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:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ ] 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:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
EMISPHERE TECHNOLOGIES, INC.
765 Old Saw Mill River Road
Tarrytown, New York 10591
December 18, 1998
Dear Stockholder:
You are cordially invited to attend the Company's Annual Meeting of
Stockholders to be held on Tuesday, January 26, 1999 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 Restated Certificate of Incorporation providing among other things
for an increase in the number of authorized shares, the classification of the
Board of Directors and the taking of stockholder action only by meeting, to
approve and adopt amendments to the Company's 1991 Stock Option Plan and 1995
Non-Qualified Stock Option Plan and to ratify the Board of Directors' selection
of PricewaterhouseCoopers LLP to serve as the Company's independent accountants
for the fiscal year ending July 31, 1999.
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
<PAGE>
EMISPHERE TECHNOLOGIES, INC.
765 Old Saw Mill River Road
Tarrytown, New York 10591
________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
________________________________
Hawthorne, New York
December 18, 1998
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 Tuesday, January 26, 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 eight directors;
2. To approve and adopt an amendment to the Company's Restated
Certificate of Incorporation providing for an increase in the number of
shares of the Common Stock the Company is authorized to issue from
20,000,000 to 40,000,000;
3. To approve and adopt amendments to the Company's Restated
Certificate of Incorporation providing for (i) the classification of the
Board of Directors into three classes to serve staggered three-year terms,
(ii) the fixing of the number of directors constituting the entire Board
of Directors at a maximum of twelve and a minimum of three, (iii) the
removal of directors only for cause and (iv) related matters;
4. To approve and adopt amendments to the Company's Restated
Certificate of Incorporation providing for the taking of any action by the
stockholders of the Corporation only at a meeting of stockholders and not
by written consent without a meeting and related matters;
5. To approve and adopt an amendment to the Company's 1991 Stock
Option Plan providing among other things for an increase in the maximum
number of shares of the Company's Common Stock available for issuance
thereunder by 300,000;
6. To approve and adopt an amendment to the Company's 1995 Non-
Qualified Stock Option Plan providing among other things for an increase
in the maximum number of shares of the Company's Common Stock available
for issuance thereunder by 250,000;
7. To ratify the Board of Directors' selection of
PricewaterhouseCoopers LLP to serve as the Company's independent
accountants for the fiscal year ending July 31, 1999; and
8. 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 27, 1998 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, 765 Old
Saw Mill River Road, Tarrytown, New York 10591.
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
<PAGE>
EMISPHERE TECHNOLOGIES, INC.
765 Old Saw Mill River Road
Tarrytown, New York 10591
________________________________
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 Tuesday, January 26, 1999, 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. The Company has retained the services of
________ to assist in the solicitation of proxies, for which the Company will
pay a fee of $_______ and certain expenses incurred. 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 17, 1998.
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 eight nominees named herein, FOR the adoption of
the amendments to the Company's Restated Certificate of Incorporation, FOR the
approval of the amendments to the 1991 Stock Option Plan and the 1995 Non-
Qualified Stock Option Plan and FOR ratification of the Board of Directors'
selection of PricewaterhouseCoopers LLP to serve as the Company's independent
accountants for the fiscal year ending July 31, 1999.
If a quorum is present at the meeting, those nominees receiving a
plurality of the votes cast will be elected as directors. The affirmative vote
of a majority of the shares of the Common Stock outstanding will be required to
approve the adoption of the amendments to the Company's Restated Certificate of
Incorporation. 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 and the
ratification of the Board's selection of PricewaterhouseCoopers LLP as the
Company's independent accountants.
VOTING
Only stockholders of record at the close of business on November 27,
1998 will be entitled to vote at the meeting or any and all adjournments
thereof. As of November 27, 1998 the Company had outstanding 11,024,808 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.
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN
STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information, as of October 16,
1998, 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).......................... 1,162,300 10.5%
One Embarcardero Center, Suite 2300
San Francisco, California 94111-3162
Elan International Services Ltd.......... 940,000 8.5%
102 St James Court
Flatts Smiths FL04
Bermuda
INVESCO PLC and affiliates (4)........... 962,450 8.7%
11 Devonshire Square
London EC2M 4YR
England
Michael M. Goldberg, M.D................. 1,248,516(5) 10.2%
Sam J. Milstein, Ph.D.................... 768,844 6.5%
Howard M. Pack........................... 168,363(6) 1.5%
Jere E. Goyan, Ph.D...................... 77,000 *
Peter Barton Hutt, Esq................... 77,000 *
Mark I. Greene, M.D., Ph.D............... 57,000 *
Joseph R. Robinson, Ph.D................. 9,000 *
Robert J. Levenson (7)................... 8,000 *
Robert A. Baughman, Jr., Pharm.D., Ph.D.. 139,088 1.2%
Lewis H. Bender.......................... 57,884 *
Barry B. Kanarek, M.D., Ph.D............. 700 *
All directors and executive officers
as a group............................. 2,611,395(5)(6)(7) 19.4%
_______________________________
* Less than 1%
(1) Unless otherwise specified, the address of each beneficial owner is c/o the
Company, 765 Old Saw Mill River Road, Tarrytown, New York 10591.
(2) The number of shares set forth 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 by the Company:
Number of Shares
----------------
Dr. Goldberg....................... 1,207,497
Dr. Milstein....................... 767,757
Mr. Pack........................... 77,000
Dr. Goyan.......................... 77,000
Mr. Hutt........................... 77,000
Dr. Greene......................... 57,000
Dr. Robinson....................... 9,000
Dr. Baughman....................... 135,268
Mr. Bender......................... 53,176
All directors and executive
officers as a group................ 2,460,698
-2-
<PAGE>
(3) Based on a Schedule 13G/A filed February 13, 1998, 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 1,162,300 shares.
(4) Based on a Schedule 13G/A filed February 12, 1998, INVESCO PLC, AMVESCAP
PLC, AVZ, Inc., AIM Management Group Inc., AMVESCAP Group Services, Inc.,
INVESCO, Inc., INVESCO North American Holdings, Inc., INVESCO Capital
Management, Inc., INVESCO Funds Group, Inc., INVESCO Management & Research,
Inc. and INVESCO Realty Advisers, Inc., all of which are English
corporations, share voting and dispositive power with respect to 962,450
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.
(7) Includes 1,000 shares held by the Robert J. and Mira Levenson Family
Foundation, with respect to which shares Mr. Levenson disclaims beneficial
ownership
PROPOSAL I: ELECTION OF DIRECTORS
At the meeting, eight directors (constituting the entire Board of
Directors) are to be elected. If the proposed amendments to the Company's
Restated Certificate of Incorporation (as set forth in Proposal III) relating
to the classification of the Board of Directors into three classes with
staggered three-year terms are adopted by the stockholders of the Company, the
proxies given pursuant to this solicitation will be voted, unless authority is
withheld, in favor of the eight nominees listed below to serve for the terms
indicated.
Class I Class II Class III
----------------------- ----------------------- -----------------------
(Term expiring in 2000) (Term expiring in 2001) (Term expiring in 2002)
If such amendments are not adopted, the eight nominees will be
elected to serve until the next annual meeting of stockholders and until their
respective successors are elected and qualified. 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:
-3-
<PAGE>
Year
First
Elected
Name Age Director Position with the Company
- ---------------------------- --- -------- --------------------------------
Michael M. Goldberg, M.D.... 39 1990 Chairman of the Board of
Directors and Chief Executive
Officer
Jere E. Goyan, Ph.D......... 68 1992 Director
Mark I. Greene, M.D., Ph.D.. 50 1995 Director
Peter Barton Hutt, Esq...... 64 1992 Director
Robert J. Levenson.......... 57 1998 Director
Sam J. Milstein, Ph.D....... 49 1991 Director,President, Chief
Scientific Officer and Secretary
Howard M. Pack.............. 80 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.
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 John Eckman Professor of Medical
Science, School of Medicine at the University of Pennsylvania for more than the
past five years. He currently serves as a director of Ribi ImmunoChem
Research, Inc., a biopharmaceutical company.
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 Interneuron Pharmaceuticals, Inc. and Sparta Pharmaceuticals, Inc.
Robert J. Levenson has been Executive Vice President of First Data
Corporation for more than the past five years. He previously held positions as
a director, Senior Executive Vice President, member of the Office of the
President and Chief Operating Officer of Medco Containment Services, Inc. and
as a director and Group President of Automatic Data Processing, Inc. He
currently serves as a director of First Data Corporation, Superior Telecom Inc.
and Vestcom International, 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.
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.
-4-
<PAGE>
Meetings and Committees of the Board of Directors
During the fiscal year ended July 31, 1998, 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 no meetings during the fiscal year ended July 31, 1998.
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, 1998 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 and Mr. Levenson have each
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,
$6.125 for the initial option granted to Mr. Levenson 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, for each meeting of the Board or a committee thereof
attended, directors have a right to receive, pursuant to the Directors Deferred
Compensation Stock Plan, a number of shares of the Common Stock, based on the
closing price of the Common Stock on the date of the meeting and an amount
determined by the Board as compensation for the meeting. For meetings attended
during the 1997 fiscal year, Drs. Goyan, Greene and Robinson and Messrs. Hutt
and Pack each earned the right to receive 114 shares.
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 eight
nominees listed above as directors to be in the best interest of the Company
and its stockholders and recommends a vote "FOR" their election.
-5-
<PAGE>
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:
SUMMARY COMPENSATION TABLE
Fiscal Annual Stock
Name and Principal Position Year Compensation(1) Option Grants Other(2)
- ---------------------------- ------ --------------- ----------------- --------
Michael M. Goldberg......... 1998 $388,506 6,687 $9,792
Chairman of the Board and 1997 359,880 4,985 shares(3) 4,750
Chief Executive Officer 1996 335,349 756,749 shares 4,620
Sam J. Milstein............. 1998 $280,900 4,662 $9,792
President, Chief Scientific 1997 312,904 4,253 shares(3) 4,750
Officer and Secretary 1996 287,683 555,903 shares 3,850
Robert A. Baughman, Jr...... 1998 $175,000 2,844 $7,000
Senior Vice President and 1997 195,337 22,724 shares 4,750
Director of Development 1996 180,154 3,664 shares 3,175
Lewis H. Bender............. 1998 $180,096 3,052 $7,000
Senior Vice President, 1997 144,479 51,843 shares 2,748
Business Development 1996 120,125 77,396 shares 2,032
Barry B. Kanarek............ 1998 $ 65,625 126,611 shares $ -
Senior Vice President,
Clinical Affairs and
Chief Medical Officer (4)
_______________________________
(1) Annual compensation consists solely of base salary except that Drs.
Goldberg, Milstein and Baughman and Mr. Bender were also paid in lieu of
earned vacations $40,190, $0, $0 and $10,096, respectively, during the 1998
fiscal year, $31,280, $38,231, $22,212 and $0, respectively, during the
1997 fiscal year and $25,349, $33,873, $20,154 and $0, respectively, during
the 1996 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.
(2) Other compensation consists solely of matching contributions made by the
Company under a defined contribution plan available to substantially all
employees.
(3) 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 shares for Dr. Milstein. The Board
also extended from July 31, 1997 to July 31, 2002 the expiration dates for
such options.
(4) Dr. Kanarek became an executive officer of the Company in June of 1998.
-6-
<PAGE>
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, 1998:
STOCK OPTION GRANTS DURING THE FISCAL YEAR ENDED JULY 31, 1998
<TABLE>
<CAPTION>
Percent Potential Realizable
of Total Value at Assumed
Number Option Annual Rates of Stock
of Shares Shares Exercise Price Appreciation
Underlying Granted Price Expir- for Option Term
Options to Em- per ation ----------------------
Name Granted<F1> ployees<F2> Share Date 5% 10%
- ----------------------- ----------- ----------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael M. Goldberg.... 975 <F3> $13.76 2/1/98 $ 2,368 $ 2,368
920 <F3> 14.025 5/1/98 2,277 2,277
2,161 <F3> 7.44 8/1/98 2,837 2,837
2,631 <F3> 6.27 11/1/98 2,837 2,837
Sam J. Milstein........ 786 <F3> $13.76 2/1/98 $ 1,909 $ 1,909
751 <F3> 14.025 5/1/98 1,859 1,859
1,416 <F3> 7.44 8/1/98 1,859 1,859
1,709 <F3> 6.27 11/1/98 1,859 1,859
Robert A. Baughman, Jr. 490 <F3> $13.76 2/1/98 $ 1,190 $ 1,190
468 <F3> 14.025 5/1/98 1,158 1,158
822 <F3> 7.44 8/1/98 1,079 1,079
1,064 <F3> 6.27 11/1/98 1,158 1,158
Lewis H. Bender........ 462 <F3> $13.76 2/1/98 $ 1,122 $ 1.122
441 <F3> 14.025 5/1/98 1,091 1,091
1,085 <F3> 7.44 8/1/98 1,425 1,425
1,064 <F3> 6.27 11/1/98 1,158 1,158
Barry B. Kanarek....... 125,000 30.1% $14.50 6/4/08 $1,139,872 $2,888,658
1,611 <F3> 6.27 11/1/98 1,737 1,737
____________________________
<FN>
<F1>Options that expired in 1998 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 2008 were all granted under the Company's 1991 Stock Option
Plan at prices equal to the fair market value on the date of grant.
<F2>The total number of option shares granted during the 1998 fiscal year to
employees includes 75,174 shares under the Company's Employee Stock
Purchase Plan or Non-Qualified Employee Stock Purchase Plan and 340,272
shares under the Company's 1991 Stock Option Plan.
<F3>Less than 1.0%
</FN>
</TABLE>
-7-
<PAGE>
The following table sets forth information as to the exercises of
options during the fiscal year ended July 31, 1998 and the number and value of
unexercised options held by the executive officers named above as of July 31,
1998:
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Exercises During
the Fiscal Year Number of
--------------------- Shares Underlying Value of Unexercised
Number Unexercised Options In-the-Money Options<F1>
of ----------------------- ------------------------
Shares Value Exer- Unexer- Exer- Unexer-
Name Acquired Realized cisable cisable cisable cisable
- ----------------------- -------- ----------- ------------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Michael M. Goldberg.... 748 $ 2,051<F2> 1,337,497<F6> 300,000 $1,554,833 $600,000
850 2,544<F3>
975 40,298<F4>
920 2,323<F5>
Sam J. Milstein........ 603 $ 1,653<F2> 767,757 220,000 $ 921,058 $440,000
844 2,050<F3>
786 31,860<F4>
751 2,134<F5>
Robert A. Baughman, Jr. 398 $ 1,058<F2> 135,268 - $ 31,222 -
592 1,313<F3>
490 20,199<F4>
468 1,237<F5>
Lewis H. Bender........ 351 $ 827<F2> 53,176 88,800 $ 133,117 $122,175
427 1,026<F3>
462 11,104<F4>
441 946<F5>
Barry B. Kanarek....... - - 125,000 - - -
_______________________________
<FN>
<F1>Based on a closing price of $10.625 on July 31, 1998 on the Nasdaq National
Market.
<F2>Based on a closing price of $19.00 on August 1, 1997, the date of exercise,
on the Nasdaq National Market.
<F3>Based on a closing price of $19.375 on November 1, 1997, the date of
exercise, on the Nasdaq National Market.
<F4>Based on a closing price of $16.188 on February 2, 1998, the date of
exercise, on the Nasdaq National Market.
<F5>Based on a closing price of $16.50 on May 1, 1998, the date of exercise, on
the Nasdaq National Market.
<F6>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.
</FN>
</TABLE>
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 $369,215 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 $297,754 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. Also pursuant to the agreements, Dr. Goldberg was granted
an option to purchase 750,000 shares of the Common Stock and Dr. Milstein was
granted an option to purchase 550,000 shares. 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.
-8-
<PAGE>
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. The Compensation Committee's policy with respect to
stock options is that their exercise prices should be equal to or above the
fair market value of the Common Stock on the date of grant, that employee stock
options should generally involve a five-year vesting period and that options
previously granted at exercise prices higher than the current fair market value
should not be repriced.
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 1998 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, 1993 in each of the Company's Common
Stock, the stocks comprising the Nasdaq Market Index and the stocks comprising
the Nasdaq Pharmaceutical Index.
-9-
<PAGE>
Emisphere Nasdaq Market Nasdaq Pharm.
--------- ------------- -------------
7/31/93 100 100 100
7/31/94 275 103 88
7/31/95 45 145 125
7/31/96 50 157 150
7/31/97 129 232 177
7/31/98 71 274 178
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, III AND IV: APPROVAL OF AMENDMENTS TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION
The Board of Directors deems it advisable that the Company's Restated
Certificate of Incorporation be amended, subject to stockholder approval, to
provide for (i) an increase in the number of shares of the Common Stock the
Company is authorized to issue from 20,000,000 to 40,000,000, (ii) the
classification of the Board of Directors into three classes with staggered
three-year terms, (iii) the fixing of the number of directors constituting the
entire Board of Directors at a maximum of twelve and a minimum of three, (iii)
the removal of directors only for cause, (iv) the taking of any action by the
stockholders of the Corporation only at a meeting of stockholders and not by
written consent without a meeting and (v) related matters.
Summary of the Proposed Amendments
The proposed amendments to the Company's Restated Certificate of
Incorporation, which are set forth in Appendix A hereto, are summarized briefly
as follows:
Increase in the Number of Authorized Shares. The proposed amendment
to Article FOURTH of the Company's Restated Certificate of Incorporation
increases the number of shares of the Common Stock the Company has the
authority to issue from 20,000,000 to 40,000,000. Based on the number of
shares issued and outstanding and reserved for issuance under the Company's
benefit plans, the proposed amendment if adopted will increase the number of
unreserved shares of the Common Stock available for issuance from approximately
_________ to approximately ________.
Classification of the Board of Directors. The Company's directors
are currently elected annually and hold office until the next annual meeting of
stockholders and until their respective successors are duly elected and
qualified. The proposed amendments to Article TENTH to the Company's Restated
Certificate of Incorporation provide for the classification of the Board of
Directors into three classes with staggered terms, designated as Class I, Class
II and Class III. Class I will initially consist of two directors, each to
hold office until the Annual Meeting of Stockholders in 2000; Class II will
initially consist of three directors, each to hold office until the Annual
Meeting of Stockholders in 2001; Class III will initially consist of three
directors, each to hold office until the Annual Meeting of Stockholders in
2002. Starting with the Annual Meeting of Stockholders following the 1999
fiscal year, one class of directors will be elected for a three-year term at
each annual meeting, with the remaining classes continuing in office.
-10-
<PAGE>
Number of Directors. The Company's Board of Directors is currently
composed of eight persons. The proposed amendments will fix the number of
directors constituting the entire Board of Directors at a maximum of twelve and
a minimum of three.
Removal of Directors. Members of the Company's Board of Directors
can currently be removed, with or without cause, by the holders of a majority
of the Common Stock outstanding. The proposed amendments provide that such
removal can be effected only for cause.
Vacancy of Directors. Any vacancies occurring on the Board of
Directors can currently be filled by a majority of the remaining directors,
although less than a quorum, to serve until the next annual meeting of
stockholders and until a successor is duly elected and qualified. With the
proposed amendments, any director so chosen will serve for the remaining term
of the class for which such director was chosen.
Stockholder Action only by Meeting. Under the Company's Restated
Certificate of Incorporation as currently in effect, any requisite or permitted
action of stockholders may be taken without a meeting, without prior notice and
without a vote if written consent is signed by stockholders having the minimum
number of votes necessary to authorize the action. The proposed amendments
provide that action by stockholders can be taken only at an annual or special
meeting of stockholders and may not be taken by written consent without a
meeting.
Two Thirds Majority to Amend Article TENTH. Under the Company's
Restated Certificate of Incorporation as currently in effect, any amendment
thereto requires the affirmative vote of a majority of the Common Stock
outstanding and entitled to vote. The proposed amendments provide that any
amendment to Article TENTH (relating to the classification of the Board, the
removal of directors only for cause and the taking of stockholder action only
by meeting) will require either (i) the affirmative vote of a two-thirds
majority of the stock outstanding and entitled to vote or (ii) the unanimous
approval of the Board of Directors of the Corporation and a majority of the
stock outstanding and entitled to vote.
Purposes and Effects of the Proposed Amendments
Increase in the Number of Authorized Shares. While the Company has
no present plans, agreements or understandings regarding the issuance of
additional shares of the Common Stock, the Board of Directors believes that the
adoption of the amendment to increase the number of authorized shares is
advisable because it will provide the Company with greater flexibility in
connection with possible future financing transactions, acquisitions of other
companies or business properties, stock dividends or splits, employee benefit
plans and other proper corporate purposes. Moreover, having such additional
authorized shares available will give the Company the ability to issue shares
without the expense and delay of a special meeting of stockholders. Such a
delay might deprive the Company of the flexibility the Board views as important
in facilitating the effective use of the Company's shares. Except as otherwise
required by applicable law or rules, authorized but unissued shares of the
Common Stock may be issued at such time, for such purposes and for such
consideration as the Board of Directors may determine to be appropriate,
without further authorization by stockholders.
Since the issuance of additional shares of the Common Stock, other
than on a pro rata basis to all current stockholders, would dilute the
ownership interest of a person seeking to obtain control of the Company, such
issuance could be used to discourage a change in control of the Company by
making it more difficult or more costly. The Company is not aware of any third
party seeking to accumulate shares of the Common Stock or to obtain control of
the Company and the Company has no present intention to use the additional
authorized shares to deter such a change in control.
-11-
<PAGE>
Classification of the Board of Directors and Related Matters. As
more fully discussed below, the Board of Directors believes that the proposed
amendments providing for the classification of the Board of Directors and
related matters will, if adopted, effectively reduce the possibility that a
third party could effect a sudden or surprise change in majority control of the
Board without the support of the incumbent Board.
Although neither the Board of Directors nor the management of the
Company is aware of any actual or threatened change in control of the Company,
the purpose of the proposed amendments is to discourage certain types of
activity that in the future might involve an actual or threatened change in
control. The proposed amendments are designed to make it more difficult and
time consuming to change majority control of the Board of Directors and thus
reduce the vulnerability of the Company to an unsolicited proposal for the
takeover of the Company that does not contemplate the acquisition of all of the
Company's outstanding shares at a fair price, or an unsolicited proposal for
the restructuring or sale of all or part of the Company.
Third parties sometimes accumulate substantial stock positions in
public companies with a view toward using a control block of stock to force a
restructuring, merger or consolidation or to force a corporation to repurchase
the control block at a premium. Such actions are often taken without advance
notice to or consultation with the board of directors or management of the
corporation. In many cases, such third parties seek representation on the
corporation's board of directors in order to increase the likelihood that their
proposals will be implemented by the corporation. If the corporation resists
the efforts to obtain representation on the corporation's board, such parties
may commence proxy contests to have themselves or their nominees elected to the
board of directors in place of certain directors or the entire board. In some
cases, such third party may be interested not in taking over the corporation,
but in using the threat of a proxy fight or takeover bid as a means of forcing
the corporation to repurchase its holdings at a substantial premium over market
price.
The Board of Directors of the Company believes that the threat of
removal of the Company's directors in such situations would curtail the Board's
ability to negotiate effectively with such persons. Management would be
deprived of the time and information necessary to evaluate the takeover
proposal, to study alternative proposals and to help ensure that the best price
is obtained in any transaction involving the Company that may ultimately be
undertaken.
The proposed amendments to Article TENTH of the Company's Restated
Certificate of Incorporation will, if adopted, have the effect of making it
more difficult to change the composition of the Board of Directors and
therefore help to assure the continuity and stability of the Company's
management and policies. A classified Board of Directors upon which Directors
serve three-year terms requires at least two annual stockholder meetings in
order to effect a change in the control of the Board. Currently, a change in
control of the Board of Directors could be effected in one stockholder meeting.
The provision prohibiting removal of Directors except for cause further
stabilizes the composition of the Board of Directors.
By stabilizing the composition of the Board of Directors, the
proposed amendment is designed to encourage any person who might seek to
acquire control of the Company to consult first with the Company's Board of
Directors and to negotiate the terms of any proposed business combination or
tender offer. The Board of Directors believes that any takeover attempt or
business combination in which the Company is involved should be thoroughly
studied by the Board of Directors to assure that all of the Company's
stockholders are treated fairly.
-12-
<PAGE>
Takeovers or changes in the directors of the Company that are
proposed and effected without prior consultation and negotiation with the
Company's Board of Directors may not necessarily be detrimental to the Company
and its stockholders; the adoption of the proposed amendments could discourage
or frustrate future attempts to acquire control of the Company that are not
approved by the incumbent Board of Directors, but which a majority of
stockholders might deem to be in their best interests. One of the effects of
proposed amendments to Article TENTH may be to discourage prospective acquirors
from making tender offers for, or open market purchases of, shares of the
Common Stock without the approval of the Company's Board of Directors. The
proposed amendments, if adopted, could also delay or frustrate the assumption
of control by a holder of a large block of shares of the Common Stock or the
removal of incumbent directors, even if stockholders considered such events to
be beneficial. The Board of Directors feels, however, that the benefits of
seeking to protect its ability to negotiate with the proponent of an unfriendly
or unsolicited proposal to take over or restructure the Company outweigh the
disadvantages of discouraging such proposals.
Stockholder Action Only by Meeting and Related Matters. The
provision for stockholder action only by meeting in the proposed amendments to
Article TENTH of the Company's Restated Certificate of Incorporation will, if
adopted, have the effect of delaying any stockholder action until a meeting of
stockholders can be called. Since the Company's By-Laws, as amended, bar
stockholders from calling a special meeting of stockholders, the presentation
of stockholder actions that have not received approval of the Board of
Directors may be delayed until the next annual meeting of stockholders.
Furthermore, since the Company's By-Laws set notice requirements for the
presentation of stockholder actions at an annual meeting of stockholders,
action on stockholder proposals may be further delayed. Set forth as Appendix
B hereto are the relevant provisions in the Company's By-Laws, as amended,
relating to the procedure to be followed for the presentation of stockholder
proposals.
Certain Other Provisions and Factors Having Possible Anti-Takeover Effects
Preferred Stock and Preferred Stock Purchase Rights. Article FOURTH
of the Company's Restated Certificate of Incorporation authorizes the issuance
of 1,000,000 shares of Preferred Stock by the Company without requiring any
further action by the Company's stockholders and authorizes the Board of
Directors to issue Preferred Stock in one or more series, with such powers,
designations, preferences and rights as determined by the Board. On March 5,
1996, the Board of Directors designated the Series A Junior Participating
Cumulative Preferred Stock, par value $.01 per share (the "Series A Preferred
Stock"), and declared a dividend distribution of one right (a "Right") to
purchase shares of the Series A Preferred Stock for each share of the Common
Stock outstanding to stockholders of record at the close of business on March
15, 1996. The description and terms of the Rights are set forth in a Rights
Agreement, dated as of February 23, 1996 (the "Rights Agreement"), between the
Company and Continental Stock Transfer & Trust Company, as Rights Agent.
The Rights are non-exercisable and non-separable from the Common
Stock until the earlier of (i) ten days following a public announcement that a
person or group of affiliates or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 20% or more
of the shares of the Common Stock outstanding or (ii) ten business days
following the commencement of a tender offer or exchange offer that would
result in a person or group beneficially owning 20% or more of the shares of
the Common Stock outstanding,. Thereafter, upon the occurrence of certain
events specified in the Rights Agreement and unless the Rights are redeemed by
the Board of Directors, the holders of the Rights other than an Acquiring
Person can exercise the Rights in accordance with the terms thereof.
-13-
<PAGE>
The Rights may have certain anti-takeover effects in that they may
deter a third party from acquiring control of the Company in a manner or on
terms not approved by the Board of Directors. In light of recent rulings in
Delaware courts with respect to shareholder rights plans generally, the Board
of Directors may consider the adoption of certain amendments to the Rights
Agreement and the notification of the Company's stockholders of such
amendments.
The Board presently has no plans to issue shares of Preferred Stock
other than as may be required by the Rights Agreement.
Collaboration Agreements. In connection with certain collaboration
agreements the Company has entered into with Elan Corporation plc, Eli Lilly
and Company and Novartis Pharma AG, each of those companies has agreed not to
acquire shares of the Common Stock above certain specified levels.
Furthermore, the agreement with Elan Corporation plc provides that a change of
control of the Company would constitute an event of default thereunder with
potential adverse effects on the Company.
Delaware Law. Section 203 of the Delaware General Corporation Law
prohibits publicly held Delaware corporations from engaging in a "business
combination" with an "interested stockholder" for a period of three years
following the time of the transaction in which the person or entity became an
interested stockholder unless (i) prior to such time either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder is approved by the board of directors of the
corporation, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the outstanding voting stock of the corporation
(excluding for this purpose certain shares owned by persons who are directors
and also officers of the corporation and by certain employee benefit plans) or
(iii) at or subsequent to such time the business combination is approved by the
board of directors of the corporation and by the affirmative vote (and not by
written consent) of at least 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder. For the purposes of Section 203, a
"business combination" is broadly defined to include mergers, asset sales and
other transactions resulting in a financial benefit to the interested
stockholder. An "interested stockholder" is person who, together with
affiliates and associates, owns (or within the immediately preceding three
years did own) 15% or more of the corporation's voting stock.
Voting
The amendments to the Company's Restated Certificate of Incorporation
must be approved by the affirmative vote of a majority of the shares of the
Common Stock outstanding. Abstentions from voting and broker non-votes will
have the effect of "no" votes.
The Board of Directors of the Company deems the adoption of the
amendments to the Company's Restated Certificate of Incorporation to be in the
best interest of the Company and its stockholders and recommends that holders
of the Common Stock vote FOR Proposal II, FOR Proposal III and FOR Proposal IV.
-14-
<PAGE>
PROPOSALS V AND VI: 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
1,700,000 shares to 2,000,000 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 2,100,000
shares to 2,350,000. As of October 31, 1998, 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.
The Board has also approved, subject to approval of the Company's
stockholders, an amendment with respect to the provision for amending the
Plans. The 1991 Plan currently calls for shareholder approval of any amendment
that would increase the aggregate number of shares that could be issued
thereunder, materially increase the benefits thereunder or modify the class of
persons eligible to receive options thereunder. The 1995 Plan calls for
shareholder approval of any material amendment thereof. As amended, the Plans
will call for shareholder approval if such approval is required to ensure that
the grant and exercise of options thereunder are exempt transactions under Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended, to
comply with any rule or regulation of a governmental authority, applicable
securities exchange or the Nasdaq National Market or, with respect to the 1991
Plan, to ensure that options intended to qualify as incentive stock options
under the Internal Revenue Code of 1986, as amended, meet all requirements for
such qualification.
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.
-15-
<PAGE>
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 2,000,000 in the
aggregate with respect to the 1991 Plan and 2,350,000 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.
-16-
<PAGE>
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
Underlying Options
Dollar ----------------------
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 -
Senior Vice President, Business
Development
Barry B. Kanarek.................. - 125,000 -
Senior Vice President, Clinical
Affairs and Chief Medical Officer
All current executive officers as
a group......................... - 774,676 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 V and FOR
Proposal VI.
-17-
<PAGE>
PROPOSAL VII: RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP to
serve as independent accountants for the fiscal year ending July 31, 1999.
PricewaterhouseCoopers LLP has served as the Company's independent accountants
since November 1991.
A representative of PricewaterhouseCoopers LLP 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.
On October 1, 1998 Emisphere Technologies, Inc. (the "Company")
engaged PricewaterhouseCoopers LLP as the independent accountants to audit the
financial statements of Ebbisham Limited ("Ebbisham"), the joint venture
company owned equally by the Company and Elan Corporation plc. KPMG,
Ebbisham's independent chartered accountants upon whose opinion
PricewaterhouseCoopers LLP relied for the period from the commencement of its
operations on September 26, 1996 to July 31, 1997, will continue as Ebbisham's
independent chartered accountants but was dismissed by the Company with respect
to an opinion upon which PricewaterhouseCoopers LLP relied for the fiscal year
ended July 31, 1998.
Neither PricewaterhouseCoopers LLP's report on the Company's
financial statements for the 1996 and 1997 fiscal years nor KPMG's report on
Ebbisham for the period from the commencement of its operations to July 31,
1997 contained an adverse opinion or disclaimer of opinion and neither report
was qualified or modified as to uncertainty, audit scope or accounting
principles. During the Company's 1996 and 1997 fiscal years and the subsequent
period preceding the dismissal of KPMG, there were neither (i) disagreements
with KPMG on any matter of accounting principles or practice, financial
statement disclosure or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of KPMG, would have caused it to make
reference to the subject matter thereof in connection with its report nor (ii)
any of the reportable events listed in paragraphs (a)(1)(v)(A) through (D) of
Item 304 of Regulation S-K promulgated under the Securities Exchange Act of
1934, as amended.
Prior to the engagement of PricewaterhouseCoopers LLP as the
independent accountant to audit Ebbisham's financial statements, neither the
Company nor Ebbisham consulted with PricewaterhouseCoopers LLP regarding the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements. The Company's decision to change
accountants with respect to the audit of Ebbisham's financial statements was
not recommended or approved by the audit committee of the Company's Board of
Directors.
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 PricewaterhouseCoopers LLP as independent accountants of the
Company.
The Board of Directors of the Company deems the ratification of the
selection of PricewaterhouseCoopers LLP 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 VII.
-18-
<PAGE>
FORM 10-K
Stockholders may obtain without charge a copy of the Company's Annual
Report on Form 10-K for the fiscal year ended July 31, 1998 by directing
written requests to Investor Relations, Emisphere Technologies, Inc., 765 Old
Saw Mill River Road, Tarrytown, New York 10591.
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 2000 must be received by the Company no later than July 31, 1999, 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
December 18, 1998
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<PAGE>
Appendix A
EMISPHERE TECHNOLOGIES, INC.
PROPOSED AMENDMENT
to the
RESTATED CERTIFICATE OF INCORPORATION
RESOLVED that Article FOURTH and Article TENTH of the Corporation's
Certificate of Incorporation be amended to read in full as follows:
* * * *
FOURTH: The total number of shares of stock which the Corporation
shall have the authority to issue is forty-one million (41,000,000),
consisting of 40,000,000 shares of common stock, $.01 par value per share
("Common Stock"), and 1,000,000 shares of preferred stock, $.01 par value
per share ("Preferred Stock").
* * * *
TENTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and
regulation of the powers of the corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further
provided:
(a) Number, Election and Terms of Office of Board of
Directors. The business of the Corporation shall be managed by a Board of
Directors consisting of not less than three nor more than twelve members,
the exact number of directors within such minimum and maximum limitations
to be fixed from time to time by resolution adopted by a majority of the
entire Board of Directors then in office, whether or not present at a
meeting. Directors need not be stockholders of the Corporation. The
directors shall be divided into three classes with the term of office of
the first class to expire at the first annual meeting of stockholders of
the Corporation next following the end of the Corporation's fiscal year
ending July 31, 1999, the term of office of the second class to expire at
the first annual meeting of stockholders of the Corporation next following
the end of the Corporation's fiscal year ending July 31, 2000 and the term
of office of the third class to expire at the annual meeting of
stockholders of the Corporation next following the end of the Corporation's
fiscal year ending July 31, 2001. At each annual meeting of stockholders
following such initial election as specified above, directors elected to
succeed those directors whose terms expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders
after their election.
(b) Adoption, Amendment and Repeal of By-Laws. The power to
adopt, amend or repeal by-laws of the Corporation shall be vested in the
Board of Directors; provided, however, that the stockholders of the
Corporation may adopt, amend or repeal by-laws of the Corporation upon the
affirmative vote of a majority of the stock outstanding and entitled to
vote thereon.
A-1
<PAGE>
(c) Newly Created Directorships and Vacancies. Subject to
the rights of the holders of any series of Preferred Stock then
outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal
from office or other cause shall be filled by a majority vote of the
remaining directors then in office, although less than a quorum, or by a
sole remaining director and any director so chosen shall hold office for a
term expiring at the annual meeting of stockholders at which the term of
the class to which he or she has been elected expires or, in each case,
until his or her successor is duly elected and qualified. Except as may
otherwise be specified in the designations of rights of any series of
Preferred Stock then outstanding, no decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
(d) Removal of Directors. The removal of a director may be
effected only for cause and only upon the affirmative vote of a majority of
the stock outstanding and entitled to vote for the election of directors.
(e) Action by Stockholders. Notwithstanding the provisions
of Section 228 of the General Corporation Law of the State of Delaware (or
any successor statute), any action required or permitted by such General
Corporation Law to be taken at any annual or special meeting of
stockholders of the Corporation shall be taken only at such an annual or
special meeting of stockholders and may not be taken by written consent
without a meeting. At any annual meeting or special meeting of
stockholders of the Corporation, only such business as has been brought
before such meeting in the manner provided by the by-laws of the
Corporation shall be conducted.
(f) Special Meetings of Stockholders. Special meetings of
stockholders of the Corporation may be called only by the Board of
Directors, the Chairman of the Board of Directors or the Chief Executive
Officer of the Corporation and shall be held at such place or places within
or without the State of Delaware as may be designated by the Board of
Directors or the person calling such meeting and stated in the notice
thereof.
(g) Amendments to this Article TENTH. Notwithstanding
anything in this Restated Certificate of Incorporation to the contrary, the
amendment of this Article TENTH shall require either (i) the affirmative
vote of a two-thirds majority of the stock outstanding and entitled to vote
or (ii) the unanimous approval of the Board of Directors of the Corporation
and a majority of the stock outstanding and entitled to vote.
A-2
<PAGE>
Appendix B
EMISPHERE TECHNOLOGIES, INC.
BY-LAWS
* * * *
SECTION 1.2. Special Meetings. A special meeting of stockholders
may be called at any time by the Board of Directors, the Chairman of the Board
or the Chief Executive Officer. Any such meeting shall be held at such time
and at such place, within or without the State of Delaware, as shall be
determined by the body or person calling such meeting and as shall be stated in
the notice of such meeting. At any special meeting of stockholders, no
business may be transacted other than (i) such business stated in the notice
thereof given pursuant to Section 1.3 hereof or (ii) such business as is
related to the purpose or purposes of such meeting and which is properly
brought before the meeting by or at the direction of the Board.
* * * *
SECTION 1.5. Conduct of the Meeting. (a) At each meeting of
stockholders the Chairman of the Board, or in his absence the President, or in
his absence the person designated in writing by the Chairman of the Board, or
if no person is so designated, then a person designated by the Board of
Directors, shall preside as chairman of the meeting; if no person is so
designated, then the meeting shall choose a chairman by plurality vote. The
Secretary, or in his absence a person designated by the chairman of the
meeting, shall act as secretary of the meeting.
(b) No person shall be eligible for election to the Board of
Directors at an annual or special meeting of stockholders of the Corporation
unless such person has been nominated (i) by or at the direction of the Board,
(ii) by a nominating committee or person appointed by the Board or (iii) by a
stockholder of record of the Corporation who is entitled to vote for the
election of directors and who has given the Corporation timely written notice
(the "Notice of Nomination") in accordance with the provisions hereof. The
Notice of Nomination shall set forth (i) the name and record address of the
stockholder proposing to make the nominations, (ii) the class and number of
shares of capital stock held of record, held beneficially and represented by
proxy held by such person as of the record date for the meeting and as of the
date of the Notice of Nomination, (iii) all information regarding each nominee
proposed by such stockholder that would be required to be set forth in a
definitive proxy statement filed with the Securities and Exchange Commission
pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, or
any successor statute thereto (the "Exchange Act"), and the written consent of
each such nominee to serve if elected and (iv) all other information that would
be required to be filed with the Securities and Exchange Commission if the
person proposing such nominations were a participant in a solicitation subject
to Section 14 of the Exchange Act.
(c) No business shall be conducted at any annual meeting of
Stockholders unless such business is properly brought before the meeting and no
business shall be properly brought before a meeting unless such business is
(i) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board, (ii) otherwise properly brought before the
meeting by or at the direction of the Board or (iii) specified in a timely
written notice (the "Notice of Business") given by or on behalf of a
stockholder of record of the Corporation in accordance with the provisions
hereof. The Notice of Business shall set forth (i) the name and record address
of the stockholder proposing such business, (ii) the class and number of shares
of capital stock held of record, held beneficially and represented by proxy
held by such stockholder as of the record date for the meeting and as of the
date of such Notice of Business, (iii) a brief description of the business such
stockholder desires to bring before the annual meeting and the reasons for
conducting such business at the annual meeting, (iv) any material interest such
stockholder has in such business and (v) all other information that would be
required to be filed with the Securities and Exchange Commission if the person
proposing such Stockholder business were a participant in a solicitation
subject to Section 14 of the Exchange Act.
B-1
<PAGE>
(d) The Notice of Nomination and the Notice of Business shall, in
order to meet the requirement of timeliness, be delivered to the Corporation
in person or, if mailed, received at the principal executive offices of the
Corporation addressed to the attention of the Secretary not less than 30 days
nor more than 60 days prior to the annual meeting or special meeting of
stockholders; provided, however, that, in the event that notice of the meeting
is first given or made to the stockholders of the Corporation less than 40 days
prior to the date of the meeting, the Notice of Nomination or the Notice of
Business, as the case may be, shall, in order to meet the requirement of
timeliness, be received no later than the close of business on the tenth day
following the earlier of (i) the date on which such notice of the meeting is
mailed or (ii) the date public disclosure of the date of the meeting is first
made. For purposes of the foregoing, public disclosure shall be deemed to
include any press release reported by the Dow Jones News Services, Associated
Press or comparable national news service and any document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to
Sections 13, 14 or 15(d) of the Exchange Act.
(e) The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that any proposals by a stockholder for a
nomination to the Board or for business to be conducted at the meeting were not
made in accordance with the foregoing procedures and, if he should so
determine, any such defective nomination shall be discarded and any such
defective proposal for business to be conducted shall be stricken from the
agenda for the meeting.
* * * *
B-2
<PAGE>
EMISPHERE TECHNOLOGIES, INC.
765 Old Saw Mill River Road
Tarrytown, New York 10591
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 27, 1998 at the Annual
Meeting of Stockholders to be held on January 26, 1999 or any adjournments or
postponements thereof.
1. ELECTION OF DIRECTORS
Nominees:
Michael M. Goldberg, M.D. STOCKHOLDERS MAY WITHHOLD AUTHORITY TO VOTE
Jere E. Goyan, Ph.D FOR ANY NOMINEE BY DRAWING A LINE THROUGH
Mark I. Greene, M.D., Ph.D. OR OTHERWISE STRIKING OUT THE NAME OF SUCH
Peter Barton Hutt NOMINEE. ANY PROXY EXECUTED IN SUCH MANNER
Robert J. Levenson AS NOT TO WITHHOLD AUTHORITY TO VOTE FOR
Sam J. Milstein, Ph.D. THE ELECTION OF ANY NOMINEE SHALL BE DEEMED
Howard M. Pack TO GRANT SUCH AUTHORITY.
Joseph R. Robinson, Ph.D.
__ GRANT authority to vote for __ WITHOLD authority to
the eight nominees as a vote for the eight
group nominees as a group
2. Approval and adoption of the amendments to the Company's Restated
Certificate of Incorporation to increase the number of authorized share
__ FOR __ AGAINST __ ABSTAIN
3. Approval and adoption of the amendments to the Company's Restated
Certificate of Incorporation to provide for a staggered Board and related
matters
__ FOR __ AGAINST __ ABSTAIN
4. Approval and adoption of the amendments to the Company's Restated
Certificate of Incorporation to provide for stockholder action only by
meeting and related matters
__ FOR __ AGAINST __ ABSTAIN
5. Approval and adoption of the amendments to the Company's 1991 Stock Option
Plan
__ FOR __ AGAINST __ ABSTAIN
6. Approval and adoption of the amendments to the Company's 1995 Non-
Qualified Stock Option Plan
__ FOR __ AGAINST __ ABSTAIN
7. Ratification of the Board of Directors' selection of
PricewaterhouseCoopers LLP to serve as the Company's independent
accountants for the fiscal year ending July 31, 1999
__ FOR __ AGAINST __ ABSTAIN
8. 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 _______________________, 199_
_________________________________________
(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.
