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 Section 240.14a-11(c) or Section
                    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:                 

     2)  Form, Schedule or Registration Statement No.:

     3)  Filing Party:                 

     4)  Date Filed:                 


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


                                                    November 28, 1997



Dear Stockholder:

          You are  cordially invited  to attend  the Company's Annual
Meeting of  Stockholders to  be held on Thursday, January 15, 1998 at
10:00 a.m.  local time  at the  Westchester Marriott Hotel, 670 White
Plains Road, Tarrytown, 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  and 1995  Non-
Qualified Stock  Option Plan,  to  approve  the  Directors'  Deferred
Compensation Stock  Plan  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, 1998.

          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
                                                     November 28, 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 Westchester Marriott Hotel,
670 White  Plains Road,  Tarrytown, New  York on Thursday, January 15,
1998 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
     300,000;

          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 200,000;

          4.   To approve  the Directors'  Deferred Stock Compensation
     Plan providing  for the  issuance of  up to  25,000 shares of the
     Company's Common Stock 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, 1998; 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 November  26, 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 Westchester  Marriott Hotel, 670 White Plains Road, Tarrytown, New
York on  Thursday, January  15, 1998, 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 December 4, 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  and the 1995 Non-Qualified Stock Option Plan,
FOR the  approval of  the Directors'  Deferred Compensation Stock Plan
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, 1998.

          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 to
the 1991  Stock Option  Plan and  the 1995  Non-Qualified Stock Option
Plan, the  approval of the Directors' Deferred Compensation Stock Plan
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
November 26,  1997 will  be entitled to vote at the meeting or any and
all adjournments  thereof.   As of  November 26,  1997 the Company had
outstanding 10,707,672  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.

                                 -2-

           BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN
                     STOCKHOLDERS AND MANAGEMENT

          The following  table sets  forth certain  information, as of
November 10, 1997, 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    Percent
 Name and Address of                             of Beneficial         of
  Beneficial Owner (1)                           Ownership (2)       Class

 Amerindo Investment Advisors Inc.                                  
  and affiliates (3).................              1,107,300          10.3%
  One Embarcardero Center, Suite 2300
  San Francisco, California  94111-3162
 Elan International Services Ltd.....                850,000           7.8%
  102 St James Court
  Flatts Smiths FL04
  Bermuda
 INVESCO PLC and affiliates (4)......              1,243,800          11.6%
  11 Devonshire Square
  London EC2M 4YR
  England
 Michael M. Goldberg, M.D............              1,096,058 (5)       9.3%
 Sam J. Milstein, Ph.D...............                668,206           5.9%
 Howard M. Pack......................                163,383 (6)       1.5%
 Jere E. Goyan, Ph.D.................                 70,000            *
 Peter Barton Hutt, Esq..............                 70,000            *
 Mark I. Greene, M.D., Ph.D..........                 50,333            *
 Joseph R. Robinson, Ph.D............                  2,000            *
 Robert A. Baughman, Jr., Pharm.D., Ph.D.            139,801           1.3%
 Lewis H. Bender.....................                 44,831            *
 All directors and executive officers
  as a group.........................              2,304,612 (5)(6)   17.9%
_______________________________
* 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......................       1,059,095
       Dr. Milstein......................         659,204
       Mr. Pack..........................          70,000
       Dr. Goyan.........................          70,000
       Mr. Hutt..........................          70,000
       Dr. Greene........................          50,333
       Dr. Robinson......................           2,000
       Dr. Baughman......................         136,258
       Mr. Bender........................          40,814
       All directors and executive 
         officers as a group                    2,157,704

                                 -3-
(3)  Based on  a Schedule 13G filed April 4, 1997, 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 1,107,300
  shares.

(4)  Based on  a Schedule 13G filed February 14, 1997, INVESCO PLC, an
  English corporation,  INVESCO North American Group, Ltd., an English
  corporation, INVESCO,  Inc., a  Delaware corporation,  INVESCO North
  American Holdings,  Inc., a  Delaware corporation, and INVESCO Funds
  Group, Inc.,  a Delaware  corporation, share  voting and dispositive
  power with respect to 1,243,800 shares.

(5)  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.

(6)  Does not  include 331,519  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.    38     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.  49    1995         Director
 Peter Barton Hutt, Esq...    63    1992         Director
 Sam J. Milstein, Ph.D....    48    1991         Director,      President,
                                                 Chief Scientific  Officer
                                                 and Secretary
 Howard M. Pack...........    79    1985         Director
 Joseph R. Robinson, Ph.D.    59    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.

                                 -4-

          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., Interneuron  Pharmaceuticals, 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, 1997,  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 the  Audit Committee  and Mr.  Pack and Drs. Greene and
Robinson serve  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, 1997.

                                 -5-

          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 took all action by unanimous consent during the
fiscal year ended July 31, 1997 and held no meetings.

          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
initial option  to purchase  70,000 shares under the Directors Plan in
effect prior  to January  29, 1997.    Under  the  Directors  Plan  as
currently in  effect, Dr.  Robinson has  received an initial option to
purchase 35,000  shares and  Messrs. Hutt  and Pack and Dr. Goyan have
each received  an additional  option to  purchase 21,000  shares.  The
exercise prices  are $13.00  per share for the initial options granted
to Dr.  Goyan and Messrs. Hutt and Pack, $8.625 for the initial option
granted to  Dr. Greene,  $23.50 for  the initial option granted to Dr.
Robinson and $13.75 for the additional options granted to Messrs. Hutt
and Pack  and Dr.  Goyan.  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.

          In  addition,   directors  will  receive,  pursuant  to  the
Directors Deferred  Compensation Stock Plan, a number of shares of the
Common Stock  for each  meeting of  the Board  or a  committee thereof
attended.  See Proposal IV.

Voting

          Those nominees  receiving a plurality of the votes cast will
be elected  directors.   Abstentions and  broker  non-votes  will  not
affect the outcome of the election.

          The Board  of Directors of the Company deems the election of
the seven  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, 1997 to the Company's Chief Executive Officer and other
executive officers  whose total  compensation exceeded $100,000 during
the last fiscal year:

                                 -6-


                      SUMMARY COMPENSATION TABLE
Annual Fiscal Compensation Stock Other Name and Principal Position Year Option Grants Michael M. Goldberg..... 1997 $359,880 4,985 shares $4,750 Chairman of the Board and 1996 335,349 756,749 shares 4,620 Chief Executive Officer 1995 227,605 16,507 shares 4,497 Sam J. Milstein......... 1997 $312,904 4,253 shares $4,750 President, Chief Scientific 1996 287,683 555,903 shares 3,850 Officer and Secretary 1995 202,187 10,792 shares 3,850 Robert A. Baughman, Jr.. 1997 $195,337 22,724 shares $4,750 Senior Vice President and 1996 180,154 3,664 shares 3,175 Director of Development 1995 165,641 8,131 shares 2,910 Lewis H. Bender......... 1997 $144,479 51,843 shares $2,748 Senior Vice President, 1996 120,125 77,396 shares 2,032 Business Development _______________________________ Annual compensation consists solely of base salary except that Drs. Goldberg, Milstein and Baughman were also paid in lieu of earned vacations $31,280, $38,231 and $22,212, respectively, during the 1997 fiscal year, $25,349, $33,873 and $20,154, respectively, during the 1996 fiscal year and $0, $14,808 and $12,308, respectively, 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. Other compensation consists solely of matching contributions made by the Company under a defined contribution plan available to substantially all employees. Does not include options with respect to 562,315 shares for Dr. Goldberg and 346,716 shares for Dr. Milstein originally granted in 1992 in connection with each of their respective employment agreements. By resolution of the Company's Board of Directors adopted during the 1997 fiscal year, such options were deemed for all purposes to have been granted under the Company's 1991 Stock Option Plan with respect to 262,315 shares for Dr. Goldberg and 146,716 shares for Dr. Milstein and under the Company's 1995 Non- Qualified Stock Option Plan with respect to 300,000 shares for Dr. Goldberg and 200,000 for Dr. Milstein. The Board also extended from July 31, 1997 to July 31, 2002 the expiration dates for such options. Mr. Bender became an executive officer of the Company in October of 1995.
-7- 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, 1997: STOCK OPTION GRANTS DURING THE FISCAL YEAR ENDED JULY 31, 1997
Percent Number of Total Potential of Shares Option Realizable Value at Under- Shares Assumed Annual lying Granted Exercise Annual Rates of Options to Price Expir- Stock Price Appreciation Granted Employees Per ation for Option Term Name Share Date 5% 10% Michael M. Goldberg 2,388 $ 7.13 2/1/97 $ 3,005 $ 3,005 999 13.175 5/1/97 2,323 2,323 748 16.15 8/1/97 2,132 2,132 850 14.50 11/1/97 2,175 2,175 Sam J. Milstein. 1,888 $ 7.13 2/1/97 $ 2,376 $ 2,376 918 13.175 5/1/97 2,134 2,134 603 16.15 8/1/97 1,719 1,719 844 14.50 11/1/97 2,160 2,160 Robert A. Baughman, 1,197 $ 7.13 2/1/97 $ 1,056 $ 1,056 Jr.............. 532 13.175 5/1/97 1,237 1,237 398 16.15 8/1/97 1,134 1,134 592 14.50 11/1/97 1,515 1,515 20,000 5.0% 10.00 9/3/06 125,579 318,748 Lewis H. Bender. 658 $ 7.13 2/1/97 $ 828 $ 828 407 13.175 5/1/97 946 946 351 16.15 8/1/97 1,000 1,000 427 14.50 11/1/97 1,093 1,093 50,000 1.4% 16.875 3/21/07 530,630 1,344,720 _______________________________ Options that expired in 1997 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 2006 or 2007 were all granted under the Company's 1991 Stock Option Plan at prices equal to the fair market value on the date of grant. The total number of option shares granted during the 1997 fiscal year to employees includes 52,259 shares under the Company's Employee Stock Purchase Plan or Non-Qualified Employee Stock Purchase Plan, 275,500 shares under the Company's 1991 Stock Option Plan and 75,000 shares under the Company's 1995 Non-Qualified Stock Option Plan. Less than 1.0%
-8- The following table sets forth information as to the exercises of options during the fiscal year ended July 31, 1997 and the number and value of unexercised options held by the executive officers named above as of July 31, 1997: AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
Exercises During the Fiscal Year Number of Number Shares Undelying Value of Unexercised of Unexercised Options In-the-Money Options Shares Value Exer- Unexer- Exer- Unexer- Name Acquired Realized cisable cisable cisable cisable Michael M. Goldberg 1,919 $2,051 1,189,095 450,000 $10,667,937 $4,837,500 969 2,544 2,388 40,298 999 2,323 Sam J. Milstein 1,547 $1,653 659,204 330,000 $ 5,855,738 $3,547,500 781 2,050 1,888 31,860 918 2,134 Robert A. Baughman, 990 $1,058 136,258 - $ 1,043,987 - Jr............. 500 1,313 1,197 20,199 532 1,237 Lewis H. Bender 774 $ 827 40,814 102,000 $ 463,243 $ 720,475 391 1,026 658 11,104 407 946 _______________________________ Based on a closing price of $19.375 on July 31, 1997 on the Nasdaq National Market. Based on a closing price of $7.125 on August 1, 1996, the date of exercise, on the Nasdaq National Market. Based on a closing price of $14.625 on November 1, 1996, the date of exercise, on the Nasdaq National Market. Based on a closing price of $24.00 on February 3, 1997, the date of exercise, on the Nasdaq National Market. Based on a closing price of $19.00 on May 1, 1997, 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 $348,316 for the 1998 fiscal year to increase at 6% per year, Dr. Milstein is to serve as President and Chief Scientific Officer at an annual salary of $280,900 for the 1998 fiscal year 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. -9- 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 1997 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 Mark I. Greene Joseph R. Robinson 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, 1992 in each of the Company's Common Stock, the stocks comprising the Nasdaq Market Index and the stocks comprising the Nasdaq Pharmaceutical Index. Nasdaq Nasdaq Emisphere Market Pharm. 7/31/92 100 100 100 7/31/93 79 122 80 7/31/94 22 125 78 7/31/95 36 176 99 7/31/96 40 191 120 7/31/97 102 283 141 -10- 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 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 1,400,000 shares to 1,700,000 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 1,900,000 shares to 2,100,000. As of October 31, 1997, options with respect to 1,444,470 shares were outstanding under the 1991 Plan and options with respect to 1,875,000 shares were outstanding under the 1995 Plan. 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. -11- 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 1,700,000 in the aggregate with respect to the 1991 Plan and 2,100,000 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. -12- 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.......... - 90,268 - Senior Vice President and Director of Development Lewis H. Bender................. - 141,976 - Vice President of Business Development All current executive officers as a group..................... - 649,676 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 - 865,226 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. 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. -13- PROPOSAL IV: APPROVAL OF THE DIRECTORS' DEFERRED COMPENSATION STOCK PLAN The Board has unanimously adopted the Directors' Deferred Compensation Stock Plan ( the "Plan") providing for the issuance of up to 25,000 shares of the Common Stock in connection with the payment of deferred compensation to outside directors for attending meetings of the Board. The Plan is set forth in its entirety as Appendix A hereto and is summarized below. If the Plan is not approved by the stockholders, the Company will have to reevaluate how it will compensate outside directors for attending meetings of the Board. Summary of the Plan 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. Pursuant to the Plan, the Company shall set up and maintain for each eligible director an account (each a "Share Account"). For each meeting attended by an eligible director,a number of shares of the Common Stock will be allocated to such director's Share Account equal to (i) the amount of compensation as determined by the Board of Directors for attending such meeting divided by (ii) the fair market value of the Common Stock as of the date of such meeting. With respect to cash dividends and distributions paid by the Company, the Plan provides that a number of shares of the Common Stock shall be allocated to each Share Account in an amount equal to (i) the amount of the dividend that would be paid if the shares allocated to the Share Account were issued and outstanding shares of the Common Stock divided by (ii) the fair market value of the Common Stock as of the date of payment of such dividend or distribution. For purposes of the Plan, the fair market value of the Common Stock as of any date shall be the closing price of the stock on such date. The shares allocated to a director's Share Account will be issued to such director within six months of his or her retirement from the Board or other termination as a director. It is anticipated, based on current tax law, that the directors participation in the Plan will not be subject to any federal income tax until the shares are issued and delivered to the them, that the amount of the federal income tax will be based on the value of the shares on the date of issuance and that the Company will be then entitled to take a corresponding federal income tax deduction. In the event of a stock dividend, stock split, recapitalization, merger in which the Company is the surviving corporation or other capital adjustment affecting the shares of the Common Stock outstanding, an appropriate adjustment shall be made, as determined by the Board of Directors, to the aggregate number of shares the Company may issue under the Plan and the number of shares allocated to each Share Account. In the event of the complete liquidation of the Company, or of a reorganization, consolidation or merger in which the Company is not the surviving corporation, the Company shall prior thereto issue and deliver to each of the directors all of the shares allocated to his or her Share Account. The Board of Directors may alter, amend, suspend or terminate the Plan in whole or in part, provided, however, that no alteration, amendment, suspension or termination shall adversely affect the right of a director to receive the number of shares allocated to his or her Share Account. Benefits under the Plan It is not possible to determine the benefits or number of shares that will be received by or allocated to each outside director until the amount of each meeting fee is specified by the Board and the fair market value of the shares is determined as of the meeting date. In no event will a director or officer, other than a non-executive director, be entitled to receive any benefits under the Plan. Voting Approval of the Plan requires 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 Directors' Deferred Compensation Stock Plan to be in the best interest of the Company and its stockholders and recommends that holders of the Common Stock vote FOR Proposal IV. -14- 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, 1998. 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, 1997 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 1999 must be received by the Company no later than July 31, 1998, 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 November 28, 1997 -15- Appendix A EMISPHERE TECHNOLOGIES, INC. DIRECTORS' DEFERRED COMPENSATION STOCK PLAN 25,000 Shares 1. Purpose The purpose of the Directors' Deferred Compensation Stock Plan (the "Plan") of Emisphere Technologies, Inc. (the "Company") is to attract, compensate and retain well qualified directors by providing them with deferred compensation for attending meetings of the Board of Directors or a committee thereof and with an equity interest in the Company's success. 2. Stock Subject to the Plan The Company may issue and deliver a total of 25,000 shares of its common stock, par value $.01 per share (the "Common Stock"), pursuant to the Plan. Such shares may be either authorized but unissued shares or treasury shares. 3. Administration The Plan shall be administered by the Board of Directors of the Company. The Board shall have the power and authority as may be necessary to carry out the provisions of the Plan, including the interpretation and construction of the Plan, the determination of the amount of compensation for attending each meeting, the adoption of such rules and regulations as it may deem advisable and the termination of further share issuances under the Plan. 4. Eligibility Eligibility to participate in the Plan shall be open to only those 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 and (iii) are not affiliated with any person who is such an officer, employee or owner. 5. Share Accounts The Company shall set up and maintain for each eligible director an account (each a "Share Account') representing the number of shares of the Common Stock which the Company is obligated in the future to issue and deliver to such director, determined as follows: (a) for each meeting attended by an eligible director, a number of shares of the Common Stock shall be added to his or her Share Account in an amount equal to (i) the amount determined by the Board of Directors as compensation for attending such meeting divided by (ii) the fair market value of the Common Stock as of the date of such meeting; A-1 (b) for each cash dividend or distribution paid by the Company with respect to the Common Stock, a number of shares of the Common Stock shall be added to each Share Account in an amount equal to (i) the amount of the dividend that would be paid if the shares in the Share Account were issued and outstanding shares of the Common Stock divided by (ii) the fair market value of the Common Stock as of the date of payment of such dividend or distribution; (c) As used herein, the fair market value of the Common Stock as of any date shall be the closing price of the Common Stock on the Nasdaq National Market on such date. In the event the Common Stock ceases at any time to be traded on the Nasdaq National Market, the fair market value of the Common Stock shall be determined in such manner as may be set by the Board of Directors of the Company; and (d) All share calculations shall be made to the nearest one thousandth of a share. 6. Issuance of Shares The Company shall within six months following the date each participant in the Plan ceases to be a director of the Company issue and deliver to such person all of the shares in his or her Share Account. In the event of the death of a director, such shares shall be delivered to the director's estate or legal representative. Nothing herein shall be deemed to confer any right to continue as a director of the Company or to limit the right of the Company to remove a director. 7. Rights as a Stockholder Until such time as the shares in a director's Share Account have been issued and delivered to the director in accordance with the terms of the Plan, the director shall have no rights as a stockholder with respect to the shares of the Common Stock in his or her Share Account. 8. Nontransferability of the Share Account The right to receive shares in a director's Share Account may not be assigned or transferred except by will or by the laws of descent and distribution and may be delivered during the life of the director only to the director. 9. Compliance with Securities Laws If the shares to be issued under the Plan have not been registered under the Securities Act of 1933, as amended, the Company's obligation to issue such shares shall be conditioned upon receipt of a representation in writing that the director is acquiring such shares for his or her own account and not with a view to the distribution thereof and the certificate representing such shares shall bear a legend in such form as the Company's counsel deems necessary or desirable. In no event shall the Company be obligated to issue any shares under the Plan if, in the opinion of the Company's counsel, such issuance would result in a violation of any federal or state securities laws. 10. Stock Adjustments (a) In the event of a stock dividend, stock split, recapitalization, merger in which the Company is the surviving corporation or other capital adjustment affecting shares of the Common Stock outstanding, an appropriate adjustment shall be made, as determined by the Board of Directors of the Company, to the aggregate number of shares the Company may issue under the Plan and the number of shares in each Share Account. (b) In the event of the complete liquidation of the Company, or of a reorganization, consolidation or merger in which the Company is not the surviving corporation, the Company shall prior thereto issue and deliver to each of the directors all of the shares in his or her Share Account. A-2 11. Effectiveness of the Plan The Plan was adopted on September 11, 1997 by resolution of the Board of Directors of the Company and is effective as of such date. The Plan shall be submitted to the Company's stockholders for approval by the affirmative votes of the holders of a majority of the Common Stock present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the State of Delaware. 12. 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 right of a director to receive the number of shares of the Common Stock in his or her Share Account and (ii) any amendment which must be approved by the stockholders of the Company in order to ensure that all transactions under the Plan continue to be exempt 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. A-3 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 November 26, 1997 at the Annual Meeting of Stockholders to be held on January 15, 1998 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 Sam J. Milstein, Ph.D. EXECUTED IN SUCH MANNER AS NOT TO Howard M. Pack WITHHOLD AUTHORITY TO VOTE FOR THE Joseph R. Robinson, Ph.D. ELECTION OF ANY 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 300,000 _ 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 200,000 _ FOR _ AGAINST _ ABSTAIN 4. Approval of the Company's Directors' Deferred Compensation Stock Plan _ 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, 1998 _ 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 , 1998 (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.