As filed with the Securities and Exchange Commission on July 16, 1999
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Securities and Exchange Commission
Washington, D.C. 20549
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FORM 8-K
Current Report Pursuant
To Section 13 or 15(d) of the
Securities Exchange Act of 1934
July 2, 1999
Date of report (Date of earliest event reported)
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Emisphere Technologies, Inc.
(Exact Name of Registrant as Specified in its Charter)
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Delaware 13-3306985
(State or Other Jurisdiction of Incorporation (IRS Employer Identification No.)
or Organization)
1-10615
(Commission File Number)
Emisphere Technologies, Inc.
765 Old Saw Mill River Road
Tarrytown, New York 10591
(Address of Principal Executive Offices) (Zip Code)
(914) 347-2220
(Registrant's Telephone Number Including Area Code)
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Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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<PAGE>
Item 2: Acquisition or Disposition of Assets.
On July 2, 1999, Emisphere Technologies, Inc. (the "Company") entered
into a series of transactions with Elan Corporation, plc and its affiliates,
which transactions are summarized in a press release attached as Exhibit 99.1
Item 7: Financial Statements and Exhibits.
(a) Financial Statements of Emisphere Technologies, Inc.
To be filed by amendment no later than September 15, 1999.
(b) Pro Forma Financial Information.
To be filed by amendment no later than September 15, 1999.
(c) Exhibits.
Exhibit Number Exhibit
- -------------- -------
2.1 Termination Agreement, dated July 2, 1999, among the
Company, Elan Corporation, plc and Ebbisham Limited, now
a wholly owned subsidiary of the Company.*
2.2 Patent License Agreement, dated July 2, 1999,
between the Company and Elan Corporation, plc.*
2.3 Patent Assignment by Mary Martin and Kenneth Iain
Cumming in favor of Ebbisham Limited.
2.4 Note Purchase Agreement, dated July 2, 1999, between the
Company and Elan International Services, Ltd.*
2.5 Zero Coupon Note, dated July 2, 1999, issued by the
Company to Elan International Services, Ltd. for an initial
principal amount of $20 million.
2.6 Subscription Agreement, dated July 2, 1999, between the
Company and Elan International Management, Ltd.
2.7 Registration Rights Agreement, dated July 2, 1999, between
the Company and Elan International Management, Ltd.
2.8 Letter Agreement, dated July 2, 1999, between the Company
and Elan International Services, Ltd.*
99.1 Press Release of the Company, dated July 6, 1999.
*Contains provisions subject to a request for confidential treatment.
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SIGNATURE
Under the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned.
EMISPHERE TECHNOLOGIES, INC.
By: /s/ Charles H. Abdalian, Jr.
----------------------------
Name: Charles H. Abdalian, Jr.
Title: Chief Financial Officer
Date: July 16, 1999
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EXHIBIT INDEX
Exhibit
Number Exhibit
- ------ -------
2.1 Termination Agreement, dated July 2, 1999, among the
Company, Elan Corporation, plc and Ebbisham
Limited, now a wholly owned subsidiary of the
Company.*
2.2 Patent License Agreement, dated July 2, 1999, between the
Company and Elan Corporation, plc.*
2.3 Patent Assignment by Mary Martin and Kenneth Iain
Cumming in favor of Ebbisham Limited.
2.4 Note Purchase Agreement, dated July 2, 1999, between
the Company and Elan International Services, Ltd.*
2.5 Zero Coupon Note, dated July 2, 1999, issued by the
Company to Elan International Services, Ltd. for an
initial principal amount of $20 million.
2.6 Subscription Agreement, dated July 2, 1999, between
the Company and Elan International Management, Ltd.
2.7 Registration Rights Agreement, dated July 2, 1999,
between the Company and Elan International
Management, Ltd.
2.8 Letter Agreement, dated July 2, 1999, between the
Company and Elan International Services, Ltd.*
99.1 Press Release of the Company, dated July 6, 1999.
*Contains provisions subject to a request for confidential treatment.
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As executed
- -----------
Dated 2 July, 1999
ELAN CORPORATION, PLC.
AND
EMISPHERE TECHNOLOGIES, INC.
AND
EBBISHAM LIMITED
TERMINATION AGREEMENT
(terminating the
i. the Joint Venture Agreement dated 26 September 1996 between Ebbisham
Limited and Elan Corporation, plc. and Emisphere Technologies, Inc.;
and
ii. the License Agreement dated 26 September 1996 between Ebbisham Limited
and Elan Corporation, plc.)
[* * *] = This provision is subject to a request for confidential treatment.
<PAGE>
Table of Contents
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Page #
1. Interpretation........................................................3
2. Termination of the JV Agreement and the Elan License Agreement........5
3. Payment of monies:....................................................8
4. Property Ownership Rights.............................................8
5. Non-competition and agreement not to sue.............................11
6. Sale of Shares and Completion........................................12
7. Warranties and Indemnities...........................................13
8. Secrecy/No announcements.............................................16
9. Waiver of accrued rights/covenant not to sue.........................18
10. Governing law and jurisdiction.......................................20
11. General..............................................................21
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THIS TERMINATION AGREEMENT is made on 2 July, 1999.
AMONG:
(1) ELAN CORPORATION, PLC, a company incorporated in Ireland of Lincoln
House, Lincoln Place, Dublin 2, Ireland (including its Affiliates and
successors) ("Elan"); and
(2) EMISPHERE TECHNOLOGIES, INC., a corporation incorporated under the laws
of the State of Delaware, USA, having its executive offices at 765 Old
Saw Mill River Road, Tarrytown, NY 10591, USA (including its Affiliates
and successors) ("Emisphere"); and
(3) EBBISHAM LIMITED, a company incorporated in Ireland of Monksland,
Athlone, Co. Westmeath, Ireland (including its Affiliates and
successors) ("Ebbisham").
RECITALS:
A. Elan, Emisphere and Ebbisham entered into various agreements on 26
September 1996 whereby, inter alia, Elan and Emisphere established the
joint venture company, Ebbisham, and Elan and Emisphere each licensed
certain patents and know-how to Ebbisham for a specified field of use.
Specifically:
(i) Elan, Emisphere and Ebbisham entered into a Joint Venture
Agreement dated 26 September 1996 (the "JV Agreement");
(ii) Elan and Ebbisham entered into a (non-exclusive) License
Agreement dated 26 September 1996 (the "Elan License
Agreement");
(iii) Emisphere and Ebbisham entered into an (exclusive) License
Agreement dated 26 September 1996 (the "Emisphere License
Agreement");
(iv) Elan, Emisphere and Ebbisham entered into various other
transaction documents dated 26 September 1996 (the
"Transaction Documents").
B. Elan, Emisphere and Ebbisham wish to terminate in full the JV Agreement
and the Elan License Agreement pursuant to this Termination Agreement
and to set forth their agreement in relation to other matters
including, inter alia, the transfer by Elan to Emisphere of the A
Shares.
C. As of the Effective Date, Elan (or certain Affiliates of Elan, as the
case may be) and Emisphere and/or Ebbisham, as the case may be, are
entering into various financing documents including, inter alia, the
Note Purchase Agreement, the Subscription
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Agreement, the Registration Rights Agreement and the Ebbisham Loan
Agreement ("the Current Transaction Financing Documents") pursuant to
which Emisphere, among other things, will issue a zero coupon note in
the initial principal amount of $20,000,000.
D. As of the Effective Date, Elan and Emisphere have entered into a
license agreement ("the New License Agreement") whereby Elan has
licensed to Emisphere certain rights relating to [* * *] filed by Elan
on [* * *] and [* * *] filed by Elan on [* * *].
E. As of the Effective Date, Elan has caused the [* * *] Patent
Application to be assigned to Ebbisham pursuant to a written assignment
agreement ("the Assignment Agreement").
NOW IT IS HEREBY AGREED AS FOLLOWS IN CONSIDERATION OF THE PAYMENT OF
$10 AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND ADEQUACY
OF WHICH IS HEREBY ACKNOWLEDGED:
1. Interpretation:
"Affiliate" means any corporation or other 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
or if not meeting the preceding criteria, the power to direct or cause
the direction of management and strategic decisions of that corporation
or other entity.
"Agreements" mean collectively the Elan License Agreement, the
Emisphere License Agreement, the JV Agreement and the Transaction
Documents.
"A Shares" means the [* * *] Shares in the capital of Ebbisham which
were allotted to Elan under the JV Agreement.
"Balance Sheet Date" means 30 April 1999.
"Completion" means the completion of the transactions that occur on the
Effective Date.
"Compounds" (as previously defined in the Agreements) means Heparin
and/or Heparinoids.
"Current Transaction Documents" means the Current Transaction Financing
Documents, this Termination Agreement, the New License Agreement and
the Assignment Agreement.
"Effective Date" means the date of signing of this Termination
Agreement by the parties.
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"Ebbisham Loan Agreement" means the Loan Agreement of even date
herewith between Elan and Ebbisham in the amount of [* * *].
"Ebbisham's 30 April Balance Sheet" means the balance sheet contained
in Ebbisham's 30 April Management Accounts.
"Ebbisham's 30 April Management Accounts" means the management accounts
of Ebbisham for the period ended 30 April 1999, a copy of which is
attached at Schedule 1.
"Heparin" (as previously defined in the Agreements) means naturally
occurring forms of Heparin, including Heparin USP, BP and EP as well as
smaller molecular fractions thereof.
"Heparinoids" (as previously defined in the Agreements) means various
sulphated polysaccharides that have anti-coagulant activity resembling
that of Heparin.
"[* * *] Patent Application" means [* * *] Patent Application [* * *],
filed on [* * *].
"Note Purchase Agreement" means the Note Purchase Agreement of even
date herewith between Emisphere and Elan International Services, Ltd.,
a Bermudian company.
"Registration Rights Agreement" means the Registration Rights Agreement
of even date herewith between Emisphere and Elan International
Management, Ltd., a Bermudian company.
"Scheduled Company Programme Technology" means only the patents,
know-how and other intellectual property, as the case may be, which is
described in Schedule 2.
"Scheduled Elan Programme Technology" means only the Elan Programme
Technology which is described in Schedule 3.
"Scheduled Emisphere Programme Technology" means only the Emisphere
Programme Technology which is described in Schedule 4.
"Scheduled Serendipity Inventions" means only the patents, know-how and
other intellectual property, as the case may be, which is described in
Schedule 5.
"SNAC" means Sodium N-[8-(2-hydroxybenzoyl)amino]caprylate, its free
acid, esters thereof and other pharmaceutically accepted salt forms
thereof.
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"SNAD" means Sodium N-[10-(2-hydroxybenzoyl)amino] decanoate, its free
acid, esters thereof and other pharmaceutically accepted salt forms
thereof.
"Subscription Agreement" means the Subscription Agreement of even date
herewith between Emisphere and Elan International Management, Ltd., a
Bermudian company.
"1090 Patent Application" means the [* * *] patent application which
was filed by Elan [* * *], a copy of which is attached at Schedule
[* * *], entitled [* * *]; any equivalent [* * *]-provisionals,
continuations, continuations-in-part, divisionals, and re-issues
thereof and any foreign counterpart applications, and any patents
granted on such applications.
[* * *]
Capitalised terms used in this Termination Agreement shall have the
same meanings assigned to them in the Agreements, unless such terms are
expressly defined to the contrary in this Termination Agreement.
2. Termination of the JV Agreement and the Elan License Agreement:
2.1 Subject to the provisions of Clause 2.2, Elan and Ebbisham
hereby agree to terminate the JV Agreement and the Elan
License Agreement, in each case with effect from the Effective
Date.
All the provisions of the JV Agreement and the Elan License Agreement
shall terminate forthwith with effect from the Effective Date and be of
no further legal force or effect.
2.2 For the avoidance of doubt and without prejudice to the
generality of the foregoing Clause 2.1, Elan, Emisphere and
Ebbisham hereby acknowledge and agree as follows as of the
Effective Date:-
2.2.1 the Management Committee and the Research Committee
(as such terms were defined in the JV Agreement)
shall each be dissolved forthwith with effect from
the Effective Date and thereby cease to have any
function in relation to Ebbisham;
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2.2.2 the nominees on the Management Committee of the "A"
Directors and the "B" Directors respectively shall
be deemed to have been removed from the Management
Committee by the "A" Directors and the "B" Directors
respectively immediately prior to the dissolution of
the Management Committee;
2.2.3 the nominees on the Research Committee of the
nominees on the Management Committee of the "A"
Directors and the "B" Directors respectively, shall
be deemed to have been removed from the Research
Committee by the nominees on the Management
Committee of the "A" Directors and the "B" Directors
respectively, immediately prior to the dissolution
of the Management Committee pursuant to Clause
2.2.1;
2.2.4 the rights granted to Ebbisham pursuant to the Elan
License Agreement to use the Elan Patents, the Elan
Know-How, Improvements and the Elan Trademarks (as
such terms were defined in the Elan License
Agreement) shall terminate forthwith with effect
from the Effective Date;
2.2.5 the rights granted to Elan pursuant to the Elan
License Agreement to use the Elan Programme
Technology, the Emisphere Programme Technology, the
Company Programme Technology and the Emisphere
Technology shall terminate forthwith with effect
from the Effective Date;
2.2.6 any sub-license of the Elan Technology (as such term
was defined in the Elan License Agreement) which may
have been granted by Ebbisham to Emisphere pursuant
to Clause 2.5 of the Elan License Agreement shall
terminate forthwith with effect from the Effective
Date;
2.2.7 any sub-license of the Emisphere Technology (as such
term was defined in the Emisphere License Agreement)
which may have been granted by Ebbisham to Elan
pursuant to Clause 2.5 of the Emisphere License
Agreement shall terminate forthwith with effect from
the Effective Date;
2.2.8 subject only to the provisions of the New License
Agreement, with effect from the Effective Date,
neither of Emisphere nor Ebbisham shall have any
right of any nature to use, disclose, license or
otherwise transfer the Elan Patents, the Elan
Know-How, Improvements and/or the Elan Trademarks
(as such terms were defined in the Elan License
Agreement) and/or any other patents, know-how or any
other intellectual property rights whatsoever of
Elan;
2.2.9 with effect from the Effective Date, Elan shall not
have any right of any nature to use, disclose,
license or otherwise transfer the Emisphere
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Patents, the Emisphere Know-How, Improvements and/or
the Emisphere Trademarks (as such terms were defined
in the Emisphere License Agreement) and/or any other
patents, know-how or any other intellectual property
rights whatsoever of Emisphere;
2.2.10 with effect from the Effective Date, Elan shall not
have any right of any nature to use, disclose,
license or otherwise transfer the Scheduled Company
Programme Technology, the Scheduled Elan Programme
Technology, the Scheduled Emisphere Programme
Technology or the Scheduled Serendipity Inventions;
2.2.11 subject only to the provisions of this Termination
Agreement, as and from the Effective Date, Elan
shall be free to license, sublicense, commercialize
in any way and otherwise use the Elan Patents, the
Elan Know-How, Improvements and the Elan Trademarks
(as such terms were defined in the Elan License
Agreement)) in relation to or in connection with all
and any applications and uses, including for the
avoidance of doubt, in relation to the Compounds, or
otherwise, whether alone or in conjunction with any
third party;
2.2.12 subject only to the provisions of this Termination
Agreement and any restrictions which may apply as
between Emisphere and Ebbisham, as and from the
Effective Date, Emisphere and Ebbisham shall be free
to license, sublicense, commercialize in any way and
otherwise use the Emisphere Patents, the Emisphere
Know-How, Improvements and the Emisphere Trademarks
(as such terms were defined in the Emisphere License
Agreement), the Scheduled Company Programme
Technology, the Scheduled Elan Programme Technology,
the Scheduled Emisphere Programme Technology and the
Scheduled Serendipity Inventions) in relation to or
in connection with all and any applications and
uses, including for the avoidance of doubt, in
relation to the Compounds, or otherwise, whether
alone or in conjunction with any third party;
2.2.13 all research and development work (if any) being
conducted by Elan under Clause 6 of the Elan License
Agreement and all research and development services
(if any) being conducted by Elan and/or Emisphere
under Clause 7.6 of the JV Agreement shall terminate
forthwith with effect from the Effective Date;
2.2.14 with effect from the Effective Date, Elan shall have
no obligation to provide working capital or other
funding or financing of any nature to Ebbisham;
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2.2.15 all equipment or other tangible assets (if any)
purchased by Emisphere and/or Elan which were funded
by Ebbisham pursuant to Clause 10.1 of the JV
Agreement shall be delivered to and become the
absolute property of Ebbisham within 10 days of the
Effective Date;
2.2.16 all technical services and assistance (if any) being
conducted by Elan and/or Emisphere under Clause 13
of the JV Agreement (Technical Services and
Assistance) shall terminate forthwith with effect
from the Effective Date.
2.3 Ebbisham hereby warrants to Elan that it has not granted any
sub-licences or any other rights of any nature to any third
parties pursuant to the Elan License Agreement, save any
sub-license of the Elan Technology (as such term was defined
in the Elan License Agreement) which may have been granted by
Ebbisham to Emisphere pursuant to Clause 2.5 of the Elan
License Agreement.
3. Payment of monies:
3.1 Subject to Clause 3.3 and 3.4, none of the parties shall be liable
to repay to any other party any amount of money which may have been
paid by any party to another party under the JV Agreement.
3.2 Subject to Clause 3.3 and 3.4, each of the parties acknowledges and
agrees with the other parties that no monies are owed by any of the
parties to the others pursuant to the JV Agreement on the Effective
Date.
3.3 The parties acknowledge that certain loans were made by Elan to
Ebbisham as described in the Recitals to the Note Purchase Agreement
which are being repaid by Ebbisham/Emisphere on the Effective Date in
the manner set forth in the Recitals to the Note Purchase Agreement.
3.3.1 The parties acknowledge that there are certain
monies owed to Emisphere by Ebbisham that will
remain outstanding following the Effective Date.
4. Property Ownership Rights:
4.1 Ownership:
4.1.1 On and following the Effective Date:
(1) for the avoidance of doubt, the Elan
Patents, the Elan Know-How, Improvements
and/or the Elan Trademarks (as such terms
were
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defined in the Elan License Agreement) shall
remain the sole and exclusive property of
Elan;
(2) for the avoidance of doubt, the Emisphere
Patents, the Emisphere Know-How,
Improvements and/or the Emisphere Trademarks
(as such terms were defined in the Emisphere
License Agreement) shall remain the sole and
exclusive property of Emisphere;
(3) all Scheduled Company Programme Technology
shall remain the sole and exclusive property
of Ebbisham.
(4) all Scheduled Elan Programme Technology
shall remain the sole and exclusive property
of Ebbisham;
(5) all Scheduled Emisphere Programme Technology
shall remain the sole and exclusive property
of Ebbisham;
(6) all Scheduled Serendipity Inventions shall
remain the sole and exclusive property of
Ebbisham.
4.1.2 Except as described in Item 4 of Schedule 3, Elan
hereby warrants to Ebbisham and Emisphere that it
has not granted any license or sublicense or any
other rights to any third party in respect of the
Scheduled Elan Programme Technology, the Scheduled
Emisphere Programme Technology or the Scheduled
Company Programme Technology.
4.1.3 Each of Ebbisham and Emisphere hereby warrants to
Elan that it has not granted any license or
sublicense to any third party in respect of the
Scheduled Elan Programme Technology, the Scheduled
Emisphere Programme Technology or the Scheduled
Company Programme
Technology.
4.1.4 Elan hereby warrants that it has used all reasonable
efforts in carrying out the work required in listing
the Scheduled Elan Programme Technology.
4.1.5 Emisphere hereby warrants that it has used all
reasonable efforts in carrying out the work required
in listing the Scheduled Emisphere Programme
Technology.
4.1.6 Each of Emisphere and Elan hereby warrants that it
has used all reasonable efforts in carrying out the
work required in listing the Scheduled Company
Programme Technology and the Scheduled
Serendipity Inventions.
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4.2 Acknowledgements and confirmations:
For the avoidance of doubt, each of the parties irrevocably
acknowledges and confirms to the other parties as follows:
4.2.1 no Company Programme Technology (as such term was
defined in Clause 8.5 of the JV Agreement) has
arisen or been created at any time pursuant to the
Agreements, save the Scheduled Company Programme
Technology;
4.2.2 [* * *], no Emisphere Programme Technology (as such
term was defined in the Emisphere License Agreement)
has arisen or been created at any time pursuant to
the Agreements, save the Scheduled Emisphere
Programme Technology;
4.2.3 [* * *], no Elan Programme Technology (as such term
was defined in the Elan License Agreement) has
arisen or been created at any time pursuant to the
Agreements, save the Scheduled Elan Programme
Technology;
4.2.4 no "serendipity invention" (as such term was defined
in Clause 8.6 of the JV Agreement) has arisen or
been created at any time by any of the parties
pursuant to the Agreements, save the Scheduled
Serendipity Inventions.
4.3 [* * *] Patent Application:
On the Effective Date, Elan shall cause the [* * *] Patent
Application to be assigned to Ebbisham pursuant to the
Assignment Agreement.
4.4 Prosecution and maintenance of the [* * *] Patent Application:
4.4.1 Ebbisham, at Ebbisham's expense, shall have the
right to file and prosecute a regular US application
and foreign applications corresponding to the
[* * *] Patent Application and claiming priority to
the [* * *] Patent Application; defend all such
applications against third party oppositions; and to
maintain in force any issued letters patent.
Ebbisham shall have the right in its reasonable
business discretion to control such filing,
prosecution, defence and mainenance, provided
however, that Elan, shall be provided with copies of
all documents relating to such filing, prosecution,
defence, and maintenance in sufficient time to
review such documents to comment and approve in
writing prior
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to filing, said approval not to be unreasonably
withheld by Elan and required prior to Ebbisham
filing any document.
At any time, Ebbisham has the right to abandon the
[* * *] Patent Application or any corresponding
application or patent claiming priority from the
[* * *] Patent Application.
4.4.2 Elan, Emisphere and Ebbisham agree that at no time
will any independent claim of any application filed
according to Clause 4.4.1 [* * *]:
[* * *]
4.4.3 Elan, Emisphere and Ebbisham agree that at no time
will Emisphere and Ebbisham [* * *] without the
prior consent in writing of Elan.
4.4.4 Elan, Emisphere and Ebbisham agree that at no time
[* * *] (as specifically defined in [* * *] Patent
Application).
4.4.5 Elan, Emisphere and Ebbisham agree that at no time
will [* * *] is in the form of [* * *].
[* * *]
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[* * *]
6. Sale of Shares and Completion:
6.1 Subject to the terms of this Termination Agreement:
6.1.1 Elan shall sell as beneficial owner and Emisphere
shall purchase, free from all liens, charges and
encumbrances and together with all rights now or
hereafter attaching to them, the A Shares;
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6.1.2 the A Shares will be sold by Elan to Emisphere at a
price of $1 each, making an aggregate of $10,000 in
respect of the transfer of the A Shares by Elan to
Emisphere under Clause 5.1.1.
6.2 Completion shall take place at Elan's offices at Lincoln
House, Lincoln Place, Dublin 1 on 25 June 1999 at 2pm (or such
later date as may be agreed by the parties) and such other
places, if any, as the parties may agree.
On Completion, Elan and Emisphere 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
Ebbisham, or such other meetings, as appropriate:
6.2.1 the resignation of all the A Directors and the
Secretary of Ebbisham holding office prior to the
execution of this Termination Agreement;
6.2.2 the delivery by Elan to Emisphere of a transfer in
respect of the A Shares duly executed by Elan in
favour of Emisphere or as it may direct together
with the relative share certificates;
6.2.3 the payment by Emisphere to Elan of the
consideration for the A Shares as provided by Clause
6.1.2;
6.2.4 the transfer to Emisphere (or as it may direct) of
the share register, and all books and records of
Ebbisham in the possession of Elan (including minute
books and the company seal(s));
6.2.5 the change of the registered office of Ebbisham to
26 Lower Hatch Street, Dublin 2;
6.2.6 subject to the satisfaction of any pre-conditions to
the Ebbisham Loan Agreement, the funding by Elan of
[* * *] pursuant to the Ebbisham Loan Agreement; and
6.2.7 any other steps required by the Current Transaction
Documents.
6.3 Emisphere shall, following Completion, promptly deliver to the
Irish Revenue Commissioners the stock transfer form referred
to in Clause 6.2.2 for assessment of stamp duty, and shall
promptly pay the duty thus assessed.
7. Warranties and Indemnities:
7.1 WITH REFERENCE TO THE TRANSFER BY ELAN TO EMISPHERE OF
THE A SHARES AS PROVIDED BY CLAUSE 6 AT COMPLETION (BUT
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WITHOUT PREJUDICE TO ELAN'S OBLIGATION UNDER CLAUSE 6.1.1
HEREOF TO TRANSFER THE A SHARES TO EMISPHERE FREE FROM ALL
LIENS, CHARGES AND ENCUMBRANCES), AND SAVE AS PROVIDED IN
CLAUSE 7.4.2, THE PARTIES ACKNOWLEDGE AND AGREE THAT ELAN
MAKES NO REPRESENTATION OR WARRANTY OF ANY NATURE TO EMISPHERE
OR ANY OTHER PERSON IN RELATION TO EBBISHAM OR ANY OF ITS
AFFAIRS PAST, PRESENT OR FUTURE.
Emisphere acknowledges that it is entering into this
Termination Agreement in reliance exclusively on its own
business judgement, the information which has been available
to it as a shareholder of Ebbisham and otherwise and on the
due diligence it has carried out in relation to Ebbisham.
7.2 EXCEPT AS EXPRESSLY PROVIDED IN THIS TERMINATION AGREEMENT,
ALL OTHER WARRANTIES, CONDITIONS AND REPRESENTATIONS, EXPRESS
OR IMPLIED, STATUTORY OR OTHERWISE HEREUNDER ARE HEREBY
EXPRESSLY EXCLUDED BY THE PARTIES.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS TERMINATION
AGREEMENT, NONE OF THE PARTIES SHALL BE LIABLE TO ANY OF THE
OTHER PARTIES BY REASON OF ANY REPRESENTATION OR WARRANTY,
CONDITION OR OTHER TERM OR ANY DUTY OF COMMON LAW, OR UNDER
THE EXPRESS TERMS OF THIS TERMINATION AGREEMENT, FOR ANY
CONSEQUENTIAL OR INCIDENTAL OR PUNITIVE LOSS OR DAMAGE
(WHETHER FOR LOSS OF PROFITS OR OTHERWISE) AND WHETHER
OCCASIONED BY THE NEGLIGENCE OF THE RESPECTIVE PARTIES, THEIR
EMPLOYEES OR AGENTS OR OTHERWISE.
7.3 Without prejudice to the generality of Clauses 7.1 and 7.2,
for the avoidance of doubt, each of Elan and Emisphere hereby
acknowledges as follows:
7.3.1 with reference to Ebbisham's 30 April Balance Sheet
and save in respect of Ebbisham's taxation
liabilities for which provision has been made in
Ebbisham's 30 April Management Accounts, the only
creditors of Ebbisham on 30 April 1999 were Elan and
Emisphere;
7.3.2 save in respect of Ebbisham's taxation liabilities
for which provision has been made in Ebbisham's 30
April Management Accounts, the only creditors of
Ebbisham immediately prior to Completion were Elan
and Emisphere;
14
<PAGE>
7.3.3 to the knowledge of Emisphere and Elan, the
financial position of Ebbisham as stated in
Ebbisham's 30 April Management Accounts is accurate
and since the Balance Sheet Date, there has been no
material adverse change in the financial position or
prospects of Ebisham provided that neither Emisphere
nor Elan will be liable to compensate the other in
the event that the acknowledgement in this Clause
7.3.3 is incorrect in any way.
7.4 For the avoidance of doubt:
7.4.1 Subject only to the provisions of Clause 7.4.2,
Emisphere hereby indemnifies Elan, the A Directors
and the Secretary of Ebbisham holding office prior
to the execution of this Termination Agreement,
against any claims, costs liabilities or expenses of
any nature arising in relation to any claim or
proceedings which may be initiated against Ebbisham,
Elan, the A Directors or the Secretary of Ebbisham
holding office prior to the execution of this
Termination Agreement, following the Effective Date
which relate in any way to the activities of
Ebbisham, past, present or future, provided that the
indemnified party under this Clause 7.4.1 shall have
no right to indemnification hereunder to the extent
arising out of its own gross negligence or fraud.
7.4.2 To their respective knowledge, each of Emisphere and
Elan acknowledge and confirm that full provision or
reserve was made in Ebbisham's 30 April Balance
Sheet for all taxation that is or may be payable by,
or assessed against, Ebbisham for any taxable period
ending on or prior to 30 April 1999.
If following the Effective Date, Ebbisham's taxation
for any taxable period ending on or prior to 30
April 1999 is finally determined to be in excess of
the afore-mentioned provision or reserve for
taxation in Ebbisham's 30 April Balance Sheet, Elan
and Emisphere shall each contribute to Ebbisham 50%
of the amount of the excess.
Emisphere and Ebbisham agree to provide to Elan
copies of all correspondence and notices from the
relevant taxation authorities relating to the
taxation matters described in this Clause 7.4.2
together with all such additional materials and
assistance as may reasonably be requested by Elan,
and the parties agree to use all reasonable
commercial efforts to minimise any taxation
liability of Ebbisham described in this Clause 7.4.2
prior to discharge of same by Ebbisham.
15
<PAGE>
8. Secrecy/No announcements:
8.1 On or within 10 working days of the Effective Date:
8.1.1 Elan shall return to Ebbisham and Emisphere all
confidential information of Ebbisham and Emisphere
in its possession on the Effective Date, including,
without limitation, the information, product and
materials listed in Schedule 6; and
8.1.2 Ebbisham and Emisphere shall return to Elan all
confidential information of Elan in its possession
on the Effective Date.
8.2 Emisphere and Ebbisham agree to maintain in confidence and,
save as otherwise provided in this Clause 8, shall not
disclose this Termination Agreement or any information of Elan
in the form of documentation or oral presentations of a
proprietary or confidential nature ("Confidential
Information") which may be disclosed by Elan to Emisphere or
Ebbisham pursuant to this Termination Agreement.
8.3 Elan agrees to maintain in confidence and, save as otherwise
provided in this Clause 8, shall not disclose this Termination
Agreement or any information of Emisphere or Ebbisham in the
form of documentation or oral presentations of a proprietary
or confidential nature ("Confidential Information") which may
be disclosed by Emisphere or Ebbisham to Elan pursuant to this
Termination Agreement.
8.4 Each party agrees to treat Confidential Information disclosed
to it by the other hereunder with the same degree of care as
it does in protecting its own confidential information,
provided that:
8.4.1 Confidential Information may be disclosed to each
party's Representatives on a needtoknow basis;
8.4.2 Confidential Information shall be disclosed within
the recipient company only on a needtoknow basis;
and
[* * *]
For this purpose, each party shall ensure that any such
officers, directors, financial advisors, independent auditors,
legal counsel or employees (its "Representatives")
16
<PAGE>
and potential strategic partners are bound by confidentiality
undertakings no less strict than those set out herein.
8.5 The restrictions and obligations of nondisclosure and nonuse
shall not apply to information which:
8.5.1 is in the public domain;
8.5.2 is in the possession of the recipient at the time of
disclosure;
8.5.3 becomes available to the recipient on a
non-confidential basis, from a third party who is
under no confidentiality obligations to the party
disclosing Confidential Information; or
8.5.4 is independently developed by the recipient.
8.6 If any party or any of its Representatives or Affiliates
becomes legally compelled (by deposition, interrogatory,
request for documents, subpoena, civil investigative demand or
similar process) to disclose any of the other party's
Confidential Information, such party shall provide the other
party with prompt prior written notice and may disclose that
portion of the other party's Confidential Information that is
legally required and shall [* * *] to obtain (and shall
cooperate with the other party's efforts to obtain) assurance
that confidential treatment will be accorded the other party's
Confidential Information.
If any party is required by law to make any public disclosure,
including any public filings required to be made under the
rules or regulations of the U.S. Securities and Exchange
Commission, the Nasdaq Stock Market or other national
securities exchange, otherwise prohibited by this Termination
Agreement, such party shall provide the other party with
prompt prior written notice and may disclose that portion of
the other party's Confidential Information that is legally
required and shall [* * *] to obtain (and shall cooperate with
the other party's efforts to obtain) assurance that
confidential treatment will be accorded the other party's
Confidential Information.
8.7 Each of the parties agree that money damages may not be a
sufficient remedy for any breach of this Section 8 and that
Elan or Emisphere or Ebbisham, as the case may be, shall be
entitled to seek injunctive or other equitable relief as a
remedy for any such breach.
8.8 For the avoidance of doubt, in the event of any conflict
between the provisions of this Clause 8 and any of the
provisions of Clauses 2.2.4, 2.2.5, 2.2.6, 2.2.7, 2.2.8,
17
<PAGE>
2.2.9, 2,2.10, 2.2.11, 2.2.12 and 4 of this Termination
Agreement ("the Prevailing Provisions"), the Prevailing
Provisions shall prevail.
8.9 Subject only to the specific exceptions set forth in this
Clause 8, none of the parties shall disclose the existence of
this Termination Agreement or the other agreements entered
into by the parties on the Effective Date, the subject matter
hereof nor originate any publicity, new release or other
public announcement, written or oral without the prior written
consent of the other parties.
9. Waiver of accrued rights/covenant not to sue:
9.1 With reference to Clause 22.1 of the Elan License Agreement
and Clause 30.12 of the JV Agreement respectively and [* * *],
with effect from the Effective Date, each of the parties
waives any accrued rights which it may have under the Elan
License Agreement and the JV Agreement respectively.
9.2 Without prejudice to the waiver of accrued rights set forth in
Clause 9.1 and [* * *].
9.2.1 Elan covenants to Emisphere and Ebbisham not to take
any legal proceedings or pursue any remedy in any
court or other forum against Emisphere or Ebbisham
or licensee or sub-licensee of Emisphere or Ebbisham
in respect of any accrued rights which Elan may have
under the Elan License Agreement or JV Agreement on
the Effective Date;
9.2.2 Each of Emisphere and Ebbisham covenant to Elan not
to take any legal proceedings or pursue any remedy
in any court or other forum against Elan or any
licensee or sub-licensee of Elan in respect of any
accrued rights which either of such parties may have
under Elan License Agreement or the JV Agreement on
the Effective Date.
9.3 For the avoidance of doubt:
9.3.1 the provisions of this Clause 9 shall not in any way
act as a waiver by any of the parties in respect of
any of the provisions set forth in this Termination
Agreement or in respect of any claim of fraud;
9.3.2 the provisions of this Clause 9 shall not in any way
restrict any of the parties' respective rights to
take any legal proceedings or pursue any remedy in a
court in respect of any of the provisions set forth
in this Termination Agreement pursuant to Clause
10.2 of this Termination Agreement.
18
<PAGE>
9.4 For the avoidance of doubt, each of the parties acknowledges
to the other parties that Elan was not a party to the
Emisphere License Agreement and accordingly, was not at any
time subject to any obligations to any party thereunder.
[* * *]
19
<PAGE>
[* * *]
10. Governing law and jurisdiction:
10.1 This Termination Agreement shall be governed by and construed
in accordance with the laws of Ireland.
20
<PAGE>
10.2 The parties hereby submit to the jurisdiction of the state and
Federal courts located in the State of New York, USA and the
courts of Ireland and the parties hereby waive any and all
defences of improper venue or that the Forum is inconvenient.
11. General:
11.1 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
Termination Agreement.
11.2 Further Assurance
Each of the parties hereto shall, and shall use their
respective commercially 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
Termination Agreement into full force and effect.
11.3 No Representation
Each of the parties hereby acknowledges that in entering into
this Termination Agreement it has not relied on any
representation or warranty save as expressly set out in this
Termination Agreement or in any other Current Transaction
Document.
11.4 Counterparts
This Termination 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 Termination Agreement.
11.5 Notices
Any notice to be given under this Termination Agreement shall
be sent in writing by registered or recorded delivery post or
telecopied to:
21
<PAGE>
- Elan at
Elan Corporation PLC
Lincoln House, Lincoln Place, Dublin 2, Ireland
Attention: Vice President & General Counsel, Elan
Pharmaceutical Technologies
Telephone: 353 1 7094301
Telefax: 353 1 7094124
- Emisphere at
Emisphere Technologies, Inc.
765 Old Saw Mill River Road, Tarrytown, NY 10591, USA
Attention: Chief Financial Officer
Telephone: 001 914 785 4763
Telefax: 001 914 593 8292
- Ebbisham at
Ebbisham Limited
26 Lower Hatch Street, Dublin 2, Ireland
Attention: James Cawley
Telephone: 353 1 6762599
Telefax: 353 1 6762688
or to that 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.
11.6 Severability
If any provision in this Termination Agreement is agreed by
the parties to be, deemed to be or becomes invalid, illegal,
void or unenforceable under any applicable law, (i) the
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
22
<PAGE>
the date of such agreement or such earlier date as the parties
may agree, and (ii) the validity, legality and enforceability
of the remaining provisions of this Termination Agreement
shall not be impaired or affected in any way.
11.7 Amendments
No amendment, modification or addition to this Termination
Agreement shall be effective or binding on any party unless
set forth in writing and executed by a duly authorised
representative of all parties.
11.8 Waiver
No waiver of any right under this Termination 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 Termination Agreement.
11.9 Successors
This Termination Agreement shall be binding upon and enure to
the benefit of the parties hereto and their successors.
23
<PAGE>
IN WITNESS of which the parties have executed this Termination
Agreement.
24
<PAGE>
SCHEDULE 1
Management Accounts of Ebbisham for the year ended 30 April 1999
(Attached)
25
<PAGE>
SCHEDULE 2
[* * *]
26
<PAGE>
SCHEDULE 3
[* * *]
35
<PAGE>
SCHEDULE 4
[* * *]
36
<PAGE>
SCHEDULE 5
[* * *]
37
<PAGE>
SCHEDULE 6
[* * *]
38
<PAGE>
SCHEDULE 7
[* * *]
39
<PAGE>
Executed by ELAN CORPORATION, PLC
/s/ Seamus Mulligan
- -------------------
Name: Seamus Mulligan
Title: Exec. V.P. - Corporate Development
Executed by EMISPHERE TECHNOLOGIES, INC.
/s/ Charles Abdalian
- --------------------
Name: Charles Abdalian
Title: Chief Financial Officer
40
As executed
This Agreement is dated 2 July, 1999
BY AND BETWEEN
EMISPHERE TECHNOLOGIES, INC.,
a corporation incorporated under the laws of the State of Delaware, USA, having
its executive offices at 765 Old Saw Mill River Road, Tarrytown, NY 10591, USA
as more fully described in the definition of "Emisphere" contained in the
definition section.
AND
ELAN CORPORATION, PLC.,
an Irish company of Lincoln House, Lincoln Place, Dublin 2, Ireland as more
fully described in the definition of "Elan" contained in the definition section.
LICENSE AGREEMENT
[* * *] = This provision is subject to a request for confidential treatment.
<PAGE>
TABLE OF CONTENTS
Page No.
--------
CLAUSE 1. DEFINITIONS..................................................1
CLAUSE 2. GRANT OF RIGHTS..............................................6
CLAUSE 3. IMPROVEMENTS.................................................8
CLAUSE 4. INTELLECTUAL PROPERTY RIGHTS.................................8
CLAUSE 5. FINANCIAL PROVISIONS.........................................8
CLAUSE 6. RIGHT OF AUDIT AND INSPECTION...............................11
CLAUSE 7. PATENTS.....................................................11
CLAUSE 8. CONFIDENTIAL INFORMATION....................................12
CLAUSE 9. TERM OF AGREEMENT...........................................14
CLAUSE 10. WARRANTIES AND INDEMNITIES..................................16
CLAUSE 11. REGULATORY APPROVALS .......................................17
CLAUSE 12. EXPLOITATION................................................18
CLAUSE 13. INSURANCE...................................................18
CLAUSE 14. IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE................18
CLAUSE 15. SETTLEMENT OF DISPUTES; PROPER LAW..........................18
CLAUSE 16. ASSIGNMENT..................................................19
CLAUSE 17. NOTICES.....................................................19
CLAUSE 18. MISCELLANEOUS CLAUSES.......................................20
i
<PAGE>
WHEREAS
Emisphere desires to enter into this Agreement with Elan so as to obtain a
non-exclusive licence of the Elan Patent and the Elan Know-How for the Field to
package, import, use, offer for sale and sell the Product(s) in the Territory.
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:
"Affiliate" means any corporation or other entity 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 or if not meeting the
preceding criteria, the power to direct or cause the
direction of management and strategic decisions of
that corporation or other entity;
"Agreement" means this agreement (which expression shall be
deemed to include the Recitals, the Schedules and
Appendices hereto);
"Carriers" means the agents SNAC and SNAD only
that are used to facilitate
transport through membranes,
including oral, nasal, buccal,
intraocular, sublingual,
subcutaneous, intramuscular and
pulmonary delivery of the Compounds.
"Compounds" means Heparin and/or Heparinoids;
"Effective Date" means the date of signing of this Agreement by the
parties.
"Elan" means Elan Corporation, plc, and its
successors and permitted assigns,
but excluding its Affiliates save as
specifically included in any
provision of this Agreement.
1
<PAGE>
"Elan Know-How" means only the specific know-how
which is disclosed in the Elan
Patent, whether or not covered
by any patent, copyright, design
patent, trademark, trade secret or
other industrial or any intellectual
property rights.
For the avoidance of doubt, Elan
Know-How shall not include:
(i) any improvements to the
Elan Know-How invented,
created, conceived or
developed by Elan or its
Affiliates or by any third
party on their behalf;
(ii) any know-how other than the
Elan Know-How owned,
licensed or controlled by
Elan or its Affiliates on
the Effective Date or
subsequent to the Effective
Date;
(iii) any know-how owned by or licensed to
Affiliates of Elan including, without
limitation, [* * *] which
incorporates, inter alia, [* * *].
"Elan Patent" means [* * *] filed by Elan on [* * *] and
[* * *] filed by Elan on [* * *].
For the avoidance of doubt, the Elan
Patent shall not include:
(i) any improvements to the
Elan Patent invented,
created, conceived or
developed by Elan or its
Affiliates or by any third
party on their behalf;
(ii) any patent(s) other than
the Elan Patent owned,
licensed or controlled by
Elan or its Affiliates on
the Effective Date or
subsequent to the Effective
Date;
2
<PAGE>
(iii) any patent owned by or licensed to Affiliates
of Elan including, without limitation, [* * *]
which incorporates, inter alia, [* * *].
"Emisphere" means Emisphere Technologies, Inc., its Affiliates,
successors and permitted assigns;
"Field" means the research, development and optimisation
of the Compounds solely utilising the Carriers, or
a combination of the 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 product 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" means various sulphated polysaccharides that have
anti-coagulant activity resembling that of Heparin;
"INDA" means any Investigational New Drug
Application in relation to any
Product(s) filed by Emisphere with
the FDA or a similar application
filed in another jurisdiction;
"In Market" means the sale of any Product(s) by
Emisphere or its Affiliates, or
where applicable by a permitted
sub-licensee, to an unaffiliated
third party such as a wholesaler,
distributor, managed care
organisation, hospital or pharmacy
and the like and
3
<PAGE>
shall exclude the transfer pricing of the Product(s)
by Emisphere to an Affiliate or a permitted sub-
licensee;
"NDA" means any New Drug Application in relation to any
Product(s) filed by Emisphere with the FDA or a
similar application filed in another jurisdiction;
"Net Revenues" means any proceeds or other amounts received by
Emisphere in relation to Product(s) including, inter
alia, license royalties and excluding Net Sales, and
proceeds or other amounts received for research and
development and clinical trials [* * *].
"Net Sales" means:
(i) in the case of any Product(s) sold by Emisphere
In Market, that sum determined by deducting
from the aggregate gross In Market sales
proceeds billed for the Product(s) by
Emisphere, [* * *] together with deductions in
accordance with [* * *] US GAAP, subject to a
deduction in respect of uncollectible accounts
(up to a cumulative maximum of [* * *]), and
less 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 Product(s);
(ii) where Emisphere does not sell In Market (in
whole), that sum determined by deducting from
the aggregate royalties on sales of any
Product(s) received by Emisphere from a
permitted sublicensee, [* * *]
4
<PAGE>
together with deductions in accordance with
[* * *] US GAAP, subject to a deduction in
respect of uncollectible accounts (up to a
cumulative maximum of [* * *]), and less
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 Product(s).
[* * *]
Net Revenues" [* * *]
[* * *]
Net Revenues" [* * *]
[* * *]
Net Revenues" [* * *]
"Product(s)" means oral dosage forms of the
Compound(s) in conjunction with the
Carriers, or a combination of the
Carriers, [* * *]
"Product Manufacturing
Cost" shall mean the costs to Emisphere
directly related to the manufacture
of any Product, calculated in
accordance with the provisions of
Schedule 1.
"SNAC" means Sodium N-[8-(2-hydroxybenzoyl)amino]
caprylate, its free acid, esters thereof and
other pharmaceutically accepted salt forms
thereof;
5
<PAGE>
"SNAD" means Sodium N-[10-(2-hydroxybenzoyl)amino]
decanoate, its free acid, esters thereof and
other pharmaceutically accepted salt forms
thereof;
"Technological Competitor" shall mean a company, corporation or person
having a substantial part of its business,
research, development and/or manufacturing in
the drug delivery area of the pharmaceutical
industry.
"Termination Agreement" means the Termination Agreement of even date
herewith between Elan, Emisphere and Ebbisham
Limited.
"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 only and shall not affect its construction
or interpretation.
2. GRANT OF RIGHTS
2.1 Subject to the terms of this Agreement, Elan hereby grants
to Emisphere and Emisphere hereby accepts for the term of
this Agreement a non-exclusive license of the Elan Patent
and the Elan Know-How solely in the Field to package,
import, use, offer for sale and sell Product(s) in the
Territory.
2.2 All proprietary rights and rights of ownership with respect
to the Elan Patent and the Elan Know-How shall at all times
remain solely with Elan. Emisphere shall not have any rights
to use the Elan Patent or the Elan Know-How other than
insofar as they relate directly to the Field and are
expressly granted herein.
6
<PAGE>
2.3 For the avoidance of doubt and subject only to the
non-exclusive license granted to Emisphere hereunder [* * *]
of the Termination Agreement, the parties hereby acknowledge
and agree that, following the Effective Date, Elan (and each
of its Affiliates) shall be free to license, sub-license,
commercialize in any way and otherwise use all of its
patents, know-how and other intellectual property rights in
relation to or in connection with all and any applications
and uses, including for the avoidance of doubt, in relation
to the Compounds, or otherwise, whether alone or in
conjunction with any third party.
2.4 Sub-licensing by Emisphere:
2.4.1 Emisphere shall be entitled, subject to the prior
written consent of Elan which shall not be
unreasonably withheld or delayed, to grant
sub-licences of the Elan Patent and the Elan
Know-How solely in the Field to package, import,
use, offer for sale and sell Product(s) in one or
more countries of the Territory, provided that
Emisphere shall not grant a sub-licence to a
Technological Competitor of Elan.
2.4.2 Any sub-licence granted hereunder shall be in the
same terms mutatis mutandis as the terms of this
Agreement insofar as they are applicable, but
excluding the right to grant a sub-licence.
2.4.3 For the avoidance of doubt, Emisphere shall use its
reasonable endeavours to ensure that Elan shall have
the same rights of audit and inspection vis-a-vis a
sub-licensee, as Elan has pursuant to this Agreement
concerning Emisphere.
2.4.4 Emisphere shall be liable to Elan for all acts and
omissions of any sub-licensee as though such acts
and omissions were by Emisphere and Emisphere shall
provide the indemnity to Elan outlined in Clause 10.
2.4.5 Where a sub-licence has been granted under Clause
2.4.1, such sub-licence shall automatically
terminate if this Agreement terminates for the
country or countries covered by the sub- licence.
2.4.6 For the avoidance of doubt the parties agree that
any sub-licence granted pursuant to this Clause 2.4
shall not be capable of surviving the termination of
this Agreement.
7
<PAGE>
3. IMPROVEMENTS
3.1 Emisphere shall have no right hereunder or otherwise to any
improvements to the Elan Patent and/or the Elan Know-How
invented, created, conceived or developed by Elan or its
Affiliates, or by any third party on their behalf.
3.2 Elan shall remain the sole and exclusive owner of any
improvements to the Elan Patent and/or the Elan Know-How
invented, created, conceived or developed by Elan or its
Affiliates, or by any third party on their behalf at any
time.
4. INTELLECTUAL PROPERTY RIGHTS
Elan shall remain the sole and exclusive owner of the Elan Patent and
the Elan Know-How.
5. FINANCIAL PROVISIONS
5.1 Licence Royalty:
In consideration of the licence of the Elan Patent granted
to Emisphere under this Agreement, Emisphere shall pay to
Elan a non-refundable license royalty of [* * *] upon
execution of the Agreement by both parties, receipt of which
is hereby acknowledged by Elan.
5.2 Royalties on [* * *] Net Revenues:
In consideration of the licence of the Elan Patent to
Emisphere hereunder, the royalties payable by Emisphere to
Elan on [* * *] Net Revenues, in respect of Product(s), for
the term of this Agreement, shall be as follows:
5.2.1 subject to Clause 5.2.2, [* * *] of
[* * *];
5.2.2 royalties shall be payable by Emisphere to Elan on
[* * *] pursuant to the provisions of Clause 5.2.1
subject to the following conditions:
8
<PAGE>
(1) the parties agree that any [* * *] Net
Revenues shall be deemed to be [* * *]
Net Revenues solely for the purpose of
determining whether the [* * *];
(2) for the avoidance of doubt, where the
[* * *], shall not be subject to the
payment by Emisphere to Elan of royalties
pursuant to Clause 5.2.1;
(3) for the avoidance of doubt, the parties
acknowledge that a determination that the
[* * *] by a [* * *] Product [* * *], and
all [* * *] (whether in respect of one or
[* * *]) shall be subject to the payment
by Emisphere to Elan of royalties
pursuant to Clause 5.2.1 [* * *].
5.3 Royalties on [* * *] Net Revenues and Net Sales:
In consideration of the licence of the Elan Patent to
Emisphere hereunder, the royalties payable by
Emisphere to Elan on [* * *] Net Revenues and Net
Sales in respect of Product(s), for the term of this
Agreement, shall be as follows:
5.3.1 subject to Clause 5.3.2, [* * *] of [* * *] Net
Revenues and [* * *] of Net Sales;
5.3.2 the [* * *] royalties which shall be payable by
Emisphere to Elan on the [* * *] of [* * *] Net
Revenues and Net Sales [* * *] of the Agreement
shall be [* * *].
5.4 Payment of royalties shall be made [* * *] within thirty
[* * *] after the expiry of the [* * *]. 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 Emisphere. In addition, the
report
9
<PAGE>
shall clearly show the Net Revenues and Net Sales for the
months of the [* * *] for which payment is being
made on a country by country basis. In the event that no
royalty is due to Elan for any [* * *] period, the senior
financial officer shall so report.
5.5 Emisphere shall maintain and keep clear, detailed, complete,
accurate and separate records so:
5.5.1 as to enable any royalties on Net Revenues and Net
Sales which shall have accrued hereunder to be
determined; and
5.5.2 that any deductions made in arriving at the Net
Revenues and Net Sales can be determined.
5.6 All payments due hereunder shall be made in United States
Dollars. Payments due on Net Revenues and Net Sales 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 Emisphere is being made.
5.7 Subject to the provisions of this Agreement, Emisphere shall
pay all royalties at full rate.
5.8 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
Emisphere 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.
5.9 Elan and Emisphere 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.
5.10 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 Emisphere after deduction
of the appropriate withholding tax, in which
10
<PAGE>
event the parties shall co-operate to obtain the appropriate
tax clearance as soon as is practicable. On receipt of such
clearance, Emisphere shall forthwith procure that the amount
so withheld is paid to Elan.
5.11 Method of calculation of royalties and fees:
The parties acknowledge and agree that the methods for
calculating the royalties and fees hereunder are for the
purposes of the convenience of the parties, are freely
chosen and not coerced.
6. RIGHT OF AUDIT AND INSPECTION
6.1 Not more than once in each calendar year, Emisphere shall
permit an internationally-recognised independent firm of
Chartered Accountants upon reasonable notice and at any
reasonable time during normal business hours to have access
to inspect and audit the accounts and records of Emisphere
relating to the calculation of the royalty payments on Net
Revenues and Net Sales submitted to Elan. Any such
inspection of Emisphere'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 year of [* * *] 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 Emisphere. 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
Emisphere, Elan shall promptly reimburse Emisphere the
surplus.
6.2 In the event of any unresolved dispute regarding any alleged
deficiency or overpayment of royalty payments hereunder, the
matter will be referred to [* * *] for a resolution of such
dispute. Any decision by the [* * *] shall be [* * *] on the
parties.
7. PATENTS
7.1 Elan, at its expense, shall [* * *] to maintain in force any
[* * *] issued letters patent within the Elan Patent that
relate to the Field. Elan shall have the right in its
discretion to control such maintenance provided that
Emisphere at its request shall be provided with copies of
documents relating to such maintenance.
7.2 Elan and Emisphere shall promptly inform each other in
writing of any alleged infringement of any patents within
the Elan Patent by a third
11
<PAGE>
party of which it becomes aware and provide the other with
any available evidence of such infringement insofar as such
infringements relate solely to the Field.
7.3 Elan shall have the right to prosecute at its own expense
and for its own benefit any infringements of the Elan Patent
including any infringements that relate solely to the Field.
At Elan's request and expense, Emisphere shall co-operate
with such action. Should Elan decide not to pursue such
infringers insofar as such infringements relate solely to
the Field, within a reasonable period but in any event
within 20 days after receiving written notice of such
alleged infringement, 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 and expense,
Elan shall cooperate with such action.
8. CONFIDENTIAL INFORMATION
8.1 The parties acknowledge that it may be necessary, from time
to time, solely for the purposes of each party performing
this Agreement, to disclose to each other confidential and
proprietary information ("Confidential Information").
8.2 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 and for no other purpose.
8.3 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.
8.4 Any breach of this Clause 8 by any of the persons informed
by one of the parties is considered a breach by the party
itself.
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Confidential Information shall not be deemed to include:
(i) information that is in the public domain;
(ii) is in the possession of the recipient at the time of
disclosure;
(iii) information which is independently developed by a
party;
(iv) information that becomes available to a party on a
non- confidential basis from a third party who is
under no confidentiality obligations to the party
disclosing Confidential Information
8.5 If any party or any of its representatives or Affiliates
becomes legally compelled (by deposition, interrogatory,
request for documents, subpoena, civil investigative demand
or similar process) to disclose any of the other party's
Confidential Information, such party shall provide the other
party with prompt prior written notice and may disclose that
portion of the other party's Confidential Information that
is legally required and shall [* * *] obtain (and shall
cooperate with the other party's efforts to obtain)
assurance that confidential treatment will be accorded the
other party's Confidential Information.
If either party is required by law to make any public
disclosure, including any public filings required to be made
under the rules or regulations of the U.S. Securities and
Exchange Commission, the Nasdaq Stock Market or other
national securities exchange, otherwise prohibited by this
Agreement, such party shall provide the other party with
prompt prior written notice and may disclose that portion of
the other party's Confidential Information that is legally
required and shall [* * *] obtain (and shall cooperate with
the other party's efforts to obtain) assurance that
confidential treatment will be accorded the other party's
Confidential Information.
8.6 The parties agree that the obligations of this Clause 8 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 8, or a continuation of any
such breach by the other party, specific performance and
other equitable relief to redress
13
<PAGE>
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.
8.7 Subject only to the specific exceptions set forth in this
Clause 8 and Clause 8.4 of the Termination Agreement, none
of the parties shall disclose the existence of this
Agreement or the other agreements entered into by the
parties on the Effective Date, the subject matter hereof nor
originate any publicity, new release or other public
announcement, written or oral without the written consent of
the other parties.
9. TERM OF AGREEMENT
9.1 Subject to the rights of earlier termination set out in
Clauses 9.3 and 9.4, this Agreement commences as of the
Effective Date and expires [* * *] on the [* * *]:
9.1.1 [* * *] years starting from the date of the [* * *]
the Product [* * *]; or
9.1.2 the last to expire patent included in the Elan
Patent.
9.2 At the end of the term as specified in Clause 9.1 above (the
"Initial Period"), the Agreement may continue for an
additional period or periods of [* * *] if both parties so
agree in writing.
9.3 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
[* * *] 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 [* * *] day, the
said period shall be extended by such period as is
reasonably necessary to enable the breach to be cured.
9.4 If at any time during the term of this Agreement, an "Event
of Bankruptcy" (as defined below) relating to Emisphere
occurs, Elan shall
14
<PAGE>
have, in addition to all other legal and equitable rights
and remedies available hereunder, the option to terminate
this Agreement upon [* * *] written notice, given within
[* * *] days following the date that Elan becomes aware of
the Event of Bankruptcy.
As used in this Clause 9.4, the term "Event of Bankruptcy"
shall mean:
9.4.1 the 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
9.4.2 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 [* * *], 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.
9.5 Upon exercise of those rights of termination as specified in
Clause 9.1 to Clause 9.4 inclusive or elsewhere within the
Agreement, this Agreement shall, subject to the other
provisions of the Agreement, automatically terminate
forthwith and be of no further legal force or effect.
9.6 Upon expiration or termination of the Agreement:
9.6.1 any sums that were due from Emisphere 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 [* * *] 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;
9.6.2 all confidentiality provisions set out herein shall
remain in full force and effect;
9.6.3 all responsibilities and warranties shall insofar as
are appropriate remain in full force and effect;
15
<PAGE>
9.6.4 the rights of inspection and audit set out in Clause
6 shall continue in force for a period of one year;
9.6.5 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, Emisphere
may not thereafter use in the Territory or in such
particular country or countries in the Territory, as
the case may be, (a) the Elan Patent; and/or (b) any
Elan Know-How that remains confidential or otherwise
proprietary to Elan.
10. WARRANTIES AND INDEMNITIES
10.1 Emisphere shall assume the sole and entire responsibility
and shall indemnify and save harmless Elan and its
Affiliates from:
10.1.1 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 the manufacture,
transport, packaging, storage, handling,
distribution, marketing, advertising, promotion or
sale of the Product(s) by Emisphere, or any of its
Affiliates or any third party on behalf of
Emisphere;
10.1.2 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 infringement
by the Product(s) of the intellectual property
rights of any third party.
10.2 With reference to Clause 2, Emisphere shall indemnify and
hold harmless Elan and its Affiliates to the extent that any
claims, damages, liabilities, claims, costs or expenses
arise out of any such acts or omissions of any sub-licensee.
10.3 As a condition of obtaining an indemnity in the
circumstances set out above, Elan (and/or the relevant
Affiliate) shall:
10.3.1 fully and promptly notify Emisphere of any claim or
proceeding, or threatened claim or proceeding;
10.3.2 permit Emisphere to take full care and control of
such claim or proceeding;
16
<PAGE>
10.3.3 reasonably co-operate in the investigation and
defence of such claim or proceeding;
10.3.4 not compromise or otherwise settle any such claim or
proceeding without the prior written consent of
Emisphere, which consent shall not be unreasonably
withheld, conditioned or delayed; and
10.3.5 take all reasonable steps to mitigate any loss or
liability in respect of any such claim or
proceeding.
10.4 ELAN IS GRANTING THE LICENSE HEREUNDER ON AN "AS
IS" BASIS WITHOUT REPRESENTATION OR WARRANTY
WHETHER EXPRESS OR IMPLIED (FROM ELAN OR ANY OF
ITS AFFILIATES), INCLUDING WARRANTIES OF MERCHANT
ABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR
INFRINGEMENT OF THIRD PARTY RIGHTS, AND ALL SUCH
WARRANTIES ARE EXPRESSLY DISCLAIMED.
WITHOUT PREJUDICE TO THE PROVISIONS OF CLAUSE 10.1 AND 10.2
HEREOF AND ANY OTHER EXPRESS REPRESEN TATIONS, WARRANTIES,
INDEMNITIES OR OBLIGATIONS OF EMISPHERE HEREUNDER, EMISPHERE
HEREBY DISCLAIMS ANY AND ALL IMPLIED REPRESENTATIONS OR
WARRANTIES.
10.5 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THIS AGREEMENT, ELAN (AND ITS AFFILIATES) AND
EMISPHERE 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
OR PUNITIVE LOSS OR DAMAGE (WHETHER FOR LOSS OF
PROFITS OR OTHERWISE) AND WHETHER OCCASIONED BY
THE NEGLIGENCE OF THE RESPECTIVE PARTIES, THEIR
EMPLOYEES OR AGENTS OR OTHERWISE.
11. REGULATORY APPROVALS
11.1 For the avoidance of doubt, Emisphere shall have full
responsibility for its dealings with the FDA relating to the
Product(s) and Elan shall have no responsibility of any
nature relating thereto.
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<PAGE>
11.2 Any and all INDAs and other applications for regulatory
approval filed hereunder for the Product(s) shall remain the
property of Emisphere.
11.3 For the avoidance of doubt, the costs and expenses of any
filings and proceedings made by Emisphere to the FDA,
including post approval studies required by the FDA in
respect of the Product(s), and to maintain the FDA approval
relating thereto, shall be paid by Emisphere.
12. EXPLOITATION
12.1 Emisphere 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
strict accordance with all the legal and regulatory
requirements of each country of the Territory.
12.2 All advertising, promotional materials and marketing costs
needed to exploit the product(s) are to be paid by
Emisphere.
13. INSURANCE
Emisphere shall maintain adequate comprehensive general liability
insurance, including product liability insurance, on the Product(s)
manufactured and/or sold by Emisphere that incorporate intellectual
property licensed by Elan to Emisphere hereunder (or by a third party
on its behalf).
14. IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE
14.1 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 or
non availability of raw materials, but any such delay or
failure shall be remedied by such party as soon as
practicable.
15. SETTLEMENT OF DISPUTES; PROPER LAW
15.1 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. In the event that the parties fail to agree on a
mutually acceptable dispute resolution
18
<PAGE>
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.
15.2 This Agreement shall be governed by and construed in
accordance with the laws of Ireland.
16. ASSIGNMENT
16.1 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 any Affiliate
without such consent, and that Elan may assign this
Agreement to [* * *] without such prior written consent;
provided that such assignment does not have any adverse tax
consequences on the other party.
Elan and Emisphere 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.
17. NOTICES
17.1 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 Emisphere:
Emisphere Limited
765 Old Saw Mill River Road
Tarrytown, NY 10591
Attention: Chief Financial Officer
Telephone: 001 914 785 4763
Telefax: 001 914 593 8292
19
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If to Elan:
Elan Corporation plc
Lincoln House
Lincoln Place
Dublin 2
Ireland
Attention: Vice President, General Counsel, Elan
Pharmaceutical Technologies
Telephone: 353 1 7094301
Telefax : 353 1 7094124
or to such other address(es) and telefax numbers as may from
time to time be notified by either party to the other
hereunder.
17.2 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 after the time
of the despatch. Notice of change of address shall be
effective upon receipt.
18. MISCELLANEOUS CLAUSES
18.1 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.
18.2 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 (ii) the validity, legality and
enforceability of the remaining provisions of this Agreement
shall not be impaired or affected in any way.
18.3 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 out the provisions
of this Agreement.
20
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18.4 This Agreement shall be binding upon and enure to the
benefit of the parties hereto, their successors and
permitted assigns and sub-licenses.
18.5 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.
18.6 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.
18.7 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.
18.8 Each of the parties undertakes to do all things reasonably
within its power which are necessary or desirable to give
effect to the spirit and intent of this Agreement.
18.9 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.
18.10 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. 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.
21
<PAGE>
IN WITNESS of which the parties have executed this Agreement.
22
<PAGE>
SCHEDULE 1
PRODUCT MANUFACTURING COST
The following costs are manufacturing costs which are prepared by [* * *] in
accordance with generally accepted accounting principles consistently applied.
The following expenses are included in manufacturing costs:
1. Direct Materials
Materials used in the manufacturing process that are traced directly to the
completed product and include:
Inert raw materials or excipients
Active substances/ingredients
Packaging components such as bottles, caps, labels, etc.
2. Direct Labour
The cost of employees engaged in production activities which are directly
identifiable with product costs. Direct Labour cost includes:
Base pay, overtime, vacation and holidays, illness, personal with pay
and shift differential.
Cost of employee fringe benefits such as health and life insurance,
payroll taxes, welfare, pension and profit sharing.
3. Indirect Manufacturing Costs
Costs which are ultimately allocated to product based on standard labour hours
of the operating departments. These costs include:
Costs of Direct Labour - employees not utilised for the manufacturing
of product such as training, downtime and general duties.
Indirect Materials - supplies and chemicals which are used in the
manufacturing process and are not assigned to specific products but are
included in manufacturing overhead costs. Includes supplies which are
either common to several products or for which direct assignment to
products is not practical.
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Utilities - expenses incurred for fuel, electricity and water in
providing power for production and other plant equipment.
Maintenance and repairs - amount of expense incurred in-house or
purchased to provide services for plant maintenance and repairs of
facilities and equipment.
Depreciation - of plant (being manufacturing and laboratory premises
and buildings and the service, maintenance and renovation thereof) on
the basis of a 20 year life and equipment (being handling, storage,
manufacturing, processing and testing machinery and equipment) on the
basis of a 7 to 10 year life utilising the straight-line method of
calculation.
Insurance - cost of comprehensive and other insurance necessary for the
safeguard of manufacturing plant and equipment, and business
interruption.
Taxes - expense incurred for taxes on real and personal property
(manufacturing site, buildings, and the fixed assets of equipment,
furniture and fixtures, etc.). If manufacturing site includes other
operations (marketing, research, etc.), taxes are allocated on the
basis of total real and personal property.
4. Quality Assurance Costs
Direct labour and indirect costs for Quality Assurance departments
testing and approving materials used in manufacturing and completed
manufacturing batches and finished products. This includes all
manufacturing in-process testing and testing of finished materials.
Excluded from product costs are QA costs related to research and
development testing and testing which is allocated back to appropriate
manufacturing sites.
24
<PAGE>
SIGNED BY
/s/ Seamus Mulligan
- ----------------------------------
For and on behalf of
ELAN CORPORATION, PLC.
in the presence of:
- ----------------------------------
SIGNED BY
/s/ Charles Abdalian
- ----------------------------------
For and on behalf of
EMISPHERE TECHNOLOGIES, INC.
in the presence of:
- ----------------------------------
25
ASSIGNMENT
WHEREAS, we, Mary Martin, residing at 10 Brookfield Green, KCR Dublin
12, Ireland and Kenneth Iain Cumming, residing at 46 Old Cabra Road, Phibsboro,
Dublin 7, Ireland, have invented new and useful improvements in a "Solid Oral
Dosage Form Containing Heparin or a Heparinoid in Combination with a Carrier"
for which a provisional application for United States Letters Patent was filed
on February 22, 1999, Serial No. 60/121,065; and
WHEREAS, Ebbisham Limited, an Irish company located in 26 Lower Hatch
Street, Dublin 2, Ireland, is desirous of acquiring the entire interest in the
same;
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00),
the receipt of which is hereby acknowledged, and for other good and valuable
consideration, we, Mary Martin and Kenneth Iain Cumming, hereby do sell, assign
and transfer unto said Ebbisham Limited, the entire right, title and interest in
and to said invention and application throughout the world, including, without
limitation, any U.S. application claiming a right of priority from this
provisional application and any Letters Patent which may issue thereon, and any
reissue, reexamination, division, extension or continuation thereof and all
rights of priority under the International Convention arising from said
application; the same for its legal representatives and assigns, as fully and
entirely as the same would have been held by us had this assignment and sale not
been made;
AND, we hereby bind ourselves, our heirs, legal representatives,
administrators and assigns properly to execute without further consideration any
and all applications, petitions, oaths and assignments or other papers and
instruments which may be necessary in order to carry into full force and effect,
the sale, assignment, transfer and conveyance hereby made or intended to be made
and to aid its legal representatives and assigns to obtain and enforce proper
protection for said invention in all countries throughout the world.
1
<PAGE>
IN TESTIMONY WHEREOF, we hereunto set our hands and seals the day and
year set opposite our respective signatures.
- --------------------------------------------------------------------------------
Date _________________, 1999 /s/ Mary Martin (L.S.)
------------------------------------------------
Mary Martin
Date _________________, 1999 _______________________________________________
Witnessed by
Date _________________, 1999 ________________________________________________
Witnessed by
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Date _________________, 1999 /s/ Kenneth Iain Cumming (L.S.)
------------------------------------------------
Kenneth Iain Cumming
Date _________________, 1999 _______________________________________________
Witnessed by
Date _________________, 1999 ________________________________________________
Witnessed by
- --------------------------------------------------------------------------------
================================================================================
NOTE PURCHASE AGREEMENT
BETWEEN
EMISPHERE TECHNOLOGIES, INC.
AND
ELAN INTERNATIONAL SERVICES, LTD.
--------------------------------------
ZERO COUPON NOTE DUE 2006
--------------------------------------
DATED AS OF JULY 2, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
1. Definitions......................................................2
2. Purchase And Sale; Purchase Price................................5
(a) Purchase...................................................5
(b) Closing....................................................5
3. Representations, Warranties, Covenants, Etc. of the Buyer........5
(a) Purchase for Investment....................................5
(b) Non-U.S. Person............................................5
(c) Company Reliance...........................................5
(d) Information Provided.......................................6
(e) Absence of Approvals.......................................6
(f) Note Purchase Agreement....................................6
4. Representations, Warranties and Covenants of the Company.........7
(a) Organization and Authority.................................7
(b) Qualifications.............................................7
(c) Capitalization.............................................7
(d) Corporate Authorization....................................7
(e) Non-contravention..........................................8
(f) Approvals..................................................8
(g) SEC Filings................................................8
(h) Absence of Certain Proceedings.............................9
(i) Absence of Brokers, Finders, Etc...........................9
(j) No Solicitation; Compliance................................9
(k) Licenses; Permits.........................................10
(l) Subsequent Events.........................................10
(m) Tax Matters...............................................10
(n) Property..................................................11
(o) Contracts.................................................11
(p) Environmental Matters.....................................11
(q) Labor Matters.............................................12
(r) Insurance.................................................12
(s) Employee Benefits.........................................12
(t) Books and Records.........................................12
<PAGE>
5. Certain Covenants...............................................12
(a) Transfer Restrictions.....................................12
(b) Restrictive Legends.......................................13
(c) State Securities Laws.....................................13
(d) Commercially Reasonable Efforts...........................13
(e) Debt Obligation...........................................13
(f) Filings...................................................14
6. Conditions to the Company's Obligation to Issue.................14
7. Conditions to the Buyer's Obligation to Purchase................14
8. Miscellaneous...................................................15
(a) Governing Law.............................................15
(b) Headings..................................................15
(c) Severability..............................................15
(d) Notices...................................................15
(e) Counterparts..............................................17
(f) Entire Agreement; Benefit.................................17
(g) Standstill Agreement......................................17
(h) Waiver....................................................17
(i) Amendment.................................................17
(j) Further Assurances........................................17
(k) Expenses..................................................18
<PAGE>
NOTE PURCHASE AGREEMENT (this "Agreement"), dated as of July 2, 1999,
between EMISPHERE TECHNOLOGIES, INC., a Delaware corporation, (the "Company"),
and ELAN INTERNATIONAL SERVICES, LTD., a company incorporated under the laws of
Bermuda (the "Buyer").
RECITALS
A. On September 26, 1996, Elan Corporation, plc ("Elan"), a company
incorporated under the laws of Ireland, the Company and Ebbisham Limited, a
company incorporated under the laws of Ireland ("Ebbisham"), entered into a
Joint Venture Agreement (the "JV Agreement") and various related license and
other agreements under which Elan and the Company established Ebbisham, and
each of Elan and the Company licensed patents and know-how to Ebbisham for a
specified field of use.
B. As of the date of this Agreement, Elan has made loans to Ebbisham
under the JV Agreement in the aggregate amount of [* * *] (the "Loans").
Specifically: (i) Prior to the date of this Agreement, Elan made loans to
Ebbisham in the aggregate amount of [* * *]; and (ii) On the date of this
Agreement, Elan made a loan to Ebbisham in the amount of [* * *], which amount
reflected (x) Elan's obligation to make additional loans to Ebbisham in the
amount of [* * *] less (y) [* * *] owed by Ebbisham to Elan for services
previously rendered.
C. On the date of this Agreement, Elan, the Company and Ebbisham
entered into the Termination Agreement which provides for, among other things,
(i) the termination of the JV Agreement and some of the related license and
other agreements, (ii) the transfer by Elan of [* * *] "A" Ordinary Shares of
Ebbisham stock to the Company in exchange for [* * *], as a result of which
Ebbisham became a wholly owned subsidiary of the Company and (iii) the transfer
by Elan of all of its right, title and interest to [* * *] Patent Application
[* * *] filed [* * *] to the Company.
D. On the date of this Agreement, Elan and the Company entered into
a license agreement (the "License Agreement") whereby Elan has licensed to the
Company rights relating to [* * *] Patent [* * *] and [* * *] Patent [* * *].
Under the License Agreement, license fees in the aggregate amount of [* * *]
are payable by the Company to Elan (the "License Fees").
<PAGE>
E. On the date of this Agreement, Elan acknowledged that the
issuance of the Note to the Buyer, its wholly owned subsidiary, satisfied the
obligations of Ebbisham under the Loans and of the Company to pay the License
Fees.
F. On the date of this Agreement, the Company acknowledged that the
issuance of the Note to the Buyer satisfied the obligations of Ebbisham under
the Loans and of the Company to pay the License Fees.
G. In repayment of the Loans and payment of the License Fees, the
Company wishes to issue the Note to the Buyer, upon the terms and subject to
the conditions of this Agreement.
In consideration of the premises and the mutual covenants contained
in this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
1. Definitions.
All the agreements or instruments defined in this Agreement shall
mean agreements or instruments as the same may from time to time be
supplemented or amended or the terms of which may be waived or modified to the
extent permitted by, and in accordance with, their terms and the terms of this
Agreement.
The following terms shall have the following meanings (these
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Agreement" has the meaning provided in the recitals to this
Agreement.
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the subject Person. For purposes
of this definition, "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of the Person,
whether through the ownership of voting securities or by contract or otherwise.
"Business Day" means any day other than a Saturday, Sunday or a day
on which commercial banks in The City of New York are authorized or required by
law or executive order to remain closed.
"Buyer" has the meaning provided in the recitals to this Agreement.
<PAGE>
"CERCLA" has the meaning provided in Section 4(p) of this
Agreement.
"Closing Date" means 12:00 noon, New York City time, on July 2, 1999
or another mutually agreed to time.
"Common Stock" means the Common Stock, $.01 par value, of the
Company.
"Company" has the meaning provided in the recitals to this
Agreement.
"Contracts" has the meaning provided in Section 4(e) of this
Agreement.
"Ebbisham" has the meaning provided in the recitals to this
Agreement.
"Elan" has the meaning provided in the recitals to this Agreement.
"Environmental Law" has the meaning provided in Section 4(p) of this
Agreement.
"ERISA" has the meaning provided in Section 4(s) of this Agreement.
"Event of Default" has the meaning provided in the Note.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"JV Agreement" has the meaning provided in the recitals to this
Agreement.
"License Agreement" has the meaning provided in the recitals to this
Agreement.
"License Fees" has the meaning provided in the recitals to this
Agreement.
"Loans" has the meaning provided in the recitals to this Agreement.
"Material Adverse Effect" has the meaning provided in Section 4(b)
of this Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
<PAGE>
"Nasdaq" means the Nasdaq Stock Market, Inc.
"1934 Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute.
"1933 Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Note" means the Zero Coupon Note due July 2, 2006 of the Company in
the form of Annex A to this Agreement.
"Permits" has the meaning provided in Section 4(k) of this
Agreement.
"Permitted Transferee" means any Person which is an Affiliate or a
subsidiary, including an off-balance sheet special purpose vehicle, of the
Buyer or Elan.
"Person" means any natural person, corporation, partnership, limited
liability company, trust, incorporated organization, government, governmental
agency or political subdivision of them.
"Preferred Shares" means the Preferred Stock, par value $.01 per
share, of the Company, of which 200,000 shares have been designated Series A
Junior Participating Preferred Stock.
"Proprietary Rights" has the meaning provided in Section 4(n) of
this Agreement.
"Regulation D" means Regulation D under the 1933 Act.
"Regulation S" means Regulation S under the 1933 Act.
"SEC" means the Securities and Exchange Commission or any
successor agency.
"SEC Reports" means all periodic and other reports filed by the
Company with the SEC under the 1934 Act after July 31, 1996 and before the date
of this Agreement, in each case as filed with the SEC and including the
information and documents incorporated in them by reference.
"Standstill Agreement" means Section 5.3 of the Purchase Agreement
by and between the Company and the Buyer dated as of October 18, 1995, as
amended.
<PAGE>
"Subsidiary" means any corporation or other entity of which a
majority of the capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
the Company.
"Termination Agreement" means the Termination Agreeement dated as of
the date of this Agreement among the Company, Elan and Ebbisham.
"Transaction Documents" means, collectively, this Agreement and the
Note and the other agreements, instruments and documents contemplated by them.
2. Purchase And Sale; Purchase Price.
(a) Purchase. The Buyer agrees to purchase from the Company, and the
Company agrees to issue to the Buyer, on the Closing Date, the Note in
repayment of the Loans and payment of the License Fees.
(b) Closing. The issuance of the Note shall occur on the Closing
Date at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of
the Americas, New York, New York. At the closing, upon the terms and subject to
the conditions of this Agreement, the Company shall issue and deliver to the
Buyer the Note and the Buyer shall issue and deliver to the Company an
acknowledgment of the repayment of the Loans and payment of the License Fees in
a form reasonably satisfactory to the Company.
3. Representations, Warranties, Covenants, Etc. of the Buyer.
The Buyer represents and warrants to the Company that the following
matters are true and correct on the date of execution and delivery of this
Agreement and will be true and correct on the Closing Date, and the Buyer
covenants and agrees with the Company as follows:
(a) Purchase for Investment. The Buyer is purchasing the Note for
its own account for investment and not (1) with a view towards the public sale
or distribution of them within the meaning of the 1933 Act or (2) for the
account of or on behalf of any "U.S. person" (as the term is defined in
Regulation S).
(b) Non-U.S. Person. The Buyer is outside the United States and is
not a "U.S. person" (as the term is defined in Regulation S).
(c) Company Reliance. The Buyer and its Affiliates understand that
the Note is being issued to the Buyer in reliance on one or more exemptions
from the registration requirements of the 1933 Act and exemptions from state
securities laws and that the Company is relying upon the truth and accuracy of,
and the compliance of the Buyer and its Affiliates with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth in this
<PAGE>
Agreement, in order to determine the availability of exemptions and the
eligibility of the Buyer to acquire or receive an offer to acquire the Note.
(d) Information Provided. The Buyer, its Affiliates and their
advisors, if any, have requested, received and considered all information
relating to the business, properties, operations, financial condition or
results of operations of the Company and information relating to the issuance
of the Note deemed relevant by them; the Buyer, its Affiliates and their
advisors have been afforded the opportunity to ask questions of the Company
concerning the terms of the offering of the Note and the business, properties,
operations, financial condition or results of operations of the Company and
have received satisfactory answers to any inquiries; without limiting the
generality of the above, the Buyer, its Affiliates and their advisors have had
the opportunity to obtain and to review the SEC Reports in connection with the
Buyer's decision to purchase the Note and the Buyer has relied solely upon the
SEC Reports, the representations, warranties, covenants and agreements of the
Company set forth in this Agreement and to be contained in the other
Transaction Documents, as well as any investigation of the Company completed by
the Buyer, its Affiliates or their advisors; the Buyer and its Affiliates
understand that an investment in the Note involves a high degree of risk.
(e) Absence of Approvals. The Buyer and its Affiliates understand
that no government or governmental agency has passed on or made any
recommendation or endorsement of the Note.
(f) Note Purchase Agreement. The Buyer has all requisite power and
authority, corporate or otherwise, to execute, deliver and perform its
obligations under this Agreement and the other Transaction Documents executed
by the Buyer in connection with this Agreement and to consummate the
transactions contemplated by them; and this Agreement and the other Transaction
Documents have been duly and validly authorized, duly executed and delivered by
the Buyer and, assuming due execution and delivery by the Company, are valid
and binding agreements of the Buyer enforceable in accordance with their terms,
except (1) their enforceability may be limited by (A) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or transfer or other similar
laws now or after the date of this Agreement in effect relating to or affecting
creditors' rights generally and (B) general principles of equity, regardless of
whether enforcement is considered in a proceeding in equity or at law and (2)
any rights to indemnity or contribution may be limited by federal and state
securities laws and public policy considerations.
(g) Buyer Status. Neither the Buyer nor any of its Affiliates is a
"broker" or "dealer" as those terms are defined in the 1934 Act which is
required to be registered with the SEC under Section 15 of the 1934 Act.
<PAGE>
4. Representations, Warranties and Covenants of the Company.
The Company represents and warrants to the Buyer that the following
matters are true and correct on the date of execution and delivery of this
Agreement and will be true and correct on the Closing Date, and the Company
covenants and agrees with the Buyer as follows:
(a) Organization and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to (i) own, lease
and operate its properties and to carry on its business as described in the SEC
Reports and as currently conducted, and (ii) to execute, deliver and perform
its obligations under this Agreement and the other Transaction Documents and to
consummate the transactions contemplated by them. The Company has no
Subsidiaries other than Ebbisham.
(b) Qualifications. The Company is duly qualified to do business as
a foreign corporation and is in good standing in all jurisdictions where
qualification is necessary and where failure to qualify could reasonably have a
material adverse effect on the business, properties, assets, operations, or
financial condition of the Company and its Subsidiaries taken as a whole (any
event of this kind, a "Material Adverse Effect").
(c) Capitalization. The authorized capital of the Company consists
of (a) 40,000,000 shares of Common Stock and 1,000,000 shares of Preferred
Stock, of which 12,082,744 shares of Common Stock were outstanding on January
31, 1999 and no shares of Preferred Stock of the Company were outstanding. The
outstanding shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. Except as described in
the SEC Reports, there are no (1) options, warrants or other rights to
purchase, (2) agreements or other obligations to issue or (3) other rights to
convert any obligation into or exchange any securities for, shares of capital
stock of or ownership interests in the Company. Except as described in the SEC
Reports, the Company does not own, directly or indirectly, any shares of
capital stock or any other equity or long-term debt securities or have any
equity interest in any corporation, partnership, limited liability company,
incorporated organization, firm, joint venture or other entity.
(d) Corporate Authorization. This Agreement and the other
Transaction Documents have been duly and validly authorized by the Company;
this Agreement has been duly executed and delivered by the Company and,
assuming due execution and delivery by the Buyer, this Agreement is and the
other Transaction Documents will be, when duly executed and delivered by the
Company and the other parties to them, valid and binding obligations of the
Company enforceable in accordance with their terms, except (1) their
enforceability may be limited by (A) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or transfer or other similar laws now or
after the date of this Agreement in effect
<PAGE>
relating to or affecting creditors' rights generally and (B) general principles
of equity, regardless of whether enforcement is considered in a proceeding in
equity or at law and (2) any rights to indemnity or contribution may be limited
by federal and state securities laws and public policy considerations.
(e) Non-contravention. The execution and delivery of this Agreement
and the other Transaction Documents, and the consummation by the Company of the
issuance of the Note and the other transactions contemplated by this Agreement,
do not and will not, with or without the giving of notice or the lapse of time,
or both, (i) result in any violation of any provision of the certificate of
incorporation or by-laws of the Company, (ii) conflict with or result in a
breach by the Company of any of the terms or provisions of, or constitute a
default under, or result in the modification of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance upon any of
the properties or assets of the Company under any indenture, mortgage, deed of
trust or other agreement or instrument to which the Company is a party or by
which the Company or any of its properties or assets are bound or affected (the
"Contracts"), (iii) violate or contravene any applicable law, rule or
regulation or any applicable decree, judgment or order of any court, regulatory
body, administrative agency or other governmental body having jurisdiction over
the Company or any of its properties or assets, in each case in clause (ii) and
(iii), as could be reasonably likely to have a Material Adverse Effect;
provided that any breach, default, modification, contravention or violation or
other event or action does not and will not affect the obligation or ability of
the Company to perform any of its duties under this Agreement or the other
Transaction Documents or (iv) have any material adverse effect on any Permit,
certification, registration, approval, consent, license or franchise necessary
for the Company to own or lease and operate any of its properties and to
conduct any of its business.
(f) Approvals. No authorization, approval or consent of, or filing
with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
necessary to be obtained or made by the Company in connection with the
execution, delivery and performance of this Agreement and the Note and the
issuance and sale of the Note as contemplated by this Agreement and the terms
of the Note. In connection with the License Agreement, the Company has either
(x) satisfied the requirements of the HSR Act and the analogous laws of Ireland
or (y) determined, in consultation with its legal counsel, that the
requirements of the HSR Act and the analogous laws of Ireland do not apply.
(g) SEC Filings. The Company has timely filed all periodic and other
reports required to be filed under the 1934 Act and all other forms, reports,
registration statements and documents required to be filed with the SEC since
July 31, 1996. All of these forms, reports, registration statements and
documents complied, when filed, in all material respects, with all applicable
requirements of the 1933 Act and the 1934 Act. As of their respective dates,
these reports and documents (including the information and documents
incorporated in them by
<PAGE>
reference) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated in them or necessary to make the
statements in them, in light of the circumstances under which they were made,
not misleading.
The audited financial statements and unaudited interim financial
statements of the Company included or incorporated by reference in the forms,
reports, registration statements and documents have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved and, except as otherwise stated in them, fairly
present, in all material respects, the financial position of the Company at the
dates of them and the results of operations and cash flows for the periods then
ended (subject, in the case of any unaudited interim financial statements, to
normal year-end adjustments and to the extent they include footnotes or may be
condensed or summary statements) and the audited financial statements are
accompanied by an unqualified opinion on them by the Company's independent
auditors.
(h) Absence of Certain Proceedings. Except as described in the SEC
Reports, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company in which an unfavorable
decision, ruling or finding would have a material adverse effect on the
business, properties, operations, financial condition or results of operations
of the Company or the transactions contemplated by this Agreement or any of the
other Transaction Documents or which could adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the other Transaction Documents.
(i) Absence of Brokers, Finders, Etc. No broker, finder, or similar
Person is entitled to any commission, fee, or other compensation by reason of
the transactions contemplated by this Agreement. The Company will pay, and hold
the Buyer harmless against, any liability, loss or expense (including, without
limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in
connection with any claim for any commission, fee or other compensation of this
kind.
(j) No Solicitation; Compliance. No form of general solicitation or
general advertising was used by the Company or any of its Affiliates or, to its
knowledge, any other Person acting on behalf of the Company, in respect of the
Note or in connection with the offer and sale of the Note. Neither the Company
nor any of its Affiliates nor, to its knowledge, any Person acting on behalf of
the Company has, either directly or indirectly, (1) sold or offered for sale to
any Person the Note or, within the six months prior to the date of this
Agreement, any other similar security of the Company except as contemplated by
this Agreement or (2) engaged in any directed selling efforts (as the term is
defined in Regulation S) with respect to the Note. The Company represents that
neither the Company nor any of its Affiliates nor any Person authorized to act
on its behalf will sell or offer for sale
<PAGE>
any security to, or solicit any offers to buy any security from, or otherwise
approach or negotiate with, any Person so as to cause the issuance or sale of
the Note to be in violation of any of the provisions of Section 5 of the 1933
Act.
The Company, its Affiliates and any Person acting on behalf of the
Company have complied with the offering restrictions requirements of
Regulations S. The Company is a "reporting issuer" (as the term is defined in
Regulation S)
(k) Licenses; Permits. The Company possesses all licenses, permits,
certificates, consents, orders, approvals and other authorizations from, and
has made all declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts and
other tribunals presently required or necessary to own or lease, as the case
may be, and to operate its properties and to carry on its business as currently
conducted and as proposed to be conducted ("Permits"), except where failure to
obtain the Permits would not, individually or in the aggregate, have a Material
Adverse Effect and except as disclosed in the SEC Reports. The Company has
fulfilled and performed all of its obligations with respect to the Permits and
no event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination of them or results in any other material
impairment of the rights of the holder of any Permit. The Company has not
received any notice of any proceeding relating to revocation or modification of
any Permit, except where the revocation or modification would not, individually
or in the aggregate, have a Material Adverse Effect.
(l) Subsequent Events. Other than in connection with the Transaction
Documents, since January 31, 1999, (1) the Company has not incurred any
liabilities or obligations, direct or contingent, or entered into or agreed to
enter into any transactions or contracts (written or oral) not in the ordinary
course of business, which liabilities, obligations, transactions or contracts
would, individually or in the aggregate, be material to the business, assets,
liabilities (contingent or otherwise), operations, condition (financial or
otherwise) or solvency of the Company, (2) the Company has not purchased any of
its outstanding capital stock, nor declared, paid or otherwise made any
dividend or distribution of any kind on its capital stock and (3) there has not
been any material change in the capital stock or long-term indebtedness of the
Company.
(m) Tax Matters. The Company has filed all necessary federal, state
and foreign income and franchise tax returns, except where the failure to file
returns would not, individually or in the aggregate, have a Material Adverse
Effect, and has paid all taxes shown as due on them. Other than tax
deficiencies which the Company is contesting in good faith and for which the
Company has provided adequate reserves, there is no tax deficiency that has
been asserted against the Company that would, individually or in the aggregate,
have a Material Adverse Effect.
<PAGE>
(n) Property. The Company has good and marketable title to all real
property and personal property owned by it and all leasehold estates in the
real and personal property being leased by it, in each case free and clear of
all liens, charges, encumbrances or restrictions, except to the extent the
failure to have title or the existence of liens, charges, encumbrances or
restrictions would not, individually or in the aggregate, have a Material
Adverse Effect.
The Company owns or possesses adequate licenses or other valid
rights to use all patents and applications, trademarks, service marks, trade
names, copyrights and know-how (collectively "Proprietary Rights") necessary to
conduct the businesses currently or proposed to be conducted by it, except for
any lack of or defects in ownership as would not, individually or in the
aggregate, have a Material Adverse Effect. The Company has not received any
notice that any Proprietary Rights have been declared unenforceable or
otherwise invalid by any court or governmental agency other than notices
relating to Proprietary Rights the loss of which would not, individually or in
the aggregate, have a Material Adverse Effect. The Company has not received any
notice of infringement of or conflict with (and does not know of any
infringement of or conflict with) asserted rights of others with respect to any
Proprietary Rights which, if the assertion of infringement or conflict were
sustained, would have a Material Adverse Effect.
(o) Contracts. Each of the Contracts is valid and enforceable
against the Company and to the knowledge of the Company is valid and
enforceable against the other party or parties to them, and the Company is not,
and has no knowledge that any other party is, in default under or in respect of
any Contract, with only those exceptions as would not, individually or in the
aggregate, have a Material Adverse Effect.
(p) Environmental Matters. Except as would not, individually or in
the aggregate, have a Material Adverse Effect (1) the Company is in compliance
with and not subject to liability under applicable Environmental Laws, (2) the
Company has made all filings and provided all notices required under any
applicable Environmental Law, and has and is in compliance with all Permits
required under any applicable Environmental Laws and each of them is in full
force and effect, (3) there is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter or request for information pending or, to the knowledge
of the Company, threatened against the Company under any Environmental law, (4)
no lien, charge, encumbrance or restriction has been recorded under any
Environmental Law with respect to any assets, facility or property owned,
operated, leased or controlled by the Company, (5) the Company has not received
notice that it has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended ("CERCLA"), or any comparable state law, (6) no property or facility
of the Company is (A) listed or proposed for listing on the National Priorities
List under CERCLA or (B) listed in the Comprehensive Environmental Response,
Compensation and Liability Information System List
<PAGE>
promulgated under CERCLA, or on any comparable list maintained by any state or
local governmental authority.
For purposes of this Agreement, "Environmental Laws" means the
common law and all applicable federal, state and local laws or regulations,
codes, orders, decrees, judgments or injunctions issued, promulgated, approved
or entered under them, relating to pollution or protection of public or
employee health and safety or the environment, including laws relating to (i)
emissions, discharges, releases or threatened release of hazardous materials
into the environment (including ambient air, surface water, groundwater, land
surface or subsurface strata), (ii) the manufacture, processing, distribution,
use, generation, treatment, storage, disposal, transport or handling of
hazardous materials, and (iii) underground and aboveground storage tanks and
related piping, and emissions, discharges, releases or threatened releases from
them.
(q) Labor Matters. There is no strike, labor dispute, slowdown and
work stoppage with the employees of the Company which is pending or, to the
knowledge of the Company, threatened.
(r) Insurance. The Company carries insurance in amounts and covering
risks as is adequate for the conduct of its business and the value of its
properties.
(s) Employee Benefits. The Company has no liability for any
prohibited transaction or funding deficiency or any complete or partial
withdrawal liability with respect to any pension, profit sharing or other plan
which is subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), to which the Company or any Subsidiary makes or ever has
made a contribution and in which any employee of the Company is or has ever
been a participant. With respect to these plans, the Company and the
Subsidiaries are in compliance in all material respects with all applicable
provisions of ERISA.
(t) Books and Records. The Company (1) makes and keeps accurate
books and records and (2) maintains internal accounting controls which provide
reasonable assurance that (A) transactions are executed in accordance with
management's authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (C) access to its assets is permitted only in accordance with
management's authorization and (D) the reported accountability for its assets
is compared with existing assets at reasonable intervals.
5. Certain Covenants.
(a) Transfer Restrictions. The Buyer acknowledges and agrees that
(1) the Note to be issued to it under this Agreement has not been and is not
being registered under the provisions of the 1933 Act or any state securities
laws; (2) no
<PAGE>
sale, assignment or other transfer of the Note or any interest in it may be
made except in accordance with its terms to a Permitted Transferee; and (3) the
Company is under no obligation to register the Note under the 1933 Act.
(b) Restrictive Legends. (1) The Buyer acknowledges and agrees that
the Note shall bear a restrictive legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the Note):
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAWS. THIS NOTE HAS BEEN
ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT
EXCEPT UNDER A VALID EXEMPTION FROM REGISTRATION UNDER THE ACT AND
DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY
IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED.
(c) State Securities Laws. On or before the Closing Date, the
Company shall take any action necessary to qualify, or to obtain an exemption
for, the Note for issuance to the Buyer under this Agreement under the
securities laws of jurisdictions in the United States as shall be applicable.
In connection with these obligations of the Company, the Company shall not be
required (1) to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify, (2) to subject itself to general taxation in
any jurisdiction, (3) to file a general consent to service of process in any
jurisdiction, (4) to provide any undertakings that cause more than nominal
expense or burden to the Company or (5) to make any change in its charter or
by-laws which the Board of Directors of the Company determines to be contrary
to the best interests of the Company and its stockholders. The Company shall
furnish the Buyer with copies of all filings, applications, orders and grants
or confirmations of exemptions relating to securities laws on or before the
Closing Date.
(d) Commercially Reasonable Efforts. Each of the parties shall use
its commercially reasonable efforts timely to satisfy each of the conditions to
the other party's obligations to issue and purchase the Note set forth in
Sections 6 or 7, as the case may be, of this Agreement on or before the Closing
Date.
(e) Debt Obligation. So long as any portion of the Note is
outstanding, the Company shall cause its books, records and financial
statements to reflect the Note as a debt of the Company in its unpaid accreted
amount.
(f) Filings. In the event the Company determines, in consultation
with its legal counsel, that the requirements of the HSR Act and the analogous
laws of Ireland apply to transactions contemplated by the License Agreement,
each of the
<PAGE>
Company and the Buyer agree to make any filing required by the HSR Act and the
analogous laws of Ireland in connection with them after consultation with the
other as to the proper form, scope and substance of the filing.
6. Conditions to the Company's Obligation to Issue.
The Buyer understands that the Company's obligation to issue the
Note to the Buyer under this Agreement is conditioned upon satisfaction of the
following conditions precedent on or before the Closing Date (any or all of
which may be waived by the Company in its sole discretion):
(a) The delivery by the Buyer of the acknowledgment described in
Section 2(b).
(b) On the Closing Date, no legal action, suit or proceeding shall
be pending or threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement.
(c) The representations and warranties of the Buyer contained in
this Agreement shall have been true and correct on the date of this Agreement
and on the Closing Date as if made on the Closing Date and on or before the
Closing Date the Buyer shall have performed all covenants and agreements of the
Buyer required to be performed by the Buyer on or before the Closing Date.
(d) No event which, if the Note were outstanding, would constitute
an Event of Default shall have occurred and be continuing unless the Buyer
shall have waived in writing the Event of Default, and the rights of the Buyer
under the Note with respect to the Event of Default.
7. Conditions to the Buyer's Obligation to Purchase.
The Company understands that the Buyer's obligation to purchase the
Note is conditioned upon satisfaction of the following conditions precedent on
or before the Closing Date (any or all of which may be waived by the Buyer in
its sole discretion):
(a) Delivery by the Company of the Note in accordance with this
Agreement.
(b) On the Closing Date, the issuance of the Note under this
Agreement has not been enjoined (temporarily or permanently), and no legal
action, suit or proceeding shall be pending or threatened which seeks to
restrain or prohibit the transactions contemplated by this Agreement.
(c) The representations and warranties of the Company contained in
this Agreement that are qualified as to materiality shall be true and correct,
and
<PAGE>
the representations and warranties of the Company set forth in this Agreement
that are not so qualified shall be true and correct in all material respects,
in each case as of the date of this Agreement and as of the Closing Date, as
though made on and as of the Closing Date (except for representations given as
of a specific date, which representations shall be true and correct as of that
date), and on or before the Closing Date the Company shall have performed all
covenants and agreements of the Company contained in this Agreement required to
be performed by the Company on or before the Closing Date.
(d) No event which, if the Note were outstanding, would constitute
an Event of Default shall have occurred and be continuing. Since January 31,
1999, and except as disclosed in SEC Reports filed since that date, there shall
have been no event or development, and no information shall have become known,
that, individually or in the aggregate, has or would be reasonably likely to
have a Material Adverse Effect.
(e) The Company shall have delivered to the Buyer its certificate,
dated the Closing Date, duly executed by an officer of the Company to the
effect set forth in subparagraphs (b), (c) and (d) of this Section 7.
(f) On the Closing Date, the Buyer shall have received the opinion,
dated as of the Closing Date and addressed to the Buyer, of Paul, Weiss,
Rifkind, Wharton & Garrison, counsel for the Company, in the form attached to
this Agreement as Annex B or otherwise satisfactory to the Buyer.
8. Miscellaneous.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICT OF LAWS PROVISIONS.
(b) Headings. The headings, captions and footers of this Agreement
are for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(c) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, the invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
(d) Notices. All notices and other communications required or
permitted under this Agreement shall be sufficiently given if delivered
personally or sent by nationally recognized courier service or facsimile
(receipt requested), addressed as follows:
<PAGE>
(i) if to the Company, to:
Emisphere Technologies, Inc.
765 Old Saw Mill River Road
Tarrytown, New York 10591
Telephone: (914) 347-2220
Facsimile: (914) 347-2498
Attention: Michael M. Goldberg
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
Attention: John P. McEnroe, Esq.
and to:
H. Warren Browne, Esq.
25 Five Ponds Drive
Waccabuc, New York 10597
Telephone: (914) 763-5599
Facsimile: (914) 763-6321
(ii) if to the Buyer, to:
Elan International Services, Ltd.
102 St. James Court
Flatts, Smiths Parish
Bermuda F104
Telephone: (441) 292-9169
Telecopy: (441) 292-2224
Attention: Chief Financial Officer
with a copy to:
Cahill, Gordon & Reindel
Eighty Pine Street
New York, New York 10005-5420
Telephone: (212) 701-3000
Telecopy: (212) 269-5420
Attention: William M. Hartnett, Esq.
All notices shall be deemed to have been received (i) on the date
delivered, if delivered by facsimile or personally or (ii) on the day after the
notice is delivered into the possession and control of a nationally recognized
overnight delivery service, duly marked for delivery to the receiving party. A
party may change the address to which notice or other communication under this
Agreement is to be delivered by giving the other party notice in the manner set
forth in this
<PAGE>
section. If any notice, filing, delivery or payment shall be required by the
terms of this Agreement to be made on a day that is not a Business Day, the
notice, filing, delivery or payment shall be made on the immediately succeeding
Business Day.
(e) Counterparts. This Agreement may be executed in counterparts by
the parties to it, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument. A facsimile
transmission of this Agreement bearing a signature on behalf of a party to it
shall be legal and binding on that party.
(f) Entire Agreement; Benefit. This Agreement, together with the
Note, constitutes the entire agreement among the parties to it with respect to
the subject matter of it. There are no restrictions, promises, warranties, or
undertakings, other than those set forth or referred to in this Agreement and
the Note. This Agreement, together with the Note, supersedes all prior
agreements and understandings, whether written or oral, between the parties to
this Agreement with respect to the subject matter of this Agreement. This
Agreement and the terms and provisions of it are for the sole benefit of the
Company, the Buyer and their respective successors and permitted assigns.
(g) Standstill Agreement. The Standstill Agreement will remain
unchanged and in full force and effect until its expiration in accordance with
its terms.
(h) Waiver. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising a right or
remedy, or course of dealing between the parties shall not operate as a waiver
or as an amendment of this Agreement, nor shall any single or partial exercise
of any right or power, or any abandonment or discontinuance of steps to enforce
a right or power, preclude any other or further exercise of that right or power
or exercise of any other right or power.
(i) Amendment. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Buyer or the Company from it shall in any event be effective unless it
shall be in writing and signed by each party to this Agreement, and then shall
be effective only in the specific instance and for the purpose for which given.
No course of dealing between the parties to this Agreement shall operate as an
amendment of this Agreement.
(j) Further Assurances. Each party to this Agreement will perform
any and all acts and execute any and all documents as may be necessary and
proper under the circumstances in order to accomplish the intents and purposes
of this Agreement and to carry out its provisions.
<PAGE>
(k) Expenses. All reasonable expenses incurred in connection with
filings or qualifications under this Agreement shall be paid by the Company.
Except as otherwise provided in this section 8(k), each of the Company and the
Buyer shall bear its own expenses in connection with this Agreement and the
transactions contemplated by it.
(l) Survival. The respective representations, warranties, covenants
and agreements of the Company and the Buyer contained in this Agreement and the
documents delivered in connection with this Agreement shall survive the
execution and delivery of this Agreement and the Closing under it and delivery
of and payment for the Note, and shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of the Buyer or any
Person controlling or acting on behalf of the Buyer or by the Company or any
Person controlling or acting on behalf of the Company.
(m) Confidentiality and Non-disclosure. From and after the date of
this Agreement neither party shall, except as required by applicable law,
regulation, stock exchange rule or judicial or administrative process, disclose
to any Person, publicly or privately, this Agreement or the substance of the
transactions contemplated by it or the involvement of the parties with each
other as contemplated by it, without the prior written consent of the other
party; provided, that (1) even if one party is required by applicable law,
regulation, stock exchange rule or judicial or administrative process to make a
disclosure relating to this Agreement, the other party shall have reasonable
prior notice of and, if practicable under the circumstances, shall be afforded
the ability to provide input with respect to any disclosure and (2) the parties
agree the Company may issue a press release in a form to be agreed to by the
parties.
(n) Construction. The language used in this Agreement is the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their officers who are duly authorized as of the date first
set forth above.
EMISPHERE TECHNOLOGIES, INC.
By: /s/ Charles Abdalian
--------------------
Name: Charles Abdalian
Title: Chief Financial Officer
ELAN INTERNATIONAL SERVICES, LTD.
By: /s/ Kevin Insley
----------------
Name: Kevin Insley
Title: President
[NOTE PURCHASE AGREEMENT]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR ANY STATE SECURITIES LAWS. THIS NOTE HAS BEEN
ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE OFFERED, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
1933 ACT EXCEPT UNDER A VALID EXEMPTION FROM REGISTRATION UNDER THE ACT
AND DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL REASONABLY
SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT REGISTRATION
IS NOT REQUIRED.
THIS NOTE IS ISSUED UNDER AND SUBJECT TO THE TERMS OF THE NOTE PURCHASE
AGREEMENT, DATED AS OF THE DATE OF THIS NOTE (THE "PURCHASE AGREEMENT"),
BETWEEN THE COMPANY AND THE HOLDER, AS AMENDED FROM TIME TO TIME. THIS
NOTE MAY NOT BE TRANSFERRED EXCEPT AS PROVIDED IN THE PURCHASE AGREEMENT.
----------------------------
EMISPHERE TECHNOLOGIES, INC.
ZERO COUPON NOTE DUE 2006
No. 1 Issue Price: $20,000,000
$363.313 for each $1000 of principal amount at maturity
New York, New York Original Issue Discount at Maturity: $35,048,881
July 2, 1999 $636.687 for each $1000 of principal amount at maturity
----------------------------
For Value Received, EMISPHERE TECHNOLOGIES, INC., a Delaware
corporation (the "Company"), hereby promises to pay to ELAN INTERNATIONAL
SERVICES, LTD., a company incorporated under the laws of Bermuda, or its
successors or registered assigns (the "Holder") or order, the Principal Amount
of Fifty-five million, forty-eight thousand, eight-hundred and eighty-one
dollars
<PAGE>
($55,048,881) on July 2, 2006. This Note shall not bear interest except as
specified in this Note. Original Issue Discount will accrue as specified in this
Note.
All payments of Principal of (and premium or interest, if any) on this
Note shall be made in lawful money of the United States of America. All cash
payments shall be made by wire transfer of immediately available funds to an
account designated by the Holder by written notice in accordance with the
provisions of this Note. Whenever any amount expressed to be due by the terms of
this Note is due on any day that is not a Business Day, the same shall instead
be due on the next succeeding day which is a Business Day. Capitalized terms
used and not otherwise defined in this Note have the meaning specified in the
Purchase Agreement.
The obligations of the Company under this Note shall rank in right of
payment on a parity with all other unsubordinated obligations of the Company for
the payment of borrowed money or the purchase price of property. The Note is
issued under the Purchase Agreement and is subject to the terms of the Purchase
Agreement.
The following terms shall apply to this Note:
1. Interest
1.1 This Note shall not bear interest except as specified in this
section. If the Principal Amount or any portion of the Principal Amount is not
paid when due (whether upon acceleration as provided in Article 4 of this Note,
or upon the Stated Maturity of this Note) then, in each case, the overdue amount
shall bear interest at the rate of 17% per annum, compounded semiannually (to
the extent that the payment of the interest shall be legally enforceable), which
interest shall accrue from the date the overdue amount was due to the date
payment of the amount, including interest on it, has been made and shall be
payable on demand. The accrual of interest on overdue amounts shall be in lieu
of, and not in addition to, the continued accrual of Original Issue Discount.
1.2 Original Issue Discount (the difference between the Issue Price and
the Principal Amount of this Note) in the period during which the Note remains
outstanding shall accrue at 15.0% per annum, on a semiannual bond equivalent
basis using a 360-day year consisting of twelve 30-day months, commencing on the
Issue Date of this Note, and shall cease to accrue on the earlier of (i) the
date on which the Principal Amount of this Note becomes due and payable and (ii)
any Redemption Date.
2
<PAGE>
2. Optional Redemption
2.1 Prepayment. Upon notice given to the Holder as provided in section
2.2, the Company, at its option, may prepay all or any portion of this Note, at
any time, without penalty or premium, by paying an amount equal to either (a)
the full Redemption Price of this Note or (b) the portion of the Redemption
Price corresponding to the portion of this Note that the Company calls for
prepayment, as the case may be.
2.2 Notice.
(a) The Company may give written notice of prepayment in cash
of this Note or any portion of it, not less than 3 nor more than 60 days before
the date the Company fixes for the prepayment. Notice of the prepayment shall be
given in the manner specified in Section 7.2 of this Note.
(b) Upon notice of prepayment, the Company covenants and
agrees that it shall prepay, on the date it fixes for prepayment (a "Redemption
Date"), the portion of the outstanding Principal Amount it calls for prepayment.
2.3 Interest. Unless the Company defaults in payment of the Redemption
Price, Original Issue Discount on the portion of the Note called for redemption
and interest, if any, will cease to accrue on and after the Redemption Date.
3. Covenants
Until the payment by the Company of all principal of, and interest (if
any) on, this Note and all other amounts due at the time of payment of such
principal and interest, if any, to the Holder, the Company covenants and agrees
as follows:
3.1 Payment of Notes. The Company shall promptly make all payments in
respect of the Note on the dates and in the manner provided in this Note.
3
<PAGE>
3.2 Payment of Obligations. The Company will pay and discharge, and
will cause each Significant Subsidiary to pay and discharge, all material
obligations and liabilities, including tax liabilities, except where the same
may be contested in good faith by appropriate proceedings.
3.3 Maintenance of Property; Insurance.
(a) The Company will keep, and will cause each Significant
Subsidiary to keep, all property useful and necessary in its business in good
working order and condition, ordinary wear and tear excepted.
(b) The Company will maintain, and will cause each Significant
Subsidiary to maintain, with financially sound and responsible insurance
companies, insurance in at least those amounts and against those risks as it
reasonably believes is adequate for the conduct of its businesses and the value
of its properties.
3.4 Conduct of Business and Maintenance of Existence. The Company will
continue, and will cause each Significant Subsidiary to continue, to engage in
business of the same general type as now conducted, and will preserve, renew and
keep in full force and effect, and will cause each Significant Subsidiary to
preserve, renew and keep in full force and effect, its corporate existence and
its rights, privileges and franchises necessary or desirable in the normal
conduct of business.
3.5 Compliance with Laws. The Company will comply, and will cause each
Significant Subsidiary to comply, in all material respect with all applicable
laws, ordinances, rules, regulations, decisions, orders and requirements of
governmental authorities and courts except (i) where compliance is contested in
good faith by appropriate proceedings or (ii) where non-compliance could not be
reasonably expected to have a material adverse effect on the business, financial
condition, performance or properties of the Company and its Significant
Subsidiaries, taken as a whole.
3.6 Books and Records. The Company shall, and shall cause each of its
Significant Subsidiaries to, keep proper books of record and account, in which
full and correct entries shall be made of all financial transactions and the
assets and business of the Company and each Significant Subsidiary, in
accordance with U.S. generally accepted accounting principles consistently
applied to the Company and its Significant Subsidiaries, taken as a whole.
4
<PAGE>
3.7 Inspection. The Company will permit representatives of the Holder
to visit and inspect any of its properties, to examine its corporate, financial
and operating records and make copies of or abstracts from these records, and to
discuss its affairs, finances and accounts with its directors, officers and
independent public accountants, all at such reasonable times during normal
business hours and as often as may be reasonably requested, upon reasonable
advance notice to the Company.
3.8 Withholding Taxes. All payments made by the Company under or with
respect to the Note shall be made free and clear of, and without withholding or
deduction for or on account of, any present or future Taxes (excluding net
income Taxes imposed on the Holder as a result of a present or former connection
between the United States and such Holder (except a connection arising from such
Holder having delivered, executed or performed its obligations or received a
payment under, or enforced, this Note)). If any such Taxes are levied or imposed
on such payments, the Company agrees to pay on behalf of the Holder the full
amount of such Taxes to the appropriate authority in accordance with applicable
law. Neither the Holder nor the Company will take any action that is reasonably
likely to result in the imposition of Taxes on payments made under or with
respect to the Note. In addition, the Holder and the Company agree to use
commercially reasonable efforts to cooperate with each other to prevent the
imposition of Taxes on payments made under or with respect to the Note. Without
prejudice to the Company's obligation to make payments under or with respect to
the Note free and clear of, and without withholding or deduction for or an
account of, any present or future Taxes, the Holder agrees to provide the
Company with a complete, manually-signed copy of Internal Revenue Service Form
W-8 (or successor form) on or before the date any such form previously provided
becomes obsolete and promptly after the occurrence of any event requiring a
change in the most recent form delivered to the Company, certifying that the
Holder is entitled to complete exemption from withholding Tax on payments made
under or with respect to the Note, provided that the Holder is legally able to
provide such form. If the Company pays any Tax on behalf of the Holder in
accordance with the provisions of this Section 3.8, the Holder and the Company
agree to use commercially reasonable efforts to cooperate with each other in
obtaining a refund of such Taxes. If such efforts do not secure a full refund of
such Taxes, the Holder agrees to pay the Company an amount equal to 70 percent
of the Tax paid and not refunded by the Company on the Holder's behalf.
3.9 Further Instruments and Acts. Upon request of the Holder, the
Company will execute and deliver any further instruments and do any further acts
as
5
<PAGE>
may be reasonably necessary or proper to carry out more effectively the
provisions of this Note.
4. Defaults and Remedies
4.1 Events of Default. Each of the following shall be an "Event of
Default":
(a) Failure to Pay Principal. The Company fails to pay the
Principal Amount or the Redemption Price when due, whether at maturity, upon
redemption or otherwise, as applicable;
(b) Breach of Covenant. The Company defaults in the observance
or performance of any agreement, covenant, term or condition contained in this
Note or the Purchase Agreement (other than those referred to in Section 4.1(a))
and the failure continues for 30 days after receipt by the Company of notice of
a default;
(c) Breach of Representation and Warranty. Any material
representation or warranty of the Company made in this Note or in the Purchase
Agreement shall be false or misleading in any material respect when made;
(d) Default under License Agreement. The Company fails to
perform or observe any other agreement, covenant, term or condition contained in
the License Agreement;
(e) Certain Voluntary Proceedings. The Company or any
Significant Subsidiary shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or later in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or similar official of it or any substantial part of its property, or shall
consent to any relief of that kind or to the appointment of or taking possession
by any official in an involuntary case or proceeding commenced against it, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due or shall admit in writing its
inability generally to pay its debts as they become due; or
(f) Certain Involuntary Proceedings. An involuntary case or
other proceeding shall be commenced against the Company or any Significant
Subsidiary seeking liquidation, reorganization or other relief with respect to
it or its
6
<PAGE>
debts under any bankruptcy, insolvency or other similar law now or later in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property, and the
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 60 consecutive days.
4.2 Remedies.
(a) If an Event of Default (other than an Event of Default
specified in paragraph (e) or (f) of Section 4.1) occurs and is continuing, the
Holder, by notice to the Company, may declare the Issue Price and accrued
Original Issue Discount through the date of declaration on the Note to be
immediately due and payable. Upon a declaration of that kind, the Issue Price
and accrued Original Issue Discount shall become and be due and payable
immediately. If an Event of Default specified in paragraphs (e) and (f) of
Section 4.1 occurs and is continuing, the Issue Price and accrued Original Issue
Discount on the Note shall become and be immediately due and payable without any
declaration or other act on the part of any Holder. The Holder by notice to the
Company, may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of the Issue Price and
accrued Original Issue Discount (or accrued and unpaid interest) that have
become due solely as a result of acceleration. No rescission shall affect any
subsequent or other Default or Event of Default or impair any consequent right.
(b) If an Event of Default occurs and is continuing, the
Holder may pursue any available remedy to collect the payment of the Issue Price
and accrued Original Issue Discount on the Note or to enforce the performance of
any provision of the Note.
(c) A delay or omission by the Holder in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of, or acquiescence in, the Event of Default. No remedy
is exclusive of any other remedy. All available remedies are cumulative.
(d) The Company covenants (to the extent it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury or other law whenever enacted, now or at any time after the Issue
Date in force, which would prohibit or forgive the Company from paying all or
any portion of the Principal Amount or Redemption Price, in each case, in
respect of this Note, or any
7
<PAGE>
interest on those amounts, as contemplated in this Note, or which may affect the
covenants or the performance of this Note; and the Company (to the extent it may
lawfully do so) expressly waives all benefit or advantage of any law of this
type, and covenants that it will not hinder, delay or impede the execution of
any power granted in this Note to the Holder, but will suffer and permit the
execution of every power as though no law of this type had been enacted.
(e) If an Event of Default occurs and is continuing, the
Holder, by notice to the Company, may require the Company to enter into a
non-exclusive, royalty-free license to all intellectual property rights
(including, but not limited to, patent and know-how rights) of the Company and
its Affiliates relating to all heparin technology and products.
5. Successor Corporation
5.1 The Company shall not consolidate with, amalgamate with, merge with
or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets (as an entirety or substantially as an entirety
in one transaction or a series of related transactions), to any Person unless:
(a) (i) the Company shall be the continuing Person, or (ii)
the Person (if other than the Company) formed by the consolidation or
amalgamation or into which the Company is merged or to which the properties and
assets of the Company are sold, assigned, transferred, leased, conveyed or
otherwise disposed of (in any case, the "Successor Company") shall expressly
affirm, in writing, the due and punctual performance of all of the terms,
covenants, agreements and conditions of the Note to be performed or observed by
the Company, and the obligations shall remain in full force and effect; and
(b) immediately before and immediately after giving effect to
the transaction, no Default or Event of Default shall have occurred and be
continuing.
5.2 In connection with any consolidation, amalgamation, merger or sale,
assignment, transfer, lease, conveyance or other disposition of assets, the
Company shall deliver, or cause to be delivered, to the Holder an Opinion of
Counsel stating that (i) the consolidation, amalgamation, merger or sale,
assignment, transfer, lease, conveyance or other disposition of assets complies
with this article, (ii) all conditions precedent in this article relating to the
transaction or transactions have been complied with and (iii) the affirmation
required by this article has been duly
8
<PAGE>
authorized, executed and delivered by the Successor Company and the Note is a
valid and legally binding obligation of the Successor Company enforceable
against it in accordance with its terms (subject to bankruptcy, insolvency,
reorganization and similar laws affecting the rights and remedies of creditors
generally and general equitable principles).
5.3 For purposes of this article, the transfer (by sale, assignment,
lease, conveyance or other disposition, in a single transaction or series of
related transactions) of all or substantially all of the properties or assets of
one or more Subsidiaries of the Company, the capital stock of which constitutes
all or substantially all of the properties and assets of the Company, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
5.4 Upon any consolidation, amalgamation or merger, or any sale,
assignment, transfer, lease, conveyance or other disposition of all or
substantially all of the assets of the Company in accordance with this article,
the Successor Company shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under the Note with the same effect as if
the Successor Company had been named as the Company in the Note.
6. Definitions
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the specified Person. For the purposes of this definition,
"control," when used with respect to any specified Person, means the power to
direct or cause the direction of the management and policies of the Person,
directly or indirectly, whether through the ownership of Voting Stock, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the above.
"Business Day" means any day (other than a Saturday or Sunday) on which
institutions in The City of New York are not authorized or obligated by law or
executive order to close.
"Company" means Emisphere Technologies, Inc., a Delaware corporation.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
9
<PAGE>
"Elan" means Elan Corporation, plc, a company incorporated under the
laws of Ireland.
"Event of Default" has the meaning specified in Section 4.1.
"Holder" has the meaning set forth on the face of this Note.
"Issue Date" means the date on which this Note was originally issued or
deemed issued as set forth on the face of this Note.
"Issue Price" means, in connection with the original issuance of this
Note, the initial issue price at which this Note is issued as set forth on the
face of this Note.
"JV Agreement" means the Joint Venture Agreement, dated as of September
26, 1996, among Elan, the Company and Ebbisham Limited, a company incorporated
under the laws of Ireland.
"License Agreement" shall mean the License Agreement, dated as of the
date of this Note, between the Company and Elan.
"1933 Act" means the Securities Act of 1933, as amended (or any
successor statute), and the rules and regulations of the SEC under it.
"1934 Act" means the Securities Exchange Act of 1934, as amended (or
any successor statute), and the rules and regulations of the SEC under it.
"Note" means this Zero Coupon Note due 2006, as amended and
supplemented from time to time as provided in the Purchase Agreement.
"Original Issue Discount" means the difference between the Issue Price
and the Principal Amount of this Note as set forth on the face of this Note. For
purposes of this Note, accrual of Original Issue Discount shall be calculated on
a semi-annual bond equivalent basis using a 360 day year consisting of twelve
30-day months.
"Permitted Transferee" means any Person which is an Affiliate or a
subsidiary, including an off-balance sheet special purpose vehicle, of the
Holder or its Affiliates.
10
<PAGE>
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government, or any agency or political
subdivision of any of them.
"Principal" or "Principal Amount" means the Principal Amount as set
forth on the face of this Note as it may be reduced in accordance with the terms
of this Note.
"Purchase Agreement" has the meaning set forth on the face of this
Note.
"Redemption Date" means a date specified for redemption of this Note in
accordance with its terms.
"Redemption Price" means the Issue Price plus accrued Original Issue
Discount and interest, if any, as of the applicable Redemption Date.
"SEC" means the Securities and Exchange Commission, or any successor
organization of it.
"Significant Subsidiary" means a subsidiary which is a "significant
subsidiary" as that term is defined in Rule 1-02 of Regulation S-X of the SEC as
in effect on the date of this Note.
"Stated Maturity" means the seventh anniversary of the date of this
Note.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, limited liability company, association or other
business entity, whether now existing or later organized or acquired, (i) in the
case of a corporation, of which more than 50% of the total voting power of the
capital stock entitled (without regard to the occurrence of any contingency) to
vote in the election of its directors, officers or trustees is held by the
specified Person or any of its Subsidiaries or (ii) in the case of a
partnership, joint venture, limited liability company, association or other
business entity, with respect to which the specified Person or any of its
Subsidiaries has the power to direct or cause the direction of the management
and policies of the entity by contract or otherwise.
11
<PAGE>
"Successor Company" has the meaning set forth in Section 5.1(a) of this
Note.
"Taxes" means any present or future tax, duty, levy, impost, assessment
or other government charge (including penalties, interest and any other
liabilities related to them) imposed or levied by or on behalf of any government
or any political subdivision or territory or possession of any government or any
authority or agency of any of them having power to tax.
"Voting Stock" means stock of any class or classes, however designated,
having general voting power under ordinary circumstances to elect a majority of
the board of directors, managers or trustees of a Person, other than stock
having the power only by reason of the occurrence of a contingency.
7. Miscellaneous
7.1 No Waiver. No failure or delay on the part of the Holder in the
exercise of any power, right or privilege under this Note shall operate as a
waiver under this Note, nor shall any single or partial exercise of any power,
right or privilege preclude other or further exercise of any other right, power
or privilege. All rights and remedies existing under this Note are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
7.2 Notices. Any notices or other communications required or permitted
under this Note shall be sufficiently given if delivered personally or sent by
nationally recognized overnight delivery service or facsimile (receipt
confirmed), addressed as follows:
(a) if to the Company, to:
Emisphere Technologies, Inc.
765 Old Saw Mill River Road
Tarrytown, New York 10591
Telephone: (914) 347-2220
Facsimile: (914) 347-2498
Attention: Michael M. Goldberg
12
<PAGE>
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
Attention: John P. McEnroe, Esq.
and to:
H. Warren Browne, Esq.
25 Five Ponds Drive
Waccabuc, New York 10597
Telephone: (914) 763-5199
Facsimile: (914) 763-6321
(b) if to the Holder, to:
Elan International Services, Ltd.
102 St. James Court
Flatts, Smith's Parish
Bermuda FL04
Telephone: (441) 292-9169
Facsimile: (441) 292-2224
Attention: Chief Financial Officer
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telephone: (212) 701-3000
Facsimile: (212) 269-5420
Attention: William M. Hartnett, Esq.
All notices shall be deemed to have been received (i) on the date
delivered, if delivered by facsimile or personally or (ii) on the second day
after the notice is delivered into the possession and control of a nationally
recognized overnight delivery service, duly marked for delivery to the receiving
party. A party may change the address to which notice or other communication
under this Note is to be delivered by giving the other party notice in the
manner set forth in this section. If any notice, filing, delivery or payment
shall be required by the terms of this Note to
13
<PAGE>
be made on a day that is not a Business Day, the notice, filing, delivery or
payment shall be made on the immediately succeeding Business Day.
7.3 Severability. Each provision of this Note shall be considered
separable and if for any reason any provision which is not essential to the
effectuation of the basic purpose of this Note shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired.
7.4 Amendment Provision. This Note or any of its terms may not be
changed, waived, discharged or terminated unless the change, waiver, discharge
or termination is in writing signed by the Company and the Holder.
7.5 Assignability; Successor. This Note shall be binding upon the
Company and its successors, and shall inure to the benefit of and be binding
upon the Holder and its successors and Permitted Transferees. The Company may
not assign any of its rights or delegate any of its obligations under this Note.
All agreements of the Company in this Note shall bind its successor.
7.6 Transfer of Note.
(a) This Note has not been and is not being registered under
the provisions of the 1933 Act or any state securities laws and this Note may
not be transferred unless (1) the transferee is a Permitted Transferee and (2)
the Holder shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that
this Note may be sold or transferred without registration under the 1933 Act.
Prior to any transfer, the transferee shall have represented in writing to the
Company that the transferee has requested and received from the Company all
information relating to the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company deemed
relevant by the transferee; that the transferee has been afforded the
opportunity to ask questions of the Company concerning the above and has had the
opportunity to obtain and review the reports and other information concerning
the Company which at the time of the transfer have been filed by the Company
with the SEC under the 1934 Act.
(b) The Holder may not transfer this Note unless (i) the
Holder first physically surrenders this Note to the Company, after which time
the Company shall issue and deliver upon the order of the Holder a new note of
like tenor, registered as the Holder (upon payment by the Holder of any
applicable
14
<PAGE>
transfer taxes) may request, representing in the aggregate the remaining unpaid
Principal Amount of this Note and (ii) the transfer is otherwise in compliance
with this section.
7.7 Enforceable Obligation. The Company represents and warrants that at
the time of the original issuance of this Note, it received the full purchase
price payable under the Purchase Agreement in an amount at least equal to the
Issue Price, and that this Note is an enforceable obligation of the Company
which is not subject to any offset, reduction, counterclaim or allowance of any
sort, subject to bankruptcy, insolvency, fraudulent conveyance or transfer,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and to general equitable principles.
7.8 Replacement of Notes. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft
destruction or mutilation of this Note and (a) in the case of loss, theft or
destruction, of indemnity from the Holder reasonably satisfactory in form, scope
and substance to the Company (and without the requirement to post any bond or
other security) or (b) in the case of mutilation, upon surrender and
cancellation of this Note, the Company will execute and deliver to the Holder a
new Note of like tenor.
7.9 Entire Agreement. This Note together with the Purchase Agreement
constitutes the entire agreement between the Company and the Holder with respect
to the transactions contemplated by them.
7.10 Section and Other Headings. The section and other headings
contained in this Note are for reference purposes only and shall not be deemed
to be a part of this Note or to affect the meaning or interpretation of this
Note.
7.11 GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED BY THEM.
15
<PAGE>
In WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
EMISPHERE TECHNOLOGIES, INC.
By: /s/ Charles Abdalian
--------------------
Name: Charles Abdalian
Title: Chief Financial Officer
AGREED AND ACKNOWLEDGED:
ELAN INTERNATIONAL SERVICES, LTD.
By: /s/ Kevin Insley
----------------
Name: Kevin Insley
Title: President
[NOTE]
16
================================================================================
SUBSCRIPTION AGREEMENT
BETWEEN
EMISPHERE TECHNOLOGIES, INC.
AND
ELAN INTERNATIONAL MANAGEMENT, LIMITED
--------------------------------------
COMMON STOCK
--------------------------------------
DATED AS OF JULY 2, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions.............................................................1
2. Subscription; Closing...................................................5
(a) Subscription Right.................................................5
(b) Conditions to Exercise of Subscription Right.......................5
(c) Termination of Subscription Right..................................6
(d) Notice and Certificate; Effectiveness of Exercise of Subscription
Right..............................................................6
(e) Closing; Delivery of Shares; Payment of Subscription Price.........6
3. Representations, Warranties, Covenants, Etc. of the Buyer...............7
(a) Purchase for Investment............................................7
(b) Non-U.S. Person....................................................7
(c) Company Reliance...................................................7
(d) Information Provided...............................................8
(e) Absence of Approvals...............................................8
(f) Corporate Authorization............................................8
(g) Buyer Status.......................................................8
4. Representations, Warranties and Covenants of the Company................9
(a) Organization and Authority.........................................9
(b) Qualifications.....................................................9
(c) Capitalization.....................................................9
(d) Concerning the Shares and the Common Stock........................10
(e) Corporate Authorization...........................................10
(f) Non-contravention.................................................10
(g) Approvals.........................................................11
(h) SEC Filings.......................................................11
(i) Absence of Certain Proceedings....................................12
(j) Absence of Brokers, Finders, Etc..................................12
(k) No Solicitation; Compliance.......................................12
(l) Licenses; Permits.................................................13
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(m) Subsequent Events.................................................13
(n) Tax Matters.......................................................14
(o) Property..........................................................14
(p) Contracts.........................................................14
(q) Environmental Matter..............................................14
(r) Labor Matters.....................................................15
(s) Insurance.........................................................15
(t) Employee Benefit..................................................16
(u) Books and Records.................................................16
(v) No Registration Rights............................................16
5. Certain Covenants......................................................16
(a) Transfer Restrictions.............................................16
(b) State Securities Laws.............................................16
(c) Commercially Reasonable Efforts...................................17
(d) Filings...........................................................17
(e) Change of Control Events, Etc.....................................17
(f) No Dilutive Actions...............................................17
(g) Loss or Destruction of Share Certificates.........................19
(h) Registration Rights...............................................19
6. Certain Adjustments....................................................19
(a) Stock Splits, etc.................................................19
(b) Fractional Shares.................................................20
(c) Notice of Adjustments.............................................20
7. Conditions to the Company's Obligation to Issue........................20
8. Conditions to the Buyer's Obligation to Purchase.......................21
9. Miscellaneous..........................................................23
(a) Governing Law.....................................................23
(b) Headings..........................................................23
(c) Severability......................................................23
(d) Notices...........................................................23
(e) Counterparts......................................................25
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<PAGE>
(f) Entire Agreement; Benefit.........................................25
(g) Standstill Agreement..............................................25
(h) Waiver............................................................25
(i) Amendment.........................................................26
(j) Further Assurances................................................26
(k) Expenses..........................................................26
(l) Survival..........................................................26
(m) Confidentiality and Non-disclosure................................26
(n) Construction......................................................27
(o) Assignment........................................................27
(p) No Dilution or Impairment.........................................27
(q) Charges, Taxes and Expenses.......................................27
(r) No Rights or Liabilities as Stockholder...........................27
iii
<PAGE>
SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of July 2, 1999,
between EMISPHERE TECHNOLOGIES, INC., a Delaware corporation (the "Company"),
and ELAN INTERNATIONAL MANAGEMENT LIMITED, a company incorporated under the laws
of Bermuda (the "Buyer").
WHEREAS, the Buyer wishes to subscribe for and purchase from the
Company, and the Company wishes to issue and sell to the Buyer, shares of the
Common Stock, on the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained in this Agreement and other good and valuable consideration,
the receipt and sufficiency of which are acknowledged, the parties agree as
follows:
1. Definitions.
All the agreements or instruments defined in this Agreement shall
mean agreements or instruments as the same may from time to time be supplemented
or amended or the terms of which may be waived or modified to the extent
permitted by, and in accordance with, their terms and the terms of this
Agreement.
The following terms shall have the following meanings (these
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Agreement" has the meaning set forth in the preamble to this
Agreement.
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the subject Person. For purposes
of this definition, "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of the Person,
whether through the ownership of voting securities or by contract or otherwise.
"Business Day" means any day other than a Saturday, Sunday or a day
on which commercial banks in The City of New York are authorized or required by
law or
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<PAGE>
executive order to remain closed.
"Buyer" has the meaning set forth in the preamble to this Agreement.
"CERCLA" has the meaning provided in Section 4(q) of this Agreement.
"Change of Control Event" has the meaning set forth in Section 5(e)
of this Agreement.
"Closing" has the meaning set forth in Section 2(e) of this
Agreement.
"Closing Date" has the meaning set forth in Section 2(e) of this
Agreement.
"Closing Price" means, with respect to the Common Stock as of any
day, the last reported sale price of the stock or, in case no sale takes place
on a given day, the average of the closing bid and asked prices, in either case
as reported on the principal national securities exchange on which the Common
Stock is listed or admitted to trading.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Company.
"Company" has the meaning set forth in the preamble to this
Agreement.
"Contracts" has the meaning provided in Section 4(f) of this
Agreement.
"Environmental Laws" has the meaning provided in Section 4(q) of
this Agreement.
"ERISA" has the meaning provided in Section 4(t) of this Agreement.
"Expiration Date" has the meaning set forth in Section 2(a) of this
Agreement.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
2
<PAGE>
"Irish Mergers Act" means the Irish Mergers, Take-over and
Monopolies (Control) Act, 1978 (as amended).
"Market Price" means, with respect to each share of the Common Stock
as of any date, the weighted average of the daily Closing Price per share of the
Common Stock (after taking into account any event described in Section 5(f)(i))
for the 20 consecutive trading days prior to that date.
"Material Adverse Effect" has the meaning provided in Section 4(b)
of this Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" means the Nasdaq Stock Market, Inc.
"1934 Act" means the Securities Exchange Act of 1934, as amended, or
any successor statute.
"1933 Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Note" means the Zero Coupon Note due July 2, 2006 of the Company.
"Permits" has the meaning provided in Section 4(l) of this
Agreement.
"Permitted Transferee" means any Person which is an Affiliate or
subsidiary, including an off-balance sheet special purpose vehicle, of the Buyer
or its Affiliates.
"Person" means any natural person, corporation, partnership, limited
liability company, trust, incorporated organization, government, governmental
agency or political subdivision of them.
"Proprietary Rights" has the meaning provided in Section 4(o) of
this Agreement.
3
<PAGE>
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of the date of this Agreement between the Company and the
Buyer.
"Regulation D" means Regulation D under the 1933 Act.
"Regulation S" means Regulation S under the 1933 Act.
"SEC" means the Securities and Exchange Commission or any successor
agency.
"SEC Reports" means all periodic and other reports filed by the
Company with the SEC under the 1934 Act after July 31, 1996 and before the date
of this Agreement, in each case as filed with the SEC and including the
information and documents incorporated in them by reference.
"Shares" has the meaning set forth in Section 2(a) of this
Agreement.
"Standstill Agreement" means Section 5.3 of the Purchase Agreement
by and between the Company and Elan International Services, Ltd. dated as of
October 18, 1995, as amended.
"Stock Event" has the meaning set forth in Section 6(a) of this
Agreement.
"Subscription Certificate" has the meaning set forth in Section 2(d)
of this Agreement.
"Subscription Date" has the meaning set forth in Section 2(b) of
this Agreement.
"Subscription Notice" has the meaning set forth in Section 2(d) of
this Agreement.
"Subscription Price" means the weighted average Closing Price of the
Common Stock for the 20 consecutive trading days ending on the trading day prior
to the Subscription Date.
4
<PAGE>
"Subscription Right" has the meaning set forth in Section 2(a) of
this Agreement.
"Subscription Shares" has the meaning set forth in Section 2(a) of
this Agreement.
"Subsidiary" means any corporation or other entity of which a
majority of the capital stock or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by the
Company.
"Transaction Documents" means, collectively, this Agreement, the
Registration Right Agreement and the other agreements, instruments and documents
contemplated by this Agreement and by the other Transaction Documents.
"Trigger Price" means $25.00 per share of Common Stock, as adjusted
in accordance with Section 6(a) of this Agreement.
2. Subscription; Closing.
(a) Subscription Right. The Company shall have the right (the
"Subscription Right"), on the terms and subject to the conditions set forth in
this Agreement, at any time or from time to time after the first anniversary of
the date of this Agreement and prior to 5:00 p.m., New York City time, on or
before the seventh anniversary of the date of this Agreement (the "Expiration
Date"), as the Company may select, to require the Buyer to purchase such number
of validly issued, fully paid and nonassessable shares of the Common Stock (the
"Shares") equal to the quotient of (x) the Redemption Price (as defined in the
Note) paid as prepayment or payment of all or a portion of the outstanding
Principal Amount of the Note (as defined in the Note) divided by (y) the
Subscription Price, at a price per Share equal to the Subscription Price
(provided that such number and price shall be subject to adjustment as provided
in Section 8(i)) (the "Subscription Shares").
(b) Conditions to Exercise of Subscription Right. The Company may
not exercise the Subscription Right unless: (1) a new drug application for any
heparin product has been filed with, and such filing has been accepted by, the
Food and Drug
5
<PAGE>
Administration; (2) the average Closing Price of the Common Stock for the 20
consecutive trading days ending on the trading day immediately prior to the date
the Subscription Right is exercised (the "Subscription Date") equals the Trigger
Price (as adjusted in accordance with Section 6(a)); (3) the Company has made on
such Subscription Date a prepayment or payment of all or a portion of the
outstanding Principal Amount of the Note (as defined in the Note) in accordance
with the terms of the Note; and (4) the exercise of the Subscription Right would
not require the application of equity accounting by the Buyer, as such term is
defined under United States generally accepted accounting principles.
(c) Termination of Subscription Right. The Subscription Right and
this Agreement shall terminate (x) upon the occurrence of any Change of Control
Event with respect to which the Company is required to give notice in accordance
with Section 5(e) or (y) the date the Company notifies the Buyer, in accordance
with Section 5(e) of this Agreement, that the Common Stock will cease to be
publicly traded.
(d) Notice and Certificate; Effectiveness of Exercise of
Subscription Right. In the event the Company exercises the Subscription Right,
the Company shall deliver a notice (each such notice, a "Subscription Notice")
to the Buyer not later than 12:00 noon, New York City time, on the Subscription
Date and include with it a certificate which certifies that each of the
conditions set forth in Section 2(b) have been satisfied and sets forth (1) the
amount of the Redemption Price (as defined in the Note) paid in connection with
the underlying prepayment or payment of all or a portion of the outstanding
Principal Amount of the Note (as defined in the Note), (2) the number of Shares
to be issued, (3) the amount of cash to be paid in lieu of fractional Shares
under Section 6(b), (4) the aggregate Subscription Price to be paid by the Buyer
and (5) other information as appropriate and the computations by which the above
determinations were made (each such certificate, a "Subscription Certificate").
An exercise by the Company of the Subscription Right shall be effective upon
receipt by the Buyer of the related Subscription Notice and Subscription
Certificate.
(e) Closing; Delivery of Shares; Payment of Subscription Price. Each
subscription pursuant to this Agreement shall occur at a closing (each such
closing, a "Closing") to be held at 12:00 noon, New York City time, at the
offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the
Americas, New York, New York, on the first Business Day on which each of the
conditions set forth in Sections 7 and 8 have
6
<PAGE>
been satisfied or waived, or as soon thereafter as practicable (each such date,
a "Closing Date"). At each Closing: (1) the Company shall deliver to the Buyer a
stock certificate or certificates or evidence of electronic transfer as the
parties may agree for the number of Shares specified in the antecedent
Subscription Notice, along with a check or wire transfer for the amount of cash
to be paid in lieu of fractional shares in accordance with Section 6(b), if any;
and (2) the Buyer shall deliver a check or wire transfer, as directed by the
Company, in the amount of the aggregate Subscription Price specified in the
Subscription Notice.
3. Representations, Warranties, Covenants, Etc. of the Buyer.
The Buyer represents and warrants to the Company that the following
matters are true and correct on the date of execution and delivery of this
Agreement and will be true and correct on each Closing Date, and the Buyer
covenants and agrees with the Company as follows:
(a) Purchase for Investment. The Buyer will acquire any Shares
issued to the Buyer in accordance with this Agreement for its own account for
investment and not (1) with a view towards public sale or distribution within
the meaning of the 1933 Act or (2) for the account of or on behalf of any "U.S.
person" (as the term is defined in Regulation S); and the Buyer has no intention
of making any distribution, within the meaning of the 1933 Act, of the Shares
except in compliance with the registration requirements of the 1933 Act or under
an exemption from them.
(b) Non-U.S. Person. The Buyer is outside the United States and is
not a "U.S. person" (as the term is defined in Regulation S).
(c) Company Reliance. The Buyer and its Affiliates understand that
the Shares will be issued to the Buyer in reliance on one or more exemptions
from the registration requirements of the 1933 Act and exemptions from state
securities laws and that the Company is relying upon the truth and accuracy of,
and the compliance of the Buyer and its Affiliates with, the representations,
warranties, agreements, acknowledgments and understandings of the Buyer set
forth in this Agreement, in order to determine the availability of exemptions
and the eligibility of the Buyer to acquire or receive an offer to acquire the
Shares.
7
<PAGE>
(d) Information Provided. The Buyer, its Affiliates and their
advisors, if any, have requested, received and considered all information
relating to the business, properties, operations, financial condition or results
of operations of the Company and information relating to the issuance of the
Shares and the offer and sale of the Shares deemed relevant by them; the Buyer
and its Affiliates and their advisors have been afforded the opportunity to ask
questions of the Company concerning the terms of the offering of the Shares and
the business, properties, operations, financial condition or results of
operations of the Company and have received satisfactory answers to any
inquiries; without limiting the generality of the above, the Buyer, its
Affiliates and their advisors have had the opportunity to obtain and to review
the SEC Reports in connection with the Buyer's decision to purchase the Shares
and the Buyer has relied solely upon the SEC Reports, the representations,
warranties, covenants and agreements of the Company set forth in this Agreement
and to be contained in the other Transaction Documents, as well as any
investigation of the Company completed by the Buyer, its Affiliates or their
advisors; the Buyer and its Affiliates understand that an investment in the
Shares involves a high degree of risk.
(e) Absence of Approvals. The Buyer and its Affiliates understand
that no government or governmental agency has passed on or made any
recommendation or endorsement of the Shares.
(f) Corporate Authorization. The Buyer has all requisite power and
authority, corporate or otherwise, to execute, deliver and perform its
obligations under this Agreement and the other Transaction Documents executed by
the Buyer in connection with this Agreement and to consummate the transactions
contemplated by them; and this Agreement and the other Transaction Documents
have been duly and validly authorized, duly executed and delivered by the Buyer
and, assuming due execution and delivery by the Company, are valid and binding
agreements of the Buyer enforceable in accordance with their terms, except their
enforceability may be limited by (A) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or transfer or other similar laws now or after
the date of this Agreement in effect relating to or affecting creditors' rights
generally and (B) general principles of equity, regardless of whether
enforcement is considered in a proceeding in equity or at law and (2) any rights
to indemnity or contribution may be limited by federal and state securities laws
and public policy considerations.
(g) Buyer Status. Neither the Buyer nor any of its Affiliates is a
"broker" or
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"dealer" as those terms are defined in the 1934 Act which is required to be
registered with the SEC under Section 15 of the 1934 Act.
4. Representations, Warranties and Covenants of the Company.
The Company represents and warrants to the Buyer that the following
matters are true and correct on the date of execution and delivery of this
Agreement and will be true and correct on each Closing Date, and the Company
covenants and agrees with the Buyer as follows:
(a) Organization and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to (1) own, lease
and operate its properties and to carry on its business as described in the SEC
Reports and as currently conducted, and (2) to execute, deliver and perform its
obligations under this Agreement and the other Transaction Documents and to
consummate the transactions contemplated by them. The Company has no
Subsidiaries.
(b) Qualifications. The Company is duly qualified to do business as
a foreign corporation and is in good standing in all jurisdictions where
qualification is necessary and where failure to qualify could reasonably have a
material adverse effect on the business, properties, assets, operations, or
financial condition of the Company and its Subsidiaries taken as a whole (any
event of this kind, a "Material Adverse Effect").
(c) Capitalization. The authorized capital of the Company consists
of 40,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock, of
which 12,082,744 shares of Common Stock were outstanding on January 31, 1999 and
no shares of Preferred Stock of the Company were outstanding. The outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. Except as described in the SEC
Reports, there are no (1) options, warrants or other rights to purchase, (2)
agreements or other obligations to issue or (3) other rights to convert any
obligation into or exchange any securities for, shares of capital stock of or
ownership interests in the Company. Except as described in the SEC Reports, the
Company does not own, directly or indirectly, any shares of capital stock or any
other equity or long-term debt securities or have any equity interest in any
corporation,
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partnership, limited liability company, incorporated organization, firm, joint
venture or other entity.
(d) Concerning the Shares and the Common Stock. The Shares are
authorized and when issued in accordance with the terms of this Agreement, (1)
will be duly and validly issued, fully paid and non assessable, (2) will not be
issued in violation of any preemptive or similar rights, (3) will be free of any
liens, encumbrances and restrictions on transfer (other than those imposed by
the 1933 Act or applicable state securities or "Blue Sky" laws) and (4) will not
subject their holder to personal liability by reason of being a holder. The
Company has duly reserved the required number of shares of Common Stock for
issuance under this Agreement, and the shares shall remain reserved, and the
Company shall from time to time reserve additional shares of Common Stock as
shall be required to be reserved under this Agreement, as long as this Agreement
may be in effect.
(e) Corporate Authorization. This Agreement and the other
Transaction Documents have been duly and validly authorized by the Company; this
Agreement has been duly executed and delivered by the Company and, assuming due
execution and delivery by the Buyer, this Agreement is and the other Transaction
Documents will be, when duly executed and delivered by the Company and the other
parties to them, valid and binding obligations of the Company enforceable in
accordance with their terms, except (1) their enforceability may be limited by
(A) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
transfer or other similar laws now or after the date of this Agreement in effect
relating to or affecting creditors' rights generally and (B) general principles
of equity, regardless of whether enforcement is considered in a proceeding in
equity or at law and (2) any rights to indemnity or contribution may be limited
by federal and state securities laws and public policy considerations.
(f) Non-contravention. The execution and delivery of this Agreement
and the other Transaction Documents, and the consummation by the Company of the
issuance of the Shares and the other transactions contemplated by this
Agreement, do not and will not, with or without the giving of notice or the
lapse of time, or both, (1) result in any violation of any provision of the
certificate of incorporation or by-laws of the Company, (2) conflict with or
result in a breach by the Company of any of the terms or provisions of, or
constitute a default under, or result in the modification of, or result in the
creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of
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the Company under any indenture, mortgage, deed of trust or other agreement or
instrument to which the Company is a party or by which the Company or any of its
properties or assets are bound or affected (the "Contracts"), (3) violate or
contravene any applicable law, rule or regulation or any applicable decree,
judgment or order of any court, regulatory body, administrative agency or other
governmental body having jurisdiction over the Company or any of its properties
or assets, in each case in clause (2) and (3), as could be reasonably likely to
have a Material Adverse Effect; provided that any breach, default, modification,
contravention or violation or other event or action does not and will not affect
the obligation or ability of the Company to perform any of its duties under this
Agreement, or the other Transaction Documents, including the issuance of the
Shares or (4) have any material adverse effect on any Permit, certification,
registration, approval, consent, license or franchise necessary for the Company
to own or lease and operate any of its properties and to conduct any of its
business.
(g) Approvals. No authorization, approval or consent of, or filing
with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
necessary to be obtained or made by the Company in connection with the
execution, delivery and performance of this Agreement and the other Transaction
Documents and the issuance and sale of the Shares as contemplated by this
Agreement other than (1) registration of the resale of the Shares under the 1933
Act as contemplated by the Registration Rights Agreement, (2) approval of the
Company's shareholders in connection with the issuance of the Shares in
accordance with the NASDAQ market rules and (3) satisfaction of the requirements
of the HSR Act and the Irish Mergers Act in connection with the License
Agreement and any issuance of the Shares.
(h) SEC Filings. The Company has timely filed all periodic and other
reports required to be filed under the 1934 Act and all other forms, reports,
registration statements and documents required to be filed with the SEC since
July 31, 1996. All of these forms, reports, registration statements and
documents complied, when filed, in all material respects, with all applicable
requirements of the 1933 Act and the 1934 Act. As of their respective dates,
these reports and documents (including the information and documents
incorporated in them by reference) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated in them or
necessary to make the statements in them, in light of the circumstances under
which they were made, not misleading.
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The audited financial statements and unaudited interim financial
statements of the Company included or incorporated by reference in the forms,
reports, registration statements and documents have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved and, except as otherwise stated in them, fairly
present, in all material respects, the financial position of the Company at the
dates of them and the results of operations and cash flows for the periods then
ended (subject, in the case of any unaudited interim financial statements, to
normal year-end adjustments and to the extent they include footnotes or may be
condensed or summary statements) and the audited financial statements are
accompanied by an unqualified opinion on them by the Company's independent
auditors.
(i) Absence of Certain Proceedings. Except as described in the SEC
Reports, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company in which an unfavorable
decision, ruling or finding would have a material adverse effect on the
business, properties, operations, financial condition or results of operations
of the Company or the transactions contemplated by this Agreement or any of the
other Transaction Documents or which could adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement or any of the other Transaction Documents.
(j) Absence of Brokers, Finders, Etc. No broker, finder, or similar
Person is entitled to any commission, fee, or other compensation by reason of
the transactions contemplated by this Agreement. The Company will pay, and hold
the Buyer harmless against, any liability, loss or expense (including, without
limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in
connection with any claim for any commission, fee or other compensation of this
kind.
(k) No Solicitation; Compliance. No form of general solicitation or
general advertising was used by the Company or any of its Affiliates or, to its
knowledge, any other Person acting on behalf of the Company, in respect of the
Shares or in connection with the offer and sale of the Shares. Neither the
Company nor any of its Affiliates nor, to its knowledge, any Person acting on
behalf of the Company has, either directly or indirectly, (1) sold or offered
for sale to any Person any of the Shares or, within the six months prior to the
date of this Agreement, any other similar security of the Company except as
contemplated by this Agreement or (2) engaged in any directed selling efforts
(as the term is defined in
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Regulation S) with respect to the Shares. The Company represents that neither
the Company nor any of its Affiliates nor any Person authorized to act on its
behalf will sell or offer for sale any security to, or solicit any offers to buy
any security from, or otherwise approach or negotiate with, any Person so as to
cause the issuance or sale of the Shares to be in violation of any of the
provisions of Section 5 of the 1933 Act.
The Company, its Affiliates and any Person acting on behalf of the
Company have complied with the offering restrictions requirements of Regulations
S. The Company is a "reporting issuer" (as the term is defined in Regulation S).
(l) Licenses; Permits. The Company possesses all licenses, permits,
certificates, consents, orders, approvals and other authorizations from, and has
made all declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts and
other tribunals presently required or necessary to own or lease, as the case may
be, and to operate its properties and to carry on its business as currently
conducted and as proposed to be conducted ("Permits"), except where failure to
obtain the Permits would not, individually or in the aggregate, have a Material
Adverse Effect and except as disclosed in the SEC Reports. The Company has
fulfilled and performed all of its obligations with respect to the Permits and
no event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination of them or results in any other material
impairment of the rights of the holder of any Permit. The Company has not
received any notice of any proceeding relating to revocation or modification of
any Permit, except where the revocation or modification would not, individually
or in the aggregate, have a Material Adverse Effect.
(m) Subsequent Events. Other than in connection with the Transaction
Documents, since January 31, 1999, (1) the Company has not incurred any
liabilities or obligations, direct or contingent, or entered into or agreed to
enter into any transactions or contracts (written or oral) not in the ordinary
course of business, which liabilities, obligations, transactions or contracts
would, individually or in the aggregate, be material to the business, assets,
liabilities (contingent or otherwise), operations, condition (financial or
otherwise) or solvency of the Company, (2) the Company has not purchased any of
its outstanding capital stock, nor declared, paid or otherwise made any dividend
or distribution of any kind on its capital stock and (3) there has not been any
material change in the capital stock or long-term indebtedness of the Company.
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<PAGE>
(n) Tax Matters. The Company has filed all necessary federal, state
and foreign income and franchise tax returns, except where the failure to file
returns would not, individually or in the aggregate, have a Material Adverse
Effect, and has paid all taxes shown as due on them. Other than tax deficiencies
which the Company is contesting in good faith and for which the Company has
provided adequate reserves, there is no tax deficiency that has been asserted
against the Company that would, individually or in the aggregate, have a
Material Adverse Effect.
(o) Property. The Company has good and marketable title to all real
property and personal property owned by it and all leasehold estates in the real
and personal property being leased by it, in each case free and clear of all
liens, charges, encumbrances or restrictions, except to the extent the failure
to have title or the existence of liens, charges, encumbrances or restrictions
would not, individually or in the aggregate, have a Material Adverse Effect.
The Company owns or possesses adequate licenses or other valid
rights to use all patents and applications, trademarks, service marks, trade
names, copyrights and know-how (collectively "Proprietary Rights") necessary to
conduct the businesses currently or proposed to be conducted by it, except for
any lack of or defects in ownership as would not, individually or in the
aggregate, have a Material Adverse Effect. The Company has not received any
notice that any Proprietary Rights have been declared unenforceable or otherwise
invalid by any court or governmental agency other than notices relating to
Proprietary Rights the loss of which would not, individually or in the
aggregate, have a Material Adverse Effect. The Company has not received any
notice of infringement of or conflict with (and does not know of any
infringement of or conflict with) asserted rights of others with respect to any
Proprietary Rights which, if the assertion of infringement or conflict were
sustained, would have a Material Adverse Effect.
(p) Contracts. Each of the Contracts is valid and enforceable
against the Company and to the knowledge of the Company is valid and enforceable
against the other party or parties to them, and the Company is not, and has no
knowledge that any other party is, in default under or in respect of any
Contract, with only those exceptions as would not, individually or in the
aggregate, have a Material Adverse Effect.
(q) Environmental Matter. Except as would not, individually or in
the
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<PAGE>
aggregate, have a Material Adverse Effect (1) the Company is in compliance with
and not subject to liability under applicable Environmental Laws, (2) the
Company has made all filings and provided all notices required under any
applicable Environmental Law, and has and is in compliance with all Permits
required under any applicable Environmental Laws and each of them is in full
force and effect, (3) there is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter or request for information pending or, to the knowledge
of the Company, threatened against the Company under any Environmental law, (4)
no lien, charge, encumbrance or restriction has been recorded under any
Environmental Law with respect to any assets, facility or property owned,
operated, leased or controlled by the Company, (5) the Company has not received
notice that it has been identified as a potentially responsible party under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), or any comparable state law, (6) no property or facility of
the Company is (A) listed or proposed for listing on the National Priorities
List under CERCLA or (B) listed in the Comprehensive Environmental Response,
Compensation and Liability Information System List promulgated under CERCLA, or
on any comparable list maintained by any state or local governmental authority.
For purposes of this Agreement, "Environmental Laws" means the
common law and all applicable federal, state and local laws or regulations,
codes, orders, decrees, judgments or injunctions issued, promulgated, approved
or entered under them, relating to pollution or protection of public or employee
health and safety or the environment, including laws relating to (i) emissions,
discharges, releases or threatened release of hazardous materials into the
environment (including ambient air, surface water, groundwater, land surface or
subsurface strata), (ii) the manufacture, processing, distribution, use,
generation, treatment, storage, disposal, transport or handling of hazardous
materials, and (iii) underground and aboveground storage tanks and related
piping, and emissions, discharges, releases or threatened releases from them.
(r) Labor Matters. There is no strike, labor dispute, slowdown and
work stoppage with the employees of the Company which is pending or, to the
knowledge of the Company, threatened.
(s) Insurance. The Company carries insurance in amounts and covering
risks as is adequate for the conduct of its business and the value of its
properties.
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(t) Employee Benefit. The Company has no liability for any
prohibited transaction or funding deficiency or any complete or partial
withdrawal liability with respect to any pension, profit sharing or other plan
which is subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), to which the Company or any Subsidiary makes or ever has made
a contribution and in which any employee of the Company is or has ever been a
participant. With respect to these plans, the Company and the Subsidiaries are
in compliance in all material respects with all applicable provisions of ERISA.
(u) Books and Records. The Company (1) makes and keeps accurate
books and records and (2) maintains internal accounting controls which provide
reasonable assurance that (A) transactions are executed in accordance with
management's authorization, (B) transactions are recorded as necessary to permit
preparation of its financial statements and to maintain accountability for its
assets, (C) access to its assets is permitted only in accordance with
management's authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(v) No Registration Rights. Except as provided to the Buyer and its
Affiliates in the Registration Rights Agreement, the Company has not granted or
agreed to grant any registration rights to any Person.
5. Certain Covenants.
(a) Transfer Restrictions. The Buyer acknowledges and agrees that
the Company is under no obligation to register the Shares under the 1933 Act
other than registration of the resale of the Shares in accordance with the
Registration Rights Agreement.
(b) State Securities Laws. On or before each Closing Date, the
Company shall take any action necessary to qualify, or to obtain an exemption
for, the Shares for issuance to the Buyer under this Agreement under the
securities laws of jurisdictions in the United States as shall be applicable. In
connection with these obligations of the Company, the Company shall not be
required (1) to qualify to do business in any jurisdiction where it would not
otherwise be required to qualify, (2) to subject itself to general taxation in
any jurisdiction, (3) to file a general consent to service of process in any
jurisdiction, (4) to provide any undertakings that cause more than nominal
expense or
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<PAGE>
burden to the Company or (5) to make any change in its charter or by-laws which
the Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders. The Company shall furnish the
Buyer with copies of all filings, applications, orders and grants or
confirmations of exemptions relating to securities laws on or before the Closing
Date.
(c) Commercially Reasonable Efforts. Each of the parties shall use
its commercially reasonable efforts timely to satisfy each of the conditions to
the other party's obligations to issue and purchase the Shares set forth in
Sections 7 or 8, as the case may be, of this Agreement on or before each Closing
Date.
(d) Filings. Each of the Company and the Buyer agree to make any
filing required by the HSR Act and the Irish Mergers Act after consultation with
the other as to the proper form, scope and substance of the filing in connection
with any issuance of Shares by the Company as soon as reasonably practicable
after notice is given by the Company of the Company's decisions to exercise the
Subscription Right.
(e) Change of Control Events, Etc. In the event that the Common
Stock ceases to be publicly traded or in the event of (1) a reclassification,
consolidation or merger to which the Company is a party and for which approval
of any stockholders of the Company is required, (2) the voluntary or involuntary
dissolution, liquidation or winding up of the Company or (3) the sale, exchange
or other conveyance (for cash, shares of stock, securities or other
consideration) of all or substantially all the property and assets of the
Company except to a wholly-owned subsidiary (each of the events in (1), (2) and
(3) above, a "Change of Control Event") then, in each case, the Company shall
provide notice to the Buyer under Section 9(d) not less than 20 days nor more
than 60 days before the date on which the Change of Control Event or cessation
of trading is expected to become effective, if known, and the date as of which
it is expected that holders of record of Common Stock shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
the Change of Control Event, if known. Failure to give such notice shall have no
effect on the status or effectiveness of the action to which the required notice
relates.
(f) No Dilutive Actions. During the period from and including any
Subscription Date to and including the Closing Date:
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(i) Dividend, Subdivision, Combination or Reclassification of
Company Common Stock. If the Company shall, at any time or from time to time,
(a) declare a dividend on any class of the Common Stock payable in shares of its
capital stock (including Common Stock), (b) subdivide any class of the
outstanding Common Stock, (c) combine any class of the outstanding Common Stock
into a smaller number of shares or (d) issue any shares of its capital stock in
a reclassification of any class of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then in each such case, the Subscription
Price shall be adjusted to that price which will permit that number of
Subscription Shares to be increased or reduced in the same proportion as the
number of Shares of all classes are increased or reduced in connection with such
dividend, subdivision, combination or reclassification. Any such adjustment
shall become effective immediately after the record date of such dividend or the
effective date of such subdivision, combination or reclassification and shall be
calculated as of the Closing Date. Such adjustment shall be made successively
whenever any event listed above shall occur. If a dividend described in clause
(a) above is declared and such dividend is not paid, the Subscription Price
shall again be adjusted to be the Subscription Price in effect immediately prior
to such record date.
(ii) Certain Distributions.
If the Company shall fix a record date for the distribution to all
holders of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Company is the continuing corporation) of
evidences of indebtedness, assets or other property (other than dividends
payable in capital stock for which adjustment is made under Section 5(f)(i)),
then in each such case for the purpose of this Section 5(f)(ii), the Buyer shall
be entitled to receive on the Closing Date a proportionate share of any such
distribution as though it were a holder of the Subscription Shares as of the
record date fixed for the determination of the holders of Common Stock entitled
to receive such distribution. Any such adjustment shall become effective
immediately after the record date for such distribution and shall be calculated
as of the Closing Date. Such adjustments shall be made successively whenever
such a record date is fixed. In the event that such distribution is not so made,
the Subscription Price shall be adjusted to the Subscription Price in effect
immediately prior to such record date.
(iii) Below Market Issuances. The Company shall not, unless the
parties agree upon
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satisfactory anti-dilution protection for the Buyer, (A) issue or sell
Shares for consideration in an amount per share less than the greater of
(x) the Market Price of the Common Stock on the date of such issuance or
sale and (y) the Subscription Price, (B) issue rights, options (other than
pursuant to existing option plans) or warrants to all holders of Shares
entitling them for a period expiring within 60 days after the record date
to subscribe for or purchase Shares at a price per Share less than the
greater of (x) the Market Price of the Common Stock on the date of such
issuance and (y) the Subscription Price; or (C) (a) enter into any valid
and binding written agreement with any Person to issue or sell shares of
the Common Stock on a date after the execution of such agreement and upon
the occurrence of specified events (other than solely the passage of time)
or (b) issue or sell any securities convertible into, or exercisable or
exchangeable for, Shares for consideration per Share less than the greater
of (x) the Market Price of the Common Stock on (i) in the case of clause
(C)(a), on the date of execution of such agreement, and, in the case of
clause (C)(b), on the date of such issuance or sale, the date of such
issuance or sale, and (y) the Subscription Price.
(g) Loss or Destruction of Share Certificates. Subject to the terms
and conditions of this Agreement, upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of a
certificate evidencing Shares and, in the case of loss, theft or destruction, of
a bond or indemnification as the Company may reasonably require and, in the case
of mutilation, upon surrender and cancellation of such certificate, the Company
will execute and deliver a new certificate of like tenor.
(h) Registration Rights. The Buyer shall be entitled to registration
rights with respect to the Shares issuable under this Agreement as set forth in
the Registration Rights Agreement.
6. Certain Adjustments.
(a) Stock Splits, etc. If the Company shall after the date of this
Agreement consolidate its outstanding shares of Common Stock into a smaller
number of shares or engage in any transaction having a similar effect on the
number of shares outstanding or the market price of the Common Stock (any such
event, a "Stock Event"), then the
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Trigger Price shall be adjusted, effective immediately after the record date at
which the holders of shares of Common Stock are determined for purposes of the
Stock Event, to a price determined by multiplying the Trigger Price in effect
immediately prior to the record date by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding on the record date before
giving effect to the Stock Event and the denominator of which shall be the
number of shares of Common Stock outstanding after giving effect to the Stock
Event. The Company shall not enter into any of the transactions referred to in
this Section 6(a) unless effective provision shall be made so as to give effect
to the provisions set forth in this Section 6(a).
(b) Fractional Shares. No fractional shares of Common Stock or scrip
shall be issued to the Buyer in connection with this Agreement. Instead of any
fractional shares of Common Stock that would otherwise be issuable to the Buyer,
the Company will pay to the Buyer a cash adjustment (calculated to the nearest
cent) in respect of the fractional interest in an amount equal to that
fractional interest of the then Market Price per share of Common Stock.
(c) Notice of Adjustments. Whenever the Trigger Price is adjusted
under Section 6(a), the Company shall promptly notify the Buyer in accordance
with Section 9(d) of the adjustment and provide a certificate of a firm of
independent public accountants of recognized national standing selected by the
Board of Directors of the Company (who shall be appointed at the Company's
expense and who may be the independent public accountants regularly employed by
the Company) setting forth the Trigger Price after the adjustment, a brief
statement of the facts requiring the adjustment and the computation by which the
adjustment was made.
7. Conditions to the Company's Obligation to Issue.
The Buyer understands that the Company's obligation to issue Shares
to the Buyer under this Agreement is conditioned upon satisfaction of the
following conditions precedent on or before the Closing Date (any or all of
which may be waived by the Company in its sole discretion):
(a) The delivery by the Buyer of the aggregate Subscription Price in
accordance with Section 2(f).
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(b) On the Closing Date, no legal action, suit or proceeding shall
be pending or threatened which seeks to restrain or prohibit the transactions
contemplated by this Agreement.
(c) The representations and warranties of the Buyer contained in
this Agreement shall have been true and correct on the date of this Agreement
and on the Closing Date as if made on the Closing Date and on or before the
Closing Date the Buyer shall have performed all covenants and agreements of the
Buyer required to be performed by the Buyer on or before the Closing Date.
8. Conditions to the Buyer's Obligation to Purchase.
The Company understands that the Buyer's obligation to purchase
Shares under this Agreement is conditioned upon satisfaction of the following
conditions precedent on or before the Closing Date (any or all of which may be
waived by the Buyer in its sole discretion):
(a) Delivery by the Company of the stock certificate or
certificates, or evidence of electronic transfer as agreed to by the parties for
the Shares, along with any cash in lieu of fractional Shares, in accordance with
Section 2(f) of this Agreement.
(b) On the Closing Date, the issuance of the Shares under this
Agreement has not been enjoined (temporarily or permanently), and no legal
action, suit or proceeding shall be pending or threatened which seeks to
restrain or prohibit the transactions contemplated by this Agreement.
(c) The representations and warranties of the Company contained in
this Agreement that are qualified as to materiality shall be true and correct,
and the representations and warranties of the Company set forth in this
Agreement that are not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing
Date, as though made on and as of the Closing Date (except for representations
given as of a specific date, which representations shall be true and correct as
of that date), and on or before the Closing Date the Company shall have
performed all covenants and agreements of the Company contained in this
Agreement required to be performed by the Company on or before the Closing Date.
21
<PAGE>
(d) No event which would constitute an Event of Default under the
Note (as defined in the Note) shall have occurred and be continuing. Since
January 31, 1999, and except as disclosed in SEC Reports filed since that date,
there shall have been no event or development, and no information shall have
become known, that, individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect.
(e) The Shares shall be freely transferable upon issuance and an
effective shelf registration statement shall be available for use upon resales
of the Shares by the Buyer.
(f) The shareholders of the Company shall have, if necessary under
applicable law or the rules and regulations of any securities exchange upon
which the Shares are listed or admitted for trading, approved the issuance of
the Shares in accordance with the Company's certificate of incorporation and
bylaws.
(g) The waiting periods and any extensions applicable to the
issuance of the Shares under the HSR Act and the Irish Mergers Act shall have
expired or been terminated.
(h) After giving effect to the purchase of the Shares by the Buyer,
the Buyer and its Affiliates would not beneficially own in the aggregate 10% or
more of the outstanding shares of the Common Stock, unless the Note shall have
been repaid in full in accordance with its terms at least 30 days prior to the
Closing Date.
(i) The Closing Date shall be not less than 30 days nor more than 90
days after the Subscription Date; provided that if (x) the Closing Date is more
than 45 days after the Subscription Date and (y) on the Closing Date the Market
Price is more than 10% greater than or less than the Subscription Price, then
the Buyer shall purchase such number of Shares equal to the quotient of (x) the
Redemption Price (as defined in the Note) paid as prepayment or payment of all
or a portion of the outstanding Principal Amount of the Note (as defined in the
Note) divided by (y) the Market Price, at a price per Share equal to the Market
Price. For the avoidance of doubt, if a Closing Date does not occur within 90
days after the corresponding Subscription Date, the obligation of the Buyer to
purchase the corresponding Shares shall terminate and the aggregate dollar
amount the Buyer would be required to pay hereunder to purchase shares shall be
permanently reduced by an amount equal to the Redemption Price paid on such
22
<PAGE>
Subscription Date.
(j) The Company shall have delivered to the Buyer its certificate,
dated the Closing Date, duly executed by an officer of the Company to the effect
set forth in subparagraphs (b)-(i) of this Section 8.
(k) On the Closing Date, the Buyer shall have received the opinion,
dated as of the Closing Date and addressed to the Buyer, of Paul, Weiss,
Rifkind, Wharton & Garrison, counsel for the Company, in the form attached to
this Agreement as Annex A or otherwise satisfactory to the Buyer.
9. Miscellaneous.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PROVISIONS.
(b) Headings. The headings, captions and footers of this Agreement
are for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(c) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, the invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement or the validity or enforceability of this Agreement in any other
jurisdiction.
(d) Notices. All notices and other communications required or
permitted under this Agreement shall be sufficiently given if delivered
personally or sent by nationally recognized courier service or facsimile
(receipt requested), addressed as follows:
(i) if to the Company, to:
Emisphere Technologies, Inc.
765 Old Saw Mill River Road
Tarrytown, New York 10591
23
<PAGE>
Telephone: (914) 347-2220
Facsimile: (914) 347-2498
Attention: Michael M. Goldberg
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Telephone: (212) 373-3000
Facsimile: (212) 757-3990
Attention: John P. McEnroe, Esq.
and to:
H. Warren Browne, Esq.
25 Five Ponds Drive
Waccabuc, New York 10597
Telephone: (914) 763-5599
Facsimile: (914) 763-6321
(ii) if to the Buyer, to:
Elan International Management, Limited
102 St. James Court
Flatts, Smith's Parish
Bermuda FL04
Telephone: (441) 292-9169
Facsimile: (441) 292-2224
Attention: Chief Financial Officer
with a copy to:
Cahill Gordon & Reindel
Eighty Pine Street
New York, New York 10005-5420
24
<PAGE>
Telephone: (212) 701-3000
Facsimile: (212) 269-5420
Attention: William M. Hartnett, Esq.
All notices shall be deemed to have been received (i) on the date
delivered, if delivered by facsimile or personally or (ii) on the day after the
notice is delivered into the possession and control of a nationally recognized
overnight delivery service, duly marked for delivery to the receiving party. A
party may change the address to which notice or other communication under this
Agreement is to be delivered by giving the other party notice in the manner set
forth in this section. If any notice, filing, delivery or payment shall be
required by the terms of this Agreement to be made on a day that is not a
Business Day, the notice, filing, delivery or payment shall be made on the
immediately succeeding Business Day.
(e) Counterparts. This Agreement may be executed in counterparts by
the parties to it, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument. A facsimile
transmission of this Agreement bearing a signature on behalf of a party to it
shall be legal and binding on that party.
(f) Entire Agreement; Benefit. This Agreement, together with the
other Transaction Documents, constitutes the entire agreement among the parties
to it with respect to the subject matter of it. There are no restrictions,
promises, warranties, or undertakings, other than those set forth or referred to
in the Transaction Documents. This Agreement, together with the other
Transaction Documents, supersedes all prior agreements and understandings,
whether written or oral, between the parties to this Agreement with respect to
the subject matter of this Agreement. This Agreement and the terms and
provisions of it are for the sole benefit of the Company, the Buyer and their
respective successors and permitted assigns.
(g) Standstill Agreement. The Standstill Agreement will remain
unchanged and in full force and effect until its expiration in accordance with
its terms.
(h) Waiver. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising a right or
remedy, or course of dealing between the parties shall not operate as a waiver
or as an amendment of this Agreement, nor shall any single or partial exercise
of any right or power, or any
25
<PAGE>
abandonment or discontinuance of steps to enforce a right or power, preclude any
other or further exercise of that right or power or exercise of any other right
or power.
(i) Amendment. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Buyer or the Company from it shall in any event be effective unless it shall
be in writing and signed by each party to this Agreement, and then shall be
effective only in the specific instance and for the purpose for which given. No
course of dealing between the parties to this Agreement shall operate as an
amendment of this Agreement.
(j) Further Assurances. Each party to this Agreement will perform
any and all acts and execute any and all documents as may be necessary and
proper under the circumstances in order to accomplish the intents and purposes
of this Agreement and to carry out its provisions.
(k) Expenses. All reasonable expenses incurred in connection with
filings or qualifications under this Agreement shall be paid by the Company.
Except as otherwise provided in this Section 8(k), each of the Company and the
Buyer shall bear its own expenses in connection with this Agreement and the
transactions contemplated by it.
(l) Survival. The respective representations, warranties, covenants
and agreements of the Company and the Buyer contained in this Agreement and the
documents delivered in connection with this Agreement shall survive the
execution and delivery of this Agreement and each Closing under it and each
delivery of and payment for the Shares, and shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of the
Buyer or any Person controlling or acting on behalf of the Buyer or by the
Company or any Person controlling or acting on behalf of the Company.
(m) Confidentiality and Non-disclosure. From and after the date of
this Agreement neither party shall, except as required by applicable law,
regulation, stock exchange rule or judicial or administrative process, disclose
to any Person, publicly or privately, this Agreement or the substance of the
transactions contemplated by it or the involvement of the parties with each
other as contemplated by it, without the prior written consent of the other
party; provided that (1) even if one party is required by applicable law,
regulation, stock exchange rule or judicial or administrative process to make a
disclosure relating to this Agreement, the other party shall have reasonable
prior notice of
26
<PAGE>
and, if practicable under the circumstances, shall be afforded the ability to
provide input with respect to any disclosure and (2) the parties agree the
Company may issue the press release attached to this Agreement as Annex B on or
after the date of this Agreement.
(n) Construction. The language used in this Agreement is the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
(o) Assignment. The Company may not assign this Agreement or any of
its rights, interests or obligations hereunder. The Buyer may assign this
Agreement and/or any of its rights, interests or obligations hereunder to a
Permitted Transferee.
(p) No Dilution or Impairment. The Company will not, by amendment of
its certificate or articles of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other action, avoid or seek to avoid the observance or
performance of any of the terms of this Agreement, but will, at all times, in
good faith, assist in the carrying out of all its terms. Without limiting the
generality of the foregoing, the Company will (i) at all times, reserve and keep
available the maximum number of its authorized shares of Common Stock, free from
all preemptive rights, which will be sufficient to permit the full exercise of
the Subscription Right, (ii) take any action as may be necessary or appropriate
in order that all shares of Common Stock as may be issued under the exercise of
the Subscription Right will, upon issuance, be duly and validly issued, fully
paid and nonassessable, and free from all taxes, liens and charges with respect
to their issue and (iii) comply with Sections 5(e), 5(f) and 6.
(q) Charges, Taxes and Expenses. Issuance of certificates for shares
of Common Stock under this Agreement shall be made without charge to the Buyer
for any issue or transfer tax, or other incidental expense, in respect of the
issuance or delivery of certificates or the securities represented by them, all
of which taxes and expenses shall be paid by the Company.
(r) No Rights or Liabilities as Stockholder. Nothing contained in
this Agreement shall be deemed to confer upon the Buyer any rights as a
stockholder of the Company or as imposing any liabilities on the Buyer to
purchase any securities unless the Company exercises the Subscription Right
under Section 2.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their officers who are duly authorized as of the date first set
forth above.
EMISPHERE TECHNOLOGIES, INC.
By: /s/ Charles Abdalian
--------------------
Name: Charles Abdalian
Title: Chief Financial Officer
ELAN INTERNATIONAL MANAGEMENT, LIMITED
By: /s/ Kevin Insley
----------------
Name: Kevin Insley
Title: President
28
================================================================================
REGISTRATION RIGHTS AGREEMENT
BETWEEN
EMISPHERE TECHNOLOGIES, INC.
AND
ELAN INTERNATIONAL MANAGEMENT, LIMITED
DATED AS OF JULY 2, 1999
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of July 2,
1999, between ELAN INTERNATIONAL MANAGEMENT, LIMITED, a company incorporated
under the laws of Bermuda ("Elan"), and EMISPHERE TECHNOLOGIES, INC., a Delaware
corporation (the "Company"). Some capitalized terms are defined in Section 2 of
this Agreement.
WHEREAS, under the Subscription Agreement between the Company and Elan
dated as of the date of this Agreement (the "Subscription Agreement"), Elan may
be required to purchase the Shares.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
premises, covenants and conditions contained in this Agreement, the parties
agree as follows:
1. Registration Under Securities Act, etc.
1.1 Registration on Request; Shelf Registration. The Company shall use
its commercially reasonable efforts to ensure that a registration statement
covering the Registrable Securities for an offering to be made on a continuous
basis under Rule 415 under the Securities Act (the "Shelf Registration") is
effective on each Subscription Date (as defined in the Subscription Agreement).
The Shelf Registration shall be on Form S-3, if available, or another
appropriate form permitting registration of the Registrable Securities. The
Company shall use its commercially reasonable efforts to keep the Shelf
Registration continuously effective from the date the Shelf Registration is
declared effective until the earlier of (i) the time that all of the Registrable
Securities shall cease to be Registrable Securities and (ii) the ninth
anniversary of the date of this Agreement.
Subject to Section 10 of this Agreement, the Company shall supplement
or amend, if necessary, the Shelf Registration, as required by the Securities
Act or the rules and regulations under the Securities Act or as reasonably
requested by Elan, and the Company shall furnish to Elan copies of any
supplement or amendment prior to its being used and/or filed with the
Commission. The Company shall pay all Registration Expenses incurred in
connection with the Shelf Registration and any supplements or amendments to it,
whether or not it becomes effective, and whether all, none or some of the
Registrable Securities are sold under the Shelf Registration.
1.2 Registration Procedures. In connection with the registration
statement filed under Section 1.1, the Company will, as expeditiously as
possible:
(i) subject to Section 10 of this Agreement, prepare and file
with the Commission any amendments and supplements to the registration
statement and the prospectus used in connection with it as may be
necessary to keep the registration statement effective and to comply
with the provisions of the Securities Act with respect to the
disposition of the Registrable Securities
<PAGE>
covered by the registration statement or as may be reasonably requested
by Elan, until all of the Registrable Securities have been disposed of
in accordance with the intended methods of disposition set forth in the
registration statement;
(ii) furnish to Elan and the underwriters, if any, the number
of conformed copies of the registration statement and of each amendment
and supplement to it (in each case including all exhibits) and the
number of copies of the prospectus contained in the registration
statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act and any other documents, as Elan may reasonably request;
(iii) use its commercially reasonable efforts (x) to register
or qualify all Registrable Securities covered by the registration
statement under any other securities or blue sky laws where an
exemption is not available and as Elan shall reasonably request, (y) to
keep the registration or qualification in effect for so long as the
registration statement remains in effect, and (z) to take any other
action which may be reasonably necessary or advisable to enable Elan to
consummate the disposition of the securities, except that the Company
shall not be required to qualify generally to do business as a foreign
corporation in any jurisdiction where it would not but for the
requirements of this subdivision (iii) be obligated to be so qualified,
subject itself to taxation in any jurisdiction or consent to general
service of process in any jurisdiction;
(iv) use its commercially reasonable efforts to cause all
Registrable Securities covered by the registration statement to be
registered with or approved by any other federal or state governmental
agencies or authorities as may be necessary in the opinion of counsel
to the Company and counsel to Elan to enable Elan to consummate the
disposition of the Registrable Securities;
(v) subject to Section 10 of this Agreement, promptly notify
Elan and the underwriters, if any, at any time when a prospectus
relating to the registration statement is required to be delivered
under the Securities Act, upon discovery that, or upon the happening of
any event as a result of which, the prospectus included in the
registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be
stated in it or necessary to make the statements in it not mis leading,
in the light of the circumstances under which they were made, and at
the request of Elan promptly prepare and furnish to Elan and the
underwriters, if any, a reasonable number of copies of a supplement to
or an amendment of the prospectus as may be necessary so that, as
delivered to the purchasers of the securities, the prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated in it or necessary to make the
statements in it not misleading in the light of the cir cumstances
under which they were made;
2
<PAGE>
(vi) otherwise use its commercially reasonable efforts to
comply with all applicable rules and regulations of the Commission, and
make available to Elan, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first full calendar month
after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 under the Securities Act, and promptly
furnish to Elan and the underwriters, if any, a copy of any amendment
or supplement to the registration statement or prospectus; and
(vii) use its commercially reasonable efforts to list all
Registrable Securities covered by the registration statement on the
NYSE, the AMEX or another national securities exchange on which
Registrable Securities of the same class and, if applicable, series,
covered by the registration statement are then listed or on NASDAQ if
the Registrable Securities are quoted on NASDAQ.
(viii) in the event of an underwritten offering, enter into
such agreements (including an underwriting agreement in form, scope and
substance as is customary in underwritten offerings) and take all other
appropriate and reasonable actions requested by Elan (including those
reasonably requested by the managing underwriters) in order to expedite
or facilitate the disposition of the Registrable Securities, and in
that connection, (x) use commercially reasonable efforts to obtain
opinions of counsel to the Company (which counsel and opinions (in
form, scope and substance) shall be reasonably satisfactory to the
managing underwriters and Elan's counsel), addressed to each of the
underwriters as to the matters customarily covered in opinions
requested in underwritten offerings and other matters as may be
reasonably requested by counsel and underwriters, (y) use commercially
reasonable efforts to obtain "cold comfort" letters from the
independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are required
to be, included in the registration statement), addressed to each of
the underwriters, in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings and (z) if requested and if an underwriting
agreement is entered into, provide indemnification provisions and
procedures substantially to the effect set forth in Section 1.4 with
respect to all parties to be indemnified under Section 1.4. The above
shall be done at each closing under an underwriting or similar
agreement, or as and to the extent required under it.
The Company may (i) require Elan to furnish the Company information regarding
Elan and the planned distribution of the securities as the Company may from time
to time reasonably request in writing and (ii) require Elan to agree to comply
with the Securities Act and the Exchange Act in connection with the registration
and distribution of the Registrable Securities.
3
<PAGE>
Notwithstanding the foregoing, if any registration or comparable
statement refers to Elan by name or otherwise as the holder of any securities of
the Company and in its sole and exclusive judgment Elan is or might be a
controlling person of the Company, Elan shall have the right to require the
insertion in the registration statement of language, in form and substance
reasonably satisfactory to Elan and the Company, to the effect that the holding
by Elan of the securities is not to be construed as a recommendation by Elan of
the investment quality of the Company's securities covered by it and that the
holding does not imply that Elan will assist in meeting any future financial
requirements of the Company.
Elan agrees by acquisition of the Registrable Securities that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in subdivision (v) of this Section 1.2, Elan will discontinue its
disposition of Registrable Securities under the registration statement relating
to the Registrable Securities until its receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (v) of this
Section 1.2 and, if so directed by the Company, will promptly deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in its possession of the prospectus relating to the Registrable Securities
current at the time of receipt of the notice.
1.3 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under this Agreement, the
Company (i) shall give Elan and the underwriters, if any, and counsel and
accountants designated by Elan the opportunity to participate in the preparation
of the registration statement, the prospectus included in it or filed separately
with the Commission, and each amendment of or supplement to it, (ii) shall give
each of them reasonable access to its books and records and opportunities to
discuss the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of Elan and its counsel or accountants, to exercise their due
diligence responsibilities and to conduct a reason able investigation within the
meaning of the Securities Act and (iii) shall promptly notify Elan, its counsel
and the underwriters, if any, of any stop order issued or threatened by the
Commission and promptly take all reasonable actions required to prevent the
entry of a stop order or to remove it if entered.
1.4 Indemnification.
(a) Indemnification by the Company. The Company will, and
hereby does, indemnify and hold harmless, in the case of any registration
statement filed under Section 1.1, Elan and each other Person who participates
as an underwriter in the offering or sale of the securities and each other
Person, if any, who controls Elan or any underwriter within the meaning of the
Securities Act, and their respective directors, officers, partners,
shareholders, employees and affiliates against any losses, claims, damages or
liabilities, joint or several, to which Elan or any underwriter or any director,
officer, partner, shareholder, employee, affiliate or controlling person may
become subject under the Securities Act or otherwise, including, the fees and
expenses of legal counsel, insofar as the losses, claims,
4
<PAGE>
damages or liabilities (or actions or proceedings, whether commenced or
threatened, in that respect) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in any registration
statement under which the securities were registered under the Securities Act,
any preliminary prospectus, final prospectus or summary prospectus contained in
it, or any amendment or supplement to it, or any omission or alleged omission to
state in it a material fact required to be stated in it or necessary to make the
statements in it in light of the circumstances in which they were made not
misleading, or any violation by the Company of the Securities Act or any rule or
regulation under the Securities Act applicable to the Company and the Company
will reimburse Elan or any underwriter and each director, officer, partner,
shareholder, employee, affiliate and controlling Person for any legal or any
other expenses reasonably incurred by them in connection with investigating or
defending any loss, claim, liability, action or proceeding; provided, that the
Company shall not be liable to the extent that any loss, claim, damage,
liability (or action or proceeding in that respect) or expense arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in the registration statement, any preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement in reliance upon
and in conformity with written information furnished to the Company through an
instrument duly executed by or on behalf of Elan or any underwriter, as the case
may be, specifically stating that it is for use in its preparation. This
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of Elan or any director, officer, employee, affiliate,
partner or controlling person and shall survive the transfer of the securities
by Elan.
(b) Indemnification by the Sellers. As a condition to
including any Registrable Securities in any registration statement, the Company
shall have received an undertaking reasonably satisfactory to it from Elan, and
such of Elan's Affiliates as the Company may reasonably require, to indemnify
and hold harmless (in the same manner and to the same extent as set forth in
subdivision (a) of this Section 1.4) the Company, and each director, officer,
employee and shareholder of the Company and each other Person, if any, who
participates as an underwriter in the offering or sale of the securities and
each other Person who controls the Company or any underwriter within the meaning
of the Securities Act, with respect to any untrue statement or alleged untrue
statement of a material fact contained in or any omission or alleged omission to
state in it a material fact in any registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained in it, or any
amendment or supplement to it, if the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in con
formity with written information furnished to the Company through an instrument
duly executed by or on behalf of the seller specifically stating that it is for
use in the preparation of the registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement; provided, that
the liability of the indemnifying party under this Section 1.4(b) shall be
limited to the amount of proceeds received by the indemnifying party in the
offering giving rise to liability. The indemnity shall remain in full force and
effect, regardless of any investigation
5
<PAGE>
made by or on behalf of the Company or any director, officer, employee,
shareholder or controlling person and shall survive the transfer of the
securities by Elan.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 1.4,
the indemnified party will, if a claim in that respect is to be made against an
indemnifying party, give written notice to the latter of the commencement of the
action; provided, that the failure of any indemnified party to give notice as
provided in this Section 1.4(c) shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 1.4, except to the
extent that the indemnifying party is actually prejudiced by the failure to give
notice. In case any action is brought against an indemnified party, the
indemnifying party shall be entitled to participate in and to assume the defense
of the action, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party of its election to assume the defense of the action, the
indemnifying party shall not be liable to the indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense of the action other than reasonable costs of investigation; provided,
that if the indemnified party reasonably believes it is advisable for it to be
represented by separate counsel because there exists a conflict of interest
between its interests and those of the indemnifying party with respect to the
claim, or there exist defenses available to the indemnified party which may not
be available to the indemnifying party, or if the indemnifying party shall fail
to assume responsibility for the defense, the indemnified party may retain
counsel satisfactory to it and the indemnifying party shall pay all fees and
expenses of that counsel. No indemnifying party shall be liable for any
settlement of any action or proceeding effected without its written consent,
which consent shall not be unreasonably withheld or delayed. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term the giving by the claimant or plaintiff to the indemnified
party of a release from all liability in respect of the claim or litigation or
which requires action other than the payment of money by the indemnifying party.
Each indemnified party shall furnish information regarding itself or the claim
in question as an indemnifying party may reasonably request in writing and as
shall be reasonably requested in connection with the defense of the claim and
litigation resulting from it.
(d) Contribution. If the indemnification provided for in this
Section 1.4 shall for any reason be held by a court of competent jurisdiction to
be unavailable to an indemnified party under subparagraph (a) or (b) of this
Section 1.4 in respect of any loss, claim, damage or liability, or any action in
that respect, then, in lieu of the amount paid or payable under subparagraph (a)
or (b) of this Section 1.4, the indemnified party and the indemnifying party
under subparagraph (a) or (b) of this Section 1.4 shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
the proportion as is appropriate to reflect the relative
6
<PAGE>
fault of the Company and Elan in connection with the statements or omissions
which resulted in the loss, claim, damage or liability, or action in that
respect, as well as any other relevant equitable considerations (the relative
fault of the Company and Elan to be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or Elan and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent the statement or
omission) or (ii) if the allocation provided by clause (i) is not permitted by
applicable law, in the proportion as shall be appropriate to reflect the
relative benefits received by the Company and Elan from the offering of the
securities covered by the registration statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of
fraudulent misrepre sentation. The prospective sellers' obligations to
contribute as provided in this subparagraph (d) are several in proportion to the
relative value of the Registrable Securities held by each of them covered by the
registration statement and not joint and no prospective seller shall be liable
under this subparagraph (d) for any amount in excess of the proceeds received in
the offering giving rise to liability. In addition, no Person shall be obligated
to contribute any amounts in payment for any settlement of any action or claim
effected without the Person's consent, which consent shall not be unreasonably
withheld or delayed.
(e) Other Indemnification. Indemnification and contribution
similar to that specified in the preceding subdivisions of this Section 1.4
(with appropriate modifications) shall be given by the Company, Elan and such of
Elan's Affiliates as the Company may reasonably require, with respect to any
required registration or other qualification of securities under any federal or
state law, rule or regulation of any governmental authority other than the
Securities Act.
(f) Indemnification Payments. The indemnification and
contribution required by this Section 1.4 shall be made by prompt periodic
payments during the course of the investigation or defense, as and when bills
are received or expense, loss, damage or liability is incurred.
2. Definitions.
As used in this Agreement, unless the context otherwise requires, the
following terms have the following meanings:
"Affiliate" means, with respect to any Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the subject Person. For purposes
of this definition, "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of the Person,
whether through the ownership of voting securities or by contract or otherwise.
7
<PAGE>
"Agreement" has the meaning set forth in the recitals to this
Agreement.
"AMEX" means the American Stock Exchange, Inc.
"Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Company" has the meaning set forth in the recitals to this Agreement.
"Elan" has the meaning set forth in the recitals to this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations of the
Commission under it, all as the same shall be in effect at the time. Reference
to a particular section of the Exchange Act, shall include a reference to the
comparable section, if any, of any successor federal statute.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" means the Nasdaq National Stock Market, Inc.
"NYSE" means The New York Stock Exchange, Inc.
"Person" means any individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or an agency, department or political subdivision of it) or other
entity of any kind.
"Registrable Securities" means (i) the Shares and (ii) any Related
Registrable Securities. As to any particular Registrable Securities, the
securities shall cease to be Registrable Securities when (a) a registration
statement with respect to the sale of the securities shall have become effective
under the Securities Act and the securities shall have been disposed of in
accordance with the registration statement, (b) they and all other Registrable
Securities owned by a holder may be distributed to the public by virtue of Rule
144(k) (or any successor provision) under the Securities Act, (c) they shall
have been otherwise transferred, and new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the Company and
subsequent public distribution of them shall not, in the opinion of counsel to
Elan (or in the opinion of counsel to the Company, which opinion is reasonably
satisfactory to Elan), require registration of them under the Securities Act, or
(d) they shall have ceased to be outstanding.
"Registration Expenses" means all costs, fees and expenses incident to
the Company's performance of or compliance with Section 1, including all
registration, filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger
8
<PAGE>
and delivery expenses and the fees and disbursements of counsel for the Company
and of its independent public accountants, but excluding any underwriting fees,
expenses, discounts or other costs payable to any underwriter, broker or dealer.
"Related Registrable Securities" means any securities of the Company
issued or issuable with respect to the Shares by way of a dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise.
"Securities Act" means the Securities Act of 1933, or any successor
federal statute, and the rules and regulations of the Commission under it, all
as the same shall be in effect at the time. References to a particular section
of the Securities Act shall include a reference to the comparable section, if
any, of any successor federal statute.
"Shares" means the shares of Common Stock which are issuable upon
exercise of the Subscription Right (as defined in the Subscription Agreement).
"Shelf Registration" has the meaning set forth in Section 1.1 of this
Agreement.
"Subscription Agreement" has the meaning set forth in the recitals to
this Agreement.
3. Rule 144 and Rule 144A.
The Company shall take all actions reasonably necessary to enable Elan
to sell the securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as the rule may be amended from time to time, (b) Rule 144A under the Securities
Act, as the rule may be amended from time to time, or (c) any similar rules or
regulations adopted by the Commission, including filing on a timely basis all
reports required to be filed by the Exchange Act. Upon the request of Elan, the
Company will deliver to the holder a written statement as to whether it has
complied with these requirements.
4. Amendments and Waivers.
This Agreement may be amended with the written consent of each party to
this Agreement and the Company may take any action prohibited by this Agreement,
or omit to perform any act required to be performed by it, only if the Company
shall have obtained the written consent of Elan.
5. Nominees for Beneficial Owners.
In the event that any Registrable Securities are held by a nominee for
the beneficial owner of the Registerable Securities, the beneficial owner may,
at its election in writing delivered to the Company, be treated as the holder of
the
9
<PAGE>
Registrable Securities for purposes of any request, consent, waiver or other
action by any holder or holders of Registrable Securities under this Agreement
or any determination of any number or percentage of shares of Registrable
Securities held by any holder or holders of Registrable Securities contemplated
by this Agreement. If the beneficial owner of any Registrable Securities so
elects, the Company may require assurances reasonably satisfactory to it of the
owner's beneficial ownership of the Registrable Securities.
6. Notices.
Any notices or other communications required or permitted under this
Agreement shall be sufficiently given if delivered personally, sent by
nationally recognized overnight delivery service or facsimile (receipt
confirmed) or mailed by first-class mail, postage prepaid, addressed as follows:
If to the Company:
Emisphere Technologies, Inc.
765 Old Saw Mill River Road
Tarrytown, New York 10591
Telephone: (914) 347-2220
Telecopy: (914) 327-2498
Attention: Michael M. Goldberg
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Telephone: (212) 373-3000
Telecopy: (212) 757-3990
Attention: John P. McEnroe, Esq.
and to:
H. Warren Browne, Esq.
25 Five Ponds Drive
Waccabuc, New York 10597
Telephone: (914) 763-5199
Facsimile: (914) 763-6321
If to Elan:
Elan International Management, Limited
102 St. James Court
Flatts, Smith's Parish
Bermuda FL04
Telephone: (441) 292-9169
Telecopy: (441) 292-2224
Attention: Chief Financial Officer
10
<PAGE>
with a copy to:
Cahill, Gordon & Reindel
Eighty Pine Street
New York, New York 10005-5420
Telephone: (212) 701-3000
Telecopy: (212) 269-5420
Attention: William M. Hartnett, Esq.
All notices shall be deemed to have been received (x) on the date
delivered, if delivered by facsimile or personally or (y) on the day after the
notice is delivered into the possession and control of a nationally recognized
overnight delivery service, duly marked for delivery to the receiving party. A
party may change the address to which notice or other communication under this
Agreement is to be delivered by giving the other party notice in the manner set
forth in this Section 6. If any notice, filing, delivery or payment shall be
required by the terms of this Agreement to be made on a day that is not a
Business Day, the notice, filing, delivery or payment shall be made on the
immediately succeeding Business Day.
7. Assignment.
This Agreement shall be binding upon and inure to the benefit of and
shall be enforceable by the parties to this Agreement and, with respect to the
Company, its respective successors and assigns and, with respect to Elan, any
holder of any Registrable Securities.
8. Holdback Agreements.
Notwithstanding anything in this Agreement to the contrary if (i) the
Company shall determine in good faith that it would be significantly
disadvantageous to the Company and its stockholders for the Shelf Registration
to be amended or supplemented and (ii) the need for an amendment or supplement
is not caused by a proposed public offering of any securities of the Company by
any of its security holders (other than an offering made under a registration on
Form S-8), the Company may defer amending or supplementing the Shelf
Registration for not more than 60 days and, upon appropriate notice to Elan,
Elan shall be required to discontinue disposition of any Registrable Securities
covered by the Shelf Registration during the period.
9. No Inconsistent Agreements.
The Company will not enter into any agreement with respect to its
securities which is inconsistent with the rights granted to Elan in this
Agreement.
10. Severability.
Each provision of this Agreement shall be considered separable and if
for any reason any provision which is not essential to the effectuation of the
basic
11
<PAGE>
purpose of this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired.
11. Entire Agreement.
This Agreement together with the Subscription Agreement constitute the
entire agreement between the Company and Elan with respect to the transactions
contemplated by those documents.
12. Section and Other Headings.
The section and other headings contained in this Agreement are for
reference purposes only and shall not be deemed to be a part of this Agreement
or to affect the meaning or interpretation of this Agreement.
13. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED
WITHIN THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF
CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED BY THEM.
14. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all counterparts shall together
constitute one and the same instrument.
12
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers each of whom is duly
authorized as of the date first above written.
EMISPHERE TECHNOLOGIES, INC.
By: /s/ Charles Abdalian
--------------------
Name: Charles Abdalian
Title: Chief Financial Officer
ELAN INTERNATIONAL SERVICES, LIMITED
By: /s/ Kevin Insley
----------------
Name: Kevin Insley
Title: President
[REGISTRATION RIGHTS AGREEMENT]
13
Elan International Services, Ltd.
102 St. James Court
Flatts, Smiths Parish
Bermuda FL 04
July 2, 1999
Emisphere Technologies, Inc.
15 Skyline Drive
Hawthorne, New York 10532
Attention: Michael M. Goldberg
Re: Heparin Financing
Ladies and Gentlemen:
Emisphere Technologies, Inc., a Delaware corporation ("Emisphere"),
has advised Elan International Services, Ltd., a Bermuda corporation ("EIS"),
that Emisphere intends to develop the current formulation of unfractionated oral
heparin USP which is expected to shortly enter Food and Drug Administration (the
"FDA") approved pivotal Phase III clinical trials (the "Current Heparin
Product"). Emisphere has requested that EIS commit to provide up to $15.0
million in term loans to finance the development of the Current Heparin Product.
In connection with the foregoing, EIS agrees to provide Emisphere up to $15.0
million (subject to reduction as set forth herein) in term loans to finance the
development of the Current Heparin Product on the terms and subject to the
conditions set forth in this letter agreement. This letter agreement and EIS's
commitment hereunder will terminate on the date (the "Termination Date") which
is the earlier of (i) October 31, 1999, if FDA approved pivotal Phase III
clinical trials have not commenced by such date, and (ii) March 25, 2000.
1. Definitive Agreements. This letter agreement sets forth only
certain basic and preliminary terms of the term loans and EIS's commitment
hereunder is subject to the preparation and execution of definitive agreements.
The preparation and execution by EIS of definitive agreements will be subject to
the approval by the board of directors of EIS, will take into account the
availability to Emisphere of third-party financing and will be subject to the
following conditions: (i) there shall not have occurred any change or event from
the date hereof (and EIS shall have become aware of no facts or conditions)
which could reasonably be expected to have a material adverse effect on the
rights or remedies of EIS as a lender, or on the ability of Emisphere to perform
its obligations to EIS under any such definitive agreements or which could have
a material adverse effect on the business, property, assets,
<PAGE>
operations (including all research and development activities, research and
development collaborations, licensing or other commercial activities), condition
(financial or otherwise), solvency, prospects or material agreements of
Emisphere and its subsidiaries, taken as a whole a "Material Adverse Effect";
(ii)EIS shall have completed and be satisfied with in their sole
discretion their business, legal, tax, accounting and environmental analysis and
due diligence review; and (iii)EIS shall be satisfied, in its sole
discretion, with the competitive environment for heparin products and
Emisphere's development program relating to the Current Heparin Product,
including, without limitation, the ability of Emisphere to submit an NDA for
heparin on a timely basis and the status of all clinical trials, including of
the likelihood of FDA approval of clinical trials and of ultimate FDA approval
of an NDA for such product.
2. Financing Terms; Availability. The term loans will accrue
interest until maturity at a rate of 10.0% per annum compounded semi-annually.
Interest will not be payable until maturity. The maturity of the term loans will
be four years from the initial drawdown date. Once repaid, term loans will not
be permitted to be reborrowed.
The full amount of the commitment will be available until the
Termination Date in up to three equal draws of up to $5.0 million; provided,
however, that the unfunded commitment will be reduced on a dollar-for-dollar
basis by the amount of (i) any alternative debt or equity financing obtained by
Emisphere and (ii) any revenues from a licensee or research and development
collaboration received by Emisphere. The amount of such reduction shall be
applied to the next available draw, with any excess applied to the following
draw.
3. Conditions.
The term loans will be subject to conditions customary for
transactions of this type, including, without limitation, substantially the
following:
(a) Officers' Certificate. On the effective date of the loan
agreement and each drawdown date, EIS shall have received certificates
dated such date signed by appropriate officers of Emisphere, stating that
all of the applicable conditions (disregarding any reference therein that
such condition be deemed satisfactory by EIS) have been satisfied or
waived as of such date.
(b) Opinions of Counsel. On the effective date and each drawdown
date, EIS shall have received an opinion or opinions addressed to EIS and
dated such date, each in form and substance satisfactory to EIS, from
counsel to Emisphere and local counsel to the applicable credit parties in
each jurisdiction in the United States in
2
<PAGE>
which collateral is located.
(c) Corporate Proceedings. On the effective date, all corporate and
legal proceedings and all instruments and agreements in connection with
the transactions contemplated by the loan agreement and any other related
documents shall be satisfactory in form and substance to EIS, and EIS
shall have received all information and copies of all certificates,
documents and papers, including records of corporate proceedings and
governmental approvals, if any, which EIS reasonably may have requested
from Emisphere or any of its affiliates in connection therewith, such
documents and papers where appropriate to be certified by proper corporate
or governmental authorities.
(d) Documents; Transaction. On the effective date, all terms thereof
and of all related documents shall be in form and substance satisfactory
to EIS, each of the conditions contained in such documents shall have been
satisfied or waived to the satisfaction of EIS, and Emisphere and each
other credit party shall have in all material respects done and performed
such acts and observed such covenants which each is required to do or
perform under such documents. On the effective date, Emisphere shall have
provided evidence satisfactory in form and substance to EIS that each
element of the transaction has been consummated and that each document has
been duly executed and is in full force and effect.
(e) Organizational Documentation, etc. On or prior to the effective
date, EIS shall have received copies of true and complete certified copies
of the organizational documents of each credit party, the provisions of
which shall be reasonably satisfactory to EIS.
(f) Solvency. On the effective date and each drawdown date, EIS
shall have received a solvency certificate, in each case in form and
substance satisfactory to EIS.
(g) Credit Documents. On or prior to the effective date, the loan
agreement and each other credit document shall (i) be in form and
substance satisfactory to EIS and (ii) have been duly authorized, executed
and delivered by each of the parties signatory thereto (other than EIS).
(h) Notes. On each drawdown date there shall have been delivered to
EIS a promissory note executed by Emisphere in the amounts and as
otherwise provided in the loan agreement.
(i) Certain Fees. On the effective date and each drawdown date all
costs, fees and expenses (including, without limitation, reasonable legal
fees and expenses) payable to EIS by Emisphere shall have been paid in
full and Emisphere shall have paid or have caused to be paid the fees and
expenses (including, without limitation, reasonable legal fees and
expenses) contemplated by the loan agreement and/or in connection with the
other documents.
<PAGE>
(j) Market Events. On the effective date and each drawdown date,
there shall not have occurred and be continuing (i)any suspension
or limitation of trading in securities generally on the New York Stock
Exchange (not including any suspension or limitation of trading in any
particular security as a result of computerized trading limits), or any
setting of minimum prices for trading on such exchange, (ii)any
banking moratorium declared by U.S. Federal or New York authorities or
(iii)any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency.
(k) Financial Statements, etc. Prior to the effective date, EIS
shall have received audited financial statements including a balance sheet
and statements of income and cash flow of Emisphere and its subsidiaries
for the most recently completed fiscal year and unaudited financial
statements for each subsequent fiscal quarter for which financial
statements are available. Prior to the effective date, Emisphere shall
have delivered to EIS financial projections, accompanied by a statement by
Emisphere that such projections are based on assumptions believed by it in
good faith to be reasonable as to the future financial performance of
Emisphere, reasonably satisfactory to EIS.
(l) Adverse Changes. On the effective date and each drawdown date,
nothing shall have occurred (and EIS shall not have become aware of any
facts or conditions not previously known) which EIS shall determine in its
sole discretion could have an adverse effect on the rights or remedies of
EIS or the ability of Emisphere to perform its obligations to EIS or which
could have a Material Adverse Effect.
(m) Consents, etc. On or prior to the effective date and on each
drawdown date, all material governmental and third party approvals and
consents (including, without limitation, all approvals and consents
required in connection with any environmental statutes, rules or
regulations), if any, (i) in connection with the transaction and the
documents and (ii) in connection with the conduct of the business of each
credit party or its respective subsidiaries at each drawdown date, shall
have been obtained and remain in effect. On the effective date and at each
drawdown date, there shall not exist any judgment, order, injunction or
other restraint issued or filed with respect to the making of the term
loans.
(n) Environmental Review. On or prior to the effective date and on
each drawdown date, there shall have been delivered to EIS an officers'
certificate of Emisphere with respect to certain environmental matters, in
form and substance satisfactory to EIS.
4
<PAGE>
(o) No Default; Representations and Warranties. On the effective
date and each drawdown date (at the time of the making of each term loan
and also after giving effect thereto) (i) there shall exist no default or
event of default and (ii) all representations and warranties contained in
the loan agreement or in the other credit documents shall be true and
correct with the same effect as though such representations and warranties
had been made on and as of the date of the making of such term loan,
unless such representation and warranty expressly indicates that it is
being made as of any other specific date in which case on and as of such
other date.
The term loans will also be subject to the following additional
conditions:
(i) The first draw will be available when 40% of patients for the
FDA approved pivotal Phase III clinical study have completed the study;
provided that EIS shall have the right to audit the study and that EIS
shall be satisfied in its sole discretion (x) from a design and compliance
standpoint, (y) that the drop out rate is in line with targets and (z)
with the adverse event profile.
(ii) The second draw will be available upon completion of the FDA
approved pivotal Phase III clinical study with full reports available;
provided that EIS shall have the right to audit the study and reports and
that EIS shall be satisfied in its sole discretion that the study has met
its target endpoints with clinical efficacy and an acceptable tolerance.
(iii) The third draw will be available when the NDA for the Current
Heparin Product has been filed with the FDA and the FDA has accepted the
filing; provided that EIS shall be satisfied in its sole discretion with
the likelihood of ultimate FDA approval of an NDA for the Current Heparin
Product.
4. Other Terms.
(a) Representation and Warranties. The loan agreement will contain
representations and warranties customary for transactions of this type.
(b) Covenants. The loan agreement will contain affirmative, negative
and financial covenants customary for transactions of this type.
(c) Royalties. EIS will receive a royalty on total heparin revenue
(post product approval) based on the number of draws funded. If one draw is
made, the future royalty will be [* * *]; if two draws are funded, the royalty
will be [* * *]; and if three draws are funded, the royalty will be [* * *].
(d) Tax Gross Up. If Emisphere is required by law to make any
deduction or withholding on account of taxes from any payment due under the loan
agreement or royalties, the amount payable will be increased to such amount
which, after deduction from such increased amount of all amounts required to be
deducted or withheld, will not be less than the
<PAGE>
amount otherwise due and payable.
(e) Prepayment. The term loans will not be prepayable prior to
maturity but will be subject to mandatory offers to prepay at the option of EIS
in the event of and to the extent of the amount of (i) any alternative debt or
equity financing obtained by Emisphere and (ii) any revenues from a licensee or
research and development partner received by Emisphere, in which case the
unfunded commitment will not be reduced as provided in paragraph 2 above to the
extent of any such repayment.
(f) Conversion. Each term loan would be convertible at any time at
the option of EIS into registered common equity of Emisphere at a conversion
price based on the weighted average closing sales price on the national
securities exchange on which the shares of common stock of Emisphere are listed
for one share of common stock of Emisphere for the 20 trading days prior to the
date of drawdown (for each respective drawdown) plus a premium of 25%.
(g) Events of Default; Remedies. Events of default will be customary
for transactions of this type. Upon any event of default, EIS would receive a
non-exclusive royalty-free license to all intellectual property rights
(including but not limited to patents and know-how rights) of Emisphere and its
affiliates relating to all heparin technology and products.
(h) Ranking; Security. All term loans will be senior secured debt of
Emisphere.
5. Access to Information. Emisphere will afford to the employees,
agents and authorized representatives of EIS reasonable access at reasonable
times during normal business hours, upon reasonable prior notice, to Emisphere's
properties, offices, files, agreements, books and records as may be necessary in
order that EIS may have a full opportunity to conduct such investigations and
due diligence reviews as they shall deem reasonably necessary in connection with
the preparation and execution of definitive documentation and the funding of
loans.
6. Confidentiality and Non-disclosure. From and after the date of
this letter agreement, neither EIS nor Emisphere (nor any affiliate or agent of
either) shall, except as required by applicable law or judicial or
administrative process, announce or disclose to any person or entity, publicly
or privately, this letter agreement or the substance of the transactions
contemplated hereby or the involvement of the parties with each other as
contemplated hereby, without the prior written consent of the other party;
provided, that even if required by applicable law or judicial or administrative
process, EIS shall have reasonable
6
<PAGE>
prior notice of and shall be afforded the ability to provide input with respect
to any such disclosure.
7. No Third Party Beneficiaries. This letter agreement may not be
relied by any third person or entity. EIS shall not be responsible or liable to
Emisphere or any other person for indirect or consequential damages which may be
alleged as result of this letter agreement.
8. Miscellaneous. This letter agreement (a) shall be governed by and
construed in accordance with the internal laws of the State of New York, without
regard to principles of conflicts of laws and, in connection therewith, each
party consents to the non-exclusive jurisdiction of any Federal or state court
sitting in the County, City and State of New York over any dispute arising from
this letter agreement; (b) shall not be assigned or delegated by Emisphere
without the prior written consent of EIS and, subject to the foregoing, shall be
binding upon the parties' respective successors and assigns; (c) may be executed
in counterparts and delivered by facsimile transmission; and (d) together with
any definitive agreements relating to the subject matter hereof executed and
delivered by the parties, constitutes the entire agreement among the parties and
supersedes all prior agreements or understandings among the parties.
<PAGE>
Please indicate your approval to the foregoing by signing a copy of
this letter agreement where indicated below.
Very truly yours,
ELAN INTERNATIONAL SERVICES, LTD.
By: /s/ Kevin Insley
----------------
Name: Kevin Insley
Title: President
Agreed to:
EMISPHERE TECHNOLOGIES, INC.
By: /s/ Charles Abdalian
--------------------
Name: Charles Abdalian
Title: Chief Financial Officer
8
Emisphere Contact:
Charles H. Abdalian, Jr.
Chief Financial Officer
(914) 785-4763
FOR IMMEDIATE RELEASE
- ---------------------
EMISPHERE TECHNOLOGIES, INC. ANNOUNCES RESTRUCTURING OF
RELATIONSHIP WITH ELAN CORPORATION FOR DEVELOPMENT AND
MARKETING OF ORAL HEPARIN
Tarrytown, NY, July 6, 1999 --- Emisphere Technologies, Inc. (Nasdaq: EMIS)
today announced it has agreed with Elan Corporation, plc (NYSE: ELN) to
restructure their 50-50 joint venture to develop and market oral forms of
heparin.
Under terms of the agreement, Emisphere will now fully own the technology and
marketing and product rights to the joint venture's entire family of oral
heparin products and assume complete responsibility for Phase III development
and funding of the product. As consideration for Elan's previous joint venture
investments in the form of loan stock and equity and certain intangible assets,
Emisphere has issued Elan a $20.0 million, zero coupon note. Elan will also
receive future royalties based on product sales, subject to an annual cap. The
note accrues interest at 15.0% per year and has a term of 7 years. Elan has
agreed to subscribe for Emisphere's common stock upon repayment of the note.
Elan has also committed to provide Emisphere with up to $15 million in financial
support for Phase III clinical trials of oral heparin. The provision by Elan of
these loans is subject to Emisphere attaining certain Phase III clinical
milestones, results of due diligence satisfactory to Elan (in its sole
discretion), Elan's board approval, and other conditions.
Because of the above transaction, Emisphere will take a charge of approximately
$11.0 million for in-process research and development in its fourth fiscal
quarter ending July 31, 1999. The joint venture will be concluded and Emisphere
will receive cash payments of approximately $6.0 million owed for past services.
Michael M. Goldberg, M.D., Chairman and Chief Executive Officer of Emisphere,
stated, "This new structure is intended to allow for rapid clinical development
and commercialization to maximize our short-term and long-term business
strategy. The opportunities and indications for oral heparin have expanded
beyond our original assumptions. Therefore, the two companies agreed to
restructure the existing joint venture arrangement in order to fully capitalize
on these additional indications and to maximize the oral heparin opportunity by
rapidly penetrating its existing and expanding market."
- more -
<PAGE>
"With the significant growth of heparin and low molecular weight heparin in the
marketplace over the past three years, we feel that our ability to positively
impact the lives of millions of patients can best be realized by the broad
clinical development of our family of oral heparin products. We have initiated
discussions with several potential marketing partners who meet these objectives.
We will self-fund Phase III clinical trials for oral heparin until such
partnership is formed."
The Emisphere/Elan joint venture was formed in 1996 to develop and commercialize
oral formulations of heparin. Emisphere and Elan announced on January 20, 1999
that the results of the Phase II oral heparin study indicated the oral heparin
formulations were comparable to injectable heparin in the prevention of deep
venous thrombosis. The results will be presented by Scott Berkowitz, M.D,
Assistant Professor of Medicine and Pathology Duke University Medical Center, at
the Congress of the International Society on Thrombosis and Hemostasis on August
19th in Washington, D.C. Initiation of Phase III clinical trials is subject to
FDA clearance. An end of Phase II/ Phase III FDA meeting has been recently
requested.
Emisphere Technologies, Inc. is a biopharmaceutical company focused on the
discovery and application of proprietary synthetic chemical compounds that
enable the oral delivery of therapeutic macromolecules and other compounds that
are not currently deliverable by oral means. Emisphere has strategic alliances
with Eli Lilly & Co. and Norvartis Pharma AG to develop oral formulations of
several therapeutic proteins. Further information about Emisphere can be found
at www.emisphere.com
The statements in this release relating to matters that are not historical facts
are forward-looking statements that involve risks and uncertainties, including,
but not limited to, the ability of Emisphere and/or its partners to develop,
manufacture and commercialize products using the Company's drug delivery
technology, Emisphere's ability to fund such efforts with or without partners,
its ability to access the Elan loans which are subject to significant
conditions, many of which are at Elan's discretion, and other risks and
uncertainties detailed in the Company's Securities and Exchange Commission
filings.
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