Endologix
ENDOLOGIX INC /DE/ (Form: PRE 14A, Received: 04/20/2018 17:19:04)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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ELGX_LOGOA06.JPG
Endologix, Inc.
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ENDOLOGIX, INC.
2 Musick
Irvine, California 92618
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 14, 2018
_________________________
To our Stockholders:
You are cordially invited to attend the 2018 Annual Meeting of Stockholders of Endologix, Inc., a Delaware corporation. The annual meeting will be held on Thursday, June 14, 2018, at 8:00 a.m., Pacific Time, at 3910 Brickway Blvd., Santa Rosa, California 95403, for the following purposes, as more fully described in the accompanying proxy statement:
1.
To elect one director nominee to serve as a Class II director for a three-year term expiring at the annual meeting of stockholders in 2021, and until his successor is duly elected and qualified;
2.
To approve, on a non-binding advisory basis, the compensation of our named executive officers as disclosed in the proxy statement accompanying this notice;
3.
To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018;
4.
To approve an amendment to our Amended and Restated Certificate of Incorporation to increase the total number of authorized shares of our common stock by 35,000,000 shares, or from 135,000,000 shares to 170,000,000 shares;
5.
To approve amendments to our Endologix, Inc. 2015 Stock Incentive Plan to, among other things, increase the total number of shares of our common stock reserved for issuance under the plan by 500,000 shares, or from 9,800,000 shares to 10,300,000 shares;
6.
To approve the adoption of a stock option exchange program, as described in the proxy statement accompanying this notice; and
7.
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 April 16, 2018 are entitled to notice of and to vote at the annual meeting or any adjournments or postponements 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 Notice of Internet Availability of Proxy Materials you received in the mail, and the response to the question entitled “ How do I vote? ” in the accompanying proxy statement. If you requested to receive printed proxy materials, you may also refer to the instructions on the proxy card accompanying those materials.
Sincerely,




John McDermott
Chief Executive Officer
Irvine, California
April [__], 2018

Approximate Date of Mailing of Notice of Internet Availability of Proxy Materials: April [__], 2018






TABLE OF CONTENTS
 
Page
GENERAL INFORMATION

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS

BENEFICIAL OWNERSHIP OF DIRECTORS AND NAMED EXECUTIVE OFFICERS

PROPOSAL NO. 1 ELECTION OF DIRECTORS

EXECUTIVE OFFICERS

COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Stockholder Engagement

Compensation Philosophy

Role of Compensation Committee

Compensation Consultant

Elements of 2017 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

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 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

PROPOSAL NO. 5 AMENDMENTS TO THE ENDOLOGIX, INC. 2015 STOCK INCENTIVE PLAN

PROPOSAL NO. 6 STOCK OPTION EXCHANGE PROGRAM

AUDIT COMMITTEE REPORT

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2019 ANNUAL MEETING

OTHER BUSINESS

APPENDIX A

APPENDIX B









ELGXDEF14PROXYSTA_IMAGE1A01.JPG
_________________
PROXY STATEMENT FOR 2018 ANNUAL MEETING OF STOCKHOLDERS
_________________

GENERAL INFORMATION
The enclosed proxy is solicited on behalf of our board of directors for use at our 2018 Annual Meeting of Stockholders, or the annual meeting, to be held on June 14, 2018 at 8:00 a.m., Pacific Time, at 3910 Brickway Blvd., Santa Rosa, California 95403. Endologix, Inc. is sometimes referred to herein as “we”, “us”, “our” or our “Company.”
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 June 14, 2018 at 8:00 a.m., Pacific Time at 3910 Brickway Blvd., Santa Rosa, California 95403.
Why did I receive these proxy materials?
We are making these proxy materials available 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 April 16, 2018, 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.
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 Notice and in the response to the question entitled “ How do I vote? ” 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 notice in the mail regarding the Internet availability of proxy materials?
Instead of mailing printed copies of our proxy materials to our stockholders, we have elected to provide access to them through the Internet under the SEC’s “notice and access” rules. Accordingly, on or about April [__], 2018, we mailed a Notice of Internet Availability of Proxy Materials, or the Notice, to each of our stockholders. The Notice contains instructions on how to access our proxy materials, including this proxy statement and our annual report on Form 10-K for the fiscal year ended December 31, 2017 , each of which are available at  www.proxyvote.com . The Notice also provides instructions on how to vote your shares through the Internet, by telephone, or by mail.
We believe compliance with the SEC’s “notice and access” rules will allow us to provide our stockholders with the materials they need to make informed decisions, while lowering the costs of printing and delivering those materials and reducing the environmental impact of the annual meeting. However, if you would prefer to receive printed proxy materials, please follow the instructions included in the Notice or as described below.

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Who may vote at the annual meeting?
Only stockholders of record as of the close of business on the record date, April 16, 2018 , are entitled to vote at the annual meeting. As of the record date, there were [83,985,197] shares of our common stock outstanding and entitled to vote, held by [244] holders of record.
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 the Notice. Whether or not you plan to attend the annual meeting in person, we urge you to vote your shares by proxy to ensure that 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.
How many votes do I have?
You have one vote for each share of our common stock that you own as of the close of business on the record date. These shares include shares that (i) you hold directly, as a stockholder of record, and (ii) are held for you in "street name" through a broker, bank, or other nominee.
What proposals will be voted on at the annual meeting?
The proposals to be voted on at the annual meeting are as follows:
Proposal No. 1 . Election to our board of directors of Guido J. Neels, the Class II nominee named in this proxy statement, for a term of three years expiring upon the 2021 annual meeting of stockholders, and until his successor 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, 2018.
Proposal No. 4 . Approval of an amendment to our Amended and Restated Certificate of Incorporation, as amended, or our Charter, to increase the total number of authorized shares of our common stock by 35,000,000 shares, or from 135,000,000 shares to 170,000,000 shares.

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Proposal No. 5 . Approval of amendments to our Endologix, Inc. 2015 Stock Incentive Plan, as amended, or our 2015 Plan, to, among other things, increase the total number of shares of our common stock reserved for issuance under the plan by 500,000 shares, or from 9,800,000 shares to 10,300,000 shares.
Proposal No. 6 . Approval of the adoption of a stock option exchange program, or the Exchange Program, as described in this proxy statement.
We will also consider such other business as may properly be brought 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 persons named on the accompanying proxy card will vote the shares they represent using their best judgment.

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 nominee for Class II director or you may “WITHHOLD” your vote for the nominee.
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, 2018, or you may abstain from voting.
Proposal No. 4 . You may vote “FOR” or “AGAINST” the amendment to our Charter, or you may abstain from voting.
Proposal No. 5 . You may vote “FOR” or “AGAINST” the amendment to our 2015 Plan, or you may abstain from voting.
Proposal No. 6 . You may vote “FOR” or “AGAINST” the adoption of the Exchange Program, or you may abstain from voting.

How do I vote?
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. 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. In order to cast your vote, you will be asked to provide the control number from the Notice. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on June 13, 2018. Our Internet voting procedures are designed to authenticate stockholders by using individual control numbers, which are located on the Notice.
Vote by Phone. To vote by phone, call 1-800-690-6903 from any touch-tone telephone and follow the instructions. In order to cast your vote, you will be asked to provide the control number from the Notice. Telephonic voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time on June 13, 2018. Our telephonic voting procedures are designed to authenticate stockholders by using individual control numbers, which are located on the Notice.
Vote by Mail. To vote by mail using a proxy card, you must request to receive printed proxy materials by following the instructions included in the Notice. The proxy card will be provided with the printed proxy materials. Once received, simply complete, sign and date the proxy card and return it promptly in the envelope provided.


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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 Notice or a proxy card and 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 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 held in "street name", you are entitled to give instructions to that organization regarding how to vote your shares. If you do not provide voting instructions, your broker, bank or other nominee may still vote your shares with respect to matters that are considered to be “routine,” but may not vote your shares with respect to matters that are considered to be “non-routine.” If the organization that holds your shares does not receive instructions from you on how to vote your shares on a “non-routine” matter, the organization 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 Charter (Proposal No. 4), the approval of amendments to our 2015 Plan (Proposal No. 5), and the approval of the adoption of the Exchange Program (Proposal No. 6) are each considered “non-routine” matters under the applicable rules. A broker, bank or other nominee cannot vote your shares on these matters without voting instructions from you, and therefore broker non-votes may exist in connection with Proposal Nos. 1, 2, 4, 5 and 6.
The ratification of the appointment of KPMG (Proposal No. 3) is considered a “routine” matter under applicable rules, and your broker, bank or other nominee may vote your shares for Proposal No. 3 without receiving voting instructions from you.
How do you treat broker non-votes?
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 Charter (Proposal No. 4), the approval of amendments to our 2015 Plan (Proposal No. 5), and the approval of the adoption of the Exchange Program (Proposal No. 6) 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.

What happens if I abstain from voting?

Share 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

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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 and 6.
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 nominee for Class II director who receives 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, 2018, 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 Charter 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 amendments to our 2015 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. 6 . The approval of the adoption of the 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?
Our board of directors recommends that you vote your shares as follows:
Proposal No. 1 . “FOR” the nominee for Class II director.
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, 2018.
Proposal No. 4 . “FOR” approval of an amendment to our Charter, as described in this proxy statement.
Proposal No. 5 . “FOR” approval of amendments to our 2015 Plan, as described in this proxy statement.
Proposal No. 6 . “FOR” approval of the adoption of the Exchange Program, as described in this proxy statement.

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How can I attend the annual meeting in person?
You must present a form of government-issued personal photo identification in order to be admitted to the annual meeting. If your shares are held in “street name,” you will also need proof of ownership 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 in 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.
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 your shares are held in “street name,” 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 Notice, the 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 $7,500 for their solicitation services. We may reimburse persons representing beneficial owners of shares 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.
I share an address with another stockholder, and we received only one paper copy of these proxy materials. 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.

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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 PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial ownership of our common stock as of April 16, 2018 , by each person, or group of affiliated persons, who are known to us to beneficially own more than five percent of the outstanding shares of our common stock.
Name and Address (1)
Number of Shares Beneficially Owned (2)
Percentage of Outstanding Shares (3)
   ArrowMark Colorado Holdings LLC (4)
9,890,106
11.8%
   Entities affiliated with Brown Capital Management, LLC (5)
8,779,000
10.5%
   Entities affiliated with Camber Capital Management LLC (6)
8,000,000
9.5%
   Entities affiliated with Partner Fund Management, L.P. (7)
7,601,553
9.1%
   Entities affiliated with The Vanguard Group, Inc. (8)
6,892,223
8.2%
   Entities affiliated with Redmile Group, LLC (9)
5,928,101
7.1%
   Entities affiliated with BlackRock, Inc. (10)
5,093,047
6.1%
(1)  
Unless otherwise indicated, the business address of each holder is: c/o Endologix, Inc., 2 Musick, Irvine, CA 92618.
(2)  
The number of shares of our common stock beneficially owned includes any shares deemed beneficially owned by such stockholder by virtue of such stockholder’s right to acquire such shares as of April 16, 2018 , or within 60 days of such date.
(3)  
Applicable percentages are based on [83,985,197] shares outstanding on April 16, 2018 , plus the number of shares deemed beneficially owned by such stockholder by virtue of such stockholder’s right to acquire such shares as of April 16, 2018 , or within 60 days of such date.
(4)  
Based solely on a Schedule 13G/A filed with the SEC on February 9, 2018. ArrowMark Colorado Holdings LLC, or ArrowMark, reported sole voting and dispositive power with respect to 9,890,106 shares. The address of ArrowMark is 100 Fillmore Street, Suite 325, Denver, CO 80206.
(5)  
Based solely on a Schedule 13G/A filed with the SEC on February 14, 2018. Brown Capital Management, LLC, or Brown Capital, reported beneficial ownership of 8,779,000 shares, including 4,189,227 shares beneficially owned by The Brown Capital Management Small Company Fund, which is managed by Brown Capital. Brown Capital reported sole voting power with respect to 5,479,247 shares, sole dispositive power with respect to 8,779,000 shares and no shared voting or dispositive power. The address of Brown Capital and its related entity is 1201 N. Calvert Street, Baltimore, MD 21202.
(6)  
Based solely on a Schedule 13G/A filed with the SEC on February 14, 2018. Camber Capital Management LLC and Stephen Dubois, or, collectively, Camber, reported shared voting and dispositive power with respect to 8,000,000 shares. The address of Camber is 101 Huntington Avenue, Suite 2101, Boston, MA 02199.
(7)  
Based solely on a Schedule 13G/A filed with the SEC on February 14, 2018. Partner Fund Management, L.P. and Partner Fund Management GP, LLC, or, collectively, Partner Fund, reported shared voting and dispositive power with respect to 7,509,909 shares, Partner Investment Management, L.P. and Partner Investment Management GP, LLC reported shared voting and dispositive power over 91,644 shares and Brian D. Grossman and Christopher M. James reported shared voting and dispositive power over 7,601,553 shares. The address of Partner Fund and its related entities is c/o Partner Fund Management, L.P., 4 Embarcadero Center, Suite 3500, San Francisco, CA 94111.
(8)  
Based solely on a Schedule 13G/A filed with the SEC on February 9, 2018. The Vanguard Group, Inc., or Vanguard, reported sole voting power with respect to 156,039 shares, shared voting power with respect to 3,600 shares, sole dispositive power with respect to 6,736,384 shares and shared dispositive power with respect to 155,839 shares. Includes shares beneficially owned by the following subsidiaries of Vanguard: Vanguard Fiduciary Trust Company and Vanguard Investments Australia, Ltd.. The address of Vanguard and its subsidiaries is 100 Vanguard Blvd., Malvern, PA 19355.
(9)  
Based solely on a Schedule 13G/A filed with the SEC on February 14, 2018. Redmile Group, LLC and Jeremy C. Green, or, collectively, Redmile, reported shared voting and dispositive power with respect to 5,928,101 shares. The address of Redmile is One Letterman Drive, Building D, Suite D3-300, San Francisco, CA 94129.
(10)  
Based solely on a Schedule 13G/A filed with the SEC on January 29, 2018. BlackRock, Inc., or BlackRock, reported sole voting power with respect to 4,947,917 shares, sole dispositive power with respect to 5,093,047 shares and no shared voting or dispositive power. Includes shares beneficially owned by the following subsidiaries of BlackRock: Blackrock Advisors, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock Investment Management (Australia) Limited, BlackRock (Netherlands) B.V., BlackRock Fund Advisors, BlackRock Asset Management Ireland Limited, BlackRock Institutional Trust Company, National Association, BlackRock Financial Management, Inc., BlackRock Asset Management Schweiz AG and BlackRock Investment Management, LLC. The address of BlackRock and its subsidiaries is 55 East 52nd Street, New York, NY 10055.

8


BENEFICIAL OWNERSHIP OF DIRECTORS AND NAMED EXECUTIVE OFFICERS
The following table sets forth certain information known to us regarding the beneficial ownership of our common stock, as of April 16, 2018 , by each director, each director nominee, each named executive officer, and all current directors and executive officers as a group.
Name and Address (1)
Number of Shares Beneficially Owned (2)
Percentage of Outstanding Shares (3)
Daniel Lemaitre (4)
192,921
*
   Gregory D. Waller (5)
50,550
*
Thomas C. Wilder, III (6)
63,560
*
Guido J. Neels (7)
134,202
*
Thomas F. Zenty, III (5)
69,396
*
Leslie Norwalk (8)
40,238
*
Christopher G. Chavez (9)
364,886
*
John McDermott (10)
1,738,607
2.1%
Vaseem Mahboob (11)
239,175
*
Robert D. Mitchell (12)
280,060
*
John Onopchenko (13)
-
*
Michael V. Chobotov, Ph.D. (14)
232,851
*
All directors and executive officers as a group (14 persons) (15)
3,500,392
4.1%
* Represents beneficial ownership of less than 1%.

(1)  
Unless otherwise indicated, the business address of each holder is: c/o Endologix, Inc., 2 Musick, Irvine, CA 92618.
(2)  
The number of shares of our common stock beneficially owned includes any shares deemed beneficially owned by such stockholder by virtue of such stockholder’s right to acquire such shares as of April 16, 2018 , or within 60 days of such date.
(3)  
Applicable percentages are based on [83,985,197] shares outstanding on April 16, 2018 , plus the number of shares deemed beneficially owned by such stockholder by virtue of such stockholder’s right to acquire such shares as of April 16, 2018 , or within 60 days of such date.
(4)  
Includes options to purchase 90,000 shares of our common stock that are exercisable within 60 days of April 16, 2018 and 34,232 unvested restricted stock units subject to vesting within 60 days of April 16, 2018 .
(5)  
Includes 22,822 unvested restricted stock units subject to vesting within 60 days of April 16, 2018 .
(6)  
Includes 28,238 shares held by Thomas & Catherine Wilder Family Trust. Also includes options to purchase 12,500 shares of our common stock that are exercisable within 60 days of April 16, 2018 and 22,822 unvested restricted stock units subject to vesting within 60 days of April 16, 2018 .
(7)  
Includes options to purchase 50,000 shares of our common stock that are exercisable within 60 days of April 16, 2018 and 22,822 unvested restricted stock units subject to vesting within 60 days of April 16, 2018 .
(8)  
Includes 26,075 unvested restricted stock units subject to vesting within 60 days of April 16, 2018 .
(9)  
Includes 65,640 shares held by Christopher G. Chavez Trustee of the Diana J. Chavez Irrevocable Trust and 65,640 shares held by Diana J. Chavez Trustee of the Christopher G. Chavez Family Irrevocable Trust. Also includes 22,822 unvested restricted stock units subject to vesting within 60 days of April 16, 2018 .
(10)  
Includes options to purchase 958,105 shares of our common stock that are exercisable within 60 days of April 16, 2018 and 16,057 unvested restricted stock units subject to vesting within 60 days of April 16, 2018 . Mr. McDermott will be stepping down from his role as our Chief Executive Officer no later than June 30, 2018, but currently remains in that role while we seek a successor.
(11)  
Includes options to purchase 186,074 shares of our common stock that are exercisable within 60 days of April 16, 2018 .
(12)  
Includes options to purchase 157,467 shares of our common stock that are exercisable within 60 days of April 16, 2018 and 6,021 unvested restricted stock units subject to vesting within 60 days of April 16, 2018. Mr. Mitchell retired from his role as our President effective December 30, 2017.
(13)  
Mr. Onopchenko joined us as Chief Operating Officer effective October 30, 2017.

9


(14)  
Includes options to purchase 129,903 shares of our common stock that are exercisable within 60 days of April 16, 2018 .
(15)  
Includes options to purchase 1,643,702 shares of our common stock that are exercisable within 60 days of April 16, 2018 and 227,495 unvested restricted stock units subject to vesting within 60 days of April 16, 2018.





10


PROPOSAL NO. 1
ELECTION OF DIRECTORS
Board Structure
Prior to the annual meeting, our board of directors consisted of eight authorized directors divided into three classes, with Class I having two directors, Class II having three directors and Class III having three directors. Effective as of the date of our annual meeting, our board of directors has authorized a decrease in our authorized directors from eight to seven, and has reduced the number of Class II directors from three to two (with one vacancy). Each class of directors is elected for three-year terms 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 Nominee
At the annual meeting, our stockholders are being asked to elect one director nominee. The director nominee will serve as a Class II director with his term expiring at the annual meeting of stockholders to be held in 2021, and until his successor is elected and duly qualified. In addition, Class II will include one vacancy as a result of the transition of John McDermott, whose term as a Class II director is expiring at the annual meeting. Mr. McDermott will be stepping down from his role as our Chief Executive Officer no later than June 30, 2018, but currently remains in that role while we seek a successor.
The nominee for election as a Class II director at the annual meeting is Guido J. Neels, who currently serves as a director. Mr. Neels has served as a director since December 2010. Mr. Neels has indicated a willingness to continue to serve on our board of directors if elected. However, in the event that Mr. Neels 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 nominee listed above.
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 Nominating, Governance and Compliance Committee, or 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" 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 nominee for Class II director who receives the most “FOR” votes

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(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.
Recommendation of our Board of Directors
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE "FOR" THE ELECTION OF GUIDO J. NEELS AS A DIRECTOR.
Information with Respect to Nominees and Directors
Set forth below for the nominee for election as a director, and for each of our other directors, is information regarding his or her age, position(s) with us, 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 II Directors
(Nominee for Election to our Board of Directors for a Three-Year Term Expiring at the 2021 Annual Meeting)
Guido J. Neels , 69 , has served on our board of directors since December 2010. Mr. Neels has served as a Managing Director at Essex Woodlands Health Ventures, Inc., or Essex Woodlands, a venture capital firm, since 2006. Prior to joining Essex Woodlands, 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-held medical device company, from 2005 to 2009, Lemaitre Vascular, Inc., a publicly-held medical device company, from 2006 to 2008, and Nellix, Inc., a privately-held medical device company, from 2006 until its acquisition by us in December 2010. Mr. Neels currently serves on the boards of directors of 480 Biomedical, Inc., Arsenal Medical, Inc., Bioventus LLC, and White Pine Medical, Inc., all privately-held medical device companies; and Entellus Medical, Inc. and Axotem, Inc, each a publicly-held medical device company. Mr. Neels also serves on the board of directors of Christel House International, and Armici Lovaniengis, each a non-profit organization. Mr. Neels holds a business engineering degree from the University of Leuven in Belgium and an M.B.A. from the Stanford University Graduate School of Business.
Mr. Neels was initially appointed to our board of directors pursuant to a board designation right granted to Essex Woodlands Health Ventures Fund VII, L.P., or Essex Woodlands Fund VII, an affiliate of Essex Woodlands, under a securities purchase agreement, dated as of October 27, 2010, as amended on December 9, 2010, between us and Essex Woodlands Fund VII.
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.
Class III Directors
(Directors Continuing in Office with a Term Expiring in 2019)
Gregory D. Waller , 68, has served on our board of directors since November 2003. Mr. Waller also serves on the boards of CHF Solutions & Arcadia Bioscience Corporation, both publicly traded companies, as Audit Committee Chairman. Mr. Waller is also member of the Corporate Governance Committee for CHF Solutions & Arcadia Bioscience Corporation. From March 2006 until April 2011, Mr. Waller was Chief Financial Officer of Universal Building Products, a manufacturer of concrete construction accessories. Previous to that, Mr. Waller has been in retirement except for board directorships. 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 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

12


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 has an M.B.A. with a concentration in Accounting 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 and is an “audit committee financial expert” as such term is defined under applicable SEC rules and regulations, or the applicable SEC rules. 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.

Thomas C. Wilder, III , 54, 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 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. (MTIX) from 2002 to January 2006. Prior to joining Micro Therapeutics, 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, Inc., Mr. Wilder served in the Financial Statement Audit Practice of Price Waterhouse from 1986 to 1989. Mr. Wilder served on the board of directors of Benvenue Medical, Inc., a privately-held company, until April 2017. Mr. Wilder also serves on the board of directors of Penumbra, Inc., a publicly-held company. Mr. Wilder holds an M.B.A. from Northwestern University’s J.L. Kellogg Graduate School of Management and 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 of the SEC, on our Audit Committee.
Thomas F. Zenty, III , 63, 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. 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.
Class I Directors
(Directors Continuing in Office with a Term Expiring in 2020)
Daniel Lemaitre , 64, 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 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, Inc., a publicly-traded medical device company, in April 2009. From 2005 until 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

13


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-held manufacturer of spinal implants. Mr. Lemaitre holds a B.A. in Economics from Bethany College and an M.B.A. from Bowling Green State University.
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-held company. These 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 of the SEC, on our Audit Committee.
Leslie Norwalk , 52, 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. Ms. Norwalk served as a member of the board of directors of Volcano Corporation, a publicly-held 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 NuVasive, Inc. and Providence Service Corp., both publicly-held 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 earned a J.D. degree from the George Mason University School of Law and a bachelor’s degree, 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.
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.

14


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.
Director Independence
Our common stock is listed on The NASDAQ Global Select Market and we are subject to the NASDAQ continued listing requirements, or 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. McDermott, are “independent” as defined in the NASDAQ Listing Rules. None of our independent directors have any transactions, relationships or arrangements not otherwise disclosed pursuant to the applicable SEC rules.
Meetings of our Board of Directors
Our board of directors met eight times during the year ended December 31, 2017. 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

15


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 h eld four meetings during the year ended December 31, 2017. 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 Messrs. Neels (Chair), Chavez and Zenty. 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 seven meetings during the year ended December 31, 2017.
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. 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 four meetings during the year ended December 31, 2017.
Stock Ownership Policies
In May 2013, our board of directors, upon the recommendation of our Compensation Committee, adopted a stock ownership policy for members of our board of directors. 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 have five years from the adoption of the policy, and new non-employee directors have five years from the date they are appointed to our board of directors, to reach the required ownership level.
To further align the interests of our management with those of our stockholders, in April 2014, our board of directors, upon the recommendation of our Compensation Committee, adopted a stock ownership policy for our executive officers. 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 current executive officers have five years from the adoption of this policy, and new executive officers have five years from the date of their appointment as executive officers, to reach the required ownership levels.

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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 under our Amended and Restated 2006 Employee Stock Purchase Plan, or the 2006 ESPP, (iv) shares obtained upon the settlement of restricted stock units, 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.
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.

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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. However, all directors attended our annual meeting in 2017.
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 “Compliance” page on 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.
Section 16 Beneficial Ownership Reporting Compliance
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, 2017 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 Laura Nagel, Robert Mitchell, Shari O'Quinn and John McDermott 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, 2017 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, 2017 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, 2017. None of our executive officers is serving, and during the year ended December 31, 2017 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 or Executive Officers
Except as otherwise disclosed in this proxy statement, no arrangement or understanding exists between any of our directors or executive officers and any other person, pursuant to which any of them was selected as our director 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 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

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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 these related party transactions. At each such meeting, our Audit Committee members and KPMG 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 no such transactions are currently contemplated.

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EXECUTIVE OFFICERS
The following sets forth certain biographical information regarding our executive officers as of April 16, 2018.
Name
Age
Position(s)
John McDermott
58
Chief Executive Officer and Director
Vaseem Mahboob
48
Chief Financial Officer and Corporate Secretary
Michael V. Chobotov, Ph.D.
57
Chief Technology Officer
John Onopchenko
59
Chief Operating Officer
Matthew Thompson, M.D.
56
Chief Medical Officer
Jeremy Hayden
48
General Counsel
John McDermott joined us in May 2008 as President and Chief Executive Officer and currently serves as our Chief Executive Officer. Mr. McDermott will be stepping down from his role as our Chief Executive Officer no later than June 30, 2018, but currently remains in that role while we seek a successor. Mr. McDermott will continue to provide consulting support to us following his transition as our Chief Executive Officer. Prior to joining us, Mr. McDermott served as President of Bard Peripheral Vascular, a division of C.R. Bard, Inc., from 2002 to 2007. Previously, Mr. McDermott served as President of Global Sales for C.R. Bard’s vascular surgery and endovascular businesses. Prior to that, he served for four years as President of C.R. Bard’s division IMPRA, Inc., where he was responsible for global operations, including sales, marketing, research and development, manufacturing, and finance. Mr. McDermott served as Chief Financial Officer and later Vice President and Chief Operating Officer of IMPRA, Inc., prior to its acquisition by C.R. Bard, from 1990 to 1996. Mr. McDermott has 26 years of executive management, sales, marketing, and finance experience in the vascular device industry. He is an active leader within the vascular community and is currently on the board of directors of the International Society of Endovascular Specialists. Mr. McDermott holds a B.S. in Finance from Arizona State University and an M.B.A from Western International University.
Vaseem Mahboob joined us in October 2015 and serves as our Chief Financial Officer and Corporate Secretary. Prior to joining us, Mr. Mahboob served as a senior executive officer of several business segments within the General Electric Company, a publicly-held 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 and is a member of the Audit Committee at INSYS Therapeutics (NASDAQ: INSY). 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.
Michael V. Chobotov, Ph.D.,  joined us as our Chief Technology Officer in February 2016 following our merger with TriVascular. Dr. Chobotov co-founded TriVascular as President and Chief Executive Officer in 1998, and led its spin-off from Boston Scientific Corporation in 2008, serving as President and Chief Executive Officer until 2012. He served as Chief Technology Officer of TriVascular from 2012 to February 2016 and served as a member of TriVascular’s board of directors until April 2014. Prior to co-founding TriVascular in 1998, Dr. Chobotov co-founded TransMotive Technologies, an engineering and product development consulting company. Previously, Dr. Chobotov served as Senior Vice President of Research and Development and board member of U.S. Electricar, and Senior Systems Engineer at Hughes Space and Communications. He also led the design of the Lunar Prospector, which was subsequently implemented as the first NASA Discovery mission. Dr. Chobotov holds a Ph.D. in Mechanical Engineering, an M.S. in Mechanical Engineering and a B.S. in Engineering and Applied Science, each from the California Institute of Technology.
John Onopchenko joined us in October 2017 and serves as our Chief Operating Officer. Prior to joining us, Mr. Onopchenko 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 March 2015 to September 2016. Prior to joining Philips, Mr. Onopchenko 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 public-traded medical device company, where he was responsible for its peripheral and Axsuns business units, regulatory affairs, quality assurance, program management/product development, clinical affairs, and business development. Prior to his employment with Volcano, Mr. Onopchenko served on Volcano’s board of directors for 11 years and also served as

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founder and managing director of Synergy Life Sciences Partners, LLC, an early-stage medical device venture capital fund. Mr. Onopchenko held senior positions at Johnson & Johnson, a publicly-held 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.  Mr. Onopchenko has 30 years of executive leadership experience in the medical device industry. He holds an M.B.A. from the University of Chicago, Graduate School of Business and a B.S. from Ursinus College.

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. He 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 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. 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, Jeremy 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 context for the decisions underlying the compensation paid to our NEOs in 2017. 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
Stockholder Engagement
Compensation Philosophy
Role of Compensation Committee
Compensation Consultant
Elements of 2017 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 2017:

NAME
POSITION
John McDermott
Chief Executive Officer (Expected to step down no later than June 30, 2018)
Vaseem Mahboob
Chief Financial Officer and Corporate Secretary
Robert D. Mitchell
President (Retired as of December 30, 2017)
Michael V. Chobotov, Ph.D.
Chief Technology Officer
John Onopchenko
Chief Operating Officer (Joined us on October 30, 2017)




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Overview of 2017 Executive Compensation
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.
2017 Cash Bonus Plan Awards
At-Risk  •  Performance-Based  •  Cash
Philosophy
Considerations
Performance Criteria
2017 Pay for Performance
Pay for Performance
 
Reward Achievement
 
Align Interests with Stockholders
 
Attract and Retain Executives
•  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 (no changes to target bonus percentages from 2016).

•  Actual bonus payout is based on achievement of certain corporate performance objectives and pre-determined MBOs.
•  25% of the corporate performance objective portion of the bonus opportunity was earned and 100%  of the MBO portion of the bonus opportunity was earned. 
2017 Performance-Based Restricted Stock Units (PSUs)
At-Risk  •  Performance-Based  •  Equity
Philosophy
Considerations
Performance Criteria
2017 Pay for Performance
Pay for Performance

Reward Achievement

Align Interests with Stockholders
•  Use threshold, target and maximum award levels to strike appropriate balance between compensation incentives and risks.
•  Vest subject to achievement of a global sales goal for 2017
•  The 2017 global sales threshold level was not achieved, so  the awards were not earned and were forfeited.
2017 Time-Based Stock Options (Options)
At-Risk  •  Time-Based (Long-Term Vesting)  •  Equity
Philosophy
Considerations
Vesting Provisions
Attract and Retain Executives

Align Interests with Stockholders
 
•  The option will provide a return to an NEO only if the market price of our common stock appreciates over the option term.

•  Time-based vesting promotes retention of executives during this critical stage of our growth.
•  The options vest in equal monthly installments over 48 months, such that the options will become fully vested on the fourth anniversary of the grant date, subject to an NEO’s continued employment with us during that time. 
2017 Retention and New Hire Awards
At-Risk  •  Mix of Performance-Based and Time-Based  •  Equity
Philosophy
2017 Grants
Performance Criteria/ Vesting Provisions
Attract and Retain Executives

Align Interests with Stockholders

Pay for Performance

Reward Achievement
•  Vaseem Mahboob received a  retention award  of time-based RSU.
•  Awards vest as to 50% of the shares after 18 months, and as to the remaining shares on the third anniversary of the grant date, subject to Mr. Mahboob’s continued employment with us during that time. 
•  John Onopchenko received a new hire award  of PSUs, pursuant to our 2017 Inducement Stock Incentive Plan.
•  Annual performance milestones are expected to be set for these awards. Regardless of whether the performance milestones are met, the shares will vest in full on the fourth anniversary of the grant date, subject to Mr. Onopchenko’s continued employment with us during that time. 
•  John Onopchenko received a new hire award  of time-based stock options, pursuant to the 2017 Inducement Stock Incentive Plan
•  Awards vest as to 25% of the shares on the first anniversary of the grant date and in 36 equal monthly installments thereafter, subject to Mr. Onopchenko’s continued employment with us during that time. 

2017 Executive Compensation Highlights
Our overarching executive compensation goals are to effectively align our compensation program design to our business strategy, and to attract and retain executives with the background and experience required to lead us forward and provide the best opportunity to achieve sustained growth and success. For 2017, we emphasized 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 and performance-based equity awards, each of which are correlated with the achievement of specific

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Company and individual performance objectives. This performance-based compensation is designed to align the interests of our NEOs with those of our stockholders and encourage the achievement of performance goals that we believe are critical to our long-term growth. As described in this section, we believe our 2017 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. The specific components of our executive compensation program that we believe best highlight how we implemented our compensation philosophy and accomplished our compensation goals in 2017 are set forth below.
Significant Portion of Total Compensation is At-Risk
 
In furtherance of our pay-for-performance philosophy, the Compensation Committee, which we refer to as the Committee for purposes of this section, 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 2017 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 2017 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).
For 2017, our executive compensation program included the following components that were at risk:
Cash Bonus Plan Awards : Only vest upon the achievement of pre-determined Company performance objectives and individual management by objectives, or MBOs;

Performance-Based Restricted Stock Units (PSUs) : Only vest upon the achievement of pre-determined Company performance objectives and fluctuate in value based on the market price of our common stock; and

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

2017 Cash Bonus Plan Awards Paid Out Significantly Below Target
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 no cash bonus payouts or payouts that are significantly 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 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.

For 2017, 70% of the actual cash bonus opportunity was based on achievement of certain corporate financial and operational objectives, which we refer to as Corporate Performance Objectives, including global sales, gross margin and cash burn rate goals, or the Financial Objectives, as well as quality and risk management goals, or the Operational Objectives. After taking into account the achievement of the various Corporate Performance Objectives relative to the target amounts, only 25% of the target bonus that is tied to the Corporate Performance Objectives was achieved. Accordingly, the adoption of our 2017 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 resulted in significantly reduced bonus payouts to our NEOs compared to both the 2017 target bonus amounts and the actual bonus amounts paid in 2016.

See the section below entitled “2017 Cash Bonus Plan Awards” for additional information.

No NEOs Received Base Salary Increases in 2017
The Committee considered whether any base salary increases were warranted based on a review of peer group data, our NEOs contributions to the achievement of our financial and operational objectives, and overall Company performance. While it was determined that base salary increases would have been warranted based on the peer group review, our leadership team elected not

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to accept base salary increases in order to preserve financial resources. Accordingly, the Committee decided not to increase salaries for our NEOs from 2016 levels.
Company Did Not Achieve Performance Criteria for 2017 PSUs and the Awards Were Forfeited
Consistent with our pay-for-performance philosophy, we grant equity awards that vest subject to the achievement of pre-determined Company performance objectives that the Committee believes are important for our long-term growth and success, which awards vest based on the level of achievement as compared to the performance objective and are subject to forfeiture if the threshold level of performance is not achieved. Similar to the process for establishing performance objectives for the cash bonus program, the Committee acknowledges that it must choose the right performance criteria for the equity awards to ensure they provide the appropriate incentives and motivate achievement of important financial and strategic objectives.

The Committee selected a global sales goal as the performance criterion for the PSUs because the Committee believes global sales is an important indicator of our future growth and profitability. The PSUs were designed to vest based upon the Company’s achievement relative to a target global sales amount for 2017, but provided that no vesting would occur if the Company did not achieve a threshold performance level. Since the 2017 global sales threshold level was not achieved, the awards were not earned and were forfeited. Accordingly, the issuance of PSUs in 2017 placed a significant portion of our NEO’s overall compensation opportunity at risk, and the failure to achieve the threshold level of performance with respect to the performance criteria resulted in no value to our NEOs.

See the section below entitled “2017 Performance-Based Restricted Stock Units” for additional information.

Time-Based Stock Options Require Long-Term Vesting to Promote Retention

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 growth and at a time when our stock price has been volatile. Issuing a portion on our annual equity awards in the form of options with time-based vesting serves to accomplish both of these goals. 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. In addition, time-based awards promote executive retention because they vest over a long-term 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 2017, we issued time-based options to our NEOs that vest in equal monthly installments over 48 months, such that the options will become fully vested on the fourth anniversary of the grant date, subject to an NEO’s continued employment with us during that time.

Amendments to Our 2015 Plan
As discussed in Proposal 5 of this proxy statement, our board of directors has approved changes to our 2015 Plan to adopt several important elements that we believe reflect our commitment to sound governance practices and further limit our compensation-related risks. We intend to amend our 2015 Plan to do the following:
Minimum Vesting Requirement : Impose a minimum vesting period of at least 12 months for awards granted under our 2015 Plan following the date on which the amendment is adopted, subject to certain limitations. This vesting condition requires that the participant receiving the grant remain employed by us for at least 12 months before being able to realize any value from his or her equity award, thus further promoting retention.

No Dividends on Unvested Awards : Eliminate our ability to provide for the payment of dividends on unvested shares of our common stock that are subject to outstanding awards granted under our 2015 Plan.

Clawback Policy : Reference the adoption of our Clawback Policy, and allow for the inclusion of other clawback, recovery or recoupment provisions in the relevant award agreements, including a reacquisition right upon the occurrence of certain events.

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

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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.

Stockholder Engagement
 
We are committed to enhancing and expanding our stockholder outreach efforts, including by proactively soliciting and incorporating stockholder feedback on the design and effectiveness of our executive compensation program. This perspective is motivated, in part, by the results of our “Say-on-Pay” vote at our 2017 annual meeting, at which our stockholders did not approve, by advisory vote, the compensation of our NEOs for 2016, which was an unexpected change as compared to our high approval rates in prior years. We have consistently engaged in meaningful stockholder engagement efforts over the last several years, although the results of the “Say-on-Pay” vote in 2017 caused our management team to acknowledge an even greater need for stockholder engagement as a means to engage in dialogue with and seek feedback from stockholders, 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.

Accordingly, in mid-2017, we held meetings with a number of our largest investors that collectively held more than 60% of our shares at that time, to discuss their views and concerns regarding our compensation program. John McDermott, our Chief Executive Officer, which we refer to as our CEO for purposes of this section, and Vaseem Mahboob, our CFO, led our stockholder engagement efforts, and attended meetings with portfolio managers, analysts and compliance personnel at our largest investors. The specific purpose of the meetings was to understand their perspectives regarding our compensation program and solicit specific feedback on current and potential design elements and practices.
 
During these conversations, we took the opportunity to review our business strategies and performance, and to discuss our corporate governance initiatives. We also provided responses to specific concerns raised by proxy advisory groups, greater detail as to why those groups found certain aspects of our compensation program unfavorable, and perspective regarding our plans for improvement, including the adoption of certain initiatives described in this proxy statement. We gave our investors an opportunity to ask questions, and answered specific questions regarding our management and ongoing business and strategic concerns. We also responded to investor questions regarding our decision-making process with respect to executive compensation, including discussion of the role of our independent compensation consultant in making recommendations to the Committee, the Committee’s determination of our peer group, and how and why certain decisions were made. In response to feedback from our stockholders during our outreach efforts, we have made a number of significant changes to our executive compensation program, including our heightened focus on a pay-for-performance philosophy and the proposed amendments to our 2015 Plan.
 
The Committee believes that ongoing, transparent communication with our stockholders is critical to our long-term success, and that the feedback received through our stockholder engagement efforts will continue to contribute to the evolution and enhancement of our executive compensation program. The Committee considers stockholder engagement to be an important part of its decision-making process and plans to continue proactive outreach efforts to our top investors during the coming months, and to work to integrate that feedback into its compensation decisions going forward.

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


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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.
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 strategy.
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 recently 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
•  We intend to amend our 2015 Plan to eliminate our ability to provide for the payment of dividends on unvested equity awards.
Minimum Vesting Requirements
•  We intend to amend our 2015 Plan to impose minimum vesting requirements on the awards we issue under the plan, subject to certain limitations.
No Repricing of Awards
•  Our 2015 Plan explicitly prohibits repricing outstanding options without majority stockholder consent.
No Hedging
•  Our Insider Trading Policy specifically prohibits transactions that create a hedge against fluctuations in the market price of our common stock.
No Pledging
•  Our Insider Trading Policy specifically 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

The Committee receives assessments and advice regarding our compensation policies and programs from Radford, a third-party compensation consultant. 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 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 the Company 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

For 2017, the primary change to our peer group as compared to 2016 resulted from taking into account our lower market capitalization, which resulted from the decline in the trading price of our common stock during the year. Our peer group for 2017 consisted of the following 17 companies:

PEER GROUP FOR 2017
•  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 2017, 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 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.

The peer group compensation data is 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 50 th 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 compensation decisions, including

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retention concerns, tenure and experience, level of responsibility, our recent and projected performance, individual performance, industry practices and general economic conditions. 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.

In determining base salaries for our NEOs in 2017, the Committee reviewed Radford’s report on base salaries for our NEOs relative to executives at our peer group companies. Based on this review, the Committee concluded that base salary increases would have been warranted for certain executives, although our leadership team elected not to accept base salary increases in order to preserve financial resources. Accordingly, the Committee decided not to increase salaries for our NEOs.

With respect to the cash bonus opportunity for our NEOs in 2017, the Committee reviewed Radford’s assessment of cash bonuses for our NEOs relative to executives at our peer group companies. The Committee typically aims to establish target cash bonuses in the 50 th percentile of our peer group and determined that the target bonuses as a percentage of base salary fell within that range. Accordingly, the Committee did not recommend any increases to the target bonus opportunity for our NEOs in 2017.

In determining target total equity compensation for our NEOs, the Committee reviewed information provided by Radford on the equity compensation levels for our NEOs relative to our peer group. The Committee has historically aimed to grant aggregate equity awards in the 50 th to 75 th percentile range compared to the peer group in order to emphasize equity-based compensation over cash compensation. For 2017, Radford initially provided the Committee with information on the level of equity awards that would need to be made to each executive (on an individual basis) to be in line with the 50 th percentile. The Committee then aggregated these proposed individual equity grants to establish an “equity pool” for executives. The Committee, with input from our CEO, then allocated the equity pool to the individual executives taking into account a number of the subjective factors discussed above, including retention concerns and individual performance. Thus, certain of our executives received grants above the 50 th percentile range while others received grants below the 50 th percentile range. Our CEO was not involved in the process of determining his own equity grants. The Committee determined to split the equity grants between PSUs that have a performance-based vesting condition, and time-based options that will only have value to the executives if the price of our common stock increases over time. We believe these grants reflect our strong pay-for-performance philosophy.

Elements of 2017 Executive Compensation Program
 
The following table provides summary information regarding the key elements of our 2017 executive compensation program:

COMPENSATION
ELEMENT
GUARANTEED V.
AT-RISK
PERFORMANCE-BASED
V.
TIME-BASED
CASH
V.
EQUITY
Base Salary
Guaranteed
Not applicable
Cash
2017 Cash Bonus Plan Awards
At-Risk
Performance-Based
Cash
2017 Performance-Based Restricted Stock Units (PSUs)
At-Risk
Performance-Based
Equity
2017 Time-Based Stock Options (Options)
At-Risk
Time-Based (Long-Term Vesting)
Equity
2017 Retention Awards and New Hire Awards
At-Risk
Mix of Performance-Based and Time-Based
Equity
Employee Benefits
Guaranteed
Not applicable
Other
Severance and Change of Control
At-Risk
Not applicable
Cash and Equity













Base Salary

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The following table provides information regarding the base salaries paid to our NEOs during 2017:

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 at the 50th percentile of our peer group, but may be above or below the 50th percentile 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.

No Base Salary Increases for 2017
 
The following table sets forth the base salaries paid to our NEOs during 2017 and reflects that there were no changes to base salaries as compared to 2016:

NAME
BASE SALARY
BASE SALARY CHANGE
John McDermott
$572,000
No increase
Vaseem Mahboob
$350,000
No increase
Robert D. Mitchell
$390,500
No increase
Michael V. Chobotov, Ph.D.
$300,000
No increase
John Onopchenko (1)
$400,000
Not applicable

(1)  
Mr. Onopchenko joined us as Chief Operating Officer on October 30, 2017. His base salary was generally determined based upon a market survey provided by Radford that was specific to his title and expected role and responsibilities.



























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2017 Cash Bonus Plan Awards
 
The following table provides summary information regarding the cash bonus awards granted to our NEOs during 2017:

2017 Cash Bonus Plan Awards
At-Risk • Performance-Based • Cash
Philosophy
Considerations
Performance Criteria
2017 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.
•  Annually review and set Company performance milestones which are based on Committee-approved corporate financial and operational objectives, or Corporate Performance Objectives, comprising 70% of the overall bonus opportunity (for all NEOs other than our CEO).

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

•  Our CEO’s bonus opportunity was weighted 100% towards the Corporate Performance Objectives as the Committee believes the CEO is in the best position to directly impact Company performance.

•  Use threshold, target and maximum bonus payout levels 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.
•  Target bonus is set as percentage of base salary for each NEO (no changes to target bonus percentages from 2016).

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

•  Financial Objectives included pre-determined targets relating to (i) global sales, (ii) gross margin and (iii) cash burn rate.

•  Operational Objectives included pre-determined objectives relating to (i) quality scorecard and (ii) risk management.

•  The Committee assigned relative weightings to each of the components of the Corporate Performance Objectives, which are expressed as a percentage of the target cash incentive amount.

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

•  Achievement of each component of the Corporate Performance Objectives (i) in an amount less than the minimum threshold results in no cash bonus payment with respect to that component, (ii) in an amount equal to the established target, results in a cash bonus payment of 100% of target with respect to that component, (iii) in an amount in excess of the target, results 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 2017 audited financial statements.
•  Corporate Performance Objectives : With respect to the Corporate Performance Objectives, the Committee determined that the weighted average achievement level was 25% of the target amount. Accordingly, 25% of the Corporate Performance Objective  portion of the bonus opportunity was earned.

•  MBOs : With respect to the MBOs, the Committee determined that each NEO achieved their respective MBOs at the target level. Accordingly, 100% of the MBO portion  of the bonus opportunity was earned.










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Target Cash Bonus Amount
 
At the beginning of 2017, the Committee established a target bonus amount for each NEO, which is expressed as a percentage of base salary. Both the base salaries and the target bonus percentages for each NEO were unchanged from 2016. For 2017, each of our NEOs was eligible to receive a cash bonus up to a percentage of his base salary as set forth in the following table:

NAME (1)
BASE SALARY
TARGET BONUS PERCENTAGE
TARGET CASH BONUS
John McDermott
$572,000
100%
$572,000
Vaseem Mahboob
$350,000
55%
$192,500
Robert D. Mitchell
$390,500
65%
$253,825
Michael V. Chobotov, Ph.D.

$300,000
45%
$135,000

(1) Mr. Onopchenko did not participate in the 2017 cash bonus plan because he did not join us until October 30, 2017. Mr. Onopchenko received a one-time $100,000 sign-on bonus in 2017 in lieu of a performance bonus.

Performance Objectives

Cash bonuses may be earned under the 2017 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 is 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 McDermott
100%
0%
Vaseem Mahboob
70%
30%
Robert D. Mitchell
70%
30%
Michael V. Chobotov, Ph.D.
70%
30%

Corporate Performance Objectives

The Corporate Performance Objectives comprise 70% of the total bonus opportunity for each of our NEOs (other than our CEO, for whom the Corporate Performance Objectives comprise 100% of the total bonus opportunity). 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
60%
$192M
70%
$197M
100%
$212M
200%
Gross Margin
5%
64%
50%
66%
100%
68%
150%
Cash Burn Rate
10%
$29M
50%
$24M
100%
$20M
150%
Operational Objectives
Quality Scorecard
15%
90
75%
100
100%
110
125%
Risk Management
10%
-
0%
Effective
100%
Effective
100%

Financial Objectives

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

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Global sales represent 60% of the bonus opportunity within the Corporate Performance Objectives. Achievement of global sales at the threshold amount would result in payment at 70% of target, at the target amount would result in payment at 100% of target, and at the maximum amount would result in payment at 200% of target.

Gross margin represents 5% of the bonus opportunity within the Corporate Performance Objectives. Achievement of gross margin 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.

Cash burn rate represents 10% of the bonus opportunity within the Corporate Performance Objectives. Achievement of a cash burn rate 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.

For performance levels 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. The Committee determined our actual achievement of the Corporate Performance Objectives by reference to our audited financial statements for 2017.

Operational Objectives
 
The portion of the cash bonus opportunity that relates to the Operational Objectives could be earned based on the Company’s ability to meet specified quality and risk management goals.

Achievement against our quality scorecard represents 15% of the bonus opportunity within the Corporate Performance Objectives. Achievement 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.

With respect to the risk management goal, 10% of the bonus opportunity within the Corporate Performance Objectives could be achieved if the goal is met at 100% of target. No payment results if the goal is not met at 100%, and 100% is the maximum amount that can be achieved with respect to this component.

Management by Objectives (MBOs)

The MBOs comprise 30% of the total bonus opportunity for each of our NEOs (other than our CEO). 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, for 2017 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 Committee did not establish any MBOs for our CEO, as his cash bonus opportunity is based 100% on the achievement of the Corporate Performance Objectives.

Calculation of Bonus Payout

Consistent with the application of the bonus payout formula described above, and in furtherance of the Company’s pay-for-performance philosophy, the Committee determined that 25% of the Corporate Performance Objective portion of the bonus opportunity was earned, which reflects that:

we did not achieve the global sales objective at the threshold amount;
we achieved the gross margin objective between the target and maximum amount;
we achieved the cash burn rate objective at approximately the target amount;
we did not achieve the quality scorecard at the threshold amount; and
we achieved the risk management objective at the target/maximum amount.

As a result, each of our NEOs (other than our CEO) earned 25% of the 70% of the total bonus opportunity under the 2017 cash bonus plan that was based on achievement of the Corporate Performance Objectives. Our CEO earned 25% of the 100% of his total bonus opportunity that was based on achievement of the Corporate Performance Objectives.
In addition, the Committee determined that the MBOs were achieved by each of our NEOs (other than our CEO) at the target level, which reflects the successful execution of several critical management initiatives. As a result, each of our NEOs (other than our CEO) earned 100% of the 30% of the total bonus opportunity under the 2017 cash bonus plan that was based on achievement of the MBOs.

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The actual payments made to each NEO pursuant to the 2017 cash bonus plan are set forth in the “Non-Equity Incentive Plan” column of the Summary Compensation Table.
2017 Performance-Based Restricted Stock Units

The following table provides summary information regarding the PSUs granted to our NEOs during 2017:

2017 Performance-Based Restricted Stock Units (PSUs)
At-Risk • Performance-Based • Equity
Philosophy
Considerations
Performance Criteria/ Vesting Provisions
2017 Pay for Performance
Pay for Performance :
•  Vesting of awards dependent on achievement of a global sales goal, which the Committee believes is important for our long-term growth and success.
 
Reward Achievement :
•  Provide incentives for achieving Company financial goals.
 
Align Interests with Stockholders :  
•  Provide each NEO with meaningful equity awards the value of which changes over time based on the trading price of our common stock to align the interests of our NEOs with those of our stockholders.
•  Structured as RSUs that may be settled for our common stock.

•  Company performance target is based on a Committee-approved goal derived from our business and strategic plan.

•  Global sales is an important indicator of growth and profitability which aligns executives’ interests with those of our stockholders.

•  Performance-based vesting reflects strong pay-for-performance alignment.

•  Use threshold, target and maximum award levels to strike appropriate balance between compensation incentives and risks.

•  The “target” performance level is typically in line with the level of Company performance projected for the objective.

•  Number of PSUs granted to each NEO determined by review of Radford report and exercise of discretion by the Committee and our CEO.
•  Vest subject to achievement of a global sales goal for 2017

•  Achievement below the threshold level results in no vesting. Achievement at the threshold level results in vesting of 50% of the shares underlying the PSUs. Achievement at the target level results in vesting of 100% of the shares underlying the PSUs. Achievement above the target level will increase the number of shares subject to vesting, up to a maximum of 150% of the underlying shares. 

•  Generally, an NEO must be in our employ at the time we achieve a performance milestone in order to receive the benefit of vesting under a PSU.

•  When determining our achievement relative to the performance milestone, the Committee relied upon our 2017 audited financial statements.
•  For 2017, the global sales threshold level was $190M; the target level was $200M; and the maximum level was $205M.

•  2017 global sales was approximately $181M.

•  Since the 2017 global sales threshold level was not achieved, the awards were not earned and were forfeited.






















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2017 Time-Based Stock Options
 
The following table provides summary information regarding the options granted to our NEOs during 2017:

2017 Time-Based Stock Options (Options)
At-Risk • Time-Based (Long-Term Vesting) • Equity
Philosophy
Considerations
Vesting Provisions
Attract and Retain Executives :
•  Promote retention of our executives because options vest only if the executive remains employed by us over a long-period of time.

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.
 
•  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 option 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.

•  Time-based vesting promotes retention of executives during this critical stage of our growth.

•  Number of options granted to each NEO determined by review of Radford report and exercise of discretion by the Committee and our CEO.
•  The options vest in equal monthly installments over 48 months, such that the options will become fully vested on the fourth anniversary of the grant date, subject to an NEO’s continued employment with us during that time.
  
2017 Retention and New Hire Awards
 
The following table provides information regarding additional equity awards granted to our NEOs during 2017 as retention awards or new hire awards:

2017 Retention and New Hire Awards
At-Risk • Mix of Performance-Based and Time-Based • Equity
Philosophy
2017 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 awards that vest only if the executive remains employed by us.

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

Pay for Performance :
•  Vest only upon achievement of performance conditions approved by the Committee.
 
Reward Achievement :
•  Provide incentives for achieving Company financial and operational goals.
•  Vaseem Mahboob received a retention award  of time-based RSU.
•  The Committee and our CEO exercised discretion in awarding these options based on individual performance and a determination that prior equity grants did not have intended retention value due to a significant portion of outstanding awards being out-of-the-money.
•  Awards vest as to 50% of the shares after 18 months, and as to the remaining shares on the third anniversary of the grant date, subject to Mr. Mahboob’s continued employment with us during that time.
•  John Onopchenko received a new hire award  of PSUs.
•  Grants were made pursuant to our 2017 Inducement Stock Incentive Plan

•  Awards are only available for grant under this plan to new employees and new members of our board of directors.
•  Annual performance milestones are expected to be set for these awards. Regardless of whether the performance milestones are met, the shares will vest in full on the fourth anniversary of the grant date, subject to Mr. Onopchenko’s continued employment with us during that time.
•  John Onopchenko received a new hire award  of time-based stock options.
•  Grants were made pursuant to the 2017 Inducement Stock Incentive Plan
•  Awards vest as to 25% of the shares on the first anniversary of the grant date and in 36 equal monthly installments thereafter such that all of the shares vest on the fourth anniversary of the grant date, subject to Mr. Onopchenko’s continued employment with us during that time.

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As discussed in the section of this proxy statement titled " Potential Payments Upon Termination or Change in Control " below, the vesting of certain equity awards described above may be accelerated under certain circumstances.
 
Employee Benefits
 
The following table provides summary information regarding the key employee benefits granted or paid to our NEOs during 2017:

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 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 for select executives based on responsibilities and travel requirements.

•  R elocation 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 (or nine months in the case of Dr. Chobotov), (ii) a prorated portion of the 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. No acceleration of the vesting of any outstanding equity awards would occur.

•  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 1.5 times base salary and target bonus for the year in which the termination occurs, (ii) a cash payment in an amount equal to the target bonus for the year in which the termination occurs, 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 ".


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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 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.

  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) of various payments, equity awards and other benefits.
The Committee considers the impact of the provisions of Section 162(m) of the Code, as amended by the Tax Cuts and Jobs Act, or TCJA. 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. Effective for taxable years beginning on and after January 1, 2018, “covered employees” generally include our CEO, CFO and other highly compensated executive officers. Effective for taxable years beginning prior to January 1, 2018, an exception to this deduction limit applied to “performance-based compensation,” such as cash incentive and stock option awards, that satisfied certain criteria. This exception to the Section 162(m) deduction limit for “performance-based compensation” was repealed by the TCJA. Thus, except for certain “performance-based compensation” payable pursuant to written contracts that were in effect on November 2, 2017 and that are not modified in any material respect on or after that date, effective

37


for taxable years beginning on and after January 1, 2018 our tax deduction with regard to compensation of “covered employees” is limited to $1.0 million per taxable year with respect to each executive 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 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 status under Section 162(m) of the Code. 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.

SUMMARY COMPENSATION TABLE
The following table sets forth summary compensation information for the fiscal years ended December 31, 2017, 2016 and 2015 for our NEOs.
Name and Principal Position
Year
Salary
Bonus

Restricted Stock Units (1)
Option Awards (1)
Non-Equity Incentive Plan Compensation (2)
All Other Compensation (3)
Total

John McDermott,
Chief Executive Officer (4)
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

2015
$
520,000

$
260,000

$
1,600,006

$
895,037

$

$

$
3,275,043

Vaseem Mahboob,
Chief Financial
Officer and Corporate Secretary (5)
2017
$
350,000

$

$
255,835

$
253,451

$
91,438

$

$
950,724

2016
$
350,000

$
194,729

$
250,004

$
400,162

$

$
70,069

$
1,264,964

2015
$
74,100

$
101,500

$
750,004

$
750,000

$

$

$
1,675,604

Robert D. Mitchell,
Former President (6)
2017
$
390,500

$

$
504,610

$
207,369

$
120,567

$
363,400

$
1,586,446

2016
$
390,500

$
256,764

$
250,004

$
400,162

$

$
22,500

$
1,319,930

2015
$
380,000

$
123,500

$
599,994

$
335,639

$

$
21,000

$
1,460,133

Michael V. Chobotov, Ph.D., Chief Technology Officer (7)
2017
$
300,000

$

$
96,400

$
184,328

$
64,125

$
282,480

$
927,333

2016
$
207,692

$
136,563

$
649,997

$
650,264

$

$

$
1,644,516

2015
$

$

$

$

$

$

$

John Onopchenko, Chief Operating Officer (8)
2017
$
61,538

$

$
300,001

$
500,000

$

$
100,000

$
961,539

2016
$

$

$

$

$

$

$

2015
$

$

$

$

$

$

$


(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, 2017. In accordance with 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) the amounts reported exclude the impact of estimated forfeitures related to service-based vesting conditions.

38


(2) Amounts shown in this column reflect payouts under our 2017 cash bonus plan based on the achievement of pre-determined Company and individual performance objectives. See the section entitled "2017 Cash Bonus Plan Awards" for additional information.
(3) Amounts shown in this column reflect the following payments to our NEOs during 2017: Mr. Mitchell - $285,964 reflecting the value of an equity award modification made in connection with his retirement, $53,606 for accrued vacation time paid in connection with his retirement, $18,139 for a car allowance, and $5,691 for other accrued benefits paid in connection with his retirement; Dr. Chobotov - $282,480 for a change of control payment relating to our acquisition of TriVascular; and Mr. Onopchenko - $100,000 for a one-time sign-on bonus, which was paid in lieu of a performance bonus in connection with his appointment as our Chief Operating Officer .
(4) Mr. McDermott will be stepping down from his role as our CEO no later than June 30, 2018, but currently remains in that role while we seek a successor.
(5) Mr. Mahboob joined us as Chief Financial Officer and Corporate Secretary effective October 15, 2015.
(6) Mr. Mitchell retired from his role as President effective December 30, 2017.
(7) Dr. Chobotov joined us as Chief Technology Officer effective February 3, 2016.
(8) Mr. Onopchenko joined us as Chief Operating Officer effective October 30, 2017.

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, 2017. The amounts set forth in the table do not necessarily reflect the value of the amounts paid or awards realized by our NEOs. 
Name
Grant Date
Estimated Future Payouts Under Non-Equity Incentive Plan Awards (1)
Estimated Future Payouts Under Equity Incentive Plan Awards (2)
All Other Stock Awards: Number of Shares of Stock or Units(#) (3)
All Other Option Awards: Number of Securities Underlying Options(#) (4)
Exercise or Base Price of Securities Underlying Options(#) (5)
Grant Date Fair Value of Stock and Option Awards
($) (6)
Thres.
Target
Max.
Thres.
Target
Max.
John McDermott
3/1/2017
$
347,490

$
572,000

$
979,550

 
 
 
 
 
 


5/31/2017
 
 
 
70,000
140,000
210,000
 
 
 


5/31/2017
 
 
 
 
 
 
 
270,000
$
4.82

$
622,107

Vaseem Mahboob
3/1/2017
$
81,861

$
192,500

$
288,509

 
 
 
 
 
 


5/31/2017
 
 
 
14,000
28,000
42,000
 
 
 
 
5/31/2017
 
 
 
 
 
 
 
110,000
$
4.82

$
253,451

11/8/2017
 
 
 
 
 
 
25,000
 
 
$
120,875

Robert D. Mitchell
3/1/2017
$
107,939

$
253,825

$
380,420

 
 
 
 
 
 


5/31/2017
 
 
 
11,500
23,000
34,500
 
 
 
 
5/31/2017
 
 
 
 
 
 
 
90,000
$
4.82

$
207,369

Michael V. Chobotov, Ph.D.
3/1/2017
$
57,409

$
135,000

$
202,331

 
 
 
 
 
 


5/31/2017
 
 
 
10,000
20,000
30,000
 
 
 
 
5/31/2017
 
 
 
 
 
 
 
80,000
$
4.82

$
184,328

John Onopchenko
10/30/2017
 
 
 
 
 
 
56,604
 
 
$
300,001

10/30/2017
 
 
 
 
 
 
 
190,353
$
5.30

$
500,000

(1) The amounts in these columns represent the potential payouts under our 2017 cash bonus plan based on the achievement of pre-determined Company and individual performance objectives. For the actual 2017 cash bonuses earned by our NEOs, see the "Summary Compensation Table."
(2) The share amounts in these columns represent the potential number of PSUs that could have vested based on the achievement of a pre-determined Company performance objective relating to 2017 global sales. Because the threshold level of performance was not achieved, the PSUs were not earned and were forfeited. See the section entitled "2017 Performance-Based Restricted Stock Units" for additional information.
(3) The amount in this column for Mr. Mahboob reflects a retention grant of time-based RSUs that vest as to 50% of the shares 18 months following the grant date, and as to the remaining shares on the third anniversary of the grant date. The amount in this column for Mr. Onopchenko reflects

39


the grant of PSUs. Annual performance milestones for the PSUs are expected to be established. Regardless of whether the performance milestones are met, the PSUs will vest in full on the fourth anniversary of the grant date.
(4) The amounts in this column represent the grant of time-based stock options. The 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.
(5) Stock options are granted with an exercise price equal to the closing price of our common stock on the grant date.
(6) The grant date fair value of options is equal to the Black Scholes value on the grant date, multiplied by the number of shares of our common stock underlying the options. The grant date fair value of RSUs and PSUs 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 or RSUs, as applicable.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table summarizes outstanding equity awards held by our NEOs as of December 31, 2017 .The amounts set forth in the table do not necessarily reflect the value of the awards realized by our NEOs.
 
Option Awards
Restricted Stock Awards/Units
Name
Number of Securities Underlying Unexercised Options Exercisable (#)
Number of Securities Underlying Unexercised Options Unexercisable (#) (1)
Option Exercise Price ($) (2)
Option Expiration Date (3)
Number of Shares or Units of Stock That Have Not Vested (#)
Market Value of Shares or Units of Stock that Have Not Vested ($) (4)
John McDermott
427,065

$
2.67

5/12/2018
16,057 (5)
$
85,905

125,000

$
3.54

7/6/2019
70,757 (5)
$
378,550

71,100

$
4.36

5/20/2020
 


82,000

$
8.26

5/25/2021
 


119,673

13,915 (6)
$
13.17

5/22/2024
$

77,929

42,735 (6)
$
16.59

5/28/2025
$

166,063

196,256 (6)
$
7.53

2/4/2026
$

39,375

230,625 (6)
$
4.82

5/31/2027
$

Vaseem Mahboob
73,660

63,364 (7)
$
13.56

10/15/2025
27,656 (8)
$
147,960

53,140

62,802 (6)
$
7.53

2/4/2026
22,111 (5)
$
118,294

16,042

93,958 (6)
$
4.82

5/31/2027
25,000 (9)
$
133,750

Robert D. Mitchell
29,918

3,479 (6)
$
13.17

5/22/2024
150,000 (10)
$
802,500

29,223

16,026 (6)
$
16.59

5/28/2025
6,021 (5)
$
32,212

53,140

62,802 (6)
$
7.53

2/4/2026
22,111 (5)
$
118,294

13,125

76,875 (6)
$
4.82

5/31/2027
$

Michael V. Chobotov, Ph.D.
86,353

102,053 (7)
$
7.53

2/4/2026
86,321 (10)
$
461,817

11,667

68,333 (6)
$
4.82

5/31/2027
$

John Onopchenko
190,353 (7)
$
5.30

10/30/2027
56,604 (11)
$
302,831

(1) The vesting of these stock options may fully accelerate upon a change in control pursuant to written agreements entered into with each of our NEOs.
(2) Stock options are granted with an exercise price equal to the closing price of our common stock on the grant date.
(3) Each of these stock options expire 10 years from the grant date.
(4) The amounts in this column are based on the closing price of our common stock on December 29, 2017, which was $5.35 per share.
(5) These time-based RSUs vest as to 33% of the shares on the first anniversary of the grant date, 33% of the shares on the second anniversary of the grant date, and the remaining 33% of the shares on the third anniversary of the grant date.
(6) 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.

40


(7) 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.
(8) These PSUs are subject to vesting based upon the achievement of specified Company financial milestones.
(9) These time-based RSUs vest as to 50% of the shares 18 months following the grant date, and then as to the remaining shares on the third anniversary of the grant date.
(10) These PSUs are subject to vesting based upon the achievement of specified product development milestones.
(11) Annual performance milestones for these PSUs are expected to be established. Regardless of whether the performance milestones are met, the shares will vest in full on the fourth anniversary of the grant date.

  
OPTION EXERCISES AND STOCK VESTED
The following table provides information, for our NEOs, regarding the vesting of RSUs during the fiscal year ended December 31, 2017 , including the number of shares acquired upon vesting and the value realized, before payment of any applicable withholding tax and broker commissions. No stock options were exercised by our NEOs during the fiscal year ended December 31, 2017 .
Name
Date of Vesting
Number of Shares Acquired on Vesting (#)
Value Realized on Vesting (1)
John McDermott
2/4/2017
35,485
$
249,105

5/22/2017
17,699
$
80,707

5/28/2017
16,058
$
74,027

Robert D. Mitchell
2/4/2017
11,090
$
77,852

5/22/2017
4,424
$
20,173

5/28/2017
6,022
$
27,761

Vaseem Mahboob
2/4/2017
11,090
$
77,852

2/22/2017
13,828
$
90,297

4/4/2017
13,826
$
92,081

(1) The amounts realized upon the vesting of the RSUs is based on the closing price of our common stock on the relevant vesting dates.


PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
Employment Agreements

We generally enter into employment agreements with each of our NEOs. 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, such NEO will, among other things, receive (i) the portion of his then-current base salary which accrued through the date of termination, (ii) payments for any unused vacation and reimbursement expenses, which were accrued through the date of termination, (iii) a cash severance payment in an amount equal to six months of his then-current base salary (or nine months in the case of Dr. Chobotov), payable in a lump sum within 60 days following termination, (iv) a prorated cash payment equal to the bonus for which he 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 six months following termination and (vi) payment for reasonable outplacement services for 12 months following termination, in an aggregate amount not to exceed $10,000. No equity awards held by Mr. Mahboob, Dr. Chobotov or Mr. Onopchenko, will be subject to any additional or 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, the NEO will be entitled to receive, in addition to items (i), (ii) and (vi) above, (a) a cash severance payment in an amount equal to 1.5 times his then-current base salary and his target bonus (as defined in the relevant employment agreement), payable in a lump sum within 60 days following termination, (b) a cash payment equal to his target 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.


41


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

McDermott Severance Agreement

It is expected that Mr. McDermott will be stepping down from his role as our CEO no later than June 30, 2018, or his separation date, but he currently remains in that role while we seek a successor. 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 provides that Mr. McDermott will continue to provide us consulting support pursuant to an Independent Contractor Agreement, or the McDermott Contractor Agreement, effective as of his separation date, pursuant to which we will pay Mr. McDermott a monthly consulting fee of $2,000.

The McDermott Severance Agreement provides that Mr. McDermott will, among other things, receive (i) any salary that has accrued but was not paid as of his separation date, (ii) payment for unused vacation days and reimbursement expenses which were accrued as of 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 the target bonus for the 2018 calendar year for which he is eligible, payable at the same time as bonuses, if any, are paid to our other executive officers (no later than March 15, 2019) (v) accelerated vesting of certain previously granted restricted stock awards, (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 that upon a change in control which occurs during the term of the McDermott Contractor Agreement (or in some cases through the third anniversary of his separation date), Mr. McDermott will receive full vesting acceleration of certain previously issued stock options.

Mr. McDermott’s receipt of the aforementioned payments and benefits is conditioned upon, among other things, (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 the terms of the McDermott Contractor Agreement, McDermott Severance Agreement and related Proprietary Information and Inventions Agreement effective as of his separation date, including certain non-competition, non-solicitation, non-disparagement and other standard covenants included therein.

Mitchell Severance Agreement

In connection with Mr. Mitchell’s separation from our Company effective December 31, 2017, or his separation date, we entered into a Severance Agreement and General Release with Mr. Mitchell on December 15, 2017, or the Mitchell Severance Agreement. The Mitchell Severance Agreement provides that Mr. Mitchell will, among other things, receive (i) a cash severance payment in an amount equal to six months of his base salary, payable in a lump sum in February 2018, (ii) a cash payment of the earned amount of Mr. Mitchell’s target bonus for the 2017 calendar year, as will be determined and become payable in a lump sum in February 2018, (iii) payment for unused vacation days which were accrued as of his separation date, payable in a lump sum in February 2018 and (iv) continued health insurance coverage through June 30, 2018.

Pursuant to the terms of the Mitchell Severance Agreement, we also entered into an Agreement for Independent Contractor Services with Mr. Mitchell, or the Mitchell Contractor Agreement, whereby Mr. Mitchell will perform services relating to our clinical trials and related matters during the period from January 1, 2018 through December 31, 2018. Subject to Mr. Mitchell’s continued compliance with the covenants in the Mitchell Contractor Agreement, Mr. Mitchell’s time-based stock options and restricted stock unit awards will continue to vest until termination of the Mitchell Contractor Agreement, and his performance-based restricted stock awards will continue to vest in accordance with their terms. In addition, the Mitchell Severance Agreement provides that upon a change in control which occurs during the term of the Mitchell Contractor Agreement, and subject to continued compliance with the covenants set forth in the Mitchell Contractor Agreement, Mr. Mitchell will receive full vesting acceleration of his outstanding equity awards.

Also on December 15, 2017, we entered into a second amendment to Mr. Mitchell’s Restricted Stock Award Agreement originally dated December 10, 2010, for the purpose of amending the performance-based vesting provisions related to achievement of specified product development milestones applicable to certain of the shares underlying the agreement.


42


Severance and Change in Control Payments
The following table summarizes the amounts that would become payable to each of our NEOs, pursuant to the employment agreements described above, assuming each NEO experienced an involuntary termination as of December 31, 2017, both prior to and after the occurrence of a change in control of our Company.
Name
Benefit
Involuntary Termination Prior to Change in Control($)
Involuntary Termination After Change in Control($)
John McDermott (1)
Severance pay (2)
$
858,000

$
1,144,000

Bonus pay (3)
$
572,000

$
572,000

Equity award vesting acceleration (4)
$

$
586,686

Continuation of benefits (5)
$
36,000

$
48,000

Vaseem Mahboob
Severance pay (6)
$
175,000

$
525,000

Bonus pay (3)
$
192,500

$
192,500

Equity award vesting acceleration (4)
$

$
449,801

Continuation of benefits (7)
$
12,000

$
36,000

Michael V. Chobotov, Ph.D.
Severance pay (8)
$
225,000

$
450,000

Bonus pay (3)
$
135,000

$
135,000

Equity award vesting acceleration (4)
$

$
498,034

Continuation of benefits (7)
$
12,000

$
36,000

John Onopchenko
Severance pay (6)
$
200,000

$
600,000

Bonus pay (9)
$
33,333

$
200,000

Equity award vesting acceleration (4)
$

$
312,349

Continuation of benefits (7)
$
12,000

$
36,000

(1)  
Mr. McDermott will be stepping down from his role as our CEO no later than June 30, 2018. This table reflects the amounts that would have become payable to Mr. McDermott as of December 31, 2017 based on the terms of his prior Employment Agreement. In connection with Mr. McDermott’s separation from the Company, we entered into a Severance Agreement and General Release with Mr. McDermott on February 21, 2018.
(2) “Prior to Change of Control” Mr. McDermott was entitled to his base salary for 18 months. “After Change of Control” Mr. McDermott was entitled to his base salary for 24 months.
(3) “Prior to Change of Control” equals 100% of the target bonus and assumes the target level of performance was achieved and that the executive was terminated on December 31, 2017. “After Change of Control” equals 100% of the target bonus, which would have become payable regardless of Company performance relative to the target performance level.
(4) “Prior to Change of Control” there were no outstanding awards that would accelerate or continue to vest following the date of termination. “After Change of Control” includes the fair market value of all unvested equity awards outstanding as of December 31, 2017, as they will all vest immediately upon a change of 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 the last trading day of 2017, which was $5.35 per share (and for options is calculated as the difference between such closing price and the relevant exercise prices). The equity awards do not include reference to the 2017 PSUs since the performance condition was not achieved at the threshold level and the awards were not earned and were forfeited effective as of December 31, 2017.
(5)  
“Prior to Change of Control” represents continuation of COBRA payments for 18 months. “After Change of Control” represents continuation of COBRA payments for 24 months.
(6)  
“Prior to Change of Control” the executive is entitled to his base salary for six months. “After Change of Control” the executive is entitled to his or her base salary for eighteen months.
(7)  
“Prior to Change of Control” represents continuation of benefits through COBRA payments for six months. “After Change of Control” represents continuation of benefits through COBRA payments for 18 months.

43


(8)  
“Prior to Change of Control” the executive is entitled to his base salary for nine months. “After Change of Control” the executive is entitled to his or her base salary for 18 months.
(9)  
Mr. Onopchenko joined us in October 2017. “Prior to Change of Control” equals a prorated portion of 100% of his target bonus. “After Change of Control” equals 100% of the target bonus. Mr. Onopchenko actually received a one-time $100,000 sign-on bonus in 2017 in lieu of a performance bonus, however his target bonus has been used for purposes of this table as it more accurately reflects the future payments we may receive upon a change in control.



44


CEO PAY RATIO

Presented below is the ratio of annual total compensation of our CEO to the annual total compensation of our median employee (excluding our CEO). The ratio presented below is a reasonable estimate calculated in a manner consistent with applicable SEC rules.
In identifying our median employee, we calculated the annual total cash compensation of each employee as of December 31, 2017. For these purposes, annual total cash compensation included base salary or hourly wages, cash incentive awards, and commissions, as well as comparable elements of cash compensation paid in non-U.S. jurisdictions. These amounts were calculated using internal human resources records. Compensation amounts were annualized for new hire permanent employees who did not work for the entire year. We did not apply any cost-of-living adjustments as part of the calculation.
We selected the median employee from among 648 full-time, part-time, temporary and seasonal workers who were employed and not on leaves of absence as of December 31, 2017. As of that date, our total number of employees was 655, of which 596 were U.S. employees and 59 were non-U.S. employees. However, as permitted by applicable SEC rules, we excluded three employees from Thailand, two employees from Singapore and two employees from Canada (which constitute all of our employees from those jurisdictions) pursuant to the de minimis exemption for foreign employees. Except for these foreign employees, we did not exclude from the calculation of the median employee any other employees pursuant to any other permitted exceptions.
As determined in accordance with applicable SEC rules, and consistent with the disclosure set forth in the Summary Compensation Table, the annual total compensation for our CEO for 2017 was $2,011,907. The annual total compensation for our median employee for 2017 was $102,476. Among other items, these amounts include base salary, cash incentive awards and equity-based compensation (valued based on the grant date fair value of awards granted during 2017).
As calculated in this manner, the ratio of our CEO’s total compensation for 2017 to our median employee’s total compensation for 2017 is approximately 20 to 1.

DIRECTOR COMPENSATION PROGRAM
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 chairman of each committee receives a higher cash retainer for such service (which is in lieu of, and not in addition to, committee member cash retainers). In addition, on the date of each annual meeting, each non-employee director who will continue in office following the annual meeting receives an RSU award with the number of shares subject to the award determined based on the closing price on the grant date. The Lead Independent Director and/or Chairman of the Board typically receives an additional RSU award. The RSU awards generally vest as to 100% of the shares on the one year anniversary of the grant date.
Historically, the annual cash fees paid and RSU 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, were as follows:
Position

Annual Fees Paid for Membership
Annual Fees Paid for Chair Position
Annual RSU Awards
Board of Directors
$
40,000

$

$
100,000

Lead Independent Director / Chairman of the Board
$

$

$
50,000

Audit Committee
$
9,000

$
20,000

$

Compensation Committee
$
6,000

$
13,000

$

Governance Committee
$
5,000

$
9,000

$


For 2017, in an effort to further align the interests of our directors with those of our stockholders, and to preserve cash in light of our size and stage of growth, our Compensation Committee approved a change to our director compensation program which resulted in a 10% decrease in the annual cash fees paid for service on our board and on each committee, and a proportionate 10% increase in the value of the annual RSU award granted to each non-employee director.




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In light of the change to our director compensation program, the current 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, is as follows:
Position

Annual Fees Paid for Membership
Annual Fees Paid for Chair Position
Annual RSU Awards
Board of Directors
$
36,000

$

$
110,000

Lead Independent Director/ Chairman of the Board
$

$

$
55,000

Audit Committee
$
8,100

$
18,000

$

Compensation Committee
$
5,400

$
11,700

$

Governance Committee
$
4,500

$
8,100

$

In addition, each person who first becomes a non-employee director, whether elected by our stockholders or appointed by our board of directors, will automatically be 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. The 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.
Non-employee directors also receive reimbursement for certain travel expenses and other out-of-pocket costs.

Director Compensation Paid in 2017

The following table summarizes the compensation paid to each of our non-employee directors during the fiscal year ended December 31, 2017.
Name
Fees Earned or Paid in Cash (1)
Restricted Stock Units (2)
Total
Daniel Lemaitre
$
48,600

$
164,998

$
213,598

Gregory D. Waller
$
58,500

$
110,002

$
168,502

Thomas C. Wilder, III
$
44,100

$
110,002

$
154,102

Guido J. Neels
$
52,200

$
110,002

$
162,202

Thomas F. Zenty, III
$
41,400

$
110,002

$
151,402

Leslie Norwalk
$
44,100

$
110,002

$
154,102

Christopher Chavez
$
41,400

$
110,002

$
151,402

(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) The amounts shown reflect the grant date fair value 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 equity awards, see Note 4 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2017. In accordance with applicable SEC rules, the amounts reported exclude the impact of estimated forfeitures related to service-based vesting conditions.


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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, 2017.
Director
Shares Underlying Outstanding Equity Awards
Daniel Lemaitre
124,232
Gregory D. Waller
22,822
Thomas C. Wilder, III
35,322
Guido J. Neels
72,822
Thomas F. Zenty, III
22,822
Leslie Norwalk
29,328
Christopher G. Chavez
43,037

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 this Compensation Discussion and Analysis be included in this proxy statement.
Members of the Compensation Committee
Guido J. Neels
Christopher Chavez
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.


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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. We believe it is appropriate to seek the views of our stockholders on our executive compensation program.
“Say-on-Pay” Vote
We are committed to our stockholder outreach efforts, including soliciting stockholder feedback on our executive compensation program. This is motivated, in part, by the results of our “say-on-pay” vote at our 2017 annual meeting, at which our stockholders did not approve, by advisory vote, the compensation of our named executive officers for 2016, which was an unexpected change as compared to our high approval rates in prior years. The results of the “say-on-pay” vote in 2017 caused our management team to acknowledge an even greater need for stockholder engagement as a means to facilitate a dialogue with stockholders, and improve overall stockholder understanding of and support for our executive compensation program. In response to feedback from our stockholders during our outreach efforts, we have made a number of significant changes to our executive compensation program, including a heightened focus on our pay-for-performance philosophy and certain proposed amendments to our 2015 Plan.
2017 Executive Compensation Highlights
Our overarching executive compensation goals are to align our compensation program to our business strategy, and attract and retain executives with the background and experience required to lead us forward. For 2017, we emphasized 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, which is correlated with the achievement of specific performance objectives. We believe our 2017 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.
The specific components of our executive compensation program that highlight its effectiveness are as follows:
Significant Portion of Total Compensation is At-Risk. A significant portion of an executive’s total compensation opportunity in 2017 was provided in the form of compensation that was at-risk rather than guaranteed. Our executive compensation program included performance-based cash bonus plan awards, performance-based restricted stock units, and time-based stock options. The value of each of these awards was subject to the achievement of specific performance conditions and/or was tied to the market price of our common stock.

2017 Cash Bonus Plan Awards Paid Out Significantly Below Target. For 2017, 70% of the actual cash bonus opportunity was based on achievement of pre-determined corporate financial and operational objectives. The failure to achieve the target levels of performance with respect to certain of the objectives resulted in significantly reduced bonus payouts to executives compared to both the 2017 target bonus amounts and the actual bonus amounts paid in 2016.

No Named Executive Officers Received Base Salary Increases. While the Compensation Committee determined that base salary increases for 2017 would have been warranted based on a peer group review, our leadership team elected not to accept base salary increases in order to preserve financial resources.

Company Did Not Achieve Performance Criteria for Performance-Based Restricted Stock Units. The performance-based restricted stock units were designed to vest based upon our achievement relative to a global sales target for 2017. Since the threshold level was not achieved, the awards were not earned and were forfeited.

Time-Based Stock Options Require Long-Term Vesting to Promote Retention. For 2017, a portion of the equity awards granted to our executives were time-based option awards, which vest over a four year period subject to continued employment. Options inherently contain a performance component because the awards only have value to the recipient to the extent the value of our common stock increases during the option term. In addition, time-based awards promote executive retention because they vest over a long-term service period.

Amendments to our 2015 Plan. Our board of directors has approved changes to our 2015 Plan that reflect our commitment to sound governance practices, including imposing a minimum vesting period of at least 12 months for

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awards granted under our 2015 Plan following the amendment date, subject to certain limitations, and eliminating our ability to pay dividends on unvested shares of our common stock granted under our 2015 Plan.

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 2018 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 or Opposition to Matter to be Acted Upon
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 nominee for election as a Class II director, or (iii) any associate of any of the foregoing persons.
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 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.
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 SET FORTH IN THIS PROXY STATEMENT .

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PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee has appointed KPMG as our independent registered public accounting firm for the fiscal year ending December 31, 2018, 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, 2017.
Although we are not requir