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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-12
Esperion Therapeutics, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
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statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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ESPERION THERAPEUTICS, INC.
3621 SOUTH STATE STREET
695 KMS PLACE
ANN ARBOR, MICHIGAN 48108
------------------------
NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
------------------------
TO THE STOCKHOLDERS OF ESPERION THERAPEUTICS, INC.
Notice is hereby given that the 2001 Annual Meeting of the holders of
shares of common stock, each having a par value of $0.001 per share, of Esperion
Therapeutics, Inc. (the "Company") will be held at Crowne Plaza, 610 Briarwood
Circle, Ann Arbor, Michigan 48108, on May 22, 2001 at 9:00 a.m. local time, to
consider and take action with respect to the following matters:
1. To elect two Class I directors, each to serve for a term of three years
and until their respective successors are elected and qualified.
2. To approve an amendment of the Company's 2000 Equity Compensation Plan
to increase the number of shares authorized for issuance under the Plan
and a restatement of the Plan.
3. To ratify the appointment of Arthur Andersen LLP as independent public
accountants of the Company for the fiscal year ending December 31, 2001.
4. To conduct such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Holders of common stock of record at the close of business on April 16,
2001 are entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof.
Information regarding the matters to be acted upon at the Annual Meeting is
contained in the Proxy Statement accompanying this Notice.
By Order of the Board of Directors,
Roger S. Newton, Ph.D.
President and Chief Executive Officer
Ann Arbor, Michigan
Dated: April 30, 2001
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY
CARD AND RETURN IT IN THE ENCLOSED ENVELOPE.
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ESPERION THERAPEUTICS, INC.
3621 SOUTH STATE STREET
695 KMS PLACE
ANN ARBOR, MICHIGAN 48108
------------------------
PROXY STATEMENT
FOR
2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 2001
------------------------
INTRODUCTION
This Proxy Statement and the accompanying form of proxy (the "Proxy Card")
are furnished in connection with the solicitation of proxies by the Board of
Directors of Esperion Therapeutics, Inc. (the "Company") to be used at the
Company's annual meeting of stockholders to be held on May 22, 2001 at 9:00
a.m., local time, at Crowne Plaza, 610 Briarwood Circle, Ann Arbor, Michigan
48108, and any adjournment thereof (the "Annual Meeting").
The Notice of Annual Meeting (the "Notice"), Proxy Statement and Proxy
Cards were mailed on or about April 30, 2001 to all stockholders entitled to
vote at the Annual Meeting. The expense of soliciting proxies, including the
costs of preparing, assembling and mailing the Notice, Proxy Statement and Proxy
Cards, will be borne by the Company. In addition to the use of the mail, proxies
may be solicited personally or by telephone, facsimile or telegraph. The Company
may arrange for the reimbursement of persons holding stock beneficially owned by
others for their expenses in sending proxy materials to such beneficial owners.
VOTING RIGHTS AND PROCEDURAL MATTERS
Only holders of shares of common stock, par value $0.001 per share ("Common
Stock"), of the Company as of the close of business on April 16, 2001, the
record date ("Record Date") fixed by the Board of Directors of the Company (the
"Board"), are entitled to notice of and to vote at the Annual Meeting.
Stockholders are entitled to one vote per share of Common Stock on each matter
presented at the Annual Meeting. As of April 16, 2001, there were 25,968,588
shares of Common Stock issued and outstanding and no other outstanding classes
of voting securities of the Company.
The presence of the holders of a majority of the outstanding shares of
Common Stock in person or represented by duly executed proxies at the Annual
Meeting and entitled to vote is necessary to constitute a quorum for the
transaction of business at the Annual Meeting.
The affirmative vote of a plurality of the votes cast by stockholders
present in person or represented by duly executed proxies at the Annual Meeting
and entitled to vote is required for the election of directors. Cumulative
voting for the election of directors is not permitted. The affirmative vote of a
majority of the stockholders present in person or represented by duly executed
proxies at the Annual Meeting and entitled to vote is required for approval of
the proposals to approve the amendment of the Company's 2000 Equity Compensation
Plan to increase the number of shares authorized for issuance under the Plan by
700,000 and to restate the Plan and to ratify the appointment of the Company's
independent public accountants for fiscal year 2001.
Shares of Common Stock represented by valid Proxy Cards, completed, duly
signed, dated, returned to the Company and not revoked, will be voted at the
Annual Meeting in accordance with the directions given. In the absence of
directions to the contrary, the shares will be voted "FOR" the
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election of the nominees for Class I directors named in this Proxy Statement,
"FOR" the approval of the Company's 2000 Equity Compensation Plan as amended and
restated, a copy of which is attached as Appendix A to this Proxy Statement, and
"FOR" the ratification of the appointment of the independent public accountants
named in this Proxy Statement. Shares represented by valid Proxy Cards which are
marked "WITHHELD" with regard to the election of the nominees for director will
be excluded entirely from the vote and will have no effect. Shares represented
by valid Proxy Cards which are marked "ABSTAIN" with regard to the approval of
the amendment and restatement of the Company's 2000 Equity Compensation Plan or
the ratification of the appointment of the independent public accountants will
have the same effect as a negative vote.
The Board does not know of any other matters to be presented for
consideration at the Annual Meeting. If any other matters properly come before
the Annual Meeting or any adjournment thereof, the persons designated as proxies
will vote on such matters in their discretion.
Any stockholder of the Company that returns a Proxy Card has the right to
revoke the proxy at any time prior to its exercise at the Annual Meeting by (i)
delivering to any of the persons designated as proxies on the Proxy Card, or to
the Company addressed to the Secretary, a written statement revoking the proxy,
(ii) appearing at the Annual Meeting and voting in person, or (iii) executing a
later dated Proxy Card which is exercised at the Annual Meeting.
PRINCIPAL STOCKHOLDERS
The stockholders named in the following table are those known to the
Company to be the beneficial owners of 5% or more of the outstanding Common
Stock as of March 20, 2001. For purposes of this table, and as used elsewhere in
this Proxy Statement, the term "beneficial owner" means any person (i) who,
directly or indirectly, has or shares the power to vote or dispose of shares of
Common Stock or (ii) who has the right to acquire shares of Common Stock within
sixty (60) days.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
- ------------------- -------------------- ------------
Oak Management Corporation........................... 3,162,772(1) 12.1%
One Gorham Island
Westport, CT 06880
TL Ventures III L.P.................................. 3,842,751(2) 14.7%
700 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087-1990
HealthCap AB......................................... 2,544,804(3) 9.7%
Sturegatan 34
S-11436 Stockholm, Sweden
- -------------------------
(1) This amount is based both on information provided to the Company or
disclosed in a Schedule 13G filed on February 14, 2001 by Oak Management
Corporation, Oak Investment Partners VII L.P., Oak Associates VII LLC, Oak
VII Affiliates Fund L.P., Oak VII Affiliates LLC, Bandel L. Carano, Gerald
R. Gallagher, Edward F. Glassmeyer, Fredric W. Harman and Ann H. Lamont, and
reporting shared voting and dispositive power with respect to the shares of
Common Stock.
(2) This amount is based both on information provided to the Company or
disclosed in a Schedule 13G filed on February 14, 2001 by TL Ventures III
L.P., TL Ventures III Interfund
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L.P., TL Ventures III Management L.P., TL Ventures III LLC, TL Ventures III
Offshore L.P., TL Ventures III Offshore Partners L.P., TL Ventures III
Offshore Ltd., TL Ventures IV L.P., TL Ventures IV Management L.P., TL
Ventures IV Interfund L.P., and TL Ventures IV LLC, and reporting shared
voting and dispositive power with respect to the shares of Common Stock.
Christopher Moller, Ph.D., a director of the Company, is a general partner
of TL Ventures III L.P., TL Ventures III Offshore L.P., and TL Ventures III
Interfund L.P. (collectively the "TL III entities"), and has reported
beneficial ownership of shares beneficially owned by the TL III entities.
Dr. Moller disclaims beneficial ownership of shares in which he does not
have a pecuniary interest.
(3) This amount is based on information disclosed in a report on Schedule 13G
filed by HealthCap AB on February 14, 2001, reporting sole voting and
dispositive power with respect to 2,544,804 shares of Common Stock as of
December 31, 2000.
STOCK OWNERSHIP OF DIRECTORS,
NOMINEES FOR DIRECTOR AND EXECUTIVE OFFICERS
The following table and notes thereto set forth information, as of March
20, 2001, with respect to the beneficial ownership of shares of Common Stock by
each director, each nominee for director and each executive officer named by the
Company in the Summary Compensation Table (the "Named Executive Officers") and,
as a group, by the directors and executive officers of the Company. Except as
otherwise indicated, the Company believes that each beneficial owner listed
below exercises sole voting and dispositive power over its shares of Common
Stock.
NAME OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP COMMON STOCK
- ------------------- -------------------- ------------
David I. Scheer......................................... 465,090(2) 1.8%
Christopher Moller, Ph.D. .............................. 3,179,791(3) 12.2%
Eileen M. More.......................................... 41,128 *
Seth A. Rudnick, M.D. .................................. 750,112(4) 2.9%
Anders P. Wiklund....................................... 189,963(5) *
Henry E. Blair.......................................... 0 *
Roger S. Newton, Ph.D. ................................. 690,019(6) 2.6%
Timothy M. Mayleben..................................... 72,442(7) *
Charles L. Bisgaier, Ph.D. ............................. 138,824(8) *
Jean-Louis H. Dasseux, Ph.D. ........................... 40,638(9) *
Michael E. Pape, Ph.D. ................................. 136,824(10) *
All Directors and Executive Officers as a Group
(13 persons).......................................... 5,730,540(11) 21.9%
- -------------------------
* Less than one percent (1%).
(1) The address of each of the beneficial owners is c/o Esperion Therapeutics,
Inc., 3621 S. State Street, 695 KMS Place, Ann Arbor, Michigan 48108.
(2) Includes 465,090 shares owned by Scheer Investment Holdings II, LLC. Mr.
Scheer is President of Scheer & Company, Inc., and is a co-managing member,
along with his spouse, who is also a co-managing member, of Scheer
Investment Holdings II LLC. Mr. Scheer and
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his spouse share voting and dispositive power with respect to these shares.
Mr. Scheer disclaims beneficial ownership of any shares in which he does
not have a pecuniary interest.
(3) Includes 3,173,771 shares owned by TL Ventures III L.P., TL Ventures III
Offshore L.P. and TL Ventures III Interfund L.P. Dr. Moller is a general
partner of these entities. Dr. Moller disclaims beneficial ownership of
shares in which he does not have a pecuniary interest.
(4) Includes 183 shares owned by Dr. Rudnick's spouse, 474,773 shares owned by
Canaan Equity II L.P., 212,380 shares owned Canaan Equity II L.P. (QP) and
37,690 shares owned by Canaan Equity II Entrepreneurs LLC. Dr. Rudnick, a
general partner at Canaan Equity, disclaims ownership of shares in which he
does not have a pecuniary interest.
(5) Includes 6,775 shares issuable upon the exercise of stock options within
sixty (60) days of March 20, 2001.
(6) Includes 252,875 shares subject to repurchase by the Company and 41,388
shares issuable upon the exercise of stock options within sixty (60) days
of March 20, 2001.
(7) Includes 43,021 shares issuable upon the exercise of stock options within
sixty (60) days of March 20, 2001.
(8) Includes 49,704 shares jointly owned with spouse, 7,224 restricted shares
owned by children, 50,576 shares owned by trust, of which 25,288 are
subject to repurchase by the Company, and 23,481 shares issuable upon the
exercise of stock options within sixty (60) days of March 20, 2001.
(9) Includes 22,076 shares issuable upon the exercise of stock options within
sixty (60) days of March 20, 2001.
(10) Includes 57,800 shares held by trust, of which 25,288 shares are subject to
repurchase by the Company, and 46,512 shares issuable upon the exercise of
stock options within sixty (60) days of March 20, 2001.
(11) Includes 303,451 shares subject to repurchase by the Company, and 207,943
shares issuable upon exercise of stock options within sixty (60) days of
March 20, 2001.
PROPOSAL 1
NOMINATION AND ELECTION OF CLASS I DIRECTORS
The Company's Fifth Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws provide that the number of directors of the Board
shall be fixed from time to time exclusively pursuant to a resolution adopted by
a majority of the Board and that the Board shall be divided into three Classes:
Class I, Class II and Class III. The number of directors in each class shall be
equal, to the extent possible. The members of the respective classes serve for
staggered three-year terms. Currently, there are six directors: the Class I
directors are Anders P. Wiklund and Seth A. Rudnick, M.D., the Class II
directors are Christopher Moller, Ph.D. and Eileen M. More, and the Class III
directors are David I. Scheer and Roger S. Newton, Ph.D.
Two Class I directors are to be elected at the Annual Meeting, each for a
term of three years and until their respective successors are elected and
qualified at an annual meeting of stockholders. The Board has nominated Henry E.
Blair and Seth A. Rudnick, M.D. as nominees for election as Class I directors.
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Mr. Blair and Dr. Rudnick have individually informed the Company that, if
elected, each is willing to serve as a director. If either Mr. Blair or Dr.
Rudnick should become unavailable for election as a director, an eventuality
that is not expected, the shares represented by proxies voted in favor of Mr.
Blair or Dr. Rudnick will be voted for any substitute nominee as may be named by
the Board.
The information appearing in the following tables and the notes thereto has
been furnished to the Company, where appropriate, by the nominees for director
and the directors continuing in office with respect to: (i) the present
principal occupation or employment of the nominees and each continuing director
and, if such principal occupation or employment has not been carried on during
the past five years, the occupation or employment during such period; (ii) the
names and principal businesses of the corporations or other organizations in
which such occupation or employment is carried on and/or has been carried on
during the past five years; and (iii) the directorships held by each respective
nominee or continuing director on the boards of publicly held and certain other
corporations and entities.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS
FOR A TERM OF THREE YEARS
IF ELECTED,
SERVED AS TERM EXPIRES
DIRECTOR AT ANNUAL MEETING
NAME AND PRINCIPAL OCCUPATION SINCE OF STOCKHOLDERS IN
- ----------------------------- --------- ------------------
Henry E. Blair, age 57...................................... -- 2004
Since August 1995, Mr. Blair has served as Chairman of the
Board and President, and, since April 1997, Chief
Executive Officer of Dyax Corporation, a public company
that develops and commercializes new products for the
pharmaceutical and biopharmaceutical industries. Mr. Blair
has served as a director and officer of Dyax Corporation
since its formation in 1989. Mr. Blair is also a director
of and consultant to Genzyme Corporation, a biotechnology
company, which he co-founded in 1981. Mr. Blair also
co-founded Biocode, Inc. and GelTex Pharmaceuticals, Inc.
In addition, he is a director of Genzyme Transgenics
Corporation and a member of the boards of overseers at
Tufts University School of Medicine and the Lahey
Hitchcock Clinic.
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IF ELECTED,
SERVED AS TERM EXPIRES
DIRECTOR AT ANNUAL MEETING
NAME AND PRINCIPAL OCCUPATION SINCE OF STOCKHOLDERS IN
- ----------------------------- --------- ------------------
Seth A. Rudnick, M.D., age 52............................... 2000 2004
Dr. Rudnick has served as a director since January 2000
and is also a member of the Audit Committee. Since 1998,
Dr. Rudnick has been a General Partner at Canaan Equity
Partners LLC, a venture capital firm. From 1995 through
1998, Dr. Rudnick was the Chairman and Chief Executive
Officer of Cytotherapeutics, Inc., a developer of stem
cell therapies to treat human diseases. He was previously
the Senior Vice President of the R.W. Johnson
Pharmaceutical Research Group of Ortho Pharmaceutical
Corporation, Senior Vice President of Development with
Biogen Research Corporation, a developer of pharmaceutical
products and affiliate of Schering-Plough Corporation, and
Director of Clinical Research with Schering-Plough. Dr.
Rudnick has also held various faculty appointments with
Brown University, the University of North Carolina and
Yale University. Dr. Rudnick currently serves as a
director for OraPharma, Inc. and NaPro BioTherapeutics,
Inc. Dr. Rudnick received his M.D. from the University of
Virginia, with fellowships at Yale in oncology and
epidemiology.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a plurality of the votes cast by stockholders
present in person or represented by duly executed proxies at the Annual Meeting
and entitled to vote is required for the election of the Class I directors.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
AS CLASS I DIRECTORS.
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DIRECTORS CONTINUING IN OFFICE
SERVED AS TERM EXPIRES
DIRECTOR AT ANNUAL MEETING
NAME AND PRINCIPAL OCCUPATION SINCE OF STOCKHOLDERS IN
- ----------------------------- --------- ------------------
Christopher Moller, Ph.D., age 47........................... 1998 2002
Dr. Moller has served as a Director since 1998. Since
1990, Dr. Moller has served as Vice President of TL
Ventures, a company which manages a series of private
equity funds. Dr. Moller is the Managing Director of the
following funds managed by TL Ventures: Radnor Venture
Partners, Technology Leaders, Technology Leaders II, TL
Ventures III, and TL Ventures IV. Dr. Moller currently
serves as a director of Adolor Corporation, Assurance
Medical, Inc., OraPharma, Inc., Immunicon Corporation,
eMerge Interactive Inc., ChromaVision Medical Systems,
Inc., Genomics Collaborative, Inc., and Who? Vision
Systems, Inc. Dr. Moller holds a Ph.D. in immunology from
the University of Pennsylvania.
Eileen M. More, age 55...................................... 1999 2002
Ms. More has served as a Director since 1999. Ms. More was
formerly a General Partner and is currently a Class B
Limited Partner of Oak Investment Partners, a venture
capital firm. Ms. More serves as a director of Halox
Technologies Corporation, OraPharma, Inc., Psychiatric
Solutions, Inc., and Teloquent Communications Corporation.
Roger S. Newton, Ph.D., age 50.............................. 1998 2003
Dr. Newton has served as the President, Chief Executive
Officer and Director since July 1998. He previously served
as a Distinguished Research Fellow in Vascular and Cardiac
Diseases at Parke-Davis Pharmaceutical Research,
Warner-Lambert Company, where he was the co-discoverer and
chairman of the discovery and development team for the
drug Lipitor(R), from August 1981 to May 1998. Dr. Newton
specialized in atherosclerosis research during a
post-doctoral fellowship at the University of California,
San Diego. He also holds a faculty appointment in the
Department of Pharmacology at the University of Michigan
Medical School.
David I. Scheer, age 48..................................... 1998 2003
Mr. Scheer has served as Chairman and Director since July
1998. Mr. Scheer is also a founder of the Company. Since
1981, Mr. Scheer has served as the President of Scheer &
Company, Inc., a life sciences advisory firm with
activities in venture capital, corporate strategy and
transactional advisory services focused on the life
sciences industry. Mr. Scheer currently serves as a
director of OraPharma, Inc. and Achillon Pharmaceuticals,
Inc. Mr. Scheer received his A.B. from Harvard College and
his M.S. from Yale University.
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 2000, the Board held three in-person
meetings and three telephonic meetings. During the year, no incumbent director
attended fewer than 75% of the aggregate of (i) the total number of meetings of
the Board held during the period he served as a director and (ii) the total
number of meetings held by any committee of the Board on which he served.
The committees of the Board, their principal functions and their respective
memberships are described below.
AUDIT COMMITTEE
The Audit Committee assists the Board in fulfilling its oversight
responsibilities by reviewing the financial reports and other financial
information that the Company makes public as well as by supervising the
Company's financial reporting processes and system of internal controls. The
Audit Committee also oversees the independence and performance of the Company's
independent public accountants. The Audit Committee provides an open avenue of
communication among the independent public accountants, financial and senior
management, and the Board.
The current members of the Audit Committee are: Christopher Moller, Ph.D.,
Eileen M. More, and Seth A. Rudnick, M.D., each of whom is "independent" as
defined by the listing standards of the Nasdaq National Market. The Audit
Committee held one meeting during fiscal year 2000.
A copy of the Audit Committee's charter, which was adopted by the Board, is
attached as Appendix B to this Proxy Statement. The report of the Audit
Committee is set forth below.
COMPENSATION COMMITTEE
The Compensation Committee is responsible for the evaluation, approval and
administration of salary, incentive compensation, bonuses, benefit plans, and
other forms of compensation for the officers, directors, and other key employees
of the Company. The Compensation Committee is also responsible for interpreting,
administering, and granting awards under the Company's 2000 Equity Compensation
Plan, 1998 Stock Option Plan, Employee Stock Purchase Plan, and any other stock-
based employee benefit plans.
The current members of the Compensation Committee of the Board are: David
I. Scheer, Christopher Moller, Ph.D., and Eileen M. More. The Compensation
Committee held one meeting during fiscal year 2000. The report of the
Compensation Committee follows the report of the Audit Committee.
Notwithstanding anything to the contrary, the following reports of the
Audit Committee and the Compensation Committee and the stock performance graph
under the section entitled "Stock Performance Graph" shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or under the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviews the Company's financial statements and
reporting processes on behalf of the Board. In addition, the Audit Committee
recommends to the Board, subject to stockholder ratification, the selection of
the Company's independent public accountants.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent public accountants are responsible
for performing an independent audit of the Company's financial statements in
accordance with generally accepted auditing standards and issuing a report
thereon. The Audit Committee's responsibility is to oversee these processes.
In this context, the Audit Committee has met and held discussions with
management and the independent public accountants. Management represented to the
Audit Committee that the Company's audited financial statements were prepared in
accordance with generally accepted accounting principles, and the Audit
Committee has reviewed and discussed the financial statements with management
and the independent public accountants. The Audit Committee discussed with the
independent public accountants the matters required to be discussed by Statement
on Auditing Standards No. 61 (Communication with Audit Committees).
In addition, the Audit Committee has discussed with the independent public
accountants their independence from the Company and its management, including
the matters in the written disclosures required by the Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees).
The Audit Committee discussed with the Company's independent public
accountants the overall scope and plan for their audit. The Audit Committee
meets with the independent public accountants, with and without management
present, to discuss the results of their examinations, the evaluations of the
Company's internal controls, and the overall quality of the Company's financial
reporting.
Based upon the Audit Committee's discussions with management and the
independent public accountants, the Audit Committee's review of the
representations of management and the report of the independent public
accountants to the Audit Committee, the Committee recommended that the Board
include the audited financial statements in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2000 for filing with the Securities
and Exchange Commission.
The Audit Committee:
Christopher Moller, Ph.D.
Eileen M. More
Seth A. Rudnick, M.D.
REPORT OF THE COMPENSATION COMMITTEE
As members of the Compensation Committee, it is our responsibility to
determine the most effective total executive compensation strategy based on the
Company's business and consistent with stockholders' interests. Our principal
responsibilities include reviewing the Company's compensation policies and
practices, recommending compensation for executives and key employees, making
recommendations to the Board of Directors with respect to the adoption or
modification of compensation and benefit plans for the employees of the Company,
including the executive officers, and for interpreting, administering, and
granting awards under the Company's 2000 Equity Compensation Plan, 1998 Stock
Option Plan, and Employee Stock Purchase Plan.
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The compensation packages for our executive officers are designed to retain
and attract top quality management and to encourage them to contribute to the
achievement of the Company's business objectives. In addition, the Compensation
Committee attempts to establish compensation packages that are comparable to the
packages received by executives of similar companies.
In compensating its executive officers, the Company relies on a combination
of salary and incentives designed to encourage efforts to achieve both the
Company's short-term and long-term goals. The compensation structure attempts to
reward both individual contributions as well as overall Company performance.
Traditional measures of corporate performance, such as earnings per share or
sales growth, are less applicable to the performance of development stage
pharmaceutical companies, such as the Company, than to mature pharmaceutical
companies or companies in other industries. As a result, in making executive
compensation decisions, the Compensation Committee evaluates other indications
of performance, such as the achievement of milestones in the development and
commercialization of the Company's product candidates and raising the capital
needed for its operations. The Compensation Committee also reviews and considers
input and recommendations from the Company's Chief Executive Officer concerning
executive compensation.
The basic components of the Company's compensation packages for executive
officers include the following:
- Base Salary
- Bonuses
- Stock Options
- Benefits
Each executive officer's compensation package contains a mix of these
components and is intended to provide a level of compensation competitive in the
industry. The Compensation Committee evaluates, at least annually, the
performance of the Company's chief executive officer and each other executive
officer. Base salary and increases in base salary for 2000 were determined based
on both individual and Company performance. The Compensation Committee
considered the following factors, among others, in setting the base salaries for
executive officers during 2000: progress in the development of the Company's
product candidates, success in capital raising necessary to the growth of
development of the Company, and any special expertise or contributions of a
particular executive.
Bonuses are awarded by the Compensation Committee based upon its evaluation
of the performance of each executive officer and the achievement of the
Company's and the executives' goals during the year. In January 2001, bonuses
totaling $179,100 were awarded to the Named Executive Officers for achievements
in 2000, which included the continued development and clinical progress of LUV,
AIM, RLT Peptide, ProApoA-I and HDL Elevators, along with the successful
completion of the Company's initial public offering.
The granting of stock options aligns the long-term interests of each
executive officer with the interests of our stockholders and provides long-term
incentives for each executive officer to remain with the Company. Grants are
generally made to all employees on their date of hire based on salary level and
position. In addition, all employees, including executive officers, are eligible
for discretionary grants, which are generally based on either individual or
corporate performance.
Benefits offered to our executive officers serve as a safety net of
protection against the financial catastrophes that can result from illness,
disability, or death. Benefits offered to our executive officers are
substantially the same as those offered to all of our regular employees.
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2000 COMPENSATION TO CHIEF EXECUTIVE OFFICER
In reviewing and recommending Dr. Newton's salary and bonus and in awarding
him stock options for fiscal year 2000, the Compensation Committee followed its
overall compensation philosophy. During the year ended December 31, 2000, Dr.
Newton received a salary of $215,000. For his contributions during fiscal year
2000, Dr. Newton earned a $64,500 bonus, which was paid in January 2001. In
January 2000, Dr. Newton was granted options to purchase 126,437 shares of
Common Stock at an exercise price of $2.22 per share under the terms of the
Company's 1998 Stock Option Plan. The options vest in sixteen equal quarterly
installments over a four-year period at the end of each quarter following the
grant date. The Compensation Committee recommended this option grant to secure
the long-term services of Dr. Newton and to recognize his efforts in connection
with capital-raising in 1999. In addition, Dr. Newton received 95,741 shares of
Series C Preferred Stock in January 2000 in exchange for services previously
rendered. These shares were converted to 69,172 shares of Common Stock in
connection with the Company's initial public offering.
The Compensation Committee:
Christopher Moller, Ph.D.
Eileen M. More
David I. Scheer
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EXECUTIVE OFFICER AND DIRECTOR COMPENSATION
EXECUTIVE COMPENSATION
Summary of Compensation. The following table presents information
concerning the compensation paid to or earned during the last two fiscal years
by the Company's chief executive officer and four most highly compensated
executive officers. We refer to these persons as the Named Executive Officers.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION
COMPENSATION ------------
------------------- SECURITIES
BONUS UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($)(1) OPTIONS(*) COMPENSATION($)(2)
- --------------------------- ---- --------- ------- ------------ ------------------
Roger S. Newton, Ph.D. .......... 2000 $215,000 $64,500 126,437 $ 735
President, Chief Executive 1999 200,000 60,000 -- 717,735(3)
Officer
Timothy M. Mayleben.............. 2000 175,000 35,000 90,312 735
Vice President, Chief 1999 145,000 32,000 72,250 735
Financial Officer
Jean-Louis H. Dasseux, Ph.D. .... 2000 148,500 29,700 72,249 735
Vice President, Worldwide 1999 140,000 28,000 36,125 735
Chemistry and Technologies
Charles L. Bisgaier, Ph.D. ...... 2000 132,500 26,500 72,250 735
Vice President, Discovery 1999 125,000 25,000 -- 735
Pharmacology
Michael E. Pape, Ph.D. .......... 2000 117,000 23,400 72,250 735
Senior Director, Cellular and 1999 110,000 22,000 -- 735
Molecular Biology
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* All share numbers reflect the .7225-for-1 split of shares of Common Stock
effected on May 9, 2000.
(1) Bonuses are reported in the year earned, even if actually paid in a
subsequent year. Bonuses earned in 2000 were paid in January 2001.
(2) Includes term life insurance premiums paid by the Company in the amount of
$735 for Dr. Newton, Mr. Mayleben, Dr. Dasseux, Dr. Bisgaier, and Dr. Pape
during 2000 and 1999.
(3) Includes $517,000 as the deemed value of 95,741 shares of series C preferred
stock that were issued to Dr. Newton, and $200,000 that was paid to Dr.
Newton in January 1999 to reimburse Dr. Newton for a portion of the tax
expense he incurred in connection with the early exercise of stock options
from his prior employer in 1998 when he joined Esperion.
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OPTION GRANTS IN FISCAL YEAR 2000
The following table provides information related to options for shares of
Common Stock granted to the Named Executive Officers during fiscal year 2000:
% OF TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM(2)
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------------
NAME GRANTED#(1) YEAR ($/SHARE) DATE(1) 5%($) 10%($)
- ---- ----------- ---------- --------- ---------- ------------- -------------
Roger S. Newton, Ph.D. ..... 126,437 11.9% $2.22 01/30/09 $1,484,617 $2,402,496
Timothy M. Mayleben......... 90,312 8.5 2.22 01/30/09 1,060,439 1,716,066
Jean-Louis H. Dasseux,
Ph.D. .................... 18,062 7.0 2.22 01/30/09 212,083 343,206
54,187 4.57 03/09/09 508,922 902,296
Charles L. Bisgaier,
Ph.D. .................... 21,675 6.8 2.22 01/30/09 254,507 411,858
50,575 4.57 03/09/09 474,998 842,151
Michael E. Pape, Ph.D. ..... 21,675 6.8 2.22 01/30/09 254,507 411,858
50,575 4.57 03/09/09 474,998 842,151
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* All share numbers and exercise prices reflect the .7225-for-1 split of
shares of Common Stock effected on May 9, 2000.
(1) Each of these options vests in sixteen equal quarterly installments over a
four-year period at the end of each quarter following the grant date. Each
option has a term of nine years.
(2) Because the options noted in this table were granted prior to the date of
the Company's initial public offering on August 9, 2000, the potential
realizable value has been calculated with reference to the $9.00 per share
offering price of shares of Common Stock in the Company's initial public
offering. The dollar amounts under these columns are the results of
calculations at assumed annual rates of stock price appreciation of 5% and
10% over the $9.00 per share. The 5% and 10% assumed rates of growth were
selected by the Securities and Exchange Commission for illustration purposes
only. They are not intended to forecast possible future appreciation, if
any, of the Corporation's stock price.
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AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2000 AND FISCAL YEAR-END OPTION
VALUES
The following table provides information related to any options for shares
of Common Stock exercised by the Named Executive Officers during fiscal year
2000 and certain information about unexercised options held by the Named
Executive Officers at December 31, 2000:
NUMBER OF
SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT FY-END
SHARES FY-END(#) ($)
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($)(1) UNEXERCISABLE UNEXERCISABLE(2)
- ---- -------------- -------------- --------------- ---------------------
Roger S. Newton, Ph.D. ...... -- $ -- 23,708/ 102,729 $205,193/ $889,120
Timothy M. Mayleben.......... 27,094 238,156 21,450/ 114,018 194,727/ 1,068,512
Jean-Louis H. Dasseux,
Ph.D. ..................... 9,031 79,382 20,321/ 79,022 165,618/ 621,315
Charles L. Bisgaier,
Ph.D. ..................... 44,704 393,259 17,612/ 96,634 141,420/ 818,698
Michael E. Pape, Ph.D. ...... 32,512 288,056 29,804/ 96,634 269,483/ 818,698
- -------------------------
* All numbers have been adjusted to reflect the .7225-for-1 split of shares of
Common Stock effected on May 9, 2000.
(1) The value realized is based upon the $9.00 per share offering price of
shares of Common Stock in the Company's initial public offering, since the
Company was not a public company on the dates on which the options were
exercised.
(2) "In-the-money" options are options whose base (or exercise) price was less
than the market price of the shares of Common Stock at December 31, 2000.
The value of such options is calculated based on a stock price of $10.875,
which was the closing price of a share of Common Stock on the Nasdaq Stock
Market on December 31, 2000.
DIRECTOR COMPENSATION
On July 17, 2000, the Company granted each non-employee member of the Board
options to purchase 15,000 shares of Common Stock at an exercise price per share
equal to the initial public offering price per share. The options vest in three
equal annual installments beginning on the first anniversary of the grant date
and expire on the ninth anniversary of the grant date.
The Company reimburses each member of the Board for out-of-pocket expenses
incurred in connection with attending meetings of the Board. The Company has
also adopted a cash compensation arrangement for non-employee members of the
Board that includes the payment of $1,500 for each regular meeting of the Board
attended in person, $500 for each regular meeting of the Board attended by
teleconference and $500 for each meeting of a Board committee attended in person
or by teleconference.
As a part of the discussions with Mr. Blair regarding his nomination as a
director, the Company has approved a compensation arrangement for Mr. Blair
that, if he is elected, would include a grant under the Company's 2000 Equity
Compensation Plan of an option to purchase 30,000 shares of Common Stock,
vesting on an annual basis over the three year period from the grant date at the
rate
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of 10,000 shares per year, with a per share exercise price equal to the fair
market value of a share of Common Stock on the date of grant.
The Company is also considering the adoption of a standard equity
compensation arrangement for all non-employee members of the Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 2000, Mr. David I. Scheer, Dr.
Christopher Moller, Ms. Eileen M. More, and Dr. Roger S. Newton served on the
Compensation Committee. None of these persons has served as an officer or
employee of the Company or its subsidiary, except Dr. Newton, who has been the
Company's President and Chief Executive Officer since its inception in 1998.
Effective March 24, 2000, and prior to completion of the Company's initial
public offering, Dr. Newton resigned from the Compensation Committee.
During fiscal year 2000, Mr. Scheer, the Chairman of the Board of the
Company, was compensated by the Company for services that he rendered in
accordance with an advisory relationship agreement with the Company. Pursuant to
this agreement, Scheer & Company, Inc., a company owned and controlled by David
I. Scheer, has provided the Company, since its inception, with corporate
strategy consulting services and has assisted the Company in its efforts to
develop corporate relationships. In March 1999, that advisory agreement was
updated, and the Company agreed to pay Scheer & Company a cash retainer of
$30,000 per quarter plus out-of-pocket expenses as compensation for such
services. In addition, if Scheer & Company initiates or provides material
services resulting in a transaction between the Company and another entity which
is completed within a specified time period, Scheer & Company is entitled to an
incentive fee based on the amount of consideration paid to the Company in the
transaction. During fiscal year 2000, Mr. Scheer was paid $120,000 in exchange
for services provided to the Company under the advisory relationship agreement.
The advisory agreement had an initial term of one year, but is automatically
extended if the Company and Scheer & Company so agree. As of March 20, 2001, the
advisory agreement was still in effect. Either the Company or Scheer & Company
may terminate the agreement for any reason upon 30 days' notice.
EMPLOYMENT, CHANGE OF CONTROL, AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Pursuant to a letter agreement dated June 26, 1998, Roger S. Newton, Ph.D.,
holds the positions of President and Chief Executive Officer and serves as a
member of the Board. The letter agreement specifies an initial annual base
salary amount and the right to receive an annual bonus in an amount equal to up
to 30% of his annual base salary. The amount of his annual bonus, if any, is
dependent upon achievement of a series of performance milestones set by the
Board. The letter agreement provides that the Board will review Dr. Newton's
performance on an annual basis and that the Board may adjust Dr. Newton's base
salary, and bonus amount, and grant stock options to Dr. Newton in recognition
of performance for the preceding year. In addition, pursuant to his letter
agreement, Dr. Newton is provided with a benefits package similar to that
offered to the Company's other senior executives, and has the right to receive
578,000 shares of restricted Common Stock which are subject to a right of
repurchase at the original purchase price that becomes exercisable upon the
termination of Dr. Newton's employment. The Company's repurchase right lapses on
a quarterly basis over a four-year period. If the Company terminates Dr.
Newton's employment without cause, he will receive his salary and benefits for
six months after his termination, and 25% of his unvested options and unvested
restricted stock will automatically vest. In connection with the letter
agreement, Dr. Newton entered into non-competition and confidentiality
agreements with the Company.
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Timothy M. Mayleben holds the positions of Vice President, Finance and
Administration and Chief Financial Officer. A letter agreement dated January 11,
1999 with Mr. Mayleben specifies an initial annual base salary amount and the
right to receive an annual bonus in an amount equal to up to 20% of his annual
base salary. The amount of his annual bonus, if any, is dependent upon
achievement of a series of performance milestones set by Mr. Mayleben and the
Chief Executive Officer of the Company. The letter agreement provides that Mr.
Mayleben's performance will be reviewed on an annual basis and that based on
that review, his base salary, and bonus amount, may be adjusted, and he may be
granted stock options in recognition of performance for the preceding year. In
addition, pursuant to his letter agreement, Mr. Mayleben was provided with a
benefits package similar to that offered to the Company's other executives and
he received options to purchase 90,312 shares of Common Stock, which vest on a
quarterly basis over the four-year period from the grant date and are
exercisable for a nine-year period from the grant date. If the Company
terminates Mr. Mayleben's employment without cause, he will receive his salary
and benefits for six months after his termination, and 25% of his unvested
options will automatically vest. In connection with the letter agreement, Mr.
Mayleben entered into non-competition and confidentiality agreements with the
Company.
Charles L. Bisgaier, Ph.D. holds the position of Vice President, Discovery
Pharmacology. A letter agreement dated June 26, 1998 with Dr. Bisgaier specifies
an initial annual base salary amount and the right to receive an annual bonus in
an amount equal to up to 20% of his annual base salary. The amount of his annual
bonus, if any, is dependent upon achievement of a series of performance
milestones set by Dr. Bisgaier and the Chief Executive Officer of the Company.
The letter agreement provides that the Board will review Dr. Bisgaier's
performance on an annual basis and that the Board may adjust Dr. Bisgaier's base
salary, and bonus amount, and grant stock options to Dr. Bisgaier in recognition
of performance for the preceding year. In addition, pursuant to his letter
agreement, Dr. Bisgaier was provided with a benefits package similar to that
offered to the Company's other senior executives, received options to purchase
86,700 shares of Common Stock, which vest on a quarterly basis over the
four-year period from the grant date and are exercisable for a nine-year period
from the grant date, and purchased 57,800 shares of Common Stock which are
subject to a right of repurchase at the original purchase price that becomes
exercisable upon the termination of Dr. Bisgaier's employment. The Company's
repurchase right lapses on a quarterly basis over a four-year period. If the
Company terminates Dr. Bisgaier's employment without cause, he will receive his
salary and benefits for six months after his termination, and 25% of his
unvested options and unvested restricted stock will automatically vest. In
connection with the letter agreement, Dr. Bisgaier entered into non-competition
and confidentiality agreements with the Company.
Jean-Louis H. Dasseux, Ph.D. holds the position of Vice President,
Worldwide Chemistry and Technologies. A letter agreement dated December 9, 1998
with Dr. Dasseux specifies an initial annual base salary amount and the right to
receive an annual bonus in an amount equal to up to 20% of his annual base
salary. The amount of his annual bonus, if any, is dependent upon achievement of
a series of performance milestones set by Dr. Dasseux and the Chief Executive
Officer of the Company. The letter agreement provides that the Board will review
Dr. Dasseux's performance on an annual basis and that the Board may adjust Dr.
Dasseux's base salary, and bonus amount, and grant stock options to Dr. Dasseux
in recognition of performance for the preceding year. In addition, pursuant to
his letter agreement, Dr. Dasseux is provided with a benefits package similar to
that offered to the Company's other senior executives, and received options to
purchase 36,125 shares of Common Stock, which vest on a quarterly basis over the
four-year period from the grant date and are exercisable for a nine-year period
from the grant date. If the Company terminates Dr. Dasseux's employment without
cause, he will receive his salary and benefits for six months after his
termination, and 25% of his unvested options will automatically vest. In
connection with the letter agreement, Dr. Dasseux entered into non-competition
and confidentiality agreements with the Company.
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Michael E. Pape, Ph.D. holds the position of Senior Director, Cellular and
Molecular Biology. A letter agreement dated June 26, 1998 with Dr. Pape
specifies an initial annual base salary amount and the right to receive an
annual bonus in an amount equal to up to 20% of his annual base salary. The
amount of his annual bonus, if any, is dependent upon achievement of a series of
performance milestones set by the Dr. Pape and the Chief Executive Officer of
the Company. The letter agreement provides that the Board will review Dr. Pape's
performance on an annual basis and that the Board may adjust Dr. Pape's base
salary, and bonus amount, and grant stock options to Dr. Pape in recognition of
performance for the preceding year. In addition, pursuant to his letter
agreement, Dr. Pape is provided with a benefits package similar to that offered
to the Company's other senior executives, received options to purchase 86,700
shares of Common Stock, which vest on a quarterly basis over the four-year
period from the grant date and are exercisable for a nine-year period from the
grant date, and purchased 57,800 shares of Common Stock which are subject to a
right of repurchase at the original purchase price that becomes exercisable upon
the termination of Dr. Pape's employment. The Company's repurchase right lapses
on a quarterly basis over a four-year period. If the Company terminates Dr.
Pape's employment without cause, he will receive his salary and benefits for six
months after his termination, and 25% of his unvested options and unvested
restricted stock will automatically vest. In connection with the letter
agreement, Dr. Pape entered into non-competition and confidentiality agreements
with the Company.
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STOCK PERFORMANCE GRAPH
The following graph compares the change in the total stockholder return on
shares of Common Stock during the period from August 10, 2000, the date that the
Company became a public company, through December 31, 2000, with the total
return on the Nasdaq Composite Index (U.S.), the Nasdaq Biotechnology Index, and
the AMEX Biotechnology Index. The comparison assumes that $100 was invested on
August 10, 2000 in shares of Common Stock and in each of the foregoing indices
and assumes reinvestment of dividends, if any.
ASSUMES $100 INVESTED ON AUGUST 10, 2000
YEAR ENDING DECEMBER 31, 2000
[LINE GRAPH]
- ---------------------------------------------------------------------------------------
INDEX DATA AUGUST 10, 2000 DECEMBER 31, 2000
- ---------------------------------------------------------------------------------------
Esperion Therapeutics, Inc. $100 $121
Nasdaq Composite Index (U.S.) $100 $ 64
Nasdaq Biotechnology Index $100 $ 89
AMEX Biotechnology Index $100 $ 94
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Pursuant to a consulting agreement dated as of August 12, 1998, Anders P.
Wiklund, a director of the Company who is not standing for re-election, provides
business consulting services to the Company, including assisting the Company in
its efforts to secure new product candidates and technologies. Initially, the
Company agreed to pay Mr. Wiklund a fixed amount of $3,000 per month plus
out-of-pocket expenses as compensation for such services; on August 1, 2000, the
fixed amount of compensation for such services was revised to $1,500 per month.
During fiscal year 2000, the Company paid Mr. Wiklund a total of $28,500 for
business consulting services. The consulting
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agreement had an initial term of one year, but continues in effect until
terminated by either the Company or Mr. Wiklund upon written notice to the other
or upon the occurrence of certain other events. As of March 20, 2001, the
consulting agreement was still in effect. In connection with the consulting
agreement, Mr. Wiklund entered into non-competition and confidentiality
agreements with the Company.
In September 1999, the Company entered into a license agreement with
Jean-Louis H. Dasseux, Ph.D., an executive officer of the Company, and the other
inventors of the RLT Peptide technology. Under the license agreement, the
Company obtained an exclusive license of the RLT Peptide technology and related
U.S. and foreign patents for a term of ten years. Under the terms of the license
agreement, the Company is required to make payments to the licensors upon the
achievement of certain milestones. If all of the milestones set forth in the
license agreement are achieved, the total amount payable by the Company to the
licensors, including Dr. Dasseux, would be approximately $2,165,000. Royalties
are also payable by the Company under the license agreement. During fiscal year
2000, the Company paid $39,333 to Dr. Dasseux pursuant to the license agreement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than ten percent (10%) of the
Company's outstanding Common Stock to file with the SEC initial reports of
ownership and reports of changes in ownership in the Company's Common Stock and
other equity securities. Specific due dates for these records have been
established and the Company is required to report in this proxy statement any
failure to file by these dates in fiscal year 2000. To the Company's knowledge,
based solely on a review of the copies of such reports furnished to the Company
and written representations that no other reports were required, there were no
reports required under Section 16(a) of the Exchange Act which were not timely
filed during the fiscal year ended December 31, 2000.
PROPOSAL 2
APPROVAL OF THE 2000 EQUITY COMPENSATION PLAN, AS AMENDED AND RESTATED
On April 24, 2001, the Board adopted, subject to stockholder approval at
the Annual Meeting, an amendment to the Company's 2000 Equity Compensation Plan
(the "2000 Plan") that would increase the total number of shares of Common Stock
authorized for issuance under the 2000 Plan from 1,000,000 shares to 1,700,000
shares, an increase of 700,000 shares. The Board previously amended the 2000
Plan to provide that the Compensation Committee may delegate to the Company's
chief executive officer ("CEO") and chief financial officer ("CFO") the
authority to make grants to certain individuals under the 2000 Plan. The Board
has directed that the proposal to approve the increase in the number of shares
authorized to be issued under the 2000 Plan be submitted to the Company's
stockholders for their approval.
The Company believes that the availability of the additional 700,000 shares
of Common Stock will ensure that the Company continues to have a sufficient
number of shares of Common Stock authorized for issuance under the 2000 Plan. As
of April 24, 2001, grants have been awarded with respect to 463,875 shares under
the 2000 Plan, leaving 536,125 shares available for issuance under the 2000
Plan. In addition to the shares available under the 2000 Plan, the Company has
7,246 shares available for issuance under its 1998 Stock Option Plan (the "1998
Plan").
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The Board believes that the number of shares available for issuance under
the 2000 Plan and the 1998 Plan is not sufficient in view of the Company's
compensation structure and strategy. The Board has concluded that the Company's
ability to attract, retain and motivate top quality management and employees is
material to the Company's success and would be enhanced by the Company's
continued ability to grant equity compensation. In addition, the Board believes
that the interests of the Company and its stockholders will be advanced if the
Company can continue to offer its employees, advisers, consultants and
non-employee directors the opportunity to acquire or increase their proprietary
interests in the Company.
The Company is also seeking to have the stockholders approve a restatement
of the 2000 Plan. The purpose of such approval is to ensure that the
stockholders have reapproved the entire 2000 Plan as amended, including the
performance criteria that may be used by the Compensation Committee in granting
performance-based awards under the 2000 Plan, as amended, so that such awards
will qualify for the performance-based exception to the deduction limitations of
Section 162(m) of the Internal Revenue Code ("Code Section 162(m)") until the
first meeting of stockholders that occurs in 2006. A copy of the 2000 Plan as
amended is attached to this Proxy Statement as Appendix A.
SUMMARY OF THE 2000 EQUITY COMPENSATION PLAN
The purpose of the 2000 Plan is to provide designated employees,
consultants, advisors, and non-employee directors of the Company with the
opportunity to receive grants under the Plan through the issuance of equity
awards. The Company believes that grants under the 2000 Plan will encourage the
participants of the 2000 Plan to contribute materially to the growth of the
Company, thereby benefiting the Company's stockholders by aligning the economic
interests of the participants with those of the stockholders.
The Compensation Committee, which administers the 2000 Plan, has the
authority, among other things, to: (i) select the Company's employees,
consultants, advisers and directors who will receive grants under the 2000 Plan;
(ii) determine the type, size and terms of grants to be made to each such
individual; (iii) determine the time when grants will be made and the duration
of any applicable exercise or restriction period, including the criteria for
exercisability and the acceleration of exercisability; (iv) amend the terms of
any previously issued grant; and (v) deal with any other matters arising under
the 2000 Plan. Pursuant to a prior amendment to the 2000 Plan, the Compensation
Committee may delegate to the Company's CEO and CFO the authority to make
certain grants under the 2000 Plan. All decisions made by the Compensation
Committee are conclusive and binding on all persons receiving grants under the
2000 Plan.
Grants to participants under the 2000 Plan may include: (i) options to
purchase shares of the Common Stock, including incentive stock options ("ISOs"),
which may only be granted to employees of the Company or its subsidiaries, and
nonqualified stock options ("NQSOs"), which may be granted to employees,
non-employee directors, consultants and advisers to the Company; (ii) stock
awards, which may be granted to employees, non-employee directors, and
consultants and advisers to the Company, and which may be subject to
restrictions on transferability and other conditions; and (iii) performance
units, which may be granted to employees and consultants and advisers to the
Company, whereby payments will be made in cash, in Common Stock, or in a
combination of the two, provided that the cash portion may not exceed 50% of the
amount to be distributed, and are payable if applicable performance goals are
met during a relevant performance period.
Under the terms of the 2000 Plan, no individual may receive grants in any
one calendar year relating to more than 500,000 shares of Common Stock.
Generally, under the 2000 Plan, only a
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participant, during his or her lifetime, may exercise rights under a grant of an
ISO, NQSO, stock award or performance unit.
The exercise price at which shares of the Common Stock may be purchased
upon the exercise of ISOs or NQSOs granted under the 2000 Plan shall be
determined by the Compensation Committee and may be equal to or greater than the
per share fair market value of shares of the Common Stock on the date the ISOs
or NQSOs are granted. The term of the ISOs and NQSOs will be determined by the
Compensation Committee but may not exceed 10 years from the date of grant. No
ISOs may be granted to a participant who, at the time of grant, owns an amount
of stock in the Company that would provide such individual with more than 10
percent of the total combined voting power of all classes of stock of the
Company or any parent or subsidiary of the Company, unless the per share
exercise price is not less than 110% of the fair market per share value of the
Common Stock on the date of grant and the term of the ISO is not greater than 5
years from the date of grant. The Compensation Committee will determine the term
and conditions under which ISOs and NQSOs owned by the individual become
exercisable.
ISOs and NQSOs can be exercised by a participant through the payment of
cash, delivery of shares owned by the participant (with the approval of the
Compensation Committee), through a broker, or any other method that the
Compensation Committee may approve.
The 2000 Plan permits the Compensation Committee to impose and specify
objective performance goals that must be met with respect to grants of stock
awards and performance units to employees. The Compensation Committee will
determine the performance periods for the performance goals. Forfeiture of all
or part of any such grant will occur if the performance goals are not met, as
determined by the Compensation Committee. Prior to, or soon after the beginning
of, the performance period, the Compensation Committee will establish in writing
the performance goals that must be met, the applicable performance periods, the
amounts to be paid if the performance goals are met, and any other conditions.
Performance units and stock awards granted to any employee as performance-based
compensation may not consist of more than 500,000 shares of Common Stock for any
performance period.
These performance goals, to the extent designed to meet the requirements of
Code Section 162(m), will be based on one or more of the following measures
applicable to a business unit or the Company and its subsidiaries as a whole, or
a combination of the two: stock price, earnings per share, net earnings,
operating earnings, return on assets, stockholder return, return on equity,
growth in assets, unit volume, sales, market share, scientific goals,
pre-clinical or clinical goals, regulatory approvals, or strategic business
criteria consisting of one or more objectives based on meeting specified revenue
goals, market penetration goals, geographic business expansion goals, cost
targets, goals relating to acquisitions or divestitures, or strategic
partnerships.
In the event of a change of control of the Company where the Company is not
the surviving corporation (or survives only as a subsidiary of another
corporation), unless otherwise determined by the Compensation Committee, all
outstanding ISOs and NQSOs will be assumed by or replaced with comparable
options or rights by the surviving corporation (or a parent of the surviving
corporation), and all other outstanding grants will be converted to similar
grants of the surviving corporation (or a parent of the surviving corporation).
The Compensation Committee may also take any of the following actions in the
event of a change of control of the Company: (i) provide for the full
acceleration and exercisability of ISOs and NQSOs and lapse of all restrictions
on outstanding grants; (ii) provide that all participants holding performance
units will receive payment in settlement of the performance units in an amount
determined by the Compensation Committee; (iii) require surrender of outstanding
ISOs or NQSOs in exchange for payment of cash or Common Stock in an amount by
which the fair market value of the Common Stock exceeds the exercise price of
the option; or
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(iv) after giving participants the opportunity to exercise outstanding ISOs or
NQSOs, terminate any or all unexercised options.
As of April 24, 2001, the Compensation Committee has granted awards with
respect to 463,875 shares of Common Stock under the 2000 Plan. As of such date,
536,125 shares remained available under the 2000 Plan, subject to increase in
the event any outstanding awards under the 2000 Plan terminate, expire or are
forfeited without delivery of shares. If the amendment to the 2000 Plan to
increase the number of shares authorized to be issued under the 2000 Plan is
approved, the total number of shares of the Common Stock that may be issued
under the 2000 Plan will be 1,700,000, meaning that 1,236,125 shares will be
available under the 2000 Plan.
The Board may amend or terminate the 2000 Plan at any time. However,
stockholder approval is required for any change that is required to be approved
by the stockholders by law, under the rules of any applicable stock exchange, or
in order for any grant to meet applicable requirements of the Internal Revenue
Code. The 2000 Plan will terminate on March 23, 2010, the day immediately
preceding the tenth anniversary of the effective date of the 2000 Plan, unless
the Board terminates the 2000 Plan earlier or extends it with approval of the
Company's stockholders.
No grants have been made under the 2000 Plan that are subject to
stockholder approval at the Annual Meeting. It is not possible at present to
predict the number of grants that will be made or who will receive any such
grants under the 2000 Plan after the Annual Meeting.
The last sales price of the Company's Common Stock on April 24, 2001 was
$4.60 per share.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief description of the U.S. federal income tax
consequences generally arising with respect to grants that may be awarded under
the 2000 Plan. This discussion is intended for the information of stockholders
considering how to vote at the Annual Meeting and not as tax guidance to
individuals who participate in the 2000 Plan.
The grant of an ISO or NQSO will create no tax consequences for the
participant or the Company. A participant will not recognize taxable income upon
exercising an ISO (except that the alternative minimum tax may apply), and the
Company will receive no deduction at that time. Upon exercising an NQSO, the
participant must generally recognize ordinary income equal to the difference
between the exercise price and the fair market value of the freely transferable
and non-forfeitable shares received. The Company will be entitled to a deduction
equal to the amount recognized as ordinary income by the participant.
A participant's disposition of shares acquired upon the exercise of an
option generally will result in capital gain or loss measured by the difference
between the sale price and the participant's tax basis in such shares (the
exercise price of the option in the case of shares acquired by exercise of an
ISO and held for the applicable ISO holding periods). Generally, there will be
no tax consequences to the Company in connection with a disposition of shares
acquired under an option, except that the Company will be entitled to a
deduction (and the participant will recognize ordinary income) if shares
acquired upon exercise of an ISO are disposed of before the applicable ISO
holding periods have been satisfied.
With respect to grants under the 2000 Plan that may be settled either in
cash or in shares of the Common Stock that are either not restricted as to
transferability or not subject to a substantial risk of forfeiture, the
participant must generally recognize ordinary income equal to the cash or the
fair market value of the shares received. The Company will be entitled to a
deduction for the same amount. With respect to grants involving shares that are
restricted as to transferability and subject to
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a substantial risk of forfeiture, the participant must generally recognize
ordinary income equal to the fair market value of the shares received at the
time that the shares or other property become transferable or not subject to a
substantial risk of forfeiture, whichever occurs earlier. The Company will be
entitled to a deduction in an amount equal to the ordinary income recognized by
the participant. A participant may elect to be taxed at the time of receipt of
such restricted shares rather than upon the lapse of the restriction on
transferability or the substantial risk of forfeiture, but if the participant
subsequently forfeits the shares, the participant would not be entitled to any
tax deduction, including a capital loss, for the value of the shares on which
the participant previously paid tax. Such election must be made and filed with
the Internal Revenue Service within thirty (30) days after receipt of the
shares.
Code Section 162(m) generally disallows a public corporation's tax
deduction for compensation paid to its chief executive officer or any of its
four other most highly compensated officers in excess of $1,000,000 in any year.
Compensation that qualifies as "performance-based compensation" is excluded from
the $1,000,000 deductibility cap, and therefore remains fully deductible by the
corporation that pays it. The Company intends that options granted by the
Compensation Committee with an exercise price at or above 100% of the fair
market value of the underlying Common Stock on the date of grant, and stock
awards and performance units the settlement of which are conditioned upon
achievement of performance goals based upon the criteria set forth above, will
qualify as "performance-based compensation," although other grants not meeting
these requirements under the 2000 Plan may not so qualify.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the stockholders present in person or
represented by duly executed proxies at the Annual Meeting and entitled to vote
is required to approve the Company's 2000 Equity Compensation Plan, as amended
and restated.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
COMPANY'S 2000 EQUITY COMPENSATION PLAN, AS AMENDED AND RESTATED.
PROPOSAL 3
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon the recommendation of the Audit Committee, and subject to the
ratification by the stockholders, the Board has appointed Arthur Andersen LLP as
the Company's independent public accountants to examine the Company's financial
statements for the fiscal year ending December 31, 2001. Arthur Andersen LLP has
served as the Company's independent public accountants since 1998.
Representatives from Arthur Andersen LLP are expected to be present at the
Annual Meeting and will have an opportunity to make a statement if they so
desire, and to respond to appropriate questions from those attending the
meeting.
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ARTHUR ANDERSEN LLP FEES RELATED TO FISCAL YEAR 2000
AUDIT FEES:
The aggregate audit fees billed, or to be billed, by Arthur Andersen LLP
for professional services rendered in connection with the audit of the Company's
annual financial statements for the fiscal year ended December 31, 2000 and the
reviews of the financial statements included in the Company's quarterly reports
on Form 10-Q filed by the Company during fiscal year 2000 totaled $42,500.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES:
The Company did not engage Arthur Andersen LLP to provide advice to the
Company regarding financial information systems design and implementation during
fiscal year 2000.
ALL OTHER FEES:
The aggregate of all other fees billed to the Company by Arthur Andersen
LLP during fiscal year 2000 for all non-audit services rendered to the Company,
including tax-related services ($34,000) and professional services provided in
connection with the Company's initial public offering ($297,500) during fiscal
year 2000 totaled $331,500.
The Audit Committee has considered whether the provision of non-audit
services by Arthur Andersen LLP is compatible with maintaining the independence
of Arthur Andersen LLP.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the stockholders present in person or
represented by duly executed proxies at the Annual Meeting and entitled to vote
is required to ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending December 31, 2001.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE
COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2001.
STOCKHOLDER PROPOSAL DEADLINES FOR THE 2002 ANNUAL MEETING
Any stockholder proposal submitted to the Company pursuant to Rule 14a-8
under the Securities Exchange Act of 1934 for inclusion in the Company's proxy
statement for the Company's annual meeting of stockholders in 2002 must be made
in writing and received by the Secretary of the Company at the Company's
executive office in Ann Arbor, Michigan, no later than the close of business on
January 1, 2002. Such Rule 14a-8 stockholder proposals must comply with
applicable rules of the Securities and Exchange Commission.
Any stockholder who wishes to raise other matters, including stockholder
proposals not made pursuant to Rule 14a-8, before the Company's annual meeting
of stockholders in 2002 must deliver to the Secretary of the Company, at the
Company's executive office, written notice of such other matters no later than
the close of business on March 16, 2002. If the Company does not receive
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timely notice of any such other matters, the persons designated as proxies will
retain general discretionary authority to vote on any such matters raised at
that annual meeting.
OTHER MATTERS
The Board does not intend to present any other matters at the Annual
Meeting and does not know of any other matters to be presented at the Annual
Meeting other than those listed in the Notice of Annual Meeting of Stockholders.
However, if other matters properly come before the Annual Meeting, it is the
intention of the persons named in the accompanying proxy card to vote on any
such matters in accordance with their best judgment.
Upon the receipt of a written request from any stockholder entitled to vote
at the forthcoming Annual Meeting, the Company will mail, at no charge to the
stockholder, a copy of the Company's annual report on Form 10-K, including the
financial statements and other required information, for the Company's most
recently completed fiscal year. Requests from beneficial owners of the Company's
Common Stock must set forth a good faith representation that, as of the Record
Date for the Annual Meeting, the person making the request was the beneficial
owner of shares of Common Stock entitled to vote at such meeting. Written
requests for such report should be directed to:
Christine K. Ballman, Esq.
General Counsel
Esperion Therapeutics, Inc.
3621 S. State Street
695 KMS Place
Ann Arbor, Michigan 48108
For directions to the Annual Meeting, please call Dawn Evans, Executive
Assistant, at (734) 222-1808.
You are urged to complete, sign, date, and return the enclosed Proxy Card
promptly to make certain your shares will be voted at the Annual Meeting. For
your convenience, a return envelope for the Proxy Card is enclosed requiring no
additional postage if mailed in the United States.
By Order of the Board of Directors,
Roger S. Newton, Ph.D.
President and Chief Executive Officer
Dated: April 30, 2001
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APPENDIX A
ESPERION THERAPEUTICS, INC.
2000 EQUITY COMPENSATION PLAN
(AMENDED AND RESTATED, EFFECTIVE MAY 22, 2001)
The purpose of the Esperion Therapeutics, Inc. 2000 Equity Compensation
Plan (the "Plan"), as amended and restated, effective May 22, 2001, is to
provide (i) designated employees of Esperion Therapeutics, Inc. (the "Company")
and its subsidiaries, (ii) certain consultants and advisors who perform services
for the Company or its subsidiaries and (iii) non-employee members of the Board
of Directors of the Company (the "Board") with the opportunity to receive grants
of incentive stock options, nonqualified stock options, stock awards and
performance units. The Company believes that the Plan will encourage the
participants to contribute materially to the growth of the Company, thereby
benefiting the Company's stockholders, and will align the economic interests of
the participants with those of the stockholders.
1. ADMINISTRATION
(a) Committee. The Plan shall be administered by a committee appointed by
the Board (the "Committee"), which may consist of two or more persons who are
"outside directors" as defined under section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), and related Treasury regulations and
"non-employee directors" as defined under Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). However, the Board may
ratify or approve any grants as it deems appropriate.
(b) Committee Authority. The Committee shall have the sole authority to
(i) determine the individuals to whom grants shall be made under the Plan, (ii)
determine the type, size and terms of the grants to be made to each such
individual, (iii) determine the time when the grants will be made and the
duration of any applicable exercise or restriction period, including the
criteria for exercisability and the acceleration of exercisability, (iv) amend
the terms of any previously issued grant, and (v) deal with any other matters
arising under the Plan.
(c) Committee Determinations. The Committee shall have full power and
authority to administer and interpret the Plan, to make factual determinations
and to adopt or amend such rules, regulations, agreements and instruments for
implementing the Plan and for the conduct of its business as it deems necessary
or advisable, in its sole discretion. The Committee's interpretations of the
Plan and all determinations made by the Committee pursuant to the powers vested
in it hereunder shall be conclusive and binding on all persons having any
interest in the Plan or in any awards granted hereunder. All powers of the
Committee shall be executed in its sole discretion, in the best interest of the
Company, not as a fiduciary, and in keeping with the objectives of the Plan and
need not be uniform as to similarly situated individuals.
(d) Delegation of Authority. Notwithstanding the foregoing, the Committee
may delegate to either, or both, of the Chief Executive Officer and the Chief
Financial Officer of the Company the authority to make grants under the Plan to
employees, consultants and advisors of the Company and its subsidiaries who are,
at the time of grant, not subject to the restrictions of section 16(b) of the
Exchange Act and not expected to be subject to the limitations of section 162(m)
of the Code. The grant of authority under this Subsection 1(d) shall be subject
to such conditions and limitations as may be determined by the Committee.
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2. GRANTS
Awards under the Plan may consist of grants of incentive stock options as
described in Section 5 ("Incentive Stock Options"), nonqualified stock options
as described in Section 5 ("Nonqualified Stock Options") (Incentive Stock
Options and Nonqualified Stock Options are collectively referred to as
"Options"), stock awards as described in Section 6 ("Stock Awards"), and
performance units as described in Section 7 ("Performance Units") (hereinafter
collectively referred to as "Grants"). All Grants shall be subject to the terms
and conditions set forth herein and to such other terms and conditions
consistent with this Plan as the Committee deems appropriate and as are
specified in writing by the Committee to the individual in a grant instrument or
an amendment to the grant instrument (the "Grant Instrument"). The Committee
shall approve the form and provisions of each Grant Instrument. Grants under a
particular Section of the Plan need not be uniform as among the grantees.
3. SHARES SUBJECT TO THE PLAN
(a) Shares Authorized. Subject to adjustment as described below, the
aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred under the Plan is 1,700,000 shares; provided,
however, that prior to May 22, 2001, the aggregate number of shares that could
be issued or transferred under the Plan was 1,000,000 shares. The maximum
aggregate number of shares of Company Stock that shall be subject to Grants made
under the Plan to any individual during any calendar year shall be 500,000
shares, subject to adjustment as described below. The shares may be authorized
but unissued shares of Company Stock or reacquired shares of Company Stock,
including shares purchased by the Company on the open market for purposes of the
Plan. If and to the extent Options granted under the Plan terminate, expire, or
are canceled, forfeited, exchanged or surrendered without having been exercised
or if any Stock Awards or Performance Units are forfeited, the shares subject to
such Grants shall again be available for purposes of the Plan.
(b) Adjustments. If there is any change in the number or kind of shares of
Company Stock outstanding (i) by reason of a stock dividend, spinoff,
recapitalization, stock split, or combination or exchange of shares, (ii) by
reason of a merger, reorganization or consolidation in which the Company is the
surviving corporation, (iii) by reason of a reclassification or change in par
value, or (iv) by reason of any other extraordinary or unusual event affecting
the outstanding Company Stock as a class without the Company's receipt of
consideration, or if the value of outstanding shares of Company Stock is
substantially reduced as a result of a spinoff or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Company
Stock available for Grants, the maximum number of shares of Company Stock that
any individual participating in the Plan may be granted in any year, the number
of shares covered by outstanding Grants, the kind of shares issued under the
Plan, and the price per share or the applicable market value of such Grants may
be appropriately adjusted by the Committee to reflect any increase or decrease
in the number of, or change in the kind or value of, issued shares of Company
Stock to preclude, to the extent practicable, the enlargement or dilution of
rights and benefits under such Grants; provided, however, that any fractional
shares resulting from such adjustment shall be eliminated. Any adjustments
determined by the Committee shall be final, binding and conclusive.
4. ELIGIBILITY FOR PARTICIPATION
(a) Eligible Persons. All employees of the Company and its subsidiaries
("Employees"), including Employees who are officers or members of the Board, and
members of the Board who are not Employees ("Non-Employee Directors") shall be
eligible to participate in the Plan. Consultants and advisors who perform
services for the Company or any of its subsidiaries ("Key Advisors") shall
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be eligible to participate in the Plan if the Key Advisors render bona fide
services to the Company or its subsidiaries, the services are not in connection
with the offer and sale of securities in a capital-raising transaction and the
Key Advisors do not directly or indirectly promote or maintain a market for the
Company's securities.
(b) Selection of Grantees. The Committee shall select the Employees,
Non-Employee Directors and Key Advisors to receive Grants and shall determine
the number of shares of Company Stock subject to a particular Grant in such
manner as the Committee determines. Employees, Key Advisors and Non-Employee
Directors who receive Grants under this Plan shall hereinafter be referred to as
"Grantees".
5. GRANTING OF OPTIONS
(a) Number of Shares. The Committee shall determine the number of shares
of Company Stock that will be subject to each Grant of Options to Employees,
Non-Employee Directors and Key Advisors.
(b) Type of Option and Price.
(i) The Committee may grant Incentive Stock Options that are intended
to qualify as "incentive stock options" within the meaning of section 422
of the Code or Nonqualified Stock Options that are not intended so to
qualify or any combination of Incentive Stock Options and Nonqualified
Stock Options, all in accordance with the terms and conditions set forth
herein. Incentive Stock Options may be granted only to Employees.
Nonqualified Stock Options may be granted to Employees, Non-Employee
Directors and Key Advisors.
(ii) The purchase price (the "Exercise Price") of Company Stock
subject to an Option shall be determined by the Committee and may be equal
to or greater than the Fair Market Value (as defined below) of a share of
Company Stock on the date the Option is granted; provided, however, that an
Incentive Stock Option may not be granted to an Employee who, at the time
of grant, owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company or any parent or
subsidiary of the Company, unless the Exercise Price per share is not less
than 110% of the Fair Market Value of Company Stock on the date of grant.
(iii) If the Company Stock is publicly traded, then the Fair Market
Value per share shall be determined as follows: (x) if the principal
trading market for the Company Stock is a national securities exchange or
the Nasdaq National Market, the last reported sale price thereof on the
relevant date or (if there were no trades on that date) the latest
preceding date upon which a sale was reported, or (y) if the Company Stock
is not principally traded on such exchange or market, the mean between the
last reported "bid" and "asked" prices of Company Stock on the relevant
date, as reported on Nasdaq or, if not so reported, as reported by the
National Daily Quotation Bureau, Inc. or as reported in a customary
financial reporting service, as applicable and as the Committee determines.
If the Company Stock is not publicly traded or, if publicly traded, is not
subject to reported transactions or "bid" or "asked" quotations as set
forth above, the Fair Market Value per share shall be as determined by the
Committee.
(c) Option Term. The Committee shall determine the term of each Option.
The term of any Option shall not exceed ten years from the date of grant.
However, an Incentive Stock Option that is granted to an Employee who, at the
time of grant, owns stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company, or any parent or subsidiary
of the Company, may not have a term that exceeds five years from the date of
grant.
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(d) Exercisability of Options. Options shall become exercisable in
accordance with such terms and conditions, consistent with the Plan, as may be
determined by the Committee and specified in the Grant Instrument. The Committee
may accelerate the exercisability of any or all outstanding Options at any time
for any reason.
(e) Termination of Employment, Disability or Death.
(i) Except as provided below, an Option may only be exercised while
the Grantee is employed by, or providing service to, the Company as an
Employee, Key Advisor or member of the Board. In the event that a Grantee
ceases to be employed by, or provide service to, the Company for any reason
other than Disability, death, or termination for Cause (as defined below),
any Option which is otherwise exercisable by the Grantee shall terminate
unless exercised within 90 days after the date on which the Grantee ceases
to be employed by, or provide service to, the Company (or within such other
period of time as may be specified by the Committee), but in any event no
later than the date of expiration of the Option term. Except as otherwise
provided by the Committee, any of the Grantee's Options that are not
otherwise exercisable as of the date on which the Grantee ceases to be
employed by, or provide service to, the Company shall terminate as of such
date.
(ii) In the event the Grantee ceases to be employed by, or provide
service to, the Company on account of a termination for Cause by the
Company, any Option held by the Grantee shall terminate as of the date the
Grantee ceases to be employed by, or provide service to, the Company. In
addition, notwithstanding any other provisions of this Section 5, if the
Committee determines that the Grantee has engaged in conduct that
constitutes Cause at any time while the Grantee is employed by, or
providing service to, the Company or after the Grantee's termination of
employment or service, any Option held by the Grantee shall immediately
terminate and the Grantee shall automatically forfeit all shares underlying
any exercised portion of an Option for which the Company has not yet
delivered the share certificates, upon refund by the Company of the
Exercise Price paid by the Grantee for such shares. Upon any exercise of an
Option, the Company may withhold delivery of share certificates pending
resolution of an inquiry that could lead to a finding resulting in a
forfeiture.
(iii) In the event the Grantee ceases to be employed by, or provide
service to, the Company because the Grantee is Disabled, any Option which
is otherwise exercisable by the Grantee shall terminate unless exercised
within one year after the date on which the Grantee ceases to be employed
by, or provide service to, the Company (or within such other period of time
as may be specified by the Committee), but in any event no later than the
date of expiration of the Option term. Except as otherwise provided by the
Committee, any of the Grantee's Options which are not otherwise exercisable
as of the date on which the Grantee ceases to be employed by, or provide
service to, the Company shall terminate as of such date.
(iv) If the Grantee dies while employed by, or providing service to,
the Company or within 90 days after the date on which the Grantee ceases to
be employed or provide service on account of a termination specified in
Section 5(e)(i) above (or within such other period of time as may be
specified by the Committee), any Option that is otherwise exercisable by
the Grantee shall terminate unless exercised within one year after the date
on which the Grantee ceases to be employed by, or provide service to, the
Company (or within such other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the
Option term. Except as otherwise provided by the Committee, any of the
Grantee's Options that are not otherwise exercisable as of the date on
which the Grantee ceases to be employed by, or provide service to, the
Company shall terminate as of such date.
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(v) For purposes of this Section 5(e), and Sections 6 and 7:
(A) The term "Company" shall mean the Company and its parent and
subsidiary corporations or other entities, as determined by the
Committee.
(B) "Employed by, or provide service to, the Company" shall mean
employment or service as an Employee, Key Advisor or member of the Board
(so that, for purposes of exercising Options and satisfying conditions
with respect to Stock Awards and Performance Units, a Grantee shall not
be considered to have terminated employment or service until the Grantee
ceases to be an Employee, Key Advisor and member of the Board), unless
the Committee determines otherwise.
(C) "Disability" shall mean a Grantee's becoming disabled within
the meaning of section 22(e)(3) of the Code or the Grantee becomes
entitled to receive long-term disability benefits under the Company's
long-term disability plan.
(D) "Cause" shall mean, except to the extent specified otherwise by
the Committee, a finding by the Committee that the Grantee (i) has
breached his or her employment or service contract with the Company,
(ii) has engaged in disloyalty to the Company, including, without
limitation, fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of his or her employment or service, (iii) has
disclosed trade secrets or confidential information of the Company to
persons not entitled to receive such information or (iv) has engaged in
such other behavior detrimental to the interests of the Company as the
Committee determines.
(f) Exercise of Options. A Grantee may exercise an Option that has become
exercisable, in whole or in part, by delivering a notice of exercise to the
Company with payment of the Exercise Price. The Grantee shall pay the Exercise
Price for an Option as specified by the Committee (w) in cash, (x) with the
approval of the Committee, by delivering shares of Company Stock owned by the
Grantee (including Company Stock acquired in connection with the exercise of an
Option, subject to such restrictions as the Committee deems appropriate) and
having a Fair Market Value on the date of exercise equal to the Exercise Price
or by attestation (on a form prescribed by the Committee) to ownership of shares
of Company Stock having a Fair Market Value on the date of exercise equal to the
Exercise Price, (y) payment through a broker in accordance with procedures
permitted by Regulation T of the Federal Reserve Board, or (z) by such other
method as the Committee may approve. The Committee may authorize loans by the
Company to Grantees in connection with the exercise of an Option, upon such
terms and conditions as the Committee, in its sole discretion, deems
appropriate. Shares of Company Stock used to exercise an Option shall have been
held by the Grantee for the requisite period of time to avoid adverse accounting
consequences to the Company with respect to the Option. The Grantee shall pay
the Exercise Price and the amount of any withholding tax due at the time of
exercise.
(g) Limits on Incentive Stock Options. Each Incentive Stock Option shall
provide that, if the aggregate Fair Market Value of the stock on the date of the
grant with respect to which Incentive Stock Options are exercisable for the
first time by a Grantee during any calendar year, under the Plan or any other
stock option plan of the Company or a parent or subsidiary, exceeds $100,000,
then the Option, as to the excess, shall be treated as a Nonqualified Stock
Option. An Incentive Stock Option shall not be granted to any person who is not
an Employee of the Company or a parent or subsidiary (within the meaning of
section 424(f) of the Code).
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6. STOCK AWARDS
The Committee may issue or transfer shares of Company Stock to an Employee,
Non-Employee Director or Key Advisor under a Stock Award, upon such terms as the
Committee deems appropriate. The following provisions are applicable to Stock
Awards:
(a) General Requirements. Shares of Company Stock issued or transferred
pursuant to Stock Awards may be issued or transferred for consideration or for
no consideration, and subject to restrictions or no restrictions, as determined
by the Committee. The Committee may, but shall not be required to, establish
conditions under which restrictions on Stock Awards shall lapse over a period of
time or according to such other criteria as the Committee deems appropriate,
including, without limitation, restrictions based upon the achievement of
specific performance goals. The period of time during which the Stock Awards
will remain subject to restrictions will be designated in the Grant Instrument
as the "Restriction Period."
(b) Number of Shares. The Committee shall determine the number of shares
of Company Stock to be issued or transferred pursuant to a Stock Award and the
restrictions applicable to such shares.
(c) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Company (as defined in Section 5(e))
during a period designated in the Grant Instrument as the Restriction Period, or
if other specified conditions are not met, the Stock Award shall terminate as to
all shares covered by the Grant as to which the restrictions have not lapsed,
and those shares of Company Stock must be immediately returned to the Company.
The Committee may, however, provide for complete or partial exceptions to this
requirement as it deems appropriate.
(d) Restrictions on Transfer and Legend on Stock Certificate. During the
Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of a Stock Award except to a Successor Grantee
under Section 11(a). Each certificate for a share of a Stock Award shall contain
a legend giving appropriate notice of the restrictions in the Grant. The Grantee
shall be entitled to have the legend removed from the stock certificate covering
the shares subject to restrictions when all restrictions on such shares have
lapsed. The Committee may determine that the Company will not issue certificates
for Stock Awards until all restrictions on such shares have lapsed, or that the
Company will retain possession of certificates for shares of Stock Awards until
all restrictions on such shares have lapsed.
(e) Right to Vote and to Receive Dividends. Unless the Committee
determines otherwise, during the Restriction Period, the Grantee shall have the
right to vote shares of Stock Awards and to receive any dividends or other
distributions paid on such shares, subject to any restrictions deemed
appropriate by the Committee, including, without limitation, the achievement of
specific performance goals.
(f) Lapse of Restrictions. All restrictions imposed on Stock Awards shall
lapse upon the expiration of the applicable Restriction Period and the
satisfaction of all conditions imposed by the Committee. The Committee may
determine, as to any or all Stock Awards, that the restrictions shall lapse
without regard to any Restriction Period.
7. PERFORMANCE UNITS
(a) General Requirements. The Committee may grant performance units
("Performance Units") to an Employee or Key Advisor. Each Performance Unit shall
represent the right of the Grantee to receive an amount based on the value of
the Performance Unit, if performance goals established by the Committee are met.
The value of a Performance Unit shall equal the Fair Market
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Value of a share of Company Stock. The Committee shall determine the number of
Performance Units to be granted and the requirements applicable to such Units.
(b) Performance Period and Performance Goals. When Performance Units are
granted, the Committee shall establish the performance period during which
performance shall be measured (the "Performance Period"), performance goals
applicable to the Units ("Performance Goals") and such other conditions of the
Grant as the Committee deems appropriate. Performance Goals may relate to the
financial performance of the Company or its operating units, the performance of
Company Stock, individual performance, or such other criteria as the Committee
deems appropriate.
(c) Payment with respect to Performance Units. At the end of each
Performance Period, the Committee shall determine to what extent the Performance
Goals and other conditions of the Performance Units are met, the value of the
Performance Units (if applicable), and the amount, if any, to be paid with
respect to the Performance Units. Payments with respect to Performance Units
shall be made partly in cash, in Company Stock, or in a combination of the two,
as determined by the Committee, provided that the cash portion does not exceed
50% of the amount to be distributed.
(d) Requirement of Employment or Service. If the Grantee ceases to be
employed by, or provide service to, the Company (as defined in Section 5(e))
during a Performance Period, or if other conditions established by the Committee
are not met, the Grantee's Performance Units shall be forfeited. The Committee
may, however, provide for complete or partial exceptions to this requirement as
it deems appropriate.
8. QUALIFIED PERFORMANCE-BASED COMPENSATION.
(a) Designation as Qualified Performance-Based Compensation. The Committee
may determine that Performance Units or Stock Awards granted to an Employee
shall be considered "qualified performance-based compensation" under Section
162(m) of the Code. The provisions of this Section 8 shall apply to Grants of
Performance Units and Stock Awards that are to be considered "qualified
performance-based compensation" under section 162(m) of the Code.
(b) Performance Goals. When Performance Units or Stock Awards that are to
be considered "qualified performance-based compensation" are granted, the
Committee shall establish in writing (i) the objective performance goals that
must be met in order for restrictions on the Stock Awards to lapse or amounts to
be paid under the Performance Units, (ii) the Performance Period during which
the performance goals must be met, (iii) the threshold, target and maximum
amounts that may be paid if the performance goals are met, and (iv) any other
conditions that the Committee deems appropriate and consistent with the Plan and
section 162(m) of the Code. The performance goals may relate to the Employee's
business unit or the performance of the Company and its subsidiaries as a whole,
or any combination of the foregoing. The Committee shall use objectively
determinable performance goals based on one or more of the following criteria:
stock price, earnings per share, net earnings, operating earnings, return on
assets, stockholder return, return on equity, growth in assets, unit volume,
sales, market share, scientific goals, pre-clinical or clinical goals,
regulatory approvals, or strategic business criteria consisting of one or more
objectives based on meeting specified revenue goals, market penetration goals,
geographic business expansion goals, cost targets, goals relating to
acquisitions or divestitures, or strategic partnerships.
(c) Establishment of Goals. The Committee shall establish the performance
goals in writing either before the beginning of the Performance Period or during
a period ending no later than the earlier of (i) 90 days after the beginning of
the Performance Period or (ii) the date on which 25% of the Performance Period
has been completed, or such other date as may be required or permitted under
applicable regulations under section 162(m) of the Code. The performance goals
shall satisfy the requirements for "qualified performance-based compensation,"
including the requirement that the
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achievement of the goals be substantially uncertain at the time they are
established and that the goals be established in such a way that a third party
with knowledge of the relevant facts could determine whether and to what extent
the performance goals have been met. The Committee shall not have discretion to
increase the amount of compensation that is payable upon achievement of the
designated performance goals.
(d) Maximum Payment. Performance Units and Stock Awards under this Section
8 may be granted to an Employee with respect to not more than 500,000 shares of
Company Stock for any Performance Period.
(e) Announcement of Grants. The Committee shall certify and announce the
results for each Performance Period to all Grantees immediately following the
announcement of the Company's financial results for the Performance Period. If
and to the extent that the Committee does not certify that the performance goals
have been met, the grants of Stock Awards or Performance Units for the
Performance Period shall be forfeited.
(f) Death, Disability, Change of Control or Other Circumstances. The
Committee may provide that Performance Units shall be payable or restrictions on
Stock Awards shall lapse, in whole or in part, in the event of the Grantee's
death or Disability (as defined in Section 5(e) above) during the Performance
Period, or under other circumstances consistent with the regulations and rulings
under section 162(m), and the provisions of Section 13 shall apply in the event
of a Change of Control.
9. DEFERRALS
The Committee may permit or require a Grantee to defer receipt of the
payment of cash or the delivery of shares that would otherwise be due to such
Grantee in connection with any Option, the lapse or waiver of restrictions
applicable to Stock Awards, or the satisfaction of any requirements or
objectives with respect to Performance Units. If any such deferral election is
permitted or required, the Committee shall, in its sole discretion, establish
rules and procedures for such deferrals.
10. WITHHOLDING OF TAXES
(a) Required Withholding. All Grants under the Plan shall be subject to
applicable federal (including FICA), state and local tax withholding
requirements. The Company shall have the right to deduct from all Grants paid in
cash, or from other wages paid to the Grantee, any federal, state or local taxes
required by law to be withheld with respect to such Grants. In the case of
Options, Stock Awards and other Grants paid in Company Stock, the Company may
require that the Grantee or other person receiving or exercising Grants pay to
the Company the amount of any federal, state or local taxes that the Company is
required to withhold with respect to such Grants, or the Company may deduct from
other wages paid by the Company the amount of any withholding taxes due with
respect to such Grants.
(b) Election to Withhold Shares. If the Committee so permits, a Grantee
may elect to satisfy the Company's income tax withholding obligation with
respect to Options, Stock Awards or Performance Units paid in Company Stock by
having shares withheld up to an amount that does not exceed the Company's
minimum applicable withholding tax rate for federal (including FICA), state and
local tax liabilities. The election must be in a form and manner prescribed by
the Committee and may be subject to the prior approval of the Committee.
11. TRANSFERABILITY OF GRANTS
(a) Nontransferability of Grants. Except as provided below, only the
Grantee may exercise rights under a Grant during the Grantee's lifetime. A
Grantee may not transfer those rights except by will or by the laws of descent
and distribution or, with respect to Grants other than Incentive Stock
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Options, if permitted in any specific case by the Committee, pursuant to a
domestic relations order. When a Grantee dies, the personal representative or
other person entitled to succeed to the rights of the Grantee ("Successor
Grantee") may exercise such rights. A Successor Grantee must furnish proof
satisfactory to the Company of his or her right to receive the Grant under the
Grantee's will or under the applicable laws of descent and distribution.
(b) Transfer of Nonqualified Stock Options. Notwithstanding the foregoing,
the Committee may provide, in a Grant Instrument, that a Grantee may transfer
Nonqualified Stock Options to family members, or one or more trusts or other
entities for the benefit of or owned by family members, consistent with the
applicable securities laws, according to such terms as the Committee may
determine; provided that the Grantee receives no consideration for the transfer
of an Option and the transferred Option shall continue to be subject to the same
terms and conditions as were applicable to the Option immediately before the
transfer.
12. CHANGE OF CONTROL OF THE COMPANY
As used herein, a "Change of Control" shall be deemed to have occurred if:
(a) Any "person" (as such term is used in sections 13(d) and 14(d) of
the Exchange Act) becomes a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 50% of the voting power of the then
outstanding securities of the Company; provided that a Change of Control
shall not be deemed to occur as a result of a transaction in which the
Company becomes a subsidiary of another corporation and in which the
stockholders of the Company, immediately prior to the transaction, will
beneficially own, immediately after the transaction, shares entitling such
stockholders to more than 50% of all votes to which all stockholders of the
parent corporation would be entitled in the election of directors (without
consideration of the rights of any class of stock to elect directors by a
separate class vote);
(b) The stockholders of the Company approve (or, if stockholder
approval is not required, the Board approves) an agreement providing for
(i) the merger or consolidation of the Company with another corporation
where the stockholders of the Company, immediately prior to the merger or
consolidation, will not beneficially own, immediately after the merger or
consolidation, shares entitling such stockholders to more than 50% of all
votes to which all stockholders of the surviving corporation would be
entitled in the election of directors (without consideration of the rights
of any class of stock to elect directors by a separate class vote), (ii)
the sale or other disposition of all or substantially all of the assets of
the Company, or (iii) a liquidation or dissolution of the Company;
(c) Any person has commenced a tender offer or exchange offer for 30%
or more of the voting power of the then outstanding shares of the Company;
or
(d) After the date this Plan is approved by the stockholders of the
Company, directors are elected such that a majority of the members of the
Board shall have been members of the Board for less than two years, unless
the election or nomination for election of each new director who was not a
director at the beginning of such two-year period was approved by a vote of
at least two-thirds of the directors then still in office who were
directors at the beginning of such period.
13. CONSEQUENCES OF A CHANGE OF CONTROL
(a) Assumption of Grants. Upon a Change of Control where the Company is
not the surviving corporation (or survives only as a subsidiary of another
corporation), unless the Committee determines otherwise, all outstanding Options
that are not exercised shall be assumed by, or replaced with comparable options
or rights by the surviving corporation (or a parent of the surviving
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corporation), and other outstanding Grants shall be converted to similar grants
of the surviving corporation (or a parent of the surviving corporation).
(b) Other Alternatives. Notwithstanding the foregoing, in the event of a
Change of Control, the Committee may, but shall not be obligated to, take any of
the following actions with respect to any or all outstanding Grants: the
Committee may (i) determine that outstanding Options shall automatically
accelerate and become fully exercisable and that the restrictions and conditions
on outstanding Stock Awards shall immediately lapse, (ii) determine that
Grantees holding Performance Units shall receive a payment in settlement of such
Performance Units in an amount determined by the Committee, (iii) require that
Grantees surrender their outstanding Options in exchange for a payment by the
Company, in cash or Company Stock as determined by the Committee, in an amount
equal to the amount by which the then Fair Market Value of the shares of Company
Stock subject to the Grantee's unexercised Options exceeds the Exercise Price of
the Options or (iv) after giving Grantees an opportunity to exercise their
outstanding Options, terminate any or all unexercised Options at such time as
the Committee deems appropriate. Such surrender, termination or settlement shall
take place as of the date of the Change of Control or such other date as the
Committee may specify. The Committee shall have no obligation to take any of the
foregoing actions, and, in the absence of any such actions, outstanding Grants
shall continue in effect according to their terms (subject to any assumption
pursuant to Subsection (a)).
14. REQUIREMENTS FOR ISSUANCE OR TRANSFER OF SHARES
(a) Limitations on Issuance or Transfer of Shares. No Company Stock shall
be issued or transferred in connection with any Grant hereunder unless and until
all legal requirements applicable to the issuance or transfer of such Company
Stock have been complied with to the satisfaction of the Committee. The
Committee shall have the right to condition any Grant made to any Grantee
hereunder on such Grantee's undertaking in writing to comply with such
restrictions on his or her subsequent disposition of such shares of Company
Stock as the Committee shall deem necessary or advisable, and certificates
representing such shares may be legended to reflect any such restrictions.
Certificates representing shares of Company Stock issued or transferred under
the Plan will be subject to such stop-transfer orders and other restrictions as
may be required by applicable laws, regulations and interpretations, including
any requirement that a legend be placed thereon.
(b) Lock-Up Period. If so requested by the Company or any representative
of the underwriters (the "Managing Underwriter") in connection with any
underwritten offering of securities of the Company under the Securities Act of
1933, as amended (the "Securities Act"), a Grantee (including any successors or
assigns) shall not sell or otherwise transfer any shares or other securities of
the Company during the 30-day period preceding and the 120-day period following
the effective date of a registration statement of the Company filed under the
Securities Act for such underwriting (or such shorter period as may be requested
by the Managing Underwriter and agreed to by the Company) (the "Market Standoff
Period"). The Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such Market
Standoff Period.
15. AMENDMENT AND TERMINATION OF THE PLAN
(a) Amendment. The Board may amend or terminate the Plan at any time;
provided, however, that the Board shall not amend the Plan without stockholder
approval if (i) such approval is required in order for Incentive Stock Options
granted or to be granted under the Plan to meet the requirements of section 422
of the Code, (ii) such approval is required in order to exempt compensation
under the Plan from the deduction limit under section 162(m) of the Code, or
(iii) such approval is required by applicable stock exchange requirements.
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(b) Stockholder Approval for "Qualified Performance-Based
Compensation." If Performance Units or Stock Awards are granted as "qualified
performance-based compensation" under Section 8 above, the Plan must be
reapproved by the stockholders no later than the first stockholders meeting that
occurs in the fifth year following the year in which the stockholders previously
approved the provisions of Section 8, if required by section 162(m) of the Code
or the regulations thereunder.
(c) Termination of Plan. The Plan shall terminate on the day immediately
preceding the tenth anniversary of its effective date, unless the Plan is
terminated earlier by the Board or is extended by the Board with the approval of
the stockholders.
(d) Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant is made shall not materially
impair the rights of a Grantee unless the Grantee consents or unless the
Committee acts under Section 21(c). The termination of the Plan shall not impair
the power and authority of the Committee with respect to an outstanding Grant.
Whether or not the Plan has terminated, an outstanding Grant may be terminated
or amended under Section 21(c) or may be amended by agreement of the Company and
the Grantee consistent with the Plan.
(e) Governing Document. The Plan shall be the controlling document. No
other statements, representations, explanatory materials or examples, oral or
written, may amend the Plan in any manner. The Plan shall be binding upon and
enforceable against the Company and its successors and assigns.
16. FUNDING OF THE PLAN
This Plan shall be unfunded. The Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to
assure the payment of any Grants under this Plan. In no event shall interest be
paid or accrued on any Grant, including unpaid installments of Grants.
17. RIGHTS OF PARTICIPANTS
Nothing in this Plan shall entitle any Employee, Key Advisor, Non-Employee
Director or other person to any claim or right to be granted a Grant under this
Plan. Neither this Plan nor any action taken hereunder shall be construed as
giving any individual any rights to be retained by or in the employ of the
Company or any other employment rights.
18. NO FRACTIONAL SHARES
No fractional shares of Company Stock shall be issued or delivered pursuant
to the Plan or any Grant. The Committee shall determine whether cash, other
awards or other property shall be issued or paid in lieu of such fractional
shares or whether such fractional shares or any rights thereto shall be
forfeited or otherwise eliminated.
19. HEADINGS
Section headings are for reference only. In the event of a conflict between
a title and the content of a Section, the content of the Section shall control.
20. EFFECTIVE DATE OF THE PLAN.
The Plan was initially effective as of March 24, 2000. The effective date
of this amendment and restatement of the Plan is May 22, 2001, subject to the
approval of the Company's stockholders.
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21. MISCELLANEOUS
(a) Grants in Connection with Corporate Transactions and
Otherwise. Nothing contained in this Plan shall be construed to (i) limit the
right of the Committee to make Grants under this Plan in connection with the
acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business or assets of any corporation, firm or association, including Grants to
employees thereof who become Employees of the Company, or for other proper
corporate purposes, or (ii) limit the right of the Company to grant stock
options or make other awards outside of this Plan. Without limiting the
foregoing, the Committee may make a Grant to an employee of another corporation
who becomes an Employee by reason of a corporate merger, consolidation,
acquisition of stock or property, reorganization or liquidation involving the
Company or any of its subsidiaries in substitution for a stock option or stock
awards grant made by such corporation. The terms and conditions of the
substitute grants may vary from the terms and conditions required by the Plan
and from those of the substituted stock incentives. The Committee shall
prescribe the provisions of the substitute grants.
(b) Employees Subject to Taxation Outside the United States. With respect
to Grantees who are subject to taxation in countries other than the United
States, the Committee may make Grants on such terms and conditions as the
Committee deems appropriate to comply with the laws of the applicable countries,
and the Committee may create such procedures, addenda and subplans and make such
modifications as may be necessary or advisable to comply with such laws.
(c) Compliance with Law. The Plan, the exercise of Options and the
obligations of the Company to issue or transfer shares of Company Stock under
Grants shall be subject to all applicable laws and to approvals by any
governmental or regulatory agency as may be required. With respect to persons
subject to section 16 of the Exchange Act, it is the intent of the Company that
the Plan and all transactions under the Plan comply with all applicable
provisions of Rule 16b-3 or its successors under the Exchange Act. In addition,
it is the intent of the Company that the Plan and applicable Grants under the
Plan comply with the applicable provisions of section 162(m) of the Code and
section 422 of the Code. To the extent that any legal requirement of section 16
of the Exchange Act or section 162(m) or 422 of the Code as set forth in the
Plan ceases to be required under section 16 of the Exchange Act or section
162(m) or 422 of the Code, that Plan provision shall cease to apply. The
Committee may revoke any Grant if it is contrary to law or modify a Grant to
bring it into compliance with any valid and mandatory government regulation. The
Committee may also adopt rules regarding the withholding of taxes on payments to
Grantees. The Committee may, in its sole discretion, agree to limit its
authority under this Section.
(d) Governing Law. The validity, construction, interpretation and effect
of the Plan and Grant Instruments issued under the Plan shall be governed and
construed by and determined in accordance with the laws of Delaware, without
giving effect to the conflict of laws provisions thereof.
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APPENDIX B
AMENDED AND RESTATED CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF ESPERION THERAPEUTICS, INC.
The Board of Directors (the "Board") of Esperion Therapeutics, Inc. (the
"Corporation") has already determined that the Audit Committee of the Board
shall assist the Board in fulfilling certain of the Board's oversight
responsibilities. The Board hereby adopts this Amended and Restated Charter to
establish the new governing principles of the Audit Committee.
I. ROLE OF THE AUDIT COMMITTEE
The role of the Audit Committee is to act on behalf of the Board in
fulfilling the following responsibilities of the Board:
A. To oversee all material aspects of the Corporation's reporting, control
and audit functions, except those that are specifically related to the
responsibilities of another committee of the Board;
B. To oversee the independence and performance of the Corporation's
independent accountants; and
C. To provide a means for open communication between and among the
Corporation's independent accountants, financial and senior management, the
internal audit department and the Board.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Corporation's financial statements are complete
and accurate or that they are in accordance with generally accepted accounting
principles. The responsibility to plan and conduct audits is that of the
Corporation's independent accountants. The Corporation's management has the
responsibility to determine that the Corporation's financial statements are
complete and accurate and in accordance with generally accepted accounting
principles. Nor is it the duty of the Audit Committee to ensure the
Corporation's compliance with laws and regulations or compliance with the
Corporation's code of ethical conduct. The primary responsibility for these
matters also rests with the Corporation's management.
II. COMPOSITION OF THE AUDIT COMMITTEE
A. The Board shall designate the members of the Audit Committee at the
Board's annual organizational meeting, and the members shall serve until the
next such meeting or until their successors are designated by the Board.
B. The Audit Committee shall consist of at least three members, but no more
than six members, who are free of any relationship that, in the opinion of the
Board, would interfere with their exercise of independent judgment as Committee
members. Committee members shall have a basic understanding of finance and
accounting and shall be able to read and understand financial statements. One
member of the Committee shall have accounting or related financial management
experience. In addition, the members of the Audit Committee shall meet the
requirements of the rules of the principal market or transaction reporting
system on which the Corporation's securities are traded or quoted (i.e., New
York Stock Exchange, American Stock Exchange or The Nasdaq Stock Market).
B-1
41
III. MEETINGS OF THE AUDIT COMMITTEE
The Audit Committee shall meet at least four times annually, or more
frequently as circumstances may require. The Chair of the Audit Committee shall
be responsible for meeting with the independent accountants at their request to
discuss the interim financial statements.
IV. RESPONSIBILITIES OF THE AUDIT COMMITTEE
The Audit Committee shall have the responsibility with respect to:
A. The Corporation's Risks and Control Environment:
- To discuss with the Corporation's management, independent accountants
and any internal audit department the integrity of the Corporation's
financial reporting processes and controls, particularly the controls
in areas representing significant financial and business risks;
- To investigate any matter brought to its attention within the scope of
its duties.
B. The Corporation's Independent Accountants:
- To have a constructive and positive working relationship with the
independent accountants because of the ultimate responsibility of the
independent accountants to the Board and the Audit Committee, as
representatives of the shareholders;
- To evaluate annually the effectiveness and objectivity of the
Corporation's independent accountants and to recommend to the Board the
engagement or replacement of the independent accountants;
- To ensure that the Audit Committee receives annually from the
Corporation's independent accountants the information about all of the
relationships between the independent accountants and the Corporation
that the independent accountants are required to provide to the Audit
Committee, to actively engage in a dialogue with the independent
accountants about any relationships between the independent accountants
and the Corporation or any services that the independent accountants
provide or propose to provide that may impact upon the objectivity and
independence of the independent accountants and to take, or recommend
that the Board take, any appropriate action to oversee the independence
of the independent accountants; and
- To approve the fees and other compensation paid to the independent
accountants.
C. The Corporation's Financial Reporting Process:
- To oversee the Corporation's selection of and major changes to its
accounting policies;
- To meet with the Corporation's independent accountants and financial
management both to discuss the proposed scope of the audit and to
discuss the conclusions of the audit, including any items that the
independent accountants are required by generally accepted auditing
standards to discuss with the Audit Committee, such as any significant
changes to the Company's accounting policies, the integrity of the
Corporation's financial reporting processes and any proposed changes or
improvements in financial, accounting or auditing practices;
- To discuss with the Corporation's financial management and independent
accountants the Corporation's annual results and, where appropriate,
the interim results before they are made public;
B-2
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- To review and discuss with the Corporation's financial management and
independent accountants the Corporation's audited financial statements
and, where appropriate, the Corporation's interim financial statements
before they are made public; and
- To issue for public disclosure by the Corporation the report required
by the rules of the Securities and Exchange Commission.
D. The Corporation's Internal Audit Process:
- To review, assess and approve the charter for the internal audit
department, if any;
- To review and approve the annual internal audit plan of, and any
special projects to be undertaken by, the internal audit department, if
any;
- To discuss with the internal audit department any changes to, and the
implementation of, the internal audit plan and any special projects and
discuss with the internal audit department the results of the internal
audits and any special projects; and
- To oversee the activities, organizational structure and qualifications
of the internal audit department, if any.
E. Other Matters
- To review and reassess the adequacy of this Charter on an annual basis;
- To review reports and any financial information submitted by the
Corporation to a government body or the public;
- To report to the Board the matters discussed at each meeting of the
Audit Committee;
- To keep an open line of communication with the financial and senior
management, the internal audit department, the independent accountants
and the Board; and
- To retain, at the Corporation's expense, special legal, accounting or
other consultants or experts it deems necessary in the performance of
its duties.
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DETACH HERE
Esperion Therapeutics, Inc.
COMMON STOCK
[LOGO OF Esperion Therapeutics, Inc.] PROXY CARD
THIS PROXY CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS ON MAY 22, 2001.
YOUR VOTE IS IMPORTANT!
PLEASE COMPLETE, SIGN AND DATE THE REVERSE SIDE OF THIS CARD.
PROXY
The undersigned hereby appoints Roger S. Newton, Ph.D. and Timothy M. Mayleben
and each of them, as proxies, with full power of substitution to appear on
behalf of the undersigned and to vote all shares of Common Stock of the
undersigned at the 2001 Annual Meeting of Stockholders to be held at Crowne
Plaza, 610 Briarwood Circle, Ann Arbor, Michigan 48108, on May 22, 2001 at 9:00
a.m. local time, and at any adjournment thereof, upon all subjects that may
properly come before the Annual Meeting, including the subjects specified below,
which are more fully described in the Proxy Statement furnished herewith,
subject to any directions indicated on the reverse side of this Proxy Card,
hereby revoking any and all proxies heretofore given.
The proxies will vote "FOR" the election of each of the nominees for Class I
Directors, "FOR" the approval of the Company's Amended and Restated 2000 Equity
Compensation Plan, and "FOR" the ratification of the appointment of the
independent public accountants if the applicable boxes are not marked, and at
their discretion on any other matter that may properly come before the Annual
Meeting.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE SEE REVERSE SIDE
44
DETACH HERE
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS.
1. To elect the Nominees for Class I Directors.
NOMINEE: Henry E. Blair
[ ] FOR [ ] WITHHOLD AUTHORITY TO VOTE
NOMINEE: Seth A. Rudnick, M.D.
[ ] FOR [ ] WITHHOLD AUTHORITY TO VOTE
2. To approve an amendment of the Company's 2000 Equity
Compensation Plan to increase the number of shares authorized
for issuance under the Plan and a restatement of the Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the Board of Directors' appointment of Arthur
Andersen LLP as the independent public accountants of the
Company for the fiscal year ending December 31, 2001.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Date: , 2001
-----------------------
---------------------------------------------
Signature
---------------------------------------------
Signature (if jointly held)
Please sign exactly as your name
appears on this Proxy Card. If
signing for a corporation or
partnership, or as agent, attorney
or fiduciary, indicate the capacity
in which you are signing. If shares
are held by joint tenants or as
community property, both persons
should sign. If you vote by ballot
in person at the Annual Meeting or
by submitting a valid, later dated
Proxy Card, such vote will supersede
this proxy.
[ ] MARK HERE IF YOU PLAN TO ATTEND THE MEETING
[ ] MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
PLEASE SIGN AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE OR OTHERWISE TO STOCKTRANS, INC. AT 44 WEST LANCASTER AVENUE, ARDMORE,
PA 19003, SO THAT YOUR SHARES CAN BE REPRESENTED AT THE ANNUAL MEETING.