-----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, H9w5xbT/tE07j99I2KbU185+O4JgyRzUtXNfSLhbkRrdtmbu1OzBovKB4t8bu3SR MB/qSvj7qavl1OfO/pX+Lg== 0000950124-02-003546.txt : 20021118 0000950124-02-003546.hdr.sgml : 20021118 20021114184753 ACCESSION NUMBER: 0000950124-02-003546 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021114 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: 02827675 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 k72378e10vq.txt FORM 10-Q FOR QUARTER ENDED SEPTEMBER 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: SEPTEMBER 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 October 31, 2002, was 29,353,416. ESPERION THERAPEUTICS, INC. FORM 10-Q TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001................................................................. 3 Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2002 and 2001, and the period from inception to 4 September 30, 2002................................................................ Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2002 and 2001, and the period from inception to 5 September 30, 2002................................................................ 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............................... 15 Item 4. Controls and Procedures.................................................................. 15 PART II - OTHER INFORMATION Item 1. Legal Proceedings........................................................................ 16 Item 2. Changes in Securities and Use of Proceeds................................................ 16 Item 3. Defaults Upon Senior Securities.......................................................... 16 Item 4. Submission of Matters to a Vote of Security Holders...................................... 16 Item 5. Other Information........................................................................ 16 Item 6. Exhibits and Reports on Form 8-K......................................................... 17 SIGNATURES. 18 INDEX TO EXHIBITS.................................................................................... 21
2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ESPERION THERAPEUTICS, INC. AND SUBSIDIARIES (A COMPANY IN THE DEVELOPMENT STAGE) CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, in thousands 2002 2001 - ---------------------------------------------------------------------------------------------------------------- ASSETS: (UNAUDITED) Current assets: Cash and cash equivalents $41,386 $70,286 Short-term investments 8,360 - Prepaid expenses and other 753 1,000 - ---------------------------------------------------------------------------------------------------------------- Total current assets 50,499 71,286 - ---------------------------------------------------------------------------------------------------------------- Property and equipment, net 3,436 3,313 Goodwill, net 3,108 3,108 Deposits and other assets 44 633 - ---------------------------------------------------------------------------------------------------------------- Total assets $57,087 $78,340 - ---------------------------------------------------------------------------------------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Current portion of long-term debt $975 $863 Accounts payable 1,489 2,925 Accrued liabilities 2,341 2,572 - ---------------------------------------------------------------------------------------------------------------- Total current liabilities 4,805 6,360 - ---------------------------------------------------------------------------------------------------------------- Long-term debt, less current portion 7,221 5,482 Stockholders' equity: Preferred stock - - Series A, Junior Participating Preferred Stock - - Common stock 29 29 Additional paid-in capital 133,195 133,143 Notes receivable (6) (15) Accumulated deficit during the development stage (87,427) (65,320) Deferred stock compensation (749) (1,476) Accumulated other comprehensive income 19 137 - ---------------------------------------------------------------------------------------------------------------- Total stockholders' equity 45,061 66,498 - ---------------------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $57,087 $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 NINE MONTHS ENDED INCEPTION TO SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, -------------------------------------------------------------------- -------------------------------------------------------------------- in thousands except share and per share data 2002 2001 2002 2001 2002 - ------------------------------------------------------------------------------------------------------------------------------------ Operating expenses: Research and development $5,416 $4,902 $16,999 $16,303 $71,456 General and administrative 1,677 1,395 4,750 3,732 15,911 Goodwill amortization - 210 - 630 1,089 Purchased in-process research and development - - - - 4,000 - ------------------------------------------------------------------------------------------------------------------------------------ Total operating expenses 7,093 6,507 21,749 20,665 92,456 - ------------------------------------------------------------------------------------------------------------------------------------ Loss from operations (7,093) (6,507) (21,749) (20,665) (92,456) - ------------------------------------------------------------------------------------------------------------------------------------ Other income (expense): Interest income 258 679 862 2,351 6,989 Interest expense (289) (228) (819) (540) (2,085) Other, net 144 (225) (401) 267 125 - ------------------------------------------------------------------------------------------------------------------------------------ Total other income (expense) 113 226 (358) 2,078 5,029 - ------------------------------------------------------------------------------------------------------------------------------------ Loss before income taxes (6,980) (6,281) (22,107) (18,587) (87,427) Provision for income taxes - - - - - - ------------------------------------------------------------------------------------------------------------------------------------ Net loss (6,980) (6,281) (22,107) (18,587) (87,427) Beneficial conversion feature on preferred stock - - - - (22,870) - ------------------------------------------------------------------------------------------------------------------------------------ Net loss attributable to common stockholders ($6,980) ($6,281) ($22,107) ($18,587) ($110,297) - ------------------------------------------------------------------------------------------------------------------------------------ Basic and diluted net loss per share ($0.24) ($0.22) ($0.76) ($0.70) - --------------------------------------------------------------------------------------------------------------------- Shares used in computing basic and diluted net loss per share 29,268,023 28,177,102 29,234,243 26,675,598 - --------------------------------------------------------------------------------------------------------------------- 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)
NINE MONTHS ENDED INCEPTION TO SEPTEMBER 30, SEPTEMBER 30, -------------------------------- -------------------------------- in thousands 2002 2001 2002 - ---------------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities: Net loss ($22,107) ($18,587) ($87,427) Adjustments to reconcile net loss to net cash used in operating activities: Purchased in-process research and development - - 4,000 Depreciation and amortization 1,021 2,209 4,543 Stock-based compensation expense 611 - 3,490 Decrease in notes receivable 9 49 120 Loss on sale of property and equipment 170 22 192 Non-cash interest included in long-term debt 277 171 680 Changes in operating assets and liabilities: Prepaid expenses and other 724 (320) (1,110) Other assets (15) (7) (94) Accounts payable (1,431) (1,130) 1,767 Accrued liabilities (208) 860 2,392 - ---------------------------------------------------------------------------------------------------------------------------- Net cash used in operating activities (20,949) (16,733) (71,447) - ---------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Purchases of property and equipment (715) (1,641) (7,063) Acquisition of Talaria Therapeutics, Inc. - - (233) Proceeds from sale of property and equipment 29 2 31 Purchases of short-term investments (34,221) - (34,221) Maturities of short-term investments 25,861 - 25,861 - ---------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (9,046) (1,639) (15,625) - ---------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net proceeds from issuance of convertible preferred stock - - 42,200 Proceeds from the issuance of common stock 168 22,481 78,895 Proceeds from long-term debt 1,834 3,409 9,873 Repayments of long-term debt (885) (689) (2,607) - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 1,117 25,201 128,361 - ---------------------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (22) (72) 97 - ---------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (28,900) 6,757 41,386 Cash and cash equivalents at beginning of period 70,286 70,228 - - ---------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $41,386 $76,985 $41,386 - ---------------------------------------------------------------------------------------------------------------------------- Supplemental disclosures of cash flow information: Cash paid during the period for interest $524 $362 ----------------------------------------------------------------------------------------------------- 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 of America 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 nine-month periods ended September 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 $6,950,000 and $6,277,000 for the three-month periods ended September 30, 2002 and 2001, respectively, and $22,225,000 and $18,673,000, for the nine-month periods ended September 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 and an unrealized gain on short-term investments for the period ended September 30, 2002, and the foreign currency translation adjustment for the period ended September 30, 2001. (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 448,460 and 764,938 shares of common stock for the three-month periods ended September 30, 2002 and 2001, respectively, and 474,732 and 760,994 for the nine-month periods ended September 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. Some of these payments may be fulfilled through the issuance of the Company's common stock, at the Company's option. Upon reaching certain milestones, the payments are charged to research and development expenses in the accompanying consolidated statements of operations. There were no such milestones achieved or payments made during the first nine months of 2002. At the present time, the Company can give no assurances that any such 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 September 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 nine-month periods ended September 30, 2001 and for the period from inception to September 30, 2001 would have been as follows:
Three Months Nine Months Ended Ended Inception to September 30, September 30, September 30, in thousands except share and per share data 2001 2001 2001 - --------------------------------------------------------------------------------------------------------------------------- Net loss: Reported net loss ($6,281) ($18,587) ($58,976) Goodwill amortization 210 630 880 - --------------------------------------------------------------------------------------------------------------------------- Adjusted net loss (6,071) (17,957) (58,096) Beneficial conversion feature upon issuance of preferred stock - - (22,870) - --------------------------------------------------------------------------------------------------------------------------- Adjusted net loss attributable to common stockholders ($6,071) ($17,957) ($80,966) - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- Basic and diluted net loss per share: Reported basic and diluted net loss per share ($0.22) ($0.70) Goodwill amortization 0.01 0.03 - --------------------------------------------------------------------------------------------------------- Adjusted basic and diluted net loss per share ($0.21) ($0.67) - ---------------------------------------------------------------------------------------------------------
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 our 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 $87.4 million from inception (May 18, 1998) through September 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 will increase in preparation for the commercialization of our product candidates. Until we generate positive cash flow, we will rely on financing our operations with our existing cash balance, additional equity or debt offerings 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 SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, ----------------------------------------------------------------------------- dollars in thousands 2002 2001 % CHANGE 2002 2001 % Change - -------------------------------------------------------------------------------------------------------------- Research and development $5,416 $4,902 10.5% $16,999 $16,303 4.3% % of total 76.4% 75.4% 78.2% 78.9% General and administrative $1,677 $1,395 20.2% $4,750 $3,732 27.3% % of total 23.6% 21.4% 21.8% 18.1% Goodwill amortization - $210 -100.0% - $630 -100.0% % of total - 3.2% - 3.0%
Three Months Ended September 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 and 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 $5.4 million for the three months ended September 30, 2002 compared to approximately $4.9 million for the three months ended September 30, 2001. This 10.5% increase is primarily due to the following: - Higher clinical trial costs on our product candidates. During the third quarter of 2002, the Company had three ongoing clinical trials. Patients were being enrolled in Phase II trials of the Company's ETC-216 (AIM) and ETC-588 (LUV) product candidates and a Phase I trial of the Company's ETC-642 (RLT Peptide) product candidate. The ETC-216-002 trial began in November 2001 and represents the first Phase II clinical trial for this product candidate. The study is expected to evaluate up to 50 patients with acute coronary syndrome and evaluate the changes in plaque volume in each patient's coronary arteries between pre- and post-treatment with ETC-216. The ETC-588-004 trial began in June 2002 and represents the second Phase II clinical trial for this product candidate. This trial is expected to evaluate up to 32 patients with carotid atherosclerosis and evaluate changes in plaque volume in each patient's carotid arteries using magnetic resonance imaging after administration of ETC-588. The ETC-642-002 trial began in September 2002 and represents the second Phase I clinical trial for this product candidate, extending the previous trial to higher doses. This trial is examining an escalating, single-dose of ETC-642 to examine safety and tolerability of the product candidate in patients with stable arteriosclerosis. This trial is expected to evaluate up to 20 patients. In addition to these studies, the Company incurred additional costs related to the completion of the ETC-642-001 clinical trial, which was reported on in July 2002. During the third quarter of 2001, the Company had one ongoing clinical trial: a Phase II trial of ETC-588 looking at patients with stable atherosclerosis. This trial, known as ETC-588-003, examined the safety and tolerability of various dose levels and dose frequencies in 34 patients. The preliminary results from this study were reported in November 2001. - Higher preclinical costs on development of oral small molecule lead candidate. During the third quarter of 2002, the Company continued to prepare for an Investigational New Drug Application (IND) 9 for its lead oral small molecule product candidate, ESP 31015. This resulted in higher costs related to pharmacology and toxicology studies for this product candidate during 2002 as compared to 2001. - Product candidate supply costs. In preparation for current and future pre-clinical and clinical studies, the Company incurs costs related to process development, scale-up and production of each product candidate. During 2002, the costs related to these activities were higher than 2001 due to the increased amount of drug supply needed to support the greater number of clinical trials, as well as increased patient numbers and dosage regimens being tested, offset in part by costs incurred during 2001 for production of ETC-276 not incurred in 2002. The magnitude of the Company's operating expenses, particularly research and development expenses, are largely dependent upon the progress, number, timing, nature and size of clinical trials. As clinical trials continue to progress, 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. 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 $1.7 million for the three months ended September 30, 2002 compared to approximately $1.4 million for the three months ended September 30, 2001. This 20.2% increase resulted from a charge of approximately $338,000 primarily related to the write-down of assets that are no longer being used in the Company's development programs. 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 Balance Sheets was $3.1 million at September 30, 2002 and December 31, 2001. Goodwill amortization expense was $0 and $210,000 for the three months ended September 30, 2002 and 2001, respectively. 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, interest expense, foreign currency transaction gain (loss), and other non-operating income and expenses. Interest income decreased to approximately $258,000 for the three months ended September 30, 2002 compared to approximately $679,000 for the three months ended September 30, 2001. The decrease is primarily attributable to lower cash levels combined with lower interest rates in 2002 compared to the same period last year, as well as the use of more conservative investment instruments in 2002 as compared to 2001. Interest expense for the three months ended September 30, 2002 and 2001 was approximately $289,000 and $228,000, 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 September 30, 2002, we recorded approximately $34,000 of unrealized foreign currency transaction gains compared to approximately $179,000 of unrealized foreign currency transaction losses for the three months ended September 30, 2001, on transactions that primarily related to manufacturing activities in Europe for our ongoing 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 third quarter of 2002, the US Dollar has generally strengthened against these foreign currencies, whereas the reverse was true in the third quarter of 2001. 10 Net Loss. Net loss was approximately $7.0 million for the three months ended September 30, 2002 compared to approximately $6.3 million for the three months ended September 30, 2001. The increase in net loss resulted from the increases in general and administrative and research and development expenses, and the decrease in interest income, offset in part by the decrease in goodwill amortization. Nine Months Ended September 30, 2002 and 2001 Research and Development Expenses. Research and development expenses increased to approximately $17.0 million for the nine months ended September 30, 2002 compared to approximately $16.3 million for the nine months ended September 30, 2001. This 4.3% increase is primarily due to the following: - Higher clinical trial costs on our product candidates. During the nine-months ended September 30, 2002, patients were being enrolled in four clinical trials: Phase II trials of the Company's ETC-216 (AIM) and ETC-588 (LUV) product candidates and Phase I trials of the Company's ETC-642 (RLT Peptide) product candidate. The ETC-216-002 trial began in November 2001 and represents the first Phase II clinical trial for this product candidate. The ETC-588-004 trial began in June 2002 and represents the second Phase II clinical trial for this product candidate. Also during 2002, the ETC-642-001 trial began and ended while the ETC-642-002 trial began in September 2002. These two studies examine an escalating, single-dose of ETC-642 to examine the safety and tolerability of the product candidate in patients with stable atherosclerosis. In the nine-months ended September 30, 2001, the Company incurred costs related to two clinical trials: the completion of the ETC-216-001 Phase I trial and ongoing enrollment in the ETC-588-003 Phase IIa trial. - Higher preclinical costs on development of oral small molecule lead candidate. During the nine months ended September 30, 2002, the Company prepared for an Investigational New Drug Application (IND) for its lead oral small molecule product candidate, ESP 31015. This resulted in higher costs related to pharmacology and toxicology studies for this product candidate during 2002 as compared to 2001. - Product candidate supply costs. In preparation for current and future pre-clinical and clinical studies, the Company incurs costs related to process development, scale-up and production of each product candidate. During 2002, the costs related to these activities were higher than 2001 due to the increased amount of drug supply needed to support the greater number of clinical trials, as well as increased patient numbers and dosage regimens being tested. The magnitude of the Company's operating expenses, particularly research and development expense, are largely dependent upon the progress, 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. General and Administrative Expenses. General and administrative expenses increased to approximately $4.8 million for the nine months ended September 30, 2002 compared to approximately $3.7 million for the nine months ended September 30, 2001. This 27.3% increase primarily relates to $605,000 of restructuring and related charges during the nine-months ended September 30, 2002 that were classified as general and administrative expenses in the accompanying statements of operations including the following: 1. The write-down of assets no longer being used in the Company's development programs totaling approximately $410,000; 2. Employee severance and benefits of approximately $168,000 resulting from actions announced 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 focus in cardiovascular and metabolic disease; and 3. The remaining obligations of $27,000 under an operating lease for a laboratory facility in Sweden that is no longer being used. 11 In addition, the increase resulted from a greater number of general and administrative personnel, as well as increased overhead and related costs. Goodwill Amortization. Goodwill amortization expense was $0 and $630,000 for the nine months ended September 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 above in Management's Discussion and Analysis of Financial Condition and Results of Operations. Other Income (Expense). Interest income decreased to approximately $862,000 for the nine months ended September 30, 2002 compared to approximately $2.4 million for the nine months ended September 30, 2001. The decrease is primarily attributable to lower cash levels combined with lower interest rates in 2002 compared to the same period last year, as well as the use of more conservative investment instruments in 2002 as compared to 2001. Interest expense for the nine months ended September 30, 2002 and 2001 was approximately $819,000 and $540,000, 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 nine months ended September 30, 2002, we recorded approximately $401,000 of unrealized foreign currency transaction losses compared to approximately $340,000 of unrealized foreign currency transaction gains for the nine months ended September 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 nine months ended September 30, 2002, the US Dollar has generally weakened against these foreign currencies whereas the opposite was true during the nine months ended September 30, 2001. Net Loss. Net loss was approximately $22.1 million for the nine months ended September 30, 2002 compared to approximately $18.6 million for the nine months ended September 30, 2001. The increase in net loss resulted from the 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 September 30, 2002 and 2001, the Company had cash, cash equivalents and short-term investments of approximately $49.7 million and $77.0 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 third quarter of 2002, the Company invested its cash in more conservative securities than in prior periods to fully preserve the principal investment balance. This was primarily achieved by more heavily weighting our 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, capital expenditures and debt service as currently planned until early 2004. During the nine months ended September 30, 2002 and 2001, net cash used in operating activities was approximately $20.9 million and $16.7 million, respectively. This cash was used to fund our net losses for those periods, as adjusted for non-cash expenses and changes in operating assets and liabilities. Net cash used in investing activities for the nine months ended September 30, 2002 and 2001, respectively, was approximately $9.0 million and $1.6 million, respectively. The net cash used in investing activities for the nine months ended September 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 12 the nine months ended September 30, 2001 resulted primarily from the acquisition of laboratory equipment, furniture and fixtures and other office equipment. Net cash proceeds from financing activities were $1.1 million and $25.2 million for the nine months ended September 30, 2002 and 2001, respectively. The net cash proceeds from financing activities for the nine months ended September 30, 2002 resulted primarily from $1.8 million of additional borrowings on a special project loan and equipment term loans, and $168,000 received from the issuance of common stock to employees under the Company's equity compensation plans. The proceeds were partially offset by $885,000 of cash used to repay borrowings under equipment loans. The net cash proceeds from financing activities for the nine months ended September 30, 2001 resulted primarily from $22.3 million raised in a private placement, $3.4 million of additional borrowings on a special project loan and equipment term loans, and $139,000 raised from the issuance of common stock to employees under the Company's equity compensation plans. The proceeds were partially offset by $689,000 of cash used to repay borrowings under equipment loans. We frequently 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 amounts or on terms acceptable to us, if at all. As of September 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 September 30, 2002). Borrowings outstanding under this facility as of September 30, 2002 amounted to approximately $901,000 and must be repaid by September 2005. 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 $1.4 million was outstanding under this facility at a weighted average interest rate of 12% as of September 30, 2002. Outstanding amounts under this facility must be repaid by November 2004, and no additional borrowings are allowed. - A credit facility with a Swedish entity totaling 50 million Swedish Kronor ($5.4 million as of September 30, 2002). The proceeds from this facility may only be used to fund the development of our ETC-216 (AIM) product candidate. If results achieved by the AIM project are not capable of being used commercially, 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 6.5 million Swedish kronor ($700,000), amounted to 51.5 million Swedish Kronor ($5.6 million) as of September 30, 2002. The Company is in discussions with the Swedish entity regarding the 5 million Swedish Kronor remaining under the agreement, disbursement of which is related to completion of a final milestone under the agreement. The milestone may be achieved in the future, however, the funds may be unavailable to the Company due to the ramp down of operations in Sweden during 2002. A condition under the agreement is that the project be principally carried out in Sweden. - An agreement with a Michigan non-profit corporation whereby we can borrow up to $447,000 for equipment purchases at an interest rate of 4%. As of September 30, 2002, outstanding borrowings under this arrangement totaled $382,000 and must be repaid by October 2006. 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 June 2004. Under certain of these arrangements, including the lease for our headquarters facility, we may 13 extend these leases for one or more additional periods. Total minimum future payments under these leases for the next twelve months are approximately $582,000 as of September 30, 2002. We have entered into license and other agreements with certain third parties that require us to make payments upon achievement of the milestones set forth in such agreements. The remaining payments that we could be obligated to make under those agreements could over time amount to up to $30.2 million. Some of these payments may be fulfilled through the issuance of common stock, at our option. If we sell products using technology licensed or owned under the agreements, we would be obligated to make royalty payments to the third parties 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. INCOME TAXES As of September 30, 2002, we had operating loss carryforwards of approximately $58.0 million. These carryforwards do not include tax credits for start-up costs of approximately $19.0 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 September 30, 2002, we had 65 full-time employees. Of these employees, 41 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 of America. 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 September 30, 2002, the Company had total potential obligations of approximately $12.0 million under contracts accounted for on the percentage of completion basis. Management estimates that approximately $11.1 million of the contract obligations had been incurred through September 30, 2002 and approximately $1.2 million is included in accrued liabilities in the accompanying balance sheet, for expenses under contracts on the percentage of completion basis. 14 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 September 30, 2002. Declines in interest rates over time will, however, reduce our interest income as described on page 12 in Management's Discussion and Analysis, under the subcaption "Nine Months Ended September 30, 2002 and 2001, Other Income (Expense)", while increases in interest rates over time will increase our interest expense. ITEM 4. CONTROLS AND PROCEDURES An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of November 14, 2002 was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of November 14, 2002. There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the most recent evaluation. 15 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 Not applicable. ITEM 5. OTHER INFORMATION Not applicable. 16 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS NUMBER EXHIBIT - --------------- ---------------------------------------------------------------------------------------------- 10.45 Employment arrangement between Ellen Brady and Esperion Therapeutics, Inc. dated August 12, 2002. 10.46 Master Lease Agreement between Southwest Michigan Innovation Center, Inc. and Esperion Therapeutics, Inc. effective as of July 12, 2001. 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.
(B) REPORTS ON FORM 8-K Not Applicable. 17 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: November 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) 18 I, Roger S. Newton, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Esperion Therapeutics, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Roger S. Newton Roger S. Newton Chief Executive Officer Date: November 14, 2002 19 I, Timothy M. Mayleben, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Esperion Therapeutics, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. /s/ Timothy M. Mayleben - ----------------------- Timothy M. Mayleben Chief Financial Officer Date: November 14, 2002 20 INDEX TO EXHIBITS NUMBER EXHIBIT - --------------- ----------------------------------------------------------------------------------------------------- 10.45 Employment arrangement between Ellen Brady and Esperion Therapeutics, Inc. dated August 12, 2002. 10.46 Master Lease Agreement between Southwest Michigan Innovation Center, Inc. and Esperion Therapeutics, Inc. effective as of July 12, 2001. 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.
21 EX-10.45 3 k72378exv10w45.txt EMPLOYMENT ARRANGEMENT BETWEEN ELLEN BRADY EXHIBIT 10.45 Dr. Ellen Brady August 5, 2002 Dear Ellen, 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 Senior Director of Clinical reporting on an interim basis to me. Upon hiring of a Sr. Vice President of Clinical and Regulatory, you will report to that individual. 2. You shall be paid an initial monthly salary of $13,750 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. Esperion will provide you with a starting bonus of $50,000. In the event that your employment at Esperion is terminated by you within 12 months from the time of your full-time starting date, you will be required to immediately repay the starting bonus. In the event that your employment at Esperion is terminated by you after 12 months but before 24 months from the time of your full-time starting date, you will be required to repay 50% of the starting bonus. This repayment provision will not apply if the reason for termination is other than resignation or cause. 5. Subject to meeting eligibility requirements, we intend to grant to you an option to purchase up to 50,000 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. 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. 8. 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. 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 two weeks from the date hereof. After this date (i.e. August 19, 2002) this offer may be withdrawn at the discretion of the Company. If you have any questions, please contact Susan Landauer, Human Resource Manager 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 Chief Operating Officer & CFO AGREED AND ACCEPTED: /s/ Ellen Brady August 12, 2002 - ------------------------------------------------------ Name Date EX-10.46 4 k72378exv10w46.txt MASTER LEASE AGREEMENT EXHIBIT 10.46 MASTER LEASE AGREEMENT Master Lease Agreement effective as of July 12, 2001, by and between Southwest Michigan Innovation Center, Inc., a Michigan nonprofit corporation ("Lessor") and Esperion Therapeutics, Inc., a Delaware corporation ("Lessee"). In consideration of the mutual agreements set forth in this Master Lease, the payment of rent and other amounts as provided in this Master Lease, and any equipment scheduled to be delivered pursuant to this Master Lease, the parties agree as follows: 1. Agreement to Lease. Lessor rents and leases to Lessee, and Lessee rents and leases from Lessor, all of the tangible personal property listed on each Equipment Schedule executed from time to time pursuant to this Master Lease (with respect to any Equipment Schedule called the "Equipment"). The term "Equipment" shall include all replacement parts, accessories or alterations incorporated into or made to such tangible personal property. Each Equipment Schedule shall be substantially in the form attached to this Master Lease as Exhibit A (an "Equipment Schedule"), shall incorporate in it all the terms and conditions of this Master Lease and shall contain such additional terms and conditions as Lessor and Lessee shall agree upon. Notwithstanding any other provision, Lessor and Lessee jointly issued a purchase order for a NMR Spectrometer on or after the effective date of this Master Lease and Lessor paid to Lessee the sum of Two Hundred Sixty Eight Thousand Two Hundred Dollars and No/100 ($268,200) with the Lessee of such equipment on July 12, 2001, and paid an additional One Hundred Fourteen Thousand One Hundred and no/100 ($114,100.00) to the Lessee on October 2, 2001. Lessor intends to make an additional payment of Sixty Four Thousand Seven Hundred and no/100 ($64,700.00) to Lessee. Lessor and Lessee acknowledge and agree that the NMR Spectrometer shall be leased to Lessee pursuant to this Master Lease, as evidenced by the attached Equipment Schedule and that the purchase price for the NMR Spectrometer, including installation costs, shall be added to the Principal Balance, as defined below, and recorded in the Payback Schedule, as defined below. Lessee shall be entitled to payment of an additional Fifty-Three Thousand and No/100 ($53,000.00) for reimbursement of the purchase of computer and lab equipment to be used at the Southwest Michigan Innovation Center ("SMIC") located at the Western Michigan University Business and Technology Park; subject, however, to Esperion first entering into a sublease agreement for space at SMIC and taking possession of those leased premises. 2. Term. The term of this Master Lease shall begin on July 12, 2001 (the "Commencement Date") and end seventy-two (72) months from the date of the last drawdown under this Master Lease (the "Term"). This Master Lease cannot be cancelled or terminated except as expressly permitted in this Master Lease. Upon expiration of the Master Lease, Lessee shall purchase the Equipment for the unamortized Principal Balance remaining under the Payback Schedule based upon the payment terms described in Section 3 _1_ of this Master Lease. 3. Rent and Payment; Net Lease. All sums paid by Lessor in connection with the acquisition and installation of Equipment pursuant to this Master Lease shall be recorded on the Payback Schedule. The parties agree that the Principal Balance is defined as the amount reimbursed or paid to Lessee by Lessor for the purchase of Equipment less any principal payments made under the applicable Payback Schedule. Lessee shall pay to Lessor as rent the outstanding Principal Balance plus interest according to the following terms beginning on the Commencement Date: Months Payment Amount 1 - 12 No payment; interest will accrue on the outstanding Principal Balance at four percent (4%) per annum. 13 - 36 Monthly interest only payments equal to four percent (4%) per annum of the outstanding Principal Balance, plus one twenty-fourth (1/24th)of the interest accrued during months 1 - 12. 37 - 72 Monthly principal and interest payments calculated using a ten (10) year amortization at four percent (4%) per annum of the outstanding Principal Balance. The outstanding Principal Balance shall be paid in full at the expiration of the Term. Rental Payments shall be monthly and shall be due and payable in advance on the first day of each calendar month (each such date being called a "Monthly Rent Payment Date"). Rent shall be paid to Lessor by check or wire transfer so as to constitute immediately available funds at the address of Lessor set forth above or at such other place as Lessor shall designate in writing or if to an Assignee (as defined in Section 14 below) of Lessor, at such place as such Assignee shall designate in writing. All amounts shall be paid free and clear of all claims, demands or set offs against Lessor or such Assignee. Lessor shall not be required to invoice Lessee for each payment, however, Lessor shall provide an amortization schedule, which will be incorporated into Exhibit B and shall state due dates and amounts (the "Payback Schedule") Time is of the essence of this Master Lease. Lessee agrees to pay interest on any late payment for the period beginning fifteen (15) days after the date such late payment was due through the date such late payment is made at the lesser of ten percent (10%) per annum or the maximum rate allowed by law. The Master Lease shall be non-cancelable for its entire term and Lessee shall have the right of prepayment, without penalty for the unpaid Principal Balance. _2_ LESSOR AND LESSEE ACKNOWLEDGE AND AGREE THAT LESSEE'S OBLIGATION TO PAY ALL RENTAL AND ANY OTHER AMOUNTS PAYABLE BY LESSEE UNDER THIS MASTER LEASE, AS EVIDENCED BY EXHIBIT B, SHALL BE ABSOLUTE AND UNCONDITIONAL AND, EXCEPT IF THE EQUIPMENT HAS BEEN DAMAGED TO THE EXTENT NOT REASONABLY OPERABLE BY LESSEE OR DESTROYED AS A RESULT OF THE USE OF THE EQUIPMENT BY WESTERN MICHIGAN UNIVERSITY FACULTY OR STUDENTS, SHALL NOT BE SUBJECT TO ANY ABATEMENT, REDUCTIONS, SET OFF, DEFENSE, COUNTERCLAIM, INTERRUPTION, DEFERMENT OR RECOUPMENT FOR ANY REASON WHATSOEVER, AND THAT SUCH PAYMENT SHALL BE AND CONTINUE TO BE PAYABLE IN ALL EVENTS. 4. Taxes and Fees. Lessee covenants and agrees to pay when due or reimburse and indemnify and hold Lessor harmless from and against all taxes, fees or other charges of any nature whatsoever (together with any related interest or penalties not arising from negligence on the part of Lessor) now or subsequently imposed or assessed ("Taxes") against Lessor, Lessee or the Equipment of any Federal, state, county, or local governmental authority upon or with respect to the Equipment or upon the ordering, purchase, sale, ownership, delivery, leasing, possession, use, operation, return or other disposition, or upon the rents, receipts, or earnings arising from the Equipment upon or with respect to any Equipment Schedule, if any. If Lessee is required by law or administrative practice to make any report or return with respect to such Taxes, Lessee shall promptly notify Lessor in writing and shall cooperate with Lessor to confirm that such reports are properly filed and accurately reflect Lessor's interest in the Equipment. 5. Insurance. Lessee shall obtain and maintain for the Term of the Master Lease, at its own expense, property damage and general liability insurance, including without limitation, loss by fire (including so-called extended coverage), theft, collision, and such other risks of loss as are customarily insured against the type of equipment leased under the Master Lease and by the businesses in which Lessee is engaged, in such amounts and in such form, which are reasonable with respect to the risk covered. All such insurance policies shall protect Lessor and Lessee as named insureds, and shall provide that all losses shall be payable to Lessor, adjusted solely with Lessor. On Lessor's request, Lessee shall provide evidence of such insurance to Lessor within five (5) days of such request. Notwithstanding anything to the contrary herein, the parties agree that if the Equipment is damaged to the extent not reasonably operable by Lessee or destroyed as a result of the use of the Equipment by Western Michigan University faculty or students, then Lessor will be responsible for replacing or repairing the damaged or destroyed Equipment to the extent such repair or replacement costs are not covered by insurance. 6. Location and Maintenance. Lessee shall use, operate and keep the Equipment at McCracken Hall, Haenicke Hall, or the Southwest Michigan Innovation Center. Lessee shall, at its sole expense, at all times during the Term of the Master Lease, maintain the Equipment in good repair, condition and appearance and protect the Equipment _3_ from deterioration other than normal wear and tear. Lessee shall not use the Equipment for any purpose other than that for which it was designed nor in violation of any restriction on use set forth in the applicable Equipment Schedule. Upon reasonable notice by Lessor, which will not exceed thirty-six (36) hours, Lessee shall at all reasonable times during business hours, make the Equipment available to the Lessor for inspection at the place where it is normally located and shall make Lessee's log and maintenance records pertaining to the Equipment available to Lessor for inspection, provided that a representative of Lessee accompanies Lessor. 7. Title; Financing Statement; Liens. Lessor and Lessee intend that this Master Lease is an agreement of the lease. Accordingly, title to the Equipment shall at all times remain with Lessor and nothing contained in any Equipment Schedule shall give or convey to Lessee any right, title or interest in or to the Equipment, except as a Lessee, as set forth in this Master Lease. Lessor has and is relying upon its residual interest in the Equipment at the termination of this Master Lease, whether by expiration, default or otherwise. Lessee appoints and authorized Lessor, as its agent and attorney-in-fact, to execute and file, on behalf of Lessee, any Uniform Commercial Code financing statements. Lessee shall, at its expense, protect and defend Lessor's title as well as the interest of any Assignee against all persons claiming against or through Lessee and shall at all times keep the Equipment free and clear from any legal process, liens, or encumbrances, whatsoever (except those placed by Lessor) and shall give Lessor immediate written notice of any liens and shall indemnify and hold Lessor and any Assignee harmless from and against any loss caused by such liens. 8. Risk of Loss. Until such time as the Equipment is returned and delivered to and accepted by Lessor pursuant to the terms of this Master Lease, Lessee assumes and shall bear the entire risk of loss, damage, theft and destruction of and to the Equipment or any portion of it from any cause whatsoever, commencing with delivery of such Equipment to Lessee. No loss, damage, theft or destruction of the Equipment for which Lessee has the risk of loss shall relieve Lessee in any way from the obligations to pay rental or perform any other of its obligations under this Master Lease. Notwithstanding anything to the contrary herein, the parties agree that if the Equipment is damaged to the extent not reasonably operable by Lessee or destroyed as a result of the use of the Equipment by Western Michigan University faculty or students under this Agreement, then Lessor will be responsible for replacing or repairing the damaged or destroyed Equipment to the extent not covered by insurance. Lessee shall promptly notify Lessor in writing of any loss, theft, damage or destruction of the Equipment. In the event of such a loss, damage, theft or destruction of any item of the Equipment, Lessee, at the option of Lessor, shall: (a) Promptly place, at Lessee's expense, the Equipment in good repair, condition and working order in accordance with the manufacturer's specifications and to the reasonable satisfaction _4_ of Lessor; or (b) Promptly replace, at Lessee's expense, the Equipment with like Equipment of the same or a later model and specifications, with the additions, in good repair, condition and working order in accordance with the manufacturer's specifications and to the reasonable satisfaction of Lessor. In the event Lessor elects or requires Lessee to repair or replace any such item of Equipment pursuant to (a) or (b) above, continuation of this Master Lease, and/or any Equipment Schedule and the continued payment of rent shall not be affected because of such loss, damage or destruction and the resulting repair or replacement and the insurance proceeds received by Lessor, if any, pursuant to Section 5 above, after the use of such funds to pay any accrued and unpaid rentals under this Master Lease, shall be paid to Lessee upon Lessee's furnishing proof reasonably satisfactory to Lessor that such repair or replacement has been completed in a manner reasonably satisfactory to Lessor and fully paid for by Lessee. 9. No Lien or Modifications. Lessee shall not create or incur any mortgage, lien, pledge or other encumbrance or attachment of any kind upon the Equipment. Lessee shall not make any changes to the Equipment, except as permitted by Lessor, except as required by any maintenance obligations of the Master Lease Agreement. Lessee shall not assign or in any way dispose of all or any part of its rights or obligations under the Master Lease Agreement. 10. Selection; Finance Lease Status. Lessee acknowledges, represents and warrants that is has made the selection of both (a) the Equipment and (b) the supplier(s) (individually, a "Supplier" and collectively "Suppliers") from whom Lessor is to purchase the Equipment, based on Lessee's own judgment and expressly disclaims any reliance upon statements made by the Lessor. Lessee requests that Lessor order and purchase the Equipment from Suppliers and arrange for delivery of such Equipment to Lessee. Lessee authorizes Lessor to insert in each Equipment Schedule the serial number and other identifying data of the Equipment. To the extent possible, the parties agree that this Master Lease and each Equipment Schedule are intended to qualify as a "finance lease" under Article 2A of the Uniform Commercial Code ("UCC"). Lessee acknowledges that Lessee selected and approved all Equipment leased under this Master Lease. 11. Disclaimer of Warranties. LESSOR IS NOT THE MANUFACTURER OR SUPPLIER OF ANY OF THE EQUIPMENT. ACCORDINGLY, LESSOR MAKES NO REPRESENTATION, WARRANTY OR COVENANT, EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING WITHOUT LIMITATION THE DESIGN OR CONDITION OF THE EQUIPMENT, ITS _5_ MERCHANTABILITY, FITNESS CAPACITY OR SUITABILITY FOR ANY PARTICULAR PURPOSE, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE EQUIPMENT OR ANY CONFORMITY OF THE EQUIPMENT TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE ORDER(S) RELATING TO THE EQUIPMENT. ALL EQUIPMENT SHALL BE ACCEPTED AND LEASED BY LESSEE "WHERE IS", "AS IS", AND "WITH ALL FAULTS". LESSOR SHALL NOT BE RESPONSIBLE FOR ANY PATENT OR LATENT DEFECTS IN ANY EQUIPMENT, FOR ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, OR COPYRIGHT, OR FOR DAMAGES WHETHER ACTUAL, SPECIAL, CONSEQUENTIAL OR INCIDENTAL ARISING FROM ANY CAUSE WHATSOEVER. Lessor shall not be liable to Lessee or any third party for consequential, incidental, special or exemplary damages occurring out of or related to the Master Lease, or the transactions contemplated under the Master Lease, except for Lessor's gross negligence or willful misconduct. Lessee further understands and agrees that no employee or agent of Lessor is authorized to waive or alter any term or condition of this Master Lease or any Equipment Schedule, if any, including without limitation, this Section 11. Lessor assigns to Lessee for and during the term of this Master Lease all of its right, title and interest in and to any warranty made by any manufacturer or Supplier of the Equipment to the extent the same is assignable. Lessor makes no warranties independent of those made by such manufacturer and Lessee agrees that it will look solely to such manufacturer. Lessee agrees to resolve all such warranty claims directly with such manufacturer or Supplier. Provided that no Event of Default under this Lease is then existing, Lessor shall cooperate with Lessee to resolve such warranty claims in good faith and by appropriate proceedings at Lessee's sole cost and expense. No such warranty claim shall affect in any manner the unconditional obligation fo Lessee to make rent and other payments under this Master Lease. 12. Representations and Warranties of Lessee. Lessee represents, warrants and covenants that with respect to the Master Lease and each Equipment Schedule executed pursuant to the Master Lease: (a) Lessee has been duly authorized by all necessary corporate action to execute, deliver and perform this Master Lease, and will not violate Lessee's articles of incorporation, by-laws, or require the approval of any of its shareholders, other than those individuals executing this Master Lease. (b) The individual executing this Master Lease was duly authorized to do so. (c) The Master Lease, each Equipment Schedule and all Exhibits to this Master Lease constitute legal, valid and binding agreements of Lessee enforceable in accordance with their respective terms. _6_ (d) The Equipment is personal property and when subjected to use by the Lessee will not be or become fixtures under applicable law. (e) ALL EQUIPMENT IS LEASED FOR BUSINESS PURPOSES ONLY OR TO ALLOW FOR ACCESS TO WESTERN MICHIGAN UNIVERSITY, AND NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES. 13. Assignment by Lessee. WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, LESSEE SHALL NOT (A) ASSIGN, TRANSFER, PLEDGE OR OTHERWISE DISPOSE OF THIS MASTER LEASE, THE EQUIPMENT OR ANY INTEREST THEREIN OR (B) SUBLET OR PERMIT THE EQUIPMENT TO BE USED BY ANY PARTY OTHER THAN LESSEE, OR WESTERN MICHIGAN UNIVERSITY, EXCEPT TO A SUCCESSOR TO ITS BUSINESS OR SUBSTANTIALLY ALL OF ITS ASSETS, PROVIDED, LESSOR HAS CONSENTED TO SUCH ASSIGNMENT, WHICH SHALL NOT BE UNREASONABLY WITHHELD. 14. Assignment by Lessor. Lessor may, without notice to Lessee, assign or sell its interest in, grant a security interest in or otherwise transfer, in whole or in part, this Master Lease, any or all Equipment Schedules, any or all of the Equipment or any of its rights, interests or obligations with respect to them, including, without limitation, all rental and other sums due or to become due under any Schedule to one or more persons or entities (each an "Assignee"). LESSEE ACKNOWLEDGES THAT ANY SUCH ASSIGNMENT OR TRANSFER BY LESSOR SHALL NOT MATERIALLY IMPAIR LESSEE'S PROSPECT OF OBTAINING RETURN PERFORMANCE BY LESSOR, MATERIALLY CHANGE LESSEE'S DUTIES OR OBLIGATIONS UNDER THE APPLICABLE EQUIPMENT SCHEDULE, NOR MATERIALLY INCREASE THE BURDENS OR RISKS IMPOSED ON LESSEE. LESSEE FURTHER AGREES THAT ANY SUCH ASSIGNMENT OR TRANSFER SHALL BE PERMITTED EVEN IF IT COULD BE DEEMED TO MATERIALLY EFFECT THE INTERESTS OF LESSEE. Lessee shall, upon receipt of notice of assignment from Lessor, be bound by any such assignment. Any Assignee shall have all of the rights and obligations of Lessor under this Master Lease and the applicable Equipment Schedule. Upon receipt of notice of any assignment and instructions to do so, Lessee shall pay directly to Assignee all rental and other sums due under this Master Lease and applicable Equipment Schedule. 15. Indemnity. Lessee shall and does indemnify and hold Lessor and any Assignee harmless from and against any and all claims, costs, expenses, damages, and liabilities (including without limitation reasonable attorney's fees), arising out of the possession, operating, control, use, maintenance, delivery, return or other disposition of the Equipment under this Master Lease. Notwithstanding the foregoing, Lessee shall not be responsible under the terms of this Section to a party indemnified hereunder for any claims, _7_ costs, expenses, damages, and liabilities occasioned by the negligence or willful misconduct of such indemnified party. In addition, the parties agree that if the Equipment is damaged to the extent not reasonably operable by Lessee or destroyed as a result of the use of the Equipment by Western Michigan University faculty or students under this Agreement, then Lessor will indemnify Lessee for the costs associated with replacing or repairing the damaged or destroyed Equipment that are not covered by insurance. Both Lessee and Lessor agree to give the other party prompt notice of any claim or liability that may give rise to any indemnification under this Section. This Section shall remain in effect notwithstanding the expiration or termination of this Master Lease or any Equipment Schedule insofar as it relates to an event that occurred prior to such expiration or termination. 16. Default; Remedies. The occurrence of any one or more of the following events (herein called "Events of Default") shall constitute a default under this Master Lease: (a) Default by Lessee in the payment of any installment of Monthly Rent or other amount payable by Lessee under any Equipment Schedule or this Master Lease as and when the same becomes due and payable and which continued to be unpaid for a period of thirty (30) days after notice; or (b) Default by Lessee in the performance of any other term covenant or condition of any Equipment Schedule or this Master Lease, or the inaccuracy in any material respect of any representation or warranty made by the Lessee in such Equipment Schedule or this Master Lease or any document or certificate furnished to Lessor in connection therewith, which default or inaccuracy shall continue for a period of thirty (30) days after notice; or (c) The making of an assignment by Lessee for the benefit of its creditors or the admission by Lessee in writing of its inability to pay its debts as they become due, or the insolvency of Lessee, or the filing by Lessee of a voluntary petition in bankruptcy, or the adjudication of Lessee as a bankrupt, or the filing by Lessee of any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any present or future statue, law regulation, or the filing of any answer by the Lessee admitting, or the failure by Lessee to deny the material allegations of a petition filed against it for any such relief, or the seeking or consenting by Lessee to, or acquiescence by Lessee in, the appointment of any trustee, receiver or liquidator of Lessee or of all or any substantial party of the properties of _8_ Lessee, or the inability of Lessee to pay its debts when due, or the commission by Lessee of any act of bankruptcy as defined in the Federal Bankruptcy Act, as amended; or (d) The failure by Lessee within sixty (60) days after the commencement of any proceeding against Lessee seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, to obtain the dismissal of such proceeding or, within sixty (60) days after the appointment, without the consent or acquiescence of Lessee, of any trustee, receiver or liquidator of Lessee of all or any substantial party of the properties of Lessee, to vacate such appointment; or (e) Lessee creates or suffers to exist any liens, encumbrances or security interests on the Equipment or this Master Lease; or (f) Lessee ceases doing business as a going concern or abandons all or any part of the Equipment; or (g) Lessee attempts to remove, sell, transfer, part with possession or sublease any item of Equipment. Upon the occurrence of any one or more Events of Default, Lessor has the right to exercise any one or more of the following remedies, without notice of any kind: (a) declare all of the unpaid Principal Balance of the Master Lease immediately due and payable; (b) enter upon the Premises at McCracken Hall or any place where the Equipment is located and take possession of all or any part of the Equipment, if this can be done without a breach of the peace, and either hold it at that location or remove it to any other place within the State of Michigan that Lessor desires. Lessor may then sell or release all or any part of the Equipment a public or private auction, giving notice as required by law. Any sale or release of the Equipment must be in a commercially reasonable manner. Lessor has the right to recover from Lessee an amount by which the sum received upon the sale or release (during the remaining and expired term of the Master Lease), of the Equipment is exceeded by the aggregate of (i) all sums owing to Lessor from Lessee under the Master Lease, whether for rent or otherwise; (ii) all costs reasonably incurred by Lessor in exercising its remedies, including searching for, taking possession of and selling the Equipment; and (iii) all other damages, costs and expenses, including reasonable attorney fees incurred by Lessor as a result of Lessee's default; (c) terminate the Master Lease without prejudice to any of Lessor's rights; or (d) exercise any other remedy available to Lessor in law or equity. 17. Lessee's Waivers. TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSEE HEREBY WAIVES THE FOLLOWING RIGHTS AND REMEDIES: (A) THE RIGHT TO CANCEL OR REPUDIATE THIS A MASTER LEASE AND ANY APPLICABLE LEASE EQUIPMENT SCHEDULE; (B) THE RIGHT TO _9_ REJECT OR REVOKE ACCEPTANCE OF THE EQUIPMENT; (C) THE RIGHT TO CLAIM A SECURITY INTEREST IN THE EQUIPMENT IN LESSEE'S POSSESSION OR CONTROL FOR ANY REASON; OR (D) THE RIGHT TO DEDUCT ALL OR ANY PART OF ANY CLAIMED DAMAGES RESULTING FROM LESSOR'S DEFAULT, IF ANY, UNDER THIS MASTER LEASE OR ANY APPLICABLE EQUIPMENT SCHEDULE. 18. Entire Agreement. Lessor and Lessee acknowledge that there are no agreements or understandings, written or oral between Lessor and Lessee with respect to the Equipment, other than as set forth in this Master Lease and in each Equipment Schedule and that this Master Lease and Equipment Schedule contains the entire agreement between Lessor and Lessee with respect to the leasing of the Equipment. Neither this Master Lease nor any Equipment Schedule may be altered, modified, terminated or discharged except by a writing signed by the party against whom such alteration, modification, termination or discharge is sought. 19. No Waiver. No omission, or delay, by Lessor at any time to enforce any right or remedy reserved to it, or to require performance of any of the terms, covenants or provisions of this Master Lease by Lessee at any time designated, shall be a waiver of any such right or remedy to which the Lessor is entitled, not shall it in any way affect the right of lessor to enforce such provisions thereafter. 20. Binding Nature. This Master Lease and each Equipment Schedule shall be binding upon, and shall inure to the benefit of Lessor, Lessee and their respective successors, legal representatives and assigns (including any Assignee), to the extent set forth in this Master Lease. 21. Survival of Obligations. All agreements, representatives and warranties contained in this Master Lease, any Equipment Schedule or in any document delivered pursuant to either or in connection with either shall survive the execution and delivery of this Master Lease and the expiration or other termination of this Master Lease. 22. Notice. All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given, except as otherwise provided herein, when delivered in person or by telex, telegram, facsimile, or other standard form of written telecommunication, or three (3) business days after being deposited in the U.S. mail, by certified mail, return receipt requested, postage prepaid, in each case to the parties at the following addresses: If to Lessor: Southwest Michigan Innovation Center, Inc. With a copy to: Miller, Johnson, Snell & Cummiskey, P.L.C. 303 N. Rose St, Suite 600 _10_ Kalamazoo, Michigan 49007 Attention: John M. Novak If to Lessee: Esperion Therapeutics, Inc. 3621 South State Street 695 KMS Place Ann Arbor, MI 48108 (734) 332-0516 Attention: President and CEO With copy to General Counsel 23. Governing Law. This Master Lease shall not be effective unless and until accepted by execution by any officer of Lessor in the State of Michigan. This Master Lease and all Equipment Schedules shall be governed and construed for all purposes under and in accordance with the laws of the State of Michigan. 24. Severability. In the event any one or more of the provisions of this Master Lease and/or any Equipment Schedule shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Master Lease and/or any such Equipment Schedule shall be unimpaired. 25. Counterparts. This Master Lease and any Equipment Schedule may be executed in any number of counterparts, each of which shall be deemed an original, but all such counterparts together shall constitute but on and the same instrument. If Lessor grants a security interest in all or any part of any Equipment Schedule, the Equipment covered thereby and/or sums payable thereunder, only that counterpart Equipment Schedule marked "Secured Party's Original" shall be effective to transfer Lessor's rights therein and all other counterparts shall be marked "Duplicate" to indicate that they are not the "Secured Party's Original". Dated as of July 12, 2001 SOUTHWEST MICHIGAN INNOVATION CENTER, INC. By: /s/ Barry Broome ----------------- Its: CEO --- _11_ Dated as of July 12, 2001 ESPERION THERAPEUTICS, INC. By: /s/ Timothy M. Mayleben ----------------------- Its: COO --- _12_ EXHIBIT A EQUIPMENT SCHEDULE NO. 1 DATED AS OF JULY 12, 2001 LESSEE: ESPERION THERAPEUTICS LESSOR: SOUTHWEST MICHIGAN INNOVATION CENTER, INC. Price of NMR Equipment $268,200 July 12, 2001 $114,100 October 2, 2001 $ 64,700 To be determined Each of the above payments will be added to the Payback Schedule according to the date of disbursement, and will be paid according to the terms set forth in Section 3. Location of Equipment: McCracken Hall, Western Michigan University EQUIPMENT Qty. Description Monthly Rental - --------------------------------------------------------------------------- 1 NMR Spectrometer and Probe See below Rentals: Pursuant to Section 3 of the Master Lease, the Equipment purchase price shall be added to the Payment Schedule set forth on Exhibit B of the Master Lease and Lessee agrees to pay the amounts determined according to terms set forth in Section 3. Term: Pursuant to Section 2 of the Master Lease, Lessor and Lessee agree that this Equipment Schedule is effective from the Commencement Date of the Master Lease and shall remain in force for the Term of the Master Lease. Upon expiration of the Master Lease, the outstanding Principal Balance should be paid in full. Restriction on Use: Pursuant to Section 5 of the Master Lease, Lessee agrees to the following Restrictions of the use of the Equipment: none Special Terms: Pursuant to Section 1 of the Master Lease, the following additional terms, set forth below or attached hereto, shall be applicable to and shall constitute a part of this Equipment _13_ Schedule: Lessee shall allow WMU faculty and students use of the Equipment at times that will not interfere with Lessee's use, so long as WMU faculty and students abide by all of Lessee's requirements for using the NMR, including, but not limited to, receiving appropriate training and receiving appropriate access passcode by Lessee's system administrator. Master Lease: This Equipment Schedule is issued pursuant to the Master Lease Agreement identified above. All of the terms, conditions, representations and warranties of the Master Lease Agreement are incorporated in this Equipment Schedule as if they were expressly set forth in this Equipment Schedule. By their execution and delivery of the Equipment Schedule, the parties reaffirm all of the terms, conditions, representations and warranties of the Master Lease Agreement except as modified in this Equipment Schedule. Dated as of July 12, 2001 ESPERION THERAPEUTICS, INC. SOUTHWEST MICHIGAN INNOVATION CENTER, INC. By:/s/ Timothy M. Mayleben ----------------------- By:/s/ Barry Broome ---------------- Its: COO Its: CEO --- --- _14_ EXHIBIT B See Attached _15_ EXHIBIT B SCHEDULE NO. 2
- --------------------------------------------------------------------------------------------------- PAYMENT BEGINNING INTEREST INTEREST NO. DATE BALANCE ACCRUED PAID - --------------------------------------------------------------------------------------------------- 1 11/1/2001 114,100.00 380.33 0.00 2 12/1/2001 114,480.33 381.60 0.00 3 1/1/2002 114,861.93 382.87 0.00 4 2/1/2002 115,244.81 384.15 0.00 5 3/1/2002 115,628.96 385.43 0.00 6 4/1/2002 116,014.39 386.71 0.00 7 5/1/2002 116,401.10 388.00 0.00 8 6/1/2002 116,789.11 389.30 0.00 9 7/1/2002 117,178.40 390.59 0.00 10 8/1/2002 117,569.00 391.90 0.00 11 9/1/2002 117,960.89 393.20 0.00 12 10/1/2002 118,354.10 394.51 0.00 13 11/1/2002 118,748.61 395.83 589.52 14 12/1/2002 118,554.92 395.18 588.88 15 1/1/2003 118,361.23 394.54 588.23 16 2/1/2003 118,167.53 393.89 587.58 17 3/1/2003 117,973.84 393.25 586.94 18 4/1/2003 117,780.15 392.60 586.29 19 5/1/2003 117,586.46 391.95 585.65 20 6/1/2003 117,392.77 391.31 585.00 21 7/1/2003 117,199.07 390.66 584.36 22 8/1/2003 117,005.38 390.02 583.71 23 9/1/2003 116,811.69 389.37 583.06 24 10/1/2003 116,618.00 388.73 582.42 25 11/1/2003 116,424.31 388.08 581.77 26 12/1/2003 116,230.61 387.44 581.13 27 1/1/2004 116,036.92 386.79 580.48 28 2/1/2004 115,843.23 386.14 579.84 29 3/1/2004 115,649.54 385.50 579.19 30 4/1/2004 115,455.84 384.85 578.54 31 5/1/2004 115,262.15 384.21 577.90 32 6/1/2004 115,068.46 383.56 577.25 33 7/1/2004 114,874.77 382.92 576.61 34 8/1/2004 114,681.08 382.27 575.96 35 9/1/2004 114,487.38 381.62 575.32 36 10/1/2004 114,293.69 380.98 574.67 37 11/1/2004 114,100.00 380.33 380.33 38 12/1/2004 113,325.12 377.75 377.75 39 1/1/2005 112,547.66 375.16 375.16 40 2/1/2005 111,767.61 372.56 372.56 41 3/1/2005 110,984.96 369.95 369.95 42 4/1/2005 110,199.70 367.33 367.33 43 5/1/2005 109,411.82 364.71 364.71 44 6/1/2005 108,621.32 362.07 362.07 45 7/1/2005 107,828.18 359.43 359.43 46 8/1/2005 107,032.40 356.77 356.77 47 9/1/2005 106,233.96 354.11 354.11 48 10/1/2005 105,432.87 351.44 351.44 49 11/1/2005 104,629.10 348.76 348.76 50 12/1/2005 103,822.65 346.08 346.08 51 1/1/2005 103,013.52 343.38 343.38 52 2/1/2005 102,201.69 340.67 340.67 53 3/1/2005 101,387.15 337.96 337.96 54 4/1/2005 100,569.90 335.23 335.23 55 5/1/2005 99,749.92 332.50 332.50 56 6/1/2005 98,927.21 329.76 329.76 57 7/1/2005 98,101.76 327.01 327.01 58 8/1/2005 97,273.55 324.25 324.25 59 9/1/2005 96,442.59 321.48 321.48 60 10/1/2005 95,608.85 318.70 318.70 61 11/1/2005 94,772.34 315.91 315.91 62 12/1/2005 93,933.04 313.11 313.11 63 1/1/2006 93,090.94 310.30 310.30 64 2/1/2006 92,246.03 307.49 307.49 65 3/1/2006 91,398.31 304.66 304.66 66 4/1/2006 90,547.76 301.83 301.83 67 5/1/2006 89,694.37 298.98 298.98 68 6/1/2006 88,838.14 296.13 296.13 69 7/1/2006 87,979.06 293.26 293.26 70 8/1/2006 87,117.11 290.39 290.39 71 9/1/2006 86,252.30 287.51 287.51 72 10/1/2006 85,384.59 284.62 284.62 - --------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------- PRINCIPAL ENDING PAYMENT CUMULATIVE NO. PAID BALANCE AMOUNT INTEREST - ------------------------------------------------------------------------------------------------- 1 0.00 114,480.33 0.00 380.33 2 0.00 114,861.93 0.00 761.93 3 0.00 115,244.81 0.00 1,144.81 4 0.00 115,628.96 0.00 1,528.96 5 0.00 116,014.39 0.00 1,914.39 6 0.00 116,401.10 0.00 2,301.10 7 0.00 116,789.11 0.00 2,689.11 8 0.00 117,178.40 0.00 3,078.40 9 0.00 117,569.00 0.00 3,469.00 10 0.00 117,960.89 0.00 3,860.89 11 0.00 118,354.10 0.00 4,254.10 12 0.00 118,748.61 0.00 4,648.61 13 0.00 118,554.92 589.52 5,044.44 14 0.00 118,361.23 588.88 5,439.62 15 0.00 118,167.53 588.23 5,834.16 16 0.00 117,973.84 587.58 6,228.05 17 0.00 117,780.15 586.94 6,621.30 18 0.00 117,586.46 586.29 7,013.90 19 0.00 117,392.77 585.65 7,405.85 20 0.00 117,199.07 585.00 7,797.16 21 0.00 117,005.38 584.36 8,187.83 22 0.00 116,811.69 583.71 8,577.84 23 0.00 116,618.00 583.06 8,967.22 24 0.00 116,424.31 582.42 9,355.94 25 0.00 116,230.61 581.77 9,744.02 26 0.00 116,036.92 581.13 10,131.46 27 0.00 115,843.23 580.48 10,518.25 28 0.00 115,649.54 579.84 10,904.39 29 0.00 115,455.84 579.19 11,289.89 30 0.00 115,262.15 578.54 11,674.74 31 0.00 115,068.46 577.90 12,058.95 32 0.00 114,874.77 577.25 12,442.51 33 0.00 114,681.08 576.61 12,825.43 34 0.00 114,487.38 575.96 13,207.70 35 0.00 114,293.69 575.32 13,589.32 36 0.00 114,100.00 574.67 13,970.30 37 774.88 113,325.12 1,155.21 14,350.64 38 777.46 112,547.66 1,155.21 14,728.39 39 780.05 111,767.61 1,155.21 15,103.54 40 782.65 110,984.96 1,155.21 15,476.10 41 785.26 110,199.70 1,155.21 15,846.05 42 787.88 109,411.82 1,155.21 16,213.39 43 790.50 108,621.32 1,155.21 16,578.09 44 793.14 107,828.18 1,155.21 16,940.16 45 795.78 107,032.40 1,155.21 17,299.59 46 798.44 106,233.96 1,155.21 17,656.36 47 801.10 105,432.87 1,155.21 18,010.48 48 803.77 104,629.10 1,155.21 18,361.92 49 806.45 103,822.65 1,155.21 18,710.68 50 809.13 103,013.52 1,155.21 19,056.76 51 811.83 102,201.69 1,155.21 19,400.14 52 814.54 101,387.15 1,155.21 19,740.81 53 817.25 100,569.90 1,155.21 20,078.77 54 819.98 99,749.92 1,155.21 20,414.00 55 822.71 98,927.21 1,155.21 20,746.50 56 825.45 98,101.76 1,155.21 21,076.26 57 828.20 97,273.55 1,155.21 21,403.26 58 830.96 96,442.59 1,155.21 21,727.51 59 833.73 95,608.85 1,155.21 22,048.98 60 836.51 94,772.34 1,155.21 22,367.68 61 839.30 93,933.04 1,155.21 22,683.59 62 842.10 93,090.94 1,155.21 22,996.70 63 844.91 92,246.03 1,155.21 23,307.00 64 847.72 91,398.31 1,155.21 23,614.49 65 850.55 90,547.76 1,155.21 23,919.15 66 853.38 89,694.37 1,155.21 24,220.98 67 856.23 88,838.14 1,155.21 24,519.96 68 859.08 87,979.06 1,155.21 24,816.08 69 861.95 87,117.11 1,155.21 25,109.35 70 864.82 86,252.30 1,155.21 25,399.74 71 867.70 85,384.59 1,155.21 25,687.25 72 85,384.59 0.00 85,669.21 25,971.86 - -------------------------------------------------------------------------------------------------
EX-99.1 5 k72378exv99w1.txt CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 99.1 SECTION 906 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER RELATING TO A PERIODIC REPORT CONTAINING FINANCIAL STATEMENTS 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 September 30, 2002 (the "Form on 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: November 14, 2002 EX-99.2 6 k72378exv99w2.txt CERTIFICATION PURSUANT TO SECTION 906 EXHIBIT 99.2 SECTION 906 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER RELATING TO A PERIODIC REPORT CONTAINING FINANCIAL STATEMENTS 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 September 30, 2002 (the "Form on 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: November 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----