SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
                              (Amendment No.     )


Filed by the Registrant  [x]

Filed by a Party other than the Registrant  [  ]

Check the appropriate box:

 [ ] Preliminary Proxy Statement

 [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
                    6(e)(2))

 [x] Definitive Proxy Statement

 [ ] Definitive Additional Materials

 [ ] Soliciting Material Pursuant to Sect. 240.14a-11(c) or Sect. 240.14a-12



                          EMISPHERE TECHNOLOGIES, INC.
                (Name of Registrant as Specified In Its Charter)


                                        
    (Name of Person(s) Filing Proxy Statement if other than the Registrant)


Payment of Filing Fee (Check the appropriate box):

 [x] No fee required

 [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

     1)  Title of each class of securities to which transaction applies:        

     2)  Aggregate number of securities to which transaction applies:           

     3)   Per unit  price or  other underlying  value  of  transaction  computed
     pursuant to  Exchange Act  Rule 0-11  (Set forth  the amount  on which  the
     filing fee is calculated and state how it was determined):             

     4)  Proposed aggregate value of transaction:            

     5)  Total fee paid:

 [ ] Fee paid previously with preliminary materials.

 [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and  identify the  filing for  which  the  offsetting  fee  was  paid
previously.   Identify the  previous filing by registration statement number, or
the Form or Schedule and the date of its filing.

     1)  Amount Previously Paid:            
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     3)  Filing Party:            

     4)  Date Filed:            




                         EMISPHERE TECHNOLOGIES, INC.
                               15 Skyline Drive
                           Hawthorne, New York 10532
                                                                               
                                                                               
                                                              February 10, 1997



Dear Stockholder:

          You are  cordially invited  to attend the Company's Annual Meeting of
Stockholders to be held on Thursday, March 20, 1997 at 10:00 a.m. local time at
The Ramada Inn, 540 Saw Mill River Road, Elmsford, New York.

          At this  meeting, you  will be  asked to  consider and  vote upon the
election of  directors of  the Company,  to approve and adopt amendments to the
Company's 1991  Stock Option  Plan, 1995  Non-Qualified Stock  Option Plan  and
Stock Option  Plan for  Outside Directors and to ratify the Board of Directors'
selection of  Coopers &  Lybrand L.L.P.  to serve  as the Company's independent
accountants for the fiscal year ending July 31, 1997.

          The  Board   of  Directors  appreciates  and  encourages  stockholder
participation in  the Company's affairs and cordially invites you to attend the
meeting in  person.   It  is  in  any  event  important  that  your  shares  be
represented and  we ask  that you sign, date and mail the enclosed proxy in the
envelope provided at your earliest convenience.

          Thank you for your cooperation.

                                   Very truly yours,

                                   MICHAEL M. GOLDBERG, M.D.
                                   Chairman of the Board of Directors




                         EMISPHERE TECHNOLOGIES, INC.
                               15 Skyline Drive
                           Hawthorne, New York 10532

                       ________________________________

                   NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                       ________________________________

                                                            Hawthorne, New York
                                                              February 10, 1997

          NOTICE IS  HEREBY GIVEN  that the  Annual Meeting  of Stockholders of
EMISPHERE TECHNOLOGIES,  INC. (the  "Company"), a Delaware corporation, will be
held at  The Ramada  Inn, 540  Saw Mill  River  Road,  Elmsford,  New  York  on
Thursday, March  20, 1997  at 10:00  a.m.  local  time,  for  the  purposes  of
considering and  voting upon  the following matters, as more fully described in
the attached Proxy Statement:

          1.   To elect  seven directors to serve until the next annual meeting
     of stockholders  and until  their respective  successors are  elected  and
     qualified;

          2.   To approve  and adopt  an amendment  to the Company's 1991 Stock
     Option Plan  increasing the  maximum number  of shares  of  the  Company's
     Common Stock available for issuance thereunder by 200,000;

          3.   To approve  and adopt  an amendment  to the  Company's 1995 Non-
     Qualified Stock Option Plan increasing the maximum number of shares of the
     Company's Common Stock available for issuance thereunder by 100,000;

          4.   To approve  and adopt an amendment to the Company's Stock Option
     Plan for  Outside Directors  providing for  additional  option  grants  to
     directors after  five years  of continuous  service and  reserving 170,000
     additional shares of the Company's Common Stock for issuance thereunder;

          5.   To ratify the Board of Directors' selection of Coopers & Lybrand
     L.L.P. to  serve as  the Company's  independent accountants for the fiscal
     year ending July 31, 1997; and

          6.   To transact  such other business as may properly come before the
     meeting or any adjournment thereof.

          Only those  stockholders of  record  at  the  close  of  business  on
February 10,  1997 will  be entitled  to receive  notice of,  and vote at, said
meeting.   A list  of stockholders  entitled to  vote at the meeting is open to
examination by  any stockholder  at the  principal offices  of the  Company, 15
Skyline Drive, Hawthorne, New York  10532.

          All stockholders  are cordially  invited to  attend  the  meeting  in
person.   In any  event, please mark your votes, then date, sign and return the
accompanying form  of proxy in the envelope enclosed for that purpose (to which
no postage  need be  affixed if mailed in the United States) whether or not you
expect to attend the meeting in person.  Please note that the accompanying form
of proxy  must be  returned to record your vote.  The proxy is revocable by you
at any  time prior  to its exercise.  The prompt return of the proxy will be of
assistance in  preparing for  the meeting  and your cooperation in this respect
will be appreciated.


                                   By order of the Board of Directors

                                   SAM J. MILSTEIN, PH.D.
                                   Secretary




                         EMISPHERE TECHNOLOGIES, INC.
                               15 Skyline Drive
                           Hawthorne, New York 10532

                       ________________________________

                                PROXY STATEMENT
                       ________________________________


          This Proxy  Statement is  furnished to  holders of  the Common Stock,
$.01 par  value per share (the "Common Stock"), of Emisphere Technologies, Inc.
(the "Company")  in  connection  with  the  solicitation  of  proxies,  in  the
accompanying form,  by the  Board of  Directors of  the Company, for use at the
Annual Meeting of Stockholders to be held at The Ramada Inn, 540 Saw Mill River
Road, Elmsford, New York on Thursday, March 20, 1997, at 10:00 a.m. local time,
and at any and all adjournments thereof.  Stockholders may revoke the authority
granted by  their execution of proxies at any time prior to their use by filing
with the  Secretary of  the Company a written revocation or duly executed proxy
bearing a  later date  or by  attending  the  meeting  and  voting  in  person.
Solicitation of  proxies will be made chiefly through the mails, but additional
solicitation may  be made  by telephone  or telegram by the officers or regular
employees of  the Company.   The  Company may  also enlist the aid of brokerage
houses or the Company's transfer agent in soliciting proxies.  All solicitation
expenses, including  costs of preparing, assembling and mailing proxy material,
will be  borne by  the Company.   This proxy statement and accompanying form of
proxy are being mailed to stockholders on or about February 18, 1997.

          Shares of  the Common  Stock represented  by executed  and  unrevoked
proxies will  be voted  in accordance with the choice or instructions specified
thereon.   It is  the intention  of the  persons named  in  the  proxy,  unless
otherwise specifically instructed in the proxy, to vote all proxies received by
them FOR  the election  of the seven nominees named herein, FOR the approval of
the amendments  to the  1991 Stock  Option Plan,  the 1995  Non-Qualified Stock
Option  Plan   and  the  Stock  Option  Plan  for  Outside  Directors  and  FOR
ratification of  the Board  of Directors' selection of Coopers & Lybrand L.L.P.
to serve  as the  Company's independent  accountants for the fiscal year ending
July 31, 1997.

          If a  quorum is  present at  the meeting,  those nominees receiving a
plurality of  the votes  cast will  be elected as directors.  A majority of the
votes cast  (excluding abstentions  and broker  non-votes) will be required for
the approval  of the  amendments to  the 1991  Stock Option Plan, the 1995 Non-
Qualified Stock Option Plan and the Stock Option Plan for Outside Directors and
the ratification  of the  Board's selection  of Coopers & Lybrand L.L.P. as the
Company's independent accountants.


                                    VOTING

          Only stockholders  of record at the close of business on February 10,
1997 will  be entitled  to vote  at the  meeting or  any and  all  adjournments
thereof.   As of February 10, 1997 the Company had outstanding 9,482,204 shares
of the Common Stock, the Company's only class of voting securities outstanding.
Each stockholder  of the Company will be entitled to one vote for each share of
the Common  Stock registered in his or her name on the record date.  A majority
of all  shares of  the Common  Stock outstanding  constitutes a  quorum and  is
required to  be present  in person  or by  proxy to  conduct  business  at  the
meeting.


                BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN
                          STOCKHOLDERS AND MANAGEMENT

          The following table sets forth certain information, as of October 10,
1996, except  as noted,  regarding the beneficial ownership of the Common Stock
by (i)  each person or group known to the Company to be the beneficial owner of
more than  5% of  the outstanding  Common Stock, (ii) each director and nominee
for director  of the Company, (iii) each executive officer of the Company named
below and  (iv) all directors and executive officers of the Company as a group.
Except as  otherwise specified,  the named beneficial owner has sole voting and
investment power over the shares listed.

                                              Amount and Nature of     Percent
 Name and Address of Beneficial Owner (1)   Beneficial Ownership (2)   of Class
 Amerindo Investment Advisors Inc. and                                 
   affiliates (3)........................        1,317,500                13.9%
 One Embarcardero Center, Suite 2300
 San Francisco, California  94111-3162
 Elan International Services Ltd.........          850,000                 8.7%
 102 St James Court
 Flatts Smiths FL04
 Bermuda
 Invesco Funds Group, Inc................          520,000                 5.5%
 7800 East Union Avenue
 Denver, Colorado  80237
 Michael M. Goldberg, M.D................          940,745  (4)            9.1%
 Sam J. Milstein, Ph.D...................          555,631                 5.5%
 Howard M. Pack..........................          153,383  (5)            1.5%
 Jere E. Goyan, Ph.D.....................           60,000                 *
 Peter Barton Hutt, Esq..................           60,000                 *
 Mark I. Greene, M.D., Ph.D..............           33,666                 *
 Joseph R. Robinson, Ph.D................            2,000                 *
 Robert A. Baughman, Jr., Pharm.D., Ph.D.          117,490                 1.2%
 Lewis H. Bender.........................           25,488                 *
 All directors and executive officers                                  
   as a group............................        1,948,403  (4)(5)        17.7%
_______________________________
* Less than 1%
(1)Unless otherwise  specified, the address of each beneficial owner is c/o the
  Company, 15 Skyline Drive, Hawthorne, New York 10532.
(2)The number  of shares set forth for Elan International Services Ltd. and for
  each director  and executive  officer of  the Company  includes the following
  number of  shares with  respect to  which  such  individual  has  the  right,
  exercisable within  60 days, to acquire beneficial ownership upon exercise of
  options granted or warrants issued by the Company:
                                               Number of Shares
       Elan International Services Ltd....         250,000
       Dr. Goldberg.......................         908,465
       Dr. Milstein.......................         548,538
       Mr. Pack...........................          60,000
       Dr. Goyan..........................          60,000
       Mr. Hutt...........................          60,000
       Dr. Greene.........................          33,666
       Dr. Robinson.......................           2,000
       Dr. Baughman.......................         115,168
       Mr. Bender.........................          22,226
       All directors and executive
         officers as a group..............       1,810,063

(3)Based on a Schedule 13D/A dated April 26, 1996, Amerindo Investment Advisors
  Inc., a  California corporation, Amerindo Investment Advisors, Inc., a Panama
  corporation, Alberto W. Vilar and Gary A. Tanaka share voting and dispositive
  power with respect to 1,317,500 shares.

(4)Does not  include 130,000  shares with  respect  to  which  members  of  Dr.
  Goldberg's family  have  the  right  to  acquire  beneficial  ownership  upon
  exercise of  options  and  with  respect  to  which  Dr.  Goldberg  disclaims
  beneficial ownership.

(5)Does not include 439,040 shares beneficially owned by various members of Mr.
  Pack's family, with respect to which Mr. Pack disclaims beneficial ownership.


                      PROPOSAL I:  ELECTION OF DIRECTORS

          At the  meeting, seven  directors (constituting  the entire  Board of
Directors) are  to be  elected to  serve  until  the  next  annual  meeting  of
stockholders and  until their  respective successors are elected and qualified.
The proxies  given pursuant  to this solicitation will be voted in favor of the
seven nominees  listed below  unless authority  is withheld.   Should a nominee
become unavailable  to serve  for any  reason, the proxies will be voted for an
alternative nominee  to be  determined by  the persons named in the proxy.  The
Board of  Directors  has  no  reason  to  believe  that  any  nominee  will  be
unavailable.   Proxies cannot be voted for a greater number of persons than the
number of  nominees named.  The election of directors requires a plurality vote
of those shares voted at the meeting with respect to the election of directors.

Information Concerning Nominees

          The persons  nominated as  directors of  the Company (all of whom are
currently directors  of the  Company), their respective ages, the year in which
each first  became a director of the Company and their principal occupations or
employment during the past five years are as follows:

                                      Year
                                     First
                                    Elected
Name                          Age   Director    Position with the Company   
 Michael M. Goldberg, M.D...   37     1990      Chairman  of  the  Board  of
                                                Directors     and      Chief
                                                Executive Officer
 Jere E. Goyan, Ph.D........   67     1992      Director
 Mark I. Greene, M.D., Ph.D.   48     1995      Director
 Peter Barton Hutt, Esq.....   62     1992      Director
 Sam J. Milstein, Ph.D......   47     1991      Director,  President,  Chief
                                                Scientific    Officer    and
                                                Secretary
 Howard M. Pack.............   79     1985      Director
 Joseph R. Robinson, Ph.D...   58     1997      Director

          Michael M.  Goldberg, M.D.  has served  as Chairman  of the  Board of
Directors since November 1991 and Chief Executive Officer and a director of the
Company since  August 1990.  In addition, Dr. Goldberg served as President from
August 1990  to October  1995.   In February 1990, Dr. Goldberg founded Montaur
Capital Corporation,  a health  care investment banking firm.  Prior thereto he
was a vice president of The First Boston Corporation, and was a founding member
of the firm's healthcare banking group.

          Jere E.  Goyan, Ph.D.,  is President,  Chief Operating Officer, and a
director of  Alteon, Inc., a development stage pharmaceutical company, where he
started as  Senior Vice  President Research  and Development  in January  1993.
Prior thereto  he was  a Professor of Pharmacy and Pharmaceutical Chemistry and
the Dean  of the  School of  Pharmacy at  the  University  of  California,  San
Francisco, and  has  served  in  various  other  academic,  administrative  and
advisory positions,  including that  of  Commissioner  of  the  Food  and  Drug
Administration.   He currently  serves as  a  director  of  Atrix  Corporation,
SciClone Pharmaceuticals and Boeringer Ingelheim.

          Mark  I.   Greene,  M.D.,  Ph.D.  has  been  Professor  of  Medicine,
Department of  Pathology, School  of Medicine at the University of Pennsylvania
for more than the past five years.

          Peter Barton Hutt, Esq., has for more than the past five years been a
partner at  the law  firm of  Covington & Burling in Washington, D.C., where he
specializes in  the practice  of food  and drug  law.  He currently serves as a
director  of  IDEC  Pharmaceuticals,  Inc.,  Cell  Genesys,  Inc.,  Interneuron
Pharmaceuticals, Inc., Vivus Inc. and Sparta Pharmaceuticals, Inc.

          Sam J.  Milstein, Ph.D.  has been  with the  Company since  September
1990, as  a director  and Chief  Scientific Officer  since  November  1991,  as
President since  October 1995,  as Secretary  since December  1990 and  as  Co-
Director of  Science and  Research and  Development prior to November 1991.  In
addition, Dr. Milstein served as Executive Vice President from November 1990 to
October 1995.   Prior  to September  1990, Dr.  Milstein served as President of
Mortar & Pestle Consulting, Inc., a consulting firm.

          Howard M.  Pack has  served as  a director  of the  Company since its
inception in  April 1985 and served as Executive Vice President of Finance from
the Company's  inception until  October 1988.   For  more than five years until
November 1992,  Mr. Pack  served as  Chairman of  the Board for Seatrain Lines,
Inc., a  cargo company  that filed  a consent  to an  involuntary petition  for
reorganization under the Federal Bankruptcy Code in February 1981 and a plan of
complete liquidation under Chapter 7 thereof in November 1992.

          Joseph  R.  Robinson,  Ph.D.  has  been  Professor  of  Pharmacy  and
Ophthalmology at the University of Wisconsin for more than the past five years.
He currently serves as a director of Cima Laboratories, Inc.

Meetings and Committees of the Board of Directors

          During the fiscal year ended July 31, 1996, the Board of Directors of
the Company  held four meetings.  Each of the incumbent directors attended more
than 75%  of the  aggregate number  of meetings  held  by  the  Board  and  the
Committees thereof on which he served.

          The Company  has an  Audit Committee  and a Compensation Committee of
the Board  of Directors.   Dr.  Goyan and  Messrs. Hutt  and Pack serve on both
committees and  Dr. Greene  serves on  the Compensation  Committee.   The Audit
Committee consults  with the  Company's independent  accountants,  reviews  the
services provided  by such  independent accountants  and oversees  the internal
accounting procedures  of the  Company.   The Audit  Committee held one meeting
during the fiscal year ended July 31, 1996.

          The Compensation  Committee makes  recommendations to  the  Board  of
Directors regarding  compensation of  executive officers  of  the  Company  and
administers the  Company's stock option plans.  The Compensation Committee held
one meeting during the fiscal year ended July 31, 1996.
          The Company  has no  standing nominating  committee and  no committee
performing a similar function.

Compensation of Directors

          Directors  receive   no  cash   compensation  in  their  capacity  as
directors.  Directors who are not employees of the Company receive, pursuant to
the Company's  Stock Option  Plan for Outside Directors (the "Directors Plan"),
options to purchase shares of the Common Stock.  Messrs. Hutt and Pack and Drs.
Goyan and  Greene have  each received an option to purchase 70,000 shares under
the Directors  Plan in  effect prior  to January  29, 1997.   Dr.  Robinson has
received an  option to  purchase 35,000  shares under  the  Directors  Plan  as
currently in  effect.  The exercise prices are $13.00 per share for the options
granted to  Dr. Goyan  and Messrs. Hutt and Pack, $8.625 for the option granted
to Dr.  Greene and $23.50 for the option granted to Dr. Robinson.  In the event
the holder  of an  option ceases  to serve  as a  director of  the Company, the
option may  be exercised  with respect  to the  fully vested  shares within six
months thereafter  and will  terminate immediately with respect to all unvested
shares.

          If Proposal IV is approved by the Corporation's stockholders, each of
the current  directors will  be entitled  to the  grant of  options to purchase
additional shares of the Common Stock.

          The Board  of Directors  of the Company deems the election of the six
nominees listed  above as  directors to  be in the best interest of the Company
and its stockholders and recommends a vote "FOR" their election.


                            EXECUTIVE COMPENSATION

     The  following  table  sets  forth  information  regarding  the  aggregate
compensation paid by the Company for the three fiscal years ended July 31, 1996
to the  Company's Chief  Executive Officer  and other  executive officers whose
total compensation exceeded $100,000 during the last fiscal year:

                          SUMMARY COMPENSATION TABLE

                               Fiscal      Annual          Stock
 Name and Principal Position    Year    Compensation   Option Grants   Other(2)
 Michael M. Goldberg            1996      $335,349     756,749 shares   $4,620
  Chairman of the Board and     1995       227,605      16,507 shares    4,497
  Chief Executive Officer       1994       237,500            -          4,122

 Sam J. Milstein                1996      $287,683     555,903 shares   $3,850
  President, Chief Scientific   1995       202,187      10,792 shares    3,850
  Officer and Secretary         1994       192,500            -          3,850

 Robert A. Baughman, Jr.        1996      $180,154       3,664 shares   $3,175
  Senior Vice President and     1995       165,641       8,131 shares    3,175
  Director of Development       1994       156,002      65,000 shares    2,910

 Lewis H. Bender                1996      $120,125      77,396 shares   $2,032
  Vice President and Director
  of Business Development (3)
_______________________________
(1)Annual  compensation  consists  solely  of  base  salary  except  that  Drs.
  Goldberg, Milstein  and Baughman were also paid $25,349, $33,873 and $20,154,
  respectively, in  lieu of  earned vacations  during the  1996 fiscal year and
  Drs. Milstein  and Baughman were also paid $14,808 and $12,308, respectively,
  in lieu  of earned  vacations during  the 1995  fiscal  year.    As  to  each
  individual named, the aggregate amounts of all perquisites and other personal
  benefits, securities  and property  not included  in the summary compensation
  table above  or described below do not exceed the lesser of $50,000 or 10% of
  the annual  compensation.   During a  portion of  the 1995  fiscal year,  the
  executive officers and certain other employees of the Company agreed to forgo
  a portion  of cash  compensation in return for an option to purchase a number
  of shares  of the  Common Stock  determined by  dividing the  amount of  cash
  compensation forgone by the fair market value of the Common Stock on the date
  of grant of the option.

(2)Other compensation  consists solely  of matching  contributions made  by the
  Company under  a defined  contribution plan introduced during the 1994 fiscal
  year for substantially all employees.

(3)Mr. Bender became an executive officer of the Company in October of 1995.

     The following  table sets  forth certain  information  relating  to  stock
option grants  to the  executive officers  named above  during the  fiscal year
ended July 31, 1996:

STOCK OPTION GRANTS DURING THE FISCAL YEAR ENDED JULY 31, 1996 Percent of Total Potential Realizable Number Option Value at Assumed of Shares Shares Exercise Annual Rates of Stock Underlying Granted Price Expir- Price Appreciation Options to Em- per ation for Option Term Name Granted ployees Share Date 5% 10% Michael M. Goldberg 1,918 $ 6.63 2/1/96 $ $ 1,944 7.38 5/1/96 2,242 2,242 1,919 6.06 8/1/96 2,530 2,530 968 12.00 11/1/96 2,050 2,050 750,000 46.9% 8.63 10/6/05 2,049 2,049 4,068,162 10,309,521 Sam J. Milstein 1,856 $ 6.63 2/1/96 $ $ 1,496 1,719 7.38 5/1/96 1,496 2,237 1,547 6.06 8/1/96 2,237 1,653 781 12.00 11/1/96 1,653 1,653 550,000 34.4% 8.63 10/6/05 1,653 7,560,315 2,983,318 Robert A. Baughman, Jr. 1,361 $ 6.63 2/1/96 $1,283 $ 1,283 813 7.38 5/1/96 1,058 1,058 990 6.06 8/1/96 1,058 1,058 500 12.00 11/1/96 1,058 1,058 Lewis H. Bender 597 $ 6.63 2/1/96 $ 697 $ 697 635 7.38 5/1/96 826 826 774 6.06 8/1/96 827 827 390 12.00 11/1/96 825 825 75,000 4.7% 8.63 10/6/05 406,816 1,030,952 _______________________________ Options that expired or will expire in 1996 were all granted under the Company's Employee Stock Purchase Plan or Non-Qualified Employee Stock Purchase Plan at exercise prices equal to the lower of the fair market value on the date of grant or 85% of the fair market value on the date of exercise. Options expiring in 2005 were all granted under the Company's 1991 Stock Option Plan or 1995 Non-Qualified Stock Option Plan at prices equal to the fair market value on the date of grant. The total option shares granted during the 1996 fiscal year to employees includes 49,952 shares under the Company's Employee Stock Purchase Plan or Non-Qualified Employee Stock Purchase Plan, 245,024 shares under the Company's 1991 Stock Option Plan and 1,300,000 shares under the Company's 1995 Non-Qualified Stock Option Plan. Less than 0.15%
The following table sets forth information as to the unexercised options held by the executive officers named above as of July 31, 1996:
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES Exercises During Number of Value of Unexercised the Fiscal Year Shares Underlying In-the-Money Number Unexercised Options Options of Shares Value Exer- Unexer- Exer- Unexer- Name Acquired Realized cisable cisable cisable cisable Michael M. Goldberg 1,900 $ 6,650 1,040,384 600,000 $26,682 - 4,948 29,070 1,918 7,432 1,944 13,499 Sam J. Milstein 1,539 $ 5,387 550,085 440,000 $22,429 - 5,491 32,260 1,280 4,960 684 4,749 Robert A. Baughman, Jr. 1,673 $ 5,856 94,491 22,267 $13,064 - 3,333 19,581 857 5,035 1,098 4,255 813 5,645 Lewis H. Bender 2,290 $13,454 7,940 85,200 $21,760 $44,100 597 2,313 635 4,409 _______________________________ Based on a closing price of $7.50 on July 31, 1996 on the Nasdaq National Market. Based on a closing price of $6.625 on August 1, 1995, the date of exercise, on the Nasdaq National Market. Based on a closing price of $7.375 on November 1, 1995, the date of exercise, on the Nasdaq National Market. Based on a closing price of $10.50 on February 1, 1996, the date of exercise, on the Nasdaq National Market. Based on a closing price of $12.00 on May 1, 1996, the date of exercise, on the Nasdaq National Market. Includes 130,000 shares with respect to which Dr. Goldberg has transferred options to members of his family and with respect to which Dr. Goldberg disclaims beneficial interest. Employment Agreements The Company has entered into employment agreements with Michael M. Goldberg, M.D. and Sam J. Milstein, Ph.D., expiring on July 31, 2001. Pursuant to the agreements, Dr. Goldberg is to serve as Chairman and Chief Executive Officer of the Company at an annual salary of $310,000 to increase at 6% per year, Dr. Milstein is to serve as President and Chief Scientific Officer at an annual salary of $250,000 to increase at 6% per year and both are to be nominated to serve as members of the Board of Directors. The agreements also provide for the grant of an option to purchase 750,000 shares of the Common Stock with respect to Dr. Goldberg and an option to purchase 550,000 shares with respect to Dr. Milstein. The options have an exercise price of $8.625 per share and they expire on October 5, 2005 except that they become earlier exercisable if the Company achieves certain milestones, with the rate in no event being greater than either 25% of the shares for each milestone achieved or 20% of the shares in any employment year. The Company milestones required for exercisability of the options are (i) execution of a collaboration agreement providing for the commercialization of a product utilizing the Company's drug delivery technology and the payment of a royalty to the Company, (ii) one or more financings by the Company that provide aggregate net proceeds of at least $15,000,000 and (iii) any subsequent such collaboration agreement or such financings. The agreements provide that, upon (i) termination by the Company either without cause or for any reason following a Change of Control (as defined in the agreements) or (ii) termination by Dr. Goldberg or Dr. Milstein, as the case may be, following an uncured breach or bankruptcy by the Company, the Company will make severance payments equal to the greater of (i) the compensation payable under the agreements from the date of termination to July 31, 2001 or (ii) one year's compensation under the agreements. Compensation Committee Report on Executive Compensation The Compensation Committee's policies applicable to the compensation of the Company's executive officers are based on the principle that total compensation should be set to attract and retain those executives critical to the overall success of the Company and should reward executives for their contributions to the enhancement of shareholder value. The key elements of the executive compensation package are base salary, employee benefits applicable to all employees and long-term incentive compensation in the form of stock options. In general, the Compensation Committee has adopted the policy that compensation for executive officers should be competitive with that paid by leading biotechnology companies for corresponding senior executives. The Compensation Committee also believes that it is important to have stock options constitute a substantial portion of executive compensation in order to help executives align their interests with those of the stockholders. In determining the compensation for each executive officer, the Compensation Committee generally considers (i) data from outside studies and proxy materials regarding compensation of executive officers at comparable companies, (ii) the input of other directors regarding individual performance of each executive officer and (iii) qualitative measures of Company performance such as progress in the development of the Company's technology, the engagement of corporate partners for the commercial development and marketing of products and the success of the Company in raising the funds necessary to conduct research and development and the fact that the Company successfully completed a preliminary human safety and tolerance trial. The Compensation Committee's consideration of such factors is subjective and informal. The compensation of Michael M. Goldberg, the Chief Executive Officer of the Company, for the 1996 fiscal year was as called for by his employment agreement with the Company entered into during the 1996 fiscal year and the Compensation Committee did not consider any amendments to the compensation thereunder. In approving the five-year employment agreement negotiated with Dr. Goldberg for the period ending July 31, 2001, the Compensation Committee concluded that Dr. Goldberg's leadership contributed significantly to the Company's achievements and progress in the past and that Dr. Goldberg will continue to make significant contributions to the Company's performance in the future. Howard M. Pack Jere E. Goyan Peter Barton Hutt Mark I. Greene Comparative Stock Performance Graph The graph below compares the cumulative total stockholder return on the Company's Common Stock with the cumulative total stockholder return of (i) the Nasdaq Stock Market (U.S.) Index and (ii) the Nasdaq Pharmaceutical Index, assuming an investment of $100 on July 31, 1991 in each of the Company's Common Stock, the stocks comprising the Nasdaq Market Index and the stocks comprising the Nasdaq Pharmaceutical Index. Date Emisphere Nasdaq Market Nasdaq Pharm. 7/31/91 100 100 100 7/31/92 148 117 116 7/31/93 117 143 93 7/31/94 32 147 82 7/31/95 53 206 115 7/31/96 58 225 139 Section 16(a) Beneficial Ownership Reporting and Compliance Based solely on a review of the reports under Section 16(a) of the Exchange Act and representations furnished to the Company during the last fiscal year, the Company believes that each of the persons required to file such reports is in compliance with all applicable filing requirements. PROPOSALS II AND III: APPROVAL OF AMENDMENTS TO THE COMPANY'S 1991 STOCK OPTION PLAN AND 1995 NON-QUALIFIED STOCK OPTION PLAN The Company's Board of Directors has determined that additional shares of the Common Stock should be made available for grants of stock options to the Company's officers and other employees and consultants who will be responsible for the profitability and long-term future growth of the Company. Accordingly, the Board has approved, subject to stockholder approval, an amendment to the Company's 1991 Stock Option Plan (as amended, the "1991 Plan") to increase the maximum number of shares of the Common Stock available for the grant of options thereunder from 1,200,000 shares to 1,400,000 and an amendment to the Company's 1995 Non-Qualified Stock Option Plan (as amended, the "1995 Plan" and, collectively with the 1991 Plan, the "Plans") to increase the maximum number of shares of the Common Stock available for the grant of options thereunder from 1,800,000 shares to 1,900,000. As of January 31, 1997, options with respect to 1,171,082 shares were outstanding under the 1991 Plan, leaving 28,972 additional shares available for option grants thereunder, and options with respect to 1,800,000 shares were outstanding under the 1995 Plan, leaving no additional shares available for option grants thereunder. If the amendments are not approved by the stockholders, the Company will have to reevaluate how it will provide incentives to the Company's existing and future officers and other employees and consultants. Summary of the Plans The following is a brief summary of the Plans. Purpose The purpose of the Plans is to foster the Company's ability to attract, retain and motivate those individuals who will be largely responsible for the profitability and long-term future growth of the Company. Eligible Employees The eligible participants in the 1991 Plan are the Company's officers and other key employees and consultants other than directors, as determined and designated from time to time by the Company's Compensation Committee in its sole discretion. The eligible participants in the 1995 Plan are the Company's officers and other key executive employees, as determined and designated from time to time by the Company's Compensation Committee in its sole discretion. Grants Under the Plan The 1991 Plan provides for the grant of options to purchase shares of the Common Stock, including options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). The 1995 Plan provides for the grant of options to purchase shares of the Common Stock, such options not intending to qualify as such incentive stock options. Administration The Plans are administered by the Compensation Committee of the Board of Directors of the Company, each member of which is intended to be a "Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange Act. Subject to the provisions of the Plans, the Compensation Committee has the authority and discretion to grant options under the Plans, to interpret the provisions of the Plans and option agreements made thereunder and to take such other action as may be necessary or desirable in order to carry out the provisions of the Plans. Maximum Shares to be Issued The maximum number of shares that may be issued pursuant to the grant of options under the Plans is 1,400,000 in the aggregate with respect to the 1991 Plan and 1,900,000 in the aggregate with respect to the 1995 Plan (subject to anti-dilution adjustments). In the event a stock option granted under the Plans expires or terminates prior to exercise, the shares subject thereto will thereafter be available for further option grants. Terms of Stock Option Grants The Compensation Committee specifies the terms and conditions of stock options granted under the Plans including without limitation the number of shares covered by each option, the exercise price, the option period, any vesting restrictions with respect to the exercise of the option and, with respect to the 1991 Plan, whether the option is intended to qualify as an incentive stock option. No option under the 1991 Plan may have an exercise price of less than the par value of the Common Stock or an option exercise period of more than ten years. Options intending to qualify as incentive stock options under the 1991 Plan and all options under the 1995 Plan must have an exercise price per share of not less than the fair market value of the Common Stock on the date of grant and an option exercise period of not more than ten years. Furthermore, an option intending to qualify as an incentive stock option and granted to a person who at the time of the grant holds more than 10% of the total combined voting power of all classes of stock of the Company must have an exercise price per share of not less than 110% of the fair market value of the Common Stock on the date of grant and an option exercise period of not more than five years. Restrictions on Transfer Options under the Plans may not be transferred by an optionee other than by will or by the laws of descent and distribution and may be exercised during the optionee's lifetime only by the optionee, except that an option under the 1995 Plan may be transferred to members of the optionee's family or trusts for their benefit. Federal Income Tax Consequences The grant of options under the Plans will have no federal income tax consequences to either the Company or the option grantee. The exercise of incentive stock options will generally have no federal tax consequences to either the Company or the optionee, although the excess of the value of the stock over the exercise price is potentially subject to the alternative minimum tax under Section 55 of the Code. Upon exercise of options other than incentive stock options, the optionee is subject to federal income tax on the excess of the value of the stock over the exercise price and the Company is entitled to take a corresponding federal income tax deduction (subject to the limitation on deductibility of executive compensation). The foregoing is a general description of the federal income tax consequences relating to the grant and exercise of options under the Plans. It does not purport to cover the special rules under the Code, administrative and judicial interpretations, possible changes in the law or state and local income tax consequences. Amendment The Board of Directors of the Company may at any time amend or terminate the Plans, provided that no such amendment may be made without the approval of the stockholders of the Company to the extent approval is required by applicable laws, rules or regulations and provided further that no amendment or termination may adversely affect the rights of an optionee with respect to an outstanding option. Grant Information It is not possible to determine the stock option grants that will be made pursuant to the Plans in the future. The table below sets forth information regarding the option grants that have been made under the Plans since their inception. Number of Shares Dollar Underlying Options Name and Position Value (1) 1991 Plan 1995 Plan Michael M. Goldberg.............. - 266,954 1,050,000 Chairman of the Board and Chief Executive Officer Sam J. Milstein.................. - 150,478 750,000 President, Chief Scientific Officer and Secretary Robert A. Baughman, Jr........... - 88,000 - Senior Vice President and Director of Development Lewis H. Bender.................. - 91,976 - Vice President of Business Development All current executive officers as a group............ - 597,408 1,800,000 All current directors who are not executive officers as a group (2).................. - - - All employees, including all current officers who are not executive officers, as a group (3).................. - 573,620 75,000 _______________________________ (1)Based upon the excess of the fair market value of the Common Stock on the date of grant over the exercise price. (2)Directors of the Company who are not also either employees of or consultants to the Company are not eligible to participate in the Plans. (3)Includes (i) only those options under the 1991 Plan that were outstanding on January 31, 1997 and (ii) an option under the 1995 Plan granted subject to stockholder approval of the amendment to the 1995 Plan. Voting The amendments to the Plans must be approved by a majority of the total votes cast on each proposal. An abstention from voting on either proposal will have the effect of a "no" vote. Broker non-votes are considered not cast and therefore will not affect the outcome of the vote. The Board of Directors of the Company deems the approval of the amendments to the 1991 Stock Option Plan and the 1995 Non-Qualified Stock Option Plan to be in the best interest of the Company and its stockholders and recommends that holders of the Common Stock vote FOR Proposal II and FOR Proposal III. PROPOSAL IV: APPROVAL OF THE AMENDMENT TO THE COMPANY'S STOCK OPTION PLAN FOR OUTSIDE DIRECTORS The Board has unanimously approved an amendment to the Company's Stock Option Plan for Outside Directors (as amended, the "Plan") that (i) reduces from 70,000 to 35,000 the number of shares of the Common Stock that may be purchased under options to be granted to directors upon their initial election or appointment to the Board and (ii) provides for the grant of options to purchase 21,000 shares of the Common Stock on the fifth anniversary of each director's initial election or appointment to the Board and every three years thereafter. The Plan is set forth in its entirety as Appendix A hereto and is summarized below. The stockholders are being asked to approve the Plan with respect to the grant of additional options to directors with five years of continuous service and with the respect to the reservation of 170,000 additional shares for issuance thereunder. If the amendment is not approved by the stockholders, the Company will have to reevaluate how it will compensate outside directors with more than five years of continuous service. Approval or disapproval of the Plan will not affect the rights of current directors with respect to options previously granted under the Plan. Summary of the Plan The Plan, which is set forth in its entirety in Appendix A hereto, is summarized briefly as follows: Purpose The purpose of the Plan is to enable the Company to attract and compensate eligible directors and encourage the highest level of performance by providing them with a proprietary interest in the Company's success and progress. Eligible Directors The eligible participants in the Plan are the Company's directors who are neither officers nor employees of the Company and who do not own 5% or more of the shares of the Common Stock outstanding. There are currently five directors eligible to participate in the Plan. Grants Under the Plan The Plan provides for the grant of an option to purchase 35,000 shares of the Common Stock upon a director's initial appointment or election to the Board and an option to purchase 21,000 shares on the fifth anniversary thereof and every three years thereafter. Administration The Plan is administered by the Board of Directors of the Company. Maximum Shares to be Issued The maximum number of shares that may be issued pursuant to the exercise of options under the Plan is 450,000 in the aggregate (subject to anti-dilution adjustments). In the event a stock option granted under the Plan expires or terminates prior to exercise, the shares subject thereto will thereafter be available for further option grants. Terms of Stock Option Grants All options granted under the Plan (i) will have an exercise price per share equal to the fair market value of the Common Stock as of the date of grant, (ii) will expire ten years from the date of grant and (iii) will vest and become exercisable with respect to 7,000 shares on each anniversary of the date of grant. Restrictions on Transfer Options under the Plan may not be transferred by an optionee other than by will or by the laws of descent and distribution and may be exercised during the optionee's lifetime only by the optionee. Federal Income Tax Consequences The grant of options under the Plan will have no federal income tax consequences to either the Company or the optionee. Upon exercise of options, the optionee will be subject to federal income tax on the excess of the value of the stock over the exercise price and the Company is entitled to take a corresponding federal income tax deduction. The foregoing is a general description of the federal income tax consequences relating to the grant and exercise of options under the Plan. It does not purport to cover the special rules under the Code, administrative and judicial interpretations, possible changes in the law or state and local income tax consequences. Amendment The Board of Directors of the Company may at any time amend or terminate the Plan, provided that no such amendment may be made without the approval of the stockholders of the Company to the extent approval is required by applicable laws, rules or regulations and provided further that no amendment or termination may adversely affect the rights of an optionee with respect to an outstanding option. Grant Information If the current directors continue as directors indefinitely, each of them will be granted an option to purchase 21,000 shares on the later of the fifth anniversary of his initial election or appointment to the Board or April 29, 1997 and every three years thereafter. The first such grant will be made to Dr. Goyan and Messrs. Hutt and Pack on April 29, 1997, to Dr. Greene on October 23, 2000 and to Dr. Robinson on January 29, 2002. The information regarding the option grants under the Plan set forth in the table below assumes that each of the current directors will continue as a director until the first such grant and that no new directors will be added to the Board. Number of Dollar Shares Under- Name and Position Value (1) lying Options Michael M. Goldberg................. - - Chairman of the Board and Chief Executive Officer Sam J. Milstein..................... - - President, Chief Scientific Officer and Secretary Robert A. Baughman, Jr.............. - - Senior Vice President and Director of Development Lewis H. Bender..................... - - Vice President, Director of Business Development All current executive officers as a group......................... - - All current directors who are not executive officers as a group (2).. - 105,000 All employees, including all current officers who are not executive officers, as a group..... - - _______________________________ (1)Since all options under the Plan will be granted at exercise prices equal to the fair market value of the Common Stock on the date of grant, they will have no dollar value on the date of grant. (2)Assumes that each of the current directors continues as a director until the later of (i) the fifth anniversary of his appointment or election to the Board or (ii) April 29, 1997. Voting The amendment to the Plan must be approved by a majority of the total votes cast. An abstention from voting will have the effect of a "no" vote. Broker non-votes are considered not cast and therefore will not affect the outcome of the vote. The Board of Directors of the Company deems the approval of the amendment to the Stock Option Plan for Outside Directors to be in the best interest of the Company and its stockholders and recommends that holders of the Common Stock vote FOR Proposal IV. PROPOSAL V: RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS The Board of Directors has selected Coopers & Lybrand L.L.P. to serve as independent accountants for the fiscal year ending July 31, 1997. Coopers & Lybrand L.L.P. has served as the Company's independent accountants since November 1991. A representative of Coopers & Lybrand L.L.P. is expected to be present at the meeting with the opportunity to make a statement if he desires to do so and is expected to be available to respond to appropriate questions. Although it is not required to do so, the Board of Directors is submitting the selection of independent accountants for ratification at the meeting. If this selection is not ratified, the Board of Directors will reconsider its choice. A majority of the votes cast (excluding abstentions and broker non- votes) at the meeting in person or by proxy is necessary for ratification of the selection of Coopers & Lybrand L.L.P. as independent accountants of the Company. The Board of Directors of the Company deems the ratification of the selection of Coopers & Lybrand L.L.P. as independent accountants of the Company to be in the best interest of the Company and its stockholders and recommends that holders of the Common Stock vote FOR Proposal V. FORM 10-K Stockholder may obtain without charge a copy of the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 1996 by directing written requests to Investor Relations, Emisphere Technologies, Inc., 15 Skyline Drive, Hawthorne, New York 10532. STOCKHOLDER PROPOSALS All stockholder proposals which are intended to be presented at the Annual Meeting of Stockholders of the Company contemplated to be held in January 1998 must be received by the Company no later than July 31, 1997, for inclusion in the Board of Directors' proxy statement and form of proxy relating to the meeting. OTHER BUSINESS The Board of Directors knows of no other business to be acted upon at the meeting. However, if any other business properly comes before the meeting, it is the intention of the persons named in the enclosed proxy to vote on such matters in accordance with their best judgment. The prompt return of your proxy will be appreciated and helpful in obtaining the necessary vote. Therefore, whether or not you expect to attend the meeting, please sign the proxy and return it in the enclosed envelope. By order of the Board of Directors SAM J. MILSTEIN, PH.D. Secretary Hawthorne, New York February 10, 1997 APPENDIX A EMISPHERE TECHNOLOGIES, INC. STOCK OPTION PLAN FOR OUTSIDE DIRECTORS as amended January 29, 1997 1. Purpose The purpose of the Stock Option Plan for Outside Directors (the "Plan") of Emisphere Technologies, Inc. (the "Company") is to enable the Company to attract and compensate eligible directors of the Company and to encourage the highest level of performance by providing such persons with a proprietary interest in the Company's success and progress. 2. Shares Subject to the Plan The Company may issue and sell a maximum of 450,000 shares of the Company's Common Stock, par value $.0l per share (the "Common Stock"), pursuant to options granted under the Plan. Such shares may include shares that have been subject to unexercised options, whether terminated or expired by their terms, by cancellation or otherwise. 3. Administration of the Plan The Plan shall be administered by the Board of Directors of the Company (the "Board") or by a committee of the Board consisting of two or more members of the Board appointed by the Board. The interpretation and construction by the Board or such committee of any provisions of the Plan or of any other matters related to the Plan shall be final. The Board or such committee may from time to time adopt such rules and regulations for carrying out the Plan as it may deem advisable. No member of the Board shall be liable for any action or determination made in good faith with respect to the Plan. 4. Eligibility Options under the Plan shall be granted only to directors of the Company who (i) are neither officers nor employees of the Company or any of its subsidiaries, (ii) do not beneficially own five percent or more of the Common Stock outstanding on the date of grant and (iii) are not affiliated with any person referred to in (i) or (ii) above. 5. Stock Option Grants (a) Each eligible director who is first elected or appointed to the Board on or after January 29, 1997 shall be granted an option to purchase 35,000 shares of the Common Stock on the date of such initial election or appointment. (b) On the fifth anniversary of the date that is the later of (i) each director's initial election or appointment to the Board or (ii) April 29, 1992, and on the date every three years thereafter, such director shall, if he or she is an eligible director on such date and has continuously served as a director since the date of such initial election or appointment, be granted an option to purchase 21,000 shares of the Common Stock. (c) All options granted under the Plan shall (i) have an exercise price per share equal to the Fair Market Value of the Common Stock as of the date of grant, (ii) expire ten years from the date of grant and (iii) vest and become exercisable with respect to 7,000 shares on each anniversary of the date of grant. (d) As used herein, the Fair Market Value of the Common Stock as of any date shall be (i) the closing price per share thereof on such date on the American Stock Exchange or the New York Stock Exchange, whichever exchange on which the Common Stock is then admitted to trading, or otherwise on the Nasdaq National Market if then quoted thereon, and (ii) if no such closing price is available, the value as determined in good faith by the Board. (e) Options granted under the Plan and held by directors who were initially elected or appointed to the Board prior to January 29, 1997 shall continue in full force and effect and nothing hereunder shall adversely affect the rights of the holders thereof. 6. Regulatory Compliance and Listing The exercise of any option granted under the Plan may be postponed by the Company for such period as may be required to comply with federal securities laws, state "blue sky" laws, any applicable listing requirements of any applicable securities exchange or any other law or regulation applicable to the issuance or delivery of shares of the Common Stock and the Company shall not be obligated to issue or deliver any such shares if such issuance or delivery would constitute a violation of any law or any regulation of any governmental authority or applicable securities exchange. 7. Change of Control In the event of a "Change in Control of the Company," all options granted under the Plan and outstanding at the time thereof shall become immediately exercisable. A "Change in Control of the Company" shall be deemed to have occurred if (i) there is consummated (x) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Common Stock are converted into cash, securities or other property, other than a merger of the Company in which the holders of the Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, (ii) the stockholders of the Company approve any plan or proposal for liquidation or dissolution of the Company, (iii) any person (as such term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of 40% or more of the Common Stock outstanding other than pursuant to a plan or arrangement entered in by such person and the Company or (iv) during any period of two consecutive years, individuals who at the beginning of such period constitute the entire Board cease for any reason to constitute a majority thereof unless the election, or the nomination for election by the Company's stockholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. 8. Death and Other Cessation as Director In the event the holder of an option granted under the Plan dies, his or her estate, personal representative or beneficiary may exercise such option, to the extent otherwise exercisable as of the date of his or her death, within twelve months after that date. In the event the holder of an option granted under the Plan ceases to be a director of the Company for any reason other than the director's death, such holder may exercise such option, to the extent otherwise exercisable on the date he or she ceases to be a director of the Company, within six months after that date. In no event may an option be exercised after the date of expiration thereof. 9. Stock Splits, Mergers, etc. In the event of any stock split, stock dividend or similar transaction which increases or decreases the number of shares of the Common Stock outstanding, appropriate adjustment shall be made by the Board, whose determination shall be final, to the number of shares and exercise price per share under any options outstanding. In the case of a merger, consolidation or similar transaction which results in a replacement of the Common Stock with stock of another corporation but does not constitute a Change in Control of the Company, the Company will make a reasonable effort, but shall not be required, to replace any options granted under the Plan with comparable options to purchase the stock of such other corporation, or will provide for the immediate maturity of all options outstanding and the termination of options not thereafter exercised within the time period specified by the Board. 10. Transferability An option granted under the Plan may not be assigned or transferred except by will or the laws of descent and distribution and may be exercised during a director's lifetime only by the director. 11. Exercise of Options The holder of an option granted under the Plan electing to exercise the option shall deliver to the Company written notice of such election, setting forth the number of shares of the Common Stock with respect to which the option is being exercised, together with payment of the option exercise price. The option exercise price shall be paid in cash, check or shares of the Common Stock. If shares of the Common Stock are tendered as payment of the option exercise price, the value of such shares shall be the Fair Market Value as of the date of exercise. If such tender would result in the issuance of fractional shares of the Common Stock, the Company shall instead return the difference in cash or by check. The holder of an option under the Plan shall have none of the rights of a stockholder with respect to shares of the Common Stock covered by the option until the option has been exercised and a stock certificate representing such number of shares has been issued and delivered to him. 12. Term of Plan The Plan shall terminate on January 29, 2007 and no option shall be granted under the Plan after that date. Termination of the Plan shall not affect options granted under the Plan prior to termination. 13. No Obligation to Exercise or Right to Continue as a Director The grant of an option under the Plan shall impose no obligation on the director to exercise such option and nothing in the Plan shall be deemed to create a right to continue as a director or an obligation on the part of the Board to nominate any director for reelection by the Company's stockholders. 14. Effectiveness of the Plan The Plan was initially adopted by the Board on April 29, 1992 and approved by the stockholders of the Company on April 19, 1993. As amended and restated hereby, the Plan shall become effective as of January 29, 1997, the date of its approval by the Board, except that Section 5(b) hereof shall become effective only upon approval by a majority of the total votes cast with respect to shares of the Common Stock present in person or represented by proxy at a meeting at which a quorum is present and entitled to vote thereon, or by such greater percentage as may from time to time be required under the laws of the State of Delaware. 15. Amendment of the Plan The Board may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part, provided, however, that (i) no alteration, amendment, suspension or termination shall adversely affect the rights of the holder of any outstanding option granted under the Plan and (ii) any amendment which must be approved by the stockholders of the Company in order to ensure that option grants under the Plan continue to be exempt transactions under Rule 16b-3 under the Exchange Act or any successor provision or to comply with any rule or regulation of a governmental authority, applicable securities exchange or Nasdaq National Market shall not be effective unless and until such stockholder approval has been obtained in compliance with such rule or regulation. 16. Withholding of taxes The Company shall have the right, prior to the delivery of any certificate evidencing shares of the Common Stock acquired upon exercise of an option, to require payment of an amount in cash sufficient to satisfy any Federal, state, or local tax withholding requirements. EMISPHERE TECHNOLOGIES, INC. 15 Skyline Drive Hawthorne, New York 10532 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints Michael M. Goldberg, M.D. and Sam J. Milstein, Ph.D., and each of them, as Proxies each with the power to appoint his substitute and hereby authorizes them to represent and to vote, as designated below, all of the shares of Common Stock of Emsiphere Technologies, Inc. held of record by the undersigned on February 10, 1997 at the Annual Meeting of Stockholders to be held on March 20, 1997 or any adjournments or postponements thereof. 1. ELECTION OF DIRECTORS Nominees: Michael M. Goldberg, M.D. STOCKHOLDERS MAY WITHHOLD AUTHORITY TO Jere E. Goyan, Ph.D VOTE FOR ANY NOMINEE BY DRAWING A LINE Mark I. Greene, M.D., Ph.D. THROUGH OR OTHERWISE STRIKING OUT THE Peter Barton Hutt NAME OF SUCH NOMINEE. ANY PROXY EXECUTED Sam J. Milstein, Ph.D. IN SUCH MANNER AS NOT TO WITHHOLD Howard M. Pack AUTHORITY TO VOTE FOR THE ELECTION OF ANY Joseph R. Robinson, Ph.D. NOMINEE SHALL BE DEEMED TO GRANT SUCH AUTHORITY. _ GRANT authority to vote for _ WITHOLD authority to the seven nominees as a vote for the seven group nominees as a group 2. Approval and adoption of the amendment to the Company's 1991 Stock Option Plan increasing the number of shares of the Common Stock available for issuance thereunder by 200,000 _ FOR _ AGAINST _ ABSTAIN 3. Approval and adoption of the amendment to the Company's 1995 Non-Qualified Stock Option Plan increasing the number of shares of the Common Stock available for issuance thereunder by 100,000 _ FOR _ AGAINST _ ABSTAIN 4. Approval and adoption of the amendment to the Company's Stock Option Plan for Outside Directors providing for additional option grants and reserving 170,000 additional shares of the Common Stock for issuance thereunder _ FOR _ AGAINST _ ABSTAIN 5. Ratification of the Board of Directors' selection of Coopers & Lybrand L.L.P. to serve as the Company's independent accountants for the fiscal year ending July 31, 1997 _ FOR _ AGAINST _ ABSTAIN 6. Authority to vote in their discretion on such other business as may properly come before the meeting _ FOR _ AGAINST _ ABSTAIN This proxy, when properly executed, will be voted in the manner directed herein by the undersigned stockholder. If no direction is made, this proxy will be voted for each of the proposals named above. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED ENVELOPE. Dated , 1997 (Signature) (Signature if held jointly) Please sign exactly as name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person.