-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HMMRUw9oWcDf5umYF5GdDngLIZ2hAAz/BDAKUziaU+8n9U17AoO2QKUlCRtEcf4s 9aH/S95y7DfbNbosdtp3EA== 0000950124-02-002751.txt : 20020814 0000950124-02-002751.hdr.sgml : 20020814 20020814152049 ACCESSION NUMBER: 0000950124-02-002751 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ESPERION THERAPEUTICS INC/MI CENTRAL INDEX KEY: 0001066745 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 383419139 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-16033 FILM NUMBER: 02735659 BUSINESS ADDRESS: STREET 1: 3621 S STATE STREET 695KMS PLACE STREET 2: 734-332-0506 CITY: ANN ARBOR STATE: MI ZIP: 48108 MAIL ADDRESS: STREET 1: 3621 STATE STREET STREET 2: 695 KMS PLACE CITY: ANN ARBOR STATE: MI ZIP: 48108 10-Q 1 k71021e10vq.txt FORM 10-Q FOR QUARTER ENDED JUNE 30, 2002 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: JUNE 30, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number: 001-16033 ESPERION THERAPEUTICS, INC. (Exact name of registrant as specified in its charter) DELAWARE 38-3419139 (State of incorporation) (IRS Employer Identification No.) 3621 S. STATE STREET, 695 KMS PLACE ANN ARBOR, MI 48108 (734) 332-0506 (Address of principal executive offices, including zip code, and telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ X] Yes [ ] No The number of outstanding shares of the Registrant's common stock, as of July 31, 2002, was 29,268,045. ESPERION THERAPEUTICS, INC. FORM 10-Q TABLE OF CONTENTS
PAGE ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001................................................................... 3 Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2002 and 2001, and the period from inception to June 30, 2002................... 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001, and the period from inception to June 30, 2002............................ 5 Notes to Condensed Consolidated Financial Statements................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 8 Item 3. Quantitative and Qualitative Disclosures about Market Risk................................. 14 PART II -- OTHER INFORMATION Item 1. Legal Proceedings.......................................................................... 15 Item 2. Changes in Securities and Use of Proceeds.................................................. 15 Item 3. Defaults Upon Senior Securities............................................................ 15 Item 4. Submission of Matters to a Vote of Security Holders........................................ 15 Item 5. Other Information.......................................................................... 15 Item 6. Exhibits and Reports on Form 8-K........................................................... 16 SIGNATURES............................................................................................ 17 INDEX TO EXHIBITS..................................................................................... 18
2 PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ESPERION THERAPEUTICS, INC. AND SUBSIDIARIES (A COMPANY IN THE DEVELOPMENT STAGE) CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, in thousands 2002 2001 - ------------------------------------------------------------------------------------------------------------------- ASSETS: (UNAUDITED) Current assets: Cash and cash equivalents $45,678 $70,286 Short-term investments 11,084 -- Prepaid expenses and other 580 1,000 - ------------------------------------------------------------------------------------------------------------------- Total current assets 57,342 71,286 - ------------------------------------------------------------------------------------------------------------------- Property and equipment, net 3,809 3,313 Goodwill, net 3,108 3,108 Deposits and other assets 46 633 - ------------------------------------------------------------------------------------------------------------------- Total assets $64,305 $78,340 - ------------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Current portion of long-term debt $955 $863 Accounts payable 2,282 2,925 Accrued liabilities 1,861 2,572 - ------------------------------------------------------------------------------------------------------------------- Total current liabilities 5,098 6,360 - ------------------------------------------------------------------------------------------------------------------- Long-term debt, less current portion 7,437 5,482 Stockholders' equity: Preferred stock -- -- Series A, Junior Participating Preferred Stock -- -- Common stock 29 29 Additional paid-in capital 133,258 133,143 Notes receivable (9) (15) Accumulated deficit during the development stage (80,447) (65,320) Deferred stock compensation (1,050) (1,476) Accumulated other comprehensive income (loss) (11) 137 - ------------------------------------------------------------------------------------------------------------------- Total stockholders' equity 51,770 66,498 - ------------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $64,305 $78,340 - -------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated financial statements. 3 ESPERION THERAPEUTICS, INC. AND SUBSIDIARIES (A COMPANY IN THE DEVELOPMENT STAGE) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, INCEPTION TO ---------------------------------------------------------- JUNE 30, in thousands except share and per share data 2002 2001 2002 2001 2002 - -------------------------------------------------------------------------------------------------------------------------------- Operating expenses: Research and development $5,878 $5,594 $11,583 $11,401 $66,040 General and administrative 1,428 1,186 3,073 2,337 14,234 Goodwill amortization -- 210 -- 420 1,089 Purchased in-process research and development -- -- -- -- 4,000 - -------------------------------------------------------------------------------------------------------------------------------- Total operating expenses 7,306 6,990 14,656 14,158 85,363 - -------------------------------------------------------------------------------------------------------------------------------- Loss from operations (7,306) (6,990) (14,656) (14,158) (85,363) - -------------------------------------------------------------------------------------------------------------------------------- Other income (expense): Interest income 284 710 604 1,672 6,731 Interest expense (278) (189) (530) (312) (1,796) Other, net (524) 144 (545) 492 (19) - -------------------------------------------------------------------------------------------------------------------------------- Total other income (expense) (518) 665 (471) 1,852 4,916 - -------------------------------------------------------------------------------------------------------------------------------- Loss before income taxes (7,824) (6,325) (15,127) (12,306) (80,447) Provision for income taxes -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------------- Net loss (7,824) (6,325) (15,127) (12,306) (80,447) Beneficial conversion feature on preferred stock -- -- -- -- (22,870) - -------------------------------------------------------------------------------------------------------------------------------- Net loss attributable to common stockholders ($7,824) ($6,325) ($15,127) ($12,306) ($103,317) - -------------------------------------------------------------------------------------------------------------------------------- Basic and diluted net loss per share ($0.27) ($0.24) ($0.52) ($0.47) - ------------------------------------------------------------------------------------------------------------------ Shares used in computing basic and diluted net loss per share 29,237,360 25,953,137 29,217,352 25,924,846 - ------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated financial statements. 4 ESPERION THERAPEUTICS, INC. AND SUBSIDIARIES (A COMPANY IN THE DEVELOPMENT STAGE) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, INCEPTION TO ----------------------------------- JUNE 30, in thousands 2002 2001 2002 - -------------------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net loss ($15,127) ($12,306) ($80,447) Adjustments to reconcile net loss to net cash used in operating activities: Purchased in-process research and development -- -- 4,000 Depreciation and amortization 731 949 4,253 Stock-based compensation expense 389 508 3,268 Decrease in notes receivable 6 46 117 Loss on sale of property and equipment 101 22 123 Non-cash interest included in long-term debt 177 101 580 Changes in assets and liabilities: Prepaid expenses and other 862 (324) (972) Other assets (17) (3) (96) Accounts payable (647) (2,359) 2,551 Accrued liabilities (739) 1,879 1,861 - -------------------------------------------------------------------------------------------------------------------------------- Net cash used in operating activities (14,264) (11,487) (64,762) - -------------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Purchases of property and equipment (698) (649) (7,046) Acquisition of Talaria Therapeutics, Inc. -- -- (233) Proceeds from sale of property and equipment 2 2 4 Purchases of short-term investments (34,252) -- (34,252) Maturities of short-term investments 23,168 -- 23,168 - -------------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (11,780) (647) (18,359) - -------------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net proceeds from issuance of convertible preferred stock -- -- 42,200 Proceeds from the issuance of common stock 152 105 78,879 Proceeds from long-term debt 1,834 3,140 9,873 Repayments of long-term debt (653) (426) (2,375) - -------------------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 1,333 2,819 128,577 - -------------------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash 103 (192) 222 - -------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (24,608) (9,507) 45,678 Cash and cash equivalents at beginning of period 70,286 70,228 -- - -------------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $45,678 $60,721 $45,678 - -------------------------------------------------------------------------------------------------------------------------------- Supplemental disclosures of cash flow information: Cash paid during the period for interest $343 $203 - ---------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these condensed consolidated financial statements. 5 ESPERION THERAPEUTICS, INC. AND SUBSIDIARIES NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements include the accounts of Esperion Therapeutics, Inc. ("Esperion" or the "Company") and its subsidiaries, and have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The Company believes that all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation, have been included. The information included in this Form 10-Q should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and footnotes thereto included in the Company's Form 10-K for the year ended December 31, 2001. Operating results for the three- and six-month periods ended June 30, 2002 and 2001 are not necessarily indicative of the results for the full year or any future periods. (2) COMPREHENSIVE LOSS Comprehensive loss is the total of net loss and all other non-owner changes in equity. Total comprehensive loss was $7,961,000 and $6,340,000 for the three-month periods ended June 30, 2002 and 2001, respectively, and $15,275,000 and $12,396,000, for the six-month periods ended June 30, 2002 and 2001, respectively. The difference between net loss, as reported in the accompanying condensed consolidated statements of operations, and comprehensive loss is the foreign currency translation adjustment for the respective periods. (3) BASIC AND DILUTED LOSS PER SHARE Basic and diluted net loss per share amounts have been calculated using the weighted average number of shares of common stock outstanding during the respective periods. Options for the purchase of 400,353 and 666,026 shares of common stock for the three-month periods ended June 30, 2002 and 2001, respectively, and 482,927 and 763,064 for the six-month periods ended June 30, 2002 and 2001, respectively, were not included in the calculation of diluted net loss per share as doing so would have been anti-dilutive. (4) COMMITMENTS AND CONTINGENCIES The Company has entered into various license and other agreements with third parties related to some of its products in development. The Company may be obligated to make milestone and license maintenance payments, as defined in the respective license and other agreements relating to the Company's proprietary rights, up to an aggregate remaining amount of $30.2 million. Upon reaching certain milestones, the payments are charged to research and development expenses in the accompanying consolidated statements of operations. There were no milestones achieved or payments made during the first six months of 2002. At the present time, the Company can give no assurances that such future milestones will be achieved. In addition to the milestone and license maintenance payments, the Company may be obligated to make royalty payments on future sales pursuant to formulas in the agreements. 6 (5) ADOPTION OF NEW ACCOUNTING STANDARD The Company adopted Statement of Financial Accounting Standard No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142"), effective January 1, 2002. Under SFAS No. 142, goodwill and certain indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment. In connection with the adoption of SFAS No. 142, the Company has completed the transitional goodwill impairment test, which requires the Company to compare its fair value to the carrying value of its net assets. Based on this analysis, the Company has concluded that no impairment existed at the time of adoption, and accordingly, the Company has not recognized any transitional impairment loss. Goodwill reflects the excess of the purchase price over net assets in the Company's September 2000 acquisition of Talaria Therapeutics, Inc. ("Talaria") and the milestone payments made to date under the related merger agreement. The gross carrying amount of goodwill is approximately $4.2 million, and accumulated amortization is approximately $1.1 million as of June 30, 2002 and December 31, 2001. As required by SFAS No. 142, the results of operations for periods prior to its adoption have not been restated. Had SFAS No. 142 been adopted at January 1, 2001, the pro forma loss for the three- and six-month periods ended June 30, 2001 and for the period from inception to June 30, 2001 would have been as follows:
THREE MONTHS SIX MONTHS ENDED ENDED INCEPTION TO JUNE 30, JUNE 30, JUNE 30, in thousands except share and per share data 2001 2001 2001 - -------------------------------------------------------------------------------------------------------------------------- Net loss: Reported net loss ($6,325) ($12,306) ($52,695) Goodwill amortization 210 420 670 - -------------------------------------------------------------------------------------------------------------------------- Adjusted net loss (6,115) (11,886) (52,025) Beneficial conversion feature upon issuance of preferred stock -- -- (22,870) - -------------------------------------------------------------------------------------------------------------------------- Adjusted net loss attributable to common stockholders ($6,115) ($11,886) ($74,895) - -------------------------------------------------------------------------------------------------------------------------- Basic and diluted net loss per share: Reported basic and diluted net loss per share ($0.24) ($0.47) Goodwill amortization 0.00 0.01 ------------------------------------------------------------------------------------------------------ Adjusted basic and diluted net loss per share ($0.24) ($0.46) - ------------------------------------------------------------------------------------------------------
(6) SERIES A JUNIOR PARTICIPATING PREFERRED STOCK On April 18, 2002, the Company's Board of Directors approved a stockholder rights plan as set forth in the Rights Agreement dated April 18, 2002 between the Company and StockTrans, Inc., as rights agent (the "Rights Agreement"). In connection with the approval of the Rights Agreement, the Board of Directors declared a distribution of one Right for each outstanding share of the Company's common stock, par value $.001 per share, to stockholders of record at the close of business on April 18, 2002. Each Right, if and when exercisable, will entitle the holder to purchase from the Company one one-hundredth (1/100) of a share of the Series A Junior Participating Preferred Shares, par value $.01 per share, or a combination of securities and assets of equivalent value, at a per unit, adjustable Purchase Price of $50.00. The rights will not be exercisable until the earlier of (i) ten business days following the first public announcement that a person or group of persons together with all affiliates and associates has acquired beneficial ownership of 15% or more of the then-outstanding Common Stock, or (ii) ten business days following the commencement of a tender offer or exchange offer, that if consummated, would result in a person or group of persons together with all affiliates and associates beneficially owning 15% or more of the then-outstanding Common Stock. The Rights will expire at the close of business on April 18, 2012, unless earlier redeemed or terminated by the Company. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion provides an analysis of the Company's condensed financial condition and results of operations, and should be read in conjunction with the Company's consolidated financial statements and the notes included in Item 1 of this Form 10-Q. FORWARD-LOOKING INFORMATION IS SUBJECT TO RISK AND UNCERTAINTY The information contained in this report includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are often identified by words such as "hope," "may," "believe," "anticipate," "plan," "expect," "intend," "assume" and similar expressions. The Company cautions readers that the forward-looking statements, which speak only as of the date of this report, reflect management's current expectations, estimations and projections and involve certain factors, such as risks and uncertainties, which may cause our actual results to be far different from those suggested by our forward-looking statements. These factors include, but are not limited to, risks associated with: management's ability to successfully execute its business strategies; the progress and cost of development of our product candidates; the extent and timing of market acceptance of new products developed by the Company or its competitors; dependence on third parties to conduct clinical trials for our product candidates; the extent and timing of regulatory approval, as desired or required, for our product candidates; dependence on licensing arrangements and strategic relationships with third parties; clinical trials; manufacturing; dependence on patents and proprietary rights; procurement, maintenance, enforcement and defense of the Company's patents and proprietary rights; competitive conditions in the industry; business cycles affecting the markets in which the Company's products may be sold; extraordinary events and transactions; the timing and extent of the Company's financing needs; fluctuations in foreign exchange rates; economic conditions generally or in various geographic areas; and other factors. All of the foregoing factors are difficult to forecast. More detailed information about these and other factors is set forth in the Company's Form 10-K for the year ended December 31, 2001 and other filings with the Securities and Exchange Commission. We do not intend to update any of these factors or to publicly announce the results of any revisions to any of these forward-looking statements other than as required under the federal securities law. OVERVIEW Background We have devoted substantially all of our resources since we began our operations in May 1998 to the research and development of pharmaceutical product candidates for cardiovascular and metabolic disease. We are a development stage biopharmaceutical company and have not generated any revenues from any source, including from product sales. We have incurred a cumulative net loss of approximately $80.4 million from inception (May 18, 1998) through June 30, 2002 excluding the beneficial conversion feature of preferred stock. These losses have resulted principally from costs incurred in research and development activities, and general and administrative expenses. We expect to incur significant additional operating losses for at least the next several years and until we generate sufficient revenue to offset expenses. Research and development costs relating to product candidates will continue to increase. Manufacturing, sales and marketing costs will be incurred and increase in preparation for the commercialization of our products. Until we generate positive cash flow, we will rely on financing our operations with our existing cash balance, additional equity or debt offerings or other financings and/or payments from potential strategic relationships with development partners that we may enter into in the future. 8 RESULTS OF OPERATIONS OPERATING EXPENSES
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ---------------------------------------- -------------------------------------- dollars in thousands 2002 2001 % CHANGE 2002 2001 % CHANGE - ----------------------------------------------------------------------------------------------------------------------- Research and development $5,878 $5,594 5.1% $11,583 $11,401 1.6% % of total 80.5% 80.0% 79.0% 80.5% General and administrative $1,428 $1,186 20.4% $3,073 $2,337 31.5% % of total 19.5% 17.0% 21.0% 16.5% Goodwill amortization -- $210 -100.0% -- $420 -100.0% % of total -- 3.0% -- 3.0%
Three Months Ended June 30, 2002 and 2001 Research and Development Expenses. Research and development expenses include both external and internal costs related to the research and development activities on our existing product candidates as well as discovery efforts on potential new product candidates. External costs include costs related to manufacturing, clinical trials, toxicology or pharmacology studies performed by third parties, milestone payments under certain license and other agreements and other related expenses. Internal costs include all payroll and related costs attributable to research and development activities, as well as an allocation of overhead expenses incurred by the Company. Research and development expenses increased to approximately $5.9 million for the three months ended June 30, 2002 compared to approximately $5.6 million for the three months ended June 30, 2001. This 5.1% increase is primarily due to higher clinical trial costs on our ETC-216 and ETC-642 product candidates. During the second quarter of 2002, patients were being actively enrolled in the Company's Phase II trial of ETC-216 and Phase I trial of ETC-642. During the second quarter of 2001, the Company had an ongoing Phase II trial of ETC-588. The magnitude of the Company's operating expenses, particularly research and development expense, are largely dependent upon the number, timing, nature and size of clinical trials. As clinical trials continue to progress this year, the Company anticipates that research and development costs will fluctuate as compared to current quarter levels based on the timing and size of the trials. As our product candidates progress through development, clinical trial costs will continue to increase due to the size and cost of more advanced clinical trials and the Company anticipates that research and development costs will fluctuate depending on the number, timing, nature and size of these trials. General and Administrative Expenses. General and administrative expenses include the cost of salaries, employee benefits, and other costs associated with the Company's finance, accounting, human resources, legal, administrative, business development and executive management functions. General and administrative expenses increased to approximately $1.4 million for the three months ended June 30, 2002 compared to approximately $1.2 million for the three months ended June 30, 2001. This 20.4% increase resulted from a greater number of general and administrative personnel, as well as increased overhead and related costs in support of the Company's anticipated research and development activities as compared to the prior year. Goodwill Amortization. Goodwill amortization reflects the amortization of the amount of the excess of the purchase price over net assets in the Company's September 2000 acquisition of Talaria and the milestone payments made to date under the related merger agreement. Net goodwill included in the Company's Consolidated Financial Statements was $3.1 million at June 30, 2002 and December 31, 2001. Goodwill amortization expense was $0 and $210,000 for the three months ended June 30, 2002 and 2001, respectively. 9 The Company adopted SFAS No. 142, effective January 1, 2002, under which goodwill and certain indefinite lived intangible assets are no longer amortized but are reviewed annually for impairment. In connection with the adoption of SFAS No. 142, the Company has completed the transitional goodwill impairment test, which requires the Company to compare its fair value to the carrying value of its net assets. Based on this analysis, the Company has concluded that no impairment existed at the time of adoption, and, accordingly, the Company has not recognized any transitional impairment loss. Other Income (Expense). Other income (expense) consists of interest income (expense), foreign currency transaction gain (loss), and gain (loss) on the disposal of property and equipment. Interest income decreased to approximately $284,000 for the three months ended June 30, 2002 compared to approximately $710,000 for the three months ended June 30, 2001. The decrease is primarily attributable to lower interest rates in 2002 compared to the same period last year, as well as to our investing our cash more conservatively as compared to 2001. Interest expense for the three months ended June 30, 2002 and 2001 was approximately $278,000 and $189,000, respectively, and represents interest incurred on equipment financing facilities and a special project loan. The increase in interest expense resulted from higher outstanding borrowings in 2002 as compared to the same period in 2001. During the three months ended June 30, 2002, we recorded approximately $413,000 of unrealized foreign currency transaction losses compared to approximately $144,000 of unrealized foreign currency transaction gains for the three months ended June 30, 2001, on transactions that primarily related to manufacturing activities in Europe for clinical trials. These transaction gains/(losses) result from liabilities denominated in foreign currencies primarily the Swedish Kronor and the Euro. As the exchange rate between the US dollar and these currencies fluctuates, the Company records a gain (loss) on these transactions. During the second quarter of 2002, the US dollar has generally weakened against these foreign currencies whereas the opposite was true in the second quarter of 2001. During the three months ended June 30, 2002, we recorded approximately $112,000 of loss on the disposal and/or sale of equipment primarily related to our lab and office facility in Sweden. Net Loss. The net loss was approximately $7.8 million for the three months ended June 30, 2002 compared to approximately $6.3 million for the three months ended June 30, 2001. The increase in net loss resulted from increases in general and administrative and research and development expenses, the increase in unrealized foreign currency transaction losses, and the decrease in interest income, offset in part by the decrease in goodwill amortization. Six Months Ended June 30, 2002 and 2001 Research and Development Expenses. Research and development expenses increased to approximately $11.6 million for the six months ended June 30, 2002 compared to approximately $11.4 million for the six months ended June 30, 2001. This 1.6% increase is primarily due to higher clinical trial costs on our ETC-216 and ETC-642 product candidates. During the first six months of 2002, patients were being actively enrolled in the Company's Phase II trial of ETC-216 and Phase I trial of ETC-642. During the first quarter of 2001, the Company was completing a Phase I trial of ETC-216 and initiated a Phase II trial of ETC-588, which continued during the second quarter. The magnitude of the Company's operating expenses, particularly research and development expense, are largely dependent upon the number, timing, nature and size of clinical trials. As clinical trials progress this year, the Company anticipates that research and development costs will fluctuate as compared to current quarter levels based on the number, timing, nature, and size of the trials. As our product candidates progress through development, clinical trial costs will continue to increase due to the size and cost of more advanced clinical trials and the Company anticipates that research and development costs will fluctuate depending on the number, timing, nature and size of these trials. General and Administrative Expenses. General and administrative expenses increased to approximately $3.1 million for the six months ended June 30, 2002 compared to approximately $2.3 million for the six months ended June 30, 2001. This 31.5% increase resulted from a greater number of general and administrative personnel, as well as increased overhead and related costs in support of the Company's anticipated research and development activities as compared to the prior year. In addition, the Company recorded approximately $148,000 in expenses related to employee severance and benefits resulting from actions taken in March 2002 to curtail or significantly reduce spending on certain pre-clinical research and other activities that lie outside of the Company's primary areas of 10 focus in cardiovascular metabolic disease. The Company has realigned resources toward those primary areas of focus, including clinical development. Goodwill Amortization. Goodwill amortization expense was $0 and $420,000 for the six months ended June 30, 2002 and 2001, respectively. The decrease in goodwill amortization expense resulted from the Company's adoption of SFAS No. 142 effective January 1, 2002 as discussed in Management's Discussion and Analysis of Financial Condition and Results of Operations above. Other Income (Expense). Interest income decreased to approximately $604,000 for the six months ended June 30, 2002 compared to approximately $1.7 million for the six months ended June 30, 2001. The decrease is primarily attributable to lower interest rates in 2002 compared to the same period last year, as well as to our investing our cash more conservatively as compared to 2001. Interest expense for the six months ended June 30, 2002 and 2001 was approximately $530,000 and $312,000, respectively, and represents interest incurred on equipment financing facilities and a special project loan. These transaction gains/(losses) result from liabilities denominated in foreign currencies, primarily the Swedish Kronor and the Euro. As the exchange rate between the US dollar and these currencies fluctuates, the Company records a gain (loss) on these transactions. During the first half of 2002, the US dollar has generally weakened against these foreign currencies whereas the opposite was true in the first half of 2001. The increase in interest expense resulted from higher outstanding borrowings in 2002 as compared to the same period in 2001. During the six months ended June 30, 2002, we recorded approximately $433,000 of unrealized foreign currency transaction losses compared to approximately $520,000 of unrealized foreign currency transaction gains for the six months ended June 30, 2001, on transactions that primarily related to manufacturing activities in Europe for clinical trials. During the six months ended June 30, 2002, we recorded approximately $112,000 of loss on the disposal and/or sale of equipment, primarily related to our lab and office facility in Sweden, compared to $23,000 for the six months ended June 30, 2001. Net Loss. The net loss was approximately $15.1 million for the six months ended June 30, 2002 compared to approximately $12.3 million for the six months ended June 30, 2001. The increase in net loss resulted from increases in general and administrative and research and development expenses, the increase in unrealized foreign currency transaction losses, and the decrease in interest income, offset in part by the decrease in goodwill amortization. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2002 and 2001, the Company had cash, cash equivalents and short-term investments of approximately $56.8 million and $60.7 million, respectively. Our investment policy emphasizes liquidity and preservation of principal over other portfolio considerations. We select investments that maximize interest income to the extent possible by investing cash in short-term, investment-grade, interest-bearing securities. During the second quarter of 2002, the Company invested its cash in more conservative securities to further protect the principal as compared to the previous period. This was primarily achieved by more heavily weighting its investments in government securities, such as treasury bonds, treasury notes and notes of other government agencies rather than in securities issued by corporations, including commercial paper. We believe that our current cash position, along with available borrowings under our credit facilities will be sufficient to fund our operations as currently planned, capital expenditures and debt service until at least the end of 2003. During the six months ended June 30, 2002 and 2001, net cash used in operating activities was approximately $14.3 million and $11.5 million, respectively. This cash was used to fund our net losses for the periods, adjusted for non-cash expenses and changes in operating assets and liabilities. Net cash used in investing activities for the six months ended June 30, 2002 and 2001, respectively, was approximately $11.9 million and $647,000, respectively. The net cash used in investing activities for the six months ended June 30, 2002 resulted primarily from the purchases of short-term investments and capital expenditures offset, in part, by the maturities of short-term investments. The net cash used in investing activities for the six months ended 11 June 30, 2001 resulted primarily from the acquisition of laboratory equipment, furniture and fixtures and other office equipment. Net cash proceeds from financing activities were $1.3 million and $2.8 million for the six months ended June 30, 2002 and 2001, respectively. The net cash proceeds from financing activities for the six months ended June 30, 2002 resulted primarily from $1.8 million of additional borrowings on a special project loan and equipment term loans, and $152,000 received from the issuance of common stock to employees under the Company's equity compensation plans. The proceeds were partially offset by $653,000 of cash used to repay borrowings under equipment loans. The net cash proceeds from financing activities for the six months ended June 30, 2001 resulted primarily from $3.1 million of additional borrowings on a special project loan, and $105,000 raised from the issuance of common stock to employees under the Company's equity compensation plans. The proceeds were partially offset by $426,000 of cash used to repay borrowings under an equipment loan. We continually evaluate opportunities to sell additional equity, obtain credit from lenders, enter into strategic relationships, or further strengthen our financial position in other ways. The sale of additional equity, whether publicly or privately, could result in dilution to our stockholders. In addition, from time to time, we may consider the acquisition of or investment in complementary businesses, products or technologies that might affect our liquidity requirements or position or cause us to issue additional securities. There can be no assurance that financing will be available to us in the amounts or on terms acceptable to us, if at all. As of June 30, 2002, the Company had the following credit facilities and outstanding borrowings: - A $2.0 million credit facility with a U.S. bank that may be used to finance purchases of equipment. Borrowings under this facility bear interest at the bank's prime rate (4.5% at June 30, 2002). Borrowings outstanding under this facility as of June 30, 2002 amounted to approximately $1.0 million. The facility expires in December 2002. - An additional credit facility with a U.S. lending institution to finance purchases of equipment. This facility allowed for borrowings of up to $2.5 million. Approximately $1.5 million was outstanding under this facility at a weighted average interest rate of 12% as of June 30, 2002 and no additional borrowings are allowed. - A credit facility with a Swedish entity totaling 50 million Swedish kronor ($5.4 million as of June 30, 2002). The proceeds from this facility may only be used to finance the development of our ETC-216 product candidate. If a related product is not developed or does not succeed in the market, our obligation to repay the loan may be forgiven. Borrowings under the loan facility bear interest at 17.0% of which 9.5% is payable quarterly. The remaining 7.5% of interest together with principal is payable in five equal annual installments starting in December 2004. The outstanding borrowings, including accrued interest of 5.5 million Swedish kronor ($547,000), amounted to 50.5 million Swedish kronor ($5.5 million) as of June 30, 2002. - A memorandum of understanding with an economic development agency in Michigan whereby we can borrow up to $500,000 for equipment purchases at an interest rate of 4%. As of June 30, 2002, outstanding borrowings under this arrangement totaled $382,000. We anticipate that our capital expenditures for the next twelve months will be approximately $1.0 million. We expect that these expenditures will primarily include lab and computer equipment. We lease our corporate and research and development facilities under operating leases expiring at various times through December 2003. Under certain of these arrangements, including the lease for our headquarters facility, we may extend these leases for one or more additional periods. Total minimum future payments under these leases for the next twelve months are approximately $632,000 as of June 30, 2002. We have entered into license and other agreements with certain third parties, which require us to make payments upon achievement of the milestones set forth in the agreements. The remaining payments that we could be obligated to make under those agreements could over time amount to $30.2 million. If we sell products using technology 12 licensed under the agreements, we would be obligated to make royalty payments to the licensor pursuant to formulas in the agreements. There can be no assurance that we will meet any or all of the milestones in, or sell any products requiring royalty payments under, our license agreements. We expect our operating expenses in 2002 to fluctuate from quarter to quarter. Our capital expenditure requirements will depend on numerous factors, including the progress of our research and development programs, the time required to file and process regulatory approval applications, the development of our commercial manufacturing capabilities, the ability to consummate additional licensing and/or partnering arrangements, and the demand for our product candidates, if and when approved by the FDA or other regulatory authorities. INCOME TAXES As of June 30, 2002, we had operating loss carryforwards of approximately $52.4 million. These carryforwards do not include tax credits for start up costs of approximately $17.5 million, which may be utilized upon the realization of profits. These net operating loss carryforwards begin to expire in 2013. Additionally, utilization of net operating loss carryforwards may be limited under Section 382 of the Internal Revenue Code. These and other deferred income tax assets are fully reserved by a valuation allowance due to historical losses. EMPLOYEES As of June 30, 2002, we had 68 full-time employees. Of these employees, 44 were engaged in research, preclinical and clinical development, regulatory affairs, and/or manufacturing activities and 24 were engaged in general and administrative activities. CRITICAL ACCOUNTING POLICIES Management's discussion and analysis of the Company's financial condition and results of operations are based upon the Company's Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of any contingent assets and liabilities as of the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Management regularly reviews its estimates and assumptions, which are based on historical experience and on various other factors and judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions. Management believes that the following critical accounting policy is affected by significant judgments and estimates used in the preparation of its consolidated financial statements: The Company records estimated expenses under the contracts with third parties on a percentage of completion basis. These contracts cover ongoing clinical trials, manufacturing and supply agreements, and third party toxicology or pharmacology studies. The expenses are recorded as the work under the contract is completed and the Company may record an accrued liability or prepaid expense on its Consolidated Balance Sheet, depending on the payment terms under each contract. As of June 30, 2002, the Company had total potential obligations of approximately $11.4 million under contracts accounted for on the percentage of completion basis. Management estimates that approximately $8.4 million of the contract obligations had been incurred through June 30, 2002 and approximately $801,000 is included in accrued liabilities in the accompanying balance sheet, for expenses under contracts based on the percentage of completion basis. 13 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our exposure to market risk for changes in interest rates relates primarily to the increase or decrease in the amount of interest income that we can earn on our investment portfolio and on the increase or decrease in the amount of interest expense that we must pay with respect to our various outstanding debt instruments. Under our current policies, we do not use interest rate derivative instruments to manage our exposure to interest rate changes. We ensure the safety and preservation of our invested funds by limiting default risks, market risk and reinvestment risk. We mitigate default risk by investing in investment grade securities. A hypothetical 100 basis point adverse move in interest rates along the entire interest rate yield curve would not materially affect the fair value of our interest sensitive financial instruments at June 30, 2002. Declines in interest rates over time will, however, reduce our interest income such reduction is reported on page 11 in Management's Discussion and Analysis, under the subcaption "Six Months Ended June 30, 2002 and 2001, Other Income (Expense)" while increases in interest rates over time will increase our interest expense. 14 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Stockholders of the Company was held on April 18, 2002. At the Annual Meeting, the stockholders of the Company (1) approved the re-election of Ronald M. Cresswell, Ph.D. and Eileen M. More as Directors of the Company, each to hold office until the Annual Meeting of Stockholders to be held in 2005 and until their respective successors are elected and qualified; and (2) approved the amendment to the Company's 2000 Equity Compensation Plan. The votes were as follows:
WITHHELD BROKER FOR OR AGAINST ABSTAINED NON-VOTES - ------------------------------------------------------------------------------------------------------ (1) Election of Directors: Ronald M. Cresswell, Ph.D. 20,180,300 -- 1,716,264 -- Eileen M. More 20,190,900 -- 1,705,664 -- (2) Amendment to 2000 Equity Compensation Plan: 17,284,443 4,589,873 22,247 --
ITEM 5. OTHER INFORMATION Not applicable. 15 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS
NUMBER EXHIBIT - ---------------------------------------------------------------------------------------------------------------- 3.5 Certificate of Designations, Preferences, Related Rights, Qualifications, Limitations and Restrictions of Series A Junior Participating Preferred Shares of Esperion Therapeutics, Inc. Incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed April 23, 2002. 4.2 Rights Agreement between Esperion Therapeutics, Inc. and StockTrans, Inc., as Rights Agent, dated as of April 18, 2002. Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed April 23, 2002. 10.42* Esperion Therapeutics, Inc. 1998 Stock Option Plan (Amended, effective April 18, 2002) 10.43* Esperion Therapeutics, Inc. 2000 Equity Compensation Plan (Amended and Restated, effective April 18, 2002). 10.44 Employment arrangement between William F. Brinkerhoff and Esperion Therapeutics, Inc. dated April 19, 2002. 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. 99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. * Compensation plan or arrangement in which directors and/or executive officers are eligible to participate
(b) REPORTS ON FORM 8-K A report on Form 8-K was filed on April 23, 2002 under Item 4, Changes in Registrant's Certifying Accountant, and Item 5, Other Events. 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: August 14, 2002 ESPERION THERAPEUTICS, INC. (Registrant) By: /s/ Roger S. Newton ------------------------------------- Roger S. Newton President and Chief Executive Officer (Principal Executive Officer) By: /s/ Timothy M. Mayleben ------------------------------------- Timothy M. Mayleben Chief Operating Officer and Chief Financial Officer (Principal Financial Officer) 17 INDEX TO EXHIBITS
NUMBER EXHIBIT - --------------- -------------------------------------------------------------------------------------------------------------- 3.5 Certificate of Designations, Preferences, Related Rights, Qualifications, Limitations and Restrictions of Series A Junior Participating Preferred Shares of Esperion Therapeutics, Inc. Incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed April 23, 2002. 4.2 Rights Agreement between Esperion Therapeutics, Inc. and StockTrans, Inc., as Rights Agent, dated as of April 18, 2002. Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed April 23, 2002. 10.42* Esperion Therapeutics, Inc. 1998 Stock Option Plan (Amended, effective April 18, 2002) 10.43* Esperion Therapeutics, Inc. 2000 Equity Compensation Plan (Amended and Restated, effective April 18, 2002). 10.44 Employment arrangement between William F. Brinkerhoff and Esperion Therapeutics, Inc. dated April 19, 2002. 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. 99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. * Compensation plan or arrangement in which directors and/or executive officers are eligible to participate
18 EX-10.42 3 k71021exv10w42.txt 1998 STOCK OPTION PLAN EXHIBIT 10.42 ESPERION THERAPEUTICS, INC. 1998 STOCK OPTION PLAN (Amended, Effective April 18, 2002) 1. PURPOSE The purpose of the Esperion Therapeutics, Inc. 1998 Stock Option Plan (the "Plan') is to further the growth and success of Esperion Therapeutics, Inc. (the "Company") by attracting and retaining the services of directors, officers, selected employees, consultants and advisors by enabling them to acquire shares of the Company's Common Stock, par value $.001 per share (the "Common Stock"). Except where the context otherwise requires, the term "Company" shall include the parent corporation and all subsidiary corporations, if any, of the Company as defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended (the "Code"). 2. TYPES OF OPTIONS. Options granted under the Plan may be either "incentive stock options" ("ISOs"), intended to qualify as such under the provisions of Section 422 of the Code, or "non-qualified stock options" ("NQOs") not intended to qualify as ISOs under Section 422 of the Code. 3. ADMINISTRATION. (a) Board of Directors/Committee. Options under the Plan shall be granted, and the Plan shall be initially administered, by the Board of Directors of the Company (the "Board") and, upon designation by the Board, by a committee (the "Committee") consisting of two or more members of the Board who are "outside directors" as defined under section 162(m) of the Code and "non-employee directors" as defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The members of the Committee shall be appointed, and may be removed at any time with or without cause, by resolution adopted by the Board. Any vacancy on the Committee, whether due to action of the Board or any other cause, shall be filled by resolution adopted by the Board. The Committee may delegate authority to one or more subcommittees as it deems appropriate, which must consist of two or more persons who are both "outside directors" as defined under section 162(m) of the Code and "non-employee directors" as defined under Rule 16b-3 under the Exchange Act. To the extent that a subcommittee administers the Plan, references in the Plan to "Committee" shall be deemed to refer to the subcommittee. (b) Procedures. The Committee shall select from among its members a Chairman and may adopt such rules and regulations as it shall deem appropriate concerning the holding of meetings and the administration of the Plan. A majority of the entire Committee shall constitute a quorum and the action of a majority of the members of the Committee present at a meeting at which a quorum is present, or an action approved in writing by all of the members of the Committee, shall be the act of the Committee. (c) Interpretation. The Committee shall have full power and authority to interpret the provisions of the Plan and any Option Agreement (as defined in Section 6(c) below), to prescribe, amend and rescind rules and regulations relating to the Plan and to resolve all questions arising under the Plan. All decisions of the Committee shall be conclusive and binding on all participants in the Plan. (d) Delegation of Authority Notwithstanding the foregoing, the Committee may delegate to either, or both, of the Chief Executive Officer and the Chief Financial Officer of the Company the authority to make grants under the Plan to employees, consultants and advisors of the Company and its subsidiaries who are, at the time of the grant, not subject to the restrictions of section 16(b) of the Exchange Act and not expected to be subject to the limitations of section 162(m) of the Code. The grant of authority under this Subsection 3(d) shall be subject to such conditions and limitations as may be determined by the Committee. 4. SHARES OF STOCK SUBJECT TO THE PLAN. (a) Number of Shares. Subject to the provisions of Section 11 below (relating to adjustments upon changes in capital structure), the number of shares of Common Stock available for sale upon exercise of options granted under the Plan shall not exceed 1,784,575 shares. If and to the extent that options granted under the Plan terminate, expire or are cancelled without having been fully exercised, new options may be granted under the Plan with respect to the shares of Common Stock covered by the unexercised portion of such terminated, expired or cancelled options, all of which may be granted as ISOs. (b) Character of Shares. The shares of Common Stock issuable upon exercise of an option granted under the Plan may be (i) authorized but unissued shares of Common Stock, (ii) shares of Common Stock held in the Company's treasury, or (iii) a combination of both. (c) Reservation of Shares. The number of shares of Common Stock reserved by the Company for issuance under the Plan shall at no time be less than the maximum number of shares which may be purchased at any time pursuant to outstanding options. 5. ELIGIBILITY Options may be granted under the Plan only to Persons who are directors, officers, employees or advisors to the Company at the time of grant. Options granted to officers and employees of the Company shall be, in the discretion of the Committee, either ISOs or NSOs, and options granted to directors who are not employees of the Company and to consultants and advisors shall be NSOs. Notwithstanding anything herein to the contrary, ISOs 2 shall only be granted to those persons who qualify as an employee under Section 3401(c) of the Code. 6. GRANT OF OPTIONS (a) General. Options may be granted under the Plan at any time and from time to time on or prior to the Expiration Date (as defined in Section 15 below). Subject to the provisions of the Plan, the Committee may, in its discretion, determine. (i) the persons (from among the class of persons eligible under Section 5 above to receive options under the Plan) to whom options shall be granted (the "Optionees"); (ii) the time or times at which options shall be granted; (iii) the number of shares subject to each option; (iv) the Option Price (as defined in Section 7 below) of the shares subject to each option, which price, in the case of ISOs, shall be not less than the minimum specified in Section 7 below; (v) the time or times when each option shall become exercisable and the duration of the exercise period; and (vi) any restrictions on the sale of, and any repurchase rights with respect to, shares purchased upon exercise of an option, as contemplated by Section 13 below. (b) Date of Grant. The date of grant of an option under the Plan shall be the date on which the Committee approves the grant. (c) Option Agreements. Each option granted under the Plan shall be designated as an ISO or an NSO and shall be subject to the terms and conditions applicable to ISOs or NSOs (as the case may be) set forth in the Plan, and each option shall be evidenced by a written agreement (an "Option Agreement"), containing such terms and conditions, not inconsistent with the Plan, as the Committee may, in its discretion, determine. Each Option Agreement shall be executed by the Company and the Optionee. Option Agreements may differ among Optionees. (d) No Evidence of Employment. Neither the grant of an option nor any provision of the Plan or any Option Agreement shall confer upon any Optionee any right with respect to the continuation of his or her employment by, or his or her consulting or advisory relationship to, the Company or interfere in any way with the right of the Company at any time to terminate such employment or relationship 3 or, in the case of employees (including officers), to increase or decrease the compensation of the Optionee from the rate in existence at the time of the grant of an option. 7. OPTION PRICE. The price (the "Option Price") at which each share of Common Stock subject to an option granted under the Plan may be purchased shall be determined by the Committee at the time the option is granted; provided, however, that in the case of an ISO, such Option Price shall in no event be less than one hundred percent (100%) of the fair market value of such share of Common Stock at the time of grant, as determined by the Committee and, in the case of a ten percent (10%) owner (see Section 8(c) below, such Option Price shall be at least one hundred ten percent (110%) of the fair market value of the stock subject to such options. 8. EXERCISE OF OPTIONS. (a) General. Each option shall be exercisable, in whole or in part, at such time or times, or within such period or periods, or upon the occurrence of such event or events, as shall be determined by the Committee and set forth in the Option Agreement evidencing such option. If an option is not at the time of grant immediately exercisable full, the Committee may (i) in the Option Agreement evidencing such option provide for the acceleration of the exercise date or dates of such option, in whole or in part, upon the occurrence of specified events, or (ii) at any time prior to the complete expiration of an option, accelerate, in whole or in part, the exercise date or dates of such option. (b) Restrictions on Exercise. (i) No option by its terms shall be exercisable after the expiration of ten years from the date such option is granted. (ii) No option may be exercised at a time when the exercise thereof or the issuance or transfer of shares upon such exercise would, in the opinion of the Committee, constitute a violation of any law, federal, state, local or foreign, or any regulations thereunder, or the requirements of the New York Stock Exchange or any other national securities exchange or market. (iii) The Committee, in its discretion, may require an Optionee to (A) represent in writing that the shares of Common Stock to be received upon exercise of an option are being acquired for his or her own account for investment and not with a view to distribution thereof, nor with any present intention of distributing the same, and (B) make such other representations and warranties as are deemed necessary by counsel to the Company. Stock certificates representing shares of Common Stock not registered under the Securities Act of 1933, as amended (the "1933 Act"), acquired upon the exercise of options shall bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW. THESE SECURITIES 4 MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR ANY EXEMPTION THEREFROM UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW." (iv) No option may be exercised for any fractional share. (c) Limitation of Exercise of ISOs. To the extent that the aggregate fair market value (as determined by the Committee as of the time the options with respect to such stock were granted) of stock with respect to which options intended to be ISOs are exercisable for the first time by an Optionee during any calendar year (under all plans of the Company) exceeds $100,000, such options shall be treated as NSOs. An ISO may not be granted to an individual who at the time an option is granted, owns stock that has more than ten percent (10%) of the voting power of all classes of stock of the Company ("ten percent (10%) owner"). An individual is considered as owning stock, for purposes of the previous sentence, owned directly or indirectly by or for his brothers, sisters, spouse, ancestors and lineal descendants. An individual is also deemed to own stock held by a foreign or domestic corporation, partnership, trust or estate for which the individual is a shareholder, partner or beneficiary proportionately to his interest in the corporation, partnership, trust or estate as a shareholder, partner or beneficiary. Notwithstanding the foregoing prohibition on a "ten percent (10%) owner," an ISO may be granted to a "ten percent (10%) owner" if (i) the ISO so granted is not exercisable after the expiration of five (5) years from the date of grant and (ii) the Option Price of such ISO is at least one hundred ten percent (110%) of the fair market value of the stock subject to the ISO (as provided in Section 7 hereof). 9. PROCEDURE FOR EXERCISE. (a) Payment. At the time an option is granted, the Committee shall, in its discretion, specify one or more of the following forms of payment which may be used by an Optionee upon exercise of his or her option: (i) cash or personal or certified check payable to the Company in an amount equal to the aggregate Option Price of the shares with respect to which the option is being exercised; (ii) stock certificates (in negotiable form) representing shares of Common Stock having a fair market value (as determined by the Committee, which determination, if the Common Stock is publicly traded, shall be based upon market prices) equal to the aggregate Option Price of the shares with respect to which the option is being exercised; provided, however, that this method of payment may only be implemented if the Optionee has owned such shares of Common Stock, beneficially and of record, for a period of at least six (6) consecutive months immediately prior to exercise of his or her Option; (iii) cash proceeds equal to the aggregate Option Price of the shares with respect to which the option is being exercised derived from the simultaneous exercise of the option and sale of the underlying shares; or 5 (iv) a combination of any of such methods, (b) Notice. An Optionee (or other person, as provided in Section 13(a) below) may exercise an option, in whole or in part as provided in the Option Agreement evidencing such option, by delivering a written notice (the "Notice") to the Secretary of the Company. The Notice shall: (i) state that the Optionee elects to exercise the option and whether the option being exercised is an ISO or an NSO; (ii) state the number of shares with respect to which the option is being exercised (the "Optioned Shares"); (iii) state the method of payment for the Optioned Shares (which method must be available to the Optionee under the terms of his or her Option Agreement) and, if applicable, that cash, a check and stock certificates (as the case may be) are enclosed representing all or part of the aggregate Option Price of such Optioned Shares; (iv) state the date upon which the Optionee desires to consummate the purchase of the Optioned Shares (which date must be prior to termination of such option under Section 10 below); (v) include any representation of the Optionee required pursuant to Section 8(b)(iii) above, (vi) in the event the option is exercised pursuant to Section 13(a) below by any person other than the Optionee, include evidence to the satisfaction of the Committee of the right of such person to exercise the option; and (vii) include such further provisions consistent with the Plan as the Committee may from time to time require. Within 30 days from the exercise date of any option, the Optionee shall deliver to the Company a copy of any election filed by the Optionee with the Internal Revenue Service under Section 83(b) of the Code. (c) Issuance of Certificates. The Company shall issue a stock certificate in the name of the Optionee (or such other person exercising the Option in accordance with the provisions of Section 13(a) below) for the Optioned Shares as soon as practicable after receipt of the notice and payment of the aggregate Option Price for such shares. All such certificates, if so provided in the Option Agreement of such Optionee, shall bear a legend in substantially the form set forth in Section 13(b) below, and all certificates representing shares of Common Stock not registered under the 1933 Act shall bear the legend set forth in Section 8(b)(iii) above. Neither the Optionee nor any person exercising an option in accordance with the provisions of Section 13(a) below shall have any privileges as a 6 stockholder of the Company with respect to any shares of stock subject to an option until such shares shall be registered on the books of the Company in the name of such person. 10. TERMINATION OF EMPLOYMENT; DISABILITY AND DEATH. (a) General. Subject to the provisions of Section 8(b) above, the Committee may determine the period or periods of time during which an Optionee may exercise an option following (i) the termination by the Company, with or without cause, of the Optionee's employment or other relationship with the Company, (ii) the termination by the Optionee of any such relationship with the Company, or (iii) the death or permanent and total disability of the Optionee (within the meaning of Section 22(e)(3) of the Code). Such period or periods shall be set forth in the Option Agreement evidencing each such option. (b) Incentive Stock Options. No ISO may be exercised unless, at the time of exercise, the Optionee is, and has continuously since the date of the grant of such ISO been, employed by the Company, and, subject to the provisions of Section 8(b) above, the right to exercise the unexercised portion of any ISO shall forthwith terminate upon the first to occur of the following: (i) the expiration of not more than three months from the date of termination of the Optionee's employment (other than a termination described in subparagraph (ii) or (iii) below); provided, however, that if the Optionee shall die or become permanently and totally disabled (within the meaning of Section 22(e)(3) of the Code) during such three-month period, the time of termination of the unexercised portion of such option shall be determined in accordance with subparagraph (ii) below; (ii) the expiration of not more than 12 months from the date of termination of the Optionee's employment if such termination is due to such Optionee's death or permanent and total disability (within the meaning of Section 22(e)(3) of the Code); (iii) immediately upon the termination by the Company of the Optionee's employment if such termination is for cause, as determined by the Committee, or is otherwise attributable to a breach, as determined by the Committee, by the Optionee of an employment agreement with the Company; or (iv) the expiration of such period of time or the occurrence of such event as the Committee in its discretion may provide in the Option Agreement evidencing such option. 11. ANTIDULUTION. In the event the Common Stock is changed by reason of a stock split, reverse stock split, stock dividend or recapitalization (exclusive of any future public or private sales of Common Stock), or is converted into or exchanged for other securities as a result of a merger, consolidation or reorganization in which the Company is the surviving corporation, appropriate adjustments shall be made, as determined by the Committee, in the terms of the outstanding 7 options, or additional options may be granted under the Plan as shall be equitable and appropriate, in order to make such outstanding options, as nearly as may be practicable, equivalent to such options immediately prior to such change. A corresponding adjustment changing the number and class of shares allocated to, and the Option Price of, each option or portion thereof outstanding at the time shall likewise be made. In the case of ISOs, no such adjustment shall be made which would constitute a modification, extension or renewal of such ISOs within the meaning of Section 424 of the Code. 12. CORPORATE TRANSACTIONS. In the event the Common Stock is exchanged for securities, cash or other property of any other corporation or entity as the result of a reorganization, merger or consolidation in which the Company is not the surviving corporation, the dissolution or liquidation of the Company, or the sale of all or substantially all the assets of the Company, the Committee or the Board of Directors of the Company may, in its discretion, as to outstanding options (a) accelerate the exercise date or dates of such options pursuant to Section 8(a) above, (b) upon written notice to the holders thereof, provided the options have been accelerated pursuant to clause (a) above, terminate all such options prior to the consummation of the transaction unless exercised within a prescribed period, (c) provide for payment of an amount equal to the excess of the fair market value, as determined by the Committee or such board, over the Option Price of such shares as of the date of the transaction, in exchange for the surrender of the right to exercise such options, or (d) provide for the assumption of such options, or the substitution therefor of new options, by the successor corporation or entity; provided, however, that with respect to ISOs the requirements of Section 424 of the Code shall be met. 13. RESTRICTIONS ON OPTIONS AND OPTIONED SHARES. (a) Nonassignability of Option Rights. No option granted under this Plan shall be assignable or otherwise transferable by the Optionee otherwise than by will or the laws of descent and distribution, and shall be exercisable during the lifetime of the Optionee only by him or her. In the event of the death of an Optionee, any option held by such Optionee may thereafter be exercised by his or her representatives, executors or administrators to the full extent to which such option was exercisable by the Optionee at the time of his or her death. 8 (b) Right of First Refusal; Right of First Offer. The Committee, in its discretion, may provide in any Option Agreement that the Company or its designee shall have a right of first refusal or right of first offer on the sale or transfer of any shares of Common Stock issued upon exercise of the option subject to such Option Agreement, in the manner provided therein, such right of first refusal or right of first offer to expire upon the consummation of the initial public offering of the Common Stock pursuant to the 1933 Act. Any certificate representing shares of Common Stock issued pursuant to an Option Agreement containing a right of first refusal or right of first offer shall bear a legend in substantially the following form: "THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE TERMS AND CONDITIONS OF A STOCK OPTION AGREEMENT DATED AS OF ______________ AMONG ESPERION THERAPEUTICS, INC., AND THE HOLDER OF RECORD OF THIS CERTIFICATE, AND NO SALE, ASSIGNMENT, TRANSFER, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF SUCH SECURITIES SHALL BE VALID OR EFFECTIVE EXCEPT IN ACCORDANCE WITH SUCH AGREEMENT AND UNTIL SUCH TERMS AND CONDITIONS HAVE BEEN FULFILLED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF ESPERION THERAPEUTICS, INC." 14. EFFECTIVE DATE. The Plan initially became effective on June 30, 1998. The Plan was most recently amended on April 18, 2002. 15. EXPIRATION AND TERMINATION. Except with respect to options then outstanding, the Plan shall expire on the earliest to occur of (a) the tenth anniversary of the date on which the Plan was adopted by the Board, (b) the tenth anniversary of the date on which the Plan is approved by the stockholders of the Company, or (c) the date as of which the Board, in its sole discretion, determines to terminate the Plan (the "Expiration Date"). Any options outstanding as of the Expiration Date shall remain in effect until they have been exercised or have terminated or expired by their respective terms. 16. AMENDMENT. The Board may at any time terminate, modify or amend the Plan; provided, however, that if the approval of the stockholders of the Company shall be required for any modification or amendment under Section 422 of the Code, with respect to ISOs, or under Rule 16b-3 under the Securities Exchange Act of 1934, as amended with respect to shares of Common Stock registered under such Act, such approval shall be obtained before such modification or amendment shall become effective. No termination, modification or amendment of the Plan may, 9 without the consent of an Optionee, adversely affect his or her rights under an option previously granted to such Optionee. 17. DISQUALIFYING DISPOSITIONS. If stock acquired upon exercise of an ISO granted under the Plan is disposed of by the Optionee within two years from the date of grant of the ISO or within one year after the transfer of the Optioned Shares to such Optionee (a "disqualifying disposition"), such Optionee shall, immediately prior to such disqualifying disposition, notify the Company in writing of the date and terms of such disposition and provide such other information regarding the disposition as the Company may reasonably require. 18. TAXES. The Company may deduct from any cash payments due to an Optionee upon exercise of an option any federal, state or local withholding taxes and employment taxes relating thereto or, as a condition of delivery of any Optioned Shares due upon such exercise, require the Optionee to remit, or, in appropriate cases, agree to remit when due, an amount sufficient to satisfy such taxes; provided, however, that, subject to the prior approval of the Committee, the Optionee may, in whole or in part, satisfy such obligations (a) by permitting the Company to withhold some or all of such Optioned Shares, or (b) by delivering shares of Common Stock already owned by him or her. Shares so withheld or delivered shall have a fair market value, as determined by the Committee, equal to such obligations as of the date or dates the amounts of such taxes are required to be determined. At the time of any disqualifying disposition, the Optionee shall remit to the Company in cash the amount of any such taxes relating to such disposition. 19. CAPTIONS. The use of captions in the Plan or any Option Agreement is for the convenience of reference only and shall not affect the meaning of any provision of the Plan or such Option Agreement. 20. GOVERNING LAW. The validity and construction of the Plan and the Option Agreements shall be construed in accordance with and governed by the law of the State of Delaware. 10 EX-10.43 4 k71021exv10w43.txt 2000 EQUITY COMPENSATION PLAN EXHIBIT 10.43 ESPERION THERAPEUTICS, INC. 2000 Equity Compensation Plan (Amended and Restated, Effective April 18, 2002) The purpose of the Esperion Therapeutics, Inc. 2000 Equity Compensation Plan (the Plan"), as amended and restated, effective April 18, 2002, is to provide (i) designated employees of Esperion Therapeutics, Inc. (the "Company") and its subsidiaries, (ii) certain consultants and advisors who perform services for the Company or its subsidiaries and (iii) non-employee members of the Board of Directors of the Company (the "Board") with the opportunity to receive grants of incentive stock options, nonqualified stock options, stock awards and performance units. The Company believes that the Plan will encourage the participants to contribute materially to the growth of the Company, thereby benefiting the Company's stockholders, and will align the economic interests of the participants with those of the stockholders. 1. ADMINISTRATION (a) Committee. The Plan shall be administered by a committee appointed by the Board (the "Committee") consisting of two or more persons who are "outside directors" as defined under section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and related Treasury regulations and "non-employee directors" as defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). However, the Board may ratify or approve any grants as it deems appropriate, and the Board shall approve and administer all grants made to non-employee directors. The Committee may delegate authority to one or more subcommittees as it deems appropriate, which must consist of two or more persons who are both "outside directors" as defined under section 162(m) of the Code and "non-employee directors" as defined under Rule 16b-3 under the Exchange Act. To the extent that a subcommittee administers the Plan, references in the Plan to the "Committee" shall be deemed to refer to the subcommittee. (b) Committee Authority. The Committee shall have the sole authority to (i) determine the individuals to whom grants shall be made under the Plan, (ii) determine the type, size and terms of the grants to be made to each such individual, (iii) determine the time when the grants will be made and the duration of any applicable exercise or restriction period, including the criteria for exercisability and the acceleration of exercisability, (iv) amend the terms of any previously issued grant, and (v) deal with any other matters arising under the Plan. (c) Committee Determinations. The Committee shall have full power and authority to administer and interpret the Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing the Plan and for the conduct of its business as it deems necessary or advisable, in its sole discretion. The Committee's interpretations of the Plan and all determinations made by the Committee pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interest in the Plan or in any awards granted hereunder. All powers of the Committee shall be executed in its sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the objectives of the Plan and need not be uniform as to similarly situated individuals. (d) Delegation of Authority. Notwithstanding the foregoing, the Committee may delegate to either, or both, of the Chief Executive Officer and the Chief Financial Officer of the Company the authority to make grants under the Plan to employees, consultants and advisors of the Company and its subsidiaries who are, at the time of grant, not subject to the restrictions of section 16(b) of the Exchange Act and not expected to be subject to the limitations of section 162(m) of the Code. The grant of authority under this Subsection 1(d) shall be subject to such conditions and limitations as may be determined by the Committee. 1 2. GRANTS Awards under the Plan may consist of grants of incentive stock options as described in Section 5 ("Incentive Stock Options"), nonqualified stock options as described in Section 5 ("Nonqualified Stock Options") (Incentive Stock Options and Nonqualified Stock Options are collectively referred to as "Options"), stock awards as described in Section 6 ("Stock Awards"), and performance units as described in Section 7 ("Performance Units") (hereinafter collectively referred to as "Grants"). All Grants shall be subject to the terms and conditions set forth herein and to such other terms and conditions consistent with this Plan as the Committee deems appropriate and as are specified in writing by the Committee to the individual in a grant instrument or an amendment to the grant instrument (the "Grant Instrument"). The Committee shall approve the form and provisions of each Grant Instrument. Grants under a particular Section of the Plan need not be uniform as among the grantees. 3. SHARES SUBJECT TO THE PLAN (a) Shares Authorized. Subject to adjustment as described below, the aggregate number of shares of common stock of the Company ("Company Stock") that may be issued or transferred under the Plan is 3,069,000 shares; provided, however, that prior to April 18, 2002, the aggregate number of shares that could be issued or transferred under the Plan was 1,869,000 shares. The maximum aggregate number of shares of Company Stock that shall be subject to Grants made under the Plan to any individual during any calendar year shall be 500,000 shares, subject to adjustment as described below. The shares may be authorized but unissued shares of Company Stock or reacquired shares of Company Stock, including shares purchased by the Company on the open market for purposes of the Plan. If and to the extent Options granted under the Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having been exercised or if any Stock Awards or Performance Units are forfeited, the shares subject to such Grants shall again be available for purposes of the Plan. (b) Adjustments. If there is any change in the number or kind of shares of Company Stock outstanding (i) by reason of a stock dividend, spinoff, recapitalization, stock split, or combination or exchange of shares, (ii) by reason of a merger, reorganization or consolidation in which the Company is the surviving corporation, (iii) by reason of a reclassification or change in par value, or (iv) by reason of any other extraordinary or unusual event affecting the outstanding Company Stock as a class without the Company's receipt of consideration, or if the value of 2 outstanding shares of Company Stock is substantially reduced as a result of a spinoff or the Company's payment of an extraordinary dividend or distribution, the maximum number of shares of Company Stock available for Grants, the maximum number of shares of Company Stock that any individual participating in the Plan may be granted in any year, the number of shares covered by outstanding Grants, the kind of shares issued under the Plan, and the price per share or the applicable market value of such Grants may be appropriately adjusted by the Committee to reflect any increase or decrease in the number of, or change in the kind or value of, issued shares of Company Stock to preclude, to the extent practicable, the enlargement or dilution of rights and benefits under such Grants; provided, however, that any fractional shares resulting from such adjustment shall be eliminated. Any adjustments determined by the Committee shall be final, binding and conclusive. 4. ELIGIBILITY FOR PARTICIPATION (a) Eligible Persons. All employees of the Company and its subsidiaries ("Employees"), including Employees who are officers or members of the Board, and members of the Board who are not Employees ("Non-Employee Directors") shall be eligible to participate in the Plan. Consultants and advisors who perform services for the Company or any of its subsidiaries ("Key Advisors") shall be eligible to participate in the Plan if the Key Advisors render bona fide services to the Company or its subsidiaries, the services are not in connection with the offer and sale of securities in a capital-raising transaction and the Key Advisors do not directly or indirectly promote or maintain a market for the Company's securities. (b) Selection of Grantees. The Committee shall select the Employees, Non-Employee Directors and Key Advisors to receive Grants and shall determine the number of shares of Company Stock subject to a particular Grant in such manner as the Committee determines. Employees, Key Advisors and Non-Employee Directors who receive Grants under this Plan shall hereinafter be referred to as "Grantees". 5. GRANTING OF OPTIONS (a) Number of Shares. The Committee shall determine the number of shares of Company Stock that will be subject to each Grant of Options to Employees, Non-Employee Directors and Key Advisors. (b) Type of Option and Price. (i) The Committee may grant Incentive Stock Options that are intended to qualify as "incentive stock options" within the meaning of section 422 of the Code or Nonqualified Stock Options that are not intended so to qualify or any combination of Incentive Stock Options and Nonqualified Stock Options, all in accordance with the terms and conditions set forth herein. Incentive Stock Options may be granted only to Employees. Nonqualified Stock Options may be granted to Employees, Non-Employee Directors and Key Advisors. (ii) The purchase price (the "Exercise Price") of Company Stock subject to an Option shall be determined by the Committee and may be equal to or greater than the Fair Market Value (as 3 defined below) of a share of Company Stock on the date the Option is granted; provided, however, that an Incentive Stock Option may not be granted to an Employee who, at the time of grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or any parent or subsidiary of the Company, unless the Exercise Price per share is not less than 110% of the Fair Market Value of Company Stock on the date of grant. (iii) If the Company Stock is publicly traded, then the Fair Market Value per share shall be determined as follows: (x) if the principal trading market for the Company Stock is a national securities exchange or the Nasdaq National Market, the last reported sale price thereof on the relevant date or (if there were no trades on that date) the latest preceding date upon which a sale was reported, or (y) if the Company Stock is not principally traded on such exchange or market, the mean between the last reported "bid" and "asked" prices of Company Stock on the relevant date, as reported on Nasdaq or, if not so reported, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Committee determines. If the Company Stock is not publicly traded or, if publicly traded, is not subject to reported transactions or "bid" or "asked" quotations as set forth above, the Fair Market Value per share shall be as determined by the Committee. (c) Option Term. The Committee shall determine the term of each Option. The term of any Option shall not exceed ten years from the date of grant. However, an Incentive Stock Option that is granted to an Employee who, at the time of grant, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company, or any parent or subsidiary of the Company, may not have a term that exceeds five years from the date of grant. (d) Exercisability of Options. Options shall become exercisable in accordance with such terms and conditions, consistent with the Plan, as may be determined by the Committee and specified in the Grant Instrument. The Committee may accelerate the exercisability of any or all outstanding Options at any time for any reason. (e) Termination of Employment, Disability or Death. (i) Except as provided below, an Option may only be exercised while the Grantee is employed by, or providing service to, the Company as an Employee, Key Advisor or member of the Board. In the event that a Grantee ceases to be employed by, or provide service to, the Company for any reason other than Disability, death, or termination for Cause (as defined below), any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within 90 days after the date on which the Grantee ceases to be employed by, or provide service to, the Company (or within such other period of time as may be specified by the Committee), but in any event no later than the date of expiration of the Option term. Except as otherwise provided by the Committee, any of the Grantee's Options that are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Company shall terminate as of such date. 4 (ii) In the event the Grantee ceases to be employed by, or provide service to, the Company on account of a termination for Cause by the Company, any Option held by the Grantee shall terminate as of the date the Grantee ceases to be employed by, or provide service to, the Company. In addition, notwithstanding any other provisions of this Section 5, if the Committee determines that the Grantee has engaged in conduct that constitutes Cause at any time while the Grantee is employed by, or providing service to, the Company or after the Grantee's termination of employment or service, any Option held by the Grantee shall immediately terminate and the Grantee shall automatically forfeit all shares underlying any exercised portion of an Option for which the Company has not yet delivered the share certificates, upon refund by the Company of the Exercise Price paid by the Grantee for such shares. Upon any exercise of an Option, the Company may withhold delivery of share certificates pending resolution of an inquiry that could lead to a finding resulting in a forfeiture. (iii) In the event the Grantee ceases to be employed by, or provide service to, the Company because the Grantee is Disabled, any Option which is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date on which the Grantee ceases to be employed by, or provide service to, the Company (or within such other period of time as may be specified by the Committee), but in any event no later than the date of expiration of the Option term. Except as otherwise provided by the Committee, any of the Grantee's Options which are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Company shall terminate as of such date. (iv) If the Grantee dies while employed by, or providing service to, the Company or within 90 days after the date on which the Grantee ceases to be employed or provide service on account of a termination specified in Section 5(e)(i) above (or within such other period of time as may be specified by the Committee), any Option that is otherwise exercisable by the Grantee shall terminate unless exercised within one year after the date on which the Grantee ceases to be employed by, or provide service to, the Company (or within such other period of time as may be specified by the Committee), but in any event no later than the date of expiration of the Option term. Except as otherwise provided by the Committee, any of the Grantee's Options that are not otherwise exercisable as of the date on which the Grantee ceases to be employed by, or provide service to, the Company shall terminate as of such date. (v) For purposes of this Section 5(e), and Sections 6 and 7: (A) The term "Company" shall mean the Company and its parent and subsidiary corporations or other entities, as determined by the Committee. (B) "Employed by, or provide service to, the Company" shall mean employment or service as an Employee, Key Advisor or member of the Board (so that, for purposes of exercising Options and satisfying conditions with respect to Stock Awards and Performance Units, a Grantee shall not be considered to have terminated employment or service until the Grantee ceases to be an Employee, Key Advisor and member of the Board), unless the Committee determines otherwise. 5 (C) "Disability" shall mean a Grantee's becoming disabled within the meaning of section 22(e)(3) of the Code or the Grantee becomes entitled to receive long-term disability benefits under the Company's long-term disability plan. (D) "Cause" shall mean, except to the extent specified otherwise by the Committee, a finding by the Committee that the Grantee (i) has breached his or her employment or service contract with the Company, (ii) has engaged in disloyalty to the Company, including, without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty in the course of his or her employment or service, (iii) has disclosed trade secrets or confidential information of the Company to persons not entitled to receive such information or (iv) has engaged in such other behavior detrimental to the interests of the Company as the Committee determines. (f) Exercise of Options. A Grantee may exercise an Option that has become exercisable, in whole or in part, by delivering a notice of exercise to the Company with payment of the Exercise Price. The Grantee shall pay the Exercise Price for an Option as specified by the Committee (w) in cash, (x) with the approval of the Committee, by delivering shares of Company Stock owned by the Grantee (including Company Stock acquired in connection with the exercise of an Option, subject to such restrictions as the Committee deems appropriate) and having a Fair Market Value on the date of exercise equal to the Exercise Price or by attestation (on a form prescribed by the Committee) to ownership of shares of Company Stock having a Fair Market Value on the date of exercise equal to the Exercise Price, (y) payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, or (z) by such other method as the Committee may approve. The Committee may authorize loans by the Company to Grantees in connection with the exercise of an Option, upon such terms and conditions as the Committee, in its sole discretion, deems appropriate. Shares of Company Stock used to exercise an Option shall have been held by the Grantee for the requisite period of time to avoid adverse accounting consequences to the Company with respect to the Option. The Grantee shall pay the Exercise Price and the amount of any withholding tax due at the time of exercise. (g) Limits on Incentive Stock Options. Each Incentive Stock Option shall provide that, if the aggregate Fair Market Value of the stock on the date of the grant with respect to which Incentive Stock Options are exercisable for the first time by a Grantee during any calendar year, under the Plan or any other stock option plan of the Company or a parent or subsidiary, exceeds $100,000, then the Option, as to the excess, shall be treated as a Nonqualified Stock Option. An Incentive Stock Option shall not be granted to any person who is not an Employee of the Company or a parent or subsidiary (within the meaning of section 424(f) of the Code). 6. STOCK AWARDS The Committee may issue or transfer shares of Company Stock to an Employee, Non-Employee Director or Key Advisor under a Stock Award, upon such terms as the Committee deems appropriate. The following provisions are applicable to Stock Awards: (a) General Requirements. Shares of Company Stock issued or transferred pursuant to Stock Awards may be issued or transferred for consideration or for no consideration, and subject to restrictions or no restrictions, as determined by the Committee. The Committee may, but shall 6 not be required to, establish conditions under which restrictions on Stock Awards shall lapse over a period of time or according to such other criteria as the Committee deems appropriate, including, without limitation, restrictions based upon the achievement of specific performance goals. The period of time during which the Stock Awards will remain subject to restrictions will be designated in the Grant Instrument as the "Restriction Period." (b) Number of Shares. The Committee shall determine the number of shares of Company Stock to be issued or transferred pursuant to a Stock Award and the restrictions applicable to such shares. (c) Requirement of Employment or Service. If the Grantee ceases to be employed by, or provide service to, the Company (as defined in Section 5(e)) during a period designated in the Grant Instrument as the Restriction Period, or if other specified conditions are not met, the Stock Award shall terminate as to all shares covered by the Grant as to which the restrictions have not lapsed, and those shares of Company Stock must be immediately returned to the Company. The Committee may, however, provide for complete or partial exceptions to this requirement as it deems appropriate. (d) Restrictions on Transfer and Legend on Stock Certificate. During the Restriction Period, a Grantee may not sell, assign, transfer, pledge or otherwise dispose of the shares of a Stock Award except to a Successor Grantee under Section 11(a). Each certificate for a share of a Stock Award shall contain a legend giving appropriate notice of the restrictions in the Grant. The Grantee shall be entitled to have the legend removed from the stock certificate covering the shares subject to restrictions when all restrictions on such shares have lapsed. The Committee may determine that the Company will not issue certificates for Stock Awards until all restrictions on such shares have lapsed, or that the Company will retain possession of certificates for shares of Stock Awards until all restrictions on such shares have lapsed. (e) Right to Vote and to Receive Dividends. Unless the Committee determines otherwise, during the Restriction Period, the Grantee shall have the right to vote shares of Stock Awards and to receive any dividends or other distributions paid on such shares, subject to any restrictions deemed appropriate by the Committee, including, without limitation, the achievement of specific performance goals. (f) Lapse of Restrictions. All restrictions imposed on Stock Awards shall lapse upon the expiration of the applicable Restriction Period and the satisfaction of all conditions imposed by the Committee. The Committee may determine, as to any or all Stock Awards, that the restrictions shall lapse without regard to any Restriction Period. 7. PERFORMANCE UNITS (a) General Requirements. The Committee may grant performance units ("Performance Units") to an Employee or Key Advisor. Each Performance Unit shall represent the right of the Grantee to receive an amount based on the value of the Performance Unit, if performance goals established by the Committee are met. The value of a Performance Unit shall equal the Fair 7 Market Value of a share of Company Stock. The Committee shall determine the number of Performance Units to be granted and the requirements applicable to such Units. (b) Performance Period and Performance Goals. When Performance Units are granted, the Committee shall establish the performance period during which performance shall be measured (the "Performance Period"), performance goals applicable to the Units ("Performance Goals") and such other conditions of the Grant as the Committee deems appropriate. Performance Goals may relate to the financial performance of the Company or its operating units, the performance of Company Stock, individual performance, or such other criteria as the Committee deems appropriate. (c) Payment with respect to Performance Units. At the end of each Performance Period, the Committee shall determine to what extent the Performance Goals and other conditions of the Performance Units are met, the value of the Performance Units (if applicable), and the amount, if any, to be paid with respect to the Performance Units. Payments with respect to Performance Units shall be made partly in cash, in Company Stock, or in a combination of the two, as determined by the Committee, provided that the cash portion does not exceed 50% of the amount to be distributed. (d) Requirement of Employment or Service. If the Grantee ceases to be employed by, or provide service to, the Company (as defined in Section 5(e)) during a Performance Period, or if other conditions established by the Committee are not met, the Grantee's Performance Units shall be forfeited. The Committee may, however, provide for complete or partial exceptions to this requirement as it deems appropriate. 8. QUALIFIED PERFORMANCE-BASED COMPENSATION (a) Designation as Qualified Performance-Based Compensation. The Committee may determine that Performance Units or Stock Awards granted to an Employee shall be considered "qualified performance-based compensation" under Section 162(m) of the Code. The provisions of this Section 8 shall apply to Grants of Performance Units and Stock Awards that are to be considered "qualified performance-based compensation" under section 162(m) of the Code. (b) Performance Goals. When Performance Units or Stock Awards that are to be considered "qualified performance-based compensation" are granted, the Committee shall establish in writing (i) the objective performance goals that must be met in order for restrictions on the Stock Awards to lapse or amounts to be paid under the Performance Units, (ii) the Performance Period during which the performance goals must be met, (iii) the threshold, target and maximum amounts that may be paid if the performance goals are met, and (iv) any other conditions that the Committee deems appropriate and consistent with the Plan and section 162(m) of the Code. The performance goals may relate to the Employee's business unit or the performance of the Company and its subsidiaries as a whole, or any combination of the foregoing. The Committee shall use objectively determinable performance goals based on one or more of the following criteria: stock price, earnings per share, net earnings, operating earnings, return on assets, stockholder return, return on equity, growth in assets, unit volume, sales, market share, scientific goals, pre-clinical or clinical goals, regulatory approvals, or strategic business criteria consisting 8 of one or more objectives based on meeting specified revenue goals, market penetration goals, geographic business expansion goals, cost targets, goals relating to acquisitions or divestitures, or strategic partnerships. (c) Establishment of Goals. The Committee shall establish the performance goals in writing either before the beginning of the Performance Period or during a period ending no later than the earlier of (i) 90 days after the beginning of the Performance Period or (ii) the date on which 25% of the Performance Period has been completed, or such other date as may be required or permitted under applicable regulations under section 162(m) of the Code. The performance goals shall satisfy the requirements for "qualified performance-based compensation," including the requirement that the achievement of the goals be substantially uncertain at the time they are established and that the goals be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the performance goals have been met. The Committee shall not have discretion to increase the amount of compensation that is payable upon achievement of the designated performance goals. (d) Maximum Payment. Performance Units and Stock Awards under this Section 8 may be granted to an Employee with respect to not more than 500,000 shares of Company Stock for any Performance Period. (e) Announcement of Grants. The Committee shall certify and announce the results for each Performance Period to all Grantees immediately following the announcement of the Company's financial results for the Performance Period. If and to the extent that the Committee does not certify that the performance goals have been met, the grants of Stock Awards or Performance Units for the Performance Period shall be forfeited. (f) Death, Disability, Change of Control or Other Circumstances. The Committee may provide that Performance Units shall be payable or restrictions on Stock Awards shall lapse, in whole or in part, in the event of the Grantee's death or Disability (as defined in Section 5(e) above) during the Performance Period, or under other circumstances consistent with the regulations and rulings under section 162(m), and the provisions of Section 13 shall apply in the event of a Change of Control. 9. DEFERRALS The Committee may permit or require a Grantee to defer receipt of the payment of cash or the delivery of shares that would otherwise be due to such Grantee in connection with any Option, the lapse or waiver of restrictions applicable to Stock Awards, or the satisfaction of any requirements or objectives with respect to Performance Units. If any such deferral election is permitted or required, the Committee shall, in its sole discretion, establish rules and procedures for such deferrals. 10. WITHHOLDING OF TAXES (a) Required Withholding. All Grants under the Plan shall be subject to applicable federal (including FICA), state and local tax withholding requirements. The Company shall have the 9 right to deduct from all Grants paid in cash, or from other wages paid to the Grantee, any federal, state or local taxes required by law to be withheld with respect to such Grants. In the case of Options, Stock Awards and other Grants paid in Company Stock, the Company may require that the Grantee or other person receiving or exercising Grants pay to the Company the amount of any federal, state or local taxes that the Company is required to withhold with respect to such Grants, or the Company may deduct from other wages paid by the Company the amount of any withholding taxes due with respect to such Grants. (b) Election to Withhold Shares. If the Committee so permits, a Grantee may elect to satisfy the Company's income tax withholding obligation with respect to Options, Stock Awards or Performance Units paid in Company Stock by having shares withheld up to an amount that does not exceed the Company's minimum applicable withholding tax rate for federal (including FICA), state and local tax liabilities. The election must be in a form and manner prescribed by the Committee and may be subject to the prior approval of the Committee. 11. TRANSFERABILITY OF GRANTS (a) Nontransferability of Grants. Except as provided below, only the Grantee may exercise rights under a Grant during the Grantee's lifetime. A Grantee may not transfer those rights except by will or by the laws of descent and distribution or, with respect to Grants other than Incentive Stock Options, if permitted in any specific case by the Committee, pursuant to a domestic relations order. When a Grantee dies, the personal representative or other person entitled to succeed to the rights of the Grantee ("Successor Grantee") may exercise such rights. A Successor Grantee must furnish proof satisfactory to the Company of his or her right to receive the Grant under the Grantee's will or under the applicable laws of descent and distribution. (b) Transfer of Nonqualified Stock Options. Notwithstanding the foregoing, the Committee may provide, in a Grant Instrument, that a Grantee may transfer Nonqualified Stock Options to family members, or one or more trusts or other entities for the benefit of or owned by family members, consistent with the applicable securities laws, according to such terms as the Committee may determine; provided that the Grantee receives no consideration for the transfer of an Option and the transferred Option shall continue to be subject to the same terms and conditions as were applicable to the Option immediately before the transfer. 12. CHANGE OF CONTROL OF THE COMPANY As used herein, a "Change of Control" shall be deemed to have occurred if: (a) Any "person" (as such term is used in sections 13(d) and 14(d) of the Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the voting power of the then outstanding securities of the Company; provided that a Change of Control shall not be deemed to occur as a result of a transaction in which the Company becomes a subsidiary of another corporation and in which the stockholders of the Company, immediately prior to the transaction, will beneficially own, immediately after the transaction, shares entitling such stockholders to more than 50% of all votes to which all stockholders of the parent corporation 10 would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote); (b) The stockholders of the Company approve (or, if stockholder approval is not required, the Board approves) an agreement providing for (i) the merger or consolidation of the Company with another corporation where the stockholders of the Company, immediately prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling such stockholders to more than 50% of all votes to which all stockholders of the surviving corporation would be entitled in the election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote), (ii) the sale or other disposition of all or substantially all of the assets of the Company, or (iii) a liquidation or dissolution of the Company; (c) Any person has commenced a tender offer or exchange offer for 30% or more of the voting power of the then outstanding shares of the Company; or (d) After the date this Plan is approved by the stockholders of the Company, directors are elected such that a majority of the members of the Board shall have been members of the Board for less than two years, unless the election or nomination for election of each new director who was not a director at the beginning of such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period. 13. CONSEQUENCES OF A CHANGE OF CONTROL (a) Assumption of Grants. Upon a Change of Control where the Company is not the surviving corporation (or survives only as a subsidiary of another corporation), unless the Committee determines otherwise, all outstanding Options that are not exercised shall be assumed by, or replaced with comparable options or rights by the surviving corporation (or a parent of the surviving corporation), and other outstanding Grants shall be converted to similar grants of the surviving corporation (or a parent of the surviving corporation). (b) Other Alternatives. Notwithstanding the foregoing, in the event of a Change of Control, the Committee may, but shall not be obligated to, take any of the following actions with respect to any or all outstanding Grants: the Committee may (i) determine that outstanding Options shall automatically accelerate and become fully exercisable and that the restrictions and conditions on outstanding Stock Awards shall immediately lapse, (ii) determine that Grantees holding Performance Units shall receive a payment in settlement of such Performance Units in an amount determined by the Committee, (iii) require that Grantees surrender their outstanding Options in exchange for a payment by the Company, in cash or Company Stock as determined by the Committee, in an amount equal to the amount by which the then Fair Market Value of the shares of Company Stock subject to the Grantee's unexercised Options exceeds the Exercise Price of the Options or (iv) after giving Grantees an opportunity to exercise their outstanding Options, terminate any or all unexercised Options at such time as the Committee deems appropriate. Such surrender, termination or settlement shall take place as of the date of the Change of Control or such other date as the Committee may specify. The Committee shall have no obligation to take any of the foregoing actions, and, in the absence of any such actions, outstanding Grants shall 11 continue in effect according to their terms (subject to any assumption pursuant to Subsection (a)). 14. REQUIREMENTS FOR ISSUANCE OR TRANSFER OF SHARES (a) Limitations on Issuance or Transfer of Shares. No Company Stock shall be issued or transferred in connection with any Grant hereunder unless and until all legal requirements applicable to the issuance or transfer of such Company Stock have been complied with to the satisfaction of the Committee. The Committee shall have the right to condition any Grant made to any Grantee hereunder on such Grantee's undertaking in writing to comply with such restrictions on his or her subsequent disposition of such shares of Company Stock as the Committee shall deem necessary or advisable, and certificates representing such shares may be legended to reflect any such restrictions. Certificates representing shares of Company Stock issued or transferred under the Plan will be subject to such stop-transfer orders and other restrictions as may be required by applicable laws, regulations and interpretations, including any requirement that a legend be placed thereon. (b) Lock-Up Period. If so requested by the Company or any representative of the underwriters (the "Managing Underwriter") in connection with any underwritten offering of securities of the Company under the Securities Act of 1933, as amended (the "Securities Act"), a Grantee (including any successors or assigns) shall not sell or otherwise transfer any shares or other securities of the Company during the 30-day period preceding and the 120-day period following the effective date of a registration statement of the Company filed under the Securities Act for such underwriting (or such shorter period as may be requested by the Managing Underwriter and agreed to by the Company) (the "Market Standoff Period"). The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Standoff Period. 15. AMENDMENT AND TERMINATION OF THE PLAN (a) Amendment. The Board may amend or terminate the Plan at any time; provided, however, that the Board shall not amend the Plan without stockholder approval if (i) such approval is required in order for Incentive Stock Options granted or to be granted under the Plan to meet the requirements of section 422 of the Code, (ii) such approval is required in order to exempt compensation under the Plan from the deduction limit under section 162(m) of the Code, or (iii) such approval is required by applicable stock exchange requirements. (b) Stockholder Approval for "Qualified Performance-Based Compensation." If Performance Units or Stock Awards are granted as "qualified performance-based compensation" under Section 8 above, the Plan must be reapproved by the stockholders no later than the first stockholders meeting that occurs in the fifth year following the year in which the stockholders previously approved the provisions of Section 8, if required by section 162(m) of the Code or the regulations thereunder. 12 (c) Termination of Plan. The Plan shall terminate on the day immediately preceding the tenth anniversary of its effective date, unless the Plan is terminated earlier by the Board or is extended by the Board with the approval of the stockholders. (d) Termination and Amendment of Outstanding Grants. A termination or amendment of the Plan that occurs after a Grant is made shall not materially impair the rights of a Grantee unless the Grantee consents or unless the Committee acts under Section 21(c). The termination of the Plan shall not impair the power and authority of the Committee with respect to an outstanding Grant. Whether or not the Plan has terminated, an outstanding Grant may be terminated or amended under Section 21(c) or may be amended by agreement of the Company and the Grantee consistent with the Plan. (e) Governing Document. The Plan shall be the controlling document. No other statements, representations, explanatory materials or examples, oral or written, may amend the Plan in any manner. The Plan shall be binding upon and enforceable against the Company and its successors and assigns. 16. FUNDING OF THE PLAN This Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grants under this Plan. In no event shall interest be paid or accrued on any Grant, including unpaid installments of Grants. 17. RIGHTS OF PARTICIPANTS Nothing in this Plan shall entitle any Employee, Key Advisor, Non-Employee Director or other person to any claim or right to be granted a Grant under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any individual any rights to be retained by or in the employ of the Company or any other employment rights. 18. NO FRACTIONAL SHARES No fractional shares of Company Stock shall be issued or delivered pursuant to the Plan or any Grant. The Committee shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. 19. HEADINGS Section headings are for reference only. In the event of a conflict between a title and the content of a Section, the content of the Section shall control. 13 20. EFFECTIVE DATE OF THE PLAN The Plan was initially effective as of March 24, 2000. The Plan was first amended and restated on May 22, 2001. The effective date of this amendment and restatement of the Plan is April 18, 2002. 21. MISCELLANEOUS (a) Grants in Connection with Corporate Transactions and Otherwise. Nothing contained in this Plan shall be construed to (i) limit the right of the Committee to make Grants under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Grants to employees thereof who become Employees of the Company, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options or make other awards outside of this Plan. Without limiting the foregoing, the Committee may make a Grant to an employee of another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company or any of its subsidiaries in substitution for a stock option or stock awards grant made by such corporation. The terms and conditions of the substitute grants may vary from the terms and conditions required by the Plan and from those of the substituted stock incentives. The Committee shall prescribe the provisions of the substitute grants. (b) Employees Subject to Taxation Outside the United States. With respect to Grantees who are subject to taxation in countries other than the United States, the Committee may make Grants on such terms and conditions as the Committee deems appropriate to comply with the laws of the applicable countries, and the Committee may create such procedures, addenda and subplans and make such modifications as may be necessary or advisable to comply with such laws. (c) Compliance with Law. The Plan, the exercise of Options and the obligations of the Company to issue or transfer shares of Company Stock under Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect to persons subject to section 16 of the Exchange Act, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. In addition, it is the intent of the Company that the Plan and applicable Grants under the Plan comply with the applicable provisions of section 162(m) of the Code and section 422 of the Code. To the extent that any legal requirement of section 16 of the Exchange Act or section 162(m) or 422 of the Code as set forth in the Plan ceases to be required under section 16 of the Exchange Act or section 162(m) or 422 of the Code, that Plan provision shall cease to apply. The Committee may revoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government regulation. The Committee may also adopt rules regarding the withholding of taxes on payments to Grantees. The Committee may, in its sole discretion, agree to limit its authority under this Section. (d) Governing Law. The validity, construction, interpretation and effect of the Plan and Grant Instruments issued under the Plan shall be governed and construed by and determined 14 in accordance with the laws of Delaware, without giving effect to the conflict of laws provisions thereof. 15 EX-10.44 5 k71021exv10w44.txt EMPLOYMENT ARRANGEMENT - WILLIAM F. BRINKERHOFF EXHIBIT 10.44 William Brinkerhoff 1011 Lincoln Ave. Ann Arbor, Michigan 48104 April 19, 2002 Dear Bill, On behalf of Esperion Therapeutics, Inc. (the "Company"), I am pleased to offer you a position with the Company. The following is an outline of the terms of this offer: 1. The position offered is that of Vice President of Business Development in the Operations and Finance Department reporting to Tim Mayleben. 2. You shall be paid a salary of $13,333.33 per month plus a bonus of up to 20% of base salary. The right to receive a bonus for the first year of employment or portion thereof for which the Company pays bonuses is dependent on continued employment during that period. The magnitude of the bonus, if any, will be determined, based upon achievement of a series of mutually agreed upon performance objectives/milestones. A proposed series of objectives/milestones will be developed between you and your supervisor. 3. A benefits package will be provided to you, which are equivalent to that offered to other similarly situated employees with the Company. 4. Subject to meeting eligibility requirements, we intend to grant to you an option to purchase up to 75,000 shares of the Company's common stock under one of the Company's equity compensation plans, subject to the approval of our Board of Directors. The option grant will become effective on the date of such approval, and will have an exercise price that will be equal to or greater than the fair market value of a share of our stock on the date of such approval, as determined by the Board of Directors. The terms and conditions of the option, along with the period during which the option will become exercisable, will be set forth in a Stock Option Agreement that you will be required to execute. 5. Esperion employment begins with a 90-day evaluation period during which your performance will be evaluated. This evaluation, as well as continuation of employment after the 90-day period, will be based upon mutually agreed upon performance objectives that will be developed between you and your supervisor. If your employment during this period is terminated by the Company for reasons other than cause during the first 30 days, you will be provided with a severance package of one month's salary, with a continuation of benefits during this period. If your employment is terminated by the Company for reasons other than cause between day 31 and the 60th day, you will be provided with a severance package of two months' salary with a continuation of benefits during this period. If your employment is terminated by the Company for reasons other than cause between day 61 and the 90th day, you will be provided with a severance package of three months' salary with a continuation of benefits during this period. After successful completion of this 90-day evaluation period, if your employment is terminated by the Company for reasons other than cause, you will be provided a severance package of 6 months salary; with continuation of benefits during this period and 25% of your unvested options will automatically vest. Cause shall mean that the employee has engaged in disloyalty to the Company, including, without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty in the course of his or her employment, has disclosed trade secrets or confidential information of the Company to persons not entitled to receive such information, or has engaged in such other behavior detrimental to the interests of the Company. If you terminate your employment with the Company voluntarily or if your employment is terminated by the company for cause, you will forfeit the severance package, as well as any of your unvested stock options. 6. You will be required to execute the Company's standard forms of Non-Competition, as well as Confidentiality and Assignment Agreement. 7. This employment relationship is one of employment at will. Either Esperion Therapeutics or you may terminate this employment agreement, with or without notice, and with or without cause at any time. If the terms of this offer are acceptable to you, please so indicate by executing in the space provided below and fax to 734-222-1860, as well as mail (an original copy) to the Company. Please respond to this offer within one week from the date hereof. After this date (i.e. April 26, 2002) this offer may be withdrawn at the discretion of the Company. If you have any questions, please contact Susan Landauer, Human Resource Specialist at 734-222-1826. Welcome to Esperion Therapeutics! We look forward to working with you to bring new medicines to a world of unmet medical needs. Sincerely, /s/ Tim Mayleben Tim Mayleben Senior Vice President, Operations and Finance & C.O.O. AGREED AND ACCEPTED: /s/ William F. Brinkerhoff 4/19/02 - ----------------------------------------------------- Name Date EX-99.1 6 k71021exv99w1.txt CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 Exhibit 99.1 SECTION 906 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER - -------------------------------------------------------------------------------- I, Roger S. Newton, Chief Executive Officer of Esperion Therapeutics, Inc., a Delaware corporation (the "Company"), hereby certify that: (1) The Company's periodic report on Form 10-Q for the period ended June 30, 2002 (the "Form 10-Q") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. * * * /s/ Roger S. Newton - ---------------------------- Roger S. Newton, Chief Executive Officer Date: August 14, 2002 EX-99.2 7 k71021exv99w2.txt CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 Exhibit 99.2 SECTION 906 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER - -------------------------------------------------------------------------------- I, Timothy M. Mayleben, Chief Financial Officer of Esperion Therapeutics, Inc., a Delaware corporation (the "Company"), hereby certify that: (1) The Company's periodic report on Form 10-Q for the period ended June 30, 2002 (the "Form 10-Q") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. * * * /s/ Timothy M. Mayleben - --------------------------- Timothy M. Mayleben, Chief Financial Officer Date: August 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----