Document:

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                                                                Exhibit 10.17(a)

                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. SUCH PORTIONS ARE DESIGNATED "[***]."

This Agreement is made as of the 7th day of April, 1998

BY AND BETWEEN

Eli Lilly & Company

An Indiana Corporation with offices at Lilly Corporate Center, Indianapolis,
Indiana 46285

Emisphere Technologies, Inc.

A Delaware Corporation with offices at 15 Skyline Drive, Hawthorne, New York
10532

                               LICENSE AGREEMENT

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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                               TABLE OF CONTENTS

Section                                                               Page

1     DEFINITIONS.......................................................2

2     GRANT OF RIGHTS..................................................13

3     IMPROVEMENTS.....................................................14

4     MANUFACTURING ...................................................15

5     RESEARCH AND DEVELOPMENT.........................................16

6     SUPPLY OF PRODUCT(S).............................................17

7     EXPLOITATION OF LICENSED TECHNOLOGY..............................17

8     FINANCIAL PROVISIONS.............................................18

9     RIGHT OF AUDIT AND INSPECTION....................................20

10    PATENTS..........................................................21

11    CONFIDENTIAL INFORMATION.........................................25

12    TERM OF AGREEMENT................................................27

13    WARRANTIES/INDEMNITIES...........................................30

14    REGULATORY APPROVALS.............................................35

15    INSURANCE........................................................36

16    IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE.....................36

17    SETTLEMENT OF DISPUTES; PROPER LAW...............................36

18    ASSIGNMENT.......................................................37

19    NOTICES..........................................................37

20    MISCELLANEOUS CLAUSES............................................38
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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

WHEREAS
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A.    Emisphere is beneficially entitled to the use of various patents,
      including the Emisphere Patents which have been granted or are pending
      under various international conventions in relation to the Emisphere
      Technology.

B.    Emisphere is knowledgeable in the discovery and use of compounds which can
      interact with therapeutic agents in a manner to improve the transport of
      such therapeutic agents through biological membranes.

C.    Lilly is knowledgeable in the research, development, manufacture and
      marketing of pharmaceutical formulations.  Lilly owns and possesses
      patented therapeutic agents and other technologies.

D.    Emisphere and Lilly have previously entered into a Research Collaboration
      and Option Agreement regarding the Emisphere Technology.

E.    Lilly desires to enter into this Agreement with Emisphere so as to (a)
      permit Lilly to utilize the Emisphere Patents and the Emisphere Know-How
      in the research, development, manufacture, distribution and sale of the
      Products and other products in the Field and (b) to permit Lilly to
      utilize the Emisphere Program Technology in combination with the Lilly
      Program Technology in connection with (i)  research and development work
      conducted by the Parties and (ii) Lilly's manufacture and supply of
      Products and other related components.

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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

NOW IT IS HEREBY AGREED AS FOLLOWS:

1.    DEFINITIONS

1.1   In this present Agreement, including the Recitals and Appendix, the
      following definitions shall prevail unless the context otherwise requires:

"Acquired"         means a transfer of intellectual property or information from
                   an Independent Third Party to Emisphere or Lilly, as the case
                   may be, to the extent to which there are no obligations or
                   restrictions as to confidentiality in respect of that
                   information which prohibit disclosure or use by Lilly or
                   Emisphere, as appropriate;

"Activation
 Letter"           is the notification document (a copy of which is attached as
                   Schedule II hereto) received by Emisphere from a senior Lilly
                   officer or representative with appropriate legal
                   responsibility to render this Agreement binding on Lilly with
                   respect to a single Compound and a single Route of
                   Administration, both identified therein;

"Affiliate"        means any corporation or business entity which Lilly or
                   Emisphere, directly or indirectly, owns or controls, is under
                   common ownership with, or which owns one of the Parties to
                   this Agreement. Ownership or control shall exist when an
                   entity owns more than 50% of the capital or business assets
                   of another entity; has the power to exercise more than 50% of
                   the voting rights or to appoint more than 50% or more of the
                   Board of Directors of another entity; or has the right to
                   control the affairs of another entity. It being understood
                   that the direct or indirect ownership of a lesser percentage
                   of such shares shall not necessarily preclude the existence
                   of control;

"Agreement"        means this license agreement (which expression shall be
                   deemed to include the Recitals, Schedules and Appendix
                   hereto, and any other document(s) incorporated herein by
                   reference);

"Carriers"         means various agents that are used to facilitate transport
                   through membranes via a number of different Routes of
                   Administration to deliver the

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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                   Compounds utilizing the Emisphere Technology and/or the
                   Emisphere Program Technology. These agents can include, but
                   are not limited to proteins, peptides and other chemicals;

"Compound(s)"      means the therapeutic agent specified by Lilly in the
                   Activation Letter (in this Agreement, the parathyroid hormone
                   molecule and all active fragments, analogs, PTH-like peptides
                   with primary function similar to the PTH molecule (not to
                   include secretagogues) and mimetics);

"Cost"             means, depending upon the context, one of the following:

                   In the case of research and development, Cost will be
                   calculated in accordance with Emisphere's internal accounting
                   system, will exclude any element of corporate overhead and
                   will be in accordance with Generally Accepted Accounting
                   Principles ("GAAP").

                   In the case of materials purchased from an Independent Third
                   Party, Cost will comprise the amount actually paid, including
                   import duties, transport and handling costs and other
                   directly attributable costs, in accordance with GAAP;

"Effective Date"   means the date Emisphere receives the Option Exercise
                   Payment;

"Emisphere"        means Emisphere Technologies, Inc., its Affiliates,
                   successors and permitted assignees;

"Emisphere
 Know-How"         means all trade secrets, confidential scientific, technical
                   and medical information and expertise from time to time
                   developed, produced, created or Acquired by or on behalf of
                   Emisphere, on or before the Effective Date (i.e., excluding
                   Emisphere Program Know-How, Joint Know-How and Improvements),
                   including, but not limited to, unpatented inventions,
                   discoveries, theories, plans, ideas or designs (whether or
                   not reduced to practice) relating to the research and
                   development, registration for marketing, use or sale of the
                   Carriers or the Product(s), needed relevant data on the
                   Carriers, preclinical toxicity and manufacturing

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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                   data for the Carriers and prototype Product(s), and
                   toxicological, pharmacological, analytical and clinical data,
                   bioavailability studies, formulations, control assays and
                   specifications, methods of preparation and stability data
                   with respect to the Carriers and prototype Product(s);

"Emisphere
 Patents"          means all and any patents, utility models and any
                   applications therefor in the Territory (other than the
                   Emisphere Program Patents or Joint Patents) that are or
                   subsequently may be owned or Acquired by, or assigned or
                   licensed to, Emisphere (including any and all divisions,
                   continuations, continuations-in- part, extensions, additions,
                   registrations, confirmations, reexaminations, Supplementary
                   Protection Certificates, renewals or reissues thereto or
                   thereof) and that would be infringed by the development,
                   manufacture, use, disposal, sale, offer of disposal or sale,
                   or importation of the Product(s) in the Territory and/or
                   relate to the Field; the Emisphere Patents as of the date
                   hereof are listed on Schedule I hereto;

"Emisphere Program
Know-How"          means all trade secrets, confidential scientific, technical
                   and medical information and expertise developed, produced,
                   created or Acquired by or on behalf of Emisphere pursuant to
                   the Research and Development Program (other than Emisphere
                   Know-How and Joint Know-How), including, but not limited to,
                   unpatented inventions, discoveries, theories, plans, ideas or
                   designs (whether or not reduced to practice), and relating to
                   the research and development, registration for marketing, use
                   or sale of the Carriers or the Product(s), needed relevant
                   data on the Carriers, preclinical toxicity and manufacturing
                   data for the Carriers and prototype Product(s), and
                   toxicological, pharmacological, analytical and clinical data,
                   bioavailability studies, formulations, control assays and
                   specifications, methods of preparation and stability data
                   with respect to the Carriers and prototype Product(s);
                   Emisphere Program Know-How shall not include any trade
                   secrets, information and expertise developed, produced,
                   created or Acquired by or on behalf of Emisphere pursuant to
                   the Research and Development Program relating to the
                   Compounds

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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                   or their therapeutic uses or properties as such trade
                   secrets, information and expertise shall be Lilly Program
                   Know-How;

"Emisphere Program
Patents"           means all and any patents, utility models and applications
                   therefor in the Territory (including any and all divisions,
                   continuations, continuations-in-part, extensions, additions,
                   registrations, confirmations, reexaminations, Supplementary
                   Protection Certificates, renewals or reissues thereto or
                   thereof) on or for any inventions or discoveries that (i)
                   have been or subsequently may be conceived or made by
                   employees or agents of Emisphere pursuant to the Research and
                   Development Program (regardless of when or by whom such
                   inventions and/or discoveries are reduced to practice) or
                   (ii) relate to the Carriers or the use thereof for delivery
                   of Compounds (regardless of when or by whom such inventions
                   and/or discoveries are reduced to practice or by whom they
                   are conceived);

"Emisphere Program
Technology"        means the Emisphere Program Patents, the Emisphere Program
                   Know-How and/or Emisphere's share of the Joint Patents and
                   the Joint Know-How;

"Emisphere
Technology"        means the Emisphere Patents and/or the Emisphere Know- How;

"Ex Works"         shall have the meaning as such term is defined in the ICC
                   Incoterms, 1990, International Rules for the Interpretation
                   of Trade Terms, ICC Publication No. 460;

"FDA"              means the United States Food and Drug Administration or any
                   successors or agency the approval of which is necessary to
                   market a product in the United States of America or any other
                   relevant regulatory authority the approval of which is
                   necessary to market a product in any other country of the
                   Territory;

"Field"            means the research, development and optimization of the
                   Compound specified in the Activation Letter

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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                   utilizing one or more Carriers for all medical ailments or
                   indications for the Route of Administration (in this
                   Agreement, the oral route) specified in the Activation Letter
                   as well as the manufacture, use, promotion, distribution,
                   marketing and sale of the Product(s);

[* * *]            means, in the case of supply of Carrier(s), [* * *].

"Improvements"     means inventions, discoveries, developments and indications
                   conceived by Emisphere, and relating to the Emisphere
                   Technology, that can usefully be applied to the Field, the
                   Lilly Program Technology and/or the Emisphere Program
                   Technology, and which were first reduced to practice during
                   the term of this Agreement by Emisphere whether or not such
                   modification adds any benefit to the Field, the Lilly Program
                   Technology, the Emisphere Program Technology, or the Joint
                   Technology;

"INDA"             means any Investigational New Drug Application in relation to
                   a Product(s) filed by Lilly or its approved designee with the
                   FDA or a similar application filed in another jurisdiction;

"Independent
Third Party"       means any person other than Lilly, Emisphere or any of
                   their Affiliates;

"Joint Know-How"   means all trade secrets, confidential scientific,
                   technical and medical information and expertise, technical
                   data and marketing information, studies and data developed,
                   produced, created or Acquired jointly by the Parties during
                   the term of this Agreement pursuant to the Research and
                   Development Program, including, but not limited to,
                   unpatented inventions, discoveries, theories, plans, ideas or
                   designs; Joint Know-How shall not include any trade secrets,
                   confidential scientific, technical and medical information
                   and expertise, technical data and marketing information,
                   studies and data developed, produced, created or Acquired
                   jointly by the Parties pursuant to the Research and
                   Development Program to the extent any of such items relate to
                   either (i) Carriers or the use thereof for delivery of
                   Compounds or (ii) the Compounds or their therapeutic uses or
                   properties, since such items relating to Carriers and

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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                   such use thereof shall be considered Emisphere Program
                   Know-How and such items relating to Compounds and the
                   therapeutic uses or properties thereof shall be considered
                   Lilly Program Know-How;

"Joint Patents"    means all and any patents, utility models and any
                   applications therefor in the Territory (including any and all
                   divisions, continuations, continuations-in-part, extensions,
                   additions, registrations, confirmations, reexaminations,
                   Supplementary Protection Certificates, renewals or reissues
                   thereto or thereof) on or for any inventions or discoveries
                   that are jointly conceived by the Parties during the term of
                   this Agreement pursuant to the Research and Development
                   Program (regardless of when or by whom such inventions and/or
                   discoveries are reduced to practice) that do not relate to
                   (i) the Carriers or the use thereof for delivery of Compounds
                   nor to (ii) the Compounds or their therapeutic uses or
                   properties (i.e., other than Emisphere Patents, Emisphere
                   Program Patents, Lilly Patents and Lilly Program Patents);

"Launch"           means the commercial sale (including promotion) of a Product;
                   the date thereof shall be determined on a country-by-country
                   basis.

"Lilly"            means Eli Lilly & Company, its Affiliates, successors and
                   permitted assignees;

"Lilly Know-How"   means all trade secrets, confidential scientific,
                   technical and medical information and expertise, technical
                   data and marketing information, studies and data from time to
                   time developed, produced, created or Acquired by or on behalf
                   of Lilly, whether before the Effective Date or during the
                   term of this Agreement (other than the Lilly Program Know-How
                   or Joint Know-How), including, but not limited to, unpatented
                   inventions, discoveries, theories, plans, ideas or designs
                   (whether or not reduced to practice), relating to the
                   research and development, manufacture, registration for
                   marketing, use or sale of the Product(s), and toxicological,
                   pharmacological, analytical and clinical data,
                   bioavailability studies, product forms and formulations,
                   control assays and

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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                   specifications, methods of preparation and stability data
                   with respect to the Product(s);

"Lilly Patents"    means all and any patents, utility models and any
                   applications therefor in the Territory (other than the Lilly
                   Program Patents or Joint Patents) that are or subsequently
                   may be owned or acquired by or assigned or licensed to Lilly
                   (including any and all divisions, continuations,
                   continuations-in-part, extensions, additions, registrations,
                   confirmations, reexaminations, Supplementary Protection
                   Certificates, renewals or reissues thereto or thereof) and
                   that would be infringed by the development, manufacture, use,
                   disposal, sale, offer of disposal or sale, or importation of
                   the Product(s) in the Territory and/or relate to the Field;

"Lilly Program
Know-How"          means all trade secrets, confidential scientific, technical
                   and medical information and expertise, technical data and
                   marketing information, studies and data developed, produced,
                   created or Acquired by or on behalf of Lilly, pursuant to the
                   Research and Development Program (other than the Lilly
                   Know-How and Joint Know-How), including, but not limited to,
                   unpatented inventions, discoveries, theories, plans, ideas or
                   designs (whether or not reduced to practice), relating to the
                   research and development, manufacture, registration for
                   marketing, use or sale of the Product(s), needed relevant
                   data generated by Lilly (including preclinical toxicity data)
                   on the Product(s) and toxicological, pharmacological,
                   analytical and clinical data, bioavailability studies,
                   product forms and formulations, control assays and
                   specifications, methods of preparation and stability data
                   with respect to the Product(s); Lilly Program Know-How shall
                   not include any trade secrets, information and expertise
                   developed, produced, created or Acquired by or on behalf of
                   Lilly pursuant to the Research and Development Program
                   relating to the Carriers or the use thereof for delivery of
                   Compounds, as such trade secrets, information and expertise
                   shall be Emisphere Program Know-How;

"Lilly Program

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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

Patents"           means all and any patents, utility models and applications
                   therefor in the Territory (including any and all divisions,
                   continuations, continuations-in-part, extensions, additions,
                   registrations, confirmations, reexaminations, Supplementary
                   Protection Certificates, renewals or reissues thereto or
                   thereof) on or for any inventions or discoveries that (i)
                   have been or subsequently may be conceived or made by
                   employees or agents of Lilly pursuant to the Research and
                   Development Program (regardless of when or by whom such
                   inventions and/or discoveries are reduced to practice) or
                   (ii) relate to the Compounds or their therapeutic uses or
                   properties (regardless of when or by whom such inventions
                   and/or discoveries are reduced to practice or by whom they
                   are conceived);

"Lilly Program
Technology"        means the Lilly Program Patents, the Lilly Program Know- How
                   and/or Lilly's share of the Joint Patents and the Joint
                   Know-How;

"Lilly Technology" means the Lilly Patents and/or the Lilly
                   Know-How;

[* * *]            means a manual, a table of contents of which is attached
                   hereto as Appendix I, containing certain specifications,
                   procedures, methods and personnel contacts relating to [* *
                   *] that will be compiled and agreed upon between the Parties
                   prior to the commencement of manufacture of the Carrier(s) by
                   Emisphere. Sections of the [* * *] may be modified from time
                   to time through the issuance of a revised section
                   incorporating the modification and stating the effective date
                   of the modification. Each such revised section shall be
                   signed on behalf of the Parties by a duly authorized
                   representative. The duly authorized representative shall be
                   of a management level no lower than the management level of
                   the duly authorized representative who signed that section of
                   the original [* * *].

"Milestone"        means milestones as specified in Appendix 1 to the Option
                   Agreement, as modified by the Activation Letter attached
                   hereto as Schedule II;

"NDA"              means any New Drug Application in relation to a Product(s)
                   filed by Lilly or its approved designee with

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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
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                   the FDA or a similar application filed in another
                   jurisdiction;

"Net Sales"        means with respect to the Product(s) the gross amount
                   invoiced by Lilly, its Affiliates and/or any sub- licensee of
                   Lilly or its Affiliates to unrelated third parties for the
                   Product(s) less the following seven items: (a) trade quantity
                   and cash discounts actually allowed; (b) commission,
                   discounts, refunds, rebates, charge backs, retroactive price
                   adjustments, and any other allowances which effectively
                   reduce the net selling price; (c) actual product returns and
                   allowances; (d) that portion of the sales value associated
                   with non pharmaceutical drug delivery devices (not to include
                   Emisphere's Carriers); (e) any tax imposed on the production,
                   sale, delivery or use of the Product(s); (f) allowance for
                   distribution (transportation) expenses (limit of [* * *] of
                   gross sales); (g) any other similar, reasonable and customary
                   deductions which are properly recorded as a reduction of
                   sales under GAAP, consistently applied.

                   In the event that the Product is sold as part of a
                   combination product, the Net Sales of Product, for purposes
                   of determining royalty payments, shall be determined by
                   multiplying the Net Sales of the combination product by the
                   fraction, A/(A+B) where A is the average sales price of the
                   Product when sold separately in finished form and B is the
                   average sales prices of the other product(s) sold separately
                   in finished form; in the event that such average sales price
                   cannot be determined for both Product and the other
                   products(s) used in the combination product, Net Sales for
                   the purposes of determining royalty payments shall be
                   calculated by multiplying the Net Sales of the combination
                   product by the fraction C/(C+D) where C is Lilly's cost of
                   goods for the Product and D is Lilly's cost of goods of the
                   other products(s) used in the combination product, determined
                   in accordance with the method of accounting normally employed
                   by Lilly in computing cost of goods.

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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

"Option"           means the option to enter into a license agreement in the
                   form of this Agreement, as provided for in the Option
                   Agreement;

"Option Agreement" means that certain Research Collaboration and
                   Option Agreement, dated as of February 26, 1997, between
                   Emisphere and Lilly, incorporated herein by reference;

"Option Exercise
Payment"           means the Milestone payment specified in Appendix 1 to the
                   Option Agreement and the payment of which is required upon
                   execution of this Agreement;

"Parties"          means Lilly and Emisphere;

"Person"           means an individual, partnership, corporation, limited
                   liability company, business trust, joint stock company,
                   trust, unincorporated association, joint venture, or other
                   entity of whatever nature;

[* * *]            means a system of (1) developing standard costs at
                   levels which would be incurred if [* * *] or (2) analyzing
                   and reporting variances caused by [* * *] of resources;
                   practical capacity means the volume, usually expressed in
                   hours or minutes, which a plant, department or work center
                   can achieve in an operating period under normal but efficient
                   operating conditions and assuming sufficient volume is
                   available; it measures the amount one is prepared to make or
                   sell and includes allowances for unavoidable down time;

"Product(s)"       means, depending on the context, one or more formulations of
                   the Compound(s) with one or more of the Carriers for a
                   specific Route of Administration that complies with the
                   Specifications;

"Research and
Development
Program"           means the joint program of research and development work,
                   with respect to the Field and the Product, being conducted or
                   to be conducted by, inter alia, Lilly and Emisphere for and
                   on behalf of Lilly, for which both Parties are responsible,
                   and which has been devised by and approved by the Steering
                   Committee; the Research and Development Program shall not
                   include

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                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                   work for which Lilly alone is responsible, such as clinical
                   trials of Product(s);

"Route
of Administration" means administration of the Compound(s) by
                   the oral route;

"Specifications"   means the specifications for each of the Carriers or
                   Product(s) as approved by the FDA, as well as such other
                   specifications which may be agreed upon by the Parties in
                   writing or by the Steering Committee;

"Steering
Committee"         means the management committee appointed by Emisphere and
                   Lilly to oversee the Research and Development Programs
                   related to the Product(s);

"Territory"        means all the countries of the world; and

"United States
Dollars"
and "US$"          means the lawful currency for the time being of the
                   United States of America.

1.2   In this Agreement:

      1.2.1 The singular includes the plural and vice versa.

      1.2.2 Any reference to a Clause shall, unless otherwise specifically
            provided, be to a Clause of this Agreement.

      1.2.3 The headings of this Agreement are for ease of reference only and
            shall not affect its construction or interpretation.

2.   GRANT OF RIGHTS

In consideration of the receipt of the Activation Letter specifying the Compound
and the Route of Administration to be licensed and simultaneous receipt of the
first Milestone payment by Emisphere (both from Lilly), the receipt and adequacy
of which is acknowledged by Emisphere to Lilly by Emisphere's acceptance of the
Activation Letter and Milestone payment, Emisphere grants to Lilly for the term
of this Agreement:

2.1   an exclusive license to use (a) the Emisphere Patents, the Emisphere
      Program Patents and Emisphere's share of the Joint Patents for the Field,
      and (b) the Emisphere Know-How, the Emisphere Program Know-How and
      Emisphere's share of the Joint Know-How for the Field.  All proprietary
      rights and rights of ownership with respect to the Emisphere Technology
      and Emisphere Program

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                                                    Confidentiality Requested by
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      Technology shall at all times remain solely with Emisphere unless
      otherwise specified in this Agreement. Lilly shall not have any rights to
      use the Emisphere Technology or Emisphere Program Technology other than
      insofar as they relate directly to the Field and are expressly granted
      herein.

2.2   Subject to Clause 6.3, Lilly shall have the right to sublicense the rights
      granted to it by Emisphere pursuant to this Agreement.  Insofar as the
      obligations owed by Lilly to Emisphere are concerned, Lilly shall remain
      responsible for all acts and omissions of any sub-licensee as if they were
      by Lilly.  Lilly shall forthwith notify Emisphere of any sub-license
      granted by Lilly.  In all cases, (i) royalties shall be paid at the rate
      provided for herein (i.e., in accordance with the relevant Option
      Agreement Appendix); and (ii) the applicable royalty rate shall be
      determined with reference to market share or net sales figures (as the
      case may be) determined by cumulating all sales of the Product by Lilly
      and all of its sub-licensees.  It shall be Lilly's responsibility in all
      cases to determine the cumulated net sales or market share data and assure
      that Emisphere is paid (whether by Lilly or the sub-licensee) the
      royalties at the increased rate provided for upon reaching the yearly
      targets, all as set forth in the relevant Appendix of the Option
      Agreement.  If Emisphere does not receive payment from a sublicensee
      within [* * *] days of the end of each quarter, Emisphere shall
      immediately notify Lilly's royalty administration personnel (contact name
      shall be provided once Product is Launched) that payment has not been
      remitted.  If unforeseen circumstances result in a sublicensee not
      reporting to Lilly, the amount of their Net Sales such that Lilly cannot
      determine the cumulative Net Sales or market share data, Lilly shall pay
      Emisphere its royalty due on Lilly Net Sales only and within [* * *] days
      of the end of such calendar quarter, ensure that Emisphere will receive
      the appropriate amount of royalties from either the sublicensee or Lilly.
      Notwithstanding the previous sentence however, Net Sales by sublicensees
      shall not be counted twice in the calculation of royalty payments due to
      Emisphere.  In the event of a termination of this Agreement due to a
      breach by Lilly, Emisphere shall have the right but not the obligation to
      assume any such sub-license under the same terms.

In consideration of the obligations assumed hereunder, Lilly grants to
Emisphere, solely for the purposes of carrying out the latter's obligations
hereunder:

2.3   a non-exclusive license to use the Lilly Technology and the Lilly Program
      Technology.  All proprietary rights and rights of ownership with respect
      to the Lilly Technology and the Lilly Program Technology shall at all
      times remain solely with Lilly, unless otherwise specified in this
      Agreement.  Emisphere shall not have any rights to use the Lilly
      Technology or the Lilly Program Technology other than insofar as expressly
      granted herein.

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2.4   Emisphere shall have no right to sublicense the rights granted to it by
      Lilly pursuant to this Agreement except as expressly authorized by Lilly.
      Insofar as the obligations owed by Emisphere to Lilly are concerned,
      Emisphere shall remain responsible for all acts and omissions of any
      approved sub-licensee as if they were by Emisphere.

3.    IMPROVEMENTS

3.1   If Emisphere shall develop or have developed by an Independent Third Party
      any Improvements during the term of this Agreement (other than pursuant to
      the Research and Development Program which constitute Emisphere Program
      Technology), Emisphere shall, to the extent that it is not prohibited by
      any undertaking given to any Independent Third Party (provided that
      Emisphere shall use its commercially reasonable efforts to exclude or
      minimize the extent of any such limitations or restrictions which prevent
      or limit disclosure to or use by Lilly), communicate to Lilly such
      Improvements and shall provide to Lilly such rights, licenses, information
      and explanations as Lilly may reasonably require to be able effectively to
      utilize the Improvements for the life of this Agreement.  Such disclosed
      Improvements shall automatically on disclosure to Lilly become part of the
      Emisphere Know-How or Emisphere Patents, as the case may be, and shall be
      subject to the provisions of this Agreement.

4.    MANUFACTURING

4.1   Lilly will manufacture final Product(s).  Emisphere will manufacture at
      least [* * *] of the Carrier needed for Product sales.  Lilly will pay
      Emisphere the latter's [* * *] on all Carrier used for sales of Products
      less than or equal to the sales schedule set forth in the relevant
      Appendix to the Option Agreement. Above the Product sales level specified
      in the relevant Appendix of the Option Agreement, Lilly will pay
      Emisphere's direct manufacturing costs (calculated according to the [* *
      *].  Lilly will be permitted to manufacture up to [* * *]% of the Carrier
      needed to manufacture the Products.  If Lilly can find a Carrier source
      that can offer a supply price that is at least [* * *]% lower than
      Emisphere's supply price (including Lilly, with supply price in such case
      being [* * *] all determined in accordance with GAAP principles), Lilly
      may use such supplier for up to [* * *]% of the Carrier needed to
      manufacture the Product. So long as Lilly uses it as a supplier of
      Carrier, Emisphere will hold at minimum [* * *] of Carrier inventory per
      year to be determined at the appropriate time. Emisphere's manufacturing
      operations will meet any required regulatory agency's specifications for
      registration, as set forth in the [* * *].

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4.2   Lilly shall be permitted to produce Carrier for its use in clinical
      trials, but only until Emisphere is able to supply the Carrier pursuant to
      the terms of Section 4.1.

4.3   Lilly reserves the right to audit the facility of Emisphere as specified
      in the [* * *], including its processes, records, and other facets of the
      operation as may be necessary to assure that all applicable FDA or similar
      government regulations have been met.  Emisphere shall permit duly
      authorized representatives of Lilly to audit all research, development and
      manufacturing areas and operations as they apply to Emisphere projects or
      Carriers for Lilly at reasonable times with a prior appointment.  The
      right to audit will also apply to Carrier used in trials to support
      product registration.  These audits will be conducted to assure compliance
      with all pertinent acts, regulations, and guidelines promulgated by the
      FDA and other regulatory authorities.  Such audits will be permitted
      during normal business hours and will be performed with a minimum of
      disruption.  Lilly shall furnish to Emisphere copies of all reports
      prepared as a result of these audits.  Lilly agrees to notify Emisphere
      within [* * *] of any concerns that it may have regarding Carrier(s).
      Lilly will also have the right to audit Emisphere's financial
      manufacturing records in accordance with Clause 9.2.

5.    RESEARCH AND DEVELOPMENT

5.1   Subject to any and all specific provisions included in the Option
      Agreement or relevant Appendix, and to the extent Emisphere does not have
      the requisite capability or resources or Lilly elects to do so itself,
      Lilly agrees to use Emisphere, on terms to be negotiated in good faith, to
      conduct the Research and Development Program.  Upon agreement by the
      Parties as to the appropriate amount of compensation to Emisphere
      therefor, Emisphere shall conduct its portion of such Research and
      Development Program.

5.2   Subject to any and all specific provisions included in the Option
      Agreement or relevant Appendix, the research and development work
      conducted jointly by the Parties shall be in accordance with the Research
      and Development Program devised by the Steering Committee.  Both Parties
      shall use reasonably diligent efforts, consistent with their efforts on
      other projects of similar commercial importance and state of development,
      to conduct their respective portions of the Research and Development
      Program.

5.3   Subject to any and all specific provisions included in the Option
      Agreement or relevant Appendix, the Research and Development Program shall
      be directed by the Steering Committee.  In conducting the Research and
      Development Program, each Party shall co-operate fully with the Steering
      Committee.  Each Party shall maintain the facilities used by it for the
      performance of the Research and Development Program in compliance with the
      applicable

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      requirements of the FDA and other regulatory authorities, including
      then-current Good Manufacturing Practices and then-current Good Laboratory
      Practices standards.

5.4   Subject to any and all specific provisions included in the Option
      Agreement or relevant Appendix, Emisphere shall provide Lilly on a
      quarterly basis during the term of the Research and Development Program a
      report, detailing how Emisphere allocated funds provided by Lilly for such
      Program, if Lilly provided any such funds.  Such report shall provide
      Lilly with the names of the Emisphere employees utilized on the Program
      and the amount of each employee's time devoted to the Program.  Emisphere
      shall, further, maintain records in reasonable detail and in accordance
      with GAAP of all monies paid by Emisphere for research under the Program
      and shall provide Lilly, within [* * *] of the end of each quarterly
      period, with a report stating the dollar amount of funds supplied by Lilly
      that were expended on research activities during the three month period
      for which the report is made, using Emisphere's standard project
      accounting procedures, and such supporting details as are reasonably
      required by Lilly.  Lilly shall be entitled to any tax credits due on
      account of research and development expenses, to the extent permitted by
      law, for the funds paid by Lilly to Emisphere hereunder.  Also, Lilly may
      have the costs of the Research and Development Program audited in
      accordance with Clause 9.2.

6.    SUPPLY OF PRODUCT(S)

6.1   Except as otherwise herein provided in this Agreement, Lilly shall produce
      and supply the final commercial Product(s).  Any chemical (not including
      the Carriers) or formulation components required to make use of the
      Emisphere Technology shall be procured by Lilly at its own Cost.  Lilly
      shall ensure that supplies of the Product(s) are produced as diligently as
      any of its products of similar commercial importance.

6.2   Lilly shall deliver the Product(s) in appropriate packaging as specified
      in the [* * *] so as to permit safe storage and transport.

6.3   In the event that Lilly appoints a third party to manufacture the
      Product(s), Lilly shall be solely responsible and liable for the
      performance of the manufacturer.  Lilly shall ensure that said
      manufacturer's facility is an FDA-approved facility and that such facility
      complies with all relevant FDA and other relevant governmental and
      regulatory requirements and that all then-current Good Manufacturing
      Practices are adhered to.  In no case will Lilly appoint a third party to
      manufacture the Product(s) if that third party is a competitor with
      Emisphere in the oral protein delivery field or if that third party is
      involved in pending or threatened litigation with Emisphere.

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6.4   Pursuant to the procedures set forth in the Manufacturing Responsibilities
      Document, the quality and form of the Product(s) delivered by Lilly
      hereunder shall conform in all material aspects to the Specifications and
      all prevailing legislative and regulatory requirements of the countries
      where the Product(s) are manufactured and to be used.

7.    EXPLOITATION OF LICENSED TECHNOLOGY

7.1   Lilly will have the exclusive right to develop and/or exploit the Field.
      In order to commercialize the Product(s), Lilly shall use commercially
      reasonable efforts (consistent with its efforts on products of similar
      commercial importance) to obtain marketing approval for and Launch the
      Product(s) in such countries in the Territory as is determined by normal
      Lilly business practices.  It may be necessary to file an INDA or NDA and
      perform clinical testing in more than one country.  The conduct of such
      clinical trials and the obtaining of regulatory approvals shall be
      controlled and completed by Lilly.

7.2   The strategy for  the registration and the commercialization of the
      Product(s) shall be determined by Lilly.  Upon inquiry, Emisphere shall be
      advised as to Lilly's general commercialization strategy on a semi-annual
      basis.  For each country in which the Product is Launched, Lilly shall
      inform Emisphere of the Launch at least [* * *] prior to the expected date
      therefor.

7.3   Lilly shall exert its reasonable efforts to commercialize the Product(s)
      in each country of the Territory where Lilly has Launched Product(s).
      Such efforts shall be consistent with Lilly's efforts on products of
      similar commercial importance.

7.4   Lilly will be solely responsible for ensuring that the manufacture,
      promotion, distribution, marketing and sale of the Product(s) within each
      country of the Territory is in strict accordance with all the legal and
      regulatory requirements of each country of the Territory.

7.5   All advertising, promotional materials and marketing costs needed to
      exploit the Product(s) are to be paid by Lilly.  All package inserts, and
      any advertising or promotional materials that substantially reproduce the
      material included in the package inserts, shall, to the extent allowed by
      applicable law or regulation, include: (i) acknowledgment that the Product
      uses Emisphere technology; (ii) Emisphere's trade name (whether or not
      registered); and (iii) Emisphere's logo (whether or not registered).  Such
      incorporation by Lilly shall be made upon discussion between Emisphere and
      Lilly with respect to the appropriate protection of Emisphere's trademark,
      service mark or trade name rights, and pursuant to a non-exclusive license
      which Emisphere shall grant Lilly for such purpose at the appropriate
      time.

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8.    FINANCIAL PROVISIONS

8.1   In consideration of the research and development work conducted by
      Emisphere for and on behalf of Lilly pursuant to the Research and
      Development Program, Lilly shall pay Emisphere the sums agreed to by the
      Parties pursuant to Clause 5.1, above, subject to the proper documentation
      of research and development work and expenses.

8.2   In consideration of the granting of a license of the Emisphere Technology
      to Lilly, Lilly shall make Milestone payments and pay royalties on Net
      Sales of the Product(s) in the amounts and at the rates set forth in
      Appendix 1 of the Option Agreement, as modified by the Activation Letter
      attached hereto as Schedule II.

8.3   Lilly's obligation to pay royalties shall expire on a country-by-country
      basis upon the conclusion of the term of this Agreement, as set forth in
      Clause 12.1.  Emisphere shall file for patent protection on Emisphere
      Technology and Emisphere Program Technology included in the Product in
      those countries listed in Exhibit C to the Option Agreement.

8.4   Payment of royalties shall be made quarterly within [* * *] after the
      expiry of the calendar quarter; provided, that if the information
                                      --------
      necessary to make such payments is not available within such [* * *]
      period, Lilly shall have an additional [* * *] to make such payments.  The
      method of payment shall be by wire transfer to an account specified by
      Emisphere, or by such other manner as is mutually acceptable to the
      Parties.  Each payment made to Emisphere shall be accompanied by a written
      report, prepared and signed by the appropriate royalty administration
      personnel of Lilly.  The report shall clearly show the Net Sales for the
      calendar quarter for which payment is being made on a country-by-country
      basis.  In the event that no royalty is due to Emisphere for any quarterly
      period, Lilly's appropriate royalty administration officer shall so
      report.

8.5   Lilly shall maintain and keep clear, detailed, complete, accurate and
      separate records so:

      8.5.1 as to enable any royalties on Net Sales of the Product(s) which
            shall have accrued hereunder to be determined; and

      8.5.2 that any deductions made in arriving at the Net Sales can be
            determined by Emisphere.

8.6   All payments due hereunder shall be made in United States Dollars.
      Lilly's standard exchange rate methodology will be employed for the
      translation of foreign currency sales into United States Dollars.  This
      methodology shall be

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      the one used by Lilly in the translation of its foreign currency operating
      results for external reporting, shall be consistent with general accepted
      accounting principles, and shall be the one approved and reviewed by
      Lilly's independent certified public accountants.

8.7   Subject to the provisions of Clauses 8.8 and 8.10 of this Agreement, Lilly
      shall pay all royalties at full rate.

8.8   If, at any time, legal restrictions in the Territory prevent the prompt
      payment of running royalties or any portion thereof, the Parties shall
      meet to discuss suitable and reasonable alternative methods of reimbursing
      Emisphere the amount of such running royalties. In the event that Lilly is
      prevented from making any payment under this Agreement by virtue of the
      statutes, laws, codes or government regulations of the country from which
      the payment is to be made, then such payments may be paid by depositing
      them in the currency in which they accrue to an account set up for
      Emisphere in a bank acceptable to Emisphere in the country the currency of
      which is involved or as otherwise agreed by the Parties.

8.9   Emisphere and Lilly agree to co-operate in all respects necessary to take
      advantage of any double taxation agreements or similar agreements as may,
      from time to time, be available.

8.10  All taxes levied on payment of royalties accruing to Emisphere under this
      Agreement shall be paid by Emisphere.  If applicable laws or regulations
      require withholding taxes by Lilly, the taxes will be deducted by Lilly
      from remittable royalties and will be paid by Lilly on account of
      Emisphere to the appropriate government tax authority.

9.    RIGHT OF AUDIT AND INSPECTION

9.1   Within the term of this Agreement and within one year after its
      termination, Emisphere shall not more than [* * *] each year have the
      right at its expense to have Lilly's independent certified public
      accountants inspect and audit Lilly's records for any of the two preceding
      years for the purpose of determining the accuracy of royalty payments.
      The independent certified accountants shall keep confidential any
      information obtained during such inspection and shall report to Emisphere
      only the amounts of Net Sales and royalties due and payable.  Any such
      inspection of Lilly's records shall be at the expense of Emisphere, except
      that if any such inspection reveals a deficiency in the amount of the
      running royalty actually paid to Emisphere hereunder in any calendar year
      of [* * *]% or more of the amount of any running royalty actually due to
      Emisphere hereunder, then the expense of such inspection shall be borne
      solely by Lilly.  Any amount of deficiency shall be paid promptly to
      Emisphere.  If such inspection reveals a surplus in the

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      amount of running royalty actually paid to Emisphere by Lilly, Emisphere
      shall reimburse Lilly the surplus.

9.2   Within the term of this Agreement and within one year after its
      termination, Lilly shall not more than [* * *] each year have the right at
      its expense to have Emisphere's independent certified public accountants
      inspect and audit Emisphere's records and accompanying reports (and all
      associated documentation) for any of the two preceding years for the
      purpose of determining the accuracy of Emisphere's reported, [* * *] and
      Costs with respect to any Research and Development Program.  The
      independent certified public accountants shall keep confidential all
      materials subject to third-party confidentiality agreements and all
      materials not directly relevant to the purpose of their audit.  Any such
      inspection of Emisphere's records shall be at the expense of Lilly, except
      that if any such inspection reveals an overpayment in the amount of such
      Costs paid to Emisphere hereunder in any calendar year of [* * *] or more
      of the amount of such Costs actually due to Emisphere hereunder, then the
      expense of such inspection shall be borne solely by Emisphere instead of
      by Lilly.  Any surplus over the Costs properly payable by Lilly to
      Emisphere shall be refunded promptly to Lilly.  If such inspection reveals
      a deficit in the amount of the Costs properly payable to Emisphere by
      Lilly, Lilly shall pay the deficit to Emisphere.

9.3   In the event of any unresolved dispute regarding any alleged deficiency or
      overpayment of royalty payments or Cost payments hereunder, the matter
      will be referred to the independent firm of certified public accountants
      of [* * *] for a resolution of such dispute.  The decision of said firm of
      certified public accountants shall be binding on the Parties.

10.   PATENTS

10.1  Emisphere shall be obliged to disclose promptly to Lilly inventions made
      by or on behalf of Emisphere in connection with the performance of the
      Research and Development Programs, any patentable inventions and
      discoveries within the Emisphere Know-How that relate to the Field, the
      Emisphere Program Know-How and any patentable Improvements developed by or
      on behalf of Emisphere (other than pursuant to the Research and
      Development Program).

10.2  The Parties shall discuss in good faith all material issues relating to
      filing, prosecution and maintenance of Emisphere Patents (insofar as the
      Emisphere Patents are of relevance to the Field), the Emisphere Program
      Patents, any patentable inventions and discoveries within the Emisphere
      Know-How that relate to the Field, and any patentable Improvements
      developed by or on behalf of Emisphere or to protect such inventions
      and/or Improvements as trade secrets (other than pursuant to the Research
      and Development Program). Subject to agreement to the contrary the
      following provisions shall apply:

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        10.2.1  Emisphere at its expense shall make a good faith effort (a) to
                secure the grant of any patent applications within the Emisphere
                Patents and Emisphere Program Patents; (b) to file and prosecute
                patent applications on patentable inventions and discoveries
                within the Emisphere Know-How and patentable Improvements (or to
                protect such inventions and/or Improvements as trade secrets)
                developed by or on behalf of Emisphere (other than pursuant to
                the Research and Development Program); (c) to defend all such
                applications against third party oppositions; and (d) to
                maintain in force any issued letters patent within the Emisphere
                Patents and Emisphere Program Patents (including any letters
                patent that may issue covering any Improvements). Emisphere
                shall have the sole right in its reasonable business discretion
                to control such filing, prosecution, defense and maintenance;
                provided however, that Lilly shall have a reasonable right to be
                provided with copies of all documents relating to such filing,
                prosecution, defense, and maintenance in sufficient time to
                review such documents and comment thereon, if desired by Lilly,
                prior to filing. Should Emisphere decide for commercial or other
                reasons to abandon in any country any patent or patent
                application pertaining to the Emisphere Patents or the Emisphere
                Program Patents for those Carriers that (i) are part of a
                Product which is either undergoing or has gone through a Lilly
                clinical development program or (ii) Emisphere, in good faith,
                reasonably believes may be utilized as part of a Product for
                clinical development by Lilly, it shall first obtain Lilly's
                written consent, which consent shall not be unreasonably
                withheld.

        10.2.2  In the event that Emisphere informs Lilly that it does not
                intend to file patent applications on patentable inventions and
                discoveries within the Emisphere Know-How or Emisphere Program
                Know-How that relate to those Carriers that have gone through a
                Lilly clinical development program or patentable Improvements
                developed thereon by or on behalf of Emisphere (other than
                pursuant to the Research and Development Program) in one or more
                countries in the Territory or fails to file such an application
                within a reasonable period of time, but in no event less than
                four (4) months after disclosure to Lilly pursuant to Clause
                10.1, at Emisphere's election, Lilly shall have the right, but
                not the obligation, at Lilly's sole expense to file and
                prosecute such patent application(s) in the name of Lilly and
                Emisphere, upon written request from Lilly, shall execute all
                documents, forms and declarations and do all things as shall be
                reasonably necessary to enable Lilly to exercise such right. In
                the event that Emisphere so elects and Lilly files any such
                application, such application shall [* * *].

10.3    Emisphere shall assist Lilly in good faith regarding all material issues
        that arise from their joint work on the Research and Development Program
        relating to

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        filing, prosecution and maintenance of Lilly Patents (insofar as the
        Lilly Patents are of relevance to the Field), the Lilly Program Patents
        and any patentable inventions and discoveries within the Lilly Know-How
        that relate to the Field. Such assistance will be provided, however,
        only upon Lilly's request. Subject to agreement to the contrary, the
        following provisions shall apply:

        10.3.1  Lilly shall be solely responsible for all facets of filing and
                prosecuting patent applications and maintaining and defending
                patents within the Lilly Patents and the Lilly Program Patents,
                including all expenses pertaining thereto.

        10.3.2  Any assistance from Emisphere requested by Lilly with respect to
                its obligations as set forth in this Clause 10.3 shall be
                provided at Lilly's expense. Emisphere will use its best
                reasonable efforts to provide such assistance in the manner
                requested by Lilly.

10.4    With respect to any Joint Patents, Emisphere will prepare and file
        patent applications on behalf of both Parties and will diligently
        prosecute same. Prior to the contemplated filing, Emisphere shall submit
        a substantially completed draft of such patent applications to Lilly for
        approval, which approval shall not be unreasonably withheld or delayed.
        In the event of an imminent statutory bar to patenting, Emisphere shall
        have the right to file a patent application, for the invention on which
        a patent would be barred, without first receiving approval from Lilly,
        in order to preserve the patent rights to such invention. Lilly and
        Emisphere shall equally bear the cost of preparing, filing, prosecuting
        and maintaining any patent applications and patents falling within this
        Clause 10.4. Should Emisphere not wish to file, prosecute, maintain or
        issue any patent application falling within this Clause 10.4, or
        maintain a patent issuing from any such patent applications, in any
        particular country, Emisphere will grant Lilly any necessary authority
        to file, prosecute, maintain or issue such patent application, or
        maintain such a patent, in the name of Lilly. However, in such case,
        such patent application or patent for such country shall be considered
        to be a Lilly Program Patent. Likewise, should Lilly not wish to file,
        prosecute, maintain or issue any patent application falling with this
        Clause 10.4, or maintain a patent issuing from such patent applications,
        in any particular country, Lilly will grant Emisphere any necessary
        authority to file, prosecute, issue and maintain such patent
        application, or maintain such a patent, in the name of Emisphere.
        However, in such case, such patent application or patent for such
        country shall be considered to be an Emisphere Program Patent.

10.5    Emisphere and Lilly shall promptly inform the other in writing of any
        alleged infringement of any patents within the Emisphere Patents, the
        Emisphere Program Patents or the Joint Patents or of any alleged
        misappropriation of trade secrets within the Emisphere Know-

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        How, the Emisphere Program Know-How or the Joint Know-How, as such
        infringement or misappropriation relates to the Field, by a third party
        of which it becomes aware and provide the other with any available
        evidence of such infringement or misappropriation.

        10.5.1  (a) Emisphere shall have the primary right, but not the
                obligation, to institute, prosecute and control any action or
                proceeding with respect to any infringement of any of the
                Emisphere Technology or the Emisphere Program Technology by
                counsel of its own choice. Lilly shall cooperate with Emisphere
                at Emisphere's request in the prosecution of such action or
                proceeding. If Emisphere reasonably determines that Lilly is an
                indispensable Party to the action, Lilly hereby consents to be
                joined. In such event, Lilly shall have the right to be
                represented in that action by counsel of its own choice and at
                Lilly's expense.

                (b) If Emisphere fails to bring an action or proceeding within a
                period of [* * *] days after receiving written notice from Lilly
                or otherwise having knowledge of infringement of the Emisphere
                Technology or the Emisphere Program Technology in the Field,
                Lilly shall have the right to bring and control any such action
                by counsel of its own choice and expense. If Lilly reasonably
                determines that Emisphere is an indispensable Party to the
                action, Emisphere hereby consents to be joined. In such event,
                Emisphere shall have the right to be represented in that action
                by counsel of its own choice and at Emisphere expense.

                (c) No settlement, consent judgment or other voluntary final
                disposition of a suit under this Clause 10.5.1 may be entered
                into without the joint consent of Lilly and Emisphere (which
                consent shall not be withheld unreasonably or delayed by either
                Party).

                (d) If Emisphere brings an action hereunder, any damages or
                other monetary awards recovered by Emisphere attributable to
                sales of Product shall be applied first to defray the costs and
                expenses incurred in the action. If any balance remains,
                Emisphere shall pay Lilly [* * *]% of such balance.

                (e) If Emisphere fails to bring an action hereunder and Lilly
                brings action, any damages or other monetary awards recovered by
                Lilly attributable to sales of Product shall be applied first to
                defray the costs and expenses incurred in the action. If any
                balance remains, Lilly shall pay Emisphere [* * *]% of such
                balance.

                (f) In the alternative, the Parties may agree to institute such
                proceedings in their joint names and shall reach agreement as to
                the

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                proportion in which they will share the proceeds of any such
                proceedings, and the expense of any costs not recovered.

                (g) If the infringement of the Emisphere Patents or the
                Emisphere Program Patents affects the Field as well as other
                products being developed or commercialized by Emisphere or its
                commercial partners, the Parties shall agree as to the manner in
                which the proceedings should be instituted and shall reach
                agreement as to the proportion in which they will share the
                proceeds of any such proceedings, and the expense of any costs
                not recovered.

        10.5.2  During the term of this Agreement, Lilly shall have the first
                right but not the obligation to bring suit or otherwise take
                action against any alleged infringement of the Lilly Program
                Patents or alleged misappropriation of the Lilly Program
                Know-How. In the event that Lilly takes such action, Lilly shall
                do so solely at its own cost and expense and all damages and
                monetary award recovered in or with respect to such action shall
                be the property of Lilly. At Lilly's reasonable request,
                Emisphere will co-operate with any such action at Lilly's sole
                cost and expense.

        10.5.3  During the term of this Agreement, both Parties shall have the
                right but not the obligation to bring suit or otherwise take
                action against any alleged infringement of the Joint Patents or
                alleged misappropriation of the Joint Know-How. Both Parties
                shall be obligated to inform the other of any infringement or
                misappropriation of which they become aware. The Parties shall
                jointly determine in good faith how to manage any action with
                respect to any such infringement or misappropriation. In the
                alternative, or if one party desires to take such an action and
                the other does not, the Party that takes such action shall do so
                solely at its own cost and expense and all damages and monetary
                award recovered in or with respect to such action shall be the
                property of that Party. At such Party's reasonable request, the
                other Party will co-operate with any such action at the
                requesting Party's sole cost and expense.

10.6    Emisphere may defend against any Third Party claim that is related to
        the Emisphere Patents, Emisphere Program Patents, Emisphere Know-How or
        Emisphere Program Know-How. Lilly shall cooperate with Emisphere as may
        be reasonably requested by Emisphere in such defense and shall have the
        right to be represented by counsel of its own choice at Lilly's expense
        provided that Emisphere shall (i) keep Lilly fully informed with regard
        to the defense of such Third Party claim and (ii) obtain Lilly's prior
        written approval before entering into any settlement in connection with
        such Third Party claims, such approval not to be unreasonably withheld
        or delayed.

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        If within [* * *] of receiving notice of any Third Party claim related
        to the Field, Emisphere fails to defend against such Third Party claim,
        Lilly may, at its own cost, defend against such Third Party claim;
        provided that Lilly shall (i) keep Emisphere fully informed with regard
        to the defense of such Third Party claim, and (ii) obtain Emisphere's
        prior written approval before entering into any settlement in connection
        with such Third Party claim, such approval not be unreasonably withheld
        or delayed. Emisphere shall cooperate with Lilly as may reasonably be
        requested by Lilly in such defense and shall have the right to be
        represented by counsel of its own choice at Emisphere's expense. If
        royalties or lump sum payments are due to the Third Party by reason of a
        court order or litigation settlement, such payment shall be solely the
        responsibility of Lilly, provided that [* * *]% of such Third Party
        royalties or lump sum payments shall be offset against royalties payable
        to Emisphere under this Agreement, not to exceed the royalties due
        Emisphere, as also set forth in Clause 13.1.

10.7    Except as provided in Clauses 10.6 and 13.1, Emisphere shall have no
        liability to Lilly whatsoever or howsoever arising for any losses
        incurred by Lilly as a result of having to cease selling Product(s) or
        having to defer the Launch of Product(s) as a result of any infringement
        proceedings.

11.     CONFIDENTIAL INFORMATION

11.1    The Parties acknowledge that it may be necessary, from time to time, to
        disclose to each other confidential and proprietary information,
        including without limitation, inventions, works of authorship, trade
        secrets, specifications, designs, data, know-how and other information,
        relating to the Field, the Compounds, the Carriers, the Products,
        processes, and services of the disclosing Party or regarding the
        Emisphere Technology or Emisphere Program Technology or the Lilly
        Technology or the Lilly Program Technology. The foregoing shall be
        referred to collectively as "Confidential Information". Any Confidential
        Information revealed by a Party to another Party shall be used by the
        receiving Party exclusively for the purposes of fulfilling the receiving
        Party's obligations under this Agreement.

11.2    Each Party agrees to disclose Confidential Information of another Party
        only to those employees, representatives and agents requiring knowledge
        thereof in connection with their duties directly related to the
        fulfilling of the Party's obligations under this Agreement. Each Party
        agrees that it will exercise the same degree of care, but in no event
        less than a reasonable degree, and protection to preserve the
        proprietary and confidential nature of the Confidential Information
        disclosed by the other Party, as the receiving Party would exercise to
        preserve its own proprietary and confidential information. Each Party
        agrees that it will, upon request of the other Party, return all
        documents and any copies thereof containing Confidential Information

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        belonging to or disclosed by, such Party if such documents are not
        required to perform its obligations hereunder, and further provided that
        the returning party may keep one copy of all such documents in its legal
        archive for recording purposes.

11.3    With respect to all Confidential Information furnished by one Party to
        the other pursuant to this Agreement, either in writing or orally, the
        Party receiving such Confidential Information shall maintain the
        confidential and proprietary status of such Confidential Information,
        keep such Confidential Information and each part thereof within its
        possession or under its control, use all its reasonable efforts to
        prevent the disclosure of any Confidential Information to any other
        person, and use all its reasonable efforts to ensure that such
        Confidential Information is used only for those purposes specifically
        authorized by this Agreement. These mutual obligations of
        confidentiality shall apply until ten (10) years after termination or
        expiration of this Agreement. Confidential Information, further, shall
        not be deemed to include any information to the extent that such
        information is:

        (a) independently developed by the recipient as documented by prior
        written records outside the scope and not in violation of this
        Agreement;

        (b) in the public domain at the time of its receipt or thereafter
        becomes part of the public domain through no fault of the recipient;

        (c) received without an obligation of confidentiality from a third party
        having the right to disclose such information;

        (d) released from the restrictions of this Clause 11 by the express
        written consent of the disclosing Party;

        (e) required by law, statute, rule or court order to be disclosed (the
        disclosing Party shall, however, use reasonable efforts to obtain
        confidential treatment of any such disclosure, consult with the other
        Party and permit the other Party to participate in seeking an
        appropriate protective order).

        Notwithstanding the provisions of this Clause 11, Emisphere and Lilly
        may, to the extent necessary, disclose and use Confidential Information
        only for the purpose of carrying out their duties and obligations under
        this Agreement (i) to any Affiliate, sublicensee or subcontractor of
        either Emisphere or Lilly hereunder (if such sublicensee or
        subcontractor is subject to provisions substantially similar to those
        set forth in this Clause 11); (ii) to secure patent protection, pursuant
        to Clause 10 hereof, for an invention developed as a result of the
        collaboration undertaken pursuant to this Agreement or (iii) to obtain
        institutional or government approval to test clinically or market any
        Product subject to confidential treatment if possible.

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11.4    The Parties agree that the obligations of this Clause 11 are necessary
        and reasonable in order to protect the Parties' respective businesses,
        and each Party expressly agrees that monetary damages would be
        inadequate to compensate a Party for any breach by the other Party of
        its covenants and agreements set forth herein. Accordingly, the Parties
        agree and acknowledge that any such violation or threatened violation
        will cause irreparable injury to a Party and that, in addition to any
        other remedies that may be available, in law and equity or otherwise,
        any Party shall be entitled to obtain injunctive relief against the
        threatened breach of the provisions of this Clause 11, or a continuation
        of any such breach by the other Party, specific performance and other
        equitable relief to redress such breach together with its damages and
        reasonable counsel fees and expenses to enforce its rights hereunder,
        without the necessity of proving actual or express damages.

12.     TERM OF AGREEMENT

12.1    Subject to the provisions for earlier termination set out in Clauses
        12.2, 12.3, and 12.6 and the provisions regarding the payment of
        royalties in Clause 8, the term of this Agreement shall be a period
        commencing as of the Effective Date and expiring on a country by country
        basis on the last to occur of:

        12.1.1  nine (9) years from the date of Launch of the Product(s) in the
                country concerned; or

        12.1.2  upon the expiration of the last to expire patent included in the
                Emisphere Patents, the Emisphere Program Patents and/or the
                Joint Patents to the extent that any such patents cover
                Products(s).

12.2    In addition to the rights of early or premature termination provided for
        elsewhere in this Agreement, in the event that any of the terms or
        provisions hereof are incurably breached by either Party, the non-
        breaching Party may immediately terminate this Agreement by written
        notice. Subject to the other provisions of this Agreement, in the event
        of any other breach, the non-breaching Party may terminate this
        Agreement by giving written notice to the breaching Party that this
        Agreement will terminate on the sixtieth (60th) day from notice unless
        cure is sooner effected. If the breaching Party has proposed a course of
        action to rectify the breach and is acting in good faith to rectify same
        but has not cured the breach by the sixtieth (60th) day, the said period
        shall be extended by such period as is reasonably necessary to enable
        the breach to be cured. If termination of this Agreement pursuant to
        this Clause 12.2 is caused by a breach of this Agreement by Lilly, Lilly
        shall lose all rights pursuant to Clauses 2 and 3 above. If Emisphere
        breaches this Agreement then restitution to Lilly appropriate for the
        degree of the breach shall be made, and Lilly shall continue payments
        pursuant to a mutually acceptable escrow agreement until the matter is
        resolved.

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12.3  As used in this Clause 12, the term "Event of Bankruptcy" relating to
      either Party shall mean:

      (a)   the appointment of a liquidator, receiver, administrator, examiner,
            trustee or similar officer over either Party or over all or a
            substantial part of its assets under the law of any applicable
            jurisdiction, including without limit, the United States of America;
            or

      (b)   an application or petition for bankruptcy, corporate re-
            organization, composition, administration, examination, arrangement
            or any other procedure similar to any of the foregoing under the law
            of any applicable jurisdiction, including without limitation, the
            United States of America, is filed, and is not discharged within
            thirty (30) days, or if either Party applies for or consents to the
            appointment of a receiver, administrator, examiner or similar
            officer over it or over all or a material part of its assets, rights
            or revenues or the assets and/or the business of either Party are
            for any reason seized, confiscated or condemned.

    12.3.1  If at any time during the term of this Agreement, an "Event of
            Bankruptcy" (as defined above) relating to Emisphere occurs, Lilly
            shall have, in addition to all other legal and equitable rights and
            remedies available hereunder, the option to terminate this Agreement
            upon thirty (30) days' written notice, given within sixty (60) days
            following the date that Lilly becomes aware of the Event of
            Bankruptcy. Upon such termination by Lilly, Lilly shall be entitled
            to solely continue the activities conducted or to be conducted
            pursuant to this Agreement but for the Event of Bankruptcy.

    12.3.2  If at any time during the term of this Agreement, an "Event of
            Bankruptcy" (as defined above) relating to Lilly occurs, other than
            in circumstances where the Event of Bankruptcy arises directly or
            indirectly as a result of a dispute with Emisphere and it is
            unlikely that the Event of Bankruptcy would have arisen if Lilly and
            Emisphere had been in agreement, rather than in dispute, Emisphere
            shall have, in addition to all other legal and equitable rights and
            remedies available hereunder, the option to terminate this Agreement
            upon thirty (30) days' written notice, given within sixty (60) days
            following the date that Emisphere becomes aware of the Event of
            Bankruptcy.

12.4  Upon exercise of those rights of termination as specified in Clause 12.1
      to Clause 12.3 inclusive or elsewhere within the Agreement, this Agreement
      shall, subject to the other provisions of the Agreement, automatically
      terminate forthwith and be of no further legal force or effect.

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12.5    Upon expiration or termination of the Agreement:

        12.5.1  any sums that were due from Lilly to Emisphere on Net Sales in
                the Territory or in such particular country or countries in the
                Territory, as the case may be, prior to the expiration or
                termination of this agreement as set forth herein shall be paid
                in full within [* * *] ([* * *] if the information necessary to
                make such payment is not available within such [* * *] period)
                of the expiration or termination of this Agreement for the
                Territory or for such particular country or countries in the
                Territory, as the case may be;

        12.5.2  all confidentiality provisions set out herein shall remain in
                full force and effect;

        12.5.3  all responsibilities and warranties shall insofar as are
                appropriate remain in full force and effect;

        12.5.4  the rights of inspection and audit set out in Clause 9 shall
                continue in force for a period of one year;

        12.5.5  except as expressly provided for under Clauses 12.2 and 12.5.7
                all rights and licenses granted in and pursuant to this
                Agreement shall cease for the Territory or for such particular
                country or countries in the Territory, as the case may be.
                Following such expiration or termination, Lilly may not
                thereafter, except as expressly provided for in Clauses 12.2 and
                12.5.7, use in the Territory or in such particular country or
                countries in the Territory, as the case may be, (a) any valid
                and unexpired Emisphere Patents or Emisphere Program Patents
                and/or (b) any Emisphere Know-How or Emisphere Program Know-How
                that remains confidential or otherwise proprietary to Emisphere;
                and

        12.5.6  to the extent this Agreement is terminated (as opposed to
                expired) in the Territory or any particular country in the
                Territory, Lilly shall promptly make an accounting to Emisphere
                of the inventory of the Product(s) which it has in the Territory
                or for such particular country or countries in the Territory, as
                the case may be, if any, as of the date of such termination and
                Lilly shall have the right for a period of [* * *] after said
                termination to sell such inventory of the Product(s) in the
                Territory or in such particular country or countries in the
                Territory, as the case may be, or, if appropriate and legally
                permissible, to transport such inventory of Product(s) for sale
                in another country or countries in the Territory within such [*
                * *] period; provided that the Net Sales thereof shall be
                subject to the royalty provisions of Clause 8 and so payable to
                Emisphere. Thereafter, any remaining inventory of

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                Product(s) shall be disposed of by mutual agreement of the
                Parties in accordance with regulatory requirements.

        12.5.7  upon the conclusion of the term of this Agreement in any
                particular country, Lilly shall have a fully paid-up, exclusive
                license to make or use the Emisphere Know-How and Emisphere
                Program Know-How for the Products in the Field in that country.
                Upon such conclusion of the term of this Agreement in any
                particular country, [* * *].

12.6    Lilly shall have the option to terminate the Agreement upon [* * *]
        prior written notice to Emisphere. Lilly shall pay for any and all
        external (to Lilly) research and development commitments by Emisphere in
        place at the time of such notice of termination to the extent that
        Emisphere cannot terminate the same without penalty.

        If Lilly terminates this Agreement without cause (e.g., for reasons
        other than safety of the Carriers, clinical results of the Product, or
        the Emisphere Technology efficiency), the Parties will issue a joint
        press release which states that the termination was not due to the
        Emisphere Technology, and that Lilly will continue to evaluate the
        Emisphere Technology with respect to other Lilly therapeutic Compounds.

13.     WARRANTIES/INDEMNITIES

13.1    Emisphere represents and warrants that it has the sole, exclusive and
        unencumbered right to grant the licenses and rights herein granted to
        Lilly, and that it has not granted any option, license, right or
        interest in or to the Emisphere Technology, the Emisphere Program
        Technology, the Carriers or the Product(s) to any third party which
        would conflict with the rights granted by this Agreement.

        In the case where the Emisphere Technology or the Emisphere Program
        Technology is covered by a patent or patents (or other intellectual
        property rights) held by an Independent Third Party, and both Emisphere
        and Lilly agree that a license is required under any such patent (or
        other intellectual property right) for the Parties to utilize the
        Emisphere Technology or the Emisphere Program Technology, Emisphere
        shall obtain such license and shall not pass on to Lilly, in any manner,
        any of the costs associated with obtaining such a license, including
        royalties to the Independent Third Party. In no case, however, shall
        Emisphere be required to obtain such a license if the costs of so doing
        would exceed the royalty payments by Lilly provided for hereunder.
        However, Lilly shall be permitted to obtain such a license and deduct
        from royalties otherwise due to Emisphere the costs of obtaining the
        license, up to a limit of all royalty payments due to Emisphere
        hereunder. In any such case,

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        Lilly, in its negotiations with the Independent Third Party with respect
        to the amount of compensation for such a license, shall act in good
        faith vis a vis Emisphere.

13.2    Lilly represents and warrants that it has the sole, exclusive and
        unencumbered right to grant the licenses and rights herein granted to
        Emisphere and that it has not granted any option, license, right or
        interest in or to the Lilly Technology or the Lilly Program Technology
        to any third party which would conflict with the rights granted by this
        Agreement.

        In the case where the Lilly Technology or the Lilly Program Technology
        is covered by a patent or patents (or other intellectual property
        rights) held by an Independent Third Party, and, as a result thereof,
        either (i) Lilly is prohibited from continuing the development or sale
        of a Product or (ii) Lilly ceases development or sale of a Product
        because the costs associated with obtaining the rights to proceed with
        development or sale of the Product make such continued development or
        sale uneconomic in Lilly's sole judgment, then the licenses granted
        hereunder by Emisphere shall no longer be exclusive to Lilly, and
        Emisphere shall, in its sole discretion, have the right to enter into a
        license agreement with such Independent Third Party for use of the
        Emisphere Technology or Emisphere Program Technology in the development
        or sale of the Product. The foregoing shall not be interpreted so as to
        imply any license of the Lilly Technology or the Lilly Program
        Technology to Emisphere or to the Independent Third Party, nor shall
        this clause be deemed an impediment to any agreement among Emisphere,
        Lilly and the Independent Third Party to develop or sell the Product.

13.3    Emisphere represents and warrants that to the best of its knowledge, the
        true inventors of the subject matter claimed are named in the Emisphere
        Patents and all such inventors have irrevocably assigned all their
        rights and interests therein to Emisphere.

13.4    Emisphere represents and warrants that it is not aware of any
        information material to the examination of the Emisphere Patents that
        was not disclosed to the United States Patent Office.

13.5    Emisphere and Lilly represent and warrant for the benefit of each other
        that the execution of this Agreement by them and the full performance
        and enjoyment of the rights of them under this Agreement will not breach
        the terms and conditions of any license, contract, understanding or
        agreement, whether express, implied, written or oral between them and
        any third party.

13.6    Emisphere and Lilly represent and warrant for the benefit of each other
        that as of the Effective Date of executing this Agreement, to the best
        of their knowledge no patents, trade secrets or any other proprietary
        rights of any

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        third party would be infringed by the manufacture, use or sale of the
        Product(s).

13.7    Lilly represents and warrants that with respect to all regulatory
        filings to obtain NDA approvals, to the best of Lilly's knowledge, the
        data and information in Lilly's submission(s) are and shall be free from
        fraud or material falsity, that the NDA approvals have not been and will
        not be obtained either through bribery or the payment of illegal
        gratuities, that the data and information in Lilly's submissions are and
        shall be accurate and reliable for purposes of supporting approval of
        the submissions, and that the NDA approvals are and shall be obtained
        without illegal or unethical behavior of any kind.

13.8    Lilly represents and warrants that the Product(s) sold by Lilly under
        this Agreement shall conform to the Specifications and be in accordance
        with all regulations and requirements of the FDA including the then
        current Good Manufacturing Practice regulations which apply to the
        manufacture and supply of the Product(s). Lilly represents and warrants
        that the Product(s) sold by it shall not be adulterated or mis-branded
        as defined by the US Federal Food, Drug and Cosmetic Act, and shall not
        be a product which would violate any section of such Act if introduced
        in interstate commerce. EXCEPT AS EXPRESSLY STATED IN THIS CLAUSE 13.8,
        ALL OTHER WARRANTIES, CONDITIONS AND REPRESENTATIONS, EXPRESS OR
        IMPLIED, STATUTORY OR OTHERWISE, INCLUDING A WARRANTY AS TO THE QUALITY
        OR FITNESS FOR ANY PARTICULAR PURPOSE OF THE PRODUCT(S) ARE HEREBY
        EXCLUDED AND LILLY SHALL NOT BE LIABLE IN CONTRACT, TORT OR OTHERWISE
        FOR ANY LOSS, DAMAGE, EXPENSE OR INJURY OF ANY KIND WHATSOEVER,
        CONSEQUENTIAL OR OTHERWISE, ARISING OUT OF OR IN CONNECTION WITH THE
        PRODUCT(S) OR ANY DEFECT IN THE PRODUCT(S) OR FROM ANY OTHER CAUSE.

13.9    Lilly is fully cognizant of all applicable statutes, ordinances and
        regulations of the Territory with respect to the manufacture of the
        Product(s) including, but not limited to, the U.S. Federal Food, Drug
        and Cosmetic Act and regulations thereunder, current Good Laboratory
        Practices and current Good Manufacturing Practices. Lilly shall
        manufacture the Product(s) in conformance with the Specifications and
        the Drug Master File (which Lilly shall own), to the extent any such
        Drug Master File exists, and in a manner which fully complies with such
        statutes, ordinances, regulations and practices.

13.10   Emisphere represents and warrants that the Carrier supplied by Emisphere
        under this Agreement shall conform to the Specifications and be in
        accordance with all regulations and requirements of the FDA including
        the then current Good Manufacturing Practice regulations which apply to
        the manufacture and supply of the Carrier. Emisphere represents and
        warrants that the Carrier supplied by it shall not be adulterated or
        mis-branded as defined by the US

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        Federal Food, Drug and Cosmetic Act, and shall not be a product which
        would violate any section of such Act if introduced in interstate
        commerce. EXCEPT AS EXPRESSLY STATED IN THIS CLAUSE 13.10, ALL OTHER
        WARRANTIES, CONDITIONS AND REPRESENTATIONS, EXPRESS OR IMPLIED,
        STATUTORY OR OTHERWISE, INCLUDING A WARRANTY AS TO THE QUALITY OR
        FITNESS FOR ANY PARTICULAR PURPOSE OF THE PRODUCT(S) ARE HEREBY EXCLUDED
        AND EMISPHERE SHALL NOT BE LIABLE IN CONTRACT, TORT OR OTHERWISE FOR ANY
        LOSS, DAMAGE, EXPENSE OR INJURY OF ANY KIND WHATSOEVER, CONSEQUENTIAL OR
        OTHERWISE, ARISING OUT OF OR IN CONNECTION WITH THE PRODUCT(S) OR ANY
        DEFECT IN THE PRODUCT(S) OR FROM ANY OTHER CAUSE.

13.11   Emisphere is fully cognizant of all applicable statutes, ordinances and
        regulations of the Territory with respect to the manufacture of the
        Carrier including, but not limited to, the U.S. Federal Food, Drug and
        Cosmetic Act and regulations thereunder, current Good Laboratory
        Practices and current Good Manufacturing Practices. Emisphere shall
        manufacture the Carrier in conformance with the Specifications and the
        Drug Master File and in a manner which fully complies with such
        statutes, ordinances, regulations and practices. Emisphere shall own the
        Drug Master File with respect to the Carriers, and Lilly shall have
        access and a right of review thereto with respect to its manufacture of
        Carriers and its regulatory filings.

13.12   In addition to any other indemnifications provided for herein, Emisphere
        shall indemnify and hold harmless Lilly and its Affiliates and their
        respective employees, agents, partners, officers and directors from and
        against any claims, losses, liabilities or damages (including reasonable
        attorney's fees and expenses) incurred or sustained by Lilly arising out
        of or in connection with any (a) breach of any representation, covenant,
        warranty or obligation by Emisphere hereunder, or (b) any act or
        omission on the part of Emisphere or any of its agents or employees in
        the performance of this Agreement.

13.13   In addition to any other indemnifications provided for herein, Lilly
        shall indemnify and hold harmless Emisphere and its Affiliates and their
        respective employees, agents, partners, officers and directors from and
        against any claims, losses, liabilities or damages (including reasonable
        attorney's fees and expenses) incurred or sustained by Emisphere arising
        out of or in connection with any (a) breach of any representation,
        covenant, warranty or obligation by Lilly hereunder, or (b) any act or
        omission on the part of Lilly or any of its agents or employees in the
        performance of this Agreement.

13.14   Lilly shall assume the sole and entire responsibility and shall
        indemnify and hold harmless Emisphere from any and all claims,
        liabilities, expenses, including reasonable attorney's fees,
        responsibilities and damages by reason of any claim, proceedings,
        action, liability or injury arising out of any faults of

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        the Product(s) resulting from the transport, packaging, storage,
        handling, distribution, marketing or sale of the Product(s) by Lilly, to
        the extent that it was caused by the negligence or wrongful acts or
        omissions on the part of Lilly.

13.15   Emisphere shall assume the sole and entire responsibility and shall
        indemnify and hold harmless Lilly from any and all claims, liabilities,
        expenses, including reasonable attorney's fees, responsibilities and
        damages by reason of any claim, proceeding, action, liability or injury
        arising out of any faults of the Carrier(s) resulting from the
        transport, packaging, storage, handling, distribution, marketing or sale
        of the Carrier(s) by Emisphere, to the extent that it was caused by the
        negligence or wrongful acts or omissions on the part of Emisphere.

13.16   As a condition of obtaining an indemnity in the circumstances set out
        above, the Party seeking an indemnity shall:

        13.16.1 fully and promptly notify the other Party of any claim or
                proceeding, or threatened claim or proceeding;

        13.16.2 permit the indemnifying Party to take full care and control of
                such claim or proceeding;

        13.16.3 cooperate in the investigation and defense of such claim or
                proceeding;

        13.16.4 not compromise or otherwise settle any such claim or proceeding
                without the prior written consent of the other Party, which
                consent shall not be unreasonably withheld, conditioned or
                delayed; and

        13.16.5 take all reasonable steps to mitigate any loss or liability in
                respect of any such claim or proceeding.

13.7    NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, EMISPHERE
        AND LILLY SHALL NOT BE LIABLE TO THE OTHER BY REASON OF ANY
        REPRESENTATION OR WARRANTY, CONDITION OR OTHER TERM OR ANY DUTY OF
        COMMON LAW, OR UNDER THE EXPRESS TERMS OF THIS AGREEMENT, FOR ANY
        CONSEQUENTIAL OR INCIDENTAL LOSS OR DAMAGE (WHETHER FOR LOSS OF PROFIT
        OR OTHERWISE) AND WHETHER OCCASIONED BY THE NEGLIGENCE OF THE RESPECTIVE
        PARTIES, THEIR EMPLOYEES OR AGENTS OR OTHERWISE WHETHER OR NOT THEY HAVE
        BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

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14.     REGULATORY APPROVALS

14.1    Any and all INDAs, NDAs and other applications for regulatory approval
        filed hereunder for the Product(s) shall be the responsibility and
        property of Lilly. Lilly shall allow Emisphere access thereto to enable
        Emisphere to fulfill its obligations and exercise its rights under this
        Agreement. Lilly will be responsible for all regulatory filings in all
        countries and shall allow Emisphere access to related correspondence, to
        the extent such access is necessary to enable Emisphere to fulfill its
        obligations and exercise its rights under this Agreement. In particular,
        Lilly agrees to inform Emisphere should any such correspondence
        reasonably pertain to the Emisphere Technology or the Emisphere Program
        Technology. The Parties shall collaborate in relation to obtaining the
        approval of the FDA for final approved labeling.

14.2    Save as otherwise outlined in this Agreement, the costs and expenses of
        any filings and proceedings made by Lilly to the FDA, including post
        approval studies required by the FDA in respect of the Product(s), and
        to maintain the FDA approval hereunder shall be paid by Lilly.

14.3    Lilly shall indemnify and hold harmless Emisphere, its agents and
        employees from and against all claims, damages, losses, liabilities and
        expenses to which Emisphere, its agents, and employees may become
        subject related to or arising out of Lilly's bad faith, gross negligence
        or intentional misconduct in connection with the filing or maintenance
        or failure to file or maintain or prosecute the NDA.

14.4    Subject to the provisions of Clause 14.4, it is hereby acknowledged that
        there are inherent uncertainties involved in the registration of
        pharmaceutical products with the FDA insofar as obtaining approval is
        concerned and such uncertainties form part of the business risk involved
        in undertaking the form of commercial collaboration as set forth in this
        Agreement. Therefore, save for using its reasonable efforts, Lilly and
        Emisphere shall have no liability to each other solely as a result of
        any failure of the Product(s) to achieve the approval of the FDA, or any
        other regulatory body in the Territory.

14.5    Should the Parties receive a notice of regulatory inspection from any
        governmental agency, or if the Parties receive notice of any potential
        regulatory action, relative to the Carrier, the Parties will have an
        obligation to notify each other of same.

        Emisphere will prepare and provide Lilly with all information deemed
        necessary by Lilly for worldwide regulatory submission of the Product
        (Lilly will provide Emisphere with a template for such submissions,
        which Emisphere shall prepare and provide the relevant information to
        Lilly). Emisphere shall also provide Lilly with necessary access to any
        regulatory filings worldwide

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        relevant to the Product and Lilly shall be entitled to use the
        information contained therein in its own regulatory filings on the
        Product. Should Emisphere wish, at any time during the term of this
        Agreement, to modify its regulatory filings relating to the Product,
        Emisphere shall provide Lilly with written notification of its
        intentions prior to making such modification. Any proposed modification
        not required by law, government or regulatory agency must be responded
        to by Lilly within thirty (30) days. If Lilly's response is not received
        by Emisphere within 30 days, approval of such proposal shall be deemed
        to have been granted. Finally, to the extent details of the regulatory
        filing process are not set forth in this section or elsewhere in the
        Agreement, the Steering Committee shall decide any such matters.

15.     INSURANCE

15.1    Lilly shall maintain comprehensive general liability insurance,
        including product liability insurance on the Product(s) manufactured
        and/or sold in such prudent amount as shall be determined by Lilly
        management for the duration of this Agreement and for a period of two
        (2) years thereafter.

15.2    Emisphere shall maintain comprehensive general liability insurance,
        including product liability insurance on the Carrier(s) manufactured for
        and/or sold to Lilly in such prudent amount as shall be determined by
        Emisphere management for the duration of this Agreement and for a period
        of two (2) years thereafter. Emisphere shall also provide Lilly with a
        vendor's certificate for the Carriers substantially in a form to be
        agreed between the Parties.

16.     IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE

16.1    Neither Party to this Agreement shall be liable for delay in the
        performance of any of its obligations hereunder if such delay results
        from causes beyond its reasonable control, including, without
        limitation, acts of God, fires, strikes, acts of war, or intervention of
        a government authority, non availability of raw materials, but any such
        delay or failure shall be remedied by such Party as soon as practicable.

17.     SETTLEMENT OF DISPUTES; PROPER LAW

17.1    The Parties will attempt in good faith to resolve any dispute arising
        out of or relating to this Agreement promptly by negotiation between the
        Chief Executive Officer of Emisphere and (a) the Vice President of
        Science, Technology and Proteins if the dispute is prior to Launch of
        Products in any country in the Territory, or (b) if the dispute arises
        after such Launch, then the Vice President of Lilly's general business
        unit responsible for the Product at issue. In the event that such
        negotiations do not result in a mutually acceptable resolution, the
        Parties agree to consider other dispute resolution

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        mechanisms including mediation. Subject to the provisions of Clause
        17.2, in the event that the Parties fail to agree on a mutually
        acceptable dispute resolution mechanism, any such dispute shall be
        finally settled by a court of competent jurisdiction. The Parties hereby
        submit to the jurisdiction of the state and Federal courts located in
        the state of New York.

17.2    This Agreement shall be governed by and construed in accordance with the
        laws of New York without reference to conflicts of laws principles.

18.     ASSIGNMENT

18.1    This Agreement may not be assigned by either Party without the prior
        written consent of the other, which consent shall not be unreasonably
        withheld, conditioned or delayed, save that either Party may assign this
        Agreement to its Affiliate or to any successor by merger or sale of
        substantially all of the assets of its business unit to which this
        Agreement relates without such consent, provided that such assignment
        does not have any adverse tax consequences on the other Party. Emisphere
        and Lilly will discuss any assignment by either Party to an Affiliate
        prior to its implementation in order to avoid or reduce any additional
        tax liability to the other Party resulting solely from different tax law
        provisions applying after such assignment to an Affiliate. For the
        purpose hereof, an additional tax liability shall be deemed to have
        occurred if either Party would be subject to a higher net tax on
        payments made hereunder after taking into account any applicable tax
        treaty and available tax credits than such Party was subject to before
        the proposed assignment.

19.     NOTICES

19.1    Any notice to be given under this Agreement shall be sent in writing in
        English by registered mail or telefaxed to the following addresses:

        If to Lilly:

        Eli Lilly and Company
        Lilly Corporate Center
        Indianapolis, IN  46285

        Attention: General Patent Counsel
        Telephone: (317) 276-3881
        Telefax:   (317) 276-2763

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        If to Emisphere:

        Emisphere Technologies, Inc.
        15 Skyline Drive
        Hawthorne, NY  10532

        Attention:  Vice President Business Development
        Telephone:  (914) 347-2220
        Telefax:    (914) 347-2498

        or to such other address(es) and telefax number(s) as may from time to
        time be notified by either Party to the other hereunder.

19.2    Any notice sent by mail shall be deemed to have been delivered within
        [* * *] working days after dispatch and any notice sent by telefax shall
        be deemed to have been delivered within [* * *] the time of the
        dispatch. Notice of change of address shall be effective upon receipt.

20.     MISCELLANEOUS CLAUSES

20.1    No waiver of any right under this Agreement shall be deemed effective
        unless contained in a written document signed by the Party charged with
        such waiver, and no waiver of any breach or failure to perform shall be
        deemed to be a waiver of any other breach or failure to perform or of
        any other right arising under this Agreement.

20.2    If any provision in this Agreement is agreed by the Parties to be, or is
        deemed to be, or becomes invalid, illegal, void or unenforceable under
        any law that is applicable hereto, (i) such provision will be deemed
        amended to conform to applicable laws so as to be valid and enforceable
        or, if it cannot be so amended without materially altering the intention
        of the Parties, it will be deleted, with effect from the date of such
        agreement or such earlier date as the Parties may agree, and (ii) the
        validity, legality and enforceability of the remaining provisions of
        this Agreement shall not be impaired or affected in any way.

20.3    The Parties shall use their respective reasonable endeavors to ensure
        that the Parties and any necessary third party shall do, execute and
        perform all such further deeds, documents, assurances, acts and things
        as any of the Parties hereto may reasonably require by notice in writing
        to the other Party or such third party to carry the provisions of this
        Agreement.

20.4    This Agreement shall be binding upon and inure to the benefit of the
        Parties hereto, their successors and permitted assigns and
        sub-licensees.

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20.5    No provision of this Agreement shall be construed so as to negate,
        modify or affect in any way the provisions of any other agreement
        between the Parties unless specifically referred to, and solely to the
        extent provided, in any such other agreement. In the event of a conflict
        between the provisions of this Agreement and the provisions of the
        Option Agreement, the terms of the Option Agreement shall prevail unless
        this Agreement specifically provides otherwise.

20.6    No amendment, modification or addition hereto shall be effective or
        binding on either Party unless set forth in writing and executed by a
        duly authorized representative of each Party.

20.7    This Agreement may be executed in any number of counterparts, each of
        which when so executed shall be deemed to be an original and all of
        which when taken together shall constitute this Agreement.

20.8    Each of the Parties undertakes to do all things reasonably within its
        power which are necessary or desirable to give effect to the spirit and
        intent of this Agreement.

20.9    Each of the Parties hereby acknowledges that in entering into this
        Agreement it has not relied on any representation or warranty save as
        expressly set out herein or in any document referred to herein.

20.10   Nothing contained in this Agreement is intended or is to be construed to
        constitute Emisphere and Lilly as partners, or Emisphere as an employee
        of Lilly, or Lilly as an employee of Emisphere. Neither Party hereto
        shall have any express or implied right or authority to assume or create
        any obligations on behalf of or in the name of the other Party or to
        bind the other Party to any contract, agreement or undertaking with any
        third party.

20.11   This Agreement has been jointly prepared and shall not be strictly
        construed against any Party.

20.12   The parties hereto agree to disclose publicly through a joint press
        release, upon signing this Agreement, the nature and scope of the
        Agreement. All press releases, scientific papers and all other public
        disclosures related to this Agreement shall be approved in advance by
        both parties, except for such disclosures permitted pursuant to Clause
        11, above, such approval not to be unreasonably withheld or delayed.
        Upon the occurrence of other significant events in the Research and
        Development Program or other activities hereunder, Emisphere and Lilly
        agree to make joint press releases. In all cases Lilly shall have the
        right to review portions of any SEC filings by Emisphere that relate
        directly to Lilly; in no case shall either party release information
        which would allow a third party to determine the actual Carriers
        (including,

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        without limitation, the Carrier/Compound complex in the Product)
        developed hereunder.

IN WITNESS THEREOF  the Parties hereto have executed this Agreement in
duplicate.

SIGNED BY
For and on behalf of
Eli Lilly and Company
in the presence of:

SIGNED BY Michael M. Goldberg, M.D.
For and on behalf of
Emisphere Technologies, Inc.
in the presence of:

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                                   APPENDIX I

                           [* * *] Content Check List

[* * *]

                                       1<PAGE>

                                                                Exhibit 10.17(b)

                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.  SUCH PORTIONS ARE  DESIGNATED "[***]."

This Agreement is made as of the 7th day of April, 1998

BY AND BETWEEN

Eli Lilly & Company

An Indiana Corporation with offices at Lilly Corporate Center, Indianapolis,
Indiana 46285

Emisphere Technologies, Inc.

A Delaware Corporation with offices at 15 Skyline Drive, Hawthorne, New York
10532

                                LICENSE AGREEMENT
<PAGE>

                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                                TABLE OF CONTENTS

 Section                                                                   Page

 1        DEFINITIONS ................................................         2

 2        GRANT OF RIGHTS ............................................        13

 3        IMPROVEMENTS ...............................................        14

 4        MANUFACTURING ..............................................        15

 5        RESEARCH AND DEVELOPMENT ...................................        16

 6        SUPPLY OF PRODUCT(S) .......................................        17

 7        EXPLOITATION OF LICENSED TECHNOLOGY ........................        17

 8        FINANCIAL PROVISIONS .......................................        18

 9        RIGHT OF AUDIT AND INSPECTION ..............................        20

10        PATENTS ....................................................        21

11        CONFIDENTIAL INFORMATION ...................................        25

12        TERM OF AGREEMENT ..........................................        27

13        WARRANTIES/INDEMNITIES .....................................        30

14        REGULATORY APPROVALS .......................................        35

15        INSURANCE ..................................................        36

16        IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE ...............        36

17        SETTLEMENT OF DISPUTES; PROPER LAW .........................        36

18        ASSIGNMENT .................................................        37

19        NOTICES ....................................................        37

20        MISCELLANEOUS CLAUSES ......................................        38
<PAGE>

                                                    Confidentiality Requested by
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                                                            SEC File No. 1-10615

WHEREAS
-------

A.    Emisphere is beneficially entitled to the use of various patents,
      including the Emisphere Patents which have been granted or are pending
      under various international conventions in relation to the Emisphere
      Technology.

B.    Emisphere is knowledgeable in the discovery and use of compounds which can
      interact with therapeutic agents in a manner to improve the transport of
      such therapeutic agents through biological membranes.

C.    Lilly is knowledgeable in the research, development, manufacture and
      marketing of pharmaceutical formulations.  Lilly owns and possesses
      patented therapeutic agents and other technologies.

D.    Emisphere and Lilly have previously entered into a Research Collaboration
      and Option Agreement regarding the Emisphere Technology.

E.    Lilly desires to enter into this Agreement with Emisphere so as to (a)
      permit Lilly to utilize the Emisphere Patents and the Emisphere Know-How
      in the research, development, manufacture, distribution and sale of the
      Products and other products in the Field and (b) to permit Lilly to
      utilize the Emisphere Program Technology in combination with the Lilly
      Program Technology in connection with (i)  research and development work
      conducted by the Parties and (ii) Lilly's manufacture and supply of
      Products and other related components.

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                                                            SEC File No. 1-10615

NOW IT IS HEREBY AGREED AS FOLLOWS:

1.   DEFINITIONS

1.1  In this present Agreement, including the Recitals and Appendix, the
     following definitions shall prevail unless the context otherwise requires:

"Acquired"          means a transfer of intellectual property or information
                    from an Independent Third Party to Emisphere or Lilly, as
                    the case may be, to the extent to which there are no
                    obligations or restrictions as to confidentiality in respect
                    of that information which prohibit disclosure or use by
                    Lilly or Emisphere, as appropriate;

"Activation         Letter" is the notification document (a copy of which is
                    attached as Schedule II hereto) received by Emisphere from a
                    senior Lilly officer or representative with appropriate
                    legal responsibility to render this Agreement binding on
                    Lilly with respect to a single Compound and a single Route
                    of Administration, both identified therein;

"Affiliate"         means any corporation or business entity which Lilly or
                    Emisphere, directly or indirectly, owns or controls, is
                    under common ownership with, or which owns one of the
                    Parties to this Agreement. Ownership or control shall exist
                    when an entity owns more than 50% of the capital or business
                    assets of another entity; has the power to exercise more
                    than 50% of the voting rights or to appoint more than 50% of
                    the Board of Directors of another entity; or has the right
                    to control the affairs of another entity. It being
                    understood that the direct or indirect ownership of a lesser
                    percentage of such shares shall not necessarily preclude the
                    existence of control;

"Agreement"         means this license agreement (which expression shall be
                    deemed to include the Recitals, Schedules and Appendix
                    hereto, and any other document(s) incorporated herein by
                    reference);

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"Carriers"          means various agents that are used to facilitate transport
                    through membranes via a number of different Routes of
                    Administration to deliver the Compounds utilizing the
                    Emisphere Technology and/or the Emisphere Program
                    Technology. These agents can include, but are not limited to
                    proteins, peptides and other chemicals;

"Compound(s)"       means the therapeutic agent specified by Lilly in the
                    Activation Letter (in this Agreement, the human growth
                    hormone molecule and all active fragments, analogs, HGH-like
                    peptides with primary function similar to the HGH molecule
                    (not to include secretagogues) and mimetics);

"Cost"              means, depending upon the context, one of the following:

                    In the case of research and development, Cost will be
                    calculated in accordance with Emisphere's internal
                    accounting system, will exclude any element of corporate
                    overhead and will be in accordance with Generally Accepted
                    Accounting Principles ("GAAP").

                    In the case of materials purchased from an Independent Third
                    Party, Cost will comprise the amount actually paid,
                    including import duties, transport and handling costs and
                    other directly attributable costs, in accordance with GAAP;

"Effective Date"    means the date Emisphere receives the Option Exercise
                    Payment;

"Emisphere"         means Emisphere Technologies, Inc., its Affiliates,
                    successors and permitted assignees;

"Emisphere
Know-How"           means all trade secrets, confidential scientific, technical
                    and medical information and expertise from time to time
                    developed, produced, created or Acquired by or on behalf of
                    Emisphere, on or before the Effective Date (i.e., excluding
                    Emisphere Program Know-How, Joint Know-How and
                    Improvements), including, but not limited to, unpatented
                    inventions,

                                       3
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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                    discoveries, theories, plans, ideas or designs
                    (whether or not reduced to practice) relating to the
                    research and development, registration for marketing, use or
                    sale of the Carriers or the Product(s), needed relevant data
                    on the Carriers, preclinical toxicity and manufacturing data
                    for the Carriers and prototype Product(s), and
                    toxicological, pharmacological, analytical and clinical
                    data, bioavailability studies, formulations, control assays
                    and specifications, methods of preparation and stability
                    data with respect to the Carriers and prototype Product(s);

"Emisphere Patents" means all and any patents, utility models and any
                    applications therefor in the Territory (other than the
                    Emisphere Program Patents or Joint Patents) that are or
                    subsequently may be owned or Acquired by, or assigned or
                    licensed to, Emisphere (including any and all divisions,
                    continuations, continuations-in- part, extensions,
                    additions, registrations, confirmations, reexaminations,
                    Supplementary Protection Certificates, renewals or reissues
                    thereto or thereof) and that would be infringed by the
                    development, manufacture, use, disposal, sale, offer of
                    disposal or sale, or importation of the Product(s) in the
                    Territory and/or relate to the Field; the Emisphere Patents
                    as of the date hereof are listed on Schedule I hereto;

"Emisphere Program
Know-How"           means all trade secrets, confidential scientific,
                    technical and medical information and expertise developed,
                    produced, created or Acquired by or on behalf of Emisphere
                    pursuant to the Research and Development Program (other than
                    Emisphere Know-How and Joint Know-How), including, but not
                    limited to, unpatented inventions, discoveries, theories,
                    plans, ideas or designs (whether or not reduced to
                    practice), and relating to the research and development,
                    registration for marketing, use or sale of the Carriers or
                    the Product(s), needed relevant data on the Carriers,
                    preclinical toxicity and manufacturing data for the Carriers
                    and prototype Product(s), and toxicological,
                    pharmacological, analytical and clinical data,
                    bioavailability studies, formulations, control

                                       4
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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                    assays and specifications, methods of preparation and
                    stability data with respect to the Carriers and prototype
                    Product(s); Emisphere Program Know-How shall not include any
                    trade secrets, information and expertise developed,
                    produced, created or Acquired by or on behalf of Emisphere
                    pursuant to the Research and Development Program relating to
                    the Compounds or their therapeutic uses or properties as
                    such trade secrets, information and expertise shall be Lilly
                    Program Know-How;

"Emisphere Program
 Patents"           means all and any patents, utility models and applications
                    therefor in the Territory (including any and all divisions,
                    continuations, continuations-in-part, extensions, additions,
                    registrations, confirmations, reexaminations, Supplementary
                    Protection Certificates, renewals or reissues thereto or
                    thereof) on or for any inventions or discoveries that (i)
                    have been or subsequently may be conceived or made by
                    employees or agents of Emisphere pursuant to the Research
                    and Development Program (regardless of when or by whom such
                    inventions and/or discoveries are reduced to practice) or
                    (ii) relate to the Carriers or the use thereof for delivery
                    of Compounds (regardless of when or by whom such inventions
                    and/or discoveries are reduced to practice or by whom they
                    are conceived);

"Emisphere Program
Technology"         means the Emisphere Program Patents, the Emisphere Program
                    Know-How and/or Emisphere's share of the Joint Patents and
                    the Joint Know-How;

"Emisphere
Technology"
                    means the Emisphere Patents and/or the Emisphere Know-How;

"Ex Works"          shall have the meaning as such term is defined in the ICC
                    Incoterms, 1990, International Rules for the Interpretation
                    of Trade Terms, ICC Publication No. 460;

                                       5
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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

"FDA"               means the United States Food and Drug Administration or any
                    successors or agency the approval of which is necessary to
                    market a product in the United States of America or any
                    other relevant regulatory authority the approval of which is
                    necessary to market a product in any other country of the
                    Territory;

"Field"             means the research, development and optimization of the
                    Compound specified in the Activation Letter utilizing one or
                    more Carriers for all medical ailments or indications for
                    the Route of Administration (in this Agreement, the oral
                    route) specified in the Activation Letter as well as the
                    manufacture, use, promotion, distribution, marketing and
                    sale of the Product(s);

[* * *]             means, in the case of supply of Carrier(s), [* * *].

"Improvements"      means inventions, discoveries, developments and indications
                    conceived by Emisphere, and relating to the Emisphere
                    Technology, that can usefully be applied to the Field, the
                    Lilly Program Technology and/or the Emisphere Program
                    Technology, and which were first reduced to practice during
                    the term of this Agreement by Emisphere whether or not such
                    modification adds any benefit to the Field, the Lilly
                    Program Technology, the Emisphere Program Technology, or the
                    Joint Technology;

"INDA"              means any Investigational New Drug Application in relation
                    to a Product(s) filed by Lilly or its approved designee with
                    the FDA or a similar application filed in another
                    jurisdiction;

"Independent Third
Party"              means any person other than Lilly, Emisphere or any of their
                    Affiliates;

"JointKnow-How"     means all trade secrets, confidential scientific, technical
                    and medical information and expertise, technical data and
                    marketing information, studies and data developed, produced,
                    created or Acquired jointly by the Parties during the term
                    of this Agreement pursuant to the Research and Development
                    Program,

                                       6
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                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                    including, but not limited to, unpatented inventions,
                    discoveries, theories, plans, ideas or designs; Joint
                    Know-How shall not include any trade secrets, confidential
                    scientific, technical and medical information and expertise,
                    technical data and marketing information, studies and data
                    developed, produced, created or Acquired jointly by the
                    Parties pursuant to the Research and Development Program to
                    the extent any of such items relate to either (i) Carriers
                    or the use thereof for delivery of Compounds or (ii) the
                    Compounds or their therapeutic uses or properties, since
                    such items relating to Carriers and such use thereof shall
                    be considered Emisphere Program Know-How and such items
                    relating to Compounds and the therapeutic uses or properties
                    thereof shall be considered Lilly Program Know-How;

"Joint Patents"     means all and any patents, utility models and any
                    applications therefor in the Territory (including any and
                    all divisions, continuations, continuations-in-part,
                    extensions, additions, registrations, confirmations,
                    reexaminations, Supplementary Protection Certificates,
                    renewals or reissues thereto or thereof) on or for any
                    inventions or discoveries that are jointly conceived by the
                    Parties during the term of this Agreement pursuant to the
                    Research and Development Program (regardless of when or by
                    whom such inventions and/or discoveries are reduced to
                    practice) that do not relate to (i) the Carriers or the use
                                   ----------------

                    thereof for delivery of Compounds nor to (ii) the Compounds
                                                      ------
                    or their therapeutic uses or properties (i.e., other than
                    Emisphere Patents, Emisphere Program Patents, Lilly Patents
                    and Lilly Program Patents);

"Launch"            means the commercial sale (including promotion) of a
                    Product; the date thereof shall be determined on a
                    country-by-country basis.

"Lilly"             means Eli Lilly & Company, its Affiliates, successors and
                    permitted assignees;

"Lilly              Know-How" means all trade secrets, confidential scientific,
                    technical and medical information and expertise,

                                       7
<PAGE>

                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                    technical data and marketing information, studies and data
                    from time to time developed, produced, created or Acquired
                    by or on behalf of Lilly, whether before the Effective Date
                    or during the term of this Agreement (other than the Lilly
                    Program Know-How or Joint Know-How), including, but not
                    limited to, unpatented inventions, discoveries, theories,
                    plans, ideas or designs (whether or not reduced to
                    practice), relating to the research and development,
                    manufacture, registration for marketing, use or sale of the
                    Product(s), and toxicological, pharmacological, analytical
                    and clinical data, bioavailability studies, product forms
                    and formulations, control assays and specifications, methods
                    of preparation and stability data with respect to the
                    Product(s);

"Lilly Patents"     means all and any patents, utility models and any
                    applications therefor in the Territory (other than the Lilly
                    Program Patents or Joint Patents) that are or subsequently
                    may be owned or acquired by or assigned or licensed to Lilly
                    (including any and all divisions, continuations,
                    continuations-in-part, extensions, additions, registrations,
                    confirmations, reexaminations, Supplementary Protection
                    Certificates, renewals or reissues thereto or thereof) and
                    that would be infringed by the development, manufacture,
                    use, disposal, sale, offer of disposal or sale, or
                    importation of the Product(s) in the Territory and/or relate
                    to the Field;

"Lilly Program
Know-How"           means all trade secrets, confidential scientific, technical
                    and medical information and expertise, technical data and
                    marketing information, studies and data developed, produced,
                    created or Acquired by or on behalf of Lilly, pursuant to
                    the Research and Development Program (other than the Lilly
                    Know-How and Joint Know-How), including, but not limited to,
                    unpatented inventions, discoveries, theories, plans, ideas
                    or designs (whether or not reduced to practice), relating to
                    the research and development, manufacture, registration for
                    marketing, use or sale of the Product(s), needed relevant
                    data generated by Lilly

                                       8
<PAGE>

                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                    (including preclinical toxicity data) on the Product(s) and
                    toxicological, pharmacological, analytical and clinical
                    data, bioavailability studies, product forms and
                    formulations, control assays and specifications, methods of
                    preparation and stability data with respect to the
                    Product(s); Lilly Program Know-How shall not include any
                    trade secrets, information and expertise developed,
                    produced, created or Acquired by or on behalf of Lilly
                    pursuant to the Research and Development Program relating to
                    the Carriers or the use thereof for delivery of Compounds,
                    as such trade secrets, information and expertise shall be
                    Emisphere Program Know-How;

"Lilly Program
Patents"            means all and any patents, utility models and applications
                    therefor in the Territory (including any and all divisions,
                    continuations, continuations-in-part, extensions, additions,
                    registrations, confirmations, reexaminations, Supplementary
                    Protection Certificates, renewals or reissues thereto or
                    thereof) on or for any inventions or discoveries that (i)
                    have been or subsequently may be conceived or made by
                    employees or agents of Lilly pursuant to the Research and
                    Development Program (regardless of when or by whom such
                    inventions and/or discoveries are reduced to practice) or
                    (ii) relate to the Compounds or their therapeutic uses or
                    properties (regardless of when or by whom such inventions
                    and/or discoveries are reduced to practice or by whom they
                    are conceived);

"Lilly Program
Technology"         means the Lilly Program Patents, the Lilly Program Know-How
                    and/or Lilly's share of the Joint Patents and the Joint
                    Know-How;

"Lilly Technology"  means the Lilly Patents and/or the Lilly Know-How;

[* * *]             means a manual, a table of contents of which is attached
                    hereto as Appendix I, containing certain specifications,
                    procedures, methods and personnel contacts relating to
                    [* * *] that will be compiled and agreed upon between the
                    Parties prior to the

                                       9
<PAGE>

                                                    Confidentiality Requested by
                                                    Emisphere Technologies, Inc.
                                                            SEC File No. 1-10615

                    commencement of manufacture of the Carrier(s) by Emisphere.
                    Sections of the [* * *] may be modified from time to time
                    through the issuance of a revised section incorporating the
                    modification and stating the effective date of the
                    modification. Each such revised section shall be signed on
                    behalf of the Parties by a duly authorized representative.
                    The duly authorized representative shall be of a management
                    level no lower than the management level of the duly
                    authorized representative who signed that section of the
                    original [* * *].

"Milestone"         means milestones as specified in Appendix 3 to the Option
                    Agreement, as modified by the Activation Letter attached
                    hereto as Schedule II;

"NDA"               means any New Drug Application in relation to a Product(s)
                    filed by Lilly or its approved designee with the FDA or a
                    similar application filed in another jurisdiction;

"Net Sales"         means with respect to the Product(s) the gross amount
                    invoiced by Lilly, its Affiliates and/or any sub- licensee
                    of Lilly or its Affiliates to unrelated third parties for
                    the Product(s) less the following seven items: (a) trade
                    quantity and cash discounts actually allowed; (b)
                    commission, discounts, refunds, rebates, charge backs,
                    retroactive price adjustments, and any other allowances
                    which effectively reduce the net selling price; (c) actual
                    product returns and allowances; (d) that portion of the
                    sales value associated with non pharmaceutical drug delivery
                    devices (not to include Emisphere's Carriers); (e) any tax
                    imposed on the production, sale, delivery or use of the
                    Product(s); (f) allowance for distribution (transportation)
                    expenses (limit of [* * *]% of gross sales); (g) any other
                    similar, reasonable and customary deductions which are
                    properly recorded as a reduction of sales under GAAP,
                    consistently applied.

                    In the event that the Product is sold as part of a
                    combination product, the Net Sales of Product, for purposes
                    of determining royalty payments, shall be

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                    determined by multiplying the Net Sales of the combination
                    product by the fraction, A/(A+B) where A is the average
                    sales price of the Product when sold separately in finished
                    form and B is the average sales prices of the other
                    product(s) sold separately in finished form; in the event
                    that such average sales price cannot be determined for both
                    Product and the other products(s) used in the combination
                    product, Net Sales for the purposes of determining royalty
                    payments shall be calculated by multiplying the Net Sales of
                    the combination product by the fraction C/(C+D) where C is
                    Lilly's cost of goods for the Product and D is Lilly's cost
                    of goods of the other products(s) used in the combination
                    product, determined in accordance with the method of
                    accounting normally employed by Lilly in computing cost of
                    goods.

"Option"            means the option to enter into a license agreement in the
                    form of this Agreement, as provided for in the Option
                    Agreement;

"Option Agreement"  means that certain Research Collaboration and Option
                    Agreement, dated as of February 26, 1997, between Emisphere
                    and Lilly, incorporated herein by reference;

"Option Exercise
Payment"            means the Milestone payment specified in Appendix 3 to the
                    Option Agreement and the payment of which is required upon
                    execution of this Agreement;

"Parties"           means Lilly and Emisphere;

"Person"            means an individual, partnership, corporation, limited
                    liability company, business trust, joint stock company,
                    trust, unincorporated association, joint venture, or other
                    entity of whatever nature;

[* * *]             means a system of (1) developing standard costs at levels
                    which would be incurred if [* * *] or (2) analyzing and
                    reporting variances caused by [* * *] of resources;
                    practical capacity means the

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                    volume, usually expressed in hours or minutes, which a
                    plant, department or work center can achieve in an operating
                    period under normal but efficient operating conditions and
                    assuming sufficient volume is available; it measures the
                    amount one is prepared to make or sell and includes
                    allowances for unavoidable down time;

"Product(s)"        means, depending on the context, one or more formulations of
                    the Compound(s) with one or more of the Carriers for a
                    specific Route of Administration that complies with the
                    Specifications;

"Research and
Development
Program"            means the joint program of research and development work,
                    with respect to the Field and the Product, being conducted
                    or to be conducted by, inter alia, Lilly and Emisphere for
                    and on behalf of Lilly, for which both Parties are
                    responsible, and which has been devised by and approved by
                    the Steering Committee; the Research and Development Program
                    shall not include work for which Lilly alone is responsible,
                    such as clinical trials of Product(s);

"Route of
Administration"     means administration of the Compound(s) by the oral route;

"Specifications"    means the specifications for each of the Carriers or
                    Product(s) as approved by the FDA, as well as such other
                    specifications which may be agreed upon by the Parties in
                    writing or by the Steering Committee;

"Steering
Committee"          means the management committee appointed by Emisphere and
                    Lilly to oversee the Research and Development Programs
                    related to the Product(s);

"Territory"         means all the countries of the world; and

"United States
Dollars"            and "US$" means the lawful currency for the time being of
                    the United States of America.

1.2  In this Agreement:

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     1.2   The singular includes the plural and vice versa.

     1.2   Any reference to a Clause shall, unless otherwise specifically
           provided, be to a Clause of this Agreement.

     1.2.3 The headings of this Agreement are for ease of reference only and
           shall not affect its construction or interpretation.

 2.   GRANT OF RIGHTS

In consideration of the receipt of the Activation Letter specifying the Compound
and the Route of Administration to be licensed and simultaneous receipt of the
first Milestone payment by Emisphere (both from Lilly), the receipt and adequacy
of which is acknowledged by Emisphere to Lilly by Emisphere's acceptance of the
Activation Letter and Milestone payment, Emisphere grants to Lilly for the term
of this Agreement:

2.1  an exclusive license to use (a) the Emisphere Patents, the Emisphere
     Program Patents and Emisphere's share of the Joint Patents for the Field,
     and (b) the Emisphere Know-How, the Emisphere Program Know-How and
     Emisphere's share of the Joint Know-How for the Field. All proprietary
     rights and rights of ownership with respect to the Emisphere Technology and
     Emisphere Program Technology shall at all times remain solely with
     Emisphere unless otherwise specified in this Agreement. Lilly shall not
     have any rights to use the Emisphere Technology or Emisphere Program
     Technology other than insofar as they relate directly to the Field and are
     expressly granted herein.

2.2  Subject to Clause 6.3, Lilly shall have the right to sublicense the rights
     granted to it by Emisphere pursuant to this Agreement. Insofar as the
     obligations owed by Lilly to Emisphere are concerned, Lilly shall remain
     responsible for all acts and omissions of any sub-licensee as if they were
     by Lilly. Lilly shall forthwith notify Emisphere of any sub-license granted
     by Lilly. In all cases, (i) royalties shall be paid at the rate provided
     for herein (i.e., in accordance with the relevant Option Agreement
     Appendix); and (ii) the applicable royalty rate shall be determined with
     reference to market share or net sales figures (as the case may be)
     determined by cumulating all sales of the Product by Lilly and all of its
     sub-licensees. It shall be Lilly's responsibility in all cases to determine
     the cumulated net sales or market share data and assure that Emisphere is
     paid (whether by Lilly or the sub-licensee) the royalties at the increased
     rate provided for upon reaching the yearly targets, all as set forth in the
     relevant Appendix of the Option Agreement. If Emisphere does not receive
     payment from a sublicensee within [* * *] days of the end of each quarter,
     Emisphere shall immediately notify Lilly's royalty administration personnel
     (contact name

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     shall be provided once Product is Launched) that payment has not been
     remitted. If unforeseen circumstances result in a sublicensee not reporting
     to Lilly, the amount of their Net Sales such that Lilly cannot determine
     the cumulative Net Sales or market share data, Lilly shall pay Emisphere
     its royalty due on Lilly Net Sales only and within [* * *] days of the end
     of such calendar quarter, ensure that Emisphere will receive the
     appropriate amount of royalties from either the sublicensee or Lilly.
     Notwithstanding the previous sentence however, Net Sales by sublicensees
     shall not be counted twice in the calculation of royalty payments due to
     Emisphere. In the event of a termination of this Agreement due to a breach
     by Lilly, Emisphere shall have the right but not the obligation to assume
     any such sub-license under the same terms.

In consideration of the obligations assumed hereunder, Lilly grants to
Emisphere, solely for the purposes of carrying out the latter's obligations
hereunder:

2.3  a non-exclusive license to use the Lilly Technology and the Lilly Program
     Technology. All proprietary rights and rights of ownership with respect to
     the Lilly Technology and the Lilly Program Technology shall at all times
     remain solely with Lilly, unless otherwise specified in this Agreement.
     Emisphere shall not have any rights to use the Lilly Technology or the
     Lilly Program Technology other than insofar as expressly granted herein.

2.4  Emisphere shall have no right to sublicense the rights granted to it by
     Lilly pursuant to this Agreement except as expressly authorized by Lilly.
     Insofar as the obligations owed by Emisphere to Lilly are concerned,
     Emisphere shall remain responsible for all acts and omissions of any
     approved sub-licensee as if they were by Emisphere.

3.   IMPROVEMENTS

3.1  If Emisphere shall develop or have developed by an Independent Third Party
     any Improvements during the term of this Agreement (other than pursuant to
     the Research and Development Program which constitute Emisphere Program
     Technology), Emisphere shall, to the extent that it is not prohibited by
     any undertaking given to any Independent Third Party (provided that
     Emisphere shall use its commercially reasonable efforts to exclude or
     minimize the extent of any such limitations or restrictions which prevent
     or limit disclosure to or use by Lilly), communicate to Lilly such
     Improvements and shall provide to Lilly such rights, licenses, information
     and explanations as Lilly may reasonably require to be able effectively to
     utilize the Improvements for the life of this Agreement. Such disclosed
     Improvements shall automatically on disclosure

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     to Lilly become part of the Emisphere Know-How or Emisphere Patents, as the
     case may be, and shall be subject to the provisions of this Agreement.

4.   MANUFACTURING

4.1  Lilly will manufacture final Product(s). Emisphere will manufacture at
     least [* * *]% of the Carrier needed for Product sales. Lilly will pay
     Emisphere the latter's [* * *] on all Carrier used for sales of Products
     less than or equal to the sales schedule set forth in the relevant Appendix
     to the Option Agreement. Above the Product sales level specified in the
     relevant Appendix of the Option Agreement, Lilly will pay Emisphere's
     direct manufacturing costs (calculated according to the [* * *]). Lilly
     will be permitted to manufacture up to [* * *]% of the Carrier needed to
     manufacture the Products. If Lilly can find a Carrier source that can offer
     a supply price that is at least [* * *]% lower than Emisphere's supply
     price (including Lilly, with supply price in such case being [* * *], all
     determined in accordance with GAAP principles), Lilly may use such supplier
     for up to [* * *]% of the Carrier needed to manufacture the Product. So
     long as Lilly uses it as a supplier of Carrier, Emisphere will hold at
     minimum [* * *] of Carrier inventory per year to be determined at the
     appropriate time. Emisphere's manufacturing operations will meet any
     required regulatory agency's specifications for registration, as set forth
     in the [* * *].

4.2  Lilly shall be permitted to produce Carrier for its use in clinical trials,
     but only until Emisphere is able to supply the Carrier pursuant to the
     terms of Section 4.1.

4.3  Lilly reserves the right to audit the facility of Emisphere as specified in
     the [* * *], including its processes, records, and other facets of the
     operation as may be necessary to assure that all applicable FDA or similar
     government regulations have been met. Emisphere shall permit duly
     authorized representatives of Lilly to audit all research, development and
     manufacturing areas and operations as they apply to Emisphere projects or
     Carriers for Lilly at reasonable times with a prior appointment. The right
     to audit will also apply to Carrier used in trials to support product
     registration. These audits will be conducted to assure compliance with all
     pertinent acts, regulations, and guidelines promulgated by the FDA and
     other regulatory authorities. Such audits will be permitted during normal
     business hours and will be performed with a minimum of disruption. Lilly
     shall furnish to Emisphere copies of all reports prepared as a result of
     these audits. Lilly agrees to notify Emisphere within [* * *] of any
     concerns that it may have regarding Carrier(s). Lilly will also have the
     right to audit Emisphere's financial manufacturing records in accordance
     with Clause 9.2.

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5.   RESEARCH AND DEVELOPMENT

5.1  Subject to any and all specific provisions included in the Option Agreement
     or relevant Appendix, and to the extent Emisphere does not have the
     requisite capability or resources or Lilly elects to do so itself, Lilly
     agrees to use Emisphere, on terms to be negotiated in good faith, to
     conduct the Research and Development Program. Upon agreement by the Parties
     as to the appropriate amount of compensation to Emisphere therefor,
     Emisphere shall conduct its portion of such Research and Development
     Program.

5.2  Subject to any and all specific provisions included in the Option Agreement
     or relevant Appendix, the research and development work conducted jointly
     by the Parties shall be in accordance with the Research and Development
     Program devised by the Steering Committee. Both Parties shall use
     reasonably diligent efforts, consistent with their efforts on other
     projects of similar commercial importance and state of development, to
     conduct their respective portions of the Research and Development Program.

5.3  Subject to any and all specific provisions included in the Option Agreement
     or relevant Appendix, the Research and Development Program shall be
     directed by the Steering Committee. In conducting the Research and
     Development Program, each Party shall co-operate fully with the Steering
     Committee. Each Party shall maintain the facilities used by it for the
     performance of the Research and Development Program in compliance with the
     applicable requirements of the FDA and other regulatory authorities,
     including then-current Good Manufacturing Practices and then-current Good
     Laboratory Practices standards.

5.4  Subject to any and all specific provisions included in the Option Agreement
     or relevant Appendix, Emisphere shall provide Lilly on a quarterly basis
     during the term of the Research and Development Program a report, detailing
     how Emisphere allocated funds provided by Lilly for such Program, if Lilly
     provided any such funds. Such report shall provide Lilly with the names of
     the Emisphere employees utilized on the Program and the amount of each
     employee's time devoted to the Program. Emisphere shall, further, maintain
     records in reasonable detail and in accordance with GAAP of all monies paid
     by Emisphere for research under the Program and shall provide Lilly, within
     [* * *] of the end of each quarterly period, with a report stating the
     dollar amount of funds supplied by Lilly that were expended on research
     activities during the three month period for which the report is made,
     using Emisphere's standard project accounting procedures, and such
     supporting details as are reasonably required by Lilly. Lilly shall be
     entitled to any tax credits due on account of research and development
     expenses, to the extent permitted by

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     law, for the funds paid by Lilly to Emisphere hereunder. Also, Lilly may
     have the costs of the Research and Development Program audited in
     accordance with Clause 9.2.

6.   SUPPLY OF PRODUCT(S)

6.1  Except as otherwise herein provided in this Agreement, Lilly shall produce
     and supply the final commercial Product(s). Any chemical (not including the
     Carriers) or formulation components required to make use of the Emisphere
     Technology shall be procured by Lilly at its own Cost. Lilly shall ensure
     that supplies of the Product(s) are produced as diligently as any of its
     products of similar commercial importance.

6.2  Lilly shall deliver the Product(s) in appropriate packaging as specified in
     the [* * *] so as to permit safe storage and transport.

6.3  In the event that Lilly appoints a third party to manufacture the
     Product(s), Lilly shall be solely responsible and liable for the
     performance of the manufacturer. Lilly shall ensure that said
     manufacturer's facility is an FDA-approved facility and that such facility
     complies with all relevant FDA and other relevant governmental and
     regulatory requirements and that all then-current Good Manufacturing
     Practices are adhered to. In no case will Lilly appoint a third party to
     manufacture the Product(s) if that third party is a competitor with
     Emisphere in the oral protein delivery field or if that third party is
     involved in pending or threatened litigation with Emisphere.

6.4  Pursuant to the procedures set forth in the Manufacturing Responsibilities
     Document, the quality and form of the Product(s) delivered by Lilly
     hereunder shall conform in all material aspects to the Specifications and
     all prevailing legislative and regulatory requirements of the countries
     where the Product(s) are manufactured and to be used.

7.   EXPLOITATION OF LICENSED TECHNOLOGY

7.1  Lilly will have the exclusive right to develop and/or exploit the Field. In
     order to commercialize the Product(s), Lilly shall use commercially
     reasonable efforts (consistent with its efforts on products of similar
     commercial importance) to obtain marketing approval for and Launch the
     Product(s) in such countries in the Territory as is determined by normal
     Lilly business practices. It may be necessary to file an INDA or NDA and
     perform clinical testing in more than one country. The conduct of such
     clinical trials and the obtaining of regulatory approvals shall be
     controlled and completed by Lilly.

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7.2  The strategy for the registration and the commercialization of the
     Product(s) shall be determined by Lilly. Upon inquiry, Emisphere shall be
     advised as to Lilly's general commercialization strategy on a semi-annual
     basis. For each country in which the Product is Launched, Lilly shall
     inform Emisphere of the Launch at least [* * *] prior to the expected date
     therefor.

7.3  Lilly shall exert its reasonable efforts to commercialize the Product(s) in
     each country of the Territory where Lilly has Launched Product(s). Such
     efforts shall be consistent with Lilly's efforts on products of similar
     commercial importance.

7.4  Lilly will be solely responsible for ensuring that the manufacture,
     promotion, distribution, marketing and sale of the Product(s) within each
     country of the Territory is in strict accordance with all the legal and
     regulatory requirements of each country of the Territory.

7.5  All advertising, promotional materials and marketing costs needed to
     exploit the Product(s) are to be paid by Lilly. All package inserts, and
     any advertising or promotional materials that substantially reproduce the
     material included in the package inserts, shall, to the extent allowed by
     applicable law or regulation, include: (i) acknowledgment that the Product
     uses Emisphere technology; (ii) Emisphere's trade name (whether or not
     registered); and (iii) Emisphere's logo (whether or not registered). Such
     incorporation by Lilly shall be made upon discussion between Emisphere and
     Lilly with respect to the appropriate protection of Emisphere's trademark,
     service mark or trade name rights, and pursuant to a non-exclusive license
     which Emisphere shall grant Lilly for such purpose at the appropriate time.

8.   FINANCIAL PROVISIONS

8.1  In consideration of the research and development work conducted by
     Emisphere for and on behalf of Lilly pursuant to the Research and
     Development Program, Lilly shall pay Emisphere the sums agreed to by the
     Parties pursuant to Clause 5.1, above, subject to the proper documentation
     of research and development work and expenses.

8.2  In consideration of the granting of a license of the Emisphere Technology
     to Lilly, Lilly shall make Milestone payments and pay royalties on Net
     Sales of the Product(s) in the amounts and at the rates set forth in
     Appendix 3 of the Option Agreement, as modified by the Activation Letter
     attached hereto as Schedule II.

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8.3  Lilly's obligation to pay royalties shall expire on a country-by-country
     basis upon the conclusion of the term of this Agreement, as set forth in
     Clause 12.1. Emisphere shall file for patent protection on Emisphere
     Technology and Emisphere Program Technology included in the Product in
     those countries listed in Exhibit C to the Option Agreement.

8.4  Payment of royalties shall be made quarterly within [* * *] after the
     expiry of the calendar quarter; provided, that if the information necessary
                                     --------
     to make such payments is not available within such [* * *] period, Lilly
     shall have an additional [* * *] to make such payments. The method of
     payment shall be by wire transfer to an account specified by Emisphere, or
     by such other manner as is mutually acceptable to the Parties. Each payment
     made to Emisphere shall be accompanied by a written report, prepared and
     signed by the appropriate royalty administration personnel of Lilly. The
     report shall clearly show the Net Sales for the calendar quarter for which
     payment is being made on a country-by-country basis. In the event that no
     royalty is due to Emisphere for any quarterly period, Lilly's appropriate
     royalty administration officer shall so report.

8.5  Lilly shall maintain and keep clear, detailed, complete, accurate and
     separate records so:

     8.5.1  as to enable any royalties on Net Sales of the Product(s) which
            shall have accrued hereunder to be determined; and

     8.5.2  that any deductions made in arriving at the Net Sales can be
            determined by Emisphere.

8.6  All payments due hereunder shall be made in United States Dollars. Lilly's
     standard exchange rate methodology will be employed for the translation of
     foreign currency sales into United States Dollars. This methodology shall
     be the one used by Lilly in the translation of its foreign currency
     operating results for external reporting, shall be consistent with general
     accepted accounting principles, and shall be the one approved and reviewed
     by Lilly's independent certified public accountants.

8.7  Subject to the provisions of Clauses 8.8 and 8.10 of this Agreement, Lilly
     shall pay all royalties at full rate.

8.8  If, at any time, legal restrictions in the Territory prevent the prompt
     payment of running royalties or any portion thereof, the Parties shall meet
     to discuss suitable and reasonable alternative methods of reimbursing
     Emisphere the amount of such running royalties. In the event that Lilly is
     prevented from

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     making any payment under this Agreement by virtue of the statutes, laws,
     codes or government regulations of the country from which the payment is to
     be made, then such payments may be paid by depositing them in the currency
     in which they accrue to an account set up for Emisphere in a bank
     acceptable to Emisphere in the country the currency of which is involved or
     as otherwise agreed by the Parties.

8.9  Emisphere and Lilly agree to co-operate in all respects necessary to take
     advantage of any double taxation agreements or similar agreements as may,
     from time to time, be available.

8.1  All taxes levied on payment of royalties accruing to Emisphere under this
     Agreement shall be paid by Emisphere. If applicable laws or regulations
     require withholding taxes by Lilly, the taxes will be deducted by Lilly
     from remittable royalties and will be paid by Lilly on account of Emisphere
     to the appropriate government tax authority.

9.   RIGHT OF AUDIT AND INSPECTION

9.1  Within the term of this Agreement and within one year after its
     termination, Emisphere shall not more than [* * *] each year have the right
     at its expense to have Lilly's independent certified public accountants
     inspect and audit Lilly's records for any of the two preceding years for
     the purpose of determining the accuracy of royalty payments. The
     independent certified accountants shall keep confidential any information
     obtained during such inspection and shall report to Emisphere only the
     amounts of Net Sales and royalties due and payable. Any such inspection of
     Lilly's records shall be at the expense of Emisphere, except that if any
     such inspection reveals a deficiency in the amount of the running royalty
     actually paid to Emisphere hereunder in any calendar year of [* * *]% or
     more of the amount of any running royalty actually due to Emisphere
     hereunder, then the expense of such inspection shall be borne solely by
     Lilly. Any amount of deficiency shall be paid promptly to Emisphere. If
     such inspection reveals a surplus in the amount of running royalty actually
     paid to Emisphere by Lilly, Emisphere shall reimburse Lilly the surplus.

9.2  Within the term of this Agreement and within one year after its
     termination, Lilly shall not more than [* * *] each year have the right at
     its expense to have Emisphere's independent certified public accountants
     inspect and audit Emisphere's records and accompanying reports (and all
     associated documentation) for any of the two preceding years for the
     purpose of determining the accuracy of Emisphere's reported, [* * *] and
     Costs with respect to any Research and Development Program. The independent
     certified

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       public accountants shall keep confidential all materials subject to
       third-party confidentiality agreements and all materials not directly
       relevant to the purpose of their audit. Any such inspection of
       Emisphere's records shall be at the expense of Lilly, except that if any
       such inspection reveals an overpayment in the amount of such Costs paid
       to Emisphere hereunder in any calendar year of [* * *]% or more of the
       amount of such Costs actually due to Emisphere hereunder, then the
       expense of such inspection shall be borne solely by Emisphere instead of
       by Lilly. Any surplus over the Costs properly payable by Lilly to
       Emisphere shall be refunded promptly to Lilly. If such inspection reveals
       a deficit in the amount of the Costs properly payable to Emisphere by
       Lilly, Lilly shall pay the deficit to Emisphere.

9.3    In the event of any unresolved dispute regarding any alleged deficiency
       or overpayment of royalty payments or Cost payments hereunder, the matter
       will be referred to the independent firm of certified public accountants
       of [* * *] for a resolution of such dispute. The decision of said firm of
       certified public accountants shall be binding on the Parties.

10.    PATENTS

10.1   Emisphere shall be obliged to disclose promptly to Lilly inventions made
       by or on behalf of Emisphere in connection with the performance of the
       Research and Development Programs, any patentable inventions and
       discoveries within the Emisphere Know-How that relate to the Field, the
       Emisphere Program Know-How and any patentable Improvements developed by
       or on behalf of Emisphere (other than pursuant to the Research and
       Development Program).

10.2   The Parties shall discuss in good faith all material issues relating to
       filing, prosecution and maintenance of Emisphere Patents (insofar as the
       Emisphere Patents are of relevance to the Field), the Emisphere Program
       Patents, any patentable inventions and discoveries within the Emisphere
       Know-How that relate to the Field, and any patentable Improvements
       developed by or on behalf of Emisphere (other than pursuant to the
       Research and Development Program). Subject to agreement to the contrary
       the following provisions shall apply:

       10.2.1 Emisphere at its expense shall make a good faith effort (a) to
              secure the grant of any patent applications within the Emisphere
              Patents and Emisphere Program Patents; (b) to file and prosecute
              patent applications on patentable inventions and discoveries
              within the Emisphere Know-How and patentable Improvements (or to
              protect such inventions and/or Improvements as trade secrets)
              developed by or on behalf of Emisphere (other than pursuant to the
              Research and

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              Development Program); (c) to defend all such applications against
              third party oppositions; and (d) to maintain in force any issued
              letters patent within the Emisphere Patents and Emisphere Program
              Patents (including any letters patent that may issue covering any
              Improvements). Emisphere shall have the sole right in its
              reasonable business discretion to control such filing,
              prosecution, defense and maintenance; provided however, that Lilly
              shall have a reasonable right to be provided with copies of all
              documents relating to such filing, prosecution, defense, and
              maintenance in sufficient time to review such documents and
              comment thereon, if desired by Lilly, prior to filing. Should
              Emisphere decide for commercial or other reasons to abandon in any
              country any patent or patent application pertaining to the
              Emisphere Patents or the Emisphere Program Patents for those
              Carriers that (i) are part of a Product which is either undergoing
              or has gone through a Lilly clinical development program or (ii)
              Emisphere, in good faith, reasonably believes may be utilized as
              part of a Product for clinical development by Lilly, it shall
              first obtain Lilly's written consent, which consent shall not be
              unreasonably withheld.

       10.2.2 In the event that Emisphere informs Lilly that it does not intend
              to file patent applications on patentable inventions and
              discoveries within the Emisphere Know-How or Emisphere Program
              Know-How that relate to those Carriers that have gone through a
              Lilly clinical development program or patentable Improvements
              developed thereon by or on behalf of Emisphere (other than
              pursuant to the Research and Development Program) in one or more
              countries in the Territory or fails to file such an application
              within a reasonable period of time, but in no event less than four
              (4) months after disclosure to Lilly pursuant to Clause 10.1, at
              Emisphere's election, Lilly shall have the right, but not the
              obligation, at Lilly's sole expense to file and prosecute such
              patent application(s) in the name of Lilly and Emisphere, upon
              written request from Lilly, shall execute all documents, forms and
              declarations and do all things as shall be reasonably necessary to
              enable Lilly to exercise such right. In the event that Emisphere
              so elects and Lilly files any such application, such application
              shall [* * *].

10.3   Emisphere shall assist Lilly in good faith regarding all material issues
       that arise from their joint work on the Research and Development Program
       relating to filing, prosecution and maintenance of Lilly Patents (insofar
       as the Lilly Patents are of relevance to the Field), the Lilly Program
       Patents and any patentable inventions and discoveries within the Lilly
       Know-How that relate to the Field. Such assistance will be provided,
       however, only upon Lilly's request. Subject to agreement to the contrary,
       the following provisions shall apply:

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       10.3.1 Lilly shall be solely responsible for all facets of filing and
              prosecuting patent applications and maintaining and defending
              patents within the Lilly Patents and the Lilly Program Patents,
              including all expenses pertaining thereto.

       10.3.2 Any assistance from Emisphere requested by Lilly with respect to
              its obligations as set forth in this Clause 10.3 shall be provided
              at Lilly's expense. Emisphere will use its best reasonable efforts
              to provide such assistance in the manner requested by Lilly.

10.4   With respect to any Joint Patents, Emisphere will prepare and file patent
       applications on behalf of both Parties and will diligently prosecute
       same. Prior to the contemplated filing, Emisphere shall submit a
       substantially completed draft of such patent applications to Lilly for
       approval, which approval shall not be unreasonably withheld or delayed.
       In the event of an imminent statutory bar to patenting, Emisphere shall
       have the right to file a patent application, for the invention on which a
       patent would be barred, without first receiving approval from Lilly, in
       order to preserve the patent rights to such invention. Lilly and
       Emisphere shall equally bear the cost of preparing, filing, prosecuting
       and maintaining any patent applications and patents falling within this
       Clause 10.4. Should Emisphere not wish to file, prosecute, maintain or
       issue any patent application falling within this Clause 10.4, or maintain
       a patent issuing from any such patent applications, in any particular
       country, Emisphere will grant Lilly any necessary authority to file,
       prosecute, maintain or issue such patent application, or maintain such a
       patent, in the name of Lilly. However, in such case, such patent
       application or patent for such country shall be considered to be a Lilly
       Program Patent. Likewise, should Lilly not wish to file, prosecute,
       maintain or issue any patent application falling with this Clause 10.4,
       or maintain a patent issuing from such patent applications, in any
       particular country, Lilly will grant Emisphere any necessary authority to
       file, prosecute, issue and maintain such patent application, or maintain
       such a patent, in the name of Emisphere. However, in such case, such
       patent application or patent for such country shall be considered to be
       an Emisphere Program Patent.

10.5   Emisphere and Lilly shall promptly inform the other in writing of any
       alleged infringement of any patents within the Emisphere Patents, the
       Emisphere Program Patents or the Joint Patents or of any alleged
       misappropriation of trade secrets within the Emisphere Know-How, the
       Emisphere Program Know-How or the Joint Know-How, as such infringement or
       misappropriation relates to the Field, by a third party of which it
       becomes aware and provide the other with any available evidence of such
       infringement or misappropriation.

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       10.5.1 (a) Emisphere shall have the primary right, but not the
              obligation, to institute, prosecute and control any action or
              proceeding with respect to any infringement of any of the
              Emisphere Technology or the Emisphere Program Technology by
              counsel of its own choice. Lilly shall cooperate with Emisphere at
              Emisphere's request in the prosecution of such action or
              proceeding. If Emisphere reasonably determines that Lilly is an
              indispensable Party to the action, Lilly hereby consents to be
              joined. In such event, Lilly shall have the right to be
              represented in that action by counsel of its own choice and at
              Lilly's expense.

              (b) If Emisphere fails to bring an action or proceeding within a
              period of [* * *] after receiving written notice from Lilly or
              otherwise having knowledge of infringement of the Emisphere
              Technology or the Emisphere Program Technology in the Field, Lilly
              shall have the right to bring and control any such action by
              counsel of its own choice and expense. If Lilly reasonably
              determines that Emisphere is an indispensable Party to the action,
              Emisphere hereby consents to be joined. In such event, Emisphere
              shall have the right to be represented in that action by counsel
              of its own choice and at Emisphere expense.

              (c) No settlement, consent judgment or other voluntary final
              disposition of a suit under this Clause 10.5.1 may be entered into
              without the joint consent of Lilly and Emisphere (which consent
              shall not be withheld unreasonably or delayed by either Party).

              (d) If Emisphere brings an action hereunder, any damages or other
              monetary awards recovered by Emisphere attributable to sales of
              Product shall be applied first to defray the costs and expenses
              incurred in the action. If any balance remains, Emisphere shall
              pay Lilly [* * *]% of such balance.

              (e) If Emisphere fails to bring an action hereunder and Lilly
              brings action, any damages or other monetary awards recovered by
              Lilly attributable to sales of Product shall be applied first to
              defray the costs and expenses incurred in the action. If any
              balance remains, Lilly shall pay Emisphere [* * *]% of such
              balance.

              (f) In the alternative, the Parties may agree to institute such
              proceedings in their joint names and shall reach agreement as to
              the proportion in which they will share the proceeds of any such
              proceedings, and the expense of any costs not recovered.

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              (g) If the infringement of the Emisphere Patents or the Emisphere
              Program Patents affects the Field as well as other products being
              developed or commercialized by Emisphere or its commercial
              partners, the Parties shall agree as to the manner in which the
              proceedings should be instituted and shall reach agreement as to
              the proportion in which they will share the proceeds of any such
              proceedings, and the expense of any costs not recovered.

       10.5.2 During the term of this Agreement, Lilly shall have the first
              right but not the obligation to bring suit or otherwise take
              action against any alleged infringement of the Lilly Program
              Patents or alleged misappropriation of the Lilly Program Know-How.
              In the event that Lilly takes such action, Lilly shall do so
              solely at its own cost and expense and all damages and monetary
              award recovered in or with respect to such action shall be the
              property of Lilly. At Lilly's reasonable request, Emisphere will
              co-operate with any such action at Lilly's sole cost and expense.

       10.5.3 During the term of this Agreement, both Parties shall have the
              right but not the obligation to bring suit or otherwise take
              action against any alleged infringement of the Joint Patents or
              alleged misappropriation of the Joint Know-How. Both Parties shall
              be obligated to inform the other of any infringement or
              misappropriation of which they become aware. The Parties shall
              jointly determine in good faith how to manage any action with
              respect to any such infringement or misappropriation. In the
              alternative, or if one party desires to take such an action and
              the other does not, the Party that takes such action shall do so
              solely at its own cost and expense and all damages and monetary
              award recovered in or with respect to such action shall be the
              property of that Party. At such Party's reasonable request, the
              other Party will co-operate with any such action at the requesting
              Party's sole cost and expense.

10.6   Emisphere may defend against any Third Party claim that is related to the
       Emisphere Patents, Emisphere Program Patents, Emisphere Know-How or
       Emisphere Program Know-How. Lilly shall cooperate with Emisphere as may
       be reasonably requested by Emisphere in such defense and shall have the
       right to be represented by counsel of its own choice at Lilly's expense
       provided that Emisphere shall (i) keep Lilly fully informed with regard
       to the defense of such Third Party claim and (ii) obtain Lilly's prior
       written approval before entering into any settlement in connection with
       such Third Party claims, such approval not to be unreasonably withheld or
       delayed.

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       If within [* * *] of receiving notice of any Third Party claim related to
       the Field, Emisphere fails to defend against such Third Party claim,
       Lilly may, at its own cost, defend against such Third Party claim;
       provided that Lilly shall (i) keep Emisphere fully informed with regard
       to the defense of such Third Party claim, and (ii) obtain Emisphere's
       prior written approval before entering into any settlement in connection
       with such Third Party claim, such approval not be unreasonably withheld
       or delayed. Emisphere shall cooperate with Lilly as may reasonably be
       requested by Lilly in such defense and shall have the right to be
       represented by counsel of its own choice at Emisphere's expense. If
       royalties or lump sum payments are due to the Third Party by reason of a
       court order or litigation settlement, such payment shall be solely the
       responsibility of Lilly, provided that [* * *]% of such Third Party
       royalties or lump sum payments shall be offset against royalties payable
       to Emisphere under this Agreement, not to exceed the royalties due
       Emisphere, as also set forth in Clause 13.1.

10.7   Except as provided in Clauses 10.6 and 13.1, Emisphere shall have no
       liability to Lilly whatsoever or howsoever arising for any losses
       incurred by Lilly as a result of having to cease selling Product(s) or
       having to defer the Launch of Product(s) as a result of any infringement
       proceedings.

11.    CONFIDENTIAL INFORMATION

11.1   The Parties acknowledge that it may be necessary, from time to time, to
       disclose to each other confidential and proprietary information,
       including without limitation, inventions, works of authorship, trade
       secrets, specifications, designs, data, know-how and other information,
       relating to the Field, the Compounds, the Carriers, the Products,
       processes, and services of the disclosing Party or regarding the
       Emisphere Technology or Emisphere Program Technology or the Lilly
       Technology or the Lilly Program Technology. The foregoing shall be
       referred to collectively as "Confidential Information". Any Confidential
       Information revealed by a Party to another Party shall be used by the
       receiving Party exclusively for the purposes of fulfilling the receiving
       Party's obligations under this Agreement.

11.2   Each Party agrees to disclose Confidential Information of another Party
       only to those employees, representatives and agents requiring knowledge
       thereof in connection with their duties directly related to the
       fulfilling of the Party's obligations under this Agreement. Each Party
       agrees that it will exercise the same degree of care, but in no event
       less than a reasonable degree, and protection to preserve the proprietary
       and confidential nature of the Confidential Information disclosed by the
       other Party, as the receiving Party would exercise to preserve its own
       proprietary and confidential information.

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       Each Party agrees that it will, upon request of the other Party, return
       all documents and any copies thereof containing Confidential Information
       belonging to or disclosed by, such Party if such documents are not
       required to perform its obligations hereunder, and further provided that
       the returning party may keep one copy of all such documents in its legal
       archive for recording purposes.

11.3   With respect to all Confidential Information furnished by one Party to
       the other pursuant to this Agreement, either in writing or orally, the
       Party receiving such Confidential Information shall maintain the
       confidential and proprietary status of such Confidential Information,
       keep such Confidential Information and each part thereof within its
       possession or under its control, use all its reasonable efforts to
       prevent the disclosure of any Confidential Information to any other
       person, and use all its reasonable efforts to ensure that such
       Confidential Information is used only for those purposes specifically
       authorized by this Agreement. These mutual obligations of confidentiality
       shall apply until ten (10) years after termination or expiration of this
       Agreement. Confidential Information, further, shall not be deemed to
       include any information to the extent that such information is:

       (a) independently developed by the recipient as documented by prior
       written records outside the scope and not in violation of this Agreement;

       (b) in the public domain at the time of its receipt or thereafter becomes
       part of the public domain through no fault of the recipient;

       (c) received without an obligation of confidentiality from a third party
       having the right to disclose such information;

       (d) released from the restrictions of this Clause 11 by the express
       written consent of the disclosing Party;

       (e) required by law, statute, rule or court order to be disclosed (the
       disclosing Party shall, however, use reasonable efforts to obtain
       confidential treatment of any such disclosure, consult with the other
       Party and permit the other Party to participate in seeking an appropriate
       protective order).

       Notwithstanding the provisions of this Clause 11, Emisphere and Lilly
       may, to the extent necessary, disclose and use Confidential Information
       only for the purpose of carrying out their duties and obligations under
       this Agreement (i) to any Affiliate, sublicensee or subcontractor of
       either Emisphere or Lilly hereunder (if such sublicensee or subcontractor
       is subject to provisions substantially similar to those set forth in this
       Clause 11); (ii) to secure patent

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       protection, pursuant to Clause 10 hereof, for an invention developed as a
       result of the collaboration undertaken pursuant to this Agreement or
       (iii) to obtain institutional or government approval to test clinically
       or market any Product subject to confidential treatment if possible.

11.4   The Parties agree that the obligations of this Clause 11 are necessary
       and reasonable in order to protect the Parties' respective businesses,
       and each Party expressly agrees that monetary damages would be inadequate
       to compensate a Party for any breach by the other Party of its covenants
       and agreements set forth herein. Accordingly, the Parties agree and
       acknowledge that any such violation or threatened violation will cause
       irreparable injury to a Party and that, in addition to any other remedies
       that may be available, in law and equity or otherwise, any Party shall be
       entitled to obtain injunctive relief against the threatened breach of the
       provisions of this Clause 11, or a continuation of any such breach by the
       other Party, specific performance and other equitable relief to redress
       such breach together with its damages and reasonable counsel fees and
       expenses to enforce its rights hereunder, without the necessity of
       proving actual or express damages.

12.    TERM OF AGREEMENT

12.1   Subject to the provisions for earlier termination set out in Clauses
       12.2, 12.3, and 12.6 and the provisions regarding the payment of
       royalties in Clause 8, the term of this Agreement shall be a period
       commencing as of the Effective Date and expiring on a country by country
       basis on the last to occur of:

       12.1.1 nine (9) years from the date of Launch of the Product(s) in the
              country concerned; or

       12.1.2 upon the expiration of the last to expire patent included in the
              Emisphere Patents, the Emisphere Program Patents and/or the Joint
              Patents to the extent that any such patents cover Products(s).

12.2   In addition to the rights of early or premature termination provided for
       elsewhere in this Agreement, in the event that any of the terms or
       provisions hereof are incurably breached by either Party, the non-
       breaching Party may immediately terminate this Agreement by written
       notice. Subject to the other provisions of this Agreement, in the event
       of any other breach, the non-breaching Party may terminate this Agreement
       by giving written notice to the breaching Party that this Agreement will
       terminate on the sixtieth (60th) day from notice unless cure is sooner
       effected. If the breaching Party has proposed a course of action to
       rectify the breach and is acting in good faith to rectify same but has
       not cured the breach by the sixtieth (60th) day, the

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       said period shall be extended by such period as is reasonably necessary
       to enable the breach to be cured. If termination of this Agreement
       pursuant to this Clause 12.2 is caused by a breach of this Agreement by
       Lilly, Lilly shall lose all rights pursuant to Clauses 2 and 3 above. If
       Emisphere breaches this Agreement then restitution to Lilly appropriate
       for the degree of the breach shall be made, and Lilly shall continue
       payments pursuant to a mutually acceptable escrow agreement until the
       matter is resolved.

12.3   As used in this Clause 12, the term "Event of Bankruptcy" relating to
       either Party shall mean:

       (a)    the appointment of a liquidator, receiver, administrator,
              examiner, trustee or similar officer over either Party or over all
              or a substantial part of its assets under the law of any
              applicable jurisdiction, including without limit, the United
              States of America; or

       (b)    an application or petition for bankruptcy, corporate re-
              organization, composition, administration, examination,
              arrangement or any other procedure similar to any of the foregoing
              under the law of any applicable jurisdiction, including without
              limitation, the United States of America, is filed, and is not
              discharged within thirty (30) days, or if either Party applies for
              or consents to the appointment of a receiver, administrator,
              examiner or similar officer over it or over all or a material part
              of its assets, rights or revenues or the assets and/or the
              business of either Party are for any reason seized, confiscated or
              condemned.

       12.3.1 If at any time during the term of this Agreement, an "Event of
              Bankruptcy" (as defined above) relating to Emisphere occurs, Lilly
              shall have, in addition to all other legal and equitable rights
              and remedies available hereunder, the option to terminate this
              Agreement upon thirty (30) days' written notice, given within
              sixty (60) days following the date that Lilly becomes aware of the
              Event of Bankruptcy. Upon such termination by Lilly, Lilly shall
              be entitled to solely continue the activities conducted or to be
              conducted pursuant to this Agreement but for the Event of
              Bankruptcy.

       12.3.2 If at any time during the term of this Agreement, an "Event of
              Bankruptcy" (as defined above) relating to Lilly occurs, other
              than in circumstances where the Event of Bankruptcy arises
              directly or indirectly as a result of a dispute with Emisphere and
              it is unlikely that the Event of Bankruptcy would have arisen if
              Lilly and Emisphere had been in agreement, rather than in dispute,
              Emisphere shall have, in

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              addition to all other legal and equitable rights and remedies
              available hereunder, the option to terminate this Agreement upon
              thirty (30) days' written notice, given within sixty (60) days
              following the date that Emisphere becomes aware of the Event of
              Bankruptcy.

12.4   Upon exercise of those rights of termination as specified in Clause 12.1
       to Clause 12.3 inclusive or elsewhere within the Agreement, this
       Agreement shall, subject to the other provisions of the Agreement,
       automatically terminate forthwith and be of no further legal force or
       effect.

12.5   Upon expiration or termination of the Agreement:

       12.5.1 any sums that were due from Lilly to Emisphere on Net Sales in the
              Territory or in such particular country or countries in the
              Territory, as the case may be, prior to the expiration or
              termination of this agreement as set forth herein shall be paid in
              full within [* * *] (or [* * *] if the information necessary to
              make such payment is not available within such [* * *] period) of
              the expiration or termination of this Agreement for the Territory
              or for such particular country or countries in the Territory, as
              the case may be;

       12.5.2 all confidentiality provisions set out herein shall remain in full
              force and effect;

       12.5.3 all responsibilities and warranties shall insofar as are
              appropriate remain in full force and effect;

       12.5.4 the rights of inspection and audit set out in Clause 9 shall
              continue in force for a period of one year;

       12.5.5 except as expressly provided for under Clauses 12.2 and 12.5.7 all
              rights and licenses granted in and pursuant to this Agreement
              shall cease for the Territory or for such particular country or
              countries in the Territory, as the case may be. Following such
              expiration or termination, Lilly may not thereafter, except as
              expressly provided for in Clauses 12.2 and 12.5.7, use in the
              Territory or in such particular country or countries in the
              Territory, as the case may be, (a) any valid and unexpired
              Emisphere Patents or Emisphere Program Patents and/or (b) any
              Emisphere Know-How or Emisphere Program Know-How that remains
              confidential or otherwise proprietary to Emisphere; and

       12.5.6 to the extent this Agreement is terminated (as opposed to expired)
              in the Territory or any particular country in the Territory, Lilly
              shall

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              promptly make an accounting to Emisphere of the inventory of the
              Product(s) which it has in the Territory or for such particular
              country or countries in the Territory, as the case may be, if any,
              as of the date of such termination and Lilly shall have the right
              for a period of [* * *] after said termination to sell such
              inventory of the Product(s) in the Territory or in such particular
              country or countries in the Territory, as the case may be, or, if
              appropriate and legally permissible, to transport such inventory
              of Product(s) for sale in another country or countries in the
              Territory within such [* * *] period; provided that the Net Sales
              thereof shall be subject to the royalty provisions of Clause 8 and
              so payable to Emisphere. Thereafter, any remaining inventory of
              Product(s) shall be disposed of by mutual agreement of the Parties
              in accordance with regulatory requirements.

       12.5.7 upon the conclusion of the term of this Agreement in any
              particular country, Lilly shall have a fully paid-up, exclusive
              license to make or use the Emisphere Know-How and Emisphere
              Program Know-How for the Products in the Field in that country.
              Upon such conclusion of the term of this Agreement in any
              particular country, [* * *].

12.6   Lilly shall have the option to terminate the Agreement upon [* * *] prior
       written notice to Emisphere. Lilly shall pay for any and all external (to
       Lilly) research and development commitments by Emisphere in place at the
       time of such notice of termination to the extent that Emisphere cannot
       terminate the same without penalty.

       If Lilly terminates this Agreement without cause (e.g., for reasons other
       than safety of the Carriers, clinical results of the Product, or the
       Emisphere Technology efficiency), the Parties will issue a joint press
       release which states that the termination was not due to the Emisphere
       Technology, and that Lilly will continue to evaluate the Emisphere
       Technology with respect to other Lilly therapeutic Compounds.

13.    WARRANTIES/INDEMNITIES

13.1   Emisphere represents and warrants that it has the sole, exclusive and
       unencumbered right to grant the licenses and rights herein granted to
       Lilly, and that it has not granted any option, license, right or interest
       in or to the Emisphere Technology, the Emisphere Program Technology, the
       Carriers or the Product(s) to any third party which would conflict with
       the rights granted by this Agreement.

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       In the case where the Emisphere Technology or the Emisphere Program
       Technology is covered by a patent or patents (or other intellectual
       property rights) held by an Independent Third Party, and both Emisphere
       and Lilly agree that a license is required under any such patent (or
       other intellectual property right) for the Parties to utilize the
       Emisphere Technology or the Emisphere Program Technology, Emisphere shall
       obtain such license and shall not pass on to Lilly, in any manner, any of
       the costs associated with obtaining such a license, including royalties
       to the Independent Third Party. In no case, however, shall Emisphere be
       required to obtain such a license if the costs of so doing would exceed
       the royalty payments by Lilly provided for hereunder. However, Lilly
       shall be permitted to obtain such a license and deduct from royalties
       otherwise due to Emisphere the costs of obtaining the license, up to a
       limit of all royalty payments due to Emisphere hereunder. In any such
       case, Lilly, in its negotiations with the Independent Third Party with
       respect to the amount of compensation for such a license, shall act in
       good faith vis a vis Emisphere.

13.2   Lilly represents and warrants that it has the sole, exclusive and
       unencumbered right to grant the licenses and rights herein granted to
       Emisphere and that it has not granted any option, license, right or
       interest in or to the Lilly Technology or the Lilly Program Technology to
       any third party which would conflict with the rights granted by this
       Agreement.

       In the case where the Lilly Technology or the Lilly Program Technology is
       covered by a patent or patents (or other intellectual property rights)
       held by an Independent Third Party, and, as a result thereof, either (i)
       Lilly is prohibited from continuing the development or sale of a Product
       or (ii) Lilly ceases development or sale of a Product because the costs
       associated with obtaining the rights to proceed with development or sale
       of the Product make such continued development or sale uneconomic in
       Lilly's sole judgment, then the licenses granted hereunder by Emisphere
       shall no longer be exclusive to Lilly, and Emisphere shall, in its sole
       discretion, have the right to enter into a license agreement with such
       Independent Third Party for use of the Emisphere Technology or Emisphere
       Program Technology in the development or sale of the Product. The
       foregoing shall not be interpreted so as to imply any license of the
       Lilly Technology or the Lilly Program Technology to Emisphere or to the
       Independent Third Party, nor shall this clause be deemed an impediment to
       any agreement among Emisphere, Lilly and the Independent Third Party to
       develop or sell the Product.

13.3   Emisphere represents and warrants that to the best of its knowledge, the
       true inventors of the subject matter claimed are named in the Emisphere
       Patents

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       and all such inventors have irrevocably assigned all their rights and
       interests therein to Emisphere.

13.4   Emisphere represents and warrants that it is not aware of any information
       material to the examination of the Emisphere Patents that was not
       disclosed to the United States Patent Office.

13.5   Emisphere and Lilly represent and warrant for the benefit of each other
       that the execution of this Agreement by them and the full performance and
       enjoyment of the rights of them under this Agreement will not breach the
       terms and conditions of any license, contract, understanding or
       agreement, whether express, implied, written or oral between them and any
       third party.

13.6   Emisphere and Lilly represent and warrant for the benefit of each other
       that as of the Effective Date of executing this Agreement, to the best of
       their knowledge no patents, trade secrets or any other proprietary rights
       of any third party would be infringed by the manufacture, use or sale of
       the Product(s).

13.7   Lilly represents and warrants that with respect to all regulatory filings
       to obtain NDA approvals, to the best of Lilly's knowledge, the data and
       information in Lilly's submission(s) are and shall be free from fraud or
       material falsity, that the NDA approvals have not been and will not be
       obtained either through bribery or the payment of illegal gratuities,
       that the data and information in Lilly's submissions are and shall be
       accurate and reliable for purposes of supporting approval of the
       submissions, and that the NDA approvals are and shall be obtained without
       illegal or unethical behavior of any kind.

13.8   Lilly represents and warrants that the Product(s) sold by Lilly under
       this Agreement shall conform to the Specifications and be in accordance
       with all regulations and requirements of the FDA including the then
       current Good Manufacturing Practice regulations which apply to the
       manufacture and supply of the Product(s). Lilly represents and warrants
       that the Product(s) sold by it shall not be adulterated or mis-branded as
       defined by the US Federal Food, Drug and Cosmetic Act, and shall not be a
       product which would violate any section of such Act if introduced in
       interstate commerce. EXCEPT AS EXPRESSLY STATED IN THIS CLAUSE 13.8, ALL
       OTHER WARRANTIES, CONDITIONS AND REPRESENTATIONS, EXPRESS OR IMPLIED,
       STATUTORY OR OTHERWISE, INCLUDING A WARRANTY AS TO THE QUALITY OR FITNESS
       FOR ANY PARTICULAR PURPOSE OF THE PRODUCT(S) ARE HEREBY EXCLUDED AND
       LILLY SHALL NOT BE LIABLE IN CONTRACT, TORT OR OTHERWISE FOR ANY LOSS,
       DAMAGE, EXPENSE OR INJURY OF ANY KIND WHATSOEVER, CONSEQUENTIAL OR
       OTHERWISE, ARISING OUT

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       OF OR IN CONNECTION WITH THE PRODUCT(S) OR ANY DEFECT IN THE PRODUCT(S)
       OR FROM ANY OTHER CAUSE.

13.9   Lilly is fully cognizant of all applicable statutes, ordinances and
       regulations of the Territory with respect to the manufacture of the
       Product(s) including, but not limited to, the U.S. Federal Food, Drug and
       Cosmetic Act and regulations thereunder, current Good Laboratory
       Practices and current Good Manufacturing Practices. Lilly shall
       manufacture the Product(s) in conformance with the Specifications and the
       Drug Master File (which Lilly shall own), to the extent any such Drug
       Master File exists, and in a manner which fully complies with such
       statutes, ordinances, regulations and practices.

13.10  Emisphere represents and warrants that the Carrier supplied by Emisphere
       under this Agreement shall conform to the Specifications and be in
       accordance with all regulations and requirements of the FDA including the
       then current Good Manufacturing Practice regulations which apply to the
       manufacture and supply of the Carrier. Emisphere represents and warrants
       that the Carrier supplied by it shall not be adulterated or mis-branded
       as defined by the US Federal Food, Drug and Cosmetic Act, and shall not
       be a product which would violate any section of such Act if introduced in
       interstate commerce. EXCEPT AS EXPRESSLY STATED IN THIS CLAUSE 13.10, ALL
       OTHER WARRANTIES, CONDITIONS AND REPRESENTATIONS, EXPRESS OR IMPLIED,
       STATUTORY OR OTHERWISE, INCLUDING A WARRANTY AS TO THE QUALITY OR FITNESS
       FOR ANY PARTICULAR PURPOSE OF THE PRODUCT(S) ARE HEREBY EXCLUDED AND
       EMISPHERE SHALL NOT BE LIABLE IN CONTRACT, TORT OR OTHERWISE FOR ANY
       LOSS, DAMAGE, EXPENSE OR INJURY OF ANY KIND WHATSOEVER, CONSEQUENTIAL OR
       OTHERWISE, ARISING OUT OF OR IN CONNECTION WITH THE PRODUCT(S) OR ANY
       DEFECT IN THE PRODUCT(S) OR FROM ANY OTHER CAUSE.

13.11  Emisphere is fully cognizant of all applicable statutes, ordinances and
       regulations of the Territory with respect to the manufacture of the
       Carrier including, but not limited to, the U.S. Federal Food, Drug and
       Cosmetic Act and regulations thereunder, current Good Laboratory
       Practices and current Good Manufacturing Practices. Emisphere shall
       manufacture the Carrier in conformance with the Specifications and the
       Drug Master File and in a manner which fully complies with such statutes,
       ordinances, regulations and practices. Emisphere shall own the Drug
       Master File with respect to the Carriers, and Lilly shall have access and
       a right of review thereto with respect to its manufacture of Carriers and
       its regulatory filings.

13.12  In addition to any other indemnifications provided for herein, Emisphere
       shall indemnify and hold harmless Lilly and its Affiliates and their
       respective

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       employees, agents, partners, officers and directors from and against any
       claims, losses, liabilities or damages (including reasonable attorney's
       fees and expenses) incurred or sustained by Lilly arising out of or in
       connection with any (a) breach of any representation, covenant, warranty
       or obligation by Emisphere hereunder, or (b) any act or omission on the
       part of Emisphere or any of its agents or employees in the performance of
       this Agreement.

13.13  In addition to any other indemnifications provided for herein, Lilly
       shall indemnify and hold harmless Emisphere and its Affiliates and their
       respective employees, agents, partners, officers and directors from and
       against any claims, losses, liabilities or damages (including reasonable
       attorney's fees and expenses) incurred or sustained by Emisphere arising
       out of or in connection with any (a) breach of any representation,
       covenant, warranty or obligation by Lilly hereunder, or (b) any act or
       omission on the part of Lilly or any of its agents or employees in the
       performance of this Agreement.

13.14  Lilly shall assume the sole and entire responsibility and shall indemnify
       and hold harmless Emisphere from any and all claims, liabilities,
       expenses, including reasonable attorney's fees, responsibilities and
       damages by reason of any claim, proceedings, action, liability or injury
       arising out of any faults of the Product(s) resulting from the transport,
       packaging, storage, handling, distribution, marketing or sale of the
       Product(s) by Lilly, to the extent that it was caused by the negligence
       or wrongful acts or omissions on the part of Lilly.

13.15  Emisphere shall assume the sole and entire responsibility and shall
       indemnify and hold harmless Lilly from any and all claims, liabilities,
       expenses, including reasonable attorney's fees, responsibilities and
       damages by reason of any claim, proceeding, action, liability or injury
       arising out of any faults of the Carrier(s) resulting from the transport,
       packaging, storage, handling, distribution, marketing or sale of the
       Carrier(s) by Emisphere, to the extent that it was caused by the
       negligence or wrongful acts or omissions on the part of Emisphere.

13.16  As a condition of obtaining an indemnity in the circumstances set out
       above, the Party seeking an indemnity shall:

       13.16.1  fully and promptly notify the other Party of any claim or
                proceeding, or threatened claim or proceeding;

       13.16.2  permit the indemnifying Party to take full care and control of
                such claim or proceeding;

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       13.16.3  cooperate in the investigation and defense of such claim or
                proceeding;

       13.16.4  not compromise or otherwise settle any such claim or proceeding
                without the prior written consent of the other Party, which
                consent shall not be unreasonably withheld, conditioned or
                delayed; and

       13.16.5  take all reasonable steps to mitigate any loss or liability in
                respect of any such claim or proceeding.

13.17  NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, EMISPHERE AND
       LILLY SHALL NOT BE LIABLE TO THE OTHER BY REASON OF ANY REPRESENTATION OR
       WARRANTY, CONDITION OR OTHER TERM OR ANY DUTY OF COMMON LAW, OR UNDER THE
       EXPRESS TERMS OF THIS AGREEMENT, FOR ANY CONSEQUENTIAL OR INCIDENTAL LOSS
       OR DAMAGE (WHETHER FOR LOSS OF PROFIT OR OTHERWISE) AND WHETHER
       OCCASIONED BY THE NEGLIGENCE OF THE RESPECTIVE PARTIES, THEIR EMPLOYEES
       OR AGENTS OR OTHERWISE WHETHER OR NOT THEY HAVE BEEN ADVISED OF THE
       POSSIBILITY OF SUCH DAMAGES.

14.    REGULATORY APPROVALS

14.1   Any and all INDAs, NDAs and other applications for regulatory approval
       filed hereunder for the Product(s) shall be the responsibility and
       property of Lilly. Lilly shall allow Emisphere access thereto to enable
       Emisphere to fulfill its obligations and exercise its rights under this
       Agreement. Lilly will be responsible for all regulatory filings in all
       countries and shall allow Emisphere access to related correspondence, to
       the extent such access is necessary to enable Emisphere to fulfill its
       obligations and exercise its rights under this Agreement. In particular,
       Lilly agrees to inform Emisphere should any such correspondence
       reasonably pertain to the Emisphere Technology or the Emisphere Program
       Technology. The Parties shall collaborate in relation to obtaining the
       approval of the FDA for final approved labeling.

14.2   Save as otherwise outlined in this Agreement, the costs and expenses of
       any filings and proceedings made by Lilly to the FDA, including post
       approval studies required by the FDA in respect of the Product(s), and to
       maintain the FDA approval hereunder shall be paid by Lilly.

14.3   Lilly shall indemnify and hold harmless Emisphere, its agents and
       employees from and against all claims, damages, losses, liabilities and
       expenses to which Emisphere, its agents, and employees may become subject
       related to or arising

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       out of Lilly's bad faith, gross negligence or intentional misconduct in
       connection with the filing or maintenance or failure to file or maintain
       or prosecute the NDA.

14.4   Subject to the provisions of Clause 14.4, it is hereby acknowledged that
       there are inherent uncertainties involved in the registration of
       pharmaceutical products with the FDA insofar as obtaining approval is
       concerned and such uncertainties form part of the business risk involved
       in undertaking the form of commercial collaboration as set forth in this
       Agreement. Therefore, save for using its reasonable efforts, Lilly and
       Emisphere shall have no liability to each other solely as a result of any
       failure of the Product(s) to achieve the approval of the FDA, or any
       other regulatory body in the Territory.

14.5   Should the Parties receive a notice of regulatory inspection from any
       governmental agency, or if the Parties receive notice of any potential
       regulatory action, relative to the Carrier, the Parties will have an
       obligation to notify each other of same.

       Emisphere will prepare and provide Lilly with all information deemed
       necessary by Lilly for worldwide regulatory submission of the Product
       (Lilly will provide Emisphere with a template for such submissions, which
       Emisphere shall prepare and provide the relevant information to Lilly).
       Emisphere shall also provide Lilly with necessary access to any
       regulatory filings worldwide relevant to the Product and Lilly shall be
       entitled to use the information contained therein in its own regulatory
       filings on the Product. Should Emisphere wish, at any time during the
       term of this Agreement, to modify its regulatory filings relating to the
       Product, Emisphere shall provide Lilly with written notification of its
       intentions prior to making such modification. Any proposed modification
       not required by law, government or regulatory agency must be responded to
       by Lilly within thirty (30) days. If Lilly's response is not received by
       Emisphere within 30 days, approval of such proposal shall be deemed to
       have been granted. Finally, to the extent details of the regulatory
       filing process are not set forth in this section or elsewhere in the
       Agreement, the Steering Committee shall decide any such matters.

15.    INSURANCE

15.1   Lilly shall maintain comprehensive general liability insurance, including
       product liability insurance on the Product(s) manufactured and/or sold in
       such prudent amount as shall be determined by Lilly management for the
       duration of this Agreement and for a period of two (2) years thereafter.

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15.2   Emisphere shall maintain comprehensive general liability insurance,
       including product liability insurance on the Carrier(s) manufactured for
       and/or sold to Lilly in such prudent amount as shall be determined by
       Emisphere management for the duration of this Agreement and for a period
       of two (2) years thereafter. Emisphere shall also provide Lilly with a
       vendor's certificate for the Carriers substantially in a form to be
       agreed between the Parties.

16.    IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE

16.1   Neither Party to this Agreement shall be liable for delay in the
       performance of any of its obligations hereunder if such delay results
       from causes beyond its reasonable control, including, without limitation,
       acts of God, fires, strikes, acts of war, or intervention of a government
       authority, non availability of raw materials, but any such delay or
       failure shall be remedied by such Party as soon as practicable.

17.    SETTLEMENT OF DISPUTES; PROPER LAW

17.1   The Parties will attempt in good faith to resolve any dispute arising out
       of or relating to this Agreement promptly by negotiation between the
       Chief Executive Officer of Emisphere and (a) the Vice President of
       Science, Technology and Proteins if the dispute is prior to Launch of
       Products in any country in the Territory, or (b) if the dispute arises
       after such Launch, then the Vice President of Lilly's general business
       unit responsible for the Product at issue. In the event that such
       negotiations do not result in a mutually acceptable resolution, the
       Parties agree to consider other dispute resolution mechanisms including
       mediation. Subject to the provisions of Clause 17.2, in the event that
       the Parties fail to agree on a mutually acceptable dispute resolution
       mechanism, any such dispute shall be finally settled by a court of
       competent jurisdiction. The Parties hereby submit to the jurisdiction of
       the state and Federal courts located in the state of New York.

17.2   This Agreement shall be governed by and construed in accordance with the
       laws of New York without reference to conflicts of laws principles.

18.    ASSIGNMENT

18.1   This Agreement may not be assigned by either Party without the prior
       written consent of the other, which consent shall not be unreasonably
       withheld, conditioned or delayed, save that either Party may assign this
       Agreement to its Affiliate or to any successor by merger or sale of
       substantially all of the assets of its business unit to which this
       Agreement relates without such consent, provided that such assignment
       does not have any adverse tax

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       consequences on the other Party. Emisphere and Lilly will discuss any
       assignment by either Party to an Affiliate prior to its implementation in
       order to avoid or reduce any additional tax liability to the other Party
       resulting solely from different tax law provisions applying after such
       assignment to an Affiliate. For the purpose hereof, an additional tax
       liability shall be deemed to have occurred if either Party would be
       subject to a higher net tax on payments made hereunder after taking into
       account any applicable tax treaty and available tax credits than such
       Party was subject to before the proposed assignment.

19.    NOTICES

19.1   Any notice to be given under this Agreement shall be sent in writing in
       English by registered mail or telefaxed to the following addresses:

       If to Lilly:

       Eli Lilly and Company
       Lilly Corporate Center
       Indianapolis, IN  46285

       Attention:   General Patent Counsel
       Telephone: (317) 276-3881
       Telefax:     (317) 276-2763

       If to Emisphere:

       Emisphere Technologies, Inc.
       15 Skyline Drive
       Hawthorne, NY  10532

       Attention:  Vice President Business Development
       Telephone:  (914) 347-2220
       Telefax:    (914) 347-2498

       or to such other address(es) and telefax number(s) as may from time to
       time be notified by either Party to the other hereunder.

19.2   Any notice sent by mail shall be deemed to have been delivered within
       [* * *] working days after dispatch and any notice sent by telefax shall
       be deemed to have been delivered within [* * *] of the time of the
       dispatch. Notice of change of address shall be effective upon receipt.

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20.    MISCELLANEOUS CLAUSES

20.1   No waiver of any right under this Agreement shall be deemed effective
       unless contained in a written document signed by the Party charged with
       such waiver, and no waiver of any breach or failure to perform shall be
       deemed to be a waiver of any other breach or failure to perform or of any
       other right arising under this Agreement.

20.2   If any provision in this Agreement is agreed by the Parties to be, or is
       deemed to be, or becomes invalid, illegal, void or unenforceable under
       any law that is applicable hereto, (i) such provision will be deemed
       amended to conform to applicable laws so as to be valid and enforceable
       or, if it cannot be so amended without materially altering the intention
       of the Parties, it will be deleted, with effect from the date of such
       agreement or such earlier date as the Parties may agree, and (ii) the
       validity, legality and enforceability of the remaining provisions of this
       Agreement shall not be impaired or affected in any way.

20.3   The Parties shall use their respective reasonable endeavors to ensure
       that the Parties and any necessary third party shall do, execute and
       perform all such further deeds, documents, assurances, acts and things as
       any of the Parties hereto may reasonably require by notice in writing to
       the other Party or such third party to carry the provisions of this
       Agreement.

20.4   This Agreement shall be binding upon and inure to the benefit of the
       Parties hereto, their successors and permitted assigns and sub-licensees.

20.5   No provision of this Agreement shall be construed so as to negate, modify
       or affect in any way the provisions of any other agreement between the
       Parties unless specifically referred to, and solely to the extent
       provided, in any such other agreement. In the event of a conflict between
       the provisions of this Agreement and the provisions of the Option
       Agreement, the terms of the Option Agreement shall prevail unless this
       Agreement specifically provides otherwise.

20.6   No amendment, modification or addition hereto shall be effective or
       binding on either Party unless set forth in writing and executed by a
       duly authorized representative of each Party.

20.7   This Agreement may be executed in any number of counterparts, each of
       which when so executed shall be deemed to be an original and all of which
       when taken together shall constitute this Agreement.

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20.8   Each of the Parties undertakes to do all things reasonably within its
       power which are necessary or desirable to give effect to the spirit and
       intent of this Agreement.

20.9   Each of the Parties hereby acknowledges that in entering into this
       Agreement it has not relied on any representation or warranty save as
       expressly set out herein or in any document referred to herein.

20.10  Nothing contained in this Agreement is intended or is to be construed to
       constitute Emisphere and Lilly as partners, or Emisphere as an employee
       of Lilly, or Lilly as an employee of Emisphere. Neither Party hereto
       shall have any express or implied right or authority to assume or create
       any obligations on behalf of or in the name of the other Party or to bind
       the other Party to any contract, agreement or undertaking with any third
       party.

20.11  This Agreement has been jointly prepared and shall not be strictly
       construed against any Party.

20.12  The parties hereto agree to disclose publicly through a joint press
       release, upon signing this Agreement, the nature and scope of the
       Agreement. All press releases, scientific papers and all other public
       disclosures related to this Agreement shall be approved in advance by
       both parties, except for such disclosures permitted pursuant to Clause
       11, above, such approval not to be unreasonably withheld or delayed. Upon
       the occurrence of other significant events in the Research and
       Development Program or other activities hereunder, Emisphere and Lilly
       agree to make joint press releases. In all cases Lilly shall have the
       right to review portions of any SEC filings by Emisphere that relate
       directly to Lilly; in no case shall either party release information
       which would allow a third party to determine the actual Carriers
       (including, without limitation, the Carrier/Compound complex in the
       Product) developed hereunder.

IN WITNESS THEREOF the Parties hereto have executed this Agreement in duplicate.

SIGNED BY
For and on behalf of
Eli Lilly and Company
in the presence of:

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SIGNED BY Michael M. Goldberg, M.D.
For and on behalf of
Emisphere Technologies, Inc.
in the presence of:

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                                   APPENDIX I

                           [* * *] Content Check List

[* * *].

                                       1

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