Document:

Exhibit 10.38

SECURITY PURCHASE AGREEMENT

                    THIS SECURITY PURCHASE AGREEMENT (the “Agreement”), dated as of December 27, 2004, is made and entered into by and between Elan International Services, Ltd., a Bermuda exempted company limited by shares (the “Seller”), and Emisphere Technologies, Inc., a Delaware corporation (the “Purchaser”).

                    WHEREAS, the Seller is the owner of a certain security identified on Schedule A hereto (the “Security”);

                    WHEREAS, the Seller desires to sell to the Purchaser and the Purchaser desires to purchase from the Seller the Security.

                    NOW, THEREFORE, in consideration of the premises and of the respective representations, warranties, covenants, agreements and conditions contained herein, the Purchaser and the Seller agree as follows:

                    1.  Definitions.  As used in this Agreement, the following terms shall have the meanings set forth below:

                    “Closing Date” means the First Closing Date, the Second Closing, the Third Closing Date or the Accelerated Closing Date, as those terms are defined in Section 2 hereof.

                    “Common Stock” means the common stock, $.01 par value, of the Purchaser traded on the Nasdaq National Market.

                    “Security” has the meaning set forth in the recitals hereto.

                    “Payment A” means the first of the three payments from the Purchaser to the Seller, to occur at the First Closing, consisting of $13,000,000 in cash and the issuance of 600,000 shares of Common Stock registered in the name of the Seller.

                    “Payment B” means the second of three payments from the Purchaser to the Seller, to occur at the Second Closing, consisting of $7,000,000 in cash and 323,077 shares of Common Stock registered in the name of the Seller.

                    “Payment C” means the third of three payments from the Purchaser to the Seller, to occur at the Third Closing, consisting of $6,000,000 in cash and 276,923 shares of Common Stock registered in the name of the Seller.

                    “Purchase Price” means, subject to Section 2(c) hereof, $26,000,000 and 1,200,000 shares of Common Stock, consisting of Payment A, Payment B, and Payment C.

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                    “Restricted Trading” means establishing or maintaining a short position with respect to shares of Common Stock or executing a derivative transaction that would  be the equivalent of establishing or maintaining a short position with respect to shares of Common Stock, in any accounts directly or indirectly managed by the transferee or any affiliate of the transferee, provided, however, that nothing herein contained shall prohibit any such transferee or affiliate from selling, or establishing or maintaining a short position with respect to, any long position of such transferee or affiliate in shares of Common Stock.    

                    “SEC” means the United States Securities and Exchange Commission.

                    “Securities Act” means the United States Securities Act of 1933, as amended, and the rules and regulations in effect from time to time thereunder.

                    “Value of Payment A” means the sum of $13,000,000 and the product of 600,000 and the closing share price of the Common Stock two trading days prior to the First Closing Date.

                    “Value of Payment B” means the sum of $7,000,000 and the product of 323,077 and the VWAP.

                    “VWAP” means the volume weighted average price (the aggregate sales price of all trades of Common Stock divided by the total number of shares of Common Stock traded) for the period of twenty (20) consecutive trading days ending on the trading day immediately preceding the relevant Closing Date, as reported by Bloomberg, L.P., using the AQR function or, if such reporting service does not then exist, any reasonably comparable reporting service.

                    2.  Purchase and Sale of the Security; Closing.  The Purchaser and the Seller agree as follows:

	
   
  	
  
          (a)          Purchase and Sale of the Security.  On the basis   of the representations and warranties, and subject to the terms and   conditions, set forth herein, (i) the Seller agrees to sell to the   Purchaser a portion of the Security on each of two or three separate dates, and (ii) the Purchaser   agrees to purchase from the Seller a portion of the Security on each of three separate dates, in each case   as set forth in Section 2(b) below or, alternatively, on each of two separate   dates as set forth in Section   2(c) below.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (b)          Closings.  The first closing (the “First Closing”)   of the purchase and sale of the Security shall take place at 10:00 a.m., New   York City time, on December 27, 2004 (the “First   Closing Date”) at the offices of Cahill Gordon & Reindel LLP,   80 Pine Street, New York, New York 10005, or at such other place as the   parties hereto shall mutually agree.    At the First Closing, (i) the Seller shall deliver to the   Purchaser
  

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the   note representing the Security   and such other appropriate instruments of transfer and assignment, as the Purchaser shall reasonably request   prior to the First Closing Date, in order to transfer the Value of   Payment A from the face amount of the Security, and (ii) the   Purchaser shall deliver,   or cause to be delivered to or as directed by the Seller, Payment A and   a new note (the “First Adjusted Note”) identical to the original note except (x) the issue   price thereof shall be $29,246,302, representing (A) the sum of the original   issue price ($20,000,000)   plus accreted interest thereon through the First Closing Date, less (B) the   Value of Payment A as set forth on Schedule C, and (y) the First   Adjusted Note shall be assignable by the Seller without the prior written consent of the Purchaser at any time (1) on or after the First Closing   and prior to April 30, 2005, subject to the Seller obtaining
from the   transferee, for the benefit of the Purchaser, such transferee’s written   agreement that neither it nor its affiliates (as that term is defined in SEC Rule 12b-2)   shall engage in Restricted Trading, or (2) on or after May 1, 2005, without   having to first obtain such agreement regarding Restricted Trading; provided, however,   that in either case, such transferee agrees in writing   to be bound by the terms   of this Agreement.  The second closing   (the “Second Closing”) of the purchase and sale of the Security shall take   place at 10:00 a.m., New York City time, on April 29, 2005 (the “Second Closing Date”) at the offices of Cahill Gordon & Reindel LLP, 80 Pine Street, New   York, New York 10005, or at such other place as the parties hereto shall   mutually agree.  At the Second   Closing, (i) the Seller shall deliver to the Purchaser the First   Adjusted Note and such other appropriate instruments of transfer and
assignment, as the Purchaser   shall reasonably request prior to the Second Closing Date, in order to   transfer the Value of Payment B from the face amount of the First   Adjusted Note, and (ii) the Purchaser shall deliver, or cause to be   delivered to or as   directed by the Seller, Payment B and a new note (the “Second Adjusted Note”) identical to the First Adjusted Note except (x) the   issue price thereof shall be calculated as (A) the sum of the issue price of   the First Adjusted Note plus accreted   interest thereon through   April 29, 2005, less (B) the Value of Payment B as will be set forth on   Schedule D, and (y) the Second Adjusted Note shall be assignable by the   Seller without the prior written consent of the Purchaser at any time on or   after April 30, 2005,   provided such transferee   agrees in writing to be bound by the terms of this Agreement.  The third closing (the “Third Closing”)   of the purchase and sale of
the Security shall take place at 10:00 a.m., New   York City time, on June 30, 2005 (the “Third Closing Date”) at the offices of Cahill Gordon & Reindel LLP,   80 Pine Street, New York, New York 10005, or at such other place as the   parties hereto shall mutually   agree.  At the Third Closing,   (i) the Seller shall deliver to the Purchaser the Second Adjusted Note and such other   appropriate instruments of transfer and assignment, as the Purchaser shall   reasonably request prior to the Third Closing Date and (ii) the   Purchaser shall deliver, or cause to be delivered to or as directed by the   Seller, Payment C.
  

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          (c)          Notwithstanding   anything to the contrary in this Agreement, at the Purchaser’s election, upon not less than two business   days’ prior written notice to the Seller, the Second Closing and the Third   Closing shall take place   on a single date on or prior to March 31, 2005 (the “Accelerated Closing”, and the date of the Accelerated Closing, the “Accelerated Closing Date”).  If the   Accelerated Closing shall occur, then, notwithstanding anything to the   contrary in this   Agreement, at such Accelerated Closing, in lieu of the aggregate 600,000   shares of Common Stock otherwise required to be delivered to Seller in   respect of Payment B and Payment C, Purchaser shall issue to Seller a warrant   (the “Warrant”) to purchase up to   600,000 shares of Common Stock at an exercise
price per share equal to the   VWAP.  The Warrant shall be in the   form of Exhibit A hereto.
  

                    3.  Conditions to the Purchaser’s Obligation.  The obligation of the Purchaser to purchase and pay for the Security is subject to the satisfaction (or waiver by Purchaser) of the following conditions as of the Closing Date:

	
   
  	
  
          (a)          the   representations and warranties of the Seller made in this Agreement shall be   true and correct in all   respects, as of the date hereof and as of each of the Closing Dates as though   then made;
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (b)          the   Seller shall have delivered to the Purchaser the documents or instruments contemplated by   Section 2(b) above.
  

                    4.  Conditions to the Seller’s Obligation.  The obligation of the Seller to sell and deliver the Security to the Purchaser is subject to the satisfaction (or waiver by the Seller) of the following conditions as of each of the Closing Dates:

	
  
 
  	
  
          (a)          the   representations and warranties of the Purchaser made in this Agreement shall   be true and correct in all respects, as of the date hereof and as of each of   such Closing Date as though then made; and
  
	
   
  	
  
 
  
	
  
 
  	
  
          (b)          the   Purchaser shall have   delivered to the Seller the Purchase Price due on such Closing Date and, on   the First Closing Date and the Second Closing Date, a new note representing   the Security as contemplated by Section   2(b) above.
  

                    5.  Representations, Warranties and Covenants of the Purchaser.  The Purchaser represents and warrants to the Seller that:

	
  
 
  	
  
          (a)          The   Purchaser has all requisite power and authority to enter into and perform   this Agreement and to consummate the transactions contemplated hereby.    The Purchaser has duly and validly authorized, executed and delivered   this Agreement.
  

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          (b)          This   Agreement constitutes a valid and binding agreement of the Purchaser, enforceable against the   Purchaser in accordance   with its terms, except as enforceability may be limited by   (i) applicable bankruptcy, insolvency, reorganization, moratorium,   fraudulent conveyance or other similar laws relating to or affecting   creditors’ rights generally and (ii) general principles of equity (regardless of whether such   enforceability is considered   in a proceeding in equity or at law).
  
	
   
  	
  
 
  
	
  
 
  	
  
          (c)          The   Security being acquired by the Purchaser hereunder is being acquired for the   Purchaser’s own account   and not with the view to,   or for resale in connection with, any distribution in violation of applicable   securities   laws.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (d)          The   Purchaser acknowledges that neither the offer nor sale of the Security has been registered under   the Securities Act or any   state or foreign securities or “blue sky” laws and that the sale of the   Security is being made pursuant to an exemption   from registration under the Securities Act.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (e)          There   are no lock-ups or other restrictions of   any kind on the transferability of the Common Stock component of the Purchase Price; provided, however, that   (i) the Common Stock shall not be transferred by the Seller other than in   compliance with the Securities Act and the rules of the Securities and Exchange Commission thereunder;   and (ii) if at the close of any trading day, the Common Stock has decreased by 2% from its prior   day’s close, the Seller agrees not to sell in the following trading day,   without the Purchaser’s reasonable consent, a number of shares of Common Stock greater than 50% of the   average daily volume of the Common Stock (calculated on a trailing three   month basis).
  
	
   
  	
  
 
  
	
  
 
  	
  
          (f)          Schedule   B sets forth the number of shares authorized, issued and outstanding and issued and held in the treasury for each   class or series of capital stock (whether voting or non-voting) of the   Purchaser.  No other shares of the   Purchaser are outstanding.  All of   such issued and outstanding shares are validly issued, fully paid and   nonassessable and free of   preemptive rights.  Except as set   forth on Schedule B, the Purchaser is not a party to any agreement or   understanding, oral or written, which (a) grants an option, warrant or   other right to acquire shares of capital stock of the Purchaser or any other equitable interest in   the Purchaser, (b) grants a right of first refusal or other such similar right upon the sale of   capital stock of the Purchaser, or (c) restricts or affects the
voting   rights of capital stock of the Purchaser.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (g)          The   Common Stock being issued pursuant to this Agreement is or will be on the   Second Closing Date and Third Closing Date duly authorized by all necessary   corporate action on the part of the Purchaser, and when issued delivered and   paid for in accordance   with the terms of this Agreement will be validly issued, fully paid and   nonassessable, and free and clear of all mortgages, liens, pledges, charges,   claims, security interests, agreements,   encumbrances and preemptive rights.
  

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          (h)          No   consent, approval, qualification, order or authorization of, or filing with,   any local, state or federal governmental authority is required for the   consummation   by the Purchaser of the transactions contemplated hereby.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (i)          As   of the date hereof, the Purchaser has no indebtedness which ranks senior in   priority to the notes to be issued pursuant to this Agreement. The Purchaser   has no indebtedness for borrowed money except for unsecured indebtedness to   Novartis as described in   the 8-K filed by the Purchaser with the Securities and Exchange Commission on December 7, 2004 and   capital lease obligations for equipment used in the business of the   Purchaser.  The Purchaser has no   secured indebtedness other than with respect   to capital lease obligations for equipment used in the business of the Purchaser.
  

                    6.  Representations and Warranties of the Seller.  The Seller represents and warrants to the Purchaser that:

	
  
 
  	
  
          (a)          The   Seller has all requisite   corporate power and authority to enter into and perform this Agreement and to   consummate the transactions contemplated hereby.  The Seller has duly and validly authorized, executed and   delivered this Agreement.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (b)          This   Agreement constitutes a valid and binding agreement of the Seller,   enforceable against the Seller in accordance with its terms, except as   enforceability may be limited by (i) applicable bankruptcy, insolvency,   reorganization, moratorium, fraudulent   conveyance or other similar laws relating to or affecting creditors’ rights   generally and (ii) general principles of equity (regardless of whether   such enforceability is considered in a proceeding   in equity or at law).
  
	
  
 
  	
  
 
  
	
  
 
  	
  
          (c)          Assuming the accuracy of   representations and warranties by Purchaser, no consent, approval,   qualification, order or authorization of, or filing with, any local, state or   federal governmental authority is required for the consummation by the Seller   of the transactions contemplated hereby.
  
	
   
  	
  
 
  
	
  
 
  	
  
          (d)          The   Seller has good and marketable title to the Security that it is transferring hereunder, free and   clear of any liens, claims, encumbrances, charges or restrictions of any kind   (collectively, “Liens”).  Upon consummation of the transactions contemplated hereby, the   Purchaser will have acquired good and marketable title in and to the   Security, free and clear of any Liens.
  

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                    7.  Deferred Closings.  Notwithstanding anything to the contrary contained in this Agreement, (a) the Purchaser may defer the Second Closing and/or the Third Closing to a date not later than September 30, 2005; (b) if the Purchaser defers the Second Closing to a date later than the Second Closing Date, the Purchaser shall pay to the Seller on the first business day of each month following the Second Closing Date and prior to the date upon which the Second Closing actually occurs or the date the First Adjusted Note is paid in full, whichever is earlier, the sum of $250,000, and shall issue a new note (the “First Re-Adjusted Note”) to the Seller in exchange for the First Adjusted Note, which First Re-Adjusted Note shall be identical to the First Adjusted Note except the amount of the original issue price of the
First Re-Adjusted Note shall be an amount equal to the original issue price of the First Adjusted Note plus the product of 600,000 and the closing share price of the Common Stock two trading days prior to the First Closing Date; and (c) if the Purchaser defers the Third Closing to a date later than the Third Closing Date, the Purchaser shall pay to the Seller on the first business day of each month following the Third Closing Date and prior to the date upon which the Third Closing actually occurs or the date the Second Adjusted Note is paid in full, whichever is earlier, the sum of $250,000, without, however, duplication of any amount payable pursuant to the preceding clause (b) and, if the Second Closing has previously occurred, issue a new note (the “Second Re-Adjusted Note”) to the Seller in exchange for the Second Adjusted Note, which Second Re-Adjusted Note shall be identical to the Second Adjusted Note except the amount of the original issue price of the Second Re-Adjusted Note
shall be an amount equal to the original issue price of the Second Adjusted Note plus the product of 600,000 and the closing share price of the Common Stock two trading days prior to the First Closing Date.  If the Second Closing and/or the Third Closing do not occur prior to September 30, 2005, then, the Seller shall have no further obligations to the Purchaser under this Agreement, and the Purchaser shall have no further obligations to the Seller under this Agreement except the obligation to pay to the Seller the amounts provided for in the preceding clause (b) or (c), as the case may be (i.e., if the Purchaser desires to pay in full the First Re-Adjusted Note or the Second Re-Adjusted Note, as the case may be, on or after October 1, 2005, the amount payable would be the original issue price of the First Re-Adjusted Note or the Second Re-Adjusted Note, as the case may be, plus accreted interest thereon through the date of payment of such First Re-Adjusted Note or the Second Re-Adjusted Note, as
the case may be).  If the Purchaser shall fail to pay the amounts provided for in the preceding clause (b) or (c), as and when due, the deferral of the First Closing and/or the Second Closing, as the case may be, shall not be deemed to be authorized under this Agreement, and the failure of the Purchaser to complete the transactions contemplated to be completed at the First Closing and/or the Second Closing, as the case may be, shall be deemed a breach of this Agreement. 

                    8.  Applicable Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAWS.  

                    9.  Invalidity of Provisions.  The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction.

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                    10.  Survival of Representations and Warranties.  The representations and warranties contained herein shall survive the Closing or any termination of this Agreement.

                    11.  Headings; Execution in Counterparts.  The headings and captions contained herein are for convenience of reference only and shall not control or affect the meaning or construction of any provision hereof.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original and which together shall constitute but one and the same instrument.

                    12.  Notices.  All notices and other communications relating to this Agreement shall be dated and in writing and shall be deemed to have been duly given when delivered, if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, and when received if delivered otherwise, to the party to whom it is directed;

	
  
 
  	
  
(a)
  	
  
If   to the Seller, to the Seller at the following address:
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
Elan   International Services, Ltd.
  
	
  
 
  	
  
 
  	
  
102   St. James Court 
  
	
  
 
  	
  
 
  	
  
Flatts,   Smith’s Parish 
  
	
  
 
  	
  
 
  	
  
Bermuda  FL04
  
	
   
  	
  
 
  	
  
Attn:  President
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
Fax:  (441) 292-9169
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
with   a copy to:
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
Cahill   Gordon & Reindel llp
  
	
  
 
  	
  
 
  	
  
80   Pine Street
  
	
   
  	
  
 
  	
  
New   York, NY  10005
  
	
  
 
  	
  
 
  	
  
Attn:  Christopher T. Cox, Esq.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
(b)
  	
  
If   to the Purchaser, to the Purchaser at the following address:
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
Emisphere   Technologies, Inc.
  
	
  
 
  	
  
 
  	
  
765   Old Saw Mill River Road
  
	
  
 
  	
  
 
  	
  
Tarrytown,   New York  10591
  
	
   
  	
  
 
  	
  
Attn:  Michael M. Goldberg, M.D.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
Fax:  (914)   347-2498
  

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with   a copy to:
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
 
  	
  
Proskauer   Rose LLP
  
	
   
  	
  
 
  	
  
1585   Broadway
  
	
  
 
  	
  
 
  	
  
New   York, NY  10036
  
	
  
 
  	
  
 
  	
  
Attn:  Robert Cantone, Esq.
  

                    13.  Integration.  The parties agree that this Agreement contains the entire understanding between the parties hereto relating to the subject matter hereof.

                    14.  Third Party Beneficiaries.  Nothing expressed or implied in this Agreement is intended or shall be construed to confer upon or give to any third party any rights or remedies against any party hereto.

                    15.  Further Assurances.  Each of the parties hereto covenants and agrees upon the request of the other, to do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered all such further acts, deeds, documents, assignments, transfers, conveyances, powers of attorney and assurances as may be reasonably necessary or desirable to give full effect to this Agreement.

                                                                                [Signature Page Follows]

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                    IN WITNESS WHEREOF, the Purchaser and the Seller have executed this Agreement as of the date first above written.

	
  
 
  	
  
ELAN INTERNATIONAL SERVICES, LTD.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
By:
  	
  
/s/   KEVIN INSLEY
  
	
  
 
  	
  
 
  	
  

  
	
  
 
  	
  
Name:
  	
  
Kevin   Insley
  
	
   
  	
  
Title:
  	
  
President
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
EMISPHERE TECHNOLOGIES,   INC.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
By:
  	
  
/s/   ELLIOT MAZA
  
	
  
 
  	
  
 
  	
  

  
	
  
 
  	
  
Name:
  	
  
Elliot   Maza
  
	
  
 
  	
  
Title:
  	
  
Chief   Financial Officer
  

Exhibit 10.38

Schedule A

	
  
 
  	
  
$55,048,881   Emisphere Technologies, Inc. Zero Coupon Note due 2006 (Issue Price:  $363.313 for each $1,000 of principal   amount at maturity)
  

Exhibit 10.38

Schedule B

1)     (a)  Authorized capital stock of the Purchaser:    41,000,000 shares of Common Stock and 1,000,000 shares of preferred stock.  

        (b)  Issued shares of the Purchaser :  18,696,945 shares of Common Stock.

        (c)  Outstanding shares of the Purchaser:  18,453,345 shares of Common Stock.   243,600 shares of Common Stock of the Company are held in treasury. 

	
  2)
  	
  
Plan
  	
  
 
  	
  
Options Outstanding
  	
  
 
  
	
  
 
  	
  

  	
  
 
  	
  

  	
  
 
  
	
  
 
  	
  
a)     1995   NQ Stock Option Plan
  	
  
 
  	
  
2,459,200
  	
  
 
  
	
  
 
  	
  
b)     1991   Stock Option Plan
  	
  
 
  	
  
1,101,089
  	
  
 
  
	
  
 
  	
  
c)     2000   Stock Option Plan
  	
  
 
  	
  
1,198,922
  	
  
 
  
	
   
  	
  
d)     Outside   Directors Plan
  	
  
 
  	
  
352,000
  	
  
 
  
	
  
 
  	
  
e)     Non-Plan
  	
  
 
  	
  
332,279
  	
  
 
  
	
  
 
  	
  
f)     2002   Broadbased Plan
  	
  
 
  	
  
113,757
  	
  
 
  
	
  
 
  	
  
 
  	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
Total
  	
  
 
  	
  
5,547,247
  	
  
 
  

3)     Agreement between the Purchaser and Kingsbridge Capital Limited, dated as of the date hereof, whereby the Purchaser is issuing a warrant to purchase shares of Common Stock at an exercise price equal to $3.8111.

Exhibit 10.38

Schedule C

Value of Payment A

	
  
Cash:
  	
  
$
  	
  
13,000,000
  	
  
 
  	
  
 
  
	
  
Stock:
  	
  
 
  	
  
1,980,000
  	
  
 
  	
  
(i.e.,   600,000 shares multiplied by the closing share price of the Common Stock two   trading days prior to the First Closing Date)
  
	
   
  	
   
  	
   
 	
   
  	
   
  
	
  Total:
  	
  $
  	
  14,980,000
  	
   
  	
   
  

Schedule D

EXHIBIT A

WARRANT

THE SECURITIES EVIDENCED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS.  NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.  

[Date]

Warrant to Purchase up to 600,000 shares of Common Stock of Emisphere Technologies, Inc. (the “Company”).

In partial consideration for the sale by Elan International Services, Ltd. (the “Seller”) of a certain security pursuant to that certain Security Purchase Agreement, dated as of the December 27, 2004, between the Seller and the Company (the “Agreement”), the Company hereby agrees that the Seller or any other Warrant Holder (as defined below) is entitled, on the terms and conditions set forth below, to purchase from the Company at any time during the Exercise Period (as defined below) up to 600,000 fully paid and nonassessable shares of common stock, par value $.01 per share, of the Company (the “Common Stock”) at the Exercise Price (hereinafter defined), as the same may be adjusted from time to time pursuant to Section 6.1 hereof.  [The resale of the shares of Common Stock or other securities issuable upon exercise or exchange of this Warrant is subject to the provisions of the Registration Rights Agreement
(as defined in the Agreement).]

                    Section 1.          Definitions.

                    “Affiliate” shall mean any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by, or is under direct or indirect common control with any other Person.  For the purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the term “controls” and “controlled” have meanings correlative to the foregoing.

                    “Closing Price” shall mean the closing price per share of the Company’s Common Stock as reported by Bloomberg L.P.

                    “Exercise Period” shall mean that period beginning six months after the date of this Warrant and continuing until the expiration of the five-year period thereafter.

                    “Exercise Price” as of the date hereof shall mean [volume weighted average price (the aggregate sales price of all trades of Common Stock divided by the total number of shares of Common Stock traded) for the period of twenty (20) consecutive trading days ending on the trading day immediately preceding the date of issuance of this Warrant, as reported by Bloomberg, L.P., using the AQR function or, if such reporting service does not then exist, any reasonably comparable reporting service].

                    “Person” shall mean an individual, a corporation, a partnership, a limited liability company, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

                    “Principal Market” shall mean the Nasdaq National Market, the Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock.

                    “SEC” shall mean the United States Securities and Exchange Commission.

                    “Trading Day” shall mean any day other than a Saturday or a Sunday on which the Principal Market is open for trading in equity securities.

                    “Warrant Holder” shall mean the Seller or any permitted assignee or permitted transferee of all or any portion of this Warrant.

                    “Warrant Shares” shall mean those shares of Common Stock received upon exercise of this Warrant.

                    Section 2.          Exercise.

                                (a)  Method of Exercise.  This Warrant may be exercised in whole or in part (but not as to a fractional share of Common Stock), at any time and from time to time during the Exercise Period, by the Warrant Holder by (i) surrender of this Warrant, with the form of exercise attached hereto as Exhibit A completed and duly executed by the Warrant Holder (the “Exercise Notice”), to the Company at the address set forth in Section 10.04 of the Agreement, accompanied by payment of the Exercise Price multiplied by the number of shares of Common Stock for which this Warrant is being exercised (the “Aggregate Exercise Price”) or (ii) telecopying an executed and completed Exercise Notice to the Company and delivering to the Company within
five (5) business days thereafter the original Exercise Notice, this Warrant and the Aggregate Exercise Price.  Each date on which an Exercise Notice is received by the Company in accordance with clause (i) and each date on which the Exercise Notice is telecopied to the Company in accordance with clause (ii) above shall be deemed an “Exercise Date.”

                                (b)  Payment of Aggregate Exercise Price.  Subject to paragraph (c) below, payment of the Aggregate Exercise Price shall be made by wire transfer of immediately available funds to an account designated by the Company.  If the amount of the payment received by the Company is less than the Aggregate Exercise Price, the Warrant Holder will be notified of the deficiency and shall make payment in that amount within three (3) Trading Days.  In the event the payment exceeds the Aggregate Exercise Price, the Company will refund the excess to the Warrant Holder within five (5) Trading Days of receipt.

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                                (c)  Cashless Exercise.  In the event that the Warrant Shares to be received by the Warrant Holder upon exercise of the Warrant may not be resold pursuant to an effective registration statement or an exemption to the registration requirements of the Securities Act of 1933, as amended, and applicable state laws, the Warrant Holder may, as an alternative to payment of the Aggregate Exercise Price upon exercise in accordance with paragraph (b) above, elect to effect a cashless exercise by so indicating on the Exercise Notice and including a calculation of the number of shares of Common Stock to be issued upon such exercise in accordance with the terms hereof (a “Cashless Exercise”).  If a registration statement on Form S-1 under the
Securities Act of 1933, as amended, or such other form as deemed appropriate by counsel to the Company for the registration for the resale by the Warrant Holder of (x) the shares of Common Stock of the Company that may be purchased under the Agreement, (y) the Warrant Shares, or (z) any securities issued or issuable with respect to any of the foregoing by way of exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise, has been declared effective by the SEC and remains effective, the Company may permit or require the Warrant Holder elect to effect a Cashless Exercise.  In the event of a Cashless Exercise, the Warrant Holder shall receive that number of shares of Common Stock determined by (i) multiplying the number of Warrant Shares for which this Warrant is being exercised by the Per Share Warrant Value and (ii) dividing the product by the Closing Price on the Trading Day immediately
preceding the Exercise Date, rounded to the nearest whole share.  The Company shall cancel the total number of Warrant Shares equal to the excess of the number of the Warrant Shares for which this Warrant is being exercised over the number of Warrant Shares to be received by the Warrant Holder pursuant to such Cashless Exercise.

                                (d)  Replacement Warrant.  In the event that the Warrant is not exercised in full, the number of Warrant Shares shall be reduced by the number of such Warrant Shares for which this Warrant is exercised, and the Company, at its expense, shall forthwith issue and deliver to or upon the order of the Warrant Holder a new Warrant of like tenor in the name of the Warrant Holder, reflecting such adjusted number of Warrant Shares.

                    Section 4.          Delivery of Warrant Shares.

                    (a)          Subject to the terms and conditions of this Warrant, as soon as practicable after the exercise of this Warrant in full or in part, and in any event within ten (10) Trading Days thereafter, the Company at its expense (including, without limitation, the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Warrant Holder, or as the Warrant Holder may lawfully direct, a certificate or certificates for, or make deposit with the Depositary Trust Company via book-entry of, the number of validly issued, fully paid and non-assessable Warrant Shares to which the Warrant Holder shall be entitled on such exercise, together with any other stock or other securities or property (including cash, where applicable) to which the Warrant Holder is
entitled upon such exercise in accordance with the provisions hereof.

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                    (b)     This Warrant may not be exercised as to fractional shares of Common Stock.  In the event that the exercise of this Warrant, in full or in part, would result in the issuance of any fractional share of Common Stock, then in such event the Warrant Holder shall receive the number of shares rounded to the nearest whole share.

                    Section 5.          Representations, Warranties and Covenants of the Company.

                    (a)          The Warrant Shares, when issued in accordance with the terms hereof, will be duly authorized and, when paid for or issued in accordance with the terms hereof, shall be validly issued, fully paid and non-assessable.

                    (b)          The Company shall take all commercially reasonable action and proceedings as may be required and permitted by applicable law, rule and regulation for the legal and valid issuance of this Warrant and the Warrant Shares to the Warrant Holder.

                    (c)          The Company has authorized and reserved for issuance to the Warrant Holder the requisite number of shares of Common Stock to be issued pursuant to this Warrant.  The Company shall at all times reserve and keep available, solely for issuance and delivery as Warrant Shares hereunder, such shares of Common Stock as shall from time to time be issuable as Warrant Shares.

                    (d)          From the date hereof through the last date on which this Warrant is exercisable, the Company shall take all steps commercially reasonable to ensure that the Common Stock remains listed or quoted on the Principal Market.

                    Section 6.1.          Adjustment of the Exercise Price.  The Exercise Price and, accordingly, the number of Warrant Shares issuable upon exercise of the Warrant, shall be subject to adjustment from time to time upon the happening of certain events as follows:

                    (a)          Reclassification, Consolidation, Merger, Mandatory Share Exchange, Sale or Transfer.  

                    (i)          Upon occurrence of any of the events specified in subsection (a)(ii) below (the “Adjustment Events”) while this Warrant is unexpired and not exercised in full, the Warrant Holder may in its sole discretion require the Company, or any successor or purchasing corporation, as the case may be, without payment of any additional consideration therefor, to execute and deliver to the Warrant Holder a new Warrant providing that the Warrant Holder shall have the right to exercise such new Warrant (upon terms not less favorable to the Warrant Holder than those then applicable to this Warrant) and to receive upon such exercise, in lieu of each share of Common Stock theretofore issuable upon exercise of this Warrant, the kind and amount of shares of stock, other securities, money
or property receivable upon such Adjustment Event by the holder of one share of Common Stock issuable upon exercise of this Warrant had this Warrant been exercised immediately prior to such Adjustment Event.  Such new Warrant shall provide for adjustments that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 6.1. 

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                    (ii)         The Adjustment Events shall be (1) any reclassification or change of Common Stock (other than a change in par value, as a result of a subdivision or combination of Common Stock or in connection with an Excluded Merger or Sale), (2) any consolidation, merger or mandatory share exchange of the Company with or into another corporation (other than a merger or mandatory share exchange with another corporation in which the Company is a continuing corporation and which does not result in any reclassification or change other than a change in par value or as a result of a subdivision or combination of Common Stock), other than (each of the following referred to as an “Excluded Merger or Sale”) a transaction involving (A) sale of all or substantially all of the assets of the
Company, (B) any merger, consolidation or similar transaction where the considerable payable to the shareholders of the Company by the acquiring Person consists substantially entirely of cash, or where the acquiring Person does not agree to assume the obligations of the Company under outstanding warrants (including this Warrant).  In the event of an Excluded Merger or Sale Transaction, if the surviving, successor or purchasing Person does not agree to assume the obligations under this Warrant, then the Company shall deliver a notice to the Warrant Holder at least 10 days before the consummation of such Excluded Merger or Sale, the Warrant Holder may exercise this Warrant at any time before the consummation of such Excluded Merger or Sale (and such exercise may be made contingent upon the consummation of such Excluded Merger or Sale), and any portion of this Warrant that has not been exercised before consummation of such Excluded Merger or Sale shall terminate and expire, and shall no longer be
outstanding.

                    (b)          Subdivision or Combination of Shares.  If the Company, at any time while this Warrant is unexpired and not exercised in full, shall subdivide its Common Stock, the Exercise Price shall be proportionately reduced as of the effective date of such subdivision, or, if the Company shall take a record of holders of its Common Stock for the purpose of so subdividing, as of such record date, whichever is earlier.  If the Company, at any time while this Warrant is unexpired and not exercised in full, shall combine its Common Stock, the Exercise Price shall be proportionately increased as of the effective date of such combination, or, if the Company shall take a record of holders of its Common Stock for the purpose of so combining, as of such record date, whichever is
earlier.

                    (c)          Stock Dividends.  If the Company, at any time while this Warrant is unexpired and not exercised in full, shall pay a dividend or other distribution in shares of Common Stock to all holders of Common Stock, then the Exercise Price shall be adjusted, as of the date the Company shall take a record of the holders of its Common Stock for the purpose of receiving such dividend or other distribution (or if no such record is taken, as at the date of such payment or other distribution), to that price determined by multiplying the Exercise Price in effect immediately prior to such payment or other distribution by a fraction:

                    1.          the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and

                    2.          the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution.  

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                    The provisions of this subsection (c) shall not apply under any of the circumstances for which an adjustment is provided in subsections (a) or (b).

                    (d)          Liquidating Dividends, Etc.  If the Company, at any time while this Warrant is unexpired and not exercised in full, makes a distribution of its assets or evidences of indebtedness to the holders of its Common Stock as a dividend in liquidation or by way of return of capital or other than as a dividend payable out of earnings or surplus legally available for dividends under applicable law or any distribution to such holders made in respect of the sale of all or substantially all of the Company’s assets (other than under the circumstances provided for in the foregoing subsections (a) through (c)), then the Warrant Holder shall be entitled to receive upon exercise of this Warrant in addition to the Warrant Shares receivable in connection therewith, and without payment of
any consideration other than the Exercise Price, the kind and amount of such distribution per share of Common Stock multiplied by the number of Warrant Shares that, on the record date for such distribution, are issuable upon such exercise of the Warrant (with no further adjustment being made following any event which causes a subsequent adjustment in the number of Warrant Shares issuable), and an appropriate provision therefor shall be made a part of any such distribution.  The value of a distribution that is paid in other than cash shall be determined in good faith by the Board of Directors of the Company.  Notwithstanding the foregoing, in the event of a proposed dividend in liquidation or distribution to the shareholders made in respect of the sale of all or substantially all of the Company’s assets, the Company shall deliver a notice to the Warrant Holder at least 10 days before the consummation of such event, the Warrant Holder may exercise this Warrant at any time before the
consummation of such event (and such exercise may be made contingent upon the consummation of such event), and any portion of this Warrant that has not been exercised before consummation of such event shall terminate and expire, and shall no longer be outstanding.

                    (e)          Subsequent Equity Sales.   If, at any time while this Warrant is outstanding, the Company issues additional shares of Common Stock or rights, warrants, options or other securities or debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise entitling any Person to acquire shares of Common Stock (collectively, “Common Stock Equivalents”) at an effective net price to the Company per share of Common Stock (the “Effective Price”) less than the Exercise Price (as adjusted hereunder to such date), then the Exercise Price shall be reduced to equal the Effective Price.  If, at any time while this Warrant is outstanding, the Company issues Common Stock or Common Stock Equivalents at an Effective Price greater than the
Exercise Price (as adjusted hereunder to such date) but less than the average Closing Price over the five Trading Days prior to such issuance then the Exercise Price shall be reduced to equal the product of (A) the Exercise Price in effect immediately prior to such issuance of Common Stock or Common Stock Equivalents times (B) a fraction, the numerator of which is the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issuance, plus (2) the number of shares of Common Stock which the aggregate Effective Price of the Common Stock issued (or deemed to be issued) would purchase at the Exercise Price, and the denominator of which is the aggregate number of shares of Common Stock outstanding or deemed to be outstanding immediately after such issuance.    For purposes of this paragraph, in connection with any issuance of any

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Common Stock Equivalents, (A) the maximum number of shares of Common Stock potentially issuable at any time upon conversion, exercise or exchange of such Common Stock Equivalents (the “Deemed Number”) shall be deemed to be outstanding upon issuance of such Common Stock Equivalents, (B) the Effective Price applicable to such Common Stock shall equal the minimum dollar value of consideration payable to the Company to purchase such Common Stock Equivalents and to convert, exercise or exchange them into Common Stock (net of any discounts, fees, commissions and other expenses), divided by the Deemed Number, and (C) no further adjustment shall be made to the Exercise Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents.

                    Section 6.2          Notice of Adjustments.  Whenever the Exercise Price or number of Warrant Shares shall be adjusted pursuant to Section 6.1 hereof, the Company shall promptly prepare a certificate signed by its Chief Executive Officer or Chief Financial Officer setting forth in reasonable detail the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description of the basis on which the Company’s Board of Directors made any determination hereunder), and the Exercise Price and number of Warrant Shares purchasable at that Exercise Price after giving effect to such adjustment, and shall promptly cause copies of such certificate to be sent by overnight courier to the Warrant Holder.  In the event the
Company shall, at a time while the Warrant is unexpired and not exercised in full, take any action that pursuant to subsections (a) through (c) and (e) of Section 6.1 which may result in an adjustment of the Exercise Price, the Company shall give to the Warrant Holder at its last address known to the Company written notice of such action ten (10) days in advance of its effective date in order to afford to the Warrant Holder an opportunity to exercise the Warrant prior to such action becoming effective.

                    Section 7.          No Impairment.   The Company will not, by amendment of its Amended and Restated Articles of Incorporation or By-Laws or through any reorganization, transfer of assets, consolidation, merger, dissolution or issue or sale of securities, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the Warrant Holder against impairment.  Without limiting the generality of the foregoing, the Company (a) will not increase the par value of any Warrant Shares above the amount payable therefor on such exercise, and (b) will take all such action as
may be reasonably necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the exercise of this Warrant.

                    Section 8.          Rights As Stockholder.  Except as set forth in Section 6 above, prior to exercise of this Warrant, the Warrant Holder shall not be entitled to any rights as a stockholder of the Company with respect to the Warrant Shares, including (without limitation) the right to vote such shares, receive dividends or other distributions thereon or be notified of stockholder meetings.  However, in the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise

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acquire any shares of stock of any class or any other securities or property, or to receive any other right, the Company shall mail to each Warrant Holder, at least ten (10) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the amount and character of such dividend, distribution or right.

                    Section 9.          Replacement of Warrant.  Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of the Warrant and, in the case of any such loss, theft or destruction of the Warrant, upon delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of such Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

                    Section 10.         Choice of Law.  This Warrant shall be construed under the laws of the State of New York.

                    Section 11.         Entire Agreement; Amendments.  Except for any written instrument concurrent or subsequent to the date hereof executed by the Company and the Seller, this Warrant and the Agreement contain the entire understanding of the parties with respect to the matters covered hereby and thereby.  No provision of this Warrant may be waived or amended other than by a written instrument signed by the party against whom enforcement of any such amendment or waiver is sought.

                    Section 12.         Restricted Securities.

                    (a)          Registration or Exemption Required. This Warrant has been issued in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended, in reliance upon the provisions of Section 4(2) thereof.  This Warrant and the Warrant Shares issuable upon exercise of this Warrant may not be resold except pursuant to an effective registration statement or an exemption to the registration requirements of the Securities Act of 1933 and applicable state laws.

                    (b)          Legend.  Any replacement Warrants issued pursuant to Section 2 and Section 9 hereof and, unless a registration statement has been declared effective by the SEC in accordance with the Securities Act of 1933, as amended, with respect thereto, any Warrant Shares issued upon exercise hereof, shall bear the following legend:

	
   
  	
  
“THE   SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE   U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER   APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION   FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER   SECURITIES LAWS.  NEITHER THIS   SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,   ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, 
  	
  
 
  

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HYPOTHECATED   OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION   STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS   EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.”
  	
  
 
  

                    (c)          No Other Legend or Stock Transfer Restrictions.  No legend other than the one specified in Section 12(b) has been or shall be placed on the share certificates representing the Warrant Shares and no instructions or “stop transfer orders” (so called “stock transfer restrictions”) or other restrictions have been or shall be given to the Company’s transfer agent with respect thereto other than as expressly set forth in this Section 12.

                    (d)          Assignment.  Assuming the conditions of Section 12(a) above regarding registration or exemption have been satisfied, the Warrant Holder may sell, transfer, assign, pledge or otherwise dispose of this Warrant (each of the foregoing, a “Transfer”), in whole or in part, but only to an Affiliate of the Warrant Holder.  The Warrant Holder shall deliver a written notice to Company, substantially in the form of the Assignment attached hereto as Exhibit B, indicating the person or persons to whom the Warrant shall be Transferred and the respective number of warrants to be Transferred to each assignee.  The Company shall effect the Transfer within ten (10) days, and shall deliver to the Transferee(s) designated by the Warrant Holder a Warrant or
Warrants of like tenor and terms for the appropriate number of shares.  In connection with and as a condition of any such proposed Transfer, the Company may request the Warrant Holder to provide an opinion of counsel to the Warrant Holder in form and substance reasonably satisfactory to the Company to the effect that the proposed Transfer complies with all applicable federal and state securities laws.

                    (e)          Seller’s Compliance. Nothing in this Section 12 shall affect in any way the Seller’s obligations under any agreement to comply with all applicable securities laws upon resale of the Common Stock.

                    Section 13.         Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be given in accordance with Section 11 of the Purchase Agreement.

                    Section 14.         Miscellaneous.  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.  The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

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                    IN WITNESS WHEREOF, this Warrant was duly executed by the undersigned, thereunto duly authorized, as of the date first set forth above.

	
  
 
  	
  
EMISPHERE TECHNOLOGIES, INC.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
 
  	
  
By:
  	
  
 
  
	
  
 
  	
  
 
  	
  

  
	
  
 
  	
  
 
  	
  
Elliot M.   Maza
  
	
   
  	
  
 
  	
  
Chief   Financial Officer
  

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EXHIBIT A TO THE WARRANT

EXERCISE FORM

EMISPHERE TECHNOLOGIES, INC.

The undersigned hereby irrevocably exercises the right to purchase __________________ shares of Common Stock of Emisphere Technologies, Inc., a Delaware corporation, evidenced by the attached Warrant, and (CIRCLE EITHER (i) or (ii)) (i) tenders herewith payment of the Aggregate Exercise Price with respect to such shares in full, in the amount of $________, in cash, by certified or official bank check or by wire transfer for the account of the Company or (ii) elects, pursuant to Section 2(c) of the Warrant, to convert such Warrant into shares of Common Stock of Emisphere Technologies, Inc. on a cashless exercise basis, all in accordance with the conditions and provisions of said Warrant. 

The undersigned requests that stock certificates for such Warrant Shares be issued, and a Warrant representing any unexercised portion hereof be issued, pursuant to this Warrant, in the name of the registered Warrant Holder and delivered to the undersigned at the address set forth below.

	
  
Dated:________________________________
  	
  
 
  
	
  
 
  	
  
 
  
	
  

  	
   
  
	
  
Signature of   Registered Holder
  	
  
 
  
	
  
Name of   Registered Holder (Print)
  	
  
 
  
	
  
 
  	
  
 
  
	
  

  	
  
 
  
	
  
Address
  	
  
 
  

EXHIBIT B TO THE WARRANT
 ASSIGNMENT

(To be executed by the registered Warrant Holder desiring to transfer the Warrant)

FOR VALUED RECEIVED, the undersigned Warrant Holder of the attached Warrant hereby sells, assigns and transfers unto the persons below named the right to purchase ______________ shares of Common Stock of Emisphere Technologies, Inc. (the “Company”) evidenced by the attached Warrant and does hereby irrevocably constitute and appoint ______________________ attorney to transfer the said Warrant on the books of the Company, with full power of substitution in the premises.

	
  Dated:
  	
  
 
  
	
  
 
  	
  
 
  
	
  

  	
  
 
  
	
  
Signature
  	
  
 
  
	
  
 
  	
  
 
  
	
  
Fill in for   new Registration of Warrant:
  	
  
 
  
	
  
 
  	
  
 
  
	
  

  	
  
 
  
	
  
Name
  	
  
 
  
	
  
 
  	
  
 
  
	
  

  	
  
 
  
	
  Address
  	
   
  
	
   
  	
   
  
	
  

  	
   
  
	
  Please print   name and address of assignee
   (including zip code number)Exhibit 10.39

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 SECURITY PURCHASE AGREEMENT, DATED AS OF DECEMBER 27, 2004 (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. 2
  	
  
New York, New York
  
	
  
 
  	
  
December 27, 2004    
  

Issue Price:  $29,246,302
 $802.953 for each $1000 of principal amount at maturity

Original Issue Discount at Maturity:  $7,177,119
 $197.047 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 Thirty Six Million Four Hundred Twenty Three Thousand Four Hundred Twenty One Dollars ($36,423,421) 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.        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.

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                       (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.

            3.2  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.

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            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.

            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 on 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 may be reasonably necessary or proper to carry out more effectively the provisions of this Note.

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            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 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.

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                       (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 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

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                       (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 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.

           “Elan” means Elan Corporation, plc, a company incorporated under the laws of Ireland.

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           “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 December 27, 2004.

           “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 July 2, 1999, 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.

           “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.

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           “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.

           “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:

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                       (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

                       with a copy to:
                        Proskauer Rose LLP
                        1585 Broadway
                        New York, New York  10036
                        Telephone:  (212) 969-3000

                       Facsimile:  (212) 969-2900
                        Attention:  Robert A. Cantone, Esq.

                       (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 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.

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           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 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.

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           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.

           IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

	
  
 
  	
  
EMISPHERE TECHNOLOGIES, INC.
  
	
  
 
  	
  
 
  
	
  
 
  	
  
By:
  	
  
/s/ ELLIOT MAZA
  
	
  
 
  	
  
 
  	
  

  
	
  
 
  	
  
Name:
  	
  
Elliot Maza
  
	
  
 
  	
  
Title:
  	
  
Chief Financial Officer
  

AGREED AND ACKNOWLEDGED:

	
  
ELAN INTERNATIONAL SERVICES,   LTD.
  
	
  
 
  	
  
 
  	
  
 
  
	
  
By:
  	
  
/s/ KEVIN INSLEY
  	
  
 
  
	
  
 
  	
  

  	
  
 
  
	
  
Name:
  	
  
Kevin Insley
  	
  
 
  
	
  
Title:
  	
  
President

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