares as treasury
shares:
(i) the Company shall not exercise any voting rights
in respect of those shares and any purported
exercise of those rights shall be void; and
(ii) no dividend or other payment (including any
payment in a winding up of the Company) shall be
payable to the Company in respect of those
shares);
(e) cancel or re-issue as shares of any class any shares
held by the Company as treasury shares;
(f) make a payment in respect of the redemption or
purchase of its own shares otherwise than out of
distributable profits of the Company or the proceeds
of a fresh issue of shares.
Notice of purchase or redemption in writing shall be given in
accordance with this sub-paragraph to the holders of Ordinary Shares
to be purchased or redeemed. Any notice of purchase or redemption
shall specify the number of shares to be purchased or redeemed, the
date fixed for purchase or redemption and the place at which the
certificates for such shares are to be presented for purchase or
redemption and upon such date each of the holders of the shares
concerned shall be bound to deliver to the Company at such place the
certificates for the shares to be purchased or redeemed. If any
certificate so delivered to the Company includes any shares not to
be purchased or redeemed on that occasion a fresh certificate for
such shares shall forthwith be issued to the holder delivering such
certificate to the Company.
6(1) If at any time the share capital of the Company is divided
into different classes of shares, the rights attached to any class
(unless otherwise provided by the terms of the issue of the shares
of that class) may, subject to the provisions of the Acts, whether
or not the Company is being wound up, be varied or abrogated with
the consent in writing of the holders of three-fourths of the issued
shares of that class or with the sanction of a special resolution
passed at a separate general meeting of the holders of the shares of
the class, but not otherwise.
(2) The rights conferred upon the holders of the shares of any
class shall not, unless otherwise expressly provided by the terms of
issue of such shares, be deemed to be varied by the amendment of
rights attaching to shares or the creation or issue of further
shares ranking in priority thereto or pari passu therewith or by the
issue of further shares of any other class of shares in the Company
whether such class of shares is in existence at the time of issue of
shares in the first mentioned class or not.
(3) To every Class Meeting held pursuant to paragraph (1) of
this Article all the provisions of these Articles relating to
general meetings of the Company, and to proceedings thereat shall,
mutatis mutandis, apply, but so that the necessary quorum shall be
two persons at least holding or representing by proxy one-third in
nominal amount of the issued shares of the class (but so that if at
any adjourned meeting of such holders a quorum as above defined is
not present those members who are present in person or by proxy
shall be a quorum). Any holder of the shares of the class present
in person or by proxy may demand a poll, and each such person shall
upon such poll have one vote in respect of every share of the class
held by him respectively.
7(1) Subject to the provisions of these Articles relating to
new shares, the shares shall be at the disposal of the Directors,
and they may (subject to the provisions of the Acts) allot, grant
options over or otherwise dispose of them to such persons, on such
terms and conditions and at such times as they may consider to be in
the best interests of the Company and its shareholders, but so that
no share shall be issued at a discount.
(2) For the purposes of section 20 of the l983 Act the
Directors are, subject to Article 40, generally and unconditionally
authorised to allot relevant securities (within the meaning of the
said section 20) up to a maximum aggregate of the number of
authorised but unissued relevant securities in the capital of the
Company (whether from part of the original or any increased capital)
provided that this authority shall expire after a period of five
years from the date of adoption of these Articles (being 26
September 2001). The Company may, before such expiry, make an offer
or agreement which would or might require relevant securities to be
allotted after such expiry and the Directors may allot relevant
securities in pursuance of such offer or agreement, notwithstanding
that the authority hereby conferred has expired.
(3) In accordance with section 23(10) of the l983 Act the
application of sub-sections (1), (7) and (8) of the said section 23
is hereby excluded in relation to the allotment of equity securities
(as defined by sub-section (13) of the said section 23).
8. The Company may exercise the powers of paying commissions
conferred by section 59 of the Act, provided that the rate per cent.
and the amount of the commission paid or agreed to be paid shall be
disclosed in the manner required by that section, and the rate of
the commission shall not exceed the rate of 10 per cent. of the
price at which the shares in respect whereof the same is paid are
issued or an amount equal to 10 per cent. of such price (as the case
may be). Such commission may be satisfied by the payment of cash,
or the allotment of fully or partly paid shares or partly in one way
and partly in the other. The Company may also, on any issue of
shares, pay such brokerage as may be lawful.
9. Except as required by law, no person shall be recognised by the
Company as holding any share upon any trust and the Company shall
not be bound by or be compelled in any way to recognise (even when
having notice thereof) any equitable, contingent, future or partial
interest in any share or any interest in any fractional part of a
share or (except only as by these Articles or by law otherwise
provided) any other rights in respect of any share except an
absolute right to the entirety thereof in the registered holder, but
this shall not preclude the Company from requiring the members or a
transferee of shares to furnish the Company with information as to
the beneficial ownership of any share when such information is
reasonably required by the Company.
10. Every person whose name is entered as a member in the Register
shall be entitled without payment to one certificate for all his
shares and, if he transfers part of his holding, to one certificate
for the balance. Upon payment of such sum, not exceeding 10p for
every certificate after the first, as the Directors shall from time
to time determine, he shall also be entitled to several
certificates, each for one or more of his shares. Every certificate
shall be issued within two months after allotment or the lodgment
with the Company of a transfer of the shares, unless the conditions
of issue of such shares otherwise provide. Every such certificate
shall be under the Seal and shall specify the number and class of
shares to which it relates, the distinguishing numbers (if any)
allocated to such shares and the amount paid up thereon. The
Company shall not be bound to register more than three persons as
joint holders of any share (except in the case of executors or
trustees of a deceased member) and, in the case of a share held
jointly by several persons, the Company shall not be bound to issue
more than one certificate therefor and delivery of a certificate for
a share to one of several joint holders shall be sufficient delivery
to all.
11. If any such certificate shall be worn out, defaced, destroyed
or lost, it may be renewed on such evidence being produced and on
payment of such amount not exceeding 10p as the Directors shall
require, and, in case of wearing out or defacement, on delivery up
of the old certificate and, in case of destruction or loss, on
execution of such indemnity (if any) as the Directors may from time
to time require. In case of destruction or loss, the member to whom
such renewed certificate is given shall also bear and pay to the
Company all expenses incidental to the investigation by the Company
of the evidence of such destruction or loss and to such indemnity.
LIEN
12. The Company shall have a first and paramount lien on every
share (not being a fully paid share) for all monies (whether
immediately payable or not) called or payable at a fixed time in
respect of that share and the Company shall also have a first and
paramount lien on all shares (not being fully paid shares) standing
registered in the name of any member (whether solely or jointly with
others) for all monies due to the Company from him or his estate,
whether solely or jointly with any other person (whether a member or
not) and whether such monies are presently payable or not; but the
Directors may at any time declare any share to be wholly or in part
exempt from the provisions of this Article. The Company's lien on a
share shall extend to all dividends payable thereon.
13. For the purpose of enforcing any such lien as aforesaid the
Directors may sell, all or any shares subject thereto at such time
and in such manner as the Directors think fit, but no sale shall be
made unless a sum in respect of which the lien exists is immediately
payable, nor until the expiration of l4 days after a notice in
writing, stating and demanding payment of such part of the amount in
respect of which the lien exists as is immediately payable, has been
given to the registered holder for the time being of the share, or
the person entitled thereto by reason of his death or bankruptcy (as
the case may be).
l4. To give effect to any such sale, the Directors may authorise
some person to transfer the shares sold to the purchaser thereof.
The purchaser shall be registered as the holder of the shares
comprised in any such transfer, and he shall not be bound to see to
the application of the purchase money, nor shall his title to the
shares be affected by any irregularity or invalidity in the
proceedings in reference to the sale.
15. The net proceeds of the sale shall be received by the Company
and applied in payment of such part of the amount in respect of
which the lien exists as is immediately payable, and the residue, if
any, shall (subject to a like lien for sums not immediately payable
as existed upon the shares before the sale) be paid to the person
entitled to the shares at the date of the sale.
CALLS ON SHARES
16. The Directors may from time to time make calls upon the members
in respect of any moneys unpaid on their shares (whether on account
of the nominal value of the shares or by way of premium) and not by
the conditions of allotment thereof made payable at fixed times,
provided that excepting so far as may be otherwise agreed between
the Company and any member in the case of the shares held by him no
call shall be payable at less than one month from the date fixed for
payment of the last preceding call, and each member shall (subject
to receiving at least l4 days' notice specifying the time or times
and place of payment) pay to the Company at the time or times and
place so specified the amount called on his shares. A call may be
revoked or postponed as the Directors may determine. A call shall
be deemed to have been made at the time when the resolution of the
Directors authorising the call was passed and may be required to be
paid by instalments.
17. The joint holders of a share shall be jointly and severally
liable to pay all calls in respect thereof.
18. If a sum called in respect of a share is not paid before or on
the day appointed for payment thereof, the person from whom the sum
is due shall pay interest on the sum from the day appointed for
payment thereof to the time of actual payment at such rate, not
exceeding 10 per cent. per annum, as the Directors may determine,
but the Directors shall be at liberty to waive payment of such
interest wholly or in part.
19. On the trial or hearing of any action for the recovery of any
money due for any call it shall be sufficient to prove that the name
of the member sued is entered in the Register as the holder, or one
of the holders, of the shares in respect of which such debt has
accrued, that the resolution making the call is duly recorded in the
minute book and that notice of such call was duly given to the
member sued, in the pursuance of these Articles; and it shall not be
necessary to prove the appointment of the Directors who made such
call nor any other matters whatsoever, but the proof of the matters
aforesaid shall be conclusive evidence of the debt.
20. Any sum which by the terms of issue of a share becomes payable
on allotment or at any fixed date, whether on account of the nominal
value of the share or by way of premium, shall, for the purposes of
these Articles, be deemed to be a call duly made and payable on the
date on which, by the terms of issue, the same becomes payable, and
in case of non-payment all the relevant provisions of these Articles
as to payment of interest and expenses, forfeiture or otherwise,
shall apply as if such sum had become payable by virtue of a call
duly made and notified.
21. The Directors may, on the issue of shares, differentiate
between the holders as to the amount of calls to be paid and the
times of payment.
22. The Directors may, if they think fit, receive from any member
willing to advance the same, all or any part of the monies uncalled
and unpaid upon any shares held by him, and upon all or any of the
monies so advanced may (until the same would, but for such advance,
become payable) pay interest at such rate not exceeding (unless the
Company in general meeting otherwise directs) 10 per cent. per
annum, as may be agreed upon between the Directors and the member
paying such sum in advance; but any sum paid in excess of the amount
for the time being called up shall not be included or taken into
account in ascertaining the amount of the dividend payable on the
shares in respect of which such advance has been made.
FORFEITURE OF SHARES
23. If a member fails to pay any call or instalment of a call on
the day appointed for payment thereof, the Directors may, at any
time thereafter during such time as any part of the call or
instalment remains unpaid, serve a notice on him requiring payment
of so much of the call or instalment as is unpaid together with any
interest which may have accrued.
24. The notice shall name a further day (not earlier than the
expiration of l4 days from the date of service of the notice) on or
before which the payment required by the notice is to be made, and
shall state that in the event of non-payment at or before the time
appointed the shares in respect of which the call was made will be
liable to be forfeited.
25. If the requirements of any such notice as aforesaid are not
complied with, any share in respect of which the notice has been
given may at any time thereafter, before the payment required by the
notice has been made, be forfeited by a resolution of the Directors
to that effect. A forfeiture of shares shall include all dividends
declared in respect of the forfeited shares and not actually paid
before forfeiture.
26. A forfeited share may be sold, re-issued, or otherwise disposed
of, either to the person who was before the forfeiture the holder
thereof or entitled thereto, or to any other person upon such terms
and in such manner as the Directors shall think fit, and whether
with or without all or any part of the amount previously paid on the
share being credited as paid, and at any time before such sale,
re-issue or disposal the forfeiture may be cancelled on such terms
as the Directors may think fit. The Directors may, if necessary,
authorise some person to transfer a forfeited share to such other
person.
27. A member whose shares have been forfeited shall cease to be a
member in respect of the forfeited shares, but shall,
notwithstanding the forfeiture, remain liable to pay to the Company
all calls made and not paid on such shares at the time of forfeiture
with interest thereon to the date of payment at such rate not
exceeding 10% per annum as the Directors shall think fit, in the
same manner and in all respects as if the shares had not been
forfeited, and to satisfy all claims and demands (if any) which the
Company might have enforced in respect of the shares at the time of
forfeiture without any deduction or allowance for the value of the
shares at the time of forfeiture.
28. A statutory declaration that the declarant is a Director or the
Secretary of the Company, and that a share in the Company has been
duly forfeited on a date stated in the declaration, shall be
conclusive evidence of the facts therein stated as against all
persons claiming to be entitled to the share. The Company may
receive the consideration, if any, given for the share on any sale
or disposition thereof and may execute a transfer of the share in
favour of the person to whom the share is sold or disposed of and he
shall thereupon be registered as the holder of the share, and shall
not be bound to see to the application of the purchase money, if
any, nor shall his title to the share be affected by any
irregularity or invalidity in the proceedings in reference to the
forfeiture, sale, re-issue or disposal of the share.
29. The provisions of these Articles as to forfeiture shall apply
in the case of non-payment of any sum which, by the terms of issue
of a share, becomes payable at a fixed time, whether on account of
the nominal value of the share or by way of premium, as if the same
had been payable by virtue of a call duly made and notified.
TRANSFER OF SHARES
30. All transfers of shares shall be effected by transfer in
writing in any usual or common form, or in any other form which the
Directors may approve but need not be under seal.
31. The instrument of transfer of a share shall be signed by or on
behalf of the transferor and in the case of a share not fully paid
shall also be signed by or on behalf of the transferee. The
transferor shall be deemed to remain the holder of the share until
the name of the transferee is entered in the Register in respect
thereof.
32. The Directors may, in their absolute discretion and without
assigning any reason therefor, decline to register any transfer of
any share, whether or not it is a fully paid share.
33. The Directors may also decline to recognise any instrument of
transfer unless it is accompanied by the certificate of the shares
to which it relates, and any such other evidence as the Directors
may reasonably require to show the right of the transferor to make
the transfer.
34. If the Directors refuse to register a transfer they shall
within two months after the date on which the transfer was lodged
with the Company send to the transferee notice of the refusal.
35. All instruments of transfer which shall be registered shall be
retained by the Company.
36. Notwithstanding anything in these Articles, the Directors shall
be entitled to refuse to recognise and to refuse to register a
renunciation of the allotment of any shares by the allottee in
favour of some other person, in the same manner and for the same
reasons, if any, but not otherwise as they would be entitled to
refuse to recognise or to register a transfer of shares from such
allottee to such other person.
INCREASE OF CAPITAL
37(1) The Company may from time to time by ordinary resolution
increase the share capital by such sum to be divided into shares of
such amounts as the resolution shall prescribe.
(2) Except so far as otherwise provided by the conditions of
issue or by these Articles any capital raised by the creation of new
shares shall be considered part of the pre-existing capital, and
shall be subject to the provisions herein contained with reference
to the payment of calls and instalments, transfer and transmission,
forfeiture, lien and otherwise.
ALTERATION OF CAPITAL
38. The Company from time to time and at any time may by ordinary
resolution:
(a) consolidate and divide all or any of its share
capital into shares of larger amount than its
existing shares;
(b) sub-divide its existing shares, or any of them, into
shares of smaller amount than is fixed by the
Memorandum of Association (subject, nevertheless to
section 68(1)(d) of the Act);
(c) cancel any shares which, at the date of the passing
of the resolution, have not been taken, or agreed to
be taken by any person.
39. The Company may by special resolution reduce its share capital,
any capital redemption reserve fund or share premium account in any
manner and with and subject to any incident authorised, and consent
required, by law.
40. All new shares in a particular class shall before issue be
offered to such members as at the date of the offer are entitled to
receive notice of general meetings in proportion as nearly as the
circumstances admit to the nominal value of the existing shares of
that class held by them. Such offer shall be made by notice
specifying the number of shares offered and limiting the time within
which the offer if not accepted will be deemed to be declined and
also stating that any person who desires allotment of shares in
excess of his proportion should state within a specified period how
many excess shares he desires to have. Any unclaimed shares shall
be used for satisfying the claims in excess. If thereafter any
shares shall not have been accepted they shall be offered to members
of other classes of shares in the Company in proportion nearly as
the circumstances admit to their proportional holding of shares in
that class with the provisions in this Article dealing with the
first mentioned offer applying to an offer made pursuant to this
provision.
GENERAL MEETINGS
41(1) Subject to paragraph (2) the Company shall in each year hold
a general meeting as its annual general meeting in addition to any
other meeting in that year, and shall specify the meeting as such in
the notices calling it; and not more than 15 months shall elapse
between the date of one annual general meeting of the Company and
that of the next.
(2) So long as the Company holds its first annual general meeting
within 18 months of its incorporation, it need not hold it in the
year of its incorporation or in the year following.
42. All general meetings of the Company shall be held in the State.
43. Subject to Article 42 the annual general meeting shall be held
at such time and place as the Directors shall determine and all
general meetings other than annual general meetings shall be called
extraordinary general meetings and shall be held at such time and
place as the Directors shall determine.
44. The Directors may whenever they think fit, convene an
extraordinary general meeting and an extraordinary general meeting
shall also be convened on such requisition, or in default may be
convened by such requisitionists, as provided by section 132 of the
Act.
NOTICE OF GENERAL MEETINGS
45. Subject to the provisions of the Act an annual general meeting
and a meeting called for the passing of a special resolution shall
be called by 2l days' notice in writing at the least, and a meeting
of the Company (other than an annual general meeting or a meeting
for the passing of a special resolution) shall be called by 14 days'
notice in writing at the least. The notice shall be exclusive of
the day on which it is served or deemed to be served and of the day
for which it is given, and shall specify the place, the day and the
hour of the meeting, and in the case of special business, the
general nature of that business, and shall be given, in manner
hereinafter mentioned, to such persons as are, under these Articles,
entitled to receive such notices from the Company. Every such
notice shall comply with the provisions of section 136(3) of the Act
as to giving information to the members in regard to their right to
appoint proxies.
46. A meeting of the Company shall notwithstanding that it is
called by shorter notice than that specified in Article 45 be deemed
to have been duly called if it is so agreed by the auditors and all
the members entitled to attend and vote thereat.
47. Where, by any provision contained in the Acts, extended notice
is required of a resolution, the resolution shall not be effective
unless (except when the Directors have resolved to submit it) notice
of the intention to move it has been given to the Company not less
than 28 days (or such other period as the Acts permit) before the
meeting at which it is to be moved, and the Company shall give to
the members notice of any such resolution as required by and in
accordance with the provisions of the Acts.
PROCEEDINGS AT GENERAL MEETINGS
48. All business shall be deemed special that is transacted at an
extraordinary general meeting, and also all that is transacted at an
annual general meeting, with the exception of declaring a dividend,
the consideration of the accounts, balance sheets and the reports of
the Directors and auditors, the election of Directors in place of
those retiring, the re-appointment of the retiring auditors and the
fixing of the remuneration of the auditors.
49. No business shall be transacted at any general meeting unless a
quorum is present. Two members present in person, or by proxy, or
(being corporations) present by a representative shall be a quorum
for all purposes PROVIDED the quorum shall include a member holding
all of the issued "A" Shares and a member holding all of the issued
"B" Shares for the time being.
50. If within half an hour from the time appointed for a general
meeting, a quorum is not present, the meeting, if convened on the
requisition of members, shall be dissolved. In any other case it
shall stand adjourned to the same day in the next week, at the same
time and place, or to such other day and at such other time and
place as the members present may determine and if at the adjourned
meeting a quorum is not present within half an hour from the time
appointed for the meeting, the meeting shall stand dissolved.
51. The chairman, if any, of the Directors shall preside as
chairman at every general meeting of the Company, or if there be no
such chairman or he is not present within fifteen minutes after the
time appointed for the holding of the meeting or he is unwilling to
act, the Directors present shall choose one of their number to be
chairman of the meeting.
52. If at any meeting no Director is willing to act as chairman or
if no Director is present within fifteen minutes after the time
appointed for the holding of the meeting, the members present shall
choose one of their number to be chairman of the meeting.
53. The chairman of the meeting may with the consent of any meeting
at which a quorum is present (and shall if so directed by the
meeting) adjourn the meeting from time to time and from place to
place, but no business shall be transacted at any adjourned meeting
other than the business left unfinished at the meeting from which
the adjournment took place. It shall not be necessary to give any
notice of an adjournment or of the business to be transacted at an
adjourned meeting.
54. At any general meeting a resolution put to the vote of the
meeting shall be decided on a poll.
55. Except on the questions of the appointment of a chairman or of
an adjournment (in which cases a poll shall be taken immediately) a
poll shall be taken in such manner and at such a time as the
chairman of the meeting may direct, and the result of a poll shall
be deemed to be the resolution of the meeting.
56. When there is an equality of votes on a poll, the chairman of
the meeting shall not be entitled to a second or casting vote.
VOTES OF MEMBERS
57. Subject to any rights or restrictions for the time being
attached to any class or classes of shares, on a poll every member
shall have one vote for each share of which he is the holder
PROVIDED that no resolution shall be carried unless members holding
all of the issued "A" Shares and the issued "B" Shares shall have
voted in its favour. A vote cast by the holder of an "A" Share or a
"B" Share as the case may be shall be deemed to carry the total
number of votes attaching to all the "A" Shares or "B" Shares as the
case may be then in issue provided, if more than one vote is so cast
on the relevant class of shares, that all such votes are cast in
like manner.
58. Where there are joint holders, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to
the exclusion of the votes of the other joint holders; and for this
purpose, seniority shall be determined by the order in which the
names stand in the Register.
59. A member of unsound mind, or in respect of whom an order has
been made by any court having jurisdiction in lunacy, may vote, by
his committee, receiver, guardian or other person appointed by that
court, and any such committee, receiver, guardian or other person
may vote by proxy.
60. No member shall be entitled to vote at any general meeting
unless all calls or other sums immediately payable by him in respect
of shares in the Company have been paid.
61. No objection shall be raised to the qualification of any voter
except at the meeting or adjourned meeting at which the vote
objected to is given or tendered, and every vote not disallowed at
such meeting shall be valid for all purposes. Any such objection
made in due time shall be referred to the chairman of the meeting,
whose decision shall be final and conclusive.
62. Votes may be given either personally or by proxy, and a person
entitled to more than one vote need not use all his votes or cast
all the votes he uses in the same way.
63. The instrument appointing a proxy shall be in writing under the
hand of the appointer or of his attorney duly authorised in writing,
or, if the appointer is a body corporate, either under seal or under
the hand of an officer or attorney duly authorised. A member shall
in addition be entitled to appoint a proxy by telex but no such
appointment shall be valid unless or until any Director shall have
endorsed the same with a certificate that he is satisfied as to the
authenticity thereof. A proxy need not be a member of the Company.
64. The instrument appointing a proxy and the power of attorney or
other authority, if any, under which it is signed, or a notarially
certified copy of that power or authority shall be deposited at the
Office, or at such other place within the State as is specified for
that purpose in the notice convening the meeting, before the time
for holding the meeting or adjourned meeting at which the person
named in the instrument proposes to vote, or, in the case of a poll,
before the time appointed for the taking of the poll, and in default
the instrument of proxy shall not be treated as valid.
65. The instrument appointing a proxy shall be deemed to confer
authority to demand or join in demanding a poll.
66. An instrument appointing a proxy shall be in the following form
or in any other form which the Directors may accept;
"[ ]Limited
I/We of
being a member/members of the above-named Company hereby
appoint of
or failing him of
as my/our proxy to vote for me/us on my/our behalf at the
(annual or extraordinary, as the case may be) general
meeting of the Company to be held on the day of
19 and at any adjournment thereof.
Signed this day of 19 .
This form is to be used *in favour of/against the
resolution.
Unless otherwise instructed the proxy will vote as he
thinks fit.
*Strike out whichever is not desired."
67. A vote given in accordance with the terms of an instrument of
proxy shall be valid notwithstanding the previous death or insanity
of the principal or revocation of the proxy or of the authority
under which the proxy was executed or the transfer of the share in
respect of which the proxy is given, if no intimation in writing of
such death, insanity, revocation or transfer as aforesaid is
received by the Company at the Office before the commencement of the
meeting or adjourned meeting at which the proxy is used.
68. A resolution in writing (other than one in respect of which
extended notice is required by the Act to be given) signed by all
the members for the time being entitled to attend and vote on such
resolution at a general meeting (or being bodies corporate by their
duly appointed representatives) shall be as valid and effective for
all purposes as if the resolution had been passed at a general
meeting of the Company duly convened and held and, if described as a
special resolution, shall be deemed to be a special resolution
within the meaning of the Act. Any such resolution may consist of
several documents in the like form each signed by one or more
members for the time being entitled to attend and vote on such
resolution at a general meeting (or being bodies corporate by their
duly appointed representatives).
BODY CORPORATES ACTING BY REPRESENTATIVES
69. Any body corporate which is a member of the Company may by
resolution of its directors or other governing body authorise such
person or persons as it thinks fit to act as its representative or
representatives at any meeting of the Company or of any class of
members of the Company, and the person or persons so authorised
shall be entitled to exercise the same powers on behalf of the body
corporate which he or they represent(s) as the body corporate could
exercise if it were an individual member of the Company.
DIRECTORS
70. The number of the Directors shall be not less than two nor more
than six.
71(1) The holder of all of the "A" Shares shall be entitled at
any time and from time to time to appoint any person as a Director
to be known as an "A" Director and to remove any Director so
appointed provided that there shall not at any time be more than
three "A" Directors.
(2) The holder of all of the "B" Shares shall be entitled at
any time and from time to time to appoint any person as a Director
to be known as a "B" Director and to remove any Director so
appointed provided that there shall not at any time be more than
three "B" Directors.
(3) Any appointment or removal of a Director under paragraphs
(1) or (2) of this Article shall be effected by notice in writing to
the Company duly executed by or on behalf of the member or members
concerned.
72. The shareholding qualification for Directors may be fixed by
the Company in general meeting and unless and until so fixed no
qualification shall be required.
73. The remuneration of the Directors shall from time to time be
determined by the Directors and shall accrue from day to day. The
Directors may also be paid all such reasonable expenses as may be
properly incurred by them in attending and returning from meetings
of the Directors, or of any committee of the Directors, or general
meetings, or otherwise in or about the business of the Company.
74. The office of Director shall be vacated automatically:
(a) if a receiving order be made against him or he makes
any arrangement or composition with his creditors
generally; or
(b) if he becomes of unsound mind; or
(c) if he ceases to be a Director or is prohibited from
being a Director by reason of any Order made under
any provision of the Acts; or
(d) if he be absent from meetings of the Directors for
six consecutive months without leave, and his
alternate Director (if any) shall not during such
period have attended in his stead and the Directors
resolve that his office be vacated; or
(e) if he, not being a Director holding any executive
office for a fixed period, resigns his office by
notice in writing to the Company; or
(f) if he is convicted of an indictable offence (other
than an offence under the Road Traffic Acts 1961 and
1968 as amended from time to time) unless the
Directors otherwise determine; or
(g) if he is removed pursuant to Article 71; or
(h) if the Court makes a declaration in respect of him
under section 150 of the 1990 Act.
75(1) The Directors may from time to time appoint one or more of
their body to be the holder of any executive office, including the
office of chairman or deputy-chairman or managing or joint managing
or deputy or assistant managing director, on such terms and for such
period as they may think fit and subject to the terms of any
agreement entered into in any particular case may revoke such
appointment PROVIDED THAT the remuneration of any such person may
not, without the consent of the holders of all of the issued "A"
shares and the issued "B" shares, exceed US$50,000 per annum.
(2) The appointment of any Director to the office of chairman
or deputy-chairman or managing or joint managing or deputy or
assistant managing director shall terminate ipso facto if he shall
cease from any cause to be a Director.
(3) The appointment of any Director to any other executive
office shall terminate ipso facto if he shall cease from any cause
to be a Director, unless the contract or resolution under which he
holds office shall expressly state otherwise.
(4) Any Director who is appointed to any executive office
including the office of chairman or deputy chairman or who serves on
any committee or who otherwise performs services which in the
opinion of the Directors are outside the scope of the ordinary
duties of a Director, may be paid such extra remuneration by way of
salary, percentage of profits or otherwise as the Directors may
determine.
(5) The Directors may entrust to and confer upon a Director
holding any executive office any of the powers exercisable by them
as Directors upon such terms and conditions and with such
restrictions as they think fit, and either collaterally with or to
the exclusion of their own powers, and may from time to time revoke,
withdraw, alter or vary all or any of such powers.
76. Notwithstanding Article 70, any Director may from time to time
appoint any person to be an alternate or substitute director for the
purpose only of attending a meeting in place of the appointer (if
appointed by an "A" Director the alternate or substitute shall be
deemed an "A" Director and if appointed by a "B" Director the
alternate or substitute shall be deemed a "B" Director). The
appointee, while he holds office as an alternate director, shall be
entitled to notice of meetings of the Directors and to attend and
vote thereat as a Director, shall be counted for the purpose of
determining whether a quorum is present, generally in the absence of
his appointer shall be entitled to exercise all the functions of his
appointer and shall not be entitled to be remunerated otherwise than
out of the remuneration (if any) of the Director appointing him. At
no time shall there be more than one alternate or substitute
director apointed by a Director. Any appointment under this Article
shall be effected by notice in writing or by cable, telex, facsimile
or telegram from the appointer to the Secretary and must be produced
at the meeting at which the same is to be used. Any appointment so
made may be revoked at any time by the appointer or by a majority of
the other Directors or by the Company in General Meeting.
Revocation by an appointer shall be effected by notice in writing or
by cable, telex, or facsimile or telegram by the appointer to the
Secretary.
BORROWING POWERS
77. The Directors may exercise all the powers of the Company to
borrow money, and to mortgage or charge its undertaking, property
and uncalled capital or part thereof, and subject to section 20 of
the l983 Act to issue debentures debenture stock and other
securities, whether outright or as security for any debt, liability
or obligation of the Company or of any third party where such
borrowings does not exceed US$250,000 in value, otherwise the
consent of the holders of all of the issued "A" shares and all of
the issued "B" shares for the time being shall be required.
POWERS AND DUTIES OF DIRECTORS
78. The business of the Company shall be managed by the Directors,
who may exercise all such powers of the Company and do on behalf of
the Company all such acts as may be exercised and done by the
Company and as are not by the Acts or by these Articles required to
be exercised by the Company in general meeting, subject nevertheless
to any of these Articles and to the provisions of the Acts.
79. The Directors may from time to time, and at any time, by power
of attorney under the Seal appoint any company, firm or person or
any fluctuating body of persons, whether nominated directly or
indirectly by the Directors, to be the attorney or attorneys of the
Company for such purposes and with such powers, authorities and
discretions (not exceeding those vested in or exercisable by the
Directors under these Articles) and for such period and subject to
such conditions as they may think fit, and any such power of
attorney may contain such provisions for the protection and
convenience of persons dealing with any such attorney as the
Directors may think fit, and may also authorise any such attorney to
sub-delegate all or any of the powers, authorities and discretions
vested in him.
80. A Director who is in any way, whether directly or indirectly,
interested in a contract or arrangement or proposed contract or
arrangement with the Company shall declare the nature of his
interest at the meeting of the Directors at which the question of
entering into the contract or arrangement is first taken into
consideration, if his interest then exists, or in any other case at
the first meeting of the Directors after he becomes so interested.
A general notice given by a Director to the effect that he is a
member of a specified company or firm and is to be regarded as
interested in all transactions with such company or firm shall be
sufficient declaration of interest under this Article, and after
such general notice is given it shall not be necessary to give any
special notice relating to any subsequent transaction with such
company or firm, provided that either the notice is given at a
meeting of the Directors or the Director giving the notice takes
reasonable steps to secure that it is brought up and read at the
next meeting of the Directors after it is given.
81. A Director may vote in respect of any contract appointment or
arrangement in which he is interested and he shall be counted in the
quorum present at the meeting.
82. A Director may hold any other office or place of profit under
the Company (other than the office of auditor) in conjunction with
his office of Director for such period and on such terms as to
remuneration and otherwise as the Directors may determine, and no
Director or intending Director shall be disqualified by his office
from contracting with the Company either with regard to his tenure
of such other office or place of profit or as vendor, purchaser or
otherwise, nor shall any such contract or any contract or
arrangement entered into by or on behalf of the Company in which any
Director is in any way interested, be liable to be avoided, nor
shall any Director so contracting or being so interested be liable
to account to the Company for any profit realised by any such
contract or arrangement by reason of such Director holding that
office or of the fiduciary relation thereby established.
83. All cheques, promissory notes, drafts, bills of exchange and
other negotiable or transferable instruments, and all receipts for
moneys paid to the Company, shall be signed, drawn, accepted,
endorsed, or otherwise executed, as the case may be, in such manner
as the Directors shall from time to time by resolution determine.
84. The Directors may procure the establishment and maintenance of
or participate in, or contribute to any non-contributory or
contributory pension or superannuation fund, scheme or arrangement
or life assurance scheme or arrangement for the benefit of, and pay,
provide for or procure the grant of donations, gratuities, pensions,
allowances, benefits or emoluments to, any persons (including
Directors and other officers) who are or shall have been at any time
in the employment or service of the Company or of any company which
is or was a subsidiary of the Company or of the predecessors in
business of the Company or any such subsidiary or holding company
and the spouses, widows and widowers, families, relatives or
dependants of any such persons. The Directors may also procure the
establishment and subsidy of or subscription to and support of any
institutions, associations, clubs, funds or trusts calculated to be
for the benefit of any such persons as aforesaid or otherwise to
advance the interests and well-being of the Company or of any such
other company as aforesaid, or its members, and payments for or
towards the insurance of any such persons as aforesaid, and
subscriptions or guarantees of money for charitable or benevolent
objects or for any exhibition or for any public, general or useful
object. Provided that any Director shall be entitled to retain any
benefit received by him hereunder, subject only, where the Acts
require, to proper disclosure to the members and the approval of the
Company in general meeting.
85. The Directors shall cause minutes to be made in books provided
for the purpose:
(a) of all appointments of officers made by the
Directors;
(b) of the names of the Directors present at each meeting
of the Directors and of any committee of the
Directors;
(c) of all resolutions and proceedings at all meetings of
the Company and of the Directors and of committees of
Directors.
PROCEEDINGS OF DIRECTORS
86. The Directors may meet together for the despatch of business,
adjourn and otherwise regulate their meetings as they think fit.
Questions arising at any meeting shall be decided by the Directors
provided at least one "A" Director and one "B" Director (or their
alternate or substitute as the case may be) shall have voted in
favour of the resolutions. If less than three "A" Directors or less
than three "B" Directors, as the case may be, vote on a resolution
at a meeting of Directors, such "A" Directors as are present and
such "B" Directors present shall be deemed to exercise three votes.
Where there is an equality of votes, the Chairman shall not have a
second or casting vote. A Director may, and the Secretary on the
requisition of a Director shall, at any time summon a meeting of the
Directors. If the Directors so resolve, it shall not be necessary
to give notice of a meeting of Directors to any Director who, being
resident in the State, is for the time being absent from the State.
87. The quorum necessary for the transaction of the business of the
Directors shall be one "A" Director and one "B" Director (present in
person or by alternate or substitute). A meeting of the Directors
at which a quorum is present shall be competent to exercise all
powers and discretions for the time being exercisable by the
Directors.
88. The chairman, or deputy chairman, if any, shall preside at each
meeting of Directors provided that if no chairman or deputy chairman
shall have been appointed, or if at any meeting neither be present
within five minutes after the time appointed for holding the same,
the Directors present may choose one of their number to be chairman
of the meeting.
89. The Directors may delegate any of their powers to committees
consisting of such member or members of their body as they think fit
provided every committee includes at least one "A" Director and one
"B" Director. Any committee so formed shall in the exercise of the
powers so delegated conform to any regulations that may be imposed
by the Directors.
90. The meetings and proceedings of any such committee consisting
of two or more members shall be governed by the provisions of these
Articles regulating the meetings and proceedings of the Directors,
so far as the same are applicable and are not superseded by any
regulations made by the Directors under the last preceding Article.
91. All acts done by any meeting of Directors, or any committee
appointed under Article 89 or any person acting as a Director,
shall, as regards all persons dealing in good faith with the
Company, notwithstanding that it be afterwards discovered there was
some defect in the appointment or continuance in office of any such
Director, or member of a committee or person acting as aforesaid, or
that they or any of them were disqualified be as valid as if such
defect had not occurred.
92. The Directors may appoint any managers or agents for managing
any of the affairs of the Company, either in the State or elsewhere,
and may fix their remuneration, and may delegate to any manager or
agent any of the powers, authorities and discretions vested in the
Directors, with power to sub-delegate, and any such appointment or
delegation may be made upon such terms and subject to such
conditions as the Directors may think fit, and the Directors may
remove any person so appointed, and may annul or vary any such
delegation, but no person dealing in good faith and without notice
of any such annulment or variation shall be affected thereby.
93. The continuing Directors may act notwithstanding any vacancy in
their number, but if and so long as the number of Directors is
reduced below the minimum number fixed by or in accordance with
these Articles the continuing Directors or Director may act for the
purpose of summoning a general meeting of the Company, but not for
any other purpose. If there be no Directors or Director able or
willing to act, then any two members may summon a general meeting
for the purpose of appointing Directors.
94. A resolution in writing signed by all the Directors shall be as
effective as a resolution passed at a meeting of the Directors duly
convened and held, and may consist of several documents in the like
form, each signed by one or more of the Directors.
95. (a) For the purpose of these Articles, the
contemporaneous linking together by telephone or other means of
audio communication of a number of Directors not less than the
quorum shall be deemed to constitute a meeting of the Directors, and
all the provisions in these Articles as to meetings of the Directors
shall apply to such meetings.
(b) Each of the Directors taking part in the meeting must
be able to hear each of the other Directors taking part.
(c) At the commencement of the meeting each Director must
acknowledge his presence and that he accepts that the conversation
shall be deemed to be a meeting of the Directors.
(d) A Director may not cease to take part in the meeting
by disconnecting his telephone or other means of communication
unless he has previously obtained the express consent of the
chairman of the meeting, and a Director shall be conclusively pr
esumed to have been present and to have formed part of the quorum at
all times during the meeting unless he has previously obtained the
express consent of the chairman of the meeting to leave the meeting
as aforesaid.
(e) A minute of the proceedings at such meeting by
telephone or other means of communication shall be sufficient
evidence of such proceedings and of the observance of all necessary
formalities if certified as a correct minute by the chairman of the
meeting.
96. The Directors shall have no power to appoint any person to be a
director to fill a casual vacancy or as an addition to the existing
directors.
SECRETARY
97. The Secretary shall be appointed by the Directors for such
term, at such remuneration and upon such conditions as they may
think fit; and any Secretary so appointed may be removed by them.
98. Anything by the Acts or these Articles required or authorised
to be done by or to the Secretary may be done by or to any assistant
or acting secretary, or if there is no assistant or acting secretary
capable of acting, by or to any officer of the Company authorised
generally or specially in that behalf by the Directors provided that
any provision of the Acts or these Articles requiring or authorising
a thing to be done by or to a Director and the Secretary shall not
be satisfied by its being done by or to the same person acting both
as Director and as, or in the place of, the Secretary.
THE SEAL
99. The Seal shall be used only by the authority of the Directors
or of a committee of Directors authorised by the Directors in that
behalf, and every instrument to which the seal shall be affixed
shall be signed by a Director and shall be countersigned by the
Secretary or by a second Director or by some other person appointed
by the Directors for the purpose.
100. The Company may exercise the powers conferred by section 41 of
the Act with regard to having an official seal for use abroad and
such powers shall be vested in the Directors.
AUTHENTICATION OF DOCUMENTS
101. Any Director or the Secretary or any person appointed by the
Directors for the purpose, shall have power to authenticate any
documents affecting the constitution of the Company and any
resolutions passed by the Company or the Directors, and any books,
records, documents and accounts relating to the business of the
Company, and to certify copies thereof or extracts therefrom as true
copies or extracts; and where any books, records, documents or
accounts are elsewhere than at the Office, the local manager or
other officer of the Company having the custody thereof shall be
deemed to be a person appointed by the Directors as aforesaid.
102. A document purporting to be a copy of a resolution of the
Directors or an extract from the minutes of a meeting of the
Directors which is certified as such in accordance with the
provisions of the last preceding Article, shall be conclusive
evidence in favour of all persons dealing with the Company upon the
faith thereof that such resolution has been duly passed, or, as the
case may be, that such extract is a true and accurate record of a
duly constituted meeting of the Directors.
DIVIDENDS AND RESERVE
103. The Company in general meeting may declare dividends, but no
dividend shall exceed the amount recommended by the Directors.
104. The Directors may from time to time pay to the members such
interim dividends as appear to the Directors to be justified by the
profits of the Company.
105. No dividend shall be paid otherwise than in accordance with
the provisions of the 1983 Act which apply to the Company.
106. The Directors may, before recommending any dividend, set aside
out of the profits of the Company such sums as they think proper as
a reserve or reserves which shall, at the discretion of the
Directors, be applicable for any purpose to which the profits of the
Company may be properly applied, and pending such application may,
at the like discretion, either be employed in the business of the
Company or be invested in such investments as the Directors may
lawfully determine. The Directors may also, without placing the
same to reserve, carry forward any profits which they may think it
prudent not to divide.
107. Subject to the rights of persons, if any, entitled to shares
with special rights as to dividend, all dividends shall be declared
and paid according to the amounts paid or credited as paid on the
shares in respect whereof the dividend is paid, but no amount paid
or credited as paid on a share in advance of calls shall be treated
for the purposes of this Article as paid on the share. Subject to
the provisions of Article 4 all dividends shall be apportioned and
paid proportionately to the amounts paid or credited as paid on the
shares during any portion or portions of the period in respect of
which the dividend is paid; but if any share is issued on terms
providing that it shall rank for dividend as from a particular date,
such share shall rank for dividend accordingly.
108. The Directors may deduct from any dividend payable to any
member all sums of money (if any) immediately payable by him to the
Company on account of calls or otherwise in relation to the shares
of the Company.
109. All unclaimed dividends may be invested or otherwise made use
of by the Directors for the benefit of the Company until claimed.
110. Any dividend, interest or other monies payable in cash in
respect of any share, may be paid by cheque or warrant sent through
the post directed to the registered address of the holder, or, where
there are joint holders, to the registered address of that one of
the joint holders who is first named in the Register, or to such
person and to such address as the holder or joint holders may
direct. Every such cheque or warrant shall be made payable to the
order of the person to whom it is sent or to such person as the
holder or joint holders may direct, and payment of the cheque or
warrant shall be a good discharge for the Company. Every such
cheque or warrant shall be sent at the risk of the person entitled
to the money represented thereby.
111. Any one of two or more joint holders may give effectual
receipts for any dividends, bonuses or other monies payable in
respect of the shares held by them as joint holders.
112. Any general meeting declaring a dividend or bonus may direct
payment of such dividend or bonus wholly or partly by the
distribution of specific assets and in particular of paid up shares,
debentures or debenture stock of any other company or in any one or
more of such ways, and the Directors shall give effect to such
resolution, and where any difficulty arises in regard to such
distribution, the Directors may settle the same as they think
expedient, and in particular may issue fractional certificates and
fix the value for distribution of such specific assets or any part
thereof and may determine that cash payments shall be made to any
members upon the footing of the value so fixed, in order to adjust
the rights of all the parties, and may vest any such specific assets
in trustees as may seem expedient to the Directors.
113. No dividend shall bear interest against the Company.
ACCOUNTS
114. The Directors shall cause to be kept such books of accounts as
are necessary to comply with the provisions of the Acts. Proper
books of account shall not be deemed to be kept if there are not
kept such books of account as are necessary to give a true and fair
view of the state of the Company's affairs and explain its
transactions.
115. The books of account shall be kept at the Office, or at such
other place within the State or (subject to compliance with the
Acts) outside the State as the Directors think fit, and shall always
be open to the inspection of the Directors, or of members as
authorised by the Directors.
116. The Directors shall from time to time in accordance with the
provisions of the Acts cause to be prepared and to be laid before a
general meeting of the Company such profit and loss accounts,
balance sheets, group accounts (if any) and reports as may be
necessary.
117. A copy of every balance sheet and profit and loss account
which is to be laid before a general meeting of the Company
(including every document required by law to be annexed thereto)
together with a copy of every report of the Auditors relating
thereto and of the Directors' report shall, not less than twenty-one
days before the date of the meeting, be sent to every member of, and
every holder of debentures of, the Company and to every other person
who is entitled to receive notices from the Company under the
provisions of the Acts or of these Articles.
CAPITALISATION OF PROFITS
118. The Company in general meeting may upon the recommendation of
the Directors resolve that any sum for the time being standing to
the credit of any of the Company's reserves (including any capital
redemption reserve fund or share premium account) or to the credit
of profit and loss account be capitalised and applied on behalf of
the members who would have been entitled to receive the same if the
same had been distributed by way of dividend and in the same
proportions either in or towards paying up amounts for the time
being unpaid on any shares held by them respectively or in paying up
in full unissued shares or debentures of the Company of a nominal
amount equal to the sum capitalised (such shares or debentures to be
allotted and distributed credited as fully paid up to and amongst
such holders in the proportions aforesaid) or partly in one way and
partly in another, so however, that the only purpose for which sums
standing to the credit of the capital redemption reserve fund or the
share premium account shall be applied shall be those permitted by
the Acts.
119. The Company in general meeting may on the recommendation of
the Directors resolve that it is desirable to capitalise any part of
the amount for the time being standing to the credit of any of the
Company's reserve accounts or to the credit of the profit and loss
account which is not available for distribution by applying such sum
in paying up paid bonus shares to those members of the Company who
would have been entitled to that sum if it were distributed by way
of dividend (and in the same proportions), and the directors shall
give effect to such resolution.
120. Whenever such a resolution is passed in pursuance of Article
118 or 119, the Directors shall make all appropriations and
applications of the undistributed profits resolved to be capitalised
thereby, and all allotments and issues of fully paid shares and
debentures, if any, and generally shall do all acts and things
required to give effect thereto with full power to the Directors to
make such provision as they shall think fit for the case of shares
or debentures becoming distributable in fractions (and, in
particular but without prejudicing the generality of the foregoing,
to sell the shares or debentures represented by such fractions and
distribute the net proceeds of such sale amongst the members
otherwise entitled to such fractions in due proportions) and also to
authorise any person to enter on behalf of all the members concerned
into an agreement with the Company providing for the allotment to
them respectively credited as fully paid up of any further shares or
debentures to which they may become entitled on such capitalisation
or, as the case may require, for the payment up by the application
thereto of their respective proportions of the profits resolved to
be capitalised of the amounts remaining unpaid on their existing
shares, and any agreement made under such authority shall be
effective and binding on all such members.
AUDITORS
121. Auditors shall be appointed and their duties regulated in
accordance with the provisions of the Acts.
122. Subject to the provisions of the Acts, all acts done by any
person acting as an auditor shall, as regards all persons dealing in
good faith with the Company, be valid, notwithstanding that there
was some defect in his appointment or that he was at the time of his
appointment not qualified for appointment.
NOTICES
123. Notice of every general meeting and every separate general
meeting of the holders of any class of shares in the capital of the
Company shall be given in any manner authorised by the regulations
of the Company to:
(a) every member of the Company entitled to attend
or vote thereat; and
(b) every person entitled to receive dividends in
respect of a share vested in him in consequence
of the death or bankruptcy of a member, who, but
for his death or bankruptcy would be entitled to
receive notice of the meeting; and
(c) every Director for the time being of the
Company; and
(d) the auditor for the time being of the Company.
No other person shall be entitled to receive notice of general
meetings. Every person entitled to receive notice of every such
general meeting shall be entitled to attend thereat.
124. A notice may be given in pursuance of these Articles to any
person entitled to same either personally or by sending it to him by
post at his registered address, or transmitting to a telex number
previously supplied to the Secretary, or in the case of a notice
given to the Company, at its registered office. Where notice is sent
by post, service of the notice shall be deemed to have been effected
at the expiration of 48 hours after the letter containing same
properly addressed and prepaid is posted. Where notice is sent by
telex, notice shall be deemed to have been effected by receipt of
the relevant answer back call at the end of the telex sending out
the notice.
125. The signature to any notice to be given by or to the Company
may be written or printed.
WINDING UP
126. If the Company shall be wound up, the liquidator may, with the
sanction of a special resolution of the Company and any other
sanction required by the Acts, divide among the members in specie or
kind the whole or any part of the assets of the Company and whether
or not the assets shall consist of property of one kind or shall
consist of properties of different kinds, and may for such purpose
set such value as he deems fair upon any one or more class or
classes of property and may determine how such division shall be
carried out as between the members or different classes of members.
The liquidator may, with the like authority, vest any part of the
assets in trustees upon such trusts for the benefit of members as
the liquidator with the like authority shall think fit, and the
liquidation of the Company may be closed and the Company dissolved,
but so that no contributory shall be compelled to accept any shares
in respect of which there is a liability.
INDEMNITY
127. Every director, executive director, manager, agent, auditor,
secretary and other officer of the Company shall be entitled to be
indemnified out of the assets of the Company against all losses or
liabilities which he may sustain or incur in or about the execution
of the duties of his office or otherwise in relation thereto,
including any loss or liability incurred by him in defending any
proceedings, whether civil or criminal, in which judgment is given
in his favour or in which he is acquitted or in connection with any
application under section 39l of the Act in which relief is granted
to him by the Court, and no Director or other officer shall be
liable for any loss, damage or misfortune which may happen to or be
incurred by the Company in the execution of the duties of his office
or in relation thereto. But this Article shall only have effect in
so far as its provisions are not avoided by section 2OO of the Act.
----------------------------------------------------------------
NAMES, ADDRESSES AND DESCRIPTIONS Number of Shares
OF SUBSCRIBERS
taken by each Subscriber
----------------------------------------------------------------
MFSD Nominees Limited One
2 Harbourmaster Place
Custom House Dock
Dublin 1
Limited Company
------------------------
Director
MFSD Holdings Limited One
2 Harbourmaster Place
Custom House Dock
Dublin 1
Limited Company
------------------------
Director
---------------------------------------------------------------
Total Shares Taken: Two
----------------------------------------------------------------
Dated the 8 day of February 1996
Witness to the above signature:- Alan Fitzpatrick
2 Harbourmaster Place
Custom House Dock
Dublin 1
Secretarial Assistant
- -----------------------------------------------------------------------------
Exhibit 10
Letter Agreement dated as of September 26, 1196 by and
among Elan Corporation plc, the Company and Ebbisham Limited
- -----------------------------------------------------------------------------
September 1996
RE: Ebbisham Limited (the "Company")
We refer to the Joint Venture Agreement (the "Agreement") entered
into between Elan, Emisphere and the Company of even date with this
letter.
All defined terms used in this letter shall have the same meaning as
is given to them in the Agreement.
E l a n hereby undertakes with Emisphere and the Company, in
consideration of the Parties entering into the Agreement and the
performance by them of the mutual obligations set out therein, that,
at any time after the Management Committee determines, in its sole
and absolute discretion, that the Company has achieved
profitability, Elan shall, at the request of the Company, advance a
further loan to the Company (the "New Loan"). The New Loan shall be
in an amount equal to the amount of loan stock (the "Loan Stock")
outstanding under the Loan Stock Instrument and shall be advanced so
that the proceeds thereof may, concurrently with their advance, be
used to effect the redemption of the Loan Stock by the Company. The
New Loan shall be due and payable one year after the date of
issuance of the New Loan. The other terms of the New Loan shall be
agreed between Elan, Emisphere and the Company.
The Company undertakes with Elan and Emisphere that it shall
immediately advise them in writing of a determination being made by
the Management Committee that the Company has achieved
profitability.
Elan, Emisphere and the Company by this letter confirm their
agreement (a) to procure that all necessary steps are taken to
redeem the Loan Stock if either Elan or Emisphere advise the Company
in writing at any time after the New Loan may be availed of, that it
wishes the New Loan to be advanced in substitution for the Loan
Stock and (b) to procure that the Company shall not give its consent
for the assignment of the Loan Stock Instrument by Elan, if
Emisphere shall have reasonable grounds for wishing such consent not
to be given.
We hereby confirm that the foregoing accurately records the
agreement which we have reached on the subject matter which it
refers.
---------------------------------
For and on behalf of
Emisphere Technologies, Inc.
-------------------------
For and on behalf of
Elan Corporation plc
--------------------------
For and on behalf of
Ebbisham Limited
Dated: September 1996.
- -----------------------------------------------------------------------------
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
- -----------------------------------------------------------------------------
Exhibit 11
EMISPHERE TECHNOLOGIES, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
Fiscal Year Ended July 31,
1994 1995 1996
Primary Fully Primary Fully Primary Fully
Diluted Diluted Diluted
------------ ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Net loss $(7,690,612) $(7,690,612) $(7,784,259) $(7,784,259) $(6,107,601) $(6,107,601)
============ ============ ============ ============ ============ ============
Weighted average
number of common
shares outstanding 7,607,329 7,607,329 7,588,447 7,588,447 8,457,438 8,457,438
Shares issuable upon
exercise of
outstanding options
and warrants 413,956 316,683 1,841,884
Shares assumed to be
repurchased under
the treasury stock
method (309,129) (144,254) (1,550,574)
----------- ------------- ------------ ------------ ------------ -------------
Weighted average
number of common
shares used in
computing per
share data 7,607,329 7,712,156 7,588,447 7,760,876 8,457,438 8,748,748
=========== ============= ============ ============ ============ =============
Net loss per share $(1.01) $(1.00) $(1.03) $(1.00) $(0.72) $(0.70)
=========== ============= ============ ============ ============ =============
- -----------------------------------------------------------------------------
EXHIBIT 23
Consent of Coopers & Lybrand L.L.P.
- -----------------------------------------------------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Emisphere Technologies, Inc. on Form S-8 (File Nos.
33-44516, 33-46026, 33-62226, 33-88598 and 333-2751) and Form S-3
(File Nos. 33-62224 and 333-2323) of our report dated October 4,
1996 on our audits of the financial statements and the financial
statement schedule of Emisphere Technologies, Inc. as of July 31,
1996 and 1995, and for each of the three years in the period ended
July 31, 1996, which report is included in this Annual Report on
Form 10-K.
COOPERS & LYBRAND L.L.P.
New York, New York
October 18, 1996
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> JUL-31-1996
<CASH> 11,904,674
<SECURITIES> 6,332,817
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 18,527,260
<PP&E> 4,041,233
<DEPRECIATION> 2,590,371
<TOTAL-ASSETS> 20,039,365
<CURRENT-LIABILITIES> 727,787
<BONDS> 0
0
0
<COMMON> 94,508
<OTHER-SE> 19,172,247
<TOTAL-LIABILITY-AND-EQUITY> 20,039,365
<SALES> 0
<TOTAL-REVENUES> 3,834,340
<CGS> 0
<TOTAL-COSTS> 9,941,941
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,107,601)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,107,601)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,107,601)
<EPS-PRIMARY> (0.72)
<EPS-DILUTED> (0.70)
</TABLE>
