DEVELOPMENT AND LICENSE AGREEMENT

Exhibit 10.31

DEVELOPMENT AND LICENSE AGREEMENT

BETWEEN

H OFFMANN -L A R OCHE I NC. AND F.H OFFMANN -L A R OCHE L TD

AND

E MISPHERE T ECHNOLOGIES , I NC .

November 17, 2004

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

DEVELOPMENT AND LICENSE AGREEMENT

          T HIS D EVELOPMENT AND L ICENSE A GREEMENT (the “Agreement” ) is entered into as of November 17, 2004 (the “Effective Date” ) by and between H OFFMANN -L A R OCHE I NC . , a New Jersey corporation having a place of business at 340 Kingsland Street, Nutley, New Jersey 07110, and F.H OFFMANN -L A R OCHE L TD , a Swiss corporation, having a place of business at Grenzacherstrasse 124, CH-4070, Basel, Switzerland (collectively “Roche” ), on the one hand, and E MISPHERE T ECHNOLOGIES , I NC . , a Delaware corporation having an address of 765 Old Saw Mill River Road, Tarrytown, NY 10591 ( “Emisphere” ), on the other. 

R ECITALS

          W HEREAS , Emisphere is a biopharmaceutical company specializing in the oral delivery of therapeutic molecules;

          W HEREAS , Emisphere is developing oral delivery technology for ***compounds and oral dosage formulations of *** compounds;

          W HEREAS , Roche is a leading global health care company engaged in the research, development and commercialization of pharmaceutical products; and

          W HEREAS , Roche desires to obtain, and Emisphere is willing to grant to Roche, an exclusive, worldwide right to develop and commercialize oral *** using Emisphere’s proprietary oral drug delivery technology, subject to the terms and conditions set forth herein.

          N OW , T HEREFORE , in consideration of the foregoing premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.       D EFINITIONS

          1.1          “Adjusted Gross Sales” shall mean the gross amounts invoiced by Roche, its Affiliates and their respective sublicensees for sales of Products to Third Parties that are not Affiliates or sublicensees of the selling party (unless such Affiliate or sublicensee is the end user of such Product, in which case the amount billed therefor shall be deemed to be the amount that would be billed to a Third Party end user in an arm’s-length transaction), less deductions for returns and return reserves (such reserves consistent with International Financial Reporting Standards (“IFRS”)) (including allowances actually given for spoiled, damaged, out-dated, rejected or returned Product sold, withdrawals and recalls), rebates to the extent consistently and reasonably applied by Roche to its products (price reductions, rebates to social and welfare systems, charge backs and charge back reserves (such reserves consistent with IFRS), cash sales incentives (but only to the extent it is a sales related deduction which is accounted for within Roche on a product-by-product basis), government mandated rebates and similar types of rebates (e.g., P.P.R.S. Medicaid, each as consistently and reasonably applied by

1.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

Roche to its products), volume (quantity) discounts and cash discounts, each as consistently and reasonably applied by Roche to its products, taxes (value added or sales taxes, government mandated exceptional taxes and other taxes directly linked to the gross sales amount), it being understood that income and capital gains taxes are not the type of taxes contemplated as a deduction in this definition of Adjusted Gross Sales. 

          1.2          “Affiliate” shall mean an individual, trust, business trust, joint venture, partnership, corporation, association or any other entity which (directly or indirectly) is controlled by, controls or is under common control with a party to this Agreement.  For the purposes of this definition, the term “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) as used with respect to a party, shall mean the possession (directly or indirectly) of more than fifty percent (50%) of the outstanding voting securities of a corporation or comparable equity interest in any other type of entity, or otherwise having the power to govern the financial and the operating policies or to appoint the management of such entity.  With regard to Roche, the term “Affiliate” shall not include Genentech Inc., 1 DNA Way, South San Francisco, California 94080-4990, or Chugai Pharmaceutical Co., Ltd, 1-9, Kyobashi 2-chome, Chuo-ku, Tokyo, 104-8301, Japan, unless and until such time as Roche opts for such inclusion by written notice to Emisphere.

          1.3          “***” shall mean any compound in the class known as ***, including all *** thereof. 

          1.4          “Carrier” shall mean any synthetic chemical compound that allows a drug molecule to cross membranes.

          1.5          “Combination Product” shall have the meaning provided in Section 6.5.

          1.6          “Confidential Information” shall have the meaning provided in Section 11.1.

          1.7          “Control” shall mean, with respect to any Information or intellectual property right, possession by a party of the ability (whether by ownership, license or otherwise) to grant access, a license or a sublicense to such Information or intellectual property right without violating the terms of any agreement or other arrangement with any Third Party as of the time such Party would first be required hereunder to grant the other Party such access, license or sublicense.

          1.8          “Development Plan” shall mean the plan for conducting the Development Program, as amended from time to time by Roche.  The initial Development Plan has been agreed upon by the parties in writing as of the Effective Date and is attached as Exhibit B.  Roche shall not have the right to amend the initial Development Plan or any subsequent Development Plan in any manner that would provide for activities outside the scope of the license granted to Roche under Section 5.1(a)(ii) or in violation of the restrictions imposed on Roche pursuant to Section 5.2.

          1.9          “Development Program” shall mean the program of research and development with respect to Products conducted by Roche during the Development Term pursuant to Articles 2, 3 and 4 hereof, as more fully described in the Development Plan.  For purposes of clarification, the Development Program does not encompass development of *** in combination

2.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

with Carriers other than Program Carriers, and Roche may pursue development of products containing *** in combination with agents (other than Program Carriers) outside of the Development Program, provided that such agents are not Emisphere Other Technology.

          1.10          “Development Term” shall have the meaning provided in Section 12.1.

          1.11          “DMF” shall mean a drug master file (as such term is defined in 21 C.F.R. Part 314.420) for any Product.

          1.12          “Dossier” shall mean the file of all documents filed with a Regulatory Authority for purposes of a registration (e.g., NDA).

          1.13          “Emisphere Inventions” shall have the meaning provided in Section 9.1.

          1.14          “Emisphere Know-How” shall mean, to the extent Controlled by Emisphere on the Effective Date or during the Development Term, Information that is necessary for performance of the Development Program or necessary for the manufacture, use, sale, offer for sale or import of Products, including, in each case, any replication or any part of any of the foregoing Information.

          1.15          “Emisphere Management” shall mean any Emisphere officer with a title of Chief Executive Officer, Vice President or Senior Vice President.

          1.16          “Emisphere Other Technology” shall mean all trade secret know-how and patented Information Controlled by Emisphere as of the Effective Date or during the Development Term excluding Emisphere Technology.

          1.17          “Emisphere Patents” shall mean, to the extent Controlled by Emisphere as of the Effective Date or during the Development Term, all Patents that claim inventions necessary for performance of the Development Program or that claim the manufacture, use, sale, offer for sale or import of any Product. 

          1.18         “Emisphere Technology” shall mean the Emisphere Patents and Emisphere Know-How.

          1.19          “FDA” shall mean the United States Food and Drug Administration, or any successor agency thereto having the administrative authority to regulate the marketing to human pharmaceutical products or biological therapeutic products, delivery systems and devices in the United States of America.

          1.20          “FD&C Act” shall mean the United States Federal Food, Drug and Cosmetic Act and regulations promulgated thereunder, as each may be amended from time to time.

          1.21          “Field” shall mean the treatment and/or prevention of all human diseases and disorders using any ***.

3.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

          1.22          “First Commercial Sale” shall mean, with respect to any Product, the first sale in a country after the governing health regulatory authority of such country has granted Regulatory Approval.

          1.23          “FTE” shall mean the equivalent of a full-time scientist’s work time over a 12-month period (including normal vacations, sick days and holidays).   

          1.24          “IND” shall mean an Investigational New Drug Application filed with the FDA, or the equivalent application or filing filed with any equivalent agency or governmental authority outside the United States of America (including any supra-national agency such as in the European Union) necessary to commence human clinical trials in such jurisdiction.

          1.25          “Information” shall mean all tangible and intangible (a) techniques, technology, practices, trade secrets, inventions (whether patentable or not), methods, knowledge, know-how, skill, experience, test data and results (including pharmacological, toxicological and clinical test data and results), analytical and quality control data, results or descriptions, software and algorithms and (b) compounds, compositions of matter, cells, cell lines, assays, animal models and physical, biological or chemical material.

          1.26          “Inventions” shall have the meaning provided in Section 9.1.

          1.27         “Joint Inventions” shall have the meaning provided in Section 9.1.

          1.28          “Joint Patents” shall mean all Patents that claim a Joint Invention.

          1.29          “Major European Market Country” shall mean France, Germany, Italy, Spain or the United Kingdom.

          1.30          “Major Market Country” shall mean the United States of America, Japan or a Major European Market Country.

          1.31         “NDA” shall mean a New Drug Application (as more fully defined in 21 C.F.R. Part 314.5 et seq. ) and all amendments and supplements thereto filed with the FDA, or the equivalent application filed with any equivalent agency or governmental authority outside the United States of America (including any supra-national agency such as in the European Union), including all documents, data, and other information concerning a pharmaceutical product which are necessary for gaining Regulatory Approval to market and sell such pharmaceutical product.

          1.32          “Net Sales” shall mean Adjusted Gross Sales *** of Adjusted Gross Sales in the United States of America and *** of Adjusted Gross Sales in all other countries to cover other sales-related expenses or discounts not accounted for on a product-by-product basis (e.g., outward freights, postage charges, custom duties, transportation, insurance expenses, packaging materials for dispatch of goods, and discounts granted later than at the time of invoicing), to the extent no already deducted from gross sales.

          1.33          “Patents” shall mean (a) United States and foreign patents, re-examinations, reissues, renewals, extensions and term restorations, and (b) pending applications for United States and foreign patents, including, without limitation, provisional applications, continuations, continuations-in-part, divisional and substitute applications, including, without limitation, inventors’ certificates.

4.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

          1.34          “Phase 1 Clinical Trial” shall mean a human clinical trial that satisfies the requirements for a Phase 1 study as defined in 21 C.F.R. Part 312.21(a) (or its successor regulation).

          1.35          “Phase 2 Clinical Trial” shall mean a human clinical trial that satisfies the requirements for a Phase 2 study as defined in 21 C.F.R. Part 312.21(b) (or its successor regulation).

          1.36          “Phase 3 Clinical Trials” shall mean a human clinical trial that satisfies the requirements for a Phase 3 study as defined in 21 C.F.R. Part 312.21(c) (or its successor regulation).

          1.37          “Product” shall mean a pharmaceutical product containing any formulation of *** and a Program Carrier for oral administration only, including sublingual and buccal forms.  For clarity, *** shall be considered separate and distinct Products for the purpose of this Agreement, including for the calculation of royalties and other payments.  For the avoidance of doubt, different dosage strengths *** of a Product containing a given *** and a given Program Carrier shall not be considered separate Products.  For further avoidance of doubt, all formulations of a given *** and a given Program Carrier approved for a single indication (or related indications) shall be considered a single Product for purpose of this Agreement, whether or not such Product is marketed under a single trademark or multiple trademarks.  For example, *** is or may be marketed under various trademarks, including *** and all versions of these separately trademarked products shall be considered a single Product for the purpose of this Agreement.

          1.38         “Product-Specific Emisphere Claim” shall mean a claim of an Emisphere Patent that claims the composition of matter, method of use and/or method of manufacture of a Program Carrier or of a Product being developed or commercialized by Roche under this Agreement but that does not claim the composition of matter, method of use and/or method of manufacture of any Carrier other than the Program Carriers or Emisphere’s Carrier technology generally.  For purposes of clarification, the Product-Specific Emisphere Claims shall exclude any claim of an Emisphere Patent that claims the composition of matter, method of use and/or method of manufacture of any Carrier other than a Program Carrier or claims any aspect of Emisphere’s Carrier technology generally.

          1.39          “Product-Specific Emisphere Patent” shall mean an Emisphere Patent that claims the composition of matter, method of use and/or method of manufacture of a Program Carrier or of a Product being developed or commercialized by Roche under this Agreement but that does not claim the composition of matter, method of use and/or method of manufacture of any Carrier other than the Program Carriers or Emisphere’s Carrier technology generally.  For purposes of clarification, the Product-Specific Emisphere Patents shall exclude any Emisphere Patent that claims the composition of matter, method of use and/or method of manufacture of any Carrier other than a Program Carrier or claims any aspect of Emisphere’s Carrier technology generally.

5.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

          1.40          “Product-Specific Improvement” shall mean (a) any claim in a Roche Patent or Joint Patent the practice of which would infringe at least one of the Product-Specific Emisphere Patents, and (b) any and all Roche Know-How that is necessary for the practice of the invention claimed in such Roche Patent or Joint Patent. 

          1.41          “Program Carriers” shall mean the Carrier known as *** and the Carrier known as *** (each as shown in Exhibit A hereto).

          1.42          “Regulatory Approval” shall mean any and all approvals (including price and reimbursement approvals), licenses, registrations, or authorizations of the European Union or of any country, federal, state or local regulatory agency, department, bureau or other government entity that is necessary for the manufacture, use, storage, import, transport and/or sale of a Product in such jurisdiction.

          1.43          “Regulatory Authority” shall mean any and all national, supra-national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity, whose approval or authorization is necessary for, or to whom notice must be given prior to, the manufacture, distribution, use or sale of a Product or the designation of a Product as an orphan drug (or equivalent designation).

          1.44          “Roche Inventions” shall have the meaning provided in Section 9.1.

          1.45          “Roche Know-How” shall mean, to the extent Controlled by Roche on the Effective Date or during the Development Term, Information not included in the Roche Patents or Joint Patents that is necessary for performance of the Development Program or necessary for the manufacture, use, sale, offer for sale or import of Products, but excluding the Emisphere Know-How licensed to Roche hereunder.

          1.46          “Roche Patents” shall mean, to the extent Controlled by Roche as of the Effective Date or during the Development Term, all Patents that claim inventions necessary for performance of the Development Program or that claim the manufacture, use, sale, offer for sale or import of any Product, but excluding the Emisphere Patents licensed to Roche hereunder and the Joint Patents.

          1.47          “Roche Technology” shall mean the Roche Patents and the Roche Know-How.

          1.48          “Technical Liaison Committee” or “TLC” shall mean the committee formed pursuant to Section 2.1.

          1.49          “Term” shall have the meaning provided in Section 12.1.

          1.50          “Third Party” shall mean any entity other than Emisphere or Roche or an Affiliate of Emisphere or Roche.

          1.51          “Valid Claim” shall mean (a) an unexpired claim of an issued patent within the Emisphere Patents, Roche Patents or Joint Patents which has not been found to be unpatentable, invalid or unenforceable by a court or other authority in the subject country, from which decision no appeal is taken or can be taken; or (b) a claim of a pending application within the Emisphere

6.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

Patents, Roche Patents or Joint Patents, provided that such application has not been pending for more than five (5) years (including the pendency of any parent application(s) from which such application claims priority). 

2.        T ECHNICAL L IAISON C OMMITTEE

          2.1         Technical Liaison Committee.   Promptly after the Effective Date, the parties will form a Technical Liaison Committee (the “TLC” ) composed of three (3) representatives of each of Roche and Emisphere.  One (1) representative of Roche on the TLC shall be selected to act as the chairperson of the TLC.  The TLC shall meet as needed for exchange of information between the parties, but at least quarterly, during the Development Term.  Such meetings may be conducted by videoconference, teleconference or in person.  A reasonable number of additional representatives of either party may attend meetings of the TLC. !

          2.2         Reports.   On a semi-annual basis during the Development Term, the TLC will provide the parties with a written report describing, in reasonable detail, the status of the Development Program and a summary of the results and progress to date.   

3.       C ONDUCT OF THE D EVELOPMENT P ROGRAM

          3.1         Objectives.   Roche hereby agrees to establish and conduct the Development Program during the Development Term in accordance with the Development Plan and with the terms of this Agreement with the goal of developing Products for further development and commercialization by Roche.  Roche, through the TLC, shall advise Emisphere of any material amendments or revisions to the Development Plan in writing.

          3.2         Technology Transfer.   Commencing promptly after the Effective Date and from time to time thereafter during the Development Term, Emisphere shall disclose to Roche such Emisphere Technology as is reasonably necessary to enable Roche to perform its Development Program activities hereunder in accordance with the Development Plan.  During the Development Term, Emisphere will provide Roche with reasonable technical assistance relating to the use of the Emisphere Technology, solely to the extent permitted under the licenses granted to Roche under Article 5.

          3.3         Research Commitment.   During the Development Term, Roche shall diligently conduct the Development Program in accordance with the Development Plan, as revised from time to time by Roche.  Without limiting the generality of the foregoing, each party shall devote to the Development Program such personnel as is reasonably necessary to conduct the activities for which such party is responsible as set forth in the Development Plan.  Roche may request that Emisphere perform certain Development Plan activities; and if Emisphere agrees to perform such activities, it shall conduct such activities diligently.  In addition, Emisphere shall promptly provide written reports of the status of such activities and the results from its performance of, such activities, in accordance with a schedule agreed upon by the parties.  Roche shall compensate Emisphere for Development Plan activities (excluding activities relating to participation in, or preparation for, TLC meetings or relating to regulatory activities) performed by Emisphere personnel at a rate of *** per FTE-hour.  On a *** basis, within forty-five (45) days of the end of the ***, Emisphere shall provide a written invoice to Roche specifying the

7.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

number of FTE-hours devoted by Emisphere personnel to the Development Program, together with a description of the work completed by such personnel.  Each such invoice shall be due and payable on a *** basis.

          3.4         Information Exchange.  Each party shall keep the other party reasonably informed as to discoveries and technical developments (including, without limitation, any Inventions related to Product or otherwise necessary for the Development Program, and any Product-Specific Improvements) made in the course of performing activities under the Development Program.  Emisphere shall provide Roche with all reasonably requested and available toxicology and safety data relevant to the Program Carriers as soon as practicable after the Effective Date.  Emisphere shall disclose to Roche, in confidence, all reasonably requested and available information relating to the Products and/or the Program Carriers, including know-how, experimental data, formulas, expert opinions, experimental procedures, and clinical and regulatory data and filings.  Emisphere shall also provide technical assistance to enable Roche to utilize such information.  Notwithstanding the foregoing, a party shall not be required to disclose any information that it is prohibited from disclosing either by law or by reason of a contract with a Third Party.

          3.5         Subcontracts.   Roche may perform some of its obligations under the Development Plan through one (1) or more subcontractors, provided that (i) none of the rights of Emisphere hereunder are diminished or otherwise adversely affected as a result of such subcontracting, and (ii) the subcontractor undertakes in writing obligations of confidentiality and non-use regarding Confidential Information which are substantially the same as those undertaken by Roche pursuant to Article 12 hereof and obligations of assignment to Roche as outlined in Article 9.  In the event that Roche performs any of its obligations under the Development Plan through a subcontractor, then Roche will, at all times, be responsible for the performance and payment of such subcontractor.

          3.6         Materials Transfer.   In order to facilitate the Development Program, either party may provide to the other party certain biological materials or chemical compounds (collectively, “Materials” ) Controlled by the supplying party (other than under this Agreement) for use by the other party in furtherance of the Development Program.  Except as otherwise provided under this Agreement, all such Materials delivered to the other party will remain the sole property of the supplying party, will be used only in furtherance of the Development Program in accordance with this Agreement, will not be used or delivered to or for the benefit of any Third Party without the prior written consent of the supplying party, and will be used in compliance with all applicable laws, rules and regulations.  In particular, Emisphere shall supply Roche with *** of *** Program Carrier promptly, but in any event, no later than thirty (30) calendar days from the Effective Date of this Agreement.  Roche shall reimburse Emisphere for any Program Carriers provided to Roche at Emisphere’s cost of *** within thirty (30) days after receipt by Roche of an invoice from Emisphere.  The Materials supplied under this Agreement must be used with prudence and appropriate caution in any experimental work because not all of their characteristics may be known.  Except as expressly set forth herein, THE MATERIALS ARE PROVIDED “AS IS” AND WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE.

8.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

          3.7         Substitution of Program Carriers.  The Program Carriers as of the Effective Date are identified in Exhibit A hereto, and the parties may amend Exhibit A by mutual written agreement from time to time to substitute a different Carrier for either Program Carrier in accordance with this Section 3.7.  At any time prior to the *** anniversary of the Effective Date, Roche shall be permitted to make up to *** requests to Emisphere for a proposal of Carriers to replace the Program Carriers.  Emisphere shall in its sole discretion identify and propose to Roche Carriers for replacement of the Program Carriers.  Should Roche agree that any such proposed Carrier is acceptable for substitution for a Program Carrier, then such proposed Carrier shall be deemed a Program Carrier and the substituted Program Carrier shall cease being a Program Carrier.  For the avoidance of doubt, at no time may there be more than two (2) Program Carriers.

4.       D EVELOPMENT AND C OMMERCIALIZATION OF P RODUCTS BY R OCHE

          4.1         Development and Commercialization of Products.   Subject to the terms and conditions of this Agreement, and except as expressly set forth in the Development Plan, Roche shall control and be solely responsible for the worldwide development and commercialization of Products at its sole cost and expense.  Roche shall own all data generated in the development and/or commercialization of Products, but shall promptly and fully disclose to Emisphere in writing all preclinical and clinical data generated by or on behalf of Roche, its Affiliates or their respective sublicensees with respect to a Program Carrier (other than any such data that relates to the use of a Program Carrier in combination with a ***).  Emisphere shall be free to use all such data disclosed to it by Roche for any purpose (including, without limitation, in support of patent filings) other than the development, manufacture or commercialization of Products.  Without limiting the generality of the foregoing, Emisphere shall be free to use such data for the purpose of researching, developing, manufacturing or commercializing Program Carriers pursuant to Article 8 hereof and/or for use in combination with any compound other than a ***.  To the extent feasible, Roche shall design and conduct all toxicology studies involving Products (or cause such toxicology studies to be designed and conducted) in a manner that enables Emisphere to receive all Program Carrier-related results of such studies in one or more written reports that are separate from and independent of any such reports regarding *** or Products, and Roche shall have no obligation to disclose to Emisphere any such ***or Product-related report(s); provided, however, that Emisphere shall be permitted to review such Product-related reports to utilize data therein if required for a Regulatory Authority.  In designing any toxicology studies of Program Carrier alone, Roche shall, prior to initiation, first consult Emisphere and take into due consideration any comments and advice provided by Emisphere regarding the design of such studies.

                         (a)           Roche shall have the sole right and responsibility for conducting clinical trials of Products in accordance with the Development Plan.  Roche shall own all clinical data and reports related to such clinical trials.  All data, including safety reports from such clinical trials, shall be maintained by Roche in a centralized database.  Roche shall be the sole CTA/IND holder and will solely own all NDAs for Products.  Emisphere shall have the right to cross file and reference data from Product INDs or NDAs with respect to obtaining Regulatory Approval for Program Carriers for other drugs.

9.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

                         (b)           If there are any clinical trials involving Program Carriers that are ongoing as of the Effective Date, then Emisphere shall be responsible for completing such clinical trials, including preparation and submission of the final study reports.  Emisphere shall make available and provide reasonably requested copies to Roche of portions of the clinical trial Dossier, including related correspondence with Regulatory Authorities and/or ethics committees.

                         (c)           Roche shall have the sole right and responsibility for communicating with Regulatory Authorities concerning Products, including conducting meetings with and holding telephone discussions with such Regulatory Authorities.  If Emisphere receives any written or oral communications from a Regulatory Authority relating to a Product or solely to a Program Carrier, then Emisphere shall provide Roche with a copy of any such written communication or a summary of any such oral communication as soon as practicable but no later than ten (10) business days after receipt of such communication, or sooner if mandated by law.

                         (d)           Emisphere shall compile all data and information from any studies involving Program Carriers in CTD format and in accordance with Roche standards (compatible with the Roche electronic dossier management system (RAPID)).  Emisphere shall provide Roche with such data and information (including all research and clinical study reports) in CTD format within sixty (60) days of the later of (i) the completion of such study, or (ii) the Effective Date of this Agreement.  All Emisphere costs or expenses reasonably incurred in connection with compiling data as per this section shall be paid by Roche.

                         (e)           All work in connection with the Development Program, to the extent required by applicable laws or regulations, shall be conducted in accordance with Good Laboratory Practices, Good Manufacturing Practices and Good Clinical Practices, as such rules of practice are amended from time to time.

          4.2         Pharmacovigilance.  Each party shall fully and timely disclose to the other all clinical safety data and information on products containing any Program Carrier to the extent required by regulatory authorities or applicable law.  Within *** days of the Effective Date of this Agreement, Emisphere shall provide, in a written report, all clinical safety data in its possession or control relating to the *** carrier.

          4.3         Regulatory Approvals.   Roche shall be responsible for and shall own all filings (including INDs, CTAs, NDAs and MAAs) necessary for Regulatory Approval of Products and for obtaining and maintaining such Regulatory Approvals, at Roche’s expense, provided that Roche shall provide Emisphere with a reasonable opportunity to review and comment on those portions of any such proposed filing regarding any Program Carrier prior to submission to the applicable Regulatory Authority.  Such regulatory documents shall be maintained and held by Roche.  Emisphere agrees to use its commercially reasonable efforts to assist Roche in obtaining FDA approval of an NDA for any Product developed by Roche, as well as Regulatory Approvals from any other Governmental Authority that may be required for the marketing of Products in any other country.  Emisphere specifically agrees to cooperate with any inspection by the FDA or other regulatory agency, including, but not limited to, any inspection prior to approval of the NDA for any Product.  Roche shall reimburse Emisphere for its out-of-pocket costs incurred in connection with any such assistance and cooperation provided under this Section 4.3.  Emisphere shall have the right to receive copies of all Regulatory Approvals and other filings with Regulatory Authorities with respect to Products, subject to the provisions of Article 11.

10.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

          4.4         Disclosure Regarding Roche Efforts.   During the Term, Roche will keep Emisphere reasonably informed regarding the worldwide development of Products by Roche, its Affiliates and sublicensees on a semi-annual basis.  Without limiting the generality of the foregoing, Roche shall provide Emisphere with prompt written notice of the following:

                         (a)           filing of any regulatory documents with respect to any Product in any Major Market Country;

                         (b)           initiation of Phase 1 Clinical Trials, Phase 2 Clinical Trials and Phase 3 Clinical Trials with respect to any Product in any Major Market Country; and

                         (c)           any significant developments, clinical trial progress, and Regulatory Approval with respect to Products. 

5.       L ICENSE G RANTS

          5.1         License Grants.

                         (a)          By Emisphere. 

                                        (i)          Development License.   Subject to the terms and conditions of this Agreement, Emisphere hereby grants to Roche and its Affiliates, during the Development Term, a non-exclusive, worldwide, royalty-free license, without the right to sublicense, under the Emisphere Technology solely to perform Roche’s obligations under the Development Plan. 

                                        (ii)          Exclusive Development and Commercialization License.   Subject to the terms and conditions of this Agreement (including, without limitation, Article 6 hereof), Emisphere hereby grants to Roche an exclusive (even as to Emisphere, but subject to Section 5.2), worldwide, royalty-bearing license, with the right to sublicense through multiple tiers of sublicense, under the Emisphere Technology and Emisphere’s interest in the Joint Patents, solely to develop, make, have made, use, sell, offer for sale, have sold and import Products containing a Program Carrier in the Field.  For purposes of clarification, in no event shall Roche have any right or license under this Agreement to make, have made, use, sell, have sold, offer for sale or import (A) any pharmaceutical product containing any formulation of *** and a Program Carrier for any non-oral route of administration, (B) any pharmaceutical product containing a Program Carrier and any drug other than ***, or (C) any product containing a *** and any Carrier (other than a Program Carrier) that is covered by or derived from Emisphere Technology.  Further, for purposes of clarification, in no event shall Roche have the right to practice the Emisphere Technology for any purpose other than the performance of Roche’s obligations under the Development Plan or the manufacture, use, sale, offer for sale or import of Products in the Field.

11.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

                         (b)          By Roche. 

                                        (i)          Development License.   Subject to the terms and conditions of this Agreement, Roche hereby grants to Emisphere and its Affiliates, during the Development Term, a non-exclusive, worldwide, royalty-free license, without the right to sublicense, under the Roche Technology solely to perform Emisphere’s obligations under the Development Plan.

                                        (ii)          License for Product-Specific Improvements.   Subject to the terms and conditions of this Agreement, Roche hereby grants to Emisphere and its Affiliates, during the Term, an exclusive, worldwide, royalty-free license, with the right to sublicense through multiple tiers of sublicense, to practice Product-Specific Improvements for any purpose except as set forth in Section 5.2. 

          5.2         Exclusivity; Restricted Activities.  Emisphere hereby agrees that, during the Term, Emisphere shall not develop or commercialize, or grant any Third Party any license or right to develop or commercialize, any formulation of *** for oral administration, provided that Emisphere may conduct any development activities requested by Roche and agreed to by Emisphere in accordance with and subject to the terms of this Agreement.  Roche hereby agrees that, during the Term, neither Roche nor any of its Affiliates will conduct any research, development or commercialization activities with respect to pharmaceutical products containing any formulation of *** in combination with a Program Carrier for oral administration other than research, development and commercialization of Products in accordance with and subject to the terms of this Agreement.  For purposes of clarification, Emisphere shall at all times retain the right to use the Program Carriers for the research, development, manufacture and/or commercialization of any product, other than a formulation of *** for oral administration.  Emisphere shall at all times be free to use the Program Carriers with products other than those containing a ***, without restriction.  For purposes of clarification, subject to the terms and conditions of this Agreement, Roche shall at all times retain the unrestricted right to develop or commercialize any formulation of ***, whether alone or in combination with a Program Carrier or with any agent (other than a Program Carrier) that is not Emisphere Other Technology.

          5.3         Diligence.  Roche shall use commercially reasonable and diligent efforts to pursue the worldwide development and commercialization of Products and to maximize sales of Products.  As used herein, “commercially reasonable and diligent efforts” shall mean those efforts, consistent with the exercise of prudent scientific and business judgment, as applied in the pharmaceutical industry to development and commercialization activities conducted with respect to other products of similar potential and market size.  It is understood that such potential may change from time to time based upon changing scientific, business, marketing and return on investment considerations.  Emisphere acknowledges that, even within the Major Market Countries, Roche and its Affiliates do not always seek to market their own products in every such country or seek to obtain regulatory approval in every such country or every potential indication or every compound that has potential for an indication.  Consequently, whether Roche has exercised commercially reasonable and diligent efforts is to be determined by judging its efforts taken as a whole.

12.

*** - indicates material omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission.

          5.4         No Implied Licenses.   No right or license under any Patents or Information is granted or shall be granted by implication.  All such rights or licenses are or shall be granted only as expressly provided in the terms of this Agreement. 

6.       F EES AND P AYMENTS

          6.1         Technology Access Fee.   As reimbursement of past R&D expenses incurred by Emisphere, Roche shall pay to Emisphere a non-refundable, non-creditable technology access fee of *** within ten (10) business days after the later of the Effective Date or receipt of an invoice from Emisphere.

          6.2         Development and Commercialization Event Payments.   Roche shall provide Emisphere with written notice of the first occurrence of each of the events set forth below with respect to each Product within ten (10) days after such occurrence.  Within *** calendar days following the later of (i) receipt of an invoice from Emisphere, and (ii) the first occurrence of each of the events set forth below with respect to each Product, Roche shall pay to Emisphere the applicable payment set forth below, whether such milestone is achieved by Roche, its Affiliate or any of their respective sublicensees: