Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant
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Preliminary Proxy Statement
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under Rule 14a-12
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Endologix, Inc.
Name of Registrant as Specified In Its Charter
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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ENDOLOGIX, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On August 5, 2019
_________________________
To our Stockholders:
You are cordially invited to attend the 2019 Annual Meeting of Stockholders of Endologix, Inc., or the annual meeting. The annual meeting will be held on Monday, August 5, 2019, at 8:00 a.m., Pacific Time, at our principal corporate headquarters located at 2 Musick, Irvine, California 92618. The annual meeting is being held for the following purposes, as more fully described in the accompanying proxy statement:
1.
Proposal No. 1 - To elect three director nominees to serve as Class III directors for a three-year term expiring at the annual meeting of stockholders in 2022, or until each of their respective successors is duly elected and qualified;
2.
Proposal No. 2 - To approve, on a non-binding advisory basis, the compensation of our named executive officers as disclosed in the proxy statement;
3.
Proposal No. 3 - To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019;
4.
Proposal No. 4 - To approve an amendment to our Endologix, Inc. Amended and Restated 2015 Stock Incentive Plan, as amended, to increase the total number of shares of our common stock reserved for issuance under the plan by 2,500,000 shares, or from 1,630,000 shares to 4,130,000 shares;
5.
Proposal No. 5 - To approve an amendment to our Endologix, Inc. Amended and Restated 2015 Stock Incentive Plan, as amended, to provide that the number of shares available for grant under the plan will be reduced by one share of common stock (instead of by one-and-six-tenths (1.6) shares of common stock) for each share of common stock granted under the plan pursuant to a restricted stock award, stock payment award or restricted stock unit award;
6.
Proposal No. 6 - To approve an amendment to our Endologix, Inc. Amended and Restated 2006 Employee Stock Purchase Plan, as amended, to increase the total number of shares of our common stock reserved for issuance under the plan by 500,127 shares, or from 455,873 shares to 956,000 shares;
7.
Proposal No. 7 - To approve the adoption of a stock option exchange program, as described in the proxy statement; and
To transact such other business as may properly come before the annual meeting, or any adjournment or postponement thereof.
Only stockholders who held shares at the close of business on June 19, 2019, the record date for the annual meeting, are entitled to notice of and to vote at the annual meeting, or any adjournment or postponement thereof.    
Your vote is very important. Whether or not you plan to attend the annual meeting, we encourage you to read the accompanying proxy statement and submit your proxy or voting instructions as soon as possible to ensure your shares will be represented and voted at the annual meeting. For specific instructions on how to vote your shares, please refer to the instructions on the proxy card accompanying the proxy material, and the response to the question entitled "How may I vote my shares?" in the accompanying proxy statement.
Sincerely,
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John Onopchenko
Chief Executive Officer
Irvine, California


July 8, 2019





TABLE OF CONTENTS
 
Page
GENERAL INFORMATION
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PROPOSAL NO. 1 ELECTION OF DIRECTORS
EXECUTIVE OFFICERS
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
Compensation Philosophy
Role of Compensation Committee
Compensation Consultant and Peer Group
Elements of 2018 Executive Compensation Program
Other Compensation-Related Topics
SUMMARY COMPENSATION TABLE
GRANTS OF PLAN-BASED AWARDS
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
OPTION EXERCISES AND STOCK VESTED
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
SEVERANCE AND CHANGE IN CONTROL PAYMENTS
CEO PAY RATIO
DIRECTOR COMPENSATION PROGRAM
COMPENSATION COMMITTEE REPORT
PROPOSAL NO. 2 NON-BINDING ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
PROPOSAL NO. 3 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PROPOSAL NO. 4 AMENDMENT TO THE ENDOLOGIX, INC. AMENDED AND RESTATED 2015 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE PLAN
PROPOSAL NO. 5 AMENDMENT TO THE ENDOLOGIX, INC. AMENDED AND RESTATED 2015 STOCK INCENTIVE PLAN TO CHANGE THE IMPACT OF THE GRANT OF CERTAIN STOCK AWARDS ON THE SHARE RESERVE UNDER THE PLAN
PROPOSAL NO. 6 AMENDMENT TO THE ENDOLOGIX, INC. AMENDED AND RESTATED 2006 EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE PLAN
PROPOSAL NO. 7 STOCK OPTION EXCHANGE PROGRAM
AUDIT COMMITTEE REPORT
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2020 ANNUAL MEETING
OTHER BUSINESS
APPENDIX A
APPENDIX B






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_________________
PROXY STATEMENT FOR 2019 ANNUAL MEETING OF STOCKHOLDERS
_________________

GENERAL INFORMATION
The enclosed proxy is solicited on behalf of the board of directors of Endologix, Inc. (the "Company", "we", "us" or "our") for use at our 2019 Annual Meeting of Stockholders, or the annual meeting, to be held on August 5, 2019 at 8:00 a.m., Pacific Time, at our principal corporate headquarters located at 2 Musick, Irvine, California 92618.
Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders
to be Held on August 5, 2019
This proxy statement and the accompanying proxy card are available at www.proxyvote.com.
The following questions and answers are intended to briefly address potential questions that our stockholders may have regarding this proxy statement and the annual meeting. They are also intended to provide our stockholders with certain information that is required to be provided under the rules and regulations of the Securities and Exchange Commission, or the SEC.
QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
When and where will the annual meeting be held?
You are invited to attend the annual meeting to be held on August 5, 2019 at 8:00 a.m., Pacific Time at our principal corporate headquarters located at 2 Musick, Irvine, California 92618.
Why did I receive these proxy materials?
We are providing this proxy statement in connection with the solicitation by our board of directors of proxies to be voted at the annual meeting, and at any adjournment or postponement thereof. Your proxy is being solicited in connection with the annual meeting because you owned our common stock at the close of business on June 19, 2019, which is the record date for the annual meeting. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the annual meeting. This proxy statement and the accompanying proxy card are also available at www.proxyvote.com.
You are invited to attend the annual meeting in person to vote on the proposals described in this proxy statement. However, you do not need to attend the annual meeting to vote your shares. Instead, you may vote your shares as described in the response to the question entitled "How may I vote my shares?" below.
Your vote is very important. Whether or not you plan to attend the annual meeting, we encourage you to read this proxy statement and submit your proxy or voting instructions as soon as possible.
Why did I receive a full set of printed materials instead of a notice regarding the Internet availability of proxy materials?
For our 2018 annual meeting of stockholders, which was held in June 2018, we elected to provide access to the proxy materials through the Internet under the SEC’s “notice and access” rules by mailing each of our stockholders a notice regarding the Internet availability of the proxy materials and instructions on how to access the proxy materials on the Internet. However, for purposes of the 2019 annual meeting, after taking into account a number of considerations, including the timing of the annual meeting, our board of directors determined it would be more effective to provide a full set of printed proxy materials to each of our stockholders in connection with the annual meeting. This is the same delivery approach we followed when making proxy materials available to our stockholders in connection with our special meetings of stockholders held on December 21, 2018 and February 22, 2019. The proxy materials for the annual meeting include the proxy statement, as well as the accompanying proxy

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card. We do not expect that our decision to provide a full set of printed proxy materials in connection with the annual meeting will necessarily impact the manner in which we will deliver proxy materials for future meetings of our stockholders.

Who may vote at the annual meeting?
Only stockholders of record as of the close of business on June 19, 2019, which is the record date for the annual meeting, are entitled to attend and vote at the annual meeting. As of the record date, there were 17,351,352 shares of our common stock outstanding and entitled to vote, held by 85 holders of record. Stockholders have one vote for each share of our common stock that they own as of the close of business on the record date.
What is the quorum requirement for the annual meeting?
At least a majority of the outstanding shares of our common stock entitled to vote at the annual meeting must be present in person or represented by proxy in order to transact business at the annual meeting. This is referred to as a quorum. Abstentions and broker non-votes will be treated as shares present in person or represented by proxy at the annual meeting for purposes of determining whether or not a quorum exists. If there is no quorum, the chairman of the annual meeting, or the holders of a majority of shares present at the annual meeting in person or represented by proxy, will adjourn the annual meeting to a later date.
What is the difference between a stockholder of record and a beneficial owner of shares held in "street name"?
Stockholder of Record
If, on the record date, your shares were registered directly in your name with American Stock Transfer and Trust Company, or our transfer agent, then you are a stockholder of record. As a stockholder of record, you may vote in person at the annual meeting. Alternatively, you may vote by proxy through the Internet, by telephone or by mail as described in response to the question entitled "How may I vote my shares?" below. Whether or not you plan to attend the annual meeting in person, we urge you to vote your shares by proxy to ensure your vote is counted.
Beneficial Owner
If, on the record date, your shares were not registered directly in your name with our transfer agent, but instead were held in an account at a brokerage firm, bank, or other nominee, then you are a beneficial owner of shares held in "street name," and these proxy materials are being forwarded to you by your broker, bank, or other nominee, which is considered to be the stockholder of record with respect to those shares. As a beneficial owner, you are entitled to give instructions to your broker, bank, or other nominee regarding how to vote the shares in your account. You are also invited to attend the annual meeting. However, because you are not the stockholder of record, you may not vote your shares in person at the annual meeting unless you request and obtain a valid legal proxy from your broker, bank, or other nominee. Whether or not you plan to attend the annual meeting, we urge you to vote your shares to ensure your vote is counted.
What proposals will be voted upon at the annual meeting?
The proposals to be considered and voted upon at the annual meeting are as follows:
Proposal No. 1. Election to our board of directors of three director nominees, Gregory D. Waller, Thomas C. Wilder, III and Thomas F. Zenty, III, to serve as Class III directors, for a term of three years expiring upon the 2022 annual meeting of stockholders, or until each of their respective successors is duly elected and qualified.
Proposal No. 2. Approval, on a non-binding advisory basis, of the compensation of our named executive officers as disclosed in this proxy statement.
Proposal No. 3. Ratification of the appointment of KPMG LLP, or KPMG, as our independent registered public accounting firm for the fiscal year ending December 31, 2019.
Proposal No. 4. Approval of an amendment to our Endologix, Inc. Amended and Restated 2015 Stock Incentive Plan, as amended, or our 2015 Plan, to increase the total number of shares of our common stock reserved for issuance under the plan by 2,500,000 shares, or from 1,630,000 shares to 4,130,000 shares.
Proposal No. 5. Approval of an amendment to our 2015 Plan to provide that the number of shares available for grant under the plan will be reduced by one share of common stock (instead of by one-and-six-tenths (1.6) shares of common

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stock) for each share of common stock granted under the plan pursuant to a restricted stock award, stock payment award or restricted stock unit award, or RSU.
Proposal No. 6. Approval of an amendment to our Endologix, Inc. Amended and Restated 2006 Employee Stock Purchase Plan, as amended, or our ESPP, to increase the total number of shares of our common stock reserved for issuance under the plan by 500,127 shares, or from 455,873 shares to 956,000 shares.
Proposal No. 7. Approval of the adoption of a stock option exchange program, or the Option Exchange Program, as described in this proxy statement.
We will also consider such other business as may properly come before the annual meeting, or any adjournment or postponement thereof. As of the record date, we are not aware of any other matters to be submitted by our stockholders for consideration at the annual meeting. If any other matters are properly brought before the annual meeting, the proxy holders named on the accompanying proxy card will vote the shares they represent as they may determine in their discretion.

What are my voting options on each proposal?
You may vote on the proposals presented at the annual meeting as follows:
Proposal No. 1. You may either vote "FOR" the three nominees for Class III director or you may "WITHHOLD" your vote for one or more of the nominees.
Proposal No. 2. You may cast an advisory vote "FOR" or "AGAINST" the compensation of our named executive officers as disclosed in this proxy statement, or you may abstain from voting.
Proposal No. 3. You may vote "FOR" or "AGAINST" the ratification of the appointment of KPMG as our independent registered public accounting firm for the fiscal year ending December 31, 2019, or you may abstain from voting.
Proposal No. 4. You may vote "FOR" or "AGAINST" the amendment to our 2015 Plan to increase the number of shares reserved for issuance under the plan, or you may abstain from voting.
Proposal No. 5. You may vote "FOR" or "AGAINST" the amendment to our 2015 Plan to change the impact of the grant of certain stock awards on the share reserve, or you may abstain from voting.
Proposal No. 6. You may vote "FOR" or "AGAINST" the amendment to our ESPP to increase the number of shares reserved for issuance under the plan, or you may abstain from voting.
Proposal No. 7. You may vote "FOR" or "AGAINST" the adoption of the Option Exchange Program as described in this proxy statement, or you may abstain from voting.
How may I vote my shares?
The procedures for voting are as follows:
Stockholder of Record
If you are a stockholder of record, you may vote in person at the annual meeting. Alternatively, you may vote by proxy through the Internet, by phone or by mail as described below. Whether or not you plan to attend the annual meeting, we urge you to vote by proxy to ensure your vote is counted. If you have already voted by proxy, you may still attend the annual meeting and vote in person, and your vote at the annual meeting will have the effect of revoking your proxy. However, attending the annual meeting will not, by itself, revoke your proxy or change your vote. Please see the response to the question entitled "Can I change my vote after submitting my proxy?" below for additional information.
Vote in Person. To vote in person, please attend the annual meeting and request a ballot when you arrive.

Vote by Internet. To vote through the Internet, go to www.proxyvote.com and follow the instructions provided on the website. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on August 4, 2019. Our Internet voting procedures are designed to authenticate stockholders by using individual control numbers, which are located on the proxy card accompanying these proxy materials. In order to cast your vote, you will be asked to provide the control number from the proxy card.


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Vote by Phone. To vote by phone, call 1-800-690-6903 from any touch-tone telephone and follow the instructions. Telephonic voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on August 4, 2019. Our telephonic voting procedures are designed to authenticate stockholders by using individual control numbers, which are located on the proxy card accompanying these proxy materials. In order to cast your vote, you will be asked to provide the control number from the proxy card.

Vote by Mail. To vote by mail using the proxy card accompanying these proxy materials, simply complete, sign and date the proxy card and return it promptly in the postage-paid envelope provided.
Beneficial Owner
If you are a beneficial owner of shares registered in the name of your broker, bank or other nominee, you should have received a proxy card containing voting instructions with these proxy materials from that organization rather than from us. To vote your shares, simply follow the instructions provided to you. To vote in person at the annual meeting, you must obtain a valid proxy from your broker, bank or other nominee.
What happens if I do not give specific voting instructions?

Stockholder of Record
If you are a stockholder of record and you indicate when transmitting your voting instructions by Internet or by telephone that you wish to vote as recommended by our board of directors, or you sign and return a proxy card by mail without giving specific voting instructions, then the proxy holders named on the accompanying proxy card will vote your shares in the manner recommended by our board of directors on all matters presented in this proxy statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the annual meeting.
Beneficial Owner
Generally, if you are a beneficial owner of shares, you are entitled to give instructions to your broker, bank or other nominee regarding how to vote your shares. If you do not provide voting instructions, your broker, bank or other nominee typically may still vote your shares with respect to matters that are considered to be "routine" under rules applicable to nominees, but may not vote your shares with respect to matters that are considered to be "non-routine." Accordingly, if the nominee that holds your shares does not receive instructions from you on how to vote your shares on a "non-routine" matter, the nominee will inform the inspector of elections that it does not have the authority to vote on such matter with respect to your shares. This is generally referred to as a "broker non-vote."
What proposals are considered "routine" or "non-routine"?
The election of directors (Proposal No. 1), the non-binding advisory vote on executive compensation (Proposal No. 2), the approval of an amendment to our 2015 Plan to increase the number of shares reserved for issuance under the plan (Proposal No. 4), the approval of an amendment to our 2015 Plan to change the impact of the grant of certain stock awards on the share reserve (Proposal No. 5), the approval of an amendment to our ESPP to increase the number of shares reserved for issuance under the plan (Proposal No. 6), and the approval of the adoption of the Option Exchange Program (Proposal No. 7) are each considered "non-routine" matters under applicable rules. A broker, bank or other nominee cannot vote shares on these matters without voting instructions from beneficial owners, and therefore broker non-votes may exist in connection with Proposal Nos. 1, 2, 4, 5, 6 and 7.
The ratification of the appointment of KPMG (Proposal No. 3) is considered a "routine" matter under applicable rules, and a broker, bank or other nominee may vote shares for Proposal No. 3 without receiving voting instructions from beneficial owners.
How will broker non-votes be counted?
Shares represented by proxies that reflect a broker non-vote will be counted for purposes of determining the presence of a quorum. The election of directors (Proposal No. 1), the non-binding advisory vote on executive compensation (Proposal No. 2), the approval of an amendment to our 2015 Plan to increase the number of shares reserved for issuance under the plan (Proposal No. 4), the approval of an amendment to our 2015 Plan to change the impact of the grant of certain stock awards on the share reserve (Proposal No. 5), the approval of an amendment to our ESPP to increase the number of shares reserved for issuance under the plan (Proposal No. 6), and the approval of the adoption of the Option Exchange Program (Proposal No. 7) are considered "non-routine" matters and broker non-votes, if any, will not be counted as votes cast on these proposals and will not affect the outcome of the voting on these proposals. The ratification of the appointment of KPMG (Proposal No. 3) is considered a "routine" matter, so we do not expect any broker non-votes in connection with this proposal.

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What happens if I abstain from voting?

Shares represented by proxies that reflect abstentions or withheld votes as to a particular proposal will be counted as present at the annual meeting for purposes of determining the presence of a quorum. Abstentions and withheld votes are generally treated as shares present in person or represented by proxy and entitled to vote at the annual meeting. We will treat abstentions as follows:

abstentions will be treated as not voting for purposes of a proposal, the approval of which is determined by a plurality of the votes of the shares present in person or represented by proxy and entitled to vote on the proposal at the annual meeting, such as the election of directors (Proposal No. 1), and thus will not affect the outcome of the voting on such proposal; and
abstentions will have the same effect as votes against a proposal, the approval of which requires the affirmative vote of a majority of the outstanding shares of our common stock present in person or represented by proxy and entitled to vote on the proposal at the annual meeting (Proposal Nos. 2, 3, 4, 5, 6 and 7).
What is the voting requirement to approve each of the proposals?
Proposal No. 1. Directors will be elected by a plurality of the votes of the shares present in person or represented by proxy and entitled to vote on the election of directors at the annual meeting, so the nominees for Class III director who receive the most "FOR" votes (among votes properly cast in person or represented by proxy) will be elected. Abstentions and broker non-votes will not affect the outcome of the voting on the election of directors.
Proposal No. 2. The approval, on a non-binding advisory basis, of the compensation of our named executive officers, requires the affirmative vote of a majority of the outstanding shares of our common stock present in person or represented by proxy and entitled to vote on this proposal at the annual meeting. Abstentions will have the same effect as votes against this proposal. Broker non-votes will not affect the outcome of the voting on this proposal.
Proposal No. 3. The approval of the ratification of the appointment of KPMG as our independent registered public accounting firm for the fiscal year ending December 31, 2019, requires the affirmative vote of a majority of the outstanding shares of our common stock present in person or represented by proxy and entitled to vote on this proposal at the annual meeting. Abstentions will have the same effect as votes against this proposal. We do not expect any broker non-votes in connection with this proposal.
Proposal No. 4. The approval of an amendment to our 2015 Plan to increase the number of shares reserved for issuance under the plan requires the affirmative vote of a majority of the outstanding shares of our common stock present in person or represented by proxy and entitled to vote on this proposal at the annual meeting. Abstentions will have the same effect as votes against this proposal. Broker non-votes will not affect the outcome of the voting on this proposal.
Proposal No. 5. The approval of an amendment to our 2015 Plan to change the impact of the grant of certain stock awards on the share reserve requires the affirmative vote of a majority of the outstanding shares of our common stock present in person or represented by proxy and entitled to vote on this proposal at the annual meeting. Abstentions will have the same effect as votes against this proposal. Broker non-votes will not affect the outcome of the voting on this proposal.
Proposal No. 6. The approval of an amendment to our ESPP to increase the number of shares reserved for issuance under the plan requires the affirmative vote of a majority of the outstanding shares of our common stock present in person or represented by proxy and entitled to vote on this proposal at the annual meeting. Abstentions will have the same effect as votes against this proposal. Broker non-votes will not affect the outcome of the voting on this proposal.
Proposal No. 7. The approval of the adoption of the Option Exchange Program requires the affirmative vote of a majority of the outstanding shares of our common stock present in person or represented by proxy and entitled to vote on this proposal at the annual meeting. Abstentions will have the same effect as votes against this proposal. Broker non-votes will not affect the outcome of the voting on this proposal.
What are our board of director's voting recommendations on each of the proposals?
Our board of directors unanimously recommends that you vote your shares as follows:
Proposal No. 1. "FOR" each of the three nominees for Class III director.

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Proposal No. 2. "FOR" approval, on a non-binding advisory basis, of the compensation of our named executive officers as disclosed in this proxy statement.
Proposal No. 3. "FOR" the ratification of the appointment of KPMG as our independent registered public accounting firm for the fiscal year ending December 31, 2019.
Proposal No. 4. "FOR" approval of an amendment to our 2015 Plan to increase the number of shares reserved for issuance under the plan.
Proposal No. 5. "FOR" approval of an amendment to our 2015 Plan to change the impact of the grant of certain stock awards on the share reserve.
Proposal No. 6. "FOR" approval of an amendment to our ESPP to increase the number of shares reserved for issuance under the plan.
Proposal No. 7. "FOR" approval of the adoption of the Option Exchange Program, as described in this proxy statement.
How can I attend the annual meeting in person?
If you plan to attend the annual meeting in person, you must present a form of government-issued personal photo identification in order to be admitted. If your shares are held in "street name," you will also need proof of ownership of your shares to be admitted to the annual meeting. A recent brokerage statement or a letter from your nominee are examples of acceptable proof of ownership. No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted at the annual meeting.
Can I change my vote after submitting my proxy?
Yes. Any person giving a proxy pursuant to this solicitation has the power to revoke it at any time before it is voted at the annual meeting. The procedures for revoking your proxy are described below.
Stockholder of Record
If you are the stockholder of record, you may revoke your proxy in any one of four ways:
You may vote again by Internet or telephone at a later time (prior to the deadline for Internet or telephone voting).
You may submit a properly completed proxy card with a later date.
You may send a written notice that you are revoking your proxy to Endologix, Inc. at 2 Musick, Irvine, California 92618, Attention: Corporate Secretary.
You may attend the annual meeting and vote in person. However, attending the annual meeting will not, by itself, revoke your proxy or change your vote.
Beneficial Owner
If you are a beneficial owner of shares you may revoke your proxy by following the instructions provided to you by your broker, bank or other nominee.
Who is paying for the cost of this proxy solicitation?
We will bear the entire cost of this proxy solicitation, including costs of preparing, assembling, printing and mailing this proxy statement, the accompanying proxy card and any additional solicitation materials furnished to our stockholders. Copies of these proxy materials will be furnished to brokerage firms, banks or other nominees that hold shares of our common stock beneficially owned by others in the name of such organization, so that they may forward the proxy materials to such beneficial owners. We have retained Morrow & Sodali LLC, 470 East Ave, Stamford, Connecticut 06902, or Morrow, a proxy solicitation firm, to deliver solicitation materials to beneficial owners and to assist us in collecting proxies from such individuals. We expect to pay Morrow a fee of approximately $7,500 for their solicitation services and to reimburse them for certain expenses. We may reimburse brokerage firms, banks or other nominees for their expenses in forwarding solicitation materials to such beneficial owners. Solicitation of proxies may be supplemented by telephone, electronic mail or personal solicitation by our directors, officers or other regular employees. No additional compensation will be paid to directors, officers or other regular employees for such services.

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How may I obtain an additional copy of these proxy materials?
SEC rules permit companies, brokers, banks and other nominees to deliver a single copy of the proxy materials to households at which two or more stockholders reside. This practice, known as "householding," is designed to reduce duplicate mailings and save significant printing and postage costs, as well as natural resources. Stockholders sharing an address who have been previously notified by their broker, bank or other nominee and have consented to householding will receive only one copy of our proxy materials.
If you would like to opt out of this practice for future mailings and receive separate proxy materials for each stockholder sharing the same address, please contact your broker, bank or other nominee. You may also obtain additional copies of our proxy materials without charge by contacting us at Endologix, Inc. 2 Musick, Irvine, California 92618, Attention: Corporate Secretary, or by telephone by calling (949) 595-7200.
Stockholders sharing an address that are receiving multiple copies of our proxy materials can request delivery of a single copy of our proxy materials by contacting their broker, bank or other nominee, or by contacting us as indicated above.
Where can I find the voting results of the annual meeting?
We will announce preliminary voting results at the annual meeting and will publish final results in a current report on Form 8-K that we expect to file with the SEC within four business days of the annual meeting. If final voting results are not available to us in time to file a Form 8-K with the SEC within four business days of the annual meeting, we intend to file a Form 8-K to disclose preliminary voting results and, within four business days after the final results are known, we will file an additional Form 8-K with the SEC to disclose the final voting results.


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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables sets forth certain information regarding the beneficial ownership of our common stock, as of June 19, 2019, by (i) each person, or group of affiliated persons, who are known to us to beneficially own more than 5.0% of the outstanding shares of our common stock, and (ii) each of our named executive officers, each of our directors, and our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the shares. Except as noted in the footnotes below the tables, shares of our common stock that may be acquired by a stockholder within 60 days of June 19, 2019, whether pursuant to the exercise of stock options, warrants or other rights, are deemed to be outstanding for the purpose of computing the percentage ownership of such stockholder, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other stockholder.

Information about each stockholder listed in the tables is generally based on information filed with the SEC by such stockholder. Except as indicated in the footnotes to the tables, we believe each stockholder listed has sole voting and investment power with respect to all shares of common stock reported to be beneficially owned by them.

Percentage of outstanding shares is based on 17,351,352 shares of our common stock outstanding as of June 19, 2019. On March 5, 2019, following stockholder and board approval, we filed an amendment to our charter to effect a reverse stock split of our outstanding common stock at a ratio of 1-for-10. All share amounts in the tables and footnotes have been adjusted to reflect the impact of the reverse stock split.

Unless otherwise indicated, the business address of each holder is: c/o Endologix, Inc., 2 Musick, Irvine, CA 92618.

Beneficial Ownership of Principal Stockholders

Name and Address
Number of Shares Beneficially Owned
Percentage of Outstanding Shares
   ArrowMark Colorado Holdings LLC(1)
3,318,900
19.1%
   Entities affiliated with First Light Focus Fund, LP(2)
2,452,208
14.1%
   Entities affiliated with Corrib Capital Management, L.P.(3)
1,206,822
7.0%
   Entities affiliated with Camber Capital Management LLC(4)
930,000
5.4%
   Entities affiliated with Brown Capital Management, LLC(5)
897,731
5.2%

(1)  
Based solely on a Schedule 13G/A filed with the SEC on May 10, 2019. The amounts set forth in the table do not include an aggregate of 1,467,494 shares that the stockholder has the right to receive pursuant to the exercise of a pre-paid warrant to purchase common stock, the exercise of which is subject to and limited by a contractual 19.99% blocking provision set forth in the warrant. The address of ArrowMark is 100 Fillmore Street, Suite 325, Denver, CO 80206.

(2)  
Based solely on a Schedule 13G filed with the SEC on April 10, 2019. First Light Focus Fund, LP, First Light Focus Fund GP, LLC, First Light Asset Management, LLC and Mathew P. Arens have reported shared voting and dispositive power with respect to these shares. The address of First Light is 3300 Edinborough Way, Suite 201, Edina, MN 55435.

(3) 
Based solely on a Schedule 13G/A filed with the SEC on May 13, 2019. Corrib Capital Management L.P., Corrib Master Fund, Ltd. and Kevin M. Cavanaugh have reported shared voting and dispositive power with respect to these shares. The address of Corrib is 80 South 8th St., IDS Center, Suite 1850 Minneapolis, Minnesota 55402.

(4) 
Based solely on a Schedule 13G/A filed with the SEC on February 14, 2019. Camber Capital Management LLC and Stephen Dubois have reported shared voting and dispositive power with respect to these shares. The address of Camber is 101 Huntington Avenue, Suite 2101, Boston, MA 02199.

(5)  
Based solely on a Schedule 13G/A filed with the SEC on February 14, 2019. Brown Capital Management, LLC (Brown Capital) reported beneficial ownership of these shares, which includes 3,299,753 shares held by The Brown Capital Management Small Company Fund, which is managed by Brown Capital. Brown Capital has reported sole voting power with respect to 567,756 shares and sole dispositive power with respect to 897,731 shares. The address of Brown Capital is 1201 N. Calvert Street, Baltimore, MD 21202.






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Beneficial Ownership of Executive Officers and Directors

Name and Address
Number of Shares Beneficially Owned
Percentage of Outstanding Shares
Daniel Lemaitre(1)
23,974
*
Guido J. Neels(2)
36,112
*
Leslie V. Norwalk
4,350
*
Gregory D. Waller
5,055
*
Thomas C. Wilder, III(3)
4,901
*
Thomas F. Zenty, III
9,965
*
John Onopchenko(4)
58,385
*
Vaseem Mahboob(5)
55,043
*
Matthew Thompson(6)
15,128
*
Jeremy Hayden(7)
11,301
*
All directors and executive officers as a group (10 persons)(8)
224,214
1.3%
* Represents beneficial ownership of less than 1.0%.
(1)  
Includes options to purchase 9,000 shares of our common stock that are exercisable within 60 days of June 19, 2019.

(2)  
Includes options to purchase 5,000 shares of our common stock that are exercisable within 60 days of June 19, 2019.

(3) 
Includes 3,651 shares held by Thomas & Catherine Wilder Family Trust. Also includes options to purchase 1,250 shares of our common stock that are exercisable within 60 days of June 19, 2019.

(4)  
Includes options to purchase 14,948 shares of our common stock that are exercisable within 60 days of June 19, 2019.

(5)  
Includes options to purchase 29,249 shares of our common stock that are exercisable within 60 days of June 19, 2019.

(6)  
Includes options to purchase 11,492 shares of our common stock that are exercisable within 60 days of June 19, 2019.

(7)  
Includes options to purchase 11,301 shares of our common stock that are exercisable within 60 days of June 19, 2019.

(8) 
Includes options to purchase 82,240 shares of our common stock that are exercisable within 60 days of June 19, 2019.

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PROPOSAL NO. 1
ELECTION OF DIRECTORS
Board Structure
Prior to the annual meeting, our board of directors consisted of seven authorized directors divided into three classes, with Class I having two directors, Class II having two directors and Class III having three directors. Each class of directors is elected for a three-year term on a staggered term basis, so that each year the term of office of one class will expire and the terms of office of the other classes will continue for periods of one and two years, respectively. Each director is elected to serve until the expiration of his or her term and until his or her successor is duly elected and qualified.
Director Nominees
At the annual meeting, our stockholders are being asked to elect three director nominees. Each of the director nominees will initially serve as a Class III director with his respective term expiring at the annual meeting of stockholders to be held in 2022, and until his successor is elected and duly qualified.
The nominees for election as Class III directors at the annual meeting are Gregory D. Waller, Thomas C. Wilder, III and Thomas F. Zenty, III, who each currently serves as a director. Mr. Waller has served as a director since November 2003, Mr. Wilder has served as a director since May 2010 and Mr. Zenty has served as a director since May 2013. Messrs. Waller, Wilder and Zenty have each indicated a willingness to continue to serve on our board of directors if elected. However, in the event that any of Messrs. Waller, Wilder and Zenty is unable to or declines to serve as a director at the time of the annual meeting, the proxies will be voted for a nominee who shall be designated by the current board of directors to fill the vacancy. Unless otherwise instructed, the proxy holders intend to vote all proxies received by them in favor of the nominees listed above.
Director Resignation
Effective as of the date of our annual meeting, Guido J. Neels will resign from his position as a Class II director and from any position held by him on any committee of our board of directors. Accordingly, Mr. Neels is not standing for re-election at the annual meeting.
Director Re-designation
In order to achieve a more equal balance of membership among the three classes of directors, following the recommendation of our Nominating, Governance and Compliance Committee, or Governance Committee, our board of directors has authorized a re-designation of one our current directors from Class III to Class II. Accordingly, effective immediately following the annual meeting, assuming he is elected as a Class III director at the annual meeting, Mr. Wilder will resign as a Class III director and our board of directors will accept his resignation. Immediately following the resignation of Mr. Wilder, our board of directors will appoint Mr. Wilder to fill the vacancy created in Class II following the resignation of Mr. Neels with a term set to expire at the 2021 annual meeting. Immediately following the appointment of Mr. Wilder as a Class II director, Class I will have two directors, Class II will have two directors and Class III will have two directors and one vacancy. In order to eliminate the vacancy in Class III, our board of directors has authorized a reduction in our authorized directors from seven to six effective immediately following the appointment of Mr. Wilder as a Class II director. In connection with the reduction in our authorized directors from seven to six, Class I will have two directors, Class II will have two directors and Class III will have two directors, with no vacancies existing in any of the classes.
Corporate Governance Policy for Uncontested Election of Directors
In an uncontested election of directors, which is an election where the only nominees are those recommended by our board of directors, any director nominee who receives a greater number of votes "WITHHELD" from his or her election than votes "FOR" his or her election by stockholders present in person or represented by proxy at the annual meeting and entitled to vote in the election of directors, which we refer to as a majority withheld vote, must tender a written offer to resign from the board of directors to the Chairman of the Board within five business days of the certification of the stockholder vote.
Our Governance Committee, will promptly consider the resignation offer and recommend to our board of directors whether to accept it. However, if each member of our Governance Committee receives a majority withheld vote at the same election, then the independent members of our board of directors who have not received a majority withheld vote will appoint a committee among themselves to consider the resignation offers and recommend to our board of directors whether to accept them. In considering whether to accept or reject the resignation offer, our Governance Committee will consider all factors deemed relevant, including the length of service and qualifications of the director, the director's contributions to our Company, the director's ability to meet "independence"

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standards, and our best interests and those of our stockholders. To the extent one or more resignations is accepted by our board of directors, our Governance Committee will then recommend to our board of directors whether to fill such vacancy or vacancies, or to reduce the size of our board of directors.
Our board of directors will act on our Governance Committee's recommendation within 90 days following the certification of the stockholder vote, which may include acceptance of the offer of resignation, adoption of measures intended to address the perceived issues underlying the majority withheld vote, or rejection of the resignation offer. Our board of directors will disclose its decision whether to accept the director's resignation offer in a current report on Form 8-K to be filed with the SEC.
Our board of directors believes this process enhances accountability to stockholders and responsiveness to stockholders' votes, while allowing our board of directors appropriate discretion in considering whether a particular director's resignation would be in our best interests and those of our stockholders.
Required Vote
Directors will be elected by a plurality of the votes of the shares present in person or represented by proxy and entitled to vote on the election of directors at the annual meeting, so the nominees for Class III director who receive the most "FOR" votes (among votes properly cast in person or represented by proxy) will be elected. Proxies cannot be voted for a greater number of persons than the number of nominees named. Abstentions and broker non-votes will not affect the outcome of the voting on the election of directors.
Recommendation of our Board of Directors
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE "FOR" THE ELECTION EACH OF THE DIRECTOR NOMINEES.
Information with Respect to Director Nominees and Directors
Set forth below for each of the director nominees, and for each of our other current directors, is information regarding his or her age, experience, the period he or she has served as a director, and the public company directorships held. With respect to each person, we have also provided the specific experience, qualifications, skills and attributes that led to the conclusion that such nominee or director should serve as a director.
Class III Directors
(Nominees for Election to our Board of Directors for a Three-Year Term Expiring at the 2022 Annual Meeting)
Gregory D. Waller, 69, has served on our board of directors since November 2003. From October 2011 to April 2015, Mr. Waller was Chief Financial Officer of Ulthera Corp., a manufacturer of ultrasound equipment used to tighten and tone skin. Prior to that, from March 2006 to April 2011, Mr. Waller was Chief Financial Officer of Universal Building Products, a manufacturer of concrete construction accessories. Mr. Waller served as Vice President-Finance, Chief Financial Officer and Treasurer of Sybron Dental Specialties, Inc., a manufacturer and marketer of consumable dental products, from August 1993 until his retirement from Syborn in May 2005, and was formerly the Vice President and Treasurer of Kerr, Ormco Corporation, and Metrex. Mr. Waller joined Ormco Corporation in December 1980 as Vice President and Controller and served as Vice President of Kerr European Operations from July 1989 to August 1993. Mr. Waller also served on the board of directors and audit committee of Cardiogenesis Corporation, a publicly-traded company until its acquisition by Cryolife in 2011. Mr. Waller also served on the boards of directors of Alsius Corporation, a publicly-traded company, from June 2007 to September 2009 until its acquisition by Zoll, Biolase Technology, Inc., a publicly-traded company, from October 2009 to August 2010, Clarient, Inc., a publicly-traded company which was acquired by General Electric Company in December 2010, and SenoRx, Inc., a publicly-traded company which was acquired by C.R. Bard, Inc. in July 2010. Mr. Waller also serves on the boards of CHF Solutions and Arcadia Bioscience Corporation, both publicly-traded companies. Mr. Waller has an M.B.A. with a concentration in Accounting from California State University, Fullerton and a B.A. in Political Science from California State University, Fullerton.
As reflected in the biographical information summarized above, Mr. Waller has extensive senior management experience in the medical device industry. Mr. Waller has served on numerous other boards of directors of publicly reporting companies, including as chairman of the Audit Committees of many of those healthcare companies. This experience qualifies him to serve on our board of directors and as an "audit committee financial expert," as such term is defined under applicable rules and regulations of the SEC.

Thomas C. Wilder, III, 55, has served on our board of directors since May 2010. Since August 2017, Mr. Wilder has served as Chief Executive Officer of Neuros Medical Inc., a neuromodulation company. Mr. Wilder served as the Chief Executive Officer

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of Sequent Medical, Inc., a company dedicated to the development of innovative catheter-based neurovascular technologies, from February 2010 to July 2016. Prior to joining Sequent Medical, Mr. Wilder served as a consultant to several medical device companies from May 2009 to February 2010. Mr. Wilder served as the President and Chief Executive Officer of Photothera, Inc. from April 2006 to April 2009. Prior to joining Photothera, Mr. Wilder served as President and Chief Executive Officer of Micro Therapeutics, Inc. from 2002 to January 2006. Mr. Wilder served as President of ev3 Neurovascular, following the merger of Micro Therapeutics, Inc. into ev3 Inc., from January 2006 to April 2006. Prior to joining Micro Therapeutics, Inc., Mr. Wilder served in positions of increasing responsibility at Medtronic, Inc. from 1991 to 2002, most recently as Vice President and General Manager of its endovascular stent grafts division. Prior to joining Medtronic, Mr. Wilder served in the Financial Statement Audit Practice of Price Waterhouse from 1986 to 1989. Mr. Wilder serves on the board of directors of Penumbra, Inc., a publicly-traded company. Mr. Wilder holds an M.B.A. from Northwestern University's J.L. Kellogg Graduate School of Management and a B.A. in Economics from Stanford University.
As reflected in the biographical information summarized above, Mr. Wilder has decades of experience in the medical device industry, including many senior management and leadership positions with numerous companies. In addition, Mr. Wilder has extensive financial expertise and operational experience with growth companies. These skills and this experience, as well as Mr. Wilder's extensive financial and accounting skills and experience, qualify him to serve on our board of directors and as an "audit committee financial expert," as such term is defined under applicable rules and regulations of the SEC.
As discussed above, assuming he is elected as a Class III director at the annual meeting, immediately following the annual meeting Mr. Wilder will resign as a Class III director and our board of directors will appoint Mr. Wilder to Class II with a term set to expire at the 2021 annual meeting.
Thomas F. Zenty, III, 64, has served on our board of directors since May 2013. Mr. Zenty currently serves as the President and Chief Executive Officer of University Hospitals Health System, Inc., Cleveland, Ohio. Mr. Zenty held various executive positions with Cedars-Sinai Health System, St. Joseph's Medical Center, a division of Dignity Health, Franciscan Health System of New Jersey and St. Mary Hospital, Connecticut from 1980 to 2003. Mr. Zenty is Chairman of the Board of Western Reserve Assurance Company, Ltd. SPC, a privately-held insurance company. Mr. Zenty previously served on the boards of directors of the American Hospital Association and Nationwide Financial Services, Inc., both privately-held companies. Mr. Zenty has held several academic positions with prestigious universities, including his current position as Adjunct Professor, Banking & Finance at Case Western Reserve University, and chaired The Coalition to Protect America's Health Care. Mr. Zenty holds an M.P.A. in Public Administration from New York University, a M.H.S.A. in Hospital Administration from Xavier University, and a B.A. in Health Planning from Pennsylvania State University.
As reflected in the biographical information summarized above, Mr. Zenty has extensive business, managerial, executive and leadership experience in the health care industry, having served in numerous senior management positions, including as chief executive officer and executive vice president at a leading hospital and health care system, which qualifies him to serve on our board of directors.

Class I Directors
(Directors Continuing in Office with a Term Expiring in 2020)
Daniel Lemaitre, 65, has served on our board of directors since December 2009 and has served as our Chairman since February 2017. Mr. Lemaitre served as our Lead Independent Director from March 2014 to February 2017, when our board of directors appointed him as our Chairman. Mr. Lemaitre served as President and Chief Executive Officer of Direct Flow Medical, Inc., a privately-held medical device company, from May 2015 to November 2016. Prior to joining Direct Flow Medical, Mr. Lemaitre served as Chief Executive Officer of White Pine Medical, Inc., a privately-held medical device company, from June 2009 to May 2015. Prior to White Pine Medical, Mr. Lemaitre served as the President and Chief Executive Officer of CoreValve, a privately-held company focused on percutaneous aortic valve replacement, from April 2008 until its acquisition by Medtronic, in April 2009. From 2005 to March 2008, Mr. Lemaitre was a Senior Vice President at Medtronic, where he led the company's strategic planning and corporate development. Prior to joining Medtronic, Mr. Lemaitre spent 28 years in the medical device field as an investment analyst. This included 18 years with SG Cowen, where he was a managing director and led the healthcare research team, and six years with Merrill Lynch. Mr. Lemaitre also serves on the board of directors of Globus Medical, Inc., a publicly-traded manufacturer of spinal implants. Mr. Lemaitre holds an M.B.A. from Bowling Green State University and a B.A. in Economics from Bethany College.

As reflected in the biographical information summarized above, Mr. Lemaitre has extensive business, managerial, executive and leadership experience in the medical device industry, including having served as chief executive officer of a medical device company, and as senior vice president of one of the world's leading medical technology companies. In addition, Mr. Lemaitre's experience on the board of directors of a publicly-held medical device company brings to our board of directors a meaningful understanding of our business and industry and valuable skills related to strategic planning for a publicly-traded company. These

12



skills and this experience, as well as Mr. Lemaitre's extensive financial and accounting skills and experience, qualify him to serve on our board of directors and as an "audit committee financial expert," as such term is defined under applicable rules and regulations of the SEC.
Leslie V. Norwalk, 53, has served on our board of directors since May 2015. Ms. Norwalk is an Operating Partner at Enhanced Equity Fund, L.P., a private equity firm, and also serves as an advisor to Warburg Pincus LLC, and Peloton Equity, both private equity firms. Since 2011, Ms. Norwalk has served as a member of the board of directors of Volcano Corporation, a publicly-traded medical device company acquired by Phillips USA in February 2015. Since 2007, Ms. Norwalk has served as a Strategic Advisor and Strategic Counsel to Epstein Becker & Green, P.C., a law firm, and two consulting agencies: EBG Advisors, Inc., and National Health Advisors. Previously, Ms. Norwalk served the Bush Administration as the Acting Administrator for the Centers for Medicare & Medicaid Services, or CMS, where she managed the day-to-day operations of Medicare, Medicaid, State Child Health Insurance Programs, the survey and certification of health care facilities and other federal health care initiatives. For four years prior to that, Ms. Norwalk was the agency's Deputy Administrator, responsible for the implementation of the changes made under the Medicare Modernization Act, including the Medicare Prescription Drug Benefit. Prior to serving the Bush Administration, Ms. Norwalk practiced law in the Washington, D.C. office of Epstein Becker & Green, P.C. where she advised clients on a variety of health policy matters. She also served in the first Bush administration in the White House Office of Presidential Personnel and the Office of the U.S. Trade Representative. Ms. Norwalk serves on the boards of directors of Magellan Health, Inc., NuVasive, Inc. and Providence Service Corp., all publicly-traded companies, and on the boards of directors of several privately-held companies, and as a member of the International Advisory Council at APCO Worldwide Inc. Ms. Norwalk holds a J.D. from the George Mason University School of Law and a B.A., cum laude, in Economics and International Relations from Wellesley College.
As reflected in the biographical information summarized above, Ms. Norwalk has extensive and diverse experience in the health care industry and extensive knowledge of health care policy, which qualifies her to serve on our board of directors.

Class II Directors
(Directors Continuing in Office with a Term Expiring in 2021)
Guido J. Neels, 70, has served on our board of directors since December 2010 and, as described above, intends to resign effective as of the date of our annual meeting. Mr. Neels is an Operating Partner with EW Healthcare Partners, previously called Essex Woodlands Health Ventures which he joined in 2006. Prior to joining EW Healthcare Partners, Mr. Neels served in a variety of management positions at Guidant Corporation, a developer of cardiovascular medical products. Mr. Neels served as Guidant's Chief Operating Officer, where he was responsible for the global operations of Guidant's four operating units: Cardiac Rhythm Management, Vascular Intervention, Cardiac Surgery, and Endovascular Solutions, from July 2004 until retiring in November 2005. Mr. Neels served as Guidant's Group Chairman, Office of the President, responsible for worldwide sales operations, corporate communications, corporate marketing, investor relations and government relations, from December 2002 to July 2004. Mr. Neels was named Guidant's President, Europe, Middle East, Africa and Canada in January 2000. Mr. Neels served as Guidant's Vice President, Global Marketing, Vascular Intervention, from 1996 to 2000 and as Guidant's General Manager, Germany and Central Europe, from 1994 to 1996. Mr. Neels served on the boards of directors of Biopure Corporation, a publicly-traded medical device company, from 2005 to 2009, Lemaitre Vascular, Inc., a publicly-traded medical device company, from 2006 to 2008, Nellix, Inc., a privately-held medical device company, from 2006 until its acquisition by us in December 2010, 480 Biomedical, Inc, a privately-held medical device company, from 2016 to 2018, Arsenal Medical, Inc., a privately-held medical device company, from 2011 to 2018 and Entellus Medical, Inc., a publicly-traded medical device company, from 2009 to 2018. Mr. Neels currently serves on the boards of directors of Bioventus LLC and White Pine Medical, Inc., both privately-held medical device companies and Axogem, Inc, a publicly-traded medical device company. Mr. Neels also serves on the board of directors of Christel House International, and Amici Lovanienses, each a non-profit organization. Mr. Neels holds an M.B.A. from the Stanford University Graduate School of Business and a business engineering degree from the University of Leuven in Belgium.
As reflected in the biographical information summarized above, Mr. Neels has extensive business, managerial, executive and leadership experience in the medical device industry, having served in various senior management positions, including as chief operating officer of a publicly-traded medical device company. In addition, Mr. Neels serves or has served on the boards of directors of several publicly-traded and privately-held medical device companies, including serving on the board of directors of Nellix, which we acquired in December 2010. This experience qualifies him to serve on our board of directors.
John Onopchenko, 61, has served on our board of directors since June 2018 and has served as our Chief Executive Officer since May 2018. He first joined us in October 2017 as our Chief Operating Officer. Mr. Onopchenko has 30 years of executive leadership experience in the medical device industry. Prior to joining us, he served as Executive Vice President for Acutus Medical, Inc., a privately-held medical device company, from September 2016 to October 2017, where he was responsible for program management, product development, quality, marketing and sales. Prior to joining Acutus Medical, Mr. Onopchenko served as Senior Vice President and Head of Therapy Strategy for Koninklijke Philips Electronics NV, a publicly-traded technology company from

13



March 2015 to September 2016. Prior to joining Philips, he served as Executive Vice President, from April 2013 to November 2014, and Chief Operating Officer, from November 2014 to March 2015, of Volcano Corporation, a publicly-traded medical device company, where he was responsible for its peripheral and Axsun business units, regulatory affairs, quality assurance, program management, product development, clinical affairs, and business development. Prior to his employment with Volcano, he served on Volcano's board of directors for 11 years. Mr. Onopchenko held senior positions at Johnson & Johnson, a publicly-traded medical device company, including serving as lead of medical device investments with Johnson & Johnson Development Corporation, and as Vice President of Worldwide Operations and Marketing for Advanced Sterilization Products, a Johnson & Johnson company, from 1996 to 2006. He also served as founder and managing director of Synergy Life Sciences Partners, LLC, an early-stage medical device venture capital fund. Mr. Onopchenko holds an M.B.A. from the University of Chicago, Graduate School of Business and a B.S. from Ursinus College.
As reflected in the biographical information summarized above, Mr. Onopchenko has extensive and diverse experience in the medical device industry, including 30 years serving in executive leadership roles, most recently as our Chief Operating Officer and now as our Chief Executive Officer, which qualifies him to serve on our board of directors.

Board Leadership Structure
In February 2017, our board of directors, upon the recommendation of our Governance Committee, separated the offices of Chairman of the Board and Chief Executive Officer and appointed Daniel Lemaitre as Chairman of the Board. Our board of directors believes that this separation is appropriate for us at this time because it allows for a division of responsibilities that permits our Chief Executive Officer to focus on our day-to-day business, while allowing our Chairman of the Board to focus on leading our board of directors. It also allows for the sharing of ideas between individuals having different perspectives as a result of their different roles and responsibilities. Our Chief Executive Officer is primarily responsible for our operations and strategic direction. Our Chairman of the Board has an important responsibility to ensure effective and independent oversight of management and board decision-making. The Chairman of the Board coordinates the activities of the other non-employee directors, assists in facilitating communication between our board of directors and management, and performs other duties and functions as directed by our board of directors from time to time.
From March 2014 to February 2017, Mr. Lemaitre served as our Lead Independent Director pursuant to a lead independent director policy which was adopted by our board of directors in March 2014 upon the recommendation of our Governance Committee. Following the separation of the offices of Chairman of the Board and Chief Executive Officer, it is expected that the Lead Independent Director position will remain vacant until such time as the Chairman of the Board is not an independent director.
Our board of directors retains the authority to change the current board leadership structure, including by recombining the Chief Executive Officer and Chairman of the Board positions if it deems such a change to be appropriate in the future.
Board of Directors Involvement in Risk Oversight
Our board of directors oversees our risk management practices and strategies, taking an enterprise-wide approach to risk management that seeks to complement our organizational and strategic objectives, long-term performance and the overall enhancement of stockholder value. The approach of our board of directors to risk management includes developing a detailed understanding of the risks we face, analyzing them with the latest information available, and determining the steps that should be taken to manage those risks, with a view toward the appropriate level of risk for a company of our size, stage of growth and financial condition.
While our board of directors has the ultimate responsibility for the risk management process, senior management and various committees of our board of directors also have responsibilities for certain areas of risk management. Our senior management team is responsible for day-to-day risk management and regularly reports on risks to our full board of directors or a relevant committee. Our legal, finance and regulatory areas serve as the primary monitoring and evaluation functions for company-wide policies and procedures, and manage the day-to-day oversight of the risk management strategy for our ongoing business. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, operational, compliance and reporting levels.
Our Audit Committee focuses on financial compliance risk by working closely with management and our independent registered public accounting firm. Our Compensation Committee, assesses risks related to our compensation programs. In setting performance targets for incentive compensation, our Compensation Committee seeks to balance the need to incentivize performance that will drive our future growth and success and the need to encourage an appropriate level of risk-taking. Our Governance Committee monitors our compliance with legal and regulatory requirements that affect our Company and works closely with our internal compliance officers and outside legal counsel to identify and assess key operational risks related to legal and regulatory compliance.

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Director Independence
Our common stock is listed on The NASDAQ Global Select Market and we are subject to the NASDAQ Listing Rules. Our board of directors has affirmatively determined that all of the current members of our board of directors, other than Mr. Onopchenko, are "independent" as defined in the NASDAQ Listing Rules. None of our independent directors have any transactions, relationships or arrangements with us that are required to be disclosed pursuant to the applicable SEC rules and regulations that have not been disclosed.
Meetings of our Board of Directors
Our board of directors met ten times during the year ended December 31, 2018. During the year, each director attended at least 75% of the aggregate of (i) the total number of meetings of our board of directors and (ii) the total number of meetings held by all committees of our board of directors on which he or she served.
Committees of our Board of Directors
Our board of directors has an Audit Committee, a Compensation Committee and a Nominating, Governance and Compliance Committee. Our board of directors has affirmatively determined that each member of each of these committees meets the independence standards set forth in the applicable SEC rules and NASDAQ Listing Rules.
Each committee operates under a written charter adopted by our board of directors. Copies of the charters of all standing committees are available on the "Investor Relations" page on our website located at www.endologix.com.
Audit Committee
Our Audit Committee currently consists of Messrs. Waller (Chair), Lemaitre and Wilder. Our board of directors has determined that each member of our Audit Committee qualifies as an "audit committee financial expert" as that term is defined in the applicable SEC rules, and satisfies the "financial sophistication" standard as that term is defined in the NASDAQ Listing Rules.
Our Audit Committee has the sole authority to appoint and, when deemed appropriate, replace our independent registered public accounting firm, and has established a policy of pre-approving all audit and permissible non-audit services provided by our independent registered public accounting firm. Our Audit Committee has, among other things, the responsibility to:
review and discuss with management and our independent registered public accounting firm the content of our financial statements prior to filing our quarterly reports on Form 10-Q, and the annual audited financial statements, including disclosures made in management's discussion and analysis of financial condition and results of operations, and recommend to our board of directors whether the audited financial statements should be included in our annual report on Form 10-K;
discuss with management any major issues as to the adequacy of our disclosure controls and procedures, and discuss with our independent registered public accounting firm and management our internal control over financial reporting that have come to our auditor's attention during the conduct of the audit, and any special steps adopted in light of material control deficiencies;
establish procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls, auditing or compliance matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting, auditing or compliance matters; and
assist our board of directors in its oversight of our compliance with legal and regulatory requirements.
Our Audit Committee held four meetings during the year ended December 31, 2018. Our Audit Committee also meets separately with our independent registered public accounting firm and members of management.
Compensation Committee
Our Compensation Committee currently consists of Mr. Zenty (Chair), Ms. Norwalk and Mr. Neels. Immediately following Mr. Neels' resignation, we expect our Compensation Committee will consist of Mr. Zenty (Chair), Ms. Norwalk and Mr. Wilder. Our Compensation Committee is primarily responsible for discharging our board of director's responsibilities relating to compensation of our directors and executive officers. Our Compensation Committee held sixteen meetings during the year ended December 31, 2018.

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Additional information regarding our Compensation Committee's evaluation and approval of executive officer and director compensation is included under the heading "Role of Compensation Committee" below.
Nominating, Governance and Compliance Committee
Our Governance Committee currently consists of Ms. Norwalk (Chair) and Messrs. Lemaitre, Neels and Waller. Immediately following Mr. Neels' resignation, we expect our Governance Committee will consist of Ms. Norwalk (Chair) and Messrs. Lemaitre and Waller. Our Governance Committee has, among other things, the responsibility to:
assist our board of directors in identifying individuals qualified to become members of our board of directors, recommend director nominees for the next annual meeting of stockholders, and fill vacancies that may be created by the expansion of the number of directors of our board of directors and by resignation, retirement or other termination of incumbent members of our board of directors;
develop and recommend to our board of directors corporate governance guidelines and changes thereto;
lead our board of directors in its annual performance reviews;
recommend to our board of directors nominees for each committee of our board of directors; and
oversee our compliance efforts with respect to applicable legal and regulatory requirements and relevant internal policies and procedures (other than with respect to matters that relate to our financial statements, financial reporting processes and accounting functions, which are within the purview of our Audit Committee).
Our Governance Committee held six meetings during the year ended December 31, 2018.
Stock Ownership Policies
Our board of directors, upon the recommendation of our Compensation Committee, adopted a stock ownership policy for members of our board of directors in May 2013. Under the policy, our non-employee directors are required to hold a number of shares of our common stock equal to three times (3x) their base annual cash retainers, not including amounts received for service on committees. Incumbent non-employee directors serving at the time the policy was adopted had five years from the adoption of the policy, and new non-employee directors have five years from the date of their appointment to our board of directors, to reach the required ownership level.
To further align the interests of our management with those of our stockholders, our board of directors, upon the recommendation of our Compensation Committee, also adopted a stock ownership policy for our executive officers in April 2014. Under the policy, our Chief Executive Officer is required to hold a number of shares of our common stock equal to three times (3x) his or her annual base salary and our other executive officers are required to hold a number of shares of our common stock equal to their annual base salaries. Our executive officers at the time the policy was adopted had five years from the adoption of the policy, and new executive officers have five years from the date of their appointment as executive officers, to reach the required ownership levels.
For purposes of these stock ownership policies, "ownership" of our common stock includes: (i) shares acquired pursuant to open-market purchases, (ii) shares acquired upon the exercise of stock options, (iii) shares acquired pursuant to our ESPP, (iv) shares obtained upon the settlement of RSUs, and (v) "in-the-money" vested stock options.
Evaluation of Director Nominees
In the case of an incumbent director whose term of office is set to expire, in evaluating the director nominee, our Governance Committee reviews the nominee's overall services to us during his or her term, including the level of participation, the quality of his or her performance, and the continued need for the director's qualifications and professional experiences as part of the overall composition of our board of directors.
In the case of new director nominees, our Governance Committee typically screens potential candidates, performs reference checks, prepares a biography for each candidate and conducts interviews. The members of our Governance Committee and our Chief Executive Officer interview candidates that meet the criteria described below, and our Governance Committee recommends nominees to our board of directors that it believes are best suited to serve the needs of our board of directors and our stockholders.
Our Governance Committee does not evaluate nominees for director any differently to the extent that a nominee is recommended by a stockholder. We typically do not pay fees to any third party to identify or evaluate, or assist in identifying or evaluating, potential director nominees.

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Our Governance Committee believes that all nominees for director must meet certain minimum qualifications, including having:
the highest character and integrity;
business or other experience that is of particular relevance to the medical device industry;
sufficient time available to devote to our Company; and
no conflicts of interest which would violate any applicable law or regulations or interfere with the proper performance of the responsibilities of a director.
We do not have a written policy with respect to diversity of the members of our board of directors. However, in considering nominees for service on our board of directors, our Governance Committee takes into consideration, in addition to the criteria summarized above, the diversity of professional experience, viewpoints and skills of the members of our board of directors. Examples of this include experience in the medical device industry, management experience, financial expertise, medical expertise, and educational background. Our Governance Committee and our board of directors believe that a diverse board leads to improved performance by encouraging new ideas, expanding the knowledge base available to management and other directors, and fostering a culture that promotes innovation and vigorous deliberation.
Stockholder Nominations of Directors
Our Governance Committee will consider stockholder recommendations for directors sent to our Nominating, Governance and Compliance Committee, c/o Corporate Secretary, Endologix, Inc., 2 Musick, Irvine, California 92618. Stockholder recommendations for directors must include: (i) the name and address of the stockholder recommending the person to be nominated and the name and address of the person or persons to be nominated, (ii) a representation that the stockholder is a holder of record of our stock, (iii) a description of all arrangements or understandings between the stockholder and the recommended nominee, if any, (iv) such other information regarding the recommended nominee as would be required to be included in a proxy statement filed pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act, had the nominee been nominated, or intended to be nominated, by our board of directors, and (v) the consent of the recommended nominee to serve as a director if so elected. The stockholder must also state if the stockholder intends to appear in person or by proxy at the annual meeting to nominate the person specified in the notice.
In accordance with our bylaws, the notice containing the nomination must be received by us not less than 90 days prior to the annual or special meeting of stockholders or, in the event less than 100 days' notice or prior public disclosure of the date of the annual or special meeting has been given, no later than ten days after such notice has been given.
Communications with our Board of Directors
Stockholders can communicate with our board of directors, or with an individual director, by sending a written communication to: Endologix, Inc., 2 Musick, Irvine, California 92618, Attention: Corporate Secretary. All communications sent to this address will be delivered to the specific director(s) identified in the communication, or if no directors are identified the communication will be delivered to our Chairman of the Board.
Director Attendance at Annual Meetings
We do not have a policy with respect to director attendance at annual meetings of our stockholders although all of our directors are encouraged to attend.
Code of Conduct and Ethics
We have adopted a Code of Conduct and Ethics for our principal executive officer, principal financial officer and other senior financial officers. A copy of the Code of Conduct and Ethics is available on the "Committee Charters and Governance Documents" page under the "Investors" tab of our website located at www.endologix.com, and a copy may also be obtained by any person, without charge, upon written request delivered to: Endologix, Inc., 2 Musick, Irvine, California 92618, Attention: Corporate Secretary. We will disclose any amendment to, or waiver from, a provision of the Code of Conduct and Ethics by posting such information on our website.

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Delinquent Section 16(a) Reports
The members of our board of directors, our executive officers and persons who hold more than 10% of our outstanding common stock are subject to the reporting requirements of Section 16 of the Exchange Act, which requires them to file reports with respect to their ownership of our common stock and their transactions in such common stock. Based upon (i) copies of reports that we received from such persons relating to their transactions in our common stock during the year ended December 31, 2018 and/or (ii) written representations received from such persons that no other reports were required to be filed by them for that year, we believe that all Section 16 filing requirements were timely met during our most recent fiscal year, except that due to administrative errors Matthew Thompson, John Onopchenko and Guido Neels each filed one late Form 4.
Compensation Committee Interlocks and Insider Participation
As of the date of this proxy statement, no member of our Compensation Committee is serving, and during the year ended December 31, 2018 no member of our Compensation Committee served, as an officer or employee of our Company or any of our subsidiaries. None of our executive officers is serving, and during the year ended December 31, 2018 none of our executive officers served, as a member of the compensation committee of any other entity that has one or more executive officers serving or having served as a member of the board of directors or Compensation Committee during the year ended December 31, 2018. None of our executive officers is serving, and during the year ended December 31, 2018 none of our executive officers served, as a member of the board of directors of any other entity that has one or more executive officers serving, or that has served, as a member of our Compensation Committee.
Arrangements with Directors and Executive Officers
Except as otherwise disclosed in this proxy statement, no arrangement or understanding exists between any of our directors, director nominees or executive officers and any other person, pursuant to which any of them was selected as our director, director nominees or executive officer.
Family Relationships
There are no family relationships among any of our directors, director nominees or executive officers.
No Legal Proceedings
There are no legal proceedings related to any of our directors, director nominees or executive officers which are required to be disclosed pursuant to the applicable SEC rules.
Related Party Transactions
Our Audit Committee is responsible for identifying, reviewing and approving any proposed transaction with any related person. Currently, this review and approval requirement applies to any transaction to which we will be a party, in which the amount involved exceeds $120,000, and in which any of the following persons will have a direct or indirect material interest: (i) any of our directors or executive officers, (ii) any director nominee, (iii) any security holder who is known to us to own five percent or more of our common stock, or (iv) any member of the immediate family of any of such persons.
Our Audit Committee meets on a quarterly basis to review related party transactions and more often as necessary. At each such meeting, our Audit Committee members and our independent public accounting firm have the opportunity to ask questions before our Audit Committee approves any transaction. Though this policy is not in writing, these procedures are evidenced through the minutes of our Audit Committee.
We have not entered into any transactions with related persons which are required to be disclosed pursuant to the applicable SEC rules and regulations, and no such transactions are currently contemplated.

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EXECUTIVE OFFICERS
Each of our executive officers serves at the discretion of our board of directors. Important summary information about our current executive offices as of June 19, 2019 is set forth in the table below, followed by certain biographical information about each officer.

Name
Age
Position(s)
John Onopchenko
61
Chief Executive Officer and Director
Vaseem Mahboob
50
Chief Financial Officer
Matthew Thompson, M.D.
57
Chief Medical Officer
Jeremy Hayden
49
General Counsel and Corporate Secretary
    
See the section entitled "Information with Respect to Director Nominees and Directors" for biographical information regarding Mr. Onopchenko.

Vaseem Mahboob joined us in October 2015 and serves as our Chief Financial Officer. Prior to joining us, Mr. Mahboob served as a senior executive officer of several business segments within the General Electric Company, a publicly-traded infrastructure and financial services company, for 17 years, with expertise across all areas of finance and accounting. Mr. Mahboob served with General Electric Company's Healthcare division as Chief Financial Officer, Eastern and African Growth Markets, from January 2013 to September 2015, as Chief Financial Officer, Global Ultrasound Business, from November 2010 to December 2012, as Chief Financial Officer, Global Magnetic Resonance Business, from September 2006 to October 2010, and as Global Manufacturing Finance Manager of GE Advanced Materials from October 2004 to August 2006. Prior to that, Mr. Mahboob held several leadership positions within GE's corporate audit staff. Mr. Mahboob currently sits on the board of directors and is a member of the Audit Committee at INSYS Therapeutics, a publicly-traded company. Mr. Mahboob holds an M.B.A. in Financial Markets and Institutions & Information Systems from the State University of New York, Buffalo, New York and a B.Eng. in Computer Science from Bangalore University.

Matthew Thompson, M.D. joined us in December 2016 and serves as our as Chief Medical Officer. Prior to joining us, Dr. Thompson served as Professor of Vascular Surgery at St. George's University of London and St George's Vascular Institute. Dr. Thompson's awards include a Hunterian Professorship, the Moynihan traveling fellowship and the gold medal for the intercollegiate examination. Dr. Thompson is also the editor of the Oxford Textbook of Vascular Surgery and the Oxford Handbook of Vascular Surgery. Dr. Thompson was Chair of the National Specialized Commissioning Clinical Reference Group for Vascular Services and is a founder of the British Society for Endovascular Therapy. Dr. Thompson is also a Council Member of the Vascular Society, Chairman of the Vascular Society Annual Scientific Meeting and elected President of the Vascular Society for 2018. Dr. Thompson trained at Cambridge University, St. Bartholomew's Hospital, the University of Leicester and Adelaide.

Jeremy Hayden joined us in August 2017 and serves as our General Counsel and Corporate Secretary. Prior to joining us, Mr. Hayden served as General Counsel for Cytori Therapeutics, Inc., where he was responsible for all global legal, compliance and intellectual property activities. Prior to joining Cytori, Mr. Hayden served as Assistant General Counsel at Volcano Corporation, where he provided support to many of the key divisions at Volcano, had direct responsibility for all SEC filings, advertising and promotional reviews, and was responsible for international legal matters in Asia and Europe, including distribution agreements, partnerships and compliance. Prior to joining Volcano, Mr. Hayden was a corporate and securities attorney with several international law firms, including Brobeck, Phleger & Harrison LLP, Sheppard Mullin Richter & Hampton LLP and McKenna Long & Aldridge LLP, where he provided counsel to medical device companies on venture capital, equity and debt financings, partnerships and corporate legal matters. Mr. Hayden holds a J.D. from University of Michigan Law School and a B.A. in Politics from Princeton University.



COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis explains the compensation arrangements for our named executive officers, which we refer to as NEOs for purposes of this section, and is intended to provide information regarding our overall compensation philosophy and objectives, as well as context for the decisions underlying the compensation paid to our NEOs in 2018. This Compensation Discussion and Analysis should be read together with the compensation tables and related disclosures set forth below. This discussion is divided into the following parts:
    
Executive Summary
Compensation Philosophy
Role of Compensation Committee
Compensation Consultant and Peer Group
Elements of 2018 Executive Compensation Program
Other Compensation-Related Topics

Executive Summary

Named Executive Officers
 
The following table sets forth our NEOs and the positions that they held in 2018:

NAME
POSITION
John Onopchenko
Current Chief Executive Officer (Promoted as of May 2, 2018)
John McDermott
Former Chief Executive Officer (Stepped down as of May 2, 2018)
Vaseem Mahboob
Chief Financial Officer
Matthew Thompson M.D.
Chief Medical Officer
Jeremy Hayden
General Counsel and Corporate Secretary



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Overview of 2018 Executive Compensation
The following table provides summary information regarding the key elements of our 2018 executive compensation program, including the compensation philosophy addressed by each element, factors considered in paying each element, and the applicable performance criteria and vesting provisions:

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Base Salary
Guaranteed  •  Cash
Philosophy
Considerations
Performance Criteria
Attract and Retain Executives
•  Balance the levels of guaranteed pay with at-risk pay to properly manage our compensation-related risk.
•  No specific vesting conditions associated with payment.
2018 Cash Bonus Plan Awards
At-Risk  •  Performance-Based  •  Cash
Philosophy
Considerations
Performance Criteria
2018 Pay for Performance
Pay for Performance
 
Reward Achievement
 
Align Interests with Stockholders
 
Attract and Retain Executives
•  Generally use threshold, target and maximum bonus payout levels to strike appropriate balance between compensation incentives and risks.
•  Target bonus is set as percentage of base salary for each NEO.

•  Actual bonus payout is based on achievement of certain corporate performance objectives and pre-determined management by objectives, or MBOs (MBOs apply only to participating NEOs, not including our CEO).
•  69.8% of the corporate performance objective portion of the bonus opportunity was earned and between 86.1% and 105.6% of the MBO portion of the bonus opportunity was earned by our participating NEOs. 
2018 Annual Stock Option and Cash Awards
At-Risk  •  Time-Based (Short-Term and Long-Term Vesting)  •  Cash and Equity
Philosophy
Considerations
Vesting Provisions
Attract and Retain Executives

Align Interests with Stockholders
 
•  Awards consist of approximately 18% equity, in the form of stock options, and 82% cash. The cash amount is inclusive of a 15% premium on awards that were intended to be granted earlier in the year and that could not be fulfilled at that time because of insufficient shares reserved for issuance under our Amended and Restated 2015 Stock Incentive Plan, as amended, or our 2015 Plan.

•  Time-based vesting promotes retention of executives during this critical stage of our business restructuring.
•  100% of the option portion of the awards vests on the first anniversary of the grant date, and the cash portion of the awards is payable as to 41% of the award amount on June 30, 2020 and the remaining 41% on June 30, 2021, subject to an NEO's continued employment with us during that time.
2018 Contractual Retention and Promotion Awards
At-Risk  •  Mix of Performance-Based and Time-Based  •  Cash and Equity
Philosophy
2018 Grants
Performance Criteria/ Vesting Provisions
Attract and Retain Executives

Align Interests with Stockholders

Pay for Performance

Reward Achievement
 •  Mr. Onopchenko received a promotion bonus in the form of a (i) cash bonus, (ii) time-based stock option grant, and (iii) time-based RSU grant.
 •  Mr. Onopchenko received (i) a one-time cash sign-on bonus of $666,667, (ii) time-based stock options with a grant date fair market value of $450,000, which vest in three equal annual installments on each of the first three anniversaries of the grant date, and (iii) time-based RSUs with a grant date fair market value of $450,000, which vest in three equal annual installments on each of the first three anniversaries of the grant date.
.
 •  Mr. Onopchenko received a retention award in the form of a cash bonus.
  • Mr. Onopchenko received a $100,000 cash bonus related to his performance for fiscal year 2018, which was paid out in February 2019.
•  Mr. Mahboob received a retention award of time-based RSUs with a performance-based accelerator.
  • RSUs have a grant date fair market value of $200,000 and will vest as to 100% of the underlying shares of common stock on the third anniversary of the grant date, subject to Mr. Mahboob's continued employment with us, provided that the vesting of the RSUs are subject to acceleration based on the achievement of specified Company and/or individual performance criteria.
•  Mr. Mahboob received a retention award of time-based RSUs.
 •  RSUs have a grant date fair market value of $150,000 and will vest in two equal annual installments on each of the first two anniversaries of the grant date, subject to Mr. Mahboob's continued employment with us.
•  Dr. Thompson received a retention award of time-based RSUs.
 •  RSUs have a grant date fair market value of $350,000 and will vest in three equal annual installments on each of the first three anniversaries of the grant date, subject to Dr. Thompson's continued employment with us.



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A Focus on Retention in 2018
Overview
Our executive compensation program is designed to balance the need to incentivize executives to focus on building long-term value for stockholders, while at the same time acknowledging it is imperative to retain our executives, particularly in this critical stage of our business and at a time when our stock price has been volatile. Leading to 2018 and throughout the year, we encountered challenges resulting from the restructuring of our business, including significant management transition and critical business plan implementation. The year was also marked by a significant decline in the trading price of our common stock. This led both to heightened concerns regarding our ability to retain and motivate employees, as well as the need for a significantly greater number of shares to be granted as equity awards to our employees than anticipated earlier in the year when our stock price was higher, requiring us to seek and obtain stockholder approval to increase the number of shares available for issuance under our 2015 Plan. As a result, our 2018 executive compensation program evolved throughout the year to put a greater focus on our need to motivate and retain our executives and other key employees during this difficult transition period, which we believe was accomplished through the following:
Revisions to our 2018 Cash Bonus Plan: Due to business challenges that we encountered throughout the year, the Compensation Committee, which we refer to as the Committee for purposes of this section, approved revisions to the corporate financial and operational objectives, or the Corporate Performance Objectives, and corresponding revisions to certain MBOs for the second part of 2018 in order to preserve the incentive and retention benefits of the 2018 Cash Bonus Plan. We sought to encourage the motivation and retention of our NEOs by appropriately re-aligning the incentives of our NEOs with our updated financial outlook and strategic objectives as of August 2018, which tied their incentive compensation to objectives which our NEOs could reasonably achieve.
Time-Based Vesting under our 2018 Annual Stock Option and Cash Awards: We encountered compensation-related challenges due to the lack of available shares under our 2015 Plan, the need to seek stockholder approval to increase the number of shares available for issuance under our 2015 Plan and ongoing concerns regarding availability of shares due to the decrease in our stock price. As a result, for 2018, we issued awards with time-based vesting in the form of approximately 18% stock options (vesting on the first anniversary of the grant date) and 82% cash (vesting over the following two years in equal, annual installments).
Retention Value of RSU Awards: Each of Mr. Mahboob and Dr. Thompson was granted time-based RSU awards aimed at providing additional retention value, pursuant to contractual arrangements that we entered into with them.
A more detailed discussion of each of these features is set forth below.
Revisions to our 2018 Cash Bonus Plan
The 2018 Cash Bonus Plan was designed to align plan participants with our business goals and strategies and to reward them for their individual contributions to our achievement of those goals and strategies. As adopted in January 2018, the 2018 Cash Bonus Plan was intended to be utilized to calculate the cash bonuses payable to our NEOs with respect to the performance period from January 1, 2018 through December 31, 2018. However, in August 2018, the Committee adopted a revised 2018 Cash Bonus Plan that was utilized to calculate the cash bonuses payable to participants for the performance period from August 1, 2018 through December 31, 2018, or the Second Measurement Period. The initially-approved plan continued to be utilized to calculate the cash bonuses payable to participants with respect to the performance period from January 1, 2018 through July 31, 2018, or the First Measurement Period.

The revisions to the 2018 Cash Bonus Plan consisted of adjustments to the Corporate Performance Objectives, including global sales and expenses, or the Financial Objectives, as well as quality and compliance goals, and new product development goals within specific time periods, or the Operational Objectives, which together comprised 70% of the actual cash bonus opportunity under the 2018 Cash Bonus Plan for our participating NEOs. The changes reflected in the Corporate Performance Objectives for the Second Measurement Period as against the First Measurement Period were appropriately reflected in the MBOs of our participating NEOs. For example, Mr. Mahboob's MBO achievement for the Second Measurement Period was determined with reference to the revised global sales and expenses goals set forth for such period. The target cash bonus percentages for 2018 for each participating NEO remained unchanged.

The Committee believes that it is imperative that each element of our compensation program consider our current financial condition and projected operating results in its design. Accordingly, the Committee considered the revisions to the Corporate Performance Objectives and corresponding revisions to certain MBOs to be necessary in light of our actual and projected financial performance as of August 2018, as well as the implementation of fundamental changes to our strategic direction announced at that

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time. The Committee was mindful of the appropriateness of avoiding purely discretionary bonuses in its commitment to promote our strong pay-for-performance philosophy. In order to meet both its goals to promote retention and pay for performance, the Committee chose to keep the original 2018 Cash Bonus Plan in place with respect to the First Measurement Period, and to make changes only for the Second Measurement Period. Had the objectives not been revised, the targets not been achieved and payments not been made under the 2018 Cash Bonus Plan, this would have had a material impact on our ability to retain our NEOs. The revisions to the Corporate Performance Objectives and corresponding revisions to certain MBOs were designed to further the objectives of our executive compensation program, to appropriately align the incentives of our NEOs with our updated financial outlook and strategic objectives as of August 2018, and to encourage the motivation and retention of our NEOs by tying incentive compensation to objectives which our NEOs could reasonably achieve.

See the section below entitled "2018 Cash Bonus Plan Awards" for additional information.

Time-Based Vesting under our 2018 Annual Stock Option and Cash Awards Promotes Retention

In furtherance of our compensation philosophy, we endeavor to make annual grants of equity to our NEOs. For 2018, the Committee determined the timing and level of equity grants based on a number of factors, including the availability of shares under our 2015 Plan, further changes to the trading price of our common stock, and the expected timing of implementation of a stock option exchange program with certain eligible employee option holders. However, due to a lack of available shares in the share reserve under our 2015 Plan, we had to delay making annual equity grants for 2018 until we received stockholder approval for an increase in the shares available for issuance under our 2015 Plan, which we received at a special meeting of stockholders held on December 21, 2018. As a result, as of December 21, 2018, we granted the 2018 Annual Stock Option and Cash Awards, which were comprised of 18% equity, in the form of stock options, and 82% cash, as the overall share authorization was still limited.
 
Issuing a portion of our equity awards in the form of options with time-based vesting serves to promote executive retention because the options vest over a service period and are not directly correlated with Company performance milestones, which may not be achieved despite the expenditure of significant effort by the executive. For 2018, the time-based options granted to our NEOs vest on the first anniversary of the grant date, subject to an NEO's continued employment with us during that time. The 82% cash component of our annual awards was designed to promote retention because the awards have long-term vesting provisions which provide that they are payable as to 41% of the award amount on June 30, 2020 and the remaining 41% on June 30, 2021, subject to an NEO's continued employment with us during that time.

See the section below entitled "2018 Annual Stock Option and Cash Awards" for additional information.

Retention Value of RSU Awards
In early December 2018, we entered into contractual arrangements with Mr. Mahboob and Dr. Thompson based on individual performance and a determination that prior equity grants did not have the intended retention value due to the decline in our stock price and additional market considerations. Due to a lack of available shares in the plan reserve under our 2015 Plan, the grant of these 2018 Contractual Retention Awards was conditioned upon the availability of additional shares under our 2015 Plan (and in some cases, the satisfaction of other conditions), for which we solicited and received approval of our stockholders at a special meeting of stockholders held on December 21, 2018. The RSU awards promote retention because they have long-term vesting conditions which require an NEO to remain employed with us to vest with respect to, and realize the value of, the award. Certain awards granted to Mr. Mahboob vest as to 100% of the underlying shares of common stock on the third anniversary of the grant date, which means that he will not realize any value from those awards unless he remains employed with us for three full years or unless certain performance criteria is achieved prior to that time, which accelerates vesting. The other RSU awards vest annually on the anniversaries of the grant date over either two or three years subject to our NEOs' continued employment with us.
See the section below entitled "2018 Contractual Retention and Promotion Awards" for additional information.

Continued Focus on Pay for Performance
For 2018, we continued to focus on a strong pay-for-performance alignment by providing a significant portion of the overall compensation opportunity for our NEOs in the form of performance-based compensation, including performance-based cash bonuses which are correlated with the achievement of specific Company and individual performance objectives, as well as equity compensation which aligns the interests of our NEOs with those of our stockholders. This performance-based compensation is designed to encourage the achievement of performance goals that we believe are critical to our long-term growth. We believe our 2018 compensation program design was successful in striking the appropriate balance between achieving pay-for-performance alignment, and supporting retention during this critical stage of our business. The specific components of our executive compensation program that we believe best highlight how we implemented our pay-for-performance philosophy are set forth below.

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Significant Portion of Total Compensation is At-Risk
 
In furtherance of our pay-for-performance philosophy, the Committee annually reviews both the amount of, and the mix between, guaranteed pay and at-risk pay for our executive officers and seeks to establish appropriate performance objectives for the at-risk pay so as to ensure our performance criteria align with our financial and operational objectives, are appropriately challenging to achieve, and mitigate our overall compensation-related risk.

A significant portion of an executive's total compensation opportunity in 2018 was provided in the form of compensation that was at-risk rather than guaranteed. We offer certain standard compensation elements that provide guaranteed payments, such as base salary and limited employee benefits. However, our executive compensation mix in 2018 was weighted toward at-risk pay. In general, at-risk pay involves compensation awards that only vest or become payable subject to the achievement of specific performance conditions, or the value of which is correlated to our stock price (or a combination of both), such as the following:
2018 Cash Bonus Plan Awards: Only vest upon the achievement of pre-determined Company performance objectives and individual MBOs; and

Time-Based Stock Options: Result in value to our NEOs only to the extent they remain in our employ as of the applicable vesting date(s) and the market price of our common stock appreciates over the option term.

Time-Based Cash Awards: Paid to our NEOs only to the extent they remain in our employ as of the applicable vesting dates.

2018 Cash Bonus Plan Awards
Our cash bonus program demonstrates our strong pay-for-performance alignment because the amount of cash bonus payout actually realized by our NEOs is determined based upon achievement relative to Company and individual performance objectives, which may result in payouts that are lower than the target bonus amounts. The Committee believes choosing the right performance criteria for performance-based awards is critical for properly motivating our executives, aligning their interests with those of our stockholders and advancing our pay-for-performance philosophy. In particular, it is crucial that the performance criteria be reconsidered each year, and even throughout the year, as was done in 2018, as our business strategy and market evolve to ensure they provide the appropriate barometer of our growth and success, and motivate the achievement of our objectives in line with how we currently view the business.

After taking into account the achievement of the various Corporate Performance Objectives relative to the target amounts, including for the First Measurement Period and the Second Measurement Period, the Committee determined 69.8% of the target bonus that is tied to the Corporate Performance Objectives was achieved. With respect to the MBOs, the Committee determined that between 86.1% and 105.6% of the MBO portion of the bonus opportunity was earned by our participating NEOs. Accordingly, the adoption of our 2018 Cash Bonus Plan placed a significant portion of our NEO's overall compensation opportunity at risk, and the failure to achieve the target levels of performance (and in some cases the threshold levels of performance) with respect to certain Corporate Performance Objectives and MBOs resulted in reduced bonus payouts to our NEOs compared to the 2018 target bonus amounts.

Time-Based Stock Options

We granted time-based stock options to all of our NEOs as part of our 2018 Annual Stock Option and Cash Awards, and to Mr. Onopchenko as part of his promotion bonus. Options inherently contain a performance component because the awards are granted with an exercise price equal to fair market value on the grant date and only have value to the recipient to the extent the value of our common stock increases during the option term.

Compensation Philosophy

We strive to establish compensation policies and programs that will effectively align our compensation program design to our business strategy, while attracting and retaining executives with the talent necessary to lead our Company. We also seek to strengthen the mutuality of interests between our executives and our stockholders in order to motivate our executives to maximize stockholder value. Finally, we emphasize a strong pay-for-performance alignment by providing a significant portion of the overall compensation opportunity in the form of performance-based compensation that is at-risk.

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Primary Goals of our Compensation Program
The primary goals of our executive compensation policies and programs are as follows:

GOAL
HOW OUR PROGRAM ACHIEVES THAT GOAL
Attract and Retain Executives
•  Attract executives who have the background and experience required to lead us forward and provide the best opportunity to achieve sustained growth and success.

•  Retain our knowledgeable and talented executives by offering compensation that is competitive among our peer group companies and our industry generally, taking into account our business risks and strategies.
Pay-for-Performance
•  Offer a significant portion of the total compensation opportunity in the form of performance-based compensation that is at-risk instead of guaranteed.

•  Ensure performance-based compensation is directly correlated with the achievement of pre-established Company financial and operational objectives that the Committee believes are important to our long-term success.
Reward Achievement
•  Provide meaningful incentives for achieving Company financial and operational objectives that the Committee believes are important for achieving our strategic objectives.

•  Effectively align our compensation program design to our business risks and strategies.
Align Interests with Stockholders
•  Align the interests of our executives with those of our stockholders by tying a significant portion of compensation to performance objectives which the Committee believes are likely to result in the creation of long-term stockholder value.

•  Ensure that a portion of the total compensation is directly correlated to total stockholder return by issuing awards that increase in value as our stock price increases.




































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Governance Practices that Strengthen our Compensation Philosophy
 
Our executive compensation program has significant governance components that we believe further strengthen our compensation philosophy and reduce compensation-related risk, including as follows:

COMPENSATION PRACTICE
WHAT WE DO
Independent Directors
•  All of the members of our board of directors, other than our CEO, are independent directors under the applicable NASDAQ Listing Rules and applicable SEC rules.
Independent Compensation Committee
•  The Committee consists entirely of independent directors.
Independent Compensation Consultant
•  The Committee has retained an independent compensation consultant that assists the Committee in gathering competitive pay data, selecting our peer group, and structuring our executive compensation program. The decision to engage the consultant was made by the Committee and the consultant reports directly to the Committee.
Compensation Risk Assessment
•  The Committee performs an annual review of its charter and the risks related to our compensation practices. See the section entitled "Compensation Risk Considerations" for additional information.
Frequency of "Say on Pay" Vote
•  We ask stockholders to provide an advisory vote on our pay practices on an annual basis, and the Committee considers the outcome of the vote when establishing our executive compensation program.
Stock Ownership Policies
•  We have adopted stock ownership policies for our executive officers and non-employee directors, which are reviewed annually. See the section entitled "Stock Ownership Policies" for additional information.
Clawback Policy
•  We adopted a Clawback Policy related to our cash and equity incentive awards granted to executive officers after the policy was adopted.
No Dividends on Unvested Equity Awards
•  Our 2015 Plan eliminates our ability to provide for the payment of dividends on unvested equity awards.
Minimum Vesting Requirements
•  Our 2015 Plan imposes minimum vesting requirements on the awards we issue under the plan, subject to certain limitations.
No Repricing of Awards
•  Our 2015 Plan prohibits repricing outstanding options without majority stockholder consent.
No Hedging
•  Our Insider Trading Policy prohibits transactions that create a hedge against fluctuations in the market price of our common stock.
No Pledging
•  Our Insider Trading Policy prohibits pledging our shares as collateral and other similar practices, such as purchasing our shares on margin and holding our shares in a margin account.
No Severance Tax Gross-Ups
•  Our change in control and severance arrangements do not provide for excise tax gross-up payments.

Role of Compensation Committee

The Committee has the overall responsibility for reviewing, approving and evaluating our executive compensation policies and programs. In particular, the Committee is responsible for approving the compensation and benefits paid to our directors and executive officers, and for administering our equity compensation plans and the awards granted under our plans. In discharging its responsibility to ensure that our executive compensation program is effectively designed in light of our compensation philosophy, the Committee regularly assesses each element of our compensation policies and considers changes to our compensation program. The Committee, which is comprised solely of independent directors under the applicable SEC rules and NASDAQ Listing Rules, reviews and approves all elements of compensation for our NEOs and other executive officers.

Compensation Consultant and Peer Group

Compensation Consultant

The Committee receives assessments and advice regarding our compensation policies and programs from Radford, a third-party compensation consultant, which is a subsidiary of Aon, plc. Radford provides information on competitive pay practices and trends in our industry, and makes recommendations regarding the formulation of our peer group, as well as the design and structure of our compensation program. While we are not obligated to retain an independent compensation consultant, the Committee believes that the use of an independent compensation consultant provides additional assurance that our executive compensation program is competitive, is consistent with our objectives and pay practices in our industry generally, and is reflective of our compensation philosophy.

In accordance with the applicable SEC rules, when selecting Radford, the Committee assessed Radford's independence, taking into consideration the following factors: (i) the provision of other services to us by Radford, (ii) the amount of fees received

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from us by Radford, as a percentage of Radford's total revenue, (iii) Radford's policies and procedures that are designed to prevent conflicts of interest, (iv) any business or personal relationship of the individual compensation consultants or Radford with any member of the Committee or any of our executive officers and (v) any ownership of our common stock by the individual compensation consultants. Furthermore, Radford does not provide any additional services to us or our management, other than the services that are provided to the Committee in Radford's capacity as our compensation consultant. Following the consideration of these factors, and such additional factors as the Committee deemed appropriate under the circumstances, the Committee made an affirmative determination that Radford's services did not create any conflict of interest and that Radford is independent, and unanimously approved the engagement of Radford.

The decision to engage Radford was made by the Committee, and Radford reports directly to the Committee. The Committee has the authority to direct, terminate or continue Radford's services. While members of our management regularly communicate with representatives of Radford, our management did not recommend the engagement of Radford and does not direct or oversee the retention or activities of Radford with respect to our executive compensation program.
 
The Committee principally engages Radford for the purpose of recommending and evaluating a set of peer group companies, compiling competitive market data from our peer group and our industry generally, and assessing the compensation program for our executives as compared to those of our peer group. The Committee meets regularly with Radford throughout the year, carefully reviews and assesses the materials provided by Radford, and engages in thorough deliberations with Radford and management regarding our compensation program and potential changes.

Peer Group

Each year, Radford compiles a list of medical device companies that are generally similar to our Company based upon a number of metrics, including revenue, market capitalization, number of employees, industry focus and competition for executive talent. As part of the peer review process, Radford carefully examines both the individual comparison metrics and the specific proposed peer group companies to ensure alignment with our current size and profile. The Committee reviews the proposed list of peer group companies and, following discussion with Radford and management, approves the set of peer group companies.

Our peer group remained the same for 2018 as our peer group for 2017, and consisted of the following 17 companies:

PEER GROUP FOR 2018
•  Abaxis
•  Glaukos
•  Accuray
•  Intersect ENT
•  AngioDynamics
•  iRhythm Technologies
•  AtriCure
•  LeMaitre Vascular
•  Atrion
•  Natus Medical
•  Cardiovascular Systems
•  Orthofix International N.V.
•  CryoLife
•  Penumbra
•  Entellus Medical
•  STAAR Surgical
•  Exactech
 
Use of Peer Group in Setting Executive Compensation

In 2018, the Committee engaged Radford to gather and analyze compensation information from our peer group and other competitive market data to assist it in assessing our executive compensation program.  For comparison purposes, Radford presents a summary of the peer group data in a manner that generally reflects compensation paid, both on an aggregate basis and with respect to individual elements of compensation, within the 25th, 50th and 75th percentiles by our peer group companies. In making compensation decisions, the Committee typically compares total compensation, as well as each element of compensation, paid to our executives against the compensation paid to executives within our peer group. In addition, in order to gain a broader perspective on overall market trends and practices, the Committee regularly reviews data from both targeted and broader-based compensation surveys.

The peer group compensation data and compensation surveys are used as an initial guideline in making compensation decisions for our executives, including with respect to both the target level of total compensation and the overall structure of our executive compensation program. Historically, the Committee has targeted approximately the 50th percentile of our peer group for purposes of setting total compensation, as well as for each element of compensation. However, while the peer group compensation data is a significant factor in the Committee's evaluation, it also considers a variety of additional factors when making executive

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compensation decisions, including retention concerns, tenure and experience, level of responsibility, our recent and projected performance, individual performance, industry practices and general economic conditions. For further discussion of the most relevant factors affecting the compensation decisions for 2018, see the section above entitled "A Focus on Retention in 2018".

Elements of 2018 Executive Compensation Program
 
The following table provides summary information regarding the key elements of our 2018 executive compensation program:

COMPENSATION
ELEMENT
GUARANTEED V.
AT-RISK
PERFORMANCE-BASED
V.
TIME-BASED
CASH
V.
EQUITY
Base Salary
Guaranteed
Not applicable
Cash
2018 Cash Bonus Plan Awards
At-Risk
Performance-Based
Cash
2018 Annual Stock Option and Cash Awards

At-Risk
Time-Based (Short-Term and Long-Term Vesting)
Cash and Equity
2018 Contractual Retention and Promotion Awards
At-Risk
Mix of Performance-Based and Time-Based
Cash and Equity
Employee Benefits
Guaranteed
Not applicable
Other
Severance and Change of Control
At-Risk
Not applicable
Cash and Equity

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Base Salary
 
The following table provides information regarding the base salaries paid to our NEOs during 2018:

Base Salary
Guaranteed • Cash
Philosophy
Considerations
Performance Criteria
Attract and Retain Executives
•  Provide our NEOs with a guaranteed base level of income that is competitive within our peer group and is commensurate with their respective titles, skills, levels of responsibility and contributions to our Company.
•  Balance the levels of guaranteed pay with at-risk pay to properly manage our compensation-related risk.

•  Generally target base salaries between the 35th and 50th percentile of our peer group, but may be above or below that range depending on individual factors.
•  No specific vesting conditions associated with payment.

•  Changes from year to year are generally based on a review of peer group data, changes in duties and responsibilities, individual performance, contributions to the achievement of our strategic objectives and Company performance.

Actual base salaries paid to each NEO in 2018 are set forth under the "Salary" column of the Summary Compensation Table.



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2018 Cash Bonus Plan Awards
 
In January 2018, the Committee approved the adoption of a cash bonus plan that was initially intended to be utilized to calculate the cash bonuses payable to our NEOs with respect to the performance period from January 1, 2018 through December 31, 2018. In August 2018, the Committee adopted a revised cash bonus plan that was utilized to calculate the cash bonuses payable to participants for the performance period from August 1, 2018 through December 31, 2018, or the Second Measurement Period, since we took specific actions during the year to implement our restructuring plan to create efficiencies and strengthen a foundation for driving longer term stockholder value, which had the impact of changing our financial outlook for the remainder of the year. The initial cash bonus plan continued to be utilized to calculate the cash bonuses payable to participants with respect to the performance period from January 1, 2018 through July 31, 2018, or the First Measurement Period, as the Committee believed it was not appropriate to modify the cash bonus plan for the entire year so as to maintain alignment with our pay-for-performance philosophy. However, at the same time, by adopting a revised cash bonus plan for the Second Measurement Period, the Committee sought to encourage the motivation and retention of our NEOs by appropriately re-aligning the incentives of our NEOs with our updated financial outlook and strategic objectives as of August 2018, which tied their incentive compensation to objectives which the Committee believed our NEOs could reasonably achieve. The following table provides summary information regarding the cash bonus awards granted to our NEOs during 2018, including information regarding the initial cash bonus plan covering the First Measurement Period and the revised cash bonus plan covering the Second Measurement Period:

2018 Cash Bonus Plan Awards
At-Risk • Performance-Based • Cash
Philosophy
Considerations
Performance Criteria
2018 Pay for Performance
Pay for Performance
•  Establish appropriate performance milestones that the Committee believes will drive our future growth and allow us to meet our strategic objectives.
 
Reward Achievement
•  Provide meaningful incentives for achieving Company financial and operational objectives, as well as individual MBOs, that the Committee believes are important for our long-term success.
 
Align Interests with Stockholders:
•  Align the interests of executives with those of our stockholders by tying bonus payout to Company performance.
 
Attract and Retain Executives:
•  A significant cash bonus opportunity is considered a typical component of a competitive executive pay package for executives among our peer group.
•  Review and set (and revise if necessary), Company performance milestones which are based on Committee-approved corporate financial and non-financial objectives, or Corporate Performance Objectives, comprising 70% of the overall bonus opportunity for all participating NEOs.

•  Remaining 30% of the overall bonus opportunity based on achievement of pre-determined MBOs, which are individualized for each participating NEO.

•  Generally use threshold, target and maximum bonus payout levels for individual Corporate Performance Objectives to strike appropriate balance between compensation incentives and risks.

•  Target bonuses are typically aligned with the 50th percentile of our peer group companies.

•  The "target" performance objective level is typically in line with the level of Company performance actually projected for each objective, based on our internal forecasts, as adjusted in 2018 to reflect projected performance for the Second Measurement Period.
•  Target bonus set as percentage of base salary for each participating NEO.

•  70% of actual bonus payout based on achievement of certain Corporate Performance Objectives, which included Financial Objectives, and Non-Financial Objectives.

•  Financial Objectives, which comprise 50% of the total Corporate Performance Objectives, included pre-determined targets relating to (i) global sales and (ii) operating expenses.

•  Non-Financial Objectives, which comprise the other 50% of the total Corporate Performance Objectives, included pre-determined objectives relating to (i) quality and compliance goals and (ii) new product development goals.

•  The Committee assigned relative weightings to each of the components of the Financial Objectives and Non-Financial Objectives, respectively, which are expressed as a percentage of the target cash incentive amount. These weightings varied between the First Measurement Period and Second Measurement Period.

•  30% of actual bonus payout based on individual achievement of pre-determined MBOs, which generally relate to functional objectives.

•  Generally, achievement of each component of the Corporate Performance Objectives (i) in an amount less than the minimum threshold would result in no cash bonus payment with respect to that component, (ii) in an amount equal to the established target, would result in a cash bonus payment of 100% of target with respect to that component, (iii) in an amount in excess of the target, would result in a greater cash bonus opportunity (subject to a maximum payout for that component).

•  When determining Company achievement relative to the Financial Objectives, the Committee relied upon our 2018 audited financial statements, as adjusted by the Committee for certain non-recurring items.

•  Corporate Performance Objectives: With respect to the Corporate Performance Objectives, the Committee determined that the weighted average achievement level was 19.7% of the target amount for the First Measurement Period, and 50.1% of the target amount for the Second Measurement Period. Accordingly, 69.8% of the Corporate Performance Objective portion of the bonus opportunity was earned.

•  MBOs: With respect to the MBOs, the Committee determined that between 86.1% and 105.6% of the MBO portion of the bonus opportunity was earned by our participating NEOs.




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Target Cash Bonus Amount
 
At the beginning of 2018, the Committee established a target bonus amount for each NEO, which is expressed as a percentage of base salary. The 2018 base salary, target percentage and resulting target cash bonus amount for each named executive officer is set forth in the table below:

NAME
BASE SALARY(1)
TARGET BONUS PERCENTAGE
TARGET CASH BONUS
John Onopchenko(2)
-
-
-
John McDermott(3)
$572,000
100%
$572,000
Vaseem Mahboob
$380,000
55%
$209,000
Matthew Thompson M.D.
$400,000
45%
$180,000
Jeremy Hayden
$350,000
45%
$157,500

(1) 
Amounts reflect base salaries set at the beginning of 2018. Please refer to the "Salary" column of the Summary Compensation Table for actual base salaries paid to each NEO in 2018.

(2)  
Mr. Onopchenko was not a participant in the 2018 Cash Bonus Plan as he received a one-time cash sign-on bonus in connection with his appoint as our CEO, and a cash bonus in lieu of participating in the plan.

(3)
Mr. McDermott's participation and ultimate payout under the 2018 Cash Bonus Plan was governed by a Severance Agreement and General Release entered into between us and Mr. McDermott on February 21, 2018, in connection with his retirement as our CEO, pursuant to which he was paid a bonus based on our estimated performance for 2018 using applicable information available as of June 30, 2018 to extrapolate the extent to which our estimated 2018 performance is or would be sufficient to result in achievement of his target bonus for 2018, prorated for the number of days of service during 2018, resulting in an aggregated bonus payout of $199,000.

As a result of the one-time sign-on bonus paid to Mr. Onopchenko, as described in footnote 2, and the severance payment made to Mr. McDermott, as described in footnote 3, the only executives that were "participating NEOs" for purposes of the 2018 Cash Bonus Plan were Messrs. Hayden and Mahboob and Dr. Thompson.

Performance Objectives

Cash bonuses could be earned under the 2018 Cash Bonus Plan based on our achievement of pre-established Corporate Performance Objectives, and by plan participants based on their individual achievement of pre-determined MBOs. The percentage of the target cash bonus for each NEO that was subject to the Corporate Performance Objectives and the MBOs is set forth in the table below:

NAME
CORPORATE PERFORMANCE OBJECTIVES
(% OF BONUS OPPORTUNITY)
MBOS
(% OF BONUS OPPORTUNITY)
John Onopchenko
-
-
Vaseem Mahboob
70%
30%
Matthew Thompson M.D.
70%
30%
Jeremy Hayden
70%
30%

The cash bonuses for 2018 were payable as follows with respect to the Corporate Performance Objectives:

Approximately 50% based upon achievement of the Corporate Performance Objectives for the First Measurement Period; and
Approximately 50% based upon achievement of the Corporate Performance Objectives for the Second Measurement Period.

    

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Corporate Performance Objectives for the First Measurement Period

The Corporate Performance Objectives comprised 70% of the total bonus opportunity for each of our participating NEOs. With respect to the First Measurement Period, the following table summarizes the individual components of the Corporate Performance Objectives, including the relative weighting of each component; the specific performance levels required to achieve the threshold, target and maximum payouts amounts; and the payout percentages that result from performance at the threshold, target and maximum performance levels.

OBJECTIVE
RELATIVE
WEIGHTING OF COMPONENT

THRESHOLD PERFORMANCE
LEVELS
PAYOUT PERCENTAGE FOR THRESHOLD PERFORMANCE
TARGET PERFORMANCE LEVELS
PAYOUT PERCENTAGE FOR TARGET PERFORMANCE
MAXIMUM PERFORMANCE
LEVELS
PAYOUT PERCENTAGE FOR MAXIMUM PERFORMANCE
Financial Objectives
Global Sales
40%
$175M
50%
$185M
100%
$195M
150%
Total Operating Expenses
10%
$169M
50%
$165M
100%
$161M
150%
Non-Financial Objectives
Quality
30%
Score of 90
75%
Score of 100
100%
Score of 110
125%
New Product Development(1) 
20%
February 2019 and April 2019
75%
December 2018 and February 2019
100%
October 2018 and December 2018
125%

(1)  
As a result of the revisions to the 2018 Cash Bonus Plan, the new product development objective was removed from the objectives for the First Measurement Period, and instead performance with respect to this objective was only measured in the Second Measurement Period.

Financial Objectives for the First Measurement Period

The portion of the cash bonus opportunity that related to the Financial Objectives could be earned based on our actual performance relative to the target amounts established by the Committee.

Global sales represented 40% of the bonus opportunity within the Corporate Performance Objectives.

Total operating expenses represented 10% of the bonus opportunity within the Corporate Performance Objectives.

Achievement of both of these objectives at the threshold amount would result in payment at 50% of target, at the target amount would result in payment at 100% of target, and at the maximum amount would result in payment at 150% of target. The Committee determined our actual achievement of the Corporate Performance Objectives by reference to our audited financial statements for 2018, as adjusted by the Committee for certain non-recurring items.

Non-Financial Objectives for the First Measurement Period

The portion of the cash bonus opportunity that related to the Non-Financial Objectives could be earned based on our actual performance relative to specified goals established by the Committee.

The quality goal represented 30% of the bonus opportunity within the Corporate Performance Objectives.

The new product development goal initially represented 20% of the bonus opportunity within the Corporate Performance Objectives, but was later removed from the objectives for the First Measurement Period, and instead performance with respect to this objective was only measured in the Second Measurement Period.

Achievement of both of these objectives at the threshold amount would result in payment at 75% of target, at the target amount would result in payment at 100% of target, and at the maximum amount would result in payment at 125% of target.

For performance levels for the Corporate Performance Objectives in between the threshold and target amount, or between the target and maximum amount, the Committee adopted a sliding scale to determine the payout amount for that component.

Corporate Performance Objectives for the Second Measurement Period

With respect to the Second Measurement Period, the following table summarizes the individual components of the Corporate

33


Performance Objectives, including the relative weighting of each component; the specific performance levels required to achieve the threshold, target and maximum payouts amounts; and the payout percentages that result from performance at the threshold, target and maximum performance levels.

OBJECTIVE
RELATIVE
WEIGHTING OF COMPONENT
THRESHOLD PERFORMANCE
LEVELS
PAYOUT PERCENTAGE FOR THRESHOLD PERFORMANCE
TARGET PERFORMANCE LEVELS
PAYOUT PERCENTAGE FOR TARGET PERFORMANCE

MAXIMUM PERFORMANCE
LEVELS
PAYOUT PERCENTAGE FOR MAXIMUM PERFORMANCE
Financial Objectives
Global Sales
30%
$150M
25%
$160M
100%
-
-
Operating Expenses
20%
-
-
$165M
100%
$155M
150%
Non-Financial Objectives
Quality
25%
-
-
Successful
100%
-
-
Compliance
15%
-
-
Completed
100%
-
-
New Product Development
10%
-
-
December 2018
100%
October 2018
125%

Financial Objectives for the Second Measurement Period

The portion of the cash bonus opportunity that related to the Financial Objectives could be earned based on our actual performance relative to the target amounts established by the Committee.

Global sales represented 30% of the bonus opportunity within the Corporate Performance Objectives. Achievement of this objective at the threshold amount would result in payment at 25% of target and at the target amount would result in payment at 100% of target. No maximum amount was set.

Operating expenses represented 20% of the bonus opportunity within the Corporate Performance Objectives. Achievement of this objective at the target amount would result in payment at 100% of target, and at the maximum amount would result in payment at 150% of target. No threshold amount was set.

The Committee determined our actual achievement of the Corporate Performance Objectives by reference to our audited financial statements for 2018, as adjusted by the Committee for certain non-recurring items.

For performance levels for the Financial Objectives in between the threshold and target amount (only with respect to global sales), or between the target and maximum amount (only with respect to operating expenses), the Committee adopted a sliding scale to determine the payout amount for that component.

Non-Financial Objectives for the Second Measurement Period

The portion of the cash bonus opportunity that related to the Non-Financial Objectives could be earned based on our actual performance relative to specified goals established by the Committee.

The quality goal represented 25% of the bonus opportunity within the Corporate Performance Objectives. Payment at 100% of target could be achieved if the quality goal was successfully achieved. Otherwise, no payment would be made.

The compliance goal represented 15% of the bonus opportunity within the Corporate Performance Objectives. Payment at 100% of target could be achieved if the compliance goal was completed. Otherwise, no payment would be made.

The new product development goal represented 10% of the bonus opportunity within the Corporate Performance Objectives. Achievement of this objective at the target amount would result in payment at 100% of target, and at the maximum amount would result in payment at 125% of target. No threshold amount was set.

Management by Objectives (MBOs)

The MBOs comprise 30% of the total bonus opportunity for each of our participating NEOs. These objectives are established by the Committee and communicated to our NEOs and individualized to each NEO based on title and responsibility level. In particular,

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for 2018 the MBOs related to functional and cross-functional objectives designed to promote achievement of the Corporate Performance Objectives, including financial management goals, enterprise risk management objectives, product development milestones and leadership initiatives. The changes reflected in the Corporate Performance Objectives for the Second Measurement Period as against the First Measurement Period were appropriately reflected in the MBOs of our participating NEOs. For example, Mr. Mahboob's MBO achievement for the Second Measurement Period was determined with reference to the revised global sales and operating expense goals set forth for such period.

Calculation of Bonus Payout

First Measurement Period

Consistent with the application of the bonus payout formula described above for the First Measurement Period, and in furtherance of our pay-for-performance philosophy, the Committee determined that 19.7% of the Corporate Performance Objective portion of the bonus opportunity was earned with respect to the First Measurement Period, which reflects that:

we achieved the global sales objective at the threshold (but not the target) level;
we achieved the total operating expenses objective between the target and maximum levels;
we did not achieve the quality objective at the threshold level; and
we did not measure achievement of the new product developments objective, as performance with respect to this objective was only measured in the Second Measurement Period.

Second Measurement Period

Consistent with the application of the bonus payout formula described above for the Second Measurement Period, and in furtherance of our pay-for-performance philosophy, the Committee determined that 50.1% of the Corporate Performance Objective portion of the bonus opportunity was earned with respect to the First Measurement Period, which reflects that:

we achieved the global sales objective between the threshold and target levels;
we achieved the operating expenses objective at the maximum level;
we achieved the target quality objective;
we achieved the target compliance objective; and
we did not achieve the new product development objective.

Overall Result at Year End

As a result, each of our participating NEOs earned 69.8% of the total bonus opportunity under the 2018 Cash Bonus Plan that was based on achievement of the Corporate Performance Objectives, reflecting the aggregate achievement level for the First Measurement Period and the Second Measurement Period.
Further, our participating NEOs achieved between 86.1% and 105.6% of the total bonus opportunity under the 2018 Cash Bonus Plan that was based on achievement of the MBOs, which reflects the successful execution of several critical management initiatives.
The actual payments made to each participating NEO pursuant to the 2018 Cash Bonus Plan are set forth in the "Non-Equity Incentive Plan" column of the Summary Compensation Table.



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2018 Annual Stock Option and Cash Awards
 
Our intention in early 2018 was to make annual grants of equity to our NEOs consistent with our historical practices and our compensation philosophy. However, we encountered challenges in making our customary equity grants as a result of the lack of shares available for issuance under our 2015 Plan, which was partially due to the decrease in our stock price, leading to the need for a significantly greater number of shares to be granted as equity awards to our employees than we had anticipated earlier in the year when our stock price was higher. Throughout the year, the Committee also considered the expected timing of implementation of a stock option exchange program with certain eligible employee option holders in determining the appropriate level of equity grants, but the stock option exchange program was ultimately deemed not to be in our best interests or those of our stockholders for 2018, and was not implemented.

As a result of these factors, we had to delay making annual equity grants for 2018 until we received stockholder approval for an increase in the shares available for issuance under our 2015 Plan, which we received at a special meeting of stockholders held on December 21, 2018. As of December 21, 2018, there were sufficient shares authorized under our 2015 Plan to grant equity awards for 2018, though the overall share authorization remained limited. Due to these circumstances, the 2018 equity awards were granted at the end of the year, and took the form of the 2018 Annual Stock Option and Cash Awards. Given the limited number of shares available for issuance under our 2015 Plan, these awards were comprised of 18% of equity awards, which were made in the form of stock options, and 82% of cash awards in order to make up the rest of the value of the equity awards that would have been granted had we had sufficient shares authorized.

The following table provides summary information regarding the 2018 Annual Stock Option and Cash Awards granted to our NEOs during 2018:

2018 Annual Stock Option and Cash Awards
At-Risk • Time-Based (Short-Term and Long-Term Vesting) • Cash and Equity
Philosophy
Considerations
Vesting Provisions
Attract and Retain Executives:
•  Promote retention of our executives with customary annual incentive awards.

Align Interests with Stockholders:
•  Align the interests of executives with those of our stockholders by issuing options that only have value to our executives to the extent the price of our common stock increases over time following the grant date and remains elevated as the option vests.
 
•  Awards consist of approximately 18% equity, in the form of stock options, and 82% cash. The cash amount was inclusive of a 15% premium on awards that were intended to be granted earlier in the year and that could not be fulfilled at that time because of insufficient shares reserved for issuance under our 2015 Plan. The Committee believed this 15% premium was appropriate given the delay in making the grants and the desire to emphasize the retention of our employees.

•  Each option allows the recipient to acquire shares of our common stock at a fixed price per share (equal to the closing price of our common stock on the grant date) over a specified period of time.

•  The options will provide a return to an NEO only if he remains in our employ and the market price of our common stock appreciates over the option term. The cash portion is also only available to an NEO if he remains in our employ over the vesting term.

•  Time-based vesting of both the stock options and cash awards promotes retention of executives during this critical stage of our business restructuring.

•  Awards granted to each NEO determined by review of Radford report and exercise of discretion by the Committee.
•  100% of the stock option portion of the awards vests on the first anniversary of the grant date, and the cash portion of the awards is payable as to 41% of the award amount on June 30, 2020 and the remaining 41% on June 30, 2021, subject to an NEO's continued employment with us during that time.



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2018 Contractual Retention and Promotion Awards
 
In connection with our concerted and ongoing efforts to hire, promote, retain and motivate certain executives and other key employees during 2018, we entered into offer letters and employment agreements (and other similar arrangements) as a result of which we were contractually obligated to issue certain equity awards and make certain retentive cash bonus payments. The following table provides information regarding these contractually-obligated equity and cash awards:

2018 Contractual Retention and Promotion Awards
At-Risk • Mix of Performance-Based and Time-Based • Cash and Equity
Philosophy
2018 Grants
Considerations
Performance Criteria/ Vesting Provisions
Attract and Retain Executives:
•  Attract executives by offering compensation that is competitive in the marketplace and promote retention using time-based equity awards that vest only if the executive remains employed by us, as well as cash bonuses.

Align Interests with Stockholders:  
•  Provide NEOs with equity awards the value of which changes over time based on the market price of our common stock.

Pay for Performance:
•  In some cases, vesting may accelerate based on achievement of specified Company and/or individual performance criteria approved by the Committee.
 
Reward Achievement:
•  Provide incentives for achieving Company goals, which may lead to accelerated vesting of some awards.
• Mr. Onopchenko received a promotion bonus in the form of (i) a cash bonus, (ii) time-based stock option grant, and (iii) time-based RSU grant.
• One-time sign-on bonus package for assuming the role of our CEO on May 2, 2018.
•  Mr. Onopchenko received (i) a one-time cash sign-on bonus of $666,667, (ii) time-based incentive stock options with a grant date fair market value of $450,000, which vest in three equal annual installments on each of the first three anniversaries of the grant date, and (iii) time-based RSUs with a grant date fair market value of $450,000, which vest in three equal annual installments on each of the first three anniversaries of the grant date.
• Mr. Onopchenko received a retention award in the form of a cash bonus.
•  We entered into a contractual arrangement with Mr. Onopchenko which provided for an additional cash bonus based on individual performance for fiscal year 2018 and a determination that his compensation package did not have the intended incentive and retention value due to the decline in our stock price and additional market considerations.
•  Mr. Onopchenko received a $100,000 cash bonus related to his performance for fiscal year 2018, which was paid out in February 2019. This bonus was paid in lieu of his participation in our 2018 Cash Bonus Plan.
•  Mr. Mahboob received a retention award of time-based RSUs with a performance-based accelerator.
•  We entered into contractual arrangements which provided for grants of these awards based on individual performance and a determination that prior equity grants did not have the intended incentive and retention value due to the decline in our stock price and additional market considerations.
•  RSUs have a grant date fair market value of $200,000 and will vest as to 100% of the underlying shares of common stock on the third anniversary of the grant date, subject to Mr. Mahboob's continued employment with us, provided that the vesting of the RSUs shall be subject to acceleration based on the achievement of specified Company and/or individual performance criteria.
•  Mr. Mahboob received a retention award of time-based RSUs.
•  RSUs have a grant date fair market value of $150,000 and will vest in two equal annual installments on each of the first two anniversaries of the grant date, subject to Mr. Mahboob's continued employment with us.
•  Dr. Thompson received a retention award of time-based RSUs.
•  RSUs have a grant date fair market value of $350,000 and will vest in three equal annual installments on each of the first three anniversaries of the grant date, subject to Dr. Thompson's continued employment with us.

As discussed in the section entitled "Potential Payments Upon Termination or Change in Control" below, the vesting of certain equity awards described above may be accelerated under certain circumstances.
 








37


Employee Benefits
 
The following table provides summary information regarding the key employee benefits granted or paid to our NEOs during 2018:

Employee Benefits
Guaranteed • Other
Philosophy
Considerations
Benefits
Attract and Retain Executives:
•  Provide our NEOs with competitive broad-based employee benefits structured to attract and retain key executives.
•  Generally reflect benefits provided to all of our U.S.-based full-time employees.
•  401(k) plan for the benefit of all of our eligible employees, including our NEOs. We do not provide for matching contributions under the 401(k) plan.

•  Participation in our Amended and Restated 2006 Employee Stock Purchase Plan, or our ESPP, for eligible employees, including our NEOs. We offer shares under our ESPP in offering periods of May 1 to October 31 and November 1 to April 30, or on such other date as the administrator of our ESPP may determine. The purchase price of the shares is the lower of 85% of the fair market value of our common stock on the purchase date or the beginning of the offering period.

•  Health, dental, vision and life insurance and other customary employee assistance plans for all full-time employees, including our NEOs.

•  Automobile allowances and business travel and airfare accommodations for select executives based on responsibilities and travel requirements.

•  Relocation expenses for new hires.
  
Severance and Change of Control
 
The following table provides summary information regarding the severance and change of control provisions in our severance agreements and equity award agreements entered into with each of our NEOs:

Severance and Change of Control Provisions
At-Risk • Cash and Equity
Philosophy
Considerations
Terms
Attract and Retain Executives:
•  Retain and encourage our NEOs to remain focused on our business and the interests of our stockholders when considering strategic alternatives.

•  Intended to ease an NEOs transition due to an unexpected employment termination.

•  These provisions are considered a typical component of a competitive executive pay package for executives among our peer group.
•  The employment of our NEOs is "at will", meaning we can terminate them at any time and they can terminate their employment with us at any time.

•  Take into account the time it is expected to take a separated executive to find a job with a similar title and level of responsibility.
•  In the event of a termination of employment due to an involuntary termination, prior to a change in control, our NEOs will receive: (i) a cash severance payment in an amount equal to six months of base salary for Mr. Hayden, 12 months for each of Mr. Mahboob and Dr. Thompson and 24 months for Mr. Onopchenko, (ii) a cash payment equal to 100% of the target cash bonus for which the NEO would be eligible based on the date of termination, and (iii) continued health insurance benefits for six months following termination.

•  In the event of an involuntary termination upon, or within 24 months following, a change in control, our NEOs will receive: (i) a cash severance payment in an amount equal to 18 months of base salary for the year in which the termination occurs (24 months in the case of Mr. Onopchenko), (ii) a cash payment in an amount equal to 100% of the target cash bonus for the year in which the termination occurs (150% in the case of Mr. Onopchenko), and (iii) continued health insurance benefits for 18 months following termination. In addition, all outstanding equity awards will vest without regard to a termination of employment.
• For additional information about the severance and change of control provisions in our employment agreements, see the section entitled "Potential Payments upon Termination or Change in Control".


Other Compensation-Related Topics
Role of CEO in Compensation Decisions
 
The Committee solicits the input of our CEO in determining compensation for our NEOs other than himself, particularly with respect to salary, cash bonus opportunity and equity awards. While our CEO participates in the deliberations regarding compensation for our other NEOs, he does not participate in, and is not present at, any deliberations regarding his own compensation. The Committee considers the information provided by our CEO, as well as information provided by Radford, to make compensation

38


decisions for our NEOs.
 
Compensation Risk Considerations
 
In assessing our overall compensation policies and practices, the Committee also considers how such policies and practices may encourage risk-taking by employees. The Committee conducts a compensation risk analysis at least annually, but also takes into account compensation-related risks each time it grants compensation awards throughout the year. In conducting these assessments, the Committee considers a number of factors including the following:
Our compensation program consists of both guaranteed pay and at-risk pay, and the Committee reviews this mix annually.

Peer group and industry compensation data is reviewed regularly to ensure alignment with our compensation program and market competitiveness.

We seek to pay our executives' target total compensation at the 50th percentile compared to our peer group.

Our performance-based awards are earned based on the achievement of multiple Company and individual performance objectives.

Our performance-based awards are subject to maximum award amounts to limit the potential compensation amount associated with any particular award.

Our executive compensation program encourages executive retention through long-term vesting provisions.

We have adopted stock ownership policies, which encourage executives to have a significant, long-term equity position in our Company.

Our cash and equity incentive awards are subject to our Clawback Policy.

Our Insider Trading Policy prohibits our NEOs and other executive officers from hedging the economic interest in our securities, and from pledging our securities.

Our severance and change in control benefits are designed to attract and retain executives without providing excessive benefits.

In considering these matters, the Committee concluded that it does not believe that our compensation program is reasonably likely to have a material adverse effect on us.

Clawback Policy

Though the SEC has not yet finalized rules implementing the requirement for adoption of a clawback policy as contemplated by the Dodd-Frank Act, we have voluntarily adopted a Clawback Policy which we believe reinforces our pay-for-performance philosophy and contributes to a Company culture that emphasizes integrity and accountability in financial reporting.

Pursuant to our Clawback Policy, in the event we are required to prepare an accounting restatement of our financial statements as a result of our material noncompliance with any financial reporting requirement under the federal securities laws, our board of directors will require reimbursement or forfeiture of any excess performance-based cash or equity incentive compensation received by any of our executive officers during the three completed fiscal years immediately preceding the date on which we are required to prepare the accounting restatement. Our Clawback Policy applies all incentive compensation granted to covered employees after the date on which the policy was adopted.

Tax and Accounting Considerations
 Among the factors it considers when making executive compensation decisions, the Committee considers the anticipated tax and accounting impact to us (and to our executives and other employees) of various payments, equity awards and other benefits.
In particular, the Committee considers the impact of the provisions of Section 162(m) of the Code. That section generally limits the deductibility of compensation paid by a publicly-held company to "covered employees" for a taxable year to $1.0 million, except for certain "performance-based compensation" payable pursuant to written contracts that were in effect on November 2, 2017

39


and that are not modified in any material respect on or after that date. "Covered employees" generally include our CEO, CFO and other highly compensated executive officers. Thus, our tax deduction with regard to compensation of these officers is limited to $1.0 million per taxable year with respect to each such officer. With respect to cash and equity awards that were in effect on November 2, 2017, and that are not modified in any material respect on or after that date, the Committee is mindful of the benefit to us and our stockholders of the full deductibility of compensation and have taken steps so that both the cash incentive and stock option awards that we granted may qualify for aforementioned exception to non-deductibility under Section 162(m) of the Code. However, awards that we granted that were intended to qualify as "performance-based compensation" may not necessarily qualify for such exemption under Section 162(m) of the Code, and the Committee may determine that the modification of such awards may ultimately be in our best interests and those of our stockholders, whether to meet contractual obligations or otherwise. With respect to cash incentive and equity awards that we may grant in the future, we do not anticipate that the $1.0 million deduction limitation set forth in Section 162(m) of the Code will have a material impact on our results of operations.
The Committee also considers the impact of Section 409A of the Code, and in general, our executive plans and programs are designed to comply with the requirements of that section so as to avoid possible adverse tax consequences that may result from noncompliance.
Our change in control and severance arrangements do not provide for excise tax gross-up payments.
Although we review and consider the tax and accounting laws, rules and regulations that may impact our executive compensation program, we believe it is not in the best interests of our stockholders to restrict the Committee's discretion and flexibility in developing appropriate compensation programs and thus also consider the competitiveness of our program in our market and the importance to our stockholders of incentivizing and rewarding executives for reaching desired performance levels and other goals.


40


Securities Authorized for Issuance under Equity Compensation Plans
The following table set forth certain information regarding outstanding options, rights and shares reserved for future issuance under our existing equity compensation plans as of December 31, 2018:
Plan Category
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(#)
Weighted average exercise price of outstanding options
($)(5)
Number of securities remaining available for future issuance
(#)
Equity compensation plans approved by security holders:
 
 
 
    2015 Stock Incentive Plan, as amended(1)
1,289,100

$
44.66

230,847

    2006 Stock Incentive Plan, as amended(2)
234,574

$
102.49


    2006 Amended and Restated Employee Stock Purchase Plan

$

38,396

Equity compensation plans not approved by security holders:
 
 
 
    Inducement Grants to New Employees in Connection with
    TriVascular Merger(3)
67,216

$
75.74


    2017 Inducement Plan(4)
146,473

$
27.59

235,300

Total
1,737,363

 
504,543


(1) 
Includes 368,367 RSUs.

(2) 
Includes 15,353 RSUs.

(3) 
Includes 8,632 RSUs.

(4) 
Includes 30,367 RSUs.

(5) 
Calculation excludes RSUs granted pursuant to the respective plans, which are not granted with an exercise price.


41


SUMMARY COMPENSATION TABLE
The following table sets forth summary compensation information for the fiscal years ended December 31, 2018, 2017 and 2016 for each of our NEOs. This table is intended to be reviewed together with the section entitled "Compensation Discussion and Analysis" above, as well as the additional compensation tables and related footnotes below.

Name and Principal Position
Year
Salary
Bonus
Restricted Stock Units(1)
 Stock Options(1)
Non-Equity Incentive Plan Compensation(2)
All Other Compensation
Total
John Onopchenko, Chief Executive Officer(3)
2018
$
531,538(4)
$
766,667(5)
 
$
450,000
 
$
450,002
$
 
$
 
$
2,198,207
2017
$
61,538
$
 
$
300,001
 
$
500,000
$
 
$
100,000
 
$
961,539
Vaseem Mahboob,
Chief Financial
Officer
2018
$
387,692(6)
$
 
$
350,001
 
$
92,887
$
669,691
 
$
 
$
1,500,271
2017
$
350,000
$
 
$
255,835
 
$
253,451
$
91,438
 
$
0
 
$
950,724
2016
$
350,000
$
194,729
 
$
250,004
 
$
400,162
$
0
 
$
70,069
 
$
1,264,964
Matthew Thompson, M.D.
Chief Medical Officer(7)
2018
$
414,266(8)
$
 
$
350,001
 
$
92,886
$
641,305
 
$
 
$
1,498,458
Jeremy Hayden General Counsel and Corporate Secretary(9)
2018
$
354,615(10)
$
 
$
 
$
89,110
$
590,057
 
$
 
$
1,033,782
John McDermott,
Former Chief Executive Officer(11)
2018
$
290,400(12)
$
 
$
337,433(13)
 
$
1,523,946(14)
$
 
$
1,203,630(15)
 
$
3,452,017
2017
$
572,000
$
 
$
674,800
 
$
622,107
$
143,000
 
$
 
$
2,011,907
2016
$
572,000
$
578,623
 
$
800,002
 
$
1,250,508
$
 
$
 
$
3,201,133

(1) 
Amounts shown in this column do not necessarily reflect the actual value received or to be received by our NEOs or the amount of stock-based compensation expense reported within our consolidated financial statements. Instead, the amounts shown reflect the grant date fair values of equity awards computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions used to determine the grant date fair values of the awards, see Note 4 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2018. In accordance with the applicable SEC rules, (i) for those awards that are subject to the satisfaction of performance conditions, the amounts reported reflect the value at the grant date based upon our determination as to the probable outcome of such conditions and (ii) for those awards with service-based vesting conditions, the amounts reported exclude the impact of estimated forfeitures.

(2) 
Amounts shown in this column reflect (i) payouts under our 2018 Cash Bonus Plan based on the achievement of pre-determined Company and individual performance objectives, and (ii) the cash portion of the 2018 annual stock option and cash awards, which vest over approximately two and one half years following the grant date subject to the NEOs continued employment. See the sections entitled "2018 Cash Bonus Plan Awards" and "2018 Annual Stock Option and Cash Awards" for additional information.

(3) 
Mr. Onopchenko joined us as Chief Operating Officer in October 2017 and was promoted to Chief Executive Officer in May 2018. Mr. Onopchenko did not serve as our NEO during 2016 so no compensation information has been provided for him for that year.

(4) 
This amount reflects the base salary paid to Mr. Onopchenko during 2018. In connection with his appointment as Chief Executive Officer, Mr. Onopchenko's base salary was increased to $600,000 pursuant to an Employment Agreement entered into between us and Mr. Onopchenko on May 2, 2018.

(5) 
Mr. Onopchenko received a one-time, cash sign-on bonus of $667,000 in connection with his promotion to Chief Executive Officer. In addition, he received a one-time, discretionary cash bonus of $100,000 relating to his performance during 2018, which was paid in February 2019. Mr. Onopchenko was not eligible to participate in the 2018 Cash Bonus Plan.

(6) 
This amount reflects the base salary paid to Mr. Mahboob during 2018. Mr. Mahboob's base salary was increased to $420,000 pursuant to an Amended and Restated Employment Agreement entered into between us and Mr. Mahboob on December 4, 2018.

(7) 
Dr. Thompson joined us as Chief Medical Officer in December 2016. Dr. Thompson did not serve as our NEO during 2016 or 2017 so no compensation information has been provided for him for those years.


42


(8) 
This amount reflects the base salary paid to Dr. Thompson during 2018. Effective October 6, 2018, Dr. Thompson's base salary was increased to $435,000 pursuant to an Amended and Restated Employment Agreement entered into between us and Dr. Thompson on December 4, 2018.

(9) 
Mr. Hayden joined us as General Counsel in August 2017. Mr. Hayden did not serve as our NEO during 2016 or 2017 so no compensation information has been provided for him for those years.

(10) 
This amount reflects the base salary paid to Mr. Hayden during 2018. Effective October 6, 2018, Mr. Hayden's base salary was increased to $375,000 pursuant to an Amended and Restated Employment Agreement entered into between us and Mr. Hayden on December 4, 2018.

(11) 
Mr. McDermott stepped down from his role as Chief Executive Officer in May 2018.

(12) 
This amount reflects the base salary paid to Mr. McDermott for serving as Chief Executive Officer during 2018.

(13) 
This amount reflects the grant date fair value of certain RSU award modifications resulting from the extension of the vesting provisions of the awards consistent with the terms of the McDermott Severance Agreement. There were no new equity grants to Mr. McDermott during 2018. As required by the applicable SEC rules and regulations, the grant date fair value has been calculated in accordance with FASB ASC Topic 718. However, the amount does not necessarily reflect the actual value received by Mr. McDermott as a result of the modification of the applicable RSU awards or upon any potential future sale of the underlying shares.

(14) 
This amount reflects the grant date fair value of certain stock option award modifications resulting from the extension of the vesting provisions of the awards consistent with the terms of the McDermott Severance Agreement. There were no new equity grants to Mr. McDermott during 2018. As required by the applicable SEC rules and regulations, the grant date fair value has been calculated in accordance with FASB ASC Topic 718. However, the amount does not necessarily reflect the actual value received by Mr. McDermott as a result of the modification of the applicable stock option awards or upon any potential future sale of the underlying shares.

(15) 
This reflects amounts paid to Mr. McDermott consistent with the terms of the McDermott Severance Agreement in connection with him stepping down as Chief Executive Officer, and includes: (i) a cash severance payment equal to 18 months of base salary in the amount of $858,000, (ii) a prorated cash bonus for 2018 in the amount of $199,629, (iii) consulting fees in the amount of $146,001, and (iv) a payment for accrued but unpaid PTO in the amount of $96,608. See the section entitled "McDermott Severance Agreement" for additional information.

43


GRANTS OF PLAN-BASED AWARDS
The following table summarizes all grants of plan-based awards made to our NEOs during the fiscal year ended December 31, 2018. The amounts set forth in the table do not necessarily reflect the value of the actual amounts paid or awards realized by our NEOs.

Name
Grant Date
Estimated Payouts Under Non-Equity Incentive Plan Awards(1)
All Other Stock Awards: Number of Shares of Stock or Units(#)
All Other Option Awards: Number of Securities Underlying Options(#)(2)
Exercise or Base Price of Securities Underlying Options(#)(3)
Grant Date Fair Value of Stock Options and RSUs
($)(4)
Target
Maximum
John Onopchenko(5) 
5/2/2018



19,864

$43.60

$450,002

12/30/2018


60,443(6)



$450,000

Vaseem Mahboob
1/25/2018
$209,000

$246,489





12/30/2018



22,561

$7.45

$92,887

12/30/2018


20,147(7)



$150,000

12/30/2018


26,863(8)



$200,000

Matthew Thompson, M.D.
1/25/2018
$180,000

$212,288





12/30/2018



22,561

$7.45

$92,886

12/30/2018


47,011(9)



$350,001

Jeremy Hayden
1/25/2018
$157,500

$185,752





12/30/2018



21,644

$7.45

$89,110

John McDermott(10)
1/25/2018
$572,000

$786,500






(1) 
The amounts in these columns represent the potential payouts under our 2018 Cash Bonus Plan based on the achievement of pre-determined Company and individual performance objectives. See the section entitled "2018 Cash Bonus Plan Awards" for additional information.

(2) 
The amount in this column for Mr. Onopchenko reflects a promotion grant of time-based stock options, which vest as to one-third of the shares on each of the first three anniversaries of the grant date. The amounts in this column for our other NEOs represent the grant of time-based stock options, which vest as to 100% of the shares on the first anniversary of the grant date, subject to the NEOs continued employment with us. These grants reflect the equity portion of the 2018 Annual Stock Option and Cash Awards, which consist of 18% equity awards and 82% cash awards. The cash portion of these awards, which is not reflected in the table above, is payable as to 41% of the award amount on June 30, 2020 and the remaining 41% on June 30, 2021, in each case subject to our NEO's continued employment with us. See the section entitled "2018 Annual Stock Option and Cash Awards" for additional information.

(3) 
Stock options are granted with an exercise price equal to the closing price of our common stock on the grant date.

(4) 
The grant date fair value of stock options is equal to the Black Scholes value on the grant date, multiplied by the number of shares of our common stock underlying the stock options. The grant date fair value of RSUs is equal to the closing price of our common stock on the grant date, multiplied by the number of shares of our common stock underlying the RSUs.

(5) 
Mr. Onopchenko was not eligible to participate in the 2018 Cash Bonus Plan.

(6) 
This amount reflects a promotion grant of time-based RSUs issued in connection with Mr. Onopchenko's appointment as our Chief Executive Officer, which vested as to one-third of the shares on May 2, 2019, vest as to one-third of the shares on May 2, 2020, and vest as to the remaining one-third of the shares on May 2, 2021, subject to Mr. Onopchenko's continued employment with us.

(7) 
This amount reflects a retention award of time-based RSUs which vest as to 50% of the shares on each of the first two anniversaries of the grant date, subject to Mr. Mahboob's continued employment with us.

(8) 
This amount reflects a retention award of performance-based RSUs, which will vest based upon the achievement of Company performance objectives that will be determined by the Committee. To the extent the performance objectives are not achieved, these RSUs will vest as to 100% of the shares on the third anniversary of the grant date, subject to Mr. Mahboob's continued employment with us.

(9) 
This amount reflects a retention award of time-based RSUs which vest as to one-third of the shares on each of the first three anniversaries of the grant date, subject to Dr. Thompson's continued employment with us.

(10) 
Mr. McDermott's payment pursuant to the 2018 Cash Bonus Plan, as well as additional compensation paid to him in 2018, was governed by the McDermott Severance Agreement. See the sections entitled "2018 Cash Bonus Plan Awards" and "McDermott Severance Agreement" for additional information.

44


OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table summarizes all outstanding equity awards held by our NEOs as of December 31, 2018. The amounts set forth in the table do not necessarily reflect the actual value to be realized by our NEOs.
 
Stock Options
Restricted Stock Units
Name
Number of Shares Underlying Unexercised Options Exercisable (#)
Number of Shares Underlying Unexercised Options Unexercisable (#)(1)
Option Exercise Price ($)(2)
Option Expiration Date(3)
Number of RSUs That Have Not Vested (#)
Market Value of RSUs that Have Not Vested ($)(4)
John McDermott
12,500
 

35.40
 
7/6/2019
 
 
7,110
 

43.60
 
5/20/2020
 
 
8,200
 

82.60
 
5/25/2021
 
 
25,664
 
10,567(5)

75.30
 
2/4/2026
 
 
5
 
4,144(5)

48.20
 
5/31/2027
 
 
10,697
 
12,153(5)

48.20
 
5/31/2027
 
 
John Onopchenko
83
 
203(6)

53.00
 
10/30/2027
5,660(9)
40,526
 
5,468
 
13,280(6)

53.00
 
10/30/2027
60,443(10)
432,772
 
 
6,880(7)

43.60
 
5/2/2028
 
 
 
12,984(7)

43.60
 
5/2/2028
 
 
Vaseem Mahboob
2,211
 
614(6)

135.60
 
10/15/2025
2,500(11)
17,900
 
8,610
 
2,267(6)

135.60
 
10/15/2025
2,764(12)
19,790
 
8,212
 
3,382(5)

75.30
 
2/4/2026
1,106(10)
7,919
 
4,353
 
3,075(5)

48.20
 
5/31/2027
20,147(13)
144,253
 
19
 
3,552(5)

48.20
 
5/31/2027
26,863(14)
192,339
 
 
22,561(8)

7.45
 
12/30/2018
 
 
Matthew Thompson, M.D.
4,953
 
4,954(6)

69.10
 
12/1/2026
2,500(11)
17,900
 
180
 
346(5)

48.20
 
5/31/2027
47,011(10)
336,599
 
3,392
 
5,081(5)

48.20
 
5/31/2027
 
 
 
22,561(8)

7.45
 
12/30/2028
 
 
Jeremy Hayden
2,373
 
7,127(6)

42.10
 
8/21/2027
4,750(9)
34,010
 
5,490
 
8,611(6)

42.10
 
8/21/2027
 
 
 
21,644(8)

7.45
 
12/30/2028
 
 

(1) 
The vesting of these stock options may fully accelerate upon a change in control transaction pursuant to written agreements entered into between us and each of our NEOs.

(2) 
All stock options are granted with an exercise price equal to the closing price of our common stock on the grant date.

(3) 
All stock options expire on the date that is 10 years following the grant date.

(4) 
The amounts in this column are based on the closing price of our common stock on December 31, 2018, which was $7.16 per share.

(5) 
These time-based stock options vest in equal monthly installments over 48 months, such that all options may become fully vested upon the fourth anniversary of the grant date.

(6) 
These time-based stock options vest as to 25% of the shares on the first anniversary of the grant date and then in equal monthly installments over the next three years such that all options may become fully vested upon the fourth anniversary of the grant date.

(7) 
These time-based stock options vest as to one-third of the shares on each of the first three anniversaries of the grant date.

(8) 
These time-based stock options vest as to 100% of the shares on the first anniversary of the grant date.


45


(9) 
These performance-based RSUs will vest based upon the achievement of Company performance objectives that will be determined by the Committee. To the extent the performance objectives are not achieved, these RSUs will vest as to 100% of the shares on the fourth anniversary of the grant date.

(10) 
These time-based RSUs vest as to one-third of the shares on each of the first three anniversaries of the grant date.

(11) 
These time-based RSUs vest as to one-half of the shares 18 months following the grant date, and as to the remaining one-half of the shares on the third anniversary of the grant date.

(12) 
These performance-based RSUs will vest based upon the achievement of Company performance objectives that have been determined by Committee. It is probable that the performance objectives will not be achieved. To the extent the performance objectives are not achieved, these RSUs will vest as to 100% of the shares on the fourth anniversary of the grant date.

(13) 
These time-based RSUs vest as to one-half of the shares on the first anniversary of the grant date and as to the remaining one-half of the shares on the second anniversary of the grant date.

(14) 
These performance-based RSUs will vest based upon the achievement of Company performance objectives that will be determined by the Committee. To the extent the performance objectives are not achieved, these RSUs will vest as to 100% of the shares on the third anniversary of the grant date.



46


OPTION EXERCISES AND STOCK VESTED
The following table provides information, for each of our NEOs, regarding (i) the exercise of stock options during the fiscal year ended December 31, 2018, including the number of shares acquired upon exercise and the value realized, and (ii) the vesting of RSUs during the fiscal year ended December 31, 2018, including the number of shares acquired upon vesting and the value realized, in each case before payment of any applicable withholding tax and broker commissions.

 
Stock Options
Restricted Stock Units
Name
Exercise Date
Number of Shares Acquired on Exercise (#)
Value Realized on Exercise ($)(1)
Vesting Date
Number of Shares Acquired on Vesting (#)
Value Realized on Vesting ($)(2)
John McDermott
3/27/2018
25,000
$365,000
2/5/2018
3,537
$146,432
5/10/2018
15.538
$320,081
5/28/2018
1,605
$90,683
5/10/2018
2,168
$44,661
6/30/2018
3,537
$200,194
Vaseem Mahboob
2/5/2018
1,105
$45,747
Matthew Thompson, M.D.
5/15/2018
3,100
$150,970

(1) 
Consistent with the applicable SEC rules and regulations, the value realized upon exercise of the stock options is determined based upon the difference between closing price of our common stock on the relevant exercise date and the exercise price of the stock option.

(2) 
Consistent with the applicable SEC rules and regulations, the value realized upon the vesting of the RSUs is based on the closing price of our common stock on the relevant vesting dates.


47



PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Employment Agreements

We typically enter into employment agreements with each of our executive officers and other senior management personnel. Our current employment agreements with our NEOs generally provide that in the event of a separation from service due to termination by us other than for cause, death or disability, or the NEO's resignation for good reason, which we refer to collectively as an "involuntary termination", prior to a change in control of our Company, our NEO will receive (i) the portion of the then-current base salary that was accrued and unpaid through the date of termination, (ii) payments for any accrued and unpaid PTO through the date of termination, (iii) a cash severance payment in an amount equal to 6 months of the then-current base salary for Mr. Hayden, 12 months of the then-current base salary for each of Mr. Mahboob and Dr. Thompson, and 24 months of the then-current base salary for Mr. Onopchenko, payable in a lump sum within 60 days following termination, (iv) a cash payment equal to 100% of the target cash bonus for which the NEO would be eligible for the year in which such termination occurred, payable in a lump sum within 60 days following termination, (v) continued health insurance benefits for 6 months for Messrs. Hayden and Mahboob and Dr. Thompson following termination and 18 months for Mr. Onopchenko following termination and (vi) payment for reasonable outplacement services for 12 months following termination, in an aggregate amount not to exceed $10,000. All outstanding equity awards granted to Mr. Mahboob and Dr. Thompson under our equity incentive plans that have solely time-based vesting requirements will become fully vested as to all underlying shares of common stock upon an involuntary termination prior to a change in control. All outstanding equity awards granted to Mr. Onopchenko under our equity incentive plans that vest within 12 months following an involuntary termination prior to a change in control will become vested. No equity awards held by Mr. Hayden will be subject to any accelerated vesting upon an involuntary termination prior to a change in control.

In the event of an involuntary termination upon or within 24 months following a change in control, Mr. Onopchenko will be entitled to receive, in addition to items (i), (ii) and (vi) above as applicable to Mr. Onopchenko, (a) a cash severance payment in an amount equal to 24 months of the then-current base salary, payable in a lump sum within 60 days following termination and (b) a cash payment in an amount equal to 150% of his target cash bonus, payable in a lump sum within 60 days following termination.

In the event of an involuntary termination upon or within 24 months following a change in control, Messrs. Hayden and Mahboob and Dr. Thompson will be entitled to receive, in addition to items (i), (ii) and (vi) above, (a) a cash severance payment in an amount equal to 18 months of the then-current base salary, payable in a lump sum within 60 days following termination, (b) a cash payment equal to 100% of the target cash bonus for the year in which the termination occurs, payable in a lump sum within 60 days following termination, and (c) continued health insurance benefits for 18 months following termination.

In addition, upon a change in control transaction, the employment agreements with each of our NEOs provide for accelerated vesting of all outstanding equity awards regardless of whether a termination of employment occurs.

McDermott Severance Agreement

Mr. McDermott stepped down from his role as Chief Executive Officer in May 2018. In connection with Mr. McDermott's separation from our Company, we entered into a Severance Agreement and General Release with Mr. McDermott on February 21, 2018, or the McDermott Severance Agreement.

The McDermott Severance Agreement provided that Mr. McDermott would receive (i) any salary that was accrued but was not paid as of his separation date, (ii) payment for accrued and unpaid PTO through his separation date, (iii) a cash severance payment in an amount equal to 18 months of his base salary, payable in a lump sum within 60 days following his separation date, (iv) a prorated cash payment equal to his target bonus for 2018, (v) accelerated vesting of certain previously granted RSUs, (vi) continued vesting and exercisability of certain previously issued stock options, subject to certain conditions, (vii) a cash payment representing the cost of group medical insurance coverage for up to 18 months following his separation date, and (viii) payment for reasonable outplacement services for 12 months following his separation date, in an aggregate amount not to exceed $10,000. In addition, the McDermott Severance Agreement provides for the acceleration of vesting of certain previously issued stock options in certain circumstances.

Mr. McDermott's receipt of the aforementioned payments and benefits was conditioned upon, (i) the effectiveness of a general release of claims in favor of us (and certain affiliates and related parties) that is included within the McDermott Severance Agreement, and (ii) Mr. McDermott's compliance with certain confidentiality, non-competition, non-solicitation, non-disparagement and other standard covenants.


48


SEVERANCE AND CHANGE IN CONTROL PAYMENTS
The following table summarizes the amounts that would have become payable to each of our NEOs pursuant to the various employment agreements described above, assuming each NEO experienced an involuntary termination of employment as of December 31, 2018, both prior to and after the occurrence of a change in control transaction. If a change in control transaction was to occur on a different date, the payments to be made and value to be realized by our NEOs could be materially different.

In connection with a termination of employment as a result of death or disability, or by an NEO without good reason, we shall not have any obligations to the NEO except that the NEO shall be entitled to receive base salary through the date of termination, payments for accrued and unpaid PTO through the date of termination, and unreimbursed business expenses through the date of termination.

Name
Payment or Benefit
Involuntary Termination
(Prior to Change in Control)
Involuntary Termination
(After Change in Control)
John Onopchenko
Continuation of base salary(1)
$
1,200,000

 
$
1,200,000
 
Bonus payment(2)
$
600,000

 
$
900,000
 
Equity award vesting acceleration(3)
$
40,526

 
$
473,297
 
Continuation of benefits(4)
$
36,000

 
$
36,000
 
Vaseem Mahboob
Continuation of base salary(5)
$
420,000

 
$
630,000
 
Bonus payment(6)
$
231,000

 
$
231,000
 
Equity award vesting acceleration(7)
$
170,064

 
$
382,194
 
Continuation of benefits(8)
$
12,000

 
$
36,000
 
Matthew Thompson, M.D.
Continuation of base salary(5)
$
435,000

 
$
652,500
 
Bonus payment(6)
$
195,750

 
$
195,750
 
Equity award vesting acceleration(7)
$
354,499

 
$
354,499
 
Continuation of benefits(8)
$
12,000

 
$
36,000
 
Jeremy Hayden
Continuation of base salary(9)
$
187,500

 
$
562,500
 
Bonus payment(6)
$
168,750

 
$
168,750
 
Equity award vesting acceleration(10)
$
0

 
$
34,010
 
Continuation of benefits(8)
$
12,000

 
$
36,000
 

(1)  
The executive is entitled to receive a payment equal to base salary for 24 months both "Prior to Change in Control" and "After Change in Control."

(2)  
"Prior to Change in Control" this amount equals 100% of the target bonus for 2018 and assumes the target level of performance was achieved. "After Change in Control" this amount equals 150% of the target bonus for 2018, which would have become payable regardless of Company performance relative to the target performance level.

(3)
"Prior to Change in Control" includes the fair market value of the outstanding equity awards granted to Mr. Onopchenko under our equity incentive plans that will become vested and exercisable within 12 months of December 31, 2018. "After Change in Control" includes the fair market value of all unvested equity awards outstanding as of December 31, 2018, which will vest in full upon a change in control. Fair market value was calculated based on the number of equity awards for which vesting would have been accelerated, multiplied by the closing price of our common stock on December 31, 2018, which was $7.16 per share (and for stock options is calculated as the difference between such closing price and the relevant exercise prices).

(4)  
Represents continuation of COBRA payments for 18 months both "Prior to Change in Control" and "After Change in Control." COBRA Payments may be extended for an additional six months in limited circumstances.

(5)  
"Prior to Change in Control" the executive is entitled to receive a payment equal to base salary for 12 months. "After Change in Control" the executive is entitled to receive a payment equal to base salary for 18 months.

(6)  
"Prior to Change in Control" this amount equals 100% of the target bonus for 2018 and assumes the target level of performance was achieved. "After Change in Control" this amount equals 100% of the target bonus for 2018, which would have become payable regardless of Company performance relative to the target performance level.


49


(7)
"Prior to Change in Control" includes the fair market value of the outstanding equity awards granted to the executive under our equity incentive plans that solely have time-based vesting requirements, which will vest upon an involuntary termination of employment. "After Change in Control" includes the fair market value of all unvested equity awards outstanding as of December 31, 2018, which will vest in full upon a change in control. Fair market value was calculated based on the number of equity awards for which vesting would have been accelerated, multiplied by the closing price of our common stock on December 31, 2018, which was $7.16 per share (and for stock options is calculated as the difference between such closing price and the relevant exercise prices).

(8)  
"Prior to Change in Control" represents continuation of COBRA payments for six months. "After Change in Control" represents continuation of COBRA payments for 18 months. COBRA payments may be extended for an additional six months in limited circumstances.

(9)  
"Prior to Change in Control" the executive is entitled to receive a payment equal to base salary for six months. "After Change in Control" the executive is entitled to receive a payment equal to base salary for 18 months.

(10)
"Prior to Change in Control" there are no outstanding equity awards that would accelerate or continue to vest following the date of termination. "After Change in Control" includes the fair market value of all unvested equity awards outstanding as of December 31, 2018, which will vest in full upon a change in control. Fair market value was calculated based on the number of equity awards for which vesting would have been accelerated, multiplied by the closing price of our common stock on December 31, 2018, which was $7.16 per share (and for stock options is calculated as the difference between such closing price and the relevant exercise prices).

50


CEO PAY RATIO

General

Presented below is the ratio of the annual total compensation of our current Chief Executive Officer, Mr. Onopchenko, to the annual total compensation of our median employee (excluding our Chief Executive Officer), which is referred to as the "CEO Pay Ratio". The CEO Pay Ratio has been calculated in a manner consistent with the applicable SEC rules and regulations, which we collectively refer to as the SEC Pay Ratio Rules. We believe the CEO Pay Ratio presented represents a reasonable estimate based upon the facts and circumstances described below.

Determination of Median Employee

In identifying our median employee for the purpose of calculating the CEO Pay Ratio, or our Original Median Employee, we initially calculated the annual total cash compensation of each of our employees as of December 31, 2017, or the Original Measurement Date. For this purpose, annual total cash compensation included base salary or hourly wages, cash incentive awards and commissions, as well as comparable elements of cash compensation paid to employees in non-U.S. jurisdictions. As permitted by the SEC Pay Ratio Rules, these amounts were calculated using our internal human resources records. Compensation amounts were annualized for new hire permanent employees who did not work for us for the entire year, and we did not apply any cost-of-living adjustments as part of the calculations.
    
We selected our Original Median Employee from among 648 full-time, part-time, temporary and seasonal workers who were employed and not on leaves of absence on the Original Measurement Date. As of that date, the total number of our employees was 655, of which 596 were U.S. employees and 59 were non-U.S. employees. However, as permitted by the SEC Pay Ratio Rules, we excluded three employees from Thailand, two employees from Singapore and two employees from Canada (which constitute all of our employees from those respective jurisdictions) pursuant to the de minimis exemption for foreign employees. Except for these foreign employees, we did not exclude from the calculation of our Original Median Employee any other employees pursuant to any other permitted exceptions.

Pursuant to the SEC Pay Ratio Rules, once our Original Median Employee has been determined, we are permitted to continue to rely upon the same median employee for up to three years, and to calculate the annual total compensation for that median employee each year during that three year period. However, where there has been a change in the individual circumstances of our Original Median Employee, we are permitted to select a different median employee whose compensation is substantially similar to our Original Median Employee based on the application of the same compensation measure used to select our Original Median Employee.

During 2018, our Original Median Employee received an equity grant with a grant date fair value that was materially higher than similarly-situated employees. We determined that, if we were to rely on the annual total compensation paid to our Original Median Employee for 2018, it would have the potential to significantly reduce the CEO Pay Ratio (all else equal) because of the significant value of the equity grant. As a result, for 2018, we determined it was appropriate to select a different median employee whose annual total compensation for 2017 was substantially similar to that of our Original Median Employee on the Original Measurement Date. This new median employee, which we refer to as our "New Median Employee," was selected using the same compensation data and calculation methodology used to select our Original Median Employee. Notwithstanding the selection of our New Median Employee, we do not believe our overall employee population or compensation arrangements have changed in a manner that would significantly affect our pay ratio disclosure.

Determination of Chief Executive Officer Compensation

Mr. McDermott served as our Chief Executive Officer until May 2018, at which time he stepped down and Mr. Onopchenko was promoted to Chief Executive Officer. Mr. Onopchenko also served as our Chief Operating Officer during 2018 until his promotion to Chief Executive Officer. Accordingly, while we did not have a single person serve as our Chief Executive Officer for 2018, Mr. Onopchenko did serve as one of our executive officers for the entire year.

In general, the SEC Pay Ratio Rules require that the annual total compensation for the Chief Executive Officer for a particular year be calculated in a manner consistent with the Summary Compensation Table. However, where a company did not have a single person serving in the capacity of Chief Executive Officer for the entire year, the SEC Pay Ratio Rules provide alternative approaches to the calculation of the annual total compensation, which necessarily require the company to make certain assumptions and subjective determinations regarding the calculation.

For the purposes of calculating the CEO Pay Ratio for 2018, we have elected to take the approach of annualizing the total compensation for Mr. Onopchenko, which is one of the calculation approaches specifically contemplated by the SEC Pay Ratio Rules. However, because Mr. Onopchenko served as one of our executive officers for all of 2018, the annual total compensation for

51


Mr. Onopchenko for 2018 is already set forth in the Summary Compensation Table, which reflects the aggregate amount of compensation earned by Mr. Onopchenko for 2018. We believe this amount reflects a reasonable approximation of the annualized amount of compensation Mr. Onopchenko would have earned had he served as our Chief Executive Officer for all of 2018. In other words, the annual total compensation amount shown in the Summary Compensation Table for Mr. Onopchenko for 2018 already reflects an "annualized" compensation amount since he served as one of our executive officers for the full year. We believe this circumstance is different from a situation in which, for example, the Chief Executive Officer is hired from outside the company and is not paid by the company for the full year, which may require that the annual total compensation paid to the Chief Executive Officer be adjusted from the amount set forth in the Summary Compensation Table to reflect an annualized amount.

CEO Pay Ratio Calculation

The annual total compensation for our Chief Executive Officer for 2018, as set forth in the Summary Compensation Table, was $2,198,207. The annual total compensation for our New Median Employee for 2018 was $113,320. Accordingly, the CEO Pay Ratio for 2018 was approximately 19.4 to 1.


52


DIRECTOR COMPENSATION PROGRAM

Overview

Pursuant to our director compensation program, our non-employee directors each receive an annual cash retainer for service on our board of directors and an additional cash retainer for service on each committee on which the director is a member. The chair of each committee typically receives a higher cash retainer for such service, which is in lieu of, and not in addition to, the cash retainer paid for committee member service. In addition, on the date of each annual meeting, each non-employee director who will continue in office following the annual meeting generally receives an RSU award with a fixed value, with the number of shares subject to the award determined based on the closing price on the grant date. The Chairman of the Board or Lead Independent Director typically receives an additional RSU award. All of the annual RSU awards generally vest as to 100% of the underlying shares on the one year anniversary of the grant date.

The Compensation Committee regularly assesses our director compensation program and reviews information and analysis provided by Radford, our independent compensation consultant.

Annual Director Compensation    

For 2018, following a review of peer group director compensation data provided by Radford, and careful deliberation by the Compensation Committee, during which it took into account a number of factors, including the significant reduction in the trading price of our common stock, the potentially significant dilutive impact of the issuance of RSU awards to non-employee directors (in light of the reduced stock price), our restructuring and strategic market repositioning, our recent and projected financial performance, as well as potential perceptions of stockholders and other market participants regarding our executive and non-employee director compensation programs, our board of directors approved changes to our non-employee director compensation program for 2018. Most notably, our board of directors believed it was prudent, and in the best interests of stockholders, to approve approximately an 18% reduction in the value of the annual RSU award granted to each non-employee director as compared to 2017. The reduction is only expected to apply to non-employee director compensation for 2018. Non-employee directors also receive reimbursement for certain travel expenses and other out-of-pocket costs.

For 2018, the annual fees paid and awards granted to non-employee directors for service on our board of directors, and for service on each committee on which the director is a member for 2018 were as follows:

Position
Annual Cash Retainer Paid for Members
Annual Cash Retainer for Chair(1)
Annual RSU Awards
($)
Board of Directors
$
36,000

 
$

 
$
90,000

 
Chairman of the Board or Lead Independent Director
$

 
$

 
$
45,000(2)

 
Audit Committee
$
8,100

 
$
18,000

 
$

 
Compensation Committee
$
5,400

 
$
11,700

 
$

 
Governance Committee
$
4,500

 
$
8,100

 
$

 
(1) 
Cash retainers for the chair of each committee are in lieu of, and not in addition to, the cash retainers paid for committee member service

(2) 
The RSU grant to the Chairman of the Board or Lead Independent Director is in addition to the RSU grant for serving on the board of directors.

Director Onboarding Grants

In addition to the annual compensation described above, each person who first becomes a non-employee director, whether elected by our stockholders or appointed by our board of directors, has historically been granted an RSU award in the amount of $200,000, with the number of shares subject to the award determined based on the closing price on the grant date. This onboarding RSU award typically vests as to 25% of the shares on each anniversary of the grant date, such that all of the shares are vested on the fourth anniversary of the grant date. The board of directors intends to revisit the aggregate value of these onboarding grants for future director nominees depending on the prevailing stock price, the potential dilutive impact of such grants on stockholders and other factors.





53


One-Time Equity Grant to Chairman of the Board

In May 2018, following the recommendation of Radford, the Compensation Committee approved a one-time grant of time-based RSUs with a fair market value equal to $213,000 to Mr. Lemaitre. The number of shares subject to the grant was based on the closing price of our common stock on the grant date. This grant was made in consideration of the significant additional responsibilities undertaken by Mr. Lemaitre on behalf of our Company during the first half of 2018, including with respect to assistance rendered in connection with our Chief Executive Officer transition.  These RSUs were issued pursuant to our 2015 Plan and are subject to time-based vesting such that 100% of the shares shall vest on the first anniversary of the grant date.

Director Compensation Paid in 2018

The following table summarizes the compensation paid to each of our non-employee directors during the fiscal year ended December 31, 2018.

Name
Fees Earned or Paid in Cash(1)
Restricted Stock Units(2)
Total
Daniel Lemaitre
$
48,600
 
$
348,003
 
$
396,604
 
Guido J. Neels
$
52,200
 
$
90,000
 
$
142,200
 
Leslie V. Norwalk
$
45,450
 
$
90,000
 
$
135,450
 
Gregory D. Waller
$
58,500
 
$
90,000
 
$
148,500
 
Thomas C. Wilder, III
$
44,100
 
$
90,000
 
$
134,100
 
Thomas F. Zenty, III
$
41,400
 
$
90,000
 
$
131,400
 

(1) 
The amounts in this column reflect annual cash retainers paid for service on our board of directors and for service on each committee on which the director is a member. Annual retainers are paid in quarterly installments and prorated for any portion of a year during which a director serves.

(2) 
Amounts shown in this column do not necessarily reflect the actual value received or to be received by our non-employee directors. Instead, the amounts shown reflect the grant date fair values of equity awards computed in accordance with FASB ASC Topic 718. For a discussion of valuation assumptions used to determine the grant date fair value of the awards, see Note 4 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2018. In accordance with the applicable SEC rules, the amounts reported exclude the impact of estimated forfeitures related to service-based vesting conditions.

Outstanding Equity Awards at Fiscal Year-End
The following table sets forth the number of shares of our common stock underlying outstanding equity awards (vested and unvested) held by each of our non-employee directors as of December 31, 2018.
Director
Shares Underlying Outstanding Equity Awards (#)
Daniel Lemaitre
31,814
Guido J. Neels
17,088
Leslie V. Norwalk
12,414
Gregory D. Waller
12,088
Thomas C. Wilder, III
13,338
Thomas F. Zenty, III
12,089


54


COMPENSATION COMMITTEE REPORT
The Compensation Committee of our board of directors has reviewed and discussed with management the information provided under the heading "Compensation Discussion and Analysis" in this proxy statement. Based on such review and discussions, the Compensation Committee recommended to our board of directors that the Compensation Discussion and Analysis section of this proxy statement, together with the related compensation tables and narrative discussion, be included in this proxy statement.
Members of the Compensation Committee
Guido J. Neels
Leslie V. Norwalk
Thomas F. Zenty, III

This Compensation Committee Report 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 the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.



55


PROPOSAL NO. 2
NON-BINDING ADVISORY VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
Background
In accordance with the applicable SEC rules, we are providing our stockholders with the opportunity to cast a non-binding advisory vote on the compensation of our named executive officers, or a "say-on-pay" proposal, as described below.
"Say-on-Pay" Vote
We are committed to our stockholder outreach efforts, including soliciting stockholder feedback on our executive compensation program. In response to feedback from our stockholders during our outreach efforts, we have historically made a number of significant changes to our executive compensation program, including a heightened focus on our pay-for-performance philosophy. In addition, while our stockholders approved by advisory vote, the compensation of our NEOs at our 2018 annual meeting of stockholders, we have continued to make concerted efforts to engage in meaningful dialogue with our stockholders regarding our executive compensation program and our compensation practices more broadly. We continue to actively engage with our stockholders as a means to seek meaningful feedback, offer our perspective on and rationale for making certain compensation decisions, and improve overall stockholder support for our executive compensation program and governance practices generally.
2018 Executive Compensation Summary
Our executive compensation program is designed to balance the need to incentivize executives to focus on building long-term value for stockholders, while at the same time acknowledging it is imperative to retain our executives, particularly in this critical stage of our business and at a time when our stock price has been volatile. Leading to 2018 and throughout the year, we encountered challenges resulting from the restructuring of our business, including significant management transition and critical business plan implementation. As a result, our 2018 executive compensation program evolved throughout the year to put a greater focus on our need to motivate and retain our executives and other key employees during this difficult transition period, while also continuing to emphasize a strong pay-for-performance alignment by providing a significant portion of the overall compensation opportunity for our named executive officers in the form of performance-based compensation. We believe our 2018 compensation program design was successful in striking the appropriate balance between achieving pay-for-performance alignment, and supporting retention during this critical stage of our growth.
For additional information about our executive compensation program, see the section entitled "Compensation Discussion and Analysis" and the related tables and footnotes.
Proposal
We are asking our stockholders to indicate their support for our executive compensation program as described in this proxy statement. Accordingly, we are asking our stockholders to vote "FOR" the following resolution at the annual meeting:
"RESOLVED, that the stockholders approve, on a non-binding advisory basis, the compensation of the named executive officers of Endologix, Inc. as disclosed in the Compensation Discussion and Analysis section of the proxy statement for the 2019 Annual Meeting of Stockholders, and the related compensation tables and narrative disclosures."
The results of this advisory vote are not binding upon us. However, our Compensation Committee, which is responsible for designing and administering our executive compensation program, values the opinions expressed by stockholders in their vote on this proposal, and will continue to consider the outcome of the vote when making future executive compensation decisions.
Interest of Certain Persons in Proposal
Other than as named executive officers in respect of whose compensation this non-binding advisory vote on executive compensation will be held, none of the following persons has any substantial interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in this proposal: (i) any person who has been one of our directors or executive officers at any time since the beginning of our last fiscal year, (ii) the nominees for election as Class III directors, or (iii) any associate of any of the foregoing persons.


56


Required Vote
The affirmative vote of a majority of the outstanding shares of our common stock present in person or represented by proxy and entitled to vote on this proposal at the annual meeting is required to approve, on a non-binding advisory basis, the compensation of our named executive officers as set forth in this proxy statement. Abstentions will have the same effect as votes against this proposal. Broker non-votes will not affect the outcome of the voting on this proposal.
Recommendation of our Board of Directors
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE "FOR" THE APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DESCRIBED IN THIS PROXY STATEMENT.

57


PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee has appointed KPMG LLP, or KPMG, as our independent registered public accounting firm for the fiscal year ending December 31, 2019, and our board of directors has recommended that our stockholders ratify the appointment. KPMG audited our financial statements for the fiscal year ended December 31, 2018.
Although we are not required to submit the appointment of our independent registered public accounting firm for stockholder approval, if our stockholders do not ratify the appointment of KPMG, our Audit Committee may reconsider the appointment of KPMG. Even if the appointment is ratified, our Audit Committee may direct the appointment of a different independent registered public accounting firm at any time during the year if our Audit Committee determines that the change would be in the best interests of our Company or those of our stockholders.
Representatives of KPMG are expected to be present at the annual meeting with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.
Audit Fees
The following table sets forth the aggregate fees billed to us for professional services rendered by KPMG for the fiscal years ended December 31, 2018 and 2017:
 
December 31,
 
2018
2017
Audit Fees(1)
$
1,554,975

$
1,536,963

Audit-Related Fees(2)
$

$

Tax Fees(3)
$

$

All Other Fees
$

$

Total Fees
$
1,554,975

$
1,536,963

(1) 
Includes fees for professional services rendered for the audit of our annual consolidated financial statements and the audit of management's assessment of the design and effectiveness of our internal control over financial reporting in our annual reports on Form 10-K, selected statutory audits, and reviews of our consolidated financial statements included in our quarterly reports on Form 10-Q.
(2) 
Includes fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements.
(3) 
Includes professional services for preparation of federal and state corporation income tax returns for the years ended 2018 and 2017.
Pre-Approval Policy for Non-Audit Services
Our Audit Committee reviews and pre-approves all non-audit services to be performed by our independent registered public accounting firm, subject to certain de minimis exceptions. Our Audit Committee pre-approved all of the non-audit services provided by KPMG as set forth in the table above.
Required Vote
The affirmative vote of a majority of the outstanding shares of our common stock present in person or represented by proxy and entitled to vote on this proposal at the annual meeting is required to ratify the appointment of KPMG as our independent registered public accounting firm for the fiscal year ending December 31, 2019. Abstentions will have the same effect as votes against this proposal. We do not expect any broker non-votes in connection with this proposal.
Recommendation of our Board of Directors
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF KPMG AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019.



58


PROPOSAL NO. 4
AMENDMENT TO THE ENDOLOGIX, INC. AMENDED AND RESTATED 2015 STOCK INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER THE PLAN
Overview
We are seeking stockholder approval to amend the Endologix, Inc. Amended and Restated 2015 Stock Incentive Plan, or our 2015 Plan, to increase the number of shares of our common stock reserved under our 2015 Plan by 2,500,000 shares, or from 1,630,000 shares to 4,130,000 shares. Our Compensation Committee, which is comprised solely of independent directors, has recommended to our board of directors that we approve the amendment to our 2015 Plan. Based in part on this recommendation, and for a number of reasons discussed in greater detail below, our board of directors believes it is in the best interests of our stockholders to approve the amendment to our 2015 Plan, and has approved the amendment, subject to stockholder approval of this proposal at the annual meeting.
Purpose of our 2015 Plan
The purpose of our 2015 Plan is to provide us flexibility to attract and retain the services of qualified employees, officers and non-employee directors upon whose judgment, initiative and efforts the successful conduct and development of our business depends, and to provide additional incentives to such persons to devote their effort and skill to our advancement by providing them an opportunity to participate in the ownership of our Company and thereby have an interest in our success and increased value.
Principal Reasons for Requested Share Increase
The approval of this proposal by our stockholders, which would result in the immediate availability of additional shares for issuance under our 2015 Plan, is critical to the successful implementation of our compensation programs, and is vital to the growth and success of our business. In particular, and for the reasons discussed below, an increase in the number of shares reserved for issuance under our 2015 Plan is necessary for us to retain our employees, to continue to motivate and incentivize our employees, and to align the interests of our employees with those of our stockholders.
Consistent with many companies in our industry, equity compensation is a key component of our compensation programs, including with respect to our executives, top sales personnel and other employees. We believe the grant of equity awards, and the potential that the value of the awards will increase over time, is an important element of the compensation package and the overall value proposition we offer our employees, and is a key reason they may choose to become or remain employees of our Company. If we are unable to continue to make grants of equity awards to our employees consistent with their expectations or with our historical compensation practices, or if we are required to issue awards with significantly lower values than competitive market practices mandate due to the lack of available shares under our 2015 Plan, we could be at significant risk of failing to retain executives, top sales personnel or other key employees who are critical to our success, or to properly motivate them to achieve our strategic objectives. These risks are particularly acute in light of our commercial restructuring and ongoing business plan implementation.
Unfortunately, the significant decline in the trading price of our stock over the past couple of years has caused a substantial reduction in the value of our equity awards, resulted in the depletion of the share reserve under our 2015 Plan and caused heightened concerns regarding our ability to retain and motivate employees, thereby resulting in the need for a significantly greater number of shares to be available for grant under our 2015 Plan. Specifically, the vast majority of the option awards currently held by our employees and non-employee directors are "out-of-the-money," meaning that the exercise price of each option is less than the current trading price of our shares on the NASDAQ Stock Market, thus rendering these options essentially valueless. Further, outstanding RSUs and other awards under our 2015 Plan have materially decreased in value as our stock price has decreased, thus reducing the effectiveness of these awards as incentive and retention tools. Though we have sought, and will continue to seek, to provide meaningful equity awards to our employees and non-employee directors by all appropriate means, including through consummation of the Option Exchange Program as contemplated in Proposal No. 7 below, our ability to provide competitive near-term equity awards will be severely hampered or even rendered impossible, if we are unsuccessful in our efforts to significantly increase the pool of available shares under our 2015 Plan.
In considering our recommendation to increase the total number of shares reserved for issuance under our 2015 Plan by 2,500,000 shares, our board of directors specifically considered the following factors:
our Company's need to motivate and retain our executives, top sales personnel and other key employees at a critical stage of our Company's growth, in particular at a time when we are in the process of implementing a commercial restructuring and strategic market repositioning, which may result in the need to issue a greater number of equity awards than in previous years;

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the significant reduction in the trading price of our common stock over the past couple years, which has substantially reduced the value of our equity awards, created uncertainty among our employees, and raised concerns about our financial viability;
the number of shares currently reserved for issuance under our 2015 Plan as compared to our current and projected equity grant requirements, including the potential that our board of directors may approve significant grants to our Chief Executive Officer and other members of our senior management team in order to achieve our compensation objectives; and
the viability of and risks associated with alternative incentive programs, including cash incentive programs.

Our board of directors also took into account certain additional criteria relating to the potential impact of the amendment to our 2015 Plan on our stockholders. For example, our board of directors considered the amount of the requested share increase relative to both the total number of shares of our common stock outstanding, as well as our fully-diluted shares outstanding. Our board of directors also took into consideration that virtually all of the stock options granted under our 2015 Plan prior to November 2018 are currently "out-of-the-money" and therefore do not provide any meaningful incentive or retention benefits to our current employees and non-employee directors. In light of the foregoing, our board of directors believes the 2,500,000 share request to be appropriate and necessary to meet the strategic objectives of our compensation program.
In addition, our board of directors took into account the potential impact of the Option Exchange Program as described in this proxy statement, for which we are seeking stockholder approval in Proposal No. 7. Pursuant to the Option Exchange Program, eligible participants would be entitled to surrender certain "out-of-the-money" options for cancellation in exchange for a grant of a lesser number of options. In determining the requested number of shares, our board of directors assumed the Option Exchange Program will be adopted by our stockholders and further assumed a potential participation rate by stockholders in the program, which would result in additional shares being returned to our 2015 Plan and made available for future grant (after taking into account the exchange of options for options under the program). If the Option Exchange Program is not approved by our stockholders, or if the participation rate is significantly lower than expected, it may require us to seek approval for additional shares.
In light of the significant reduction in the value of our stock price, and the heightened need to motivate and retain our executive officers and other key employees in the face of our critical business plan implementation and other changes in our business, we expect our board of directors may approve significant grants to our Chief Executive Officer and other members of our senior management team, and further expect the average number of shares underlying equity awards granted by our Compensation Committee to be significantly greater in 2019 than in previous years. We estimate the shares authorized for issuance under our 2015 Plan, assuming that this proposal is approved by our stockholders, would be sufficient to grant awards for approximately the next year. However, our actual share usage is dependent on a number of important variables, including the future trading price of our common stock, our hiring and promotion activity, our retention needs, and market practices within our industry and geographic region. As a result, the share reserve under our 2015 Plan could last for a longer or shorter period of time than we currently expect.
Description of our 2015 Plan
The material terms of our 2015 Plan, as proposed to be amended by this proposal and by Proposal No. 5, are outlined below. This summary is qualified in its entirety by reference to the complete text of our 2015 Plan, as proposed to be amended, which is appended to this proxy statement as Appendix A and incorporated herein by reference. You are encouraged to read the full text of our 2015 Plan, as proposed to be amended, before making a voting decision.
General. Our 2015 Plan is an "omnibus" stock plan consisting of a variety of equity vehicles to provide flexibility in implementing equity awards, including incentive stock options, non-qualified stock options, restricted stock awards, stock appreciation rights, stock payment awards, RSUs and dividend equivalents. Participants in our 2015 Plan may be granted any one or more of these equity awards, as determined by our board of directors.
Shares Reserved for Issuance. As of June 19, 2019, prior to the approval of this proposal, there was an aggregate of 1,630,000 shares reserved under our 2015 Plan, of which: (i) options exercisable for 435,983 shares of our common stock with a weighted average exercise price of $81.43 and a weighted average remaining term of 5.12 years were outstanding, (ii) time-based RSUs covering 376,091 shares of our common stock were outstanding, (iii) performance-based RSUs covering 53,406 shares of our common stock were outstanding, and (iv) 68,918 shares of our common stock were reserved for future grant under our 2015 Plan. If this proposal is adopted, an aggregate of up to 2,568,918 shares of our common stock may be issued under our 2015 Plan, not taking into account any shares that may be returned to the plan and made available for future issuance pursuant to the Option Exchange Program. If the Option Exchange Program is adopted by our stockholders and implemented by our board of directors, and if an assumed 400,000 shares are returned to our 2015 Plan and made available for future grant (after taking into account exchange of options for options under the program), an aggregate of 2,968,918 shares of our common stock would be available for future grant under the plan. This amount is based on an assumed level of participation in the Option Exchange Program and is simply an estimate.

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Administration. Our board of directors has delegated administration of our 2015 Plan to our Compensation Committee. The members of our Compensation Committee satisfy the requirements for (i) an "independent director" for purposes of the applicable NASDAQ Listing Rules, (ii) a "non-employee director" for purposes of Rule 16b-3 of the Exchange Act and (iii) an "outside director" under Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended, or the Code. Our Compensation Committee has the powers and authority as may be necessary or appropriate to carry out the functions of the administrator. Subject to the express limitations of our 2015 Plan, the administrator has the authority to determine the persons to whom, and the time or times at which, awards may be granted, the number of shares, units or other rights subject to each award, the exercise, base or purchase price of an award (if any), the time or times at which an award will become vested, exercisable or payable, the performance goals and other conditions, duration and all other terms of an award. The administrator may prescribe, amend and rescind rules and regulations relating to our 2015 Plan. All interpretations, determinations and actions by the administrator in good faith shall be final, conclusive and binding upon all parties. Additionally, to the extent permitted by law, the administrator may delegate to one or more of our officers or directors the ability to grant and determine terms and conditions of awards under our 2015 Plan to certain employees.
Eligibility. Our employees, officers, directors, consultants and other service providers are eligible to receive each type of award available under our 2015 Plan, except that only our employees (including members of our board of directors who are also our employees) are eligible to receive incentive stock options under our 2015 Plan. Our directors and officers are eligible to participate in our 2015 Plan, and have a substantial direct interest in the approval of our 2015 Plan. As of June 19, 2019, approximately 514 persons were eligible to participate in our 2015 Plan.
Types of Awards under our 2015 Plan
Our 2015 Plan includes the following types of equity compensation awards: incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock award, RSUs, dividend equivalents and stock payment awards, all of which are described below.
Stock Options. Stock options granted under our 2015 Plan may be either incentive stock options or non-qualified stock options, subject to the provisions of Section 422 of the Code. The exercise price per share of a stock option shall not be less than the fair market value of our common stock on the date the option is granted, provided that if the person to whom an incentive stock option is granted beneficially owns 10% of our outstanding common stock on the date of the grant, the exercise price shall not be less than 110% of the fair market value on the date the option is granted, subject to certain exceptions. A stock option may be subject to such vesting and exercisability requirements as specified by the administrator in an award agreement. Such vesting and exercisability requirements may be based on the continued service of the participant with us for a specified time period (or periods) or on the attainment of specified performance goals established by the administrator in its discretion, or a combination of both. The administrator shall determine the period during which a vested stock option may be exercised, provided that the maximum term of a stock option shall be ten years from the date the option is granted.
Stock Appreciation Rights. A stock appreciation right will entitle the holder, upon exercise or other payment of the stock appreciation right, as applicable, to receive an amount determined by multiplying: (i) the excess of the fair market value of a share of our common stock on the date of exercise or payment of the stock appreciation right over the base price of such stock appreciation right by (ii) the number of shares as to which such stock appreciation right is exercised or paid. Subject to the requirements of Section 409A of the Code, payment of the amount determined under the foregoing shall be made either in cash or in shares of our common stock, as determined by the administrator in its discretion. If payment is made in shares of our common stock, such shares shall be valued at their fair market value on the date of exercise or payment, subject to applicable tax withholding requirements and to the conditions set forth in the award agreement. A stock appreciation right may be subject to such vesting and exercisability requirements as specified by the administrator in an award agreement. Such vesting and exercisability requirements may be based on the continued service of the participant with us for a specified time period (or periods) or on the attainment of specified performance goals established by the administrator in its discretion, or a combination of both. Stock appreciation rights may be granted on a basis that allows for the exercise of the right by the participant or that provides for the automatic payment of the right upon a specified date or event. The base price of a stock appreciation right shall not be less than the fair market value of the shares of our common stock on the date the right is granted.
Restricted Stock Awards. Restricted stock awards are shares issued under our 2015 Plan that are subject to restrictions on transfer and vesting requirements as determined by the administrator. The restrictions imposed on shares granted under a restricted stock award lapse in accordance with the vesting requirements specified in the award agreement. The vesting requirements may be based on the continued service of the participant with us for a specified time period (or periods) or on the attainment of specified performance goals established by the administrator in its discretion, or a combination of both. If the vesting requirements of a restricted stock award are not satisfied, the award will be forfeited and the unvested shares of our common stock subject to the award will be returned to us (or, to the extent the participant paid for the shares of our common stock, we have the right to repurchase such shares from the participant at the original purchase price). Subject to the provisions of our 2015 Plan and the applicable award agreement,

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the participant has all rights of a stockholder with respect to the shares granted under a restricted stock award, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto.
Restricted Stock Units. The value of each RSU is equal to one share of our common stock on the applicable date or time period of determination, as specified by the administrator. A grant of RSUs is subject to such restrictions and conditions as may be determined by the administrator. On the date the award is granted, the administrator determines the vesting requirements with respect to a stock unit award, which is set forth in the award agreement. Vesting requirements may be based on the continued service of the participant with us for a specified time period (or periods) or on the attainment of specified performance goals established by the administrator, or a combination of both. An RSU will become payable to a participant at the time or times set forth in the award agreement, which may be upon or following the vesting of the award. Payment of an RSU award is made in shares of our common stock, and is subject to applicable tax withholding requirements. The participant does not have any rights as a stockholder with respect to the shares subject to an RSU award until shares of our common stock are delivered to the participant pursuant to the terms of the award agreement.
Stock Payment Awards. A stock payment award may be granted for any valid purpose as determined by the administrator. A stock payment award granted to a participant represents shares of our common stock that are issued without restrictions on transfer and other incidents of ownership and free of forfeiture conditions, except as otherwise provided in our 2015 Plan and the award agreement. The administrator may, in connection with any stock payment award, require the payment of a specified purchase price. Subject to the provisions of our 2015 Plan and the applicable award agreement, upon the issuance of our common stock under a stock payment award the participant has all rights of a stockholder with respect to the shares of our common stock, including the right to vote the shares and receive all dividends and other distributions paid or made with respect thereto.
Dividend Equivalents. A dividend equivalent is a right to receive payments equivalent to the amount of dividends paid by us to holders of shares of our common stock with respect to the number of dividend equivalents held by the participant. The dividend equivalent may provide for payment in our common stock or in cash, or a fixed combination of our common stock or cash, or the administrator may reserve the right to determine the manner of payment at the time the dividend equivalent is payable. Dividend equivalents may be granted only in connection with a grant of RSUs and shall be subject to the vesting conditions that govern RSUs as set forth in the applicable award agreement. The accrual of dividends or dividend equivalents will only be payable to a participant to the extent that any shares of our common stock underlying a participant's award have vested, and no dividends or dividend equivalents shall be paid on options or stock appreciation rights. See the section entitled "No Dividends on Unvested Awards" below.
Certain Features of our 2015 Plan
Payment of Exercise Price or Purchase Price. The payment of the exercise price for stock options, or the purchase price for shares of restricted stock, shares covered by RSUs, or stock payment awards may be made, in the discretion of the administrator, through a variety of methods more particularly described in our 2015 Plan, including pay