UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment
No. ___)
Filed
by
the Registrant Filed
by
a Party other than the Registrant o
Check
the
appropriate box:
o Preliminary
Proxy Statement
o Confidential,
for Use of
the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive
Proxy
Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to (S)
240.14a-11(c) or (S) 240.14a-12
Endologix,
Inc.
(Name
of
Registrant as Specified In Its Charter)
______________________________________________________________________
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x No
fee
required.
o Fee
computed on table below per
Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title
of
each class of securities to which transaction applies:
_________________________________________________________________________
(2) Aggregate
number of securities to which transaction applies:
_________________________________________________________________________
|
(3)
|
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is
calculated and state how it was determined):
|
_________________________________________________________________________
(4) Proposed
maximum aggregate value of transaction:
_________________________________________________________________________
(5) Total
fee
paid:
_________________________________________________________________________
o
Fee paid previously with preliminary materials.
o |
Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its
filing.
|
(1) Amount
Previously Paid:
_________________________________________________________________________
(2) Form,
Schedule or Registration Statement No.:
_________________________________________________________________________
(3) Filing
Party:
_________________________________________________________________________
(4) Date
Filed:
_________________________________________________________________________
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held May 22, 2008
________________________
To
the
Stockholders of Endologix, Inc.:
You
are
cordially invited to attend the 2008 Annual Meeting of Stockholders (the “Annual
Meeting”) of Endologix, Inc. on May 22, 2008 at 8:00 a.m., Pacific Time. The
Annual Meeting will be held at our offices at 11 Studebaker, Irvine, California
92618 for the following purposes, as more fully described in the accompanying
proxy statement:
1. To
elect
one individual to serve as a Class I member of our Board of Directors for a
term
of three years or until his successor is duly elected and
qualified.
2. To
approve the proposed amendment to our 2006 Employee Stock Purchase Plan to
increase the total number of shares purchasable thereunder from 308,734 shares
to 558,734 shares.
3. To
approve the proposed amendment to our 2006 Stock Incentive Plan to increase
the
total number of shares available for issuance thereunder from 2,814,478
shares to 5,814,478 shares.
4. To
ratify
the selection of PricewaterhouseCoopers LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2008;
and
5.
To
transact such other business as may properly come before the Annual Meeting
or
any adjournment or postponement thereof.
Only
stockholders of record at the close of business on April 15, 2008 will be
entitled to vote at the Annual Meeting or any adjournment or postponement
thereof.
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By Order of the Board of Directors
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Paul McCormick
President and Chief Executive
Officer
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Irvine,
California
April
21,
2008
Your
vote is important. To vote your shares by proxy you may do any one of
the following:
• Vote
at the internet site address listed on your proxy card;
• Call
the toll-free number listed on your proxy card; or
• Sign,
date and return in the envelope provided the enclosed proxy
card.
If
you choose the third option, please do so promptly to ensure your
proxy arrives
in sufficient time.
_______________________
PROXY
STATEMENT
_______________________
INFORMATION
CONCERNING SOLICITATION AND VOTING
GENERAL
The
enclosed proxy is solicited on behalf of our Board of Directors for use at
the
2008 Annual Meeting of Stockholders
(the “Annual Meeting”) to be held on May 22, 2008 at 8:00
a.m., Pacific
time, at our offices at 11 Studebaker, Irvine, California 92618,
at which time stockholders of record as of April 15, 2008 will
be entitled
to vote.
On
April 15, 2008, we had 42,972,891 shares of common stock
outstanding.
We
intend
to mail this proxy statement and the accompanying proxy card on or about April
21, 2008 to all stockholders entitled to vote at the Annual Meeting. Our
principal executive offices are located at 11 Studebaker, Irvine, California
92618.
VOTING
The
shares of common stock constitute our only outstanding class of voting
securities. The presence in person or by proxy of the holders of a majority
of
the common stock issued and outstanding constitutes a quorum for the transaction
of business at the Annual Meeting. Each stockholder of record is entitled to
one
vote for each share of common stock held as of the record date on each matter
to
be voted on at the Annual Meeting. For purposes of the quorum and the discussion
below regarding the vote necessary to take stockholder action, stockholders
of
record who are present at the Annual Meeting in person or by proxy and who
abstain, including brokers holding customers’ shares of record who cause
abstentions to be recorded at the Annual Meeting, are considered stockholders
who are present and entitled to vote and count toward the quorum. Brokers
holding shares of record for customers generally are not entitled to vote on
certain matters unless they receive voting instructions from their
customers.
Directors
are elected by the affirmative vote of a plurality of votes cast at the Annual
Meeting and therefore, broker non-votes and abstentions or votes that are
withheld will be excluded entirely from the vote and have no effect on the
election of directors. Approval of all other proposals require the affirmative
vote of a majority of the shares present or represented and entitled to be
voted
at the Annual Meeting and, therefore, abstentions are counted as votes against
a
proposal and broker non-votes are not counted.
Shares
of
common stock represented by a properly executed proxy received in time for
the
Annual Meeting will be voted as specified therein, unless the proxy previously
has been revoked. Unless otherwise specified in the proxy, the persons named
therein will vote FOR
the
election of the director nominee named in this proxy statement, FOR
the
amendment of the 2006 Employee Stock Purchase Plan to increase the number of
shares purchasable thereunder as specified in this proxy statement, FOR
the
amendment of the 2006 Stock Incentive Plan to increase the number of shares
available for issuance thereunder as specified in this proxy statement and
FOR
ratification of the selection of PricewaterhouseCoopers LLP as our independent
registered public accounting firm for the fiscal year ending December 31, 2008.
As to any other business properly submitted to stockholders at the Annual
Meeting, the persons named in the proxy will vote as recommended by the Board
of
Directors or, if no recommendation is given, in their discretion.
HOW
TO VOTE
You
may
vote by proxy or in person at the Annual Meeting. To vote by proxy, you may:
vote at the Internet site address listed on your proxy card, call the toll-free
number set forth on your proxy card or mail your signed and dated proxy card
in
the envelope provided. Even if you plan to attend the Annual Meeting, you are
recommended to vote by proxy prior to the Annual Meeting. You can always change
your vote as described below.
REVOCABILITY
OF PROXIES
Any
person giving a proxy pursuant to this solicitation has the power to revoke
it
at any time before it is voted. It may be revoked by the holder of record by
filing with the Corporate Secretary at the address above, a written notice
of
revocation or a new duly executed proxy bearing a date later than the date
indicated on the previous proxy, or it may be revoked by the holder of record
attending the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not, by itself, revoke a proxy.
SOLICITATION
We
will
bear the entire cost of proxy solicitation, including costs of preparing,
assembling, printing and mailing this proxy statement, the proxy card and any
additional material furnished to stockholders. Copies of the solicitation
materials will be furnished to brokerage houses, fiduciaries and custodians
holding in their names shares of common stock beneficially owned by others,
to
forward to such beneficial owners. We may, if deemed necessary or advisable,
retain a proxy solicitation firm to deliver solicitation materials to beneficial
owners and to assist us in collecting proxies from such individuals. We may
reimburse persons representing beneficial owners of shares for their expenses
in
forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail 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.
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth certain information known to us regarding the
ownership of our common stock as of April 1, 2008 by: (i) each stockholder
known
to us to be a beneficial owner of more than five percent (5%) of our common
stock; (ii) each director; (iii) each executive officer named in the Summary
Compensation Table; and (iv) all current directors and officers as a
group.
Name
and Address (1)
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Number
of Shares
Beneficially
Owned
(2)
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Percentage
of
Outstanding
Shares
(3)
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Federated
Investors, Inc. (4)
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9,999,306
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23.5
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%
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Elliott
Associates (5)
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5,307,156
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12.5
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%
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Goldman,
Sachs & Co. (6)
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2,707,027
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6.4
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%
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Franklin
D. Brown (7)
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527,200
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1.2
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%
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Paul
McCormick (8)
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773,571
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1.8
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%
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Robert
J. Krist (9)
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190,793
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*
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Karen
Uyesugi (10)
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82,227
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*
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Stefan
D. Schreck (11)
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147,865
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*
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Janet
Fauls (12)
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16,375
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*
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Roderick
de Greef (13)
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105,000
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*
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Edward
B. Diethrich, M.D. (14)
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633,775
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1.5
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%
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Jeffrey
F. O’Donnell (15)
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295,417
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*
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Gregory
D. Waller (16)
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105,000
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*
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All
directors and officers as a group (9 persons) (17)
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2,794,996
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6.4
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%
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____________
* |
Represents
beneficial ownership of less than 1%
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(1) |
Unless otherwise indicated, the business
address of each holder is: c/o Endologix, Inc., 11 Studebaker, Irvine,
CA
92618. |
(2) |
The
number of shares of common stock beneficially owned includes any
shares
issuable pursuant to stock options that are currently exercisable
or may
be exercised within 60 days after April 1, 2008. Shares issuable
pursuant
to such options are deemed outstanding for computing the ownership
percentage of the person holding such options but are not deemed
to be
outstanding for computing the ownership percentage of any other person.
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(3) |
Applicable
percentages are based on 42,463,291 shares outstanding on April 1,
2008,
plus the number of shares such stockholder can acquire within 60
days
after April 1, 2008.
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(4) |
Based
on information contained in a Schedule 13G/A filed with the Securities
and
Exchange Commission on February 13, 2008. The address of Federated
Investors, Inc. is Federated Investors Tower, 5800 Corporate Drive,
Pittsburgh, Pennsylvania 15222.
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(5) |
Based
on information contained in Form 4 filed with the Securities and
Exchange
Commission on January 30, 2008. The address of Elliott Associates,
L.P. is
712 Fifth Avenue, 36th Floor, New York, New York 10019.
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(6) |
Based
on information contained in a Schedule 13G/A filed with the Securities
and
Exchange Commission on February 11, 2008. The address of Goldman,
Sachs
& Co. is 85 Broad Street New York, New York 10004.
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(7) |
Includes
262,500 shares subject to options exercisable within 60 days after
April
1, 2008 and 214,700 shares held in a family trust.
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(8) |
Includes 277,083 shares subject to
options
exercisable within 60 days after April 1, 2008. |
(9) |
Includes 132,723 shares subject to
options
exercisable within 60 days after April 1, 2008. |
(10) |
Consists of 82,227 shares subject to
options
exercisable within 60 days after April 1, 2008. Ms. Uyesugi resigned
effective as of November 16, 2007. |
(11) |
Includes 143,163 shares subject to
options
exercisable within 60 days after April 1, 2008. |
(12) |
Includes 16,375 shares subject to options
exercisable within 60 days after April 1, 2008.
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(13) |
Consists of 105,000 shares subject
to options
exercisable within 60 days after April 1, 2008. |
(14) |
Includes
523,775 shares held by T&L Investments L.P. Dr. and Mrs. Edward B.
Diethrich hold a total of 98% of the voting and dispositive power
over the
shares through a 98% ownership of the capital stock of EBDFam, Inc.,
the
general partner in T&L Investments L.P. Also includes 30,000 shares
held in a family trust and 80,000 shares subject to options exercisable
within 60 days after April 1, 2008.
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(15) |
Consists of 295,417 shares subject
to options
exercisable within 60 days after April 1,
2008. |
(16) |
Consists of 105,000 shares subject
to options
exercisable within 60 days after April 1, 2008.
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(17) |
Includes 1,499,488 shares subject to
options
exercisable within 60 days after April 1, 2008.
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PROPOSAL
ONE
ELECTION
OF DIRECTORS
The
Board
of Directors currently consists of six authorized directors divided into three
classes with Class I having one director, Class II having two directors and
Class III having three directors. 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. The nominee for
election at the Annual Meeting will serve as Class I director, with a term
expiring at the annual meeting of stockholders to be held in 2011. Each director
is elected to serve until the expiration of his term, or until his successor
is
duly elected and qualified.
The
nominee for election as Class I director at the Annual Meeting is Jeffrey F.
O’Donnell who currently serves as our director. Mr. O’Donnell has served as a
director since 1998 and has indicated a willingness to continue to serve on
the
Board of Directors if elected. However, in the event the nominee is unable
to or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for an additional 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.
Vote
Required and Recommendation of the Board of Directors
The
candidate receiving the highest number of affirmative votes of shares entitled
to vote at the Annual Meeting will be elected as director. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THE NOMINEE NAMED
ABOVE.
Information
With Respect to Nominee And Directors
Set
forth
below for the nominee for election as director and for each of our other
directors, is information regarding his age, position(s) with us, the period
he
has served as a director, any family relationship with any of our other
directors or executive officers, and the directorships currently held by him
in
corporations whose shares are publicly registered.
Class
I
(Director
continuing in office with a term expiring in 2011)
Jeffrey
F. O’Donnell, 48, has
served on our Board of Directors since June 1998. Mr. O’Donnell joined us in a
management capacity in 1995, became President in January 1998 and Chief
Executive Officer that June. In November 1999 Mr. O’Donnell joined PhotoMedex,
Inc., a publicly traded company, as President and Chief Executive Officer and
has served as a member of its Board of Directors since that date. From 1994
to
1995 Mr. O’Donnell held the position of President and CEO of Kensey Nash
Corporation, a manufacturer of Cardiology Products. Additionally, he has held
several senior sales and marketing management positions at Boston Scientific,
Guidant and Johnson & Johnson Orthopedic. Mr. O’Donnell currently serves on
the Board of Directors of Cardiac Science Corporation, a publicly traded
company. Mr. O’Donnell is a graduate of LaSalle University School of
Business.
Class
II
(Directors
nominated for office with a term expiring in 2009)
Franklin
D. Brown, 64,
serves
as our Chairman and has been a director since 2002, and was formerly a director
of the private company Endologix, Inc. from 1997 to 2002. Following the merger
with the former Endologix in May 2002, Mr. Brown was our Chief Executive Officer
and Chairman until January 2003, when he was elected Executive Chairman. Mr.
Brown served as our Executive Chairman until October 2004. Mr. Brown previously
served as the Chairman and Chief Executive Officer of the former Endologix,
Inc.
since joining that company in 1998. From October 1994 until the sale of the
company in September 1997, Mr. Brown served as Chairman, President and Chief
Executive Officer at Imagyn Medical, Inc. From 1986 until the sale of the
company in 1994, Mr. Brown served as President and Chief Executive Officer
of
Pharmacia Deltec, Inc., an ambulatory drug delivery company. Mr. Brown also
serves on the board of directors of Interventional Spine, Inc., a private
medical device company.
Edward
B. Diethrich, M.D., 72,
has
served on our Board of Directors since May 2002. Dr. Diethrich was a Director
for the former Endologix, Inc. from 1997 until its merger with us in May 2002.
Dr. Diethrich has been the Medical Director and Chief of Cardiovascular Surgery
of the Arizona Heart Hospital since 1997, and has been the Director and Chief
of
Cardiovascular Surgery at the Arizona Heart Institute from 1971 to the
present.
Class
III
(Directors
continuing in office with a term expiring in 2010)
Paul
McCormick, 55,
is our
President and Chief Executive Officer and has been a director since May 2002.
Mr. McCormick has more than 27 years in the medical device industry. The
majority of his career has been in emerging medical technologies. Mr. McCormick
joined the former Endologix in January 1998, prior to its merger with us in
May
2002, as Vice President of Sales and Marketing, and served as President and
Chief Operating Officer from January 2001 until the merger in May 2002. He
then
served in the same position with us until January 2003 when he became President
and Chief Executive Officer. Previously, he held various sales and marketing
positions at Progressive Angioplasty Systems, Heart Technology, Trimedyne Inc.,
and United States Surgical Corporation. Mr. McCormick also serves on the board
of directors Cardiogenesis Corporation.
Roderick
de Greef, 47,
has
served on our Board of Directors since November 2003. Mr. de Greef is the
principal of Taveyanne Capital Advisors, Inc., a corporate firm providing
finance consulting services. Mr. de Greef served as the Chief Financial
Officer of Cambridge Heart from October 2005 to July 2007. Prior
to
that, Mr.
de
Greef served as the Executive Vice President, Chief Financial Officer and
Secretary of Cardiac Science, Inc. from March 2001 to September 2005. From
1995
to 2001, Mr. de Greef provided corporate finance advisory services to a number
of early stage companies including Cardiac Science, where he was instrumental
in
securing equity capital beginning in 1997, and advising on merger and
acquisition activity. From 1989 to 1995, Mr. de Greef was Vice President and
Chief Financial Officer of BioAnalogics, Inc. and International BioAnalogics,
Inc., both publicly held development stage medical technology companies located
in Portland, Oregon. From 1986 to 1989, Mr. de Greef was Controller and then
Chief Financial Officer of publicly held Brentwood Instruments, Inc. Mr. de
Greef has a B.A. in Economics and International Relations from California State
University at San Francisco and an M.B.A. from the University of Oregon. Mr.
de
Greef serves on the board of BioLife Solutions, Inc., a public biotechnology
company located in Owego, New York. Mr. de Greef also serves
on the board of ElephantTalk Communications, Inc., an international
communications operator based in Orange, California.
Gregory
D. Waller, 58,
has
served on our Board of Directors since November 2003. Mr. Waller has been
Chief Financial Officer of Universal Building Products, a manufacturer of
concrete construction accessories since March, 2006. Previous to that Mr.
Waller had 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 and Metrex. Mr. Waller joined Ormco
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 has an
MBA
with a concentration in accounting from California State University, Fullerton.
Mr. Waller also serves on the board of Clarient, Inc., Cardiogenesis
Corporation, Alsius Corporation and SenoRx, Inc., all publicly traded companies,
where he is the audit committee chairman. He serves on the board of VivoMetrics
Corp., a privately-held company.
Executive
Officers
Our
executive officers, other than Mr. McCormick whose biography is set forth above,
are as follows:
Stefan
G. Schreck, Ph.D., 48,
joined
us in February 2004 and serves as our Vice President, Technology. Dr. Schreck
has more than 20 years of experience in research and development of medical
products. Prior to joining us, Dr. Schreck held increasingly more responsible
R&D management positions in the medical device industry. From May 1995 to
April 2000, Dr. Schreck served as Director of Research in Baxter Healthcare’s
Heart Valve Division. From April 2000 to August 2002, Dr. Schreck served as
Senior Director R&D at Edwards Lifesciences and was responsible for the
development of all surgical heart valve repair and replacement products. From
August 2002 to February 2004, Dr. Schreck served as President & CEO of
MediMorph Solutions Inc., an engineering and management consulting firm for
the
medical device industry, that he founded.
Robert
J. Krist, 59,
joined
us in August 2004 and serves as our Chief Financial Officer and Secretary.
Mr.
Krist served as Chief Financial Officer of CardioNet, Inc. from March 2003
until
May 2004. Mr. Krist previously served for three years as Chief Financial Officer
of Irvine-based Datum, Inc., a technology manufacturer. Prior to that, Mr.
Krist
served for three years as Chief Financial Officer and Vice President, Field
Operations, of Bridge Medical, Inc., a start-up pharmacy information systems
company. Mr. Krist also held various management positions during his six years
at McGaw, Inc., including Chief Financial Officer and President of the Central
Admixture Pharmacy Services Division. Mr. Krist received a BS in physics from
Villanova University and an MBA from the University of Southern
California.
Janet
Fauls,
45,
joined
us in November 2005 as our Director of Regulatory Affairs, and Quality
Assurance. In July 2007, she was promoted to Senior Director of Clinical and
Regulatory Affairs. Effective November 16, 2007, she was promoted to serve
as
our Vice President, Regulatory, Quality and Clinical Affairs. Ms. Fauls has
more
than 20 years of experience in the medical device and biopharmaceutical
industries. From 1987 to 1997, Ms. Fauls held increasingly responsible positions
in Quality and Regulatory Affairs for Allergan, Inc. and Alliance
Pharmaceuticals. From 1997 to 2001, Ms. Fauls served in a Regulatory Affairs
management capacity at Edwards Lifesciences with primary responsibility for
surgical heart valve repair and replacement products and related disposable
products. From 2001 to November 2005, Ms. Fauls served as Vice President,
Regulatory, Quality and Clinical Affairs for Cardiogenesis Corporation, a
medical device company specializing in laser-based cardiovascular therapies.
Ms.
Fauls received a BS in Chemistry from University of California, Santa
Barbara.
Director
Independence
All
of
the members of our Board of Directors, other than Messrs. McCormick and Brown
are “independent” as defined in the Nasdaq Marketplace Rules. Our Board has
determined that no member has a relationship that would interfere with the
exercise of independent judgment in carrying out his responsibilities as a
director. The independence of each director is reviewed periodically to ensure
that, at all times, at least a majority of our directors are independent.
Meetings
of the Board of Directors
The
Board
of Directors met five times during the year ended December 31, 2007. Except
for
Edward B. Diethrich, each director attended at least 75% of the aggregate of
(i)
the total number of meetings of the Board of Directors and (ii) the total number
of meetings held by all committees of the Board of Directors on which he
served.
Committees
of the Board of Directors
The
Board
of Directors has an Audit Committee, a Compensation Committee and a Nominating
and Governance Committee. Each committee operates under a written charter
adopted by the 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
The
Audit
Committee consists of Messrs. Waller, de Greef and O’Donnell. Each member of the
Audit Committee qualifies as an “independent director” in compliance with the
applicable rules of the Securities and Exchange Commission and the Nasdaq
Marketplace Rules. The Board of Directors has determined that each member of
the
Audit Committee qualifies as an “audit committee financial expert” as that term
is defined by the rules and regulations of the Securities and Exchange
Commission.
The
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. The Audit Committee has,
among other things, the responsibility to review and approve the scope and
results of the annual audit, to evaluate with the independent registered public
accounting firm the performance and adequacy of our financial personnel and
the
adequacy and effectiveness of our systems and internal financial controls,
to
review and discuss with management and the independent registered public
accounting firm the content of our financial statements prior to the filing
of
our quarterly reports on Form 10-Q and annual reports on Form 10-K, to establish
procedures for receiving, retaining and investigating reports of illegal acts
involving us or complaints or concerns regarding questionable accounting or
auditing matters and to establish procedures for the confidential, anonymous
submission by our employees of concerns or complaints regarding questionable
accounting or auditing matters. The Audit Committee met four times during the
year ended December 31, 2007. To ensure independence, the Audit Committee also
meets separately with our independent registered public accounting firm and
members of management.
Compensation
Committee
The
Compensation Committee consists of Dr. Diethrich and Messrs. O’Donnell and de
Greef each of whom satisfies the independence standards set forth in the Nasdaq
Marketplace Rules. The Compensation Committee is primarily responsible for
evaluating and approving the cash and equity compensation for the Chief
Executive Officer and other executive officers, and administers our employee
compensation plans. The Compensation Committee held four meetings during the
year ended December 31, 2007.
Additional
information regarding the Compensation Committee’s consideration and
determination of executive officer and director compensation is included under
the heading “Compensation Discussion and Analysis” beginning on page 14
below.
Nominating
and Governance Committee
The
Nominating and Governance Committee consists of Messrs. O’Donnell and de Greef,
each of whom satisfy the independence standards set forth in the Nasdaq
Marketplace Rules. The primary purposes of the Nominating and Governance
Committee are to identify and recommend to the Board of Directors individuals
qualified to serve as members of our Board of Directors and each of its
committees, to develop and recommend to the Board of Directors corporate
governance guidelines and to lead the Board of Directors in its annual review
of
its composition, effectiveness and performance. The Nominating and Governance
Committee held one meeting during the year ended December 31, 2007.
Evaluation
of Director Nominees
In
the
case of incumbent directors whose terms of office are set to expire, the
Nominating and Governance Committee reviews such directors’ overall service to
us during their term, including their level of participation and the quality
of
their performance. In the case of new director nominees, the Nominating and
Governance Committee screens candidates, does reference checks, prepares a
biography for each candidate for the Board to review and conducts interviews.
The members of the Nominating and Governance Committee and our Chief Executive
Officer interview candidates that meet the criteria described below, and the
Nominating and Governance Committee recommends nominees to the Board that best
suit the Board’s needs. The Nominating and Governance Committee does not intend
to evaluate nominees for director any differently because the nominee is or
is
not recommended by a stockholder. The nominee for director in this proxy
statement is standing for re-election. We do not pay a fee to any third party
to
identify or evaluate or assist in identifying or evaluating potential director
nominees.
The
Nominating and Governance Committee believes that 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 our
business;
|
· |
sufficient
time available to devote to our affairs;
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.
|
Stockholder
Nominations of Directors
The
Nominating and Governance Committee will consider stockholder recommendations
for directors sent to the Nominating and Governance Committee, c/o Corporate
Secretary, Endologix, Inc., 11 Studebaker, Irvine, California 92618. Stockholder
recommendations for directors must include: (1) 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, (2) a representation that the stockholder
is a holder of record of our stock, (3) a description of all arrangements or
understandings between the stockholder and the recommended nominee, if any,
(4)
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 (the “Exchange Act”) had
the nominee been nominated, or intended to be nominated, by the Board of
Directors, and (5) the consent of the recommended nominee to serve as a director
if so elected. The stockholder must also state if they intend 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, then
no
later than 10 days after such notice has been given.
Communications
with the Board of Directors
The
Board
of Directors provides a process for stockholders to send communications to
the
Board. Stockholders can send communications to the Board of Directors, or an
individual director, by sending a written communication to: Endologix, Inc.,
11
Studebaker, Irvine, California 92618, Attention: Corporate Secretary. All
communications sent to this address are sent to the specific directors
identified in the communication or if no directors are identified, the
communication is delivered to the Chairman of the Board. We do not have a policy
with respect to director attendance at annual meetings of our stockholders.
Historically, other than our employees, few stockholders have attended our
annual meetings. Five directors, one of whom was our employee, attended our
annual meeting in 2007.
Code
of Ethics
We
have
adopted a Code of Conduct and Ethics for our principal executive officer,
principal financial officer and principal accounting officer. A copy of the
Code
of Conduct and Ethics is available on the “Investor Relations” page on our
website at www.endologix.com,
and a
copy may also be obtained by any person, without charge, upon written request
delivered to Endologix, Inc., Attention: Corporate Secretary, 11 Studebaker,
Irvine, California 92618. 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 at the above address.
Section
16(a) 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(a) of the Exchange Act which requires them to file
reports with respect to their ownership of the common stock and their
transactions in such common stock. Based upon (i) the copies of Section 16(a)
reports that we received from such persons for their 2007 fiscal year
transactions in the common stock and their common stock holdings and/or (ii)
the
written representations received from one or more of such persons that no other
reports were required to be filed by them for the 2007 fiscal year, we believe
that all reporting requirements under Section 16(a) for such fiscal year were
met in a timely manner by our executive officers, Board members and greater
than
10% stockholders.
Compensation
Committee Interlocks and Insider Participation
None
of
our executive officers served on the board of directors or compensation
committee of any entity that has one or more executive officers serving as
a
member of our Board of Directors or Compensation Committee.
Related
Party Transactions
We
have
not entered into a transaction with any related person since the beginning
of
our 2007 fiscal year.
The
Audit
Committee is responsible for 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: (a) any of our directors or executive officers,
(b) any nominee for election as a director, (c) any security holder who is
known
to us to own of record or beneficially more than five percent of any class
of
our voting securities, or (d) any member of the immediate family (as defined
in
Regulation S-K, Item 404) of any of the persons described in the foregoing
clauses (a)-(c).
In
the
event that management becomes aware of any related person transaction,
management will present information regarding such transaction to the Audit
Committee for review and approval.
Compensation
Discussion and Analysis
Overview
This
compensation discussion and analysis is intended to provide context for the
decisions underlying the compensation reported in the executive compensation
tables included in this Proxy Statement for our Chief Executive Officer (“CEO”),
Chief Financial Officer (“CFO”) and our two other most highly compensated
executive officers. These four executive officers are collectively referred
to
as the “Named Executive Officers” or the “NEOs”. The Compensation Committee of
the Board of Directors is responsible for those policies and decisions regarding
the compensation and benefits for NEOs.
The
Compensation Committee of the Board of Directors evaluates and approves the
base
salary and bonuses to be paid to our executive officers each fiscal year. In
addition, the Compensation Committee administers our equity compensation plans
with respect to option grants and stock issuances made thereunder to officers
and other key employees.
Generally,
we strive to establish compensation practices and provide compensation
opportunities that attract, retain and reward our executives and strengthen
the
mutuality of interests between our executives and our shareholders in order
to
motivate them to maximize shareholder value. The primary goals of our executive
compensation program are:
· |
motivation
of our executive officers to cause us to achieve the best possible
financial and operational results;
|
· |
attraction
and retention of high quality executives who can provide effective
leadership, consistency of purpose and enduring relations with relevant
stockholders; and
|
· |
alignment
of long-term interests of our executive officers with those of our
stockholders.
|
In
making
decisions about total compensation to each executive officer, the Compensation
Committee considers our performance against internal plans, our performance
within the context of our peer group, and individual performance against
specific job responsibilities. Our performance is measured by revenues and
earnings. The Compensation Committee makes a subjective determination regarding
total compensation packages for our executive officers considering these factors
in the aggregate. Additionally, the Compensation Committee evaluates the
relativity of compensation among our executive officers with a view to ensure
that differences properly reflect differences in title, job responsibilities
and
performance.
Compensation
Program Components
The
significant components of our compensation program for executive officers
include base salary, incentive bonus, stock incentive awards and an employee
stock purchase plan.
Base
Salary
Base
salary is a fixed component of compensation, and is reviewed and adjusted
annually. The goal is to provide our executives with a stable,
market-competitive base of income that is commensurate with an executive’s
skills, experience and contributions to the company. Although
the Compensation Committee reviewed various compensation surveys, it did not
rely upon any specific survey for comparative compensation purposes. Instead,
the Compensation Committee made its decisions as to the appropriate market
level
of base salary for each executive officer on the basis of its understanding
of
the salary levels in effect for similar positions at those companies with which
we compete for executive talent. The Compensation Committee on an annual basis
will review base salaries, and adjustments will be made in accordance with
the
factors indicated above.
Incentive
Bonus
The
Endologix Employee Bonus Plan provides the Compensation Committee with
discretionary authority to award cash bonuses to the CEO and to the other
executive officers in accordance with recommendations made by the CEO. The
awards are based upon the extent to which financial and performance targets
are
met and the contribution of each such officer to the attainment of such targets.
For fiscal year 2007, the performance targets for each of the executive officers
included gross sales, cash management, engineering product goals, manufacturing
goals and regulatory milestone goals.
Stock
Incentive Awards
Stock
option awards are issued under our 2006 Stock Incentive Plan and provide the
Board with
the
ability to align the interests of the executive officer with those of the
stockholders and provide each individual with a significant incentive to manage
our company from the perspective of an owner with an equity stake in the
business. The number of shares subject to each option grant is based upon the
officer’s tenure, level of responsibility and relative position in our company.
We have established general guidelines for making option grants to the executive
officers in an attempt to target a fixed number of unvested option shares based
upon the individual’s position with us and their existing holdings of unvested
options. However, we do not adhere strictly to these guidelines and will vary
the size of the option grant made to each executive officer as it feels the
circumstances warrant. Each grant allows the officer to acquire shares of our
common stock at a fixed price per share (the market price on the grant date)
over a specified period of time (up to 10 years from the date of grant).
The option normally vests in periodic installments over a four-year period,
contingent upon the executive officer’s continued employment with us.
Accordingly, the option will provide a return to the executive officer only
if
he or she remains in our employ and the market price of our common stock
appreciates over the option term. are
intended to retain executives by providing a compelling incentive for the
participating executives to remain with us. In any given year, the Compensation
Committee may elect to grant stock options or other stock incentive awards,
such
as restricted stock or restricted stock units, depending on the Committee’s
assessment of our performance, business conditions, strategic goals and plans,
and executive retention risk.
Employee
Stock Purchase Plan
We
also
offer an Employee Stock Purchase Plan to eligible employees (including the
Named
Executive Officers) that provides an opportunity to purchase our common stock
through payroll deductions.
Accounting
and Tax Consequences
Effective
January 1, 2006, we adopted the fair value provisions of Financial Accounting
Standards Board Statement No. 123(R) (revised 2004), “Share-Based Payment,” or
SFAS 123(R). Under SFAS 123(R), we are required to estimate and record an
expense for each award of equity compensation (including stock options) over
the
vesting period of the award.
Section
162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue
Code”) limits the amount that we may deduct for compensation paid to our chief
executive officer and to each of our four most highly compensated officers
to
$1,000,000 per person, unless certain exemption requirements are met. Exemptions
to this deductibility limit may be made for various forms of “performance-based
compensation.” In the past, annual cash compensation to our executive officers
has not exceeded $1,000,000 per person, so the compensation has been deductible.
In addition to salary and bonus compensation, upon the exercise of stock
options
that are not treated as incentive stock options, the excess of the current
market price over the option price, or option spread, is treated as compensation
and accordingly, in any year, such exercise may cause an officer’s total
compensation to exceed $1,000,000.
Summary
Compensation Table
The
following table sets forth summary compensation information for the fiscals
years ended December 31, 2007 and 2006 for our Chief Executive Officer, Chief
Financial Officer and each of our executive officers as of the end of the last
fiscal year whose total compensation exceeded $100,000.
Name
and Principal Position
|
|
Year
|
|
Salary ($)
|
|
Option
Awards
($)(1)
|
|
Non-Equity
Incentive Plan Compensation ($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul
McCormick,
|
|
|
2007
|
|
$
|
350,000
|
|
$
|
229,894
|
|
$
|
98,000
|
|
$
|
677,894
|
|
President
and Chief Executive Officer
|
|
|
2006
|
|
$
|
325,000
|
|
$
|
200,285
|
|
$
|
76,781
|
|
$
|
602,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
J. Krist,
|
|
|
2007
|
|
$
|
227,700
|
|
$
|
114,084
|
|
$
|
54,648
|
|
$
|
396,432
|
|
Chief
Financial Officer and Secretary
|
|
|
2006
|
|
$
|
207,000
|
|
$
|
121,424
|
|
$
|
53,872
|
|
$
|
382,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karen
Uyesugi,
|
|
|
2007
|
|
$
|
187,546
|
|
$
|
88,972
|
|
$
|
29,000
|
|
$
|
305,518
|
|
Vice
President, Regulatory, Quality and Clinical Affairs (2)
|
|
|
2006
|
|
$
|
194,000
|
|
$
|
92,621
|
|
$
|
46,618
|
|
$
|
333,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stefan
G. Schreck,
|
|
|
2007
|
|
$
|
227,700
|
|
$
|
125,168
|
|
$
|
54,648
|
|
$
|
407,516
|
|
Vice
President, Technology
|
|
|
2006
|
|
$
|
194,000
|
|
$
|
149,645
|
|
$
|
41,526
|
|
$
|
385,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janet
Fauls,
|
|
|
2007
|
|
$
|
144,896
|
|
$
|
18,560
|
|
$
|
21,877
|
|
$
|
185,333
|
|
Vice
President, Regulatory, Quality and Clinical Affairs (3)
|
|
|
2006
|
|
$
|
125,000
|
|
$
|
12,629
|
|
$
|
15,938
|
|
$
|
153,566
|
|
(1) Represents
amounts that we recognize as compensation expense in our financial statements
for 2006 and 2007 as determined under Statement of Financial Accounting
Standards 123(R), excluding the effect of the forfeiture estimate. The amounts
are the expense for options granted in 2007 and prior years.
(2) Ms.
Uyesugi resigned effective November 16, 2007.
(3) Ms.
Fauls
was appointed as the Vice President, Regulatory, Quality and Clinical Affairs
effective November 16, 2007.
Grants
of Plan-Based Awards
The
following table summarizes grants of awards pursuant to plans made to Named
Executive Officers during the year ended December 31, 2007.
|
|
|
|
Estimated
Future Payouts Under Non-Equity Incentive Plan
Awards
|
|
All
Other Option Awards:
Number
of
Securities
Underlying
|
|
Exercise or
Base
Price
of
Option
|
|
Grant
Date Fair Value
of
Option
|
|
Name
|
|
Grant
Date
|
|
Threshold
($)
|
|
Target
($)
|
|
Maximum
($)
|
|
Options
(#)
|
|
Awards
($
/ Sh)
|
|
Awards
($ / Sh)
|
|
Paul
McCormick
|
|
|
5/22/07
(1
|
)
|
|
|
|
$
|
122,500
|
|
$
|
122,500
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
J. Krist
|
|
|
5/22/07
(1
|
)
|
|
|
|
$
|
68,310
|
|
$
|
68,310
|
|
|
37,000
|
|
|
$
4.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karen
Uyesugi
|
|
|
5/22/07
(1
|
)
|
|
|
|
$
|
64,020
|
|
$
|
64,020
|
|
|
37,000
|
|
|
$
4.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stefan
G. Schreck
|
|
|
5/22/07
(1
|
)
|
|
|
|
$
|
68,310
|
|
$
|
68,310
|
|
|
25,000
|
|
|
$
4.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janet
Fauls
|
|
|
5/22/07
(1
|
)
|
|
|
|
$
|
39,750
|
|
$
|
39,750
|
|
|
8,000
|
|
|
$
4.32
|
|
|
|
|
|
|
|
11/16/2007(1
|
)
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
$
2.87
|
|
|
|
|
(1)
The
amounts reported in this row represent the range of potential awards under
the
threshold, target, and maximum performance objectives established by the
Compensation Committee in December 2006.
Outstanding
Equity Awards at Fiscal Year-End
The
following table summarizes outstanding equity awards held by Named Executive
Officers as of December 31, 2007.
|
|
Option
Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
(1)
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
(1)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
(2)
|
|
|
|
Exercisable
|
|
Unexercisable
|
|
|
|
|
|
Paul
McCormick
|
|
|
100,000
|
|
|
—
|
|
|
$
3.92
|
|
|
12/11/2013
|
|
|
|
|
66,667
|
|
|
33,333
|
|
|
$
5.81
|
|
|
4/4/2015
|
|
|
|
|
39,583
|
|
|
60,417
|
|
|
$
3.40
|
|
|
5/23/2016
|
|
|
|
|
—
|
|
|
200,000
|
|
|
$
4.32
|
|
|
5/22/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
J. Krist
|
|
|
83,333
|
|
|
16,667
|
|
|
$
5.55
|
|
|
8/18/2014
|
|
|
|
|
12,733
|
|
|
6,367
|
|
|
$
5.81
|
|
|
4/4/2015
|
|
|
|
|
11,875
|
|
|
18,125
|
|
|
$
3.40
|
|
|
5/23/2016
|
|
|
|
|
—
|
|
|
37,000
|
|
|
$
4.32
|
|
|
5/22/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karen
Uyesugi
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,375
|
|
|
|
|
|
$
3.92
|
|
|
11/16/2008
|
|
|
|
|
38,685
|
|
|
|
|
|
$
5.81
|
|
|
11/16/2008
|
|
|
|
|
14,167
|
|
|
|
|
|
$
3.40
|
|
|
11/16/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stefan
G. Schreck
|
|
|
47,917
|
|
|
2,083
|
|
|
$
6.00
|
|
|
2/26/2014
|
|
|
|
|
21,875
|
|
|
3,125
|
|
|
$
4.70
|
|
|
6/17/2014
|
|
|
|
|
30,933
|
|
|
15,467
|
|
|
$
5.81
|
|
|
4/4/2015
|
|
|
|
|
9,583
|
|
|
10,417
|
|
|
$
7.12
|
|
|
1/17/2016
|
|
|
|
|
11,875
|
|
|
18,125
|
|
|
$
3.40
|
|
|
5/23/2016
|
|
|
|
|
—
|
|
|
25,000
|
|
|
$
4.32
|
|
|
5/22/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janet
Fauls
|
|
|
7,813
|
|
|
7,187
|
|
|
$
5.25
|
|
|
11/7/2015
|
|
|
|
|
3,958
|
|
|
6,042
|
|
|
$
3.40
|
|
|
5/23/2016
|
|
|
|
|
—
|
|
|
8,000
|
|
|
$
4.32
|
|
|
5/22/2017
|
|
|
|
|
—
|
|
|
50,000
|
|
|
$
2.87
|
|
|
11/16/2017
|
|
(1) Each
option vests 25% upon the first anniversary of the grant date and then in equal
monthly installments over the next three years. Options are fully vested upon
the fourth anniversary of the grant date. In addition, the vesting of these
options may fully accelerate upon a change in control pursuant to written
agreements entered into with each of the Named Executive Officers.
(2) Options
expire ten years from the grant date.
Option
Exercises and Stock Vested
The
following table summarizes each exercise of stock options during the fiscal
year
ended December 31, 2007 for each of the Named Executive Officers.
|
|
Option
Awards
|
|
Name
|
|
Number
of
Shares
Acquired on Exercise (#)
|
|
Value
Realized on Exercise
($)
|
|
Karen
Uyesugi
|
|
|
49,584
|
|
$
|
168,585.60
|
|
Compensation
of Directors
Non-employee
directors each receive a fee of $1,500 per quarter, $2,000 for each Board
meeting attended in person and reimbursement for certain travel expenses and
other out-of-pocket costs. Members of Board committees, other than the Audit
Committee, each receive an additional fee of $500 for each committee meeting
attended. Additionally, each member of the Audit Committee is entitled to a
fee
of $1,000 per meeting attended and the chairman of the Audit Committee is
entitled to an additional quarterly retainer of $1,000. In addition, each
individual who first becomes a non-employee Board member, whether elected by
the
stockholders or appointed by the Board, automatically will be granted, at the
time of such initial election or appointment, an option to purchase 50,000
shares of common stock at the fair market value per share of common stock on
the
grant date, which vests in three equal annual installments.
On
the
date of each annual meeting of stockholders, each individual who is to continue
to serve as a non-employee Board member after the annual meeting will receive
an
additional option grant to purchase 40,000 shares of common stock, other than
the Chairman of the Board who receives an option grant to purchase up to 50,000
shares of common stock, which vests upon the completion of one year of Board
service.
Director
Compensation Paid for the 2007 Fiscal Year
The
following table summarizes the compensation paid to each of our directors during
the fiscal year ended December 31, 2007.
Name
|
|
Fees Earned or
Paid in Cash
($)
(1)
|
|
Option Awards
($)
(2)
|
|
All
Other
Compensation
($)
(3)
|
|
Total
($)
|
|
Franklin
D. Brown
|
|
$
|
—
|
|
$
|
114,519
|
|
$
|
150,000
|
|
$
|
264,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
H. Coelyn
|
|
$
|
18,000
|
|
$
|
72,452
|
|
$
|
|
|
$
|
90,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roderick
de Greef
|
|
$
|
18,000
|
|
$
|
45,808
|
|
$
|
|
|
$
|
63,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edward
B. Diethrich
|
|
$
|
12,000
|
|
$
|
45,808
|
|
$
|
|
|
$
|
57,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
F. O'Donnell
|
|
$
|
15,000
|
|
$
|
45,808
|
|
$
|
|
|
$
|
60,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory
D. Waller
|
|
$
|
25,000
|
|
$
|
45,808
|
|
$
|
|
|
$
|
70,808
|
|
(1) Reflects
cash compensation earned for fiscal year end 2007 for meeting attendance and
annual retainer. Annual retainers are paid in quarterly installments and
prorated for any portion of a year during which a director serves.
(2) Represents
amounts that we recognized as compensation expense in our financial statements
for 2007 as determined under FAS 123(R), excluding the effect of the forfeiture
estimate. The amounts are the expense for options granted in 2007 and prior
years.
(3) Represents
compensation for Mr. Brown providing consulting services during 2007.
The
following table sets forth the number of shares underlying outstanding stock
options (vested and unvested) held by each of our directors as of the end of
the
2007 fiscal year. Our directors did not hold any unvested shares of restricted
stock as of the end of the 2007 fiscal year.
Director
|
|
Shares
underlying options at fiscal year end
|
|
Franklin
D. Brown
|
|
|
252,500
|
|
|
|
|
|
|
Ronald
H. Coelyn
|
|
|
60,000
|
|
|
|
|
|
|
Roderick
de Greef
|
|
|
105,000
|
|
|
|
|
|
|
Edward
B. Diethrich
|
|
|
80,000
|
|
|
|
|
|
|
Jeffrey
F. O'Donnell
|
|
|
295,417
|
|
|
|
|
|
|
Gregory
D. Waller
|
|
|
105,000
|
|
Severance
and Change-in-Control Arrangements for Executive Officers
We
have
entered into employment agreements with each of our Named Executive Officers.
The agreements automatically renew for one year periods on each October 18,
unless sooner terminated pursuant to the terms and provisions thereof. Unless
thirty days notice is provided by either party to the agreement before the
expiration date, the agreement automatically renews for successive one-year
terms thereafter. The agreement provides that if we terminate the executive
officer’s employment without cause or he or she resigns for good reason, the
executive officer is entitled to his or her base salary and continued benefits
for six months, all stock options that would have vested over the following
six
months will vest immediately upon termination and he or she would be entitled
to
a prorated payment equal to the target bonus amount for which he or she would
have been eligible for the year of termination. In addition, in the event the
executive officer is terminated, or resigns for good reason, in connection
with
a change in control, the executive officer is entitled to his or her base salary
and continued benefits for twelve months, all stock options will accelerate
and
vest and he or she would be entitled to a prorated payment equal to the target
bonus amount for which he or she would have been eligible for the year of
termination.
Potential
Payments Upon Termination or Change in Control
The
following table summarizes the amounts that would become payable to each of
our
Named Executive Officers pursuant to the change in control agreements described
above.
|
|
|
|
Before
Change in
Control
|
|
After
Change in
Control
|
|
Name
|
|
Benefit
|
|
Termination
without
Cause or for
Good
Reason
|
|
Termination
without
Cause or
for Good Reason
|
|
Paul
McCormick
|
|
|
Severance
Pay (1)
|
|
$
|
175,000
|
|
$
|
350,000
|
|
|
|
|
Bonus
Pay (2)
|
|
$
|
61,250
|
|
$
|
122,500
|
|
|
|
|
Stock
option vesting acceleration (3)
|
|
|
79,167
|
|
|
293,750
|
|
|
|
|
Continuation
of Benefits(4)
|
|
$
|
7,607
|
|
$
|
15,214
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
J. Krist
|
|
|
Severance
Pay (1)
|
|
$
|
113,850
|
|
$
|
227,700
|
|
|
|
|
Bonus
Pay (2)
|
|
$
|
34,155
|
|
$
|
68,310
|
|
|
|
|
Stock
option vesting acceleration (3)
|
|
|
28,659
|
|
|
78,159
|
|
|
|
|
Continuation
of Benefits(4)
|
|
$
|
2,418
|
|
$
|
4,835
|
|
|
|
|
|
|
|
|
|
|
|
|
Janet
Fauls
|
|
|
Severance
Pay (1)
|
|
$
|
82,500
|
|
$
|
165,000
|
|
|
|
|
Bonus
Pay (2)
|
|
$
|
24,750
|
|
$
|
49,500
|
|
|
|
|
Stock
option vesting acceleration (3)
|
|
|
5,292
|
|
|
71,229
|
|
|
|
|
Continuation
ofBenefits
(4)
|
|
$
|
5,582
|
|
$
|
11,165
|
|
|
|
|
|
|
|
|
|
|
|
|
Stefan
G. Schreck
|
|
|
Severance
Pay (1)
|
|
$
|
113,850
|
|
$
|
227,700
|
|
|
|
|
Bonus
Pay (2)
|
|
$
|
34,155
|
|
$
|
68,310
|
|
|
|
|
Stock
option vesting acceleration (3)
|
|
|
24,029
|
|
|
74,217
|
|
|
|
|
Continuation
of Benefits(4)
|
|
$
|
7,607
|
|
$
|
15,214
|
|
(1) “Before
Change in Control” NEO is entitled to his or her base salary for six months.
“After Change in Control” NEO is entitled to his or her base salary for twelve
months.
(2) "Before
Change in Control" six month potential bonus amount shown, assuming 100% target
was met, but would be prorated equal to the target bonus amount for which he
or
she would be entitled for the year of termination. "After Change in Control"
twelve month potential bonus amount shown, assuming 100% target was met, but
would be prorated equal to the target bonus amount for which he or she would
be
entitled for the year of termination.
(3) "Before
Change in Control" shares represent all stock options that would have vested
in
the six months following December 31, 2007, as they will vest immediately.
"After Change in Control" shares represents all stock options as of December
31,
2007, as they will all vest immediately.
(4) “Before
Change in Control” represents continuation of benefits through COBRA payments
for six months. “After Change in Control” represents continuation of benefits
through COBRA payments for twelve months.
Compensation
Committee Report
The
Compensation Committee of the Board has reviewed and discussed with management
the information provided under the heading “Compensation Discussion and
Analysis” in this proxy statement required by Item 402(b) or Regulation S-K.
Based on such review and discussions, the Compensation Committee recommended
to
the Board that this Compensation Discussion and Analysis be included in this
proxy statement.
The
Compensation Committee
Edward
B.
Dietrich, M.D.
Jeffrey
O’Donnell
The
material in this report is not “soliciting material” and is not deemed filed
with the Securities and Exchange Commission and is not to be incorporated
by
reference in any filing of Endologix under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, whether made
before
or after the date hereof and irrespective of any general incorporation language
in any such filing.
PROPOSAL
TWO
AMENDMENT
TO THE 2006 EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE
TOTAL
NUMBER
OF SHARES PURCHASABLE THEREUNDER FROM 308,734 SHARES TO 558,734
SHARES
The
Board
of Directors adopted and our stockholders originally approved the 2006 Employee
Stock Purchase Plan in May 2006 (the “2006 Purchase Plan”). The primary purposes
of the 2006 Purchase Plan are to provide to employees an incentive to join
and
remain in the service of the company, to promote employee morale and to
encourage employee ownership of our common stock by permitting them to purchase
shares at a discount through payroll deductions. The 2006 Purchase Plan is
intended to qualify as an “employee stock purchase plan” under Section 423 of
the Internal Revenue Code. At the time of its adoption, the 2006 Purchase Plan
authorized the sale of up to 308,734 shares of common stock. On April 9,
2008, the Board of Directors, subject to stockholder approval, amended the
2006
Purchase Plan to increase the authorized number of shares of common stock
purchasable thereunder by 250,000 shares and to reserve the additional shares
for purchase under the 2006 Purchase Plan, bringing the total number of shares
of common stock subject to the 2006 Purchase Plan to 558,734. A copy of the
2006
Purchase Plan is included in this proxy statement as Appendix A.
INTEREST
OF CERTAIN PERSONS IN OR OPPOSITION TO MATTER TO BE ACTED
UPON
Our
officers are eligible to participate in the 2006 Purchase Plan, and have a
substantial direct interest in the approval of the 2006 Purchase
Plan.
DESCRIPTION
OF THE 2006 EMPLOYEE STOCK PURCHASE PLAN
The
principal features of the 2006 Purchase Plan are summarized below, but the
summary is qualified in its entirety by reference to the 2006 Purchase Plan
itself. Copies of the 2006 Purchase Plan can be obtained by writing to the
Secretary, Endologix, Inc., 11 Studebaker, Irvine, California
92618.
Administration.
The
2006 Purchase Plan may be administered by either the Board of Directors or
a
committee appointed by the Board (the “Committee”). If approved, the Board will
delegate administration of the 2006 Purchase Plan to the Compensation Committee,
which is comprised of three non-employee directors, who are not eligible to
participate in the 2006 Purchase Plan. Subject to the provisions of the 2006
Purchase Plan, the Committee has full authority to implement, administer and
make all determinations necessary under the 2006 Purchase Plan.
Eligibility.
Every
employee who customarily works more than 20 hours per week for more than 5
months per calendar year will be eligible to participate in offerings made
under
the 2006 Purchase Plan. An employee may not participate in an offering under
the
2006 Purchase Plan if immediately after the purchase the employee would own
shares or options to purchase shares of stock possessing 5% or more of the
total
combined voting power or value of all of our classes of stock. As of April
1,
2007, approximately 166 persons were eligible to participate in the 2006
Purchase Plan.
Purchase
of Shares.
Shares
of common stock are generally offered for purchase through a series of 6 month
offering periods. The initial offering period started on the first business
day
in August 2006 and terminated on December 29, 2006, with subsequent offering
periods commencing on 6 month intervals thereafter beginning on January 1,
2007.
Eligible
employees who elect to participate in an offering period purchase shares of
common stock through regular payroll deductions in an amount designated by
the
employee not to exceed 10% of such employee’s compensation. For this purpose,
“compensation” means the amount indicated on the Form W-2 issued to the employee
by us, including any election deferrals with respect to a plan of the company
qualified under either Section 125 or Section 401(a) of the Internal Revenue
Code. Shares of common stock are purchased automatically on the purchase date
for each offering period, which is the last day of each offering period, at
a
price equal to 85% of the fair market value of the shares on the first business
day of the offering period or 85% of the fair market value of the shares as
of
the purchase date, whichever is lower. A participant may withdraw from an
offering at any time prior to the purchase date and receive a refund of his
payroll deductions, without interest. A participant’s rights in the 2006
Purchase Plan are nontransferable. As an employee benefit plan that satisfies
the coverage and participation requirements of Sections 423(b)(3) and 423(b)(5)
of the Internal Revenue Code, an affiliate’s transactions under the 2006
Purchase Plan are exempt from liability under Section 16(b) of the Securities
Exchange Act of 1934, as set forth in Rule 16b-3 promulgated
thereunder.
No
employee may purchase any stock under the 2006 Purchase Plan if immediately
after the purchase (1) the employee would own shares or hold outstanding options
to purchase shares under the 2006 Purchase Plan, together with all of our other
plans, possessing 5% or more of the total combined voting power of all of our
classes of shares, or (2) the purchase would permit the employee’s right to
purchase shares under all of our employee stock purchase plans to accrue at
a
rate which exceeds $25,000, based on the fair market value of such shares
determined as of the grant date, for any calendar year in which the right is
outstanding at any time.
Amendment
and Termination.
The
Board of Directors may at any time amend, suspend or terminate the 2006 Purchase
Plan; provided that any amendment that would (1) materially increase the
aggregate number of shares authorized for sale under the 2006 Purchase Plan
(except pursuant to adjustments provided for in the 2006 Purchase Plan), (2)
alter the purchase price formula so as to reduce the purchase price payable
for
the shares of common stock purchasable under the 2006 Purchase Plan, or (3)
materially increase the benefits which accrue to participants under the 2006
Purchase Plan or materially modify the requirements for eligibility to
participate in the 2006 Purchase Plan, are not effective unless approved by
the
stockholders within 12 months of the adoption of such amendment by the Board
of
Directors. Unless previously terminated by the Board of Directors, the 2006
Purchase Plan will terminate on the last business day of June 2016, or when
all
shares authorized for sale thereunder have been sold, whichever is
earlier.
NEW
PLAN BENEFITS
Future
participation by our executive officers and employees is discretionary.
Therefore, at this time the benefits that may be received by our executive
officers and other employees if our stockholders approve the 2006 Purchase
Plan
cannot be determined.
REQUIRED
VOTE AND RECOMMENDATION OF BOARD OF DIRECTORS
Approval
of the amendment to the 2006 Purchase Plan will require the affirmative vote
of
the holders of a majority of the shares present in person or by proxy at the
meeting and entitled to vote. Proxies solicited by management for which no
specific direction is included will be voted “for” the amendment to the 2006
Purchase Plan to add 250,000 shares of common stock to the pool of shares
reserved for issuance thereunder. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE AMENDMENT TO THE 2006 PURCHASE
PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE FOR PURCHASE THEREUNDER BY
250,000.
PROPOSAL
THREE
APPROVAL
OF AMENDMENT TO THE 2006 STOCK INCENTIVE PLAN TO
INCREASE
THE NUMBER OF SHARES ISSUABLE THEREUNDER FROM 2,814,478 SHARES
TO 5,814,478 SHARES
The
Board
of Directors adopted and our stockholders originally approved the 2006 Stock
Incentive Plan in May 2006 (“2006 Plan”). The primary purposes of the 2006 Plan
are (a) to enhance our ability to attract and retain the services of qualified
employees, officers, directors, consultants and other service providers upon
whose judgment, initiative and efforts the successful conduct and development
of
our business largely depends, and (b) to provide additional incentives to such
persons or entities to devote their utmost effort and skill to the advancement
and betterment of our company, by providing them an opportunity to participate
in our ownership and thereby have an interest in the success and increased
value
of our company. At the time of its adoption, the 2006 Plan authorized the grant
of awards covering up to an aggregate of 2,814,478 shares of common stock.
An amendment to the 2006 Plan was approved by the Board of Directors on April
9,
2008 subject to approval by our stockholders, to increase the authorized number
of shares of common stock issuable thereunder by 3,000,000 shares and to reserve
the additional shares for issuance thereunder, bringing the total number of
shares of common stock subject to the 2006 Plan to 5,814,478. A copy of the
2006
Plan is included in this proxy statement as Appendix B.
INTEREST
OF CERTAIN PERSONS IN OR OPPOSITION TO MATTER TO BE ACTED
UPON
Our
directors and officers are eligible to participate in the 2006 Plan, and have
a
substantial direct interest in the approval of the 2006 Plan.
DESCRIPTION
OF THE 2006 STOCK INCENTIVE PLAN
The
principal features of the 2006 Plan are summarized below, but the summary is
qualified in its entirety by reference to the 2006 Plan itself. Copies of the
2006 Plan can be obtained by writing to the Secretary, Endologix, Inc., 11
Studebaker, Irvine, California 92618.
Description
of the 2006 Plan
The
2006
Plan is an “omnibus” stock plan consisting of a variety of equity vehicles to
provide flexibility in implementing equity awards, including incentive stock
options, non-qualified stock options, restricted stock grants, stock
appreciation rights, stock payment awards, restricted stock units and dividend
equivalents. Participants in the 2006 Plan may be granted any one of the equity
awards or any combination thereof, as determined by the Board of
Directors.
Administration.
Our
Board of Directors may delegate administration of the 2006 Plan to a committee
comprised of no fewer than two members of the Board of Directors (the
“Committee”). At the Board of Directors’ discretion, each Committee member shall
satisfy the requirements for (i) a “non-employee director” for purposes of Rule
16b-3 of the Exchange Act, and (ii) an “outside director” under Section 162(m)
of the Internal Revenue Code. The term “Administrator,” as used in this proxy
statement, refers to the Board of Directors, or, if the administration of the
2006 Plan has been delegated to a committee, the Committee. Currently, the
Board
of Directors has delegated administration of the 2006 Plan to our Compensation
Committee.
The
Committee shall have such powers and authority as may be necessary or
appropriate to carry out the functions of the Administrator as described in
the
2006 Plan. Subject to the express limitations of the 2006 Plan, the
Administrator shall have authority in its discretion to determine the persons
to
whom, and the time or times at which, awards may be granted, the number of
shares, units or other rights subject to each award, the exercise, base or
purchase price of an award (if any), the time or times at which an award will
become vested, exercisable or payable, the performance goals and other
conditions of an award, the duration of the award and all other terms of the
award. The Administrator may prescribe, amend and rescind rules and regulations
relating to the 2006 Plan. All interpretations, determinations and actions
by
the Administrator in good faith shall be final, conclusive and binding upon
all
parties. Additionally, the Administrator may delegate to one or more of our
officers or directors the ability to grant and determine terms and conditions
of
awards under the 2006 Plan to certain employees.
Eligibility.
Any
person who is our employee or consultant, or any person who is a non-employee
director is eligible to be designated by the Administrator to receive awards
and
becomes a participant under the 2006 Plan (a “Participant” or the
“Participants”). As of April 1, 2007, four executive officers, four
non-employee directors, approximately 162 other employees, and consultants
were
eligible to participate in the 2006 Plan.
Types
of Awards under 2006 Plan
The
2006
Plan includes the following types of equity compensation awards: incentive
stock
options, non-qualified stock options, restricted stock grants, stock payment
awards, stock appreciation rights, restricted stock units and dividend
equivalents, all of which are described below.
Stock
Options.
Stock
options granted under the 2006 Plan may be either incentive stock options or
non-qualified stock options, subject to the provisions of Section 422 of the
Internal Revenue Code or non-qualified stock options.
The
exercise price per share of a stock option shall not be less than the fair
market value of our common stock on the date the option is granted, provided
that the Administrator may in its discretion specify for any stock option an
exercise price per share that is higher than the fair market value of our common
stock on the date the option is granted. A stock option may be subject to such
vesting and exercisability requirements as specified by the Administrator in
an
award agreement. Such vesting and exercisability requirements may be based
on
the continued service of the Participant with us for a specified time period
(or
periods) or on the attainment of specified performance goals established by
the
Administrator in its discretion. The Administrator shall determine the period
during which a vested stock option may be exercised, provided that the maximum
term of a stock option shall be ten years from the date the option is
granted.
Stock
Appreciation Rights.
A stock
appreciation right will entitle the holder, upon exercise or other payment
of
the stock appreciation right, as applicable, to receive an amount determined
by
multiplying: (i) the excess of the fair market value of a share of our common
stock on the date of exercise or payment of the stock appreciation right over
the base price of such stock appreciation right, by (ii) the number of shares
as
to which such stock appreciation right is exercised or paid. Subject to the
requirements of Section 409A of the Internal Revenue Code, payment of the amount
determined under the foregoing may be made, as approved by the Administrator
and
set forth in the award agreement, in shares of common stock valued at their
fair
market value on the date of exercise or payment, in cash, or in a combination
of
shares of common stock and cash, subject to applicable tax withholding
requirements.
A
stock
appreciation right may be subject to such vesting and exercisability
requirements as specified by the Administrator in an award agreement. Such
vesting and exercisability requirements may be based on the continued service
of
the Participant with us for a specified time period (or periods) or on the
attainment of specified performance goals established by the Administrator
in
its discretion. A stock appreciation right will be exercisable or payable at
such time or times as determined by the Administrator. The base value of a
stock
appreciation right shall not be less than 100 percent of the fair market value
of the shares of our common stock on the date the right is granted.
Stock
appreciation rights may be granted on a basis that allows for the exercise
of
the right by the Participant or that provides for the automatic payment of
the
right upon a specified date or event. Stock appreciation rights shall be
exercisable or payable at such time or times and upon conditions as may be
approved by the Administrator, provided that the Administrator may accelerate
the exercisability or payment of a stock appreciation right at any
time.
Restricted
Stock Awards.
Restricted stock awards are shares issued under the 2006 Plan that are subject
to restrictions on transfer and vesting requirements as determined by the
Administrator. The restrictions imposed on shares granted under a restricted
stock award shall lapse in accordance with the vesting requirements specified
by
the Administrator in the award agreement, provided that the Administrator may
accelerate the vesting of a restricted stock award at any time. Such vesting
requirements may be based on the continued service of the Participant with
us
for a specified time period (or periods) or on the attainment of specified
performance goals established by the Administrator in its discretion. If the
vesting requirements of a restricted stock award shall not be satisfied, the
award shall be forfeited and the unvested shares of common stock subject to
the
award shall be returned to us (or, to the extent the Participant paid for the
shares of common stock, we have the right to repurchase such shares from the
Participant at the original purchase price).
Subject
to the provisions of the 2006 Plan and the applicable award agreement, the
Participant shall have all rights of a stockholder with respect to the shares
granted to the Participant under a restricted stock award, including the right
to vote the shares and receive all dividends and other distributions paid or
made with respect thereto.
Restricted
Stock Unit Awards.
The
value of each stock unit under a restricted stock unit award is equal to one
share of our common stock on the applicable date or time period of
determination, as specified by the Administrator. A restricted stock unit award
shall be subject to such restrictions and conditions as the Administrator shall
determine. A restricted stock unit award may be granted together with a dividend
equivalent right with respect to the shares of common stock subject to the
award, which may be accumulated and may be deemed reinvested in additional
stock
units, as determined by the Administrator in its discretion.
On
the
date the award is granted, the Administrator shall in its discretion determine
the vesting requirements with respect to a stock unit award, which shall be
set
forth in the award agreement, provided that the Administrator may accelerate
the
vesting of a stock unit award at any time. Vesting requirements may be based
on
the continued service of the Participant with us for a specified time period
(or
periods) or on the attainment of specified performance goals established by
the
Administrator in its discretion.
A
stock
unit award shall become payable to a Participant at the time or times determined
by the Administrator and set forth in the award agreement, which may be upon
or
following the vesting of the award. Payment of a stock unit award shall be
made
in shares of our common stock, and shall be subject to applicable tax
withholding requirements. The Participant shall not have any rights as a
stockholder with respect to the shares subject to a stock unit award until
such
time as shares of common stock are delivered to the Participant pursuant to
the
terms of the award agreement.
Stock
Payment Awards.
A stock
payment award may be granted for past services, in lieu of bonus or other cash
compensation, as directors’ compensation or for any other valid purpose as
determined by the Administrator. A stock payment award granted to a Participant
represents shares of our common stock that are issued without restrictions
on
transfer and other incidents of ownership and free of forfeiture conditions,
except as otherwise provided in the 2006 Plan and the award agreement. The
Administrator may, in connection with any stock payment award, require the
payment of a specified purchase price.
Subject
to the provisions of the 2006 Plan and the applicable award agreement, upon
the
issuance of the common stock under a stock payment award the Participant shall
have all rights of a stockholder with respect to the shares of common stock,
including the right to vote the shares and receive all dividends and other
distributions paid or made with respect thereto.
Dividend
Equivalents. Dividend
equivalents may be credited in respect of shares of common stock covered by
an
award of Restricted Stock Units granted under the 2006 Plan, as determined
by
the Administrator. At the sole discretion of the Administrator, such dividend
equivalents may be converted into additional shares of common stock such manner
as determined by the Administrator. Any additional shares covered by an Award
credited by reason of such dividend equivalents will be subject to all the
terms
and conditions of the underlying award agreement to which they
relate.
Certain
Features of Awards Under 2006 Plan
Payment
of Exercise Price or Purchase Price. The
payment of the exercise price for stock options, or the purchase price for
shares of restricted stock, shares covered by restricted stock units, or stock
payment awards may be made, in the discretion of the Committee, through a
variety of methods more particularly described in the 2006 Plan, including
payment by (1) cash, (2) check, (3) by delivery of shares of our common stock
(provided that any shares acquired pursuant to exercise of options have been
held by the participant for the requisite period necessary to avoid a charge
to
our earnings for financial reporting purposes), which surrendered shares shall
be valued at the fair market value of our common stock on the date of exercise
or purchase, (4) cancellation of our indebtedness to the participant, (5) waiver
of compensation due to the participant for services rendered, or (6) any
combination of the foregoing methods of payment or any other consideration
or
method of payment as shall be permitted by applicable corporate
law.
Transferability
of Awards. All
incentive stock options are nontransferable except upon the Participant’s death
by will or the laws of descent or distribution or pursuant to the terms of
certain domestic relations orders. In the case of awards other than incentive
stock options, the Administrator may provide, in its discretion, for the
transfer of all or part of the award to a Participant’s “family member” (as
defined for purposes of the Form S-8 registration statement under the Securities
Act of 1933).
Adjustments
to Awards Upon Certain Changes in Capitalization.
In the
event that the outstanding shares of our common stock are increased or decreased
or exchanged for a different number or kind of shares or our other securities
by
reason of a recapitalization, stock split, combination of shares,
reclassification, stock dividend or other change in our capital structure,
then
the Administrator shall make adjustments to the aggregate number and kind of
shares subject to the 2006 Plan, the number and kind of shares and the exercise
price per share subject to outstanding awards, and the maximum share
limitations, as applicable, all in order to preserve, as nearly as practical,
but not to increase, the benefits to the Participants.
Occurrence
of Corporate Transaction. The
2006
Plan provides that in order to preserve a Participant’s rights in the event of
certain transactions constituting a change in control of the company, the
Administrator shall have the discretion to provide in each award agreement
the
terms and conditions that relate to the vesting of such award in the event
of a
change in control of the company and the assumption of such awards or the
issuance of comparable securities under an incentive program in the event of
such occurrence. The terms and conditions of each award agreement may vary.
If
the terms of an outstanding option or stock appreciation right provide for
accelerated vesting in the event of a change in control, or to the extent that
such award is vested and not yet exercised, the Administrator in its discretion
may provide, in connection with the change in control transaction, for the
purchase or exchange of each option or stock appreciation right for cash or
other property. All outstanding option and stock appreciation rights will
terminate and cease to be exercisable upon the consummation of a change in
control except to the extent that the options or stock appreciation rights
are
assumed by a successor entity (or parent) pursuant to the terms of such
transaction.
Section
162(m) Awards. Awards
of
options and stock appreciation rights granted under the 2006 Plan will
automatically qualify for the “performance-based compensation” exception under
Internal Revenue Code Section 162(m) pursuant to their expected terms. Awards
of
restricted stock and restricted stock units may qualify for the
performance-based compensation exception under Section 162(m) if the terms
of
the awards state, in terms of an objective formula or standard, the method
of
computing the amount of compensation payable under the award and preclude
discretion to increase the amount of compensation payable under the terms of
the
award.
Performance
Criteria.
The
2006 Plan includes a number of performance criteria that may be used to
determine whether and to what extent the shares covered by an award have vested.
The Administrator will have discretion to specify whether the criteria will
be
measured either annually or cumulatively over a period of years on an absolute
basis or relative to a pre-established target, to the previous years’ results or
to a designated peer group of companies, in each case as specified in the
individual award agreement at the time of grant. The performance criteria may
be
stated as either target amounts, or as a percentage increase over a base period
amount, and may be based upon any one or a combination of the
following:
· |
earnings
before interest, taxes, depreciation and
amortization;
|
· |
earnings
per share of common stock on a fully-diluted
basis;
|
· |
our
consolidated net income divided by the average consolidated common
stockholders equity;
|
· |
cash
and cash equivalents derived from either (i) net cash flow from
operations, or (ii) net cash flow from operations, financings and
investing activities;
|
· |
adjusted
operating cash flow return on
income;
|
· |
cost
containment or reduction;
|
· |
the
percentage increase in the market price of our common stock over
a stated
period;
|
· |
new
product introductions;
|
· |
obtaining
regulatory approvals for new or existing products;
and
|
· |
individual
business objectives.
|
Summary
of Federal Income Tax Consequences of the 2006 Plan
The
following is a brief summary of certain federal income tax consequences of
participation in the 2006 Plan. The summary should not be relied upon as being
a
complete statement of all possible federal income tax consequences. Federal
tax
laws are complex and subject to change. Participation in the 2006 Plan may
also
have consequences under state and local tax laws which vary from the federal
tax
consequences described below. For such reasons, we recommend that each
Participant consult his or her personal tax advisor to determine the specific
tax consequences applicable to him or her.
Incentive
Stock Options. A
Participant who receives an incentive stock option will not recognize taxable
income upon the grant of the option or the exercise of the option. However,
the
amount by which the fair market value of the shares at the time of exercise
exceeds the option exercise price will generally be included in the
Participant’s alternative minimum taxable income upon exercise. If stock
received on exercise of an incentive option is disposed of in the same year
the
option was exercised, the regular tax treatment and the alternative tax
treatment will be the same. If stock received on exercise of an incentive option
is sold during a year subsequent to that in which the option was exercised,
the
basis of the stock acquired will equal its fair market value on the date of
exercise for purposes of computing alternative minimum taxable income in the
year of sale.
A
Participant who is subject to the alternative minimum tax in the year of
exercise of an incentive option may claim, as a credit against the Participant’s
regular tax liability in future years, the amount of alternative minimum tax
paid that is attributable to the exercise of the incentive option. This credit
is available in the first year following the year of exercise in which the
Participant has a regular tax liability.
Gain
realized by a Participant upon sale of stock issued on exercise of an incentive
stock option is taxable as long-term capital gain if the Participant disposes
of
the shares more than two years after the date of grant of the option and more
than one year after the date of exercise. If the Participant disposes of the
shares less than two years after the date of grant or less than one year after
the date of exercise (a “disqualifying disposition”), the Participant will
recognize ordinary income in an amount equal to the difference between the
option exercise price and the lower of the fair market value of the shares
on
the date of exercise or on the date of disposition of the shares. If the amount
realized in a disqualifying disposition exceeds the fair market value of the
shares on the date of exercise, the gain realized, in excess of the amount
taxed
as ordinary income as indicated above, will be taxed as capital gain. Any loss
realized upon a disqualifying disposition will be treated as a capital loss.
Capital gains and losses resulting from disqualifying dispositions will be
treated as long-term or short-term depending upon whether the shares were held
for more or less than the applicable statutory holding period (which is
currently more than one year for long-term capital gains). We will generally
be
entitled to a tax deduction in an amount equal to the amount the Participant
must recognize as ordinary income.
Non-Qualified
Stock Options.
Generally, no taxable income is recognized by a Participant upon the grant
of a
non-qualified stock option or at the time or times a non-qualified stock option
becomes vested where the exercise price of such option is no less than 100%
of
the fair market value of the stock underlying such option at the time such
option is granted. Under the 2006 Plan, the exercise price for all options
shall
be at least equal to 100% of the fair market value of the stock underlying
such
options at the time of the grant. Upon exercise, however, the Participant will
recognize ordinary income in the amount by which the fair market value of the
shares purchased, on the date of exercise, exceeds the exercise price paid
for
such shares. The income recognized by the Participant who is our employee will
be subject to income tax withholding by us out of the Participant’s current
compensation. If such compensation is insufficient to pay the taxes due, the
Participant will be required to make a direct payment to us for the balance
of
the tax withholding obligation. We will be entitled to a tax deduction equal
to
the amount of ordinary income recognized by the Participant, provided that
certain reporting requirements are satisfied. If the exercise price of a
non-qualified stock option is paid by the Participant in cash, the tax basis
of
the shares acquired will be equal to the cash paid plus the amount of income
recognized by the Participant as a result of such exercise. If the exercise
price is paid by delivering shares of our common stock already owned by the
Participant or by a combination of cash and already-owned shares, there will
be
no current taxable gain or loss recognized by the Participant on the
already-owned shares exchanged (however, the Participant will nevertheless
recognize ordinary income to the extent that the fair market value of the shares
purchased on the date of exercise exceeds the price paid, as described above).
The new shares received by the Participant, up to the number of the old shares
exchanged, will have the same tax basis and holding period as the Participant’s
basis and holding period in the old shares. The balance of the new shares
received will have a tax basis equal to any cash paid by the Participant plus
the amount of income recognized by the Participant as a result of such exercise,
and will have a holding period commencing with the date of exercise. Upon the
sale or disposition of shares acquired pursuant to the exercise of a
non-qualified stock option, the difference between the proceeds realized and
the
Participant’s basis in the shares will be a capital gain or loss and will be
treated as long-term capital gain or loss if the shares have been held for
more
than the applicable statutory holding period (which is currently more than
one
year for long-term capital gains).
Restricted
Stock.
If no
Section 83(b) election is made and we retain repurchase rights, a taxable event
will occur on each date the Participant’s ownership rights vest (e.g., when our
repurchase rights expire) as to the number of shares that vest on that date,
and
the holding period for capital gain purposes will not commence until the date
the shares vest. The Participant will recognize ordinary income on each date
shares vest in an amount equal to the excess of the fair market value of such
shares on that date over the amount paid for such shares. Any income recognized
by a Participant who is an employee will be subject to income tax withholding
by
us out of the Participant’s current compensation. If such compensation is
insufficient to cover the amount to be withheld, the Participant will be
required to make a direct payment to us for the balance of the tax withholding
obligation. We are entitled to a tax deduction in an amount equal to the
ordinary income recognized by the Participant. The Participant’s basis in the
shares will be equal to the purchase price, if any, increased by the amount
of
ordinary income recognized. If a Section 83(b) election is made within 30 days
after the date of transfer, or if we do not retain any repurchase rights, then
the Participant will recognize ordinary income on the date of purchase in an
amount equal to the excess of the fair market value of such shares on the date
of purchase over the purchase price paid for such shares.
Stock
Appreciation Rights.
Generally no taxable income is recognized by a Participant receiving a stock
appreciation right at the time the stock appreciation right is granted or at
the
time or times a stock appreciation right becomes vested where the base price
of
a stock appreciation right is no less than 100% of the fair market value of
the
stock underlying such stock appreciation right at the time such option is
granted. Under the 2006 Plan, the base value for all stock appreciation rights
shall be at least equal to 100% of the fair market value of the stock underlying
such stock appreciation rights at the time of the grant. If the Participant
receives the appreciation inherent in the stock appreciation right in cash,
the
cash will be taxed as ordinary income to the Participant at the time it is
received. If the Participant receives the appreciation inherent in a stock
appreciation right in stock, the spread between the then current market value
and the base price will be taxed as ordinary income to the Participant at the
time such amount is received. We are not entitled to a federal income tax
deduction upon the grant or termination of a stock appreciation right. However,
upon the settlement of a stock appreciation right, we are entitled to a
deduction equal to the amount of ordinary income the Participant is required
to
recognize as a result of the settlement.
Restricted
Stock Unit Award, Stock Payment Awards and Dividend Equivalents.
Restricted stock unit awards, stock payment awards and dividend equivalents
are
generally subject to ordinary income tax at the time of payment.
Tax
Withholding.
Under
the 2006 Plan, we have the power to withhold, or require a Participant to remit
to it, an amount sufficient to satisfy Federal, state and local withholding
tax
requirements with respect to any award granted under the 2006 Plan. To the
extent permissible under applicable tax, securities, and other laws, the
Administrator may, in its sole discretion, permit a Participant to satisfy
an
obligation to pay any tax to any governmental entity in whole or in part, by
(i)
directing us to apply shares of common stock to which the Participant is
entitled pursuant to an award, or (ii) delivering to us shares of common stock
owned by the Participant.
Tax
Deduction Limitation.
Section
162(m) of the Internal Revenue Code generally limits to $1.0 million the amount
that a publicly-held corporation is allowed each year to deduct for the
compensation paid to the corporation’s chief executive officer and each of the
corporation’s four most highly compensated executive officers other than the
chief executive officer. However, “performance-based” compensation is not
subject to the $1.0 million deduction limit. In general, to qualify as
performance-based compensation, the following requirements must be satisfied:
(1) payments must be computed on the basis of an objective, performance-based
compensation standard determined by a committee consisting solely of two or
more
“outside directors,” (2) the material terms under which the compensation is to
be paid, including the business criteria upon which the performance goals are
based, and a limit on the maximum amount which may be paid to any participant
pursuant to any award with respect to any performance period, must be approved
by the corporation’s stockholders, and (3) the committee must certify in writing
whether, and the extent to which, the applicable performance goals have been
satisfied before payment of any performance-based compensation is made. The
Committee currently consists solely of “outside directors” as defined for
purposes of Section 162(m) of the Internal Revenue Code, and it is the intent
of
the Board that all future Committee members will also satisfy that definition.
Stock options and stock appreciation rights, the terms of which limit the amount
of compensation that an employee may receive to an increase in the value of
the
underlying stock covered by the option or right after the date of grant,
automatically satisfy the performance goal requirement described in item (1)
above.
Deferred
Compensation.
Any
deferrals made under the 2006 Plan, including awards granted under the 2006
Plan
that are considered to be deferred compensation, must satisfy the requirements
of Internal Revenue Code Section 409A to avoid adverse tax consequences to
Participants, which include the current inclusion of deferred amounts in income
and interest and a surtax on any amount included in income. The Section 409A
requirements include limitations on election timing, acceleration of payments,
and distributions. Section 409A applies to certain stock appreciation rights,
stock unit awards, and other awards that provide the Participant with an
opportunity to defer to recognition of income. We intend to structure any awards
under the 2006 Plan to meet the applicable tax law requirements under Internal
Revenue Code Section 409A in order to avoid adverse tax
consequences.
NEW
PLAN BENEFITS
We
believe that the benefits or amounts that have been received or will be received
by any participant under the 2006 Plan cannot be determined.
REQUIRED
VOTE AND RECOMMENDATION OF BOARD OF DIRECTORS
Approval
of the amendment to the 2006 Plan will require the affirmative vote of the
holders of a majority of the shares present in person or by proxy at the meeting
and entitled to vote. Proxies solicited by management for which no specific
direction is included will be voted “for” the amendment to the 2006 Plan to add
3,000,000 shares of common stock to the pool of shares reserved for issuance
thereunder. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE AMENDMENT TO THE 2006 PLAN TO
INCREASE THE NUMBER OF SHARES THEREUNDER BY 3,000,000.
Securities
Authorized for Issuance under Equity Compensation Plans
The
following table set forth certain information regarding outstanding options,
rights and shares reserved for future issuance under our existing equity
compensation plans as of December 31, 2007:
Plan
category
|
|
Number
of
securities
to be
issued
upon
exercise
of
outstanding
options
as
of December 31,
2007
(a)
|
|
Weighted
average
exercise
price of
outstanding
options
(b)
|
|
Number
of
securities
remaining
available
for
future issuance
as
of December 31,
2007
(c)
|
|
Equity
compensation plans approved by security holders:
|
|
|
|
|
|
|
|
2006
Employee Stock Purchase Plan
|
|
|
—
|
|
|
—
|
|
|
128,220
|
|
2006
Stock Incentive Plan
|
|
|
2,206,850
|
|
$
|
3.85
|
|
|
607,315
|
|
1996
Stock Option/ Stock Issuance Plan
|
|
|
1,855,889
|
|
$
|
4.92
|
|
|
—
|
|
Equity
compensation plans not approved by security
holders:
|
|
|
|
|
|
|
|
|
|
|
1997
Supplemental Stock Option Plan
|
|
|
62,000
|
|
$
|
4.61
|
|
|
—
|
|
Total
|
|
|
4,124,739
|
|
$
|
4.34
|
|
|
735,535
|
|
1997
Supplemental Stock Option Plan.
This
stock option plan is used to provide compensation to non-employees, typically
as
part of a consulting services arrangement. The plan authorizes the issuance
of
non-qualified stock options only. We account for non-employee stock-based
awards, in which goods or services are the consideration received for the stock
options issued, in accordance with the provisions of SFAS No.123 and related
interpretations.
PROPOSAL
FOUR
RATIFICATION
OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The
Audit
Committee of the Board of Directors has selected PricewaterhouseCoopers LLP
to
continue as the independent registered public accounting firm for the year
ending December 31, 2008. We are asking the stockholders to ratify the selection
of PricewaterhouseCoopers LLP as the independent registered public accounting
firm to audit our consolidated financial statements for the fiscal year ending
December 31, 2008 and to perform other appropriate services.
PricewaterhouseCoopers LLP audited our financial statements for the year ended
December 31, 2007. A representative of PricewaterhouseCoopers LLP is expected
to
be present at the Annual Meeting to respond to stockholders’ questions, and that
representative will be given an opportunity to make a brief presentation to
the
stockholders if he or she so desires and will be available to respond to
appropriate questions. We have been advised by PricewaterhouseCoopers LLP that
neither that firm nor any of its associates has any material relationship with
us or any of our affiliates.
Pre-Approval
Policy for Non-Audit Services
The
Audit
Committee reviews and pre-approves all non-audit services to be performed by
our
independent registered public accounting firm, PricewaterhouseCoopers LLP,
subject to certain de minimis exceptions. Such pre-approval is on a project
by
project basis. During 2007, PricewaterhouseCoopers LLP did not provide us any
non-audit services.
Audit
Fees
The
following table sets forth the aggregate fees billed to us by
PricewaterhouseCoopers LLP for the fiscal years ended December 31, 2006 and
December 31, 2007:
|
|
December
31,
2006
|
|
December
31,
2007
|
|
Audit
Fees (1)
|
|
$
|
519,460
|
|
$
|
500,410
|
|
Audit-Related
Fees
|
|
|
—
|
|
|
—
|
|
Tax
Fees
|
|
|
—
|
|
|
—
|
|
All
Other Fees
|
|
|
—
|
|
|
—
|
|
Total
|
|
$
|
519,460
|
|
$
|
500,410
|
|
____________
(1) |
Includes
fees for professional services rendered for the audit of our annual
financial statements, the audit of management’s assessment of internal
control over financial reporting and the effectiveness of internal
control, reviews of the financial statements included in quarterly
reports
on Form 10-Q and services that are normally provided by our independent
registered public accounting firm in connection with our statutory
and
regulatory filings.
|
Recommendation
of the Board of Directors
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE SELECTION OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2008.
Report
of the Audit Committee of the Board of Directors
Management
is responsible for the company’s internal control over financial reporting and
for the preparation of the consolidated financial statements in accordance
with
generally accepted accounting principles. The company’s independent registered
public accounting firm is responsible for performing an independent audit of
the
company’s consolidated financial statements in accordance with standards of the
Public Company Accounting Oversight Board (United States) and to issue a report
on the company’s financial statements and of its internal control over financial
reporting. The Audit Committee’s responsibility is to monitor and oversee these
processes.
In
this
context, the Audit Committee has met and held discussions with management and
the independent registered public accounting firm. Management represented to
the
Audit Committee that the company’s consolidated financial statements were
prepared in accordance with generally accepted accounting principles, and the
Audit Committee has reviewed and discussed the consolidated financial statements
with management and the independent registered public accounting firm. The
Audit
Committee discussed with the independent registered public accounting firm
matters required to be discussed by Statement on Auditing Standards No. 61
(Communications with Audit Committees, as amended).
The
company’s independent registered public accounting firm also provided to the
Audit Committee the written disclosure required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the Audit
Committee discussed with the independent registered public accounting firm
the
independent registered public accounting firm’s independence.
Based
upon the Audit Committee’s discussions with management and the independent
registered public accounting firm and the Audit Committee’s review of the
representations of management and the report of the independent registered
public accounting firm to the Audit Committee, the Audit Committee recommended
to the Board of Directors that the audited consolidated financial statements
be
included in the company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2007 filed with the Securities and Exchange
Commission.
Members
of the Audit Committee
Gregory
D. Waller
Jeffrey
O’Donnell
Roderick
de Greef
The
material in this report is not “soliciting material” and is not
deemed filed
with the Securities and Exchange Commission and is not to be
incorporated by
reference in any filing of Endologix under the Securities Act of 1933,
as amended,
or the Securities Exchange Act of 1934, as amended, whether
made before
or after the date hereof and irrespective of any general
incorporation language
in any such filing.
DEADLINE
FOR RECEIPT OF
STOCKHOLDER
PROPOSALS FOR 2009 ANNUAL MEETING
If
we
hold our 2009 annual meeting of stockholders on or about the same time as this
year’s Annual Meeting, then any stockholder desiring to submit a proposal for
action at the 2009 annual meeting of stockholders should arrange for such
proposal to be delivered to us at our principal place of business no later
than
December 23, 2008, in order to be considered for inclusion in our proxy
statement relating to that meeting. However, if we hold our 2009 annual meeting
of stockholders on a date that is more than 30 days earlier or later than this
year’s Annual Meeting, then a stockholder proposal must be received by us at our
principal place of business in a reasonable amount of time prior to when we
begin to print and mail our proxy materials. Matters pertaining to such
proposals, including the number and length thereof, the eligibility of persons
entitled to have such proposals included and other aspects are regulated by
the
Exchange Act, rules and regulations of the SEC and other laws and
regulations.
SEC
rules
also establish a different deadline, the discretionary vote deadline, for
submission of stockholder proposals that are not intended to be included in
our
proxy statement with respect to discretionary voting. The discretionary vote
deadline for the 2009 annual meeting of stockholders is March 6, 2009 (which
is
at least 45 calendar days prior to the anniversary of the mailing date of this
proxy statement). If a stockholder gives notice of such a proposal after the
discretionary vote deadline, our proxy holders will be allowed to use their
discretionary voting authority to vote against the stockholder proposal when
and
if the proposal is raised at our 2009 annual meeting of
stockholders.
We
were
not notified of any stockholder proposals to be addressed at the Annual Meeting.
Because we were not provided notice of any stockholder proposal to be included
in the proxy statement within a reasonable time before mailing, we will be
allowed to use our voting authority if any stockholder proposals are raised
at
the meeting.
OTHER
BUSINESS
The
Board
of Directors is not aware of any other matter which may be presented for action
at the Annual Meeting. Should any other matter requiring a vote of the
stockholders arise, it is intended that the proxy holders will vote on such
matters in accordance with their best judgment.
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BY ORDER OF THE BOARD OF
DIRECTORS |
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Paul McCormick |
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President and Chief Executive
Officer |
April
21,
2008
PROXY ENDOLOGIX,
INC.
Proxy
Solicited by the Board of Directors
Annual
Meeting of Stockholders - May 22, 2008
The
undersigned hereby nominates, constitutes and appoints Paul McCormick and Robert
J. Krist, and each of them individually, the attorney, agent and proxy of the
undersigned, with full power of substitution, to vote all stock of ENDOLOGIX,
INC. which the undersigned is entitled to represent and vote at the 2008 Annual
Meeting of Stockholders to be held at the company’s offices at 11 Studebaker,
Irvine, California 92618 on May 22, 2008, at 8:00 a.m., Pacific time, and at
any
and all adjournments or postponements thereof, as fully as if the undersigned
were present and voting at the meeting, as follows:
THE
DIRECTORS RECOMMEND A VOTE “FOR” ITEMS 1 THROUGH 4.
1.
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ELECTION
OF DIRECTORS:
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¨ FOR |
¨ WITHHOLD
AUTHORITY |
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the nominee
listed below (except
as
marked to the contrary below)
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to vote for the nominee
listed below |
Election
of the following nominee as director: Jeffrey F. O’Donnell.
(Instructions:
To withhold authority to vote for any nominee, print that nominee’s name in the
space provided below.)
___________________________________________________________________________
2. AMENDMENT
TO THE 2006 EMPLOYEE STOCK OPTION PURCHASE PLAN TO INCREASE THE TOTAL NUMBER
OF
SHARES PURCHASABLE THEREUNDER FROM 308,734 SHARES TO 558,734
SHARES
¨ FOR ¨ AGAINST
¨ ABSTAIN
3. AMENDMENT
TO THE 2006 STOCK INCENTIVE PLAN TO INCREASE THE TOTAL NUMBER OF SHARES ISSUABLE
THEREUNDER FROM 2,814,478 SHARES TO 5,814,478 SHARES
¨ FOR
¨ AGAINST ¨ ABSTAIN
4. RATIFICATION
OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2008:
¨ FOR ¨ AGAINST ¨ ABSTAIN
IN
THEIR DISCRETION, ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
OR ANY ADJOURNMENT THEREOF.
IMPORTANT—PLEASE
SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY
THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER.
WHERE NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED “FOR” THE ELECTION OF THE
DIRECTOR NAMED ON THE REVERSE SIDE OF THIS PROXY, “FOR” THE AMENDMENT TO THE
2006 EMPLOYEE STOCK OPTION PURCHASE PLAN TO INCREASE THE TOTAL NUMBER OF
SHARES
PURCHASABLE THEREUNDER FROM 308,734 SHARES TO 558,734 SHARES, “FOR” AMENDMENT TO
THE 2006 STOCK INCENTIVE PLAN TO INCREASE THE TOTAL NUMBER OF SHARES ISSUABLE
THEREUNDER FROM 2,814,478 SHARES TO 5,814,478 SHARES, AND “FOR” THE RATIFICATION
OF PRICEWATERHOUSECOOPERS, LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31,
2008.
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Date: __________ __, 2008 |
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(Signature
of stockholder) |
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Please sign your name exactly
as
it appears hereon. Executors, administrators, guardians, officers of
corporations and others signing in a fiduciary capacity should state
their
full titles as such. |
WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN AND RETURN THIS
PROXY, WHICH MAY BE REVOKED AT ANY TIME PRIOR TO ITS USE.
ENDOLOGIX,
INC.
2006
EMPLOYEE STOCK PURCHASE PLAN
(AS
AMENDED, SUBJECT TO STOCKHOLDER APPROVAL, BY
RESOLUTION ADOPTED
BY
THE BOARD OF DIRECTORS ON APRIL 9,
2008)
I. PURPOSE
OF THE PLAN
This
2006
Employee Stock Purchase Plan is intended to promote the interests of Endologix,
Inc. by providing eligible employees with the opportunity to acquire a
proprietary interest in the Corporation through participation in a
payroll-deduction based employee stock purchase plan designed to qualify
under
Section 423 of the Code.
Capitalized
terms herein shall have the meanings assigned to such terms in the attached
Appendix.
II. ADMINISTRATION
OF THE PLAN
The
Plan
Administrator shall have full authority to interpret and construe any provision
of the Plan and to adopt such rules and regulations for administering the
Plan
as it may deem necessary in order to comply with the requirements of Code
Section 423. Decisions of the Plan Administrator shall be final and binding
on
all parties having an interest in the Plan.
III. STOCK
SUBJECT TO PLAN
A. The
stock
purchasable under the Plan shall be shares of authorized but unissued or
reacquired Common Stock, including shares of Common Stock purchased on the
open
market. The maximum number of shares of Common Stock which may be issued
over
the term of the Plan shall not exceed 558,734.
B. Should
any change be made to the Common Stock by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or
other
change affecting the outstanding Common Stock as a class without the
Corporation’s receipt of consideration, appropriate adjustments shall be made to
(i) the maximum number and class of securities issuable under the Plan, and
(ii) the number and class of securities and the price per share in effect
under each outstanding purchase right in order to prevent the dilution or
enlargement of benefits thereunder.
IV. OFFERING
PERIODS
A. Shares
of
Common Stock shall be offered for purchase under the Plan through a series
of
successive Offering Periods until such time as (i) the maximum number of
shares of Common Stock available for issuance under the Plan shall have been
purchased or (ii) the Plan shall have been sooner terminated.
B. The
Initial Offering Period shall commence on the first business day in August
2006
and terminate on the last business day in December 2006. Each Offering Period
thereafter shall be a
six-month period from January 1 through June 30 and from July 1 through December
31.
C. The
Purchase Date shall be the last day of each Offering Period. The initial
Purchase Date shall be the last business day in December 2006.
V. ELIGIBILITY
Commencing
August 1, 2006:
A. Each
individual who is an Eligible Employee on the start date of any Offering
Period
under the Plan may enter that Offering Period on such start date, provided
he or
she remains an Eligible Employee.
B. Each
individual who first becomes an Eligible Employee after the start date of
an
Offering Period may enter on the start date of the Offering Period that
commences immediately after the date such individual first became an Eligible
Employee, provided he or she remains an Eligible Employee.
C. To
participate in the Plan for a particular Offering Period, the Eligible Employee
must complete the enrollment forms prescribed by the Plan Administrator
(including a stock purchase agreement and a payroll deduction authorization)
and
file such forms with the Plan Administrator (or its designate) on or before
the
start date of such Offering Period.
VI. PAYROLL
DEDUCTIONS
A. The
payroll deduction authorized by the Participant for purposes of acquiring
shares
of Common Stock during an Offering Period may be any multiple of one percent
(1%) of the Compensation paid to the Participant during each Offering Period
within that Offering Period, up to a maximum of ten percent (10%). The deduction
rate so authorized shall continue in effect throughout the Offering Period,
except to the extent such rate is changed in accordance with the following
guidelines:
1. The
Participant may, at any time during the Offering Period, reduce his or her
rate
of payroll deduction to become effective as soon as possible after filing
the
appropriate form with the Plan Administrator. The Participant may not, however,
effect more than one (1) such reduction per Offering Period.
2. The
Participant may, at any time during any Offering Period, increase the rate
of
his or her payroll deduction by filing the appropriate form with the Plan
Administrator. The new rate (which may not exceed the ten percent (10%) maximum)
shall become effective on the start date of the first Offering Period following
the filing of such form.
B. Payroll
deductions shall begin on the first pay day following the start date of the
Offering Period with respect to which an Eligible Employee elects to participate
and shall (unless sooner terminated by the Participant) continue through
the pay
day ending with or immediately prior to the last day of that Offering Period.
The amounts so collected shall be credited to the Participant’s book account
under the Plan, but no interest shall be paid on the balance from time to
time
outstanding in such account. The amounts collected from the Participant shall
not be held in any segregated account or trust fund and may be commingled
with
the general assets of the Corporation and used for general corporate
purposes.
C. Payroll
deductions shall automatically cease upon the termination of the Participant’s
purchase right in accordance with the provisions of the Plan.
D. The
Participant’s acquisition of Common Stock under the Plan on any Purchase Date
shall neither limit nor require the Participant’s acquisition of Common Stock on
any subsequent Purchase Date, whether within the same or a different Offering
Period.
VII. PURCHASE
RIGHTS
A. Grant
of
Purchase Right; Grant Date.
A
Participant shall be granted a separate purchase right for each Offering
Period
in which he or she participates. The purchase right shall be granted on the
Grant Date and shall provide the Participant with the right to purchase shares
of Common Stock, in a series of successive installments over the remainder
of
such Offering Period, upon the terms set forth below. The Participant shall
execute a stock purchase agreement embodying such terms and such other
provisions (not inconsistent with the Plan) as the Plan Administrator may
deem
advisable.
Under
no
circumstances shall purchase rights be granted under the Plan to any Eligible
Employee if such individual would, immediately after the grant, own (within
the
meaning of Code Section 424(d)) or hold outstanding options or other rights
to
purchase, stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Corporation or any
Corporate Affiliate.
B. Exercise
of the Purchase Right.
Each
purchase right shall be automatically exercised on each Purchase Date, and
shares of Common Stock shall accordingly be purchased on behalf of each
Participant (other than Participants whose payroll deductions have previously
been refunded pursuant to the Termination of Purchase Right provisions below)
on
each such Purchase Date. The purchase shall be effected by applying the
Participant’s payroll deductions for the Offering Period ending on such Purchase
Date to the purchase of whole shares of Common Stock at the purchase price
in
effect for the Participant for that Purchase Date.
C. Purchase
Price.
The
purchase price per share at which Common Stock will be purchased on the
Participant’s behalf on each Purchase Date shall not be less than eighty-five
percent (85%) of the lower of (i) the Fair Market Value per share of Common
Stock on the Grant Date with respect to that Offering Period or (ii) the
Fair Market Value per share of Common Stock on that Purchase Date.
D. Number
of
Purchasable Shares.
The
number of shares of Common Stock purchasable by a Participant on each Purchase
Date shall be the number of whole shares obtained by dividing the amount
collected from the Participant through payroll deductions during the Offering
Period ending with that Purchase Date by the purchase price in effect for
the
Participant for that Purchase Date.
E. Excess
Payroll Deductions.
Any
payroll deductions not applied to the purchase of shares of Common Stock
on any
Purchase Date because they are not sufficient to purchase a whole share of
Common Stock shall be held for the purchase of Common Stock on the next Purchase
Date. However, any payroll deductions not applied to the purchase of Common
Stock by reason of the limitation on the maximum number of shares purchasable
by
the Participant on the Purchase Date shall be promptly refunded.
F. Termination
of Purchase Right.
The
following provisions shall govern the termination of outstanding purchase
rights:
1. A
Participant may, at any time prior to the next scheduled Purchase Date,
terminate his or her outstanding purchase right by filing the appropriate
form
with the Plan Administrator (or its designate), and no further payroll
deductions shall be collected from the Participant with respect to the
terminated purchase right. Any payroll deductions collected during the Offering
Period in which such termination occurs shall, at the Participant’s election, be
immediately refunded or held for the purchase of shares on the next Purchase
Date. If no such election is made at the time such purchase right is terminated,
then the payroll deductions collected with respect to the terminated right
shall
be refunded as soon as possible.
2. The
termination of such purchase right shall be irrevocable, and the Participant
may
not subsequently rejoin the Offering Period for which the terminated purchase
right was granted. In order to resume participation in any subsequent Offering
Period, such individual must re-enroll in the Plan (by making a timely filing
of
the prescribed enrollment forms) on or before the start date of such Offering
Period.
3. Should
the Participant cease to remain an Eligible Employee for any reason (including
death, disability or change in status) while his or her purchase right remains
outstanding, then that purchase right shall immediately terminate, and all
of
the Participant’s payroll deductions for the Offering Period in which the
purchase right so terminates shall be immediately refunded. However, should
the
Participant cease to remain in active service by reason of an approved unpaid
leave of absence, then the Participant shall have the right, exercisable
up
until the last business day of the Offering Period in which such leave
commences, to (a) withdraw all the payroll deductions collected to date on
his or her behalf for that Offering Period or (b) have such funds held for
the purchase of shares on his or her behalf on the next scheduled Purchase
Date.
In no event, however, shall any further payroll deductions be collected on
the
Participant’s behalf during such leave. Upon the Participant’s return to active
service, his or her payroll deductions under the Plan shall automatically
resume
at the rate in effect at the time the leave began, unless the Participant
withdraws from the Plan prior to his or her return.
G. Corporate
Transaction.
Each
outstanding purchase right shall automatically be exercised, immediately
prior
to the effective date of any Corporate Transaction, by applying the payroll
deductions of each Participant for the Offering Period in which such Corporate
Transaction occurs to the purchase of whole shares of Common Stock at a purchase
price per share not less than eighty-five percent (85%) of the lower of
(i) the Fair Market Value per share of Common Stock on the Grant Date of
the Offering Period in which such Corporate Transaction occurs or (ii) the
Fair Market Value per share of Common Stock immediately prior to the effective
date of such Corporate Transaction.
The
Corporation shall use its best efforts to provide at least ten (10) days
prior
written notice of the occurrence of any Corporate Transaction, and Participants
shall, following the receipt of such notice, have the right to terminate
their
outstanding purchase rights prior to the effective date of the Corporate
Transaction.
H. Proration
of Purchase Rights.
Should
the total number of shares of Common Stock to be purchased pursuant to
outstanding purchase rights on any particular date exceed the number of shares
then available for issuance under the Plan, the Plan Administrator shall
make a
pro-rata allocation of the available shares on a uniform and nondiscriminatory
basis, and the payroll deductions of each Participant, to the extent in excess
of the aggregate purchase price payable for the Common Stock pro-rated to
such
individual, shall be refunded.
I. Assignability.
The
purchase right shall be exercisable only by the Participant and shall not
be
assignable or transferable by the Participant.
J. Stockholder
Rights.
A
Participant shall have no stockholder rights with respect to the shares subject
to his or her outstanding purchase right until the shares are purchased on
the
Participant’s behalf in accordance with the provisions of the Plan and the
Participant has become a holder of record of the purchased shares.
VIII. ACCRUAL
LIMITATIONS
A. No
Participant shall be entitled to accrue rights to acquire Common Stock pursuant
to any purchase right outstanding under this Plan if and to the extent such
accrual, when aggregated with (i) rights to purchase Common Stock accrued
under any other purchase right granted under this Plan and (ii) similar
rights accrued under other employee stock purchase plans (within the meaning
of
Code Section 423) of the Corporation or any Corporate Affiliate, would otherwise
permit such Participant to purchase more than Twenty-Five Thousand Dollars
($25,000) worth of stock of the Corporation or any Corporate Affiliate
(determined on the basis of the Fair Market Value per share on the Grant
Date)
for each calendar year such rights are at any time outstanding.
B. For
purposes of applying such accrual limitations to the purchase rights granted
under the Plan, the following provisions shall be in effect:
1. The
right
to acquire Common Stock under each outstanding purchase right shall accrue
in a
series of installments on each successive Purchase Date during the Offering
Period on which such right remains outstanding.
2. No
right
to acquire Common Stock under any outstanding purchase right shall accrue
to the
extent the Participant has already accrued in the same calendar year the
right
to acquire Common Stock under one (1) or more other purchase rights at a
rate
equal to Twenty-Five Thousand Dollars ($25,000) worth of Common Stock
(determined on the basis of the Fair Market Value per share on the Grant
Date)
for each calendar year such rights were at any time outstanding.
C. If
by
reason of such accrual limitations, any purchase right of a Participant does
not
accrue for a particular Offering Period, then the payroll deductions which
the
Participant made during that Offering Period with respect to such purchase
right
shall be promptly refunded.
D. In
the
event there is any conflict between the provisions of this Article and one
or
more provisions of the Plan or any instrument issued thereunder, the provisions
of this Article shall be controlling.
IX. EFFECTIVE
DATE AND TERM OF THE PLAN
A. The
Plan
was adopted by the Board on March 31, 2006, provided no purchase rights granted
under the Plan shall be exercised, and no shares of Common Stock shall be
issued
hereunder, until (i) the Plan shall have been approved by the stockholders
of the Corporation and (ii) the Corporation shall have complied with all
applicable requirements of the 1933 Act (including the registration of the
shares of Common Stock issuable under the Plan on a Form S-8 registration
statement filed with the Securities and Exchange Commission), all applicable
listing requirements of any stock exchange (or the Nasdaq National Market,
if
applicable) on which the Common Stock is listed for trading and all other
applicable requirements established by law or regulation. In the event such
stockholder approval is not obtained, or such compliance is not effected,
within
twelve (12) months after the date on which the Plan is adopted by the Board,
the
Plan shall terminate and have no further force or effect, and all sums collected
from Participants during the initial Offering Period hereunder shall be
refunded.
B. Unless
sooner terminated by the Board, the Plan shall terminate upon the earliest
of
(i) the last business day in July 2016, (ii) the date on which
all shares available for issuance under the Plan shall have been sold pursuant
to purchase rights exercised under the Plan or (iii) the date on which all
purchase rights are exercised in connection with a Corporate Transaction.
No
further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the PIan following such
termination.
X. AMENDMENT
OF THE PLAN
The
Board
may alter, amend, suspend or discontinue the Plan at any time to become
effective immediately following the close of any Offering Period. However,
the
Board may not, without the approval of the Corporation’s stockholders,
(i) materially increase the number of shares of Common Stock issuable under
the Plan or the maximum number of shares purchasable per Participant on any
one
Purchase Date, except for permissible adjustments in the event of certain
changes in the Corporation’s capitalization, (ii) alter the purchase price
formula so as to reduce the purchase price payable for the shares of Common
Stock purchasable under the Plan or (iii) materially increase the benefits
accruing to Participants under the Plan or materially modify the requirements
for eligibility to participate in the Plan.
XI. GENERAL
PROVISIONS
A. All
costs
and expenses incurred in the administration of the Plan shall be paid by
the
Corporation.
B. Nothing
in the Plan shall confer upon the Participant any right to continue in the
employ of the Corporation or any Corporate Affiliate for any period of specific
duration or interfere with or otherwise restrict in any way the rights of
the
Corporation (or any Corporate Affiliate employing such person) or of the
Participant, which rights are hereby expressly reserved by each, to terminate
such person’s employment at any time for any reason, with or without
cause.
C. The
provisions of the Plan shall be governed by the laws of the State of California
without resort to that states conflict-of-laws rules.
APPENDIX
The
following definitions shall be in effect under the Plan:
A. Board
shall
mean the Corporation’s Board of Directors.
B. Code
shall
mean the Internal Revenue Code of 1986, as amended.
C. Common
Stock
shall
mean the Corporation’s common stock.
D. Compensation
shall
mean the total amount required to be reported on a Form W-2, including any
elective deferrals or other payroll deductions with respect to a plan of
the
Company qualified under either Section 125 or Section 401(a) of the
Code, issued to an employee by the Company.
E. Corporate
Affiliate
shall
mean any parent or subsidiary corporation of the Corporation (as determined
in
accordance with Code Section 424), whether now existing or subsequently
established.
F. Corporate
Transaction
shall
mean either of the following stockholder-approved transactions to which the
Corporation is a party:
1. a
merger
or consolidation in which securities possessing more than fifty percent (50%)
of
the total combined voting power of the Corporation’s outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such transaction, or
2. the
sale,
transfer or other disposition of all or substantially all of the assets of
the
Corporation in complete liquidation or dissolution of the
Corporation.
G. Corporation
shall
mean Endologix, Inc., a Delaware corporation.
H. Eligible
Employee shall
mean any person who is employed by the Corporation on a basis under which
he or
she is regularly expected to render more than twenty (20) hours of service
per
week for more than five (5) months per calendar year for earnings considered
wages under Code Section 3401(a).
I. Fair
Market Value
per
share of Common Stock on any relevant date shall be determined in accordance
with the following provisions:
1. If
the
Common Stock is then listed or admitted to trading on the Nasdaq National
Market
System or a Stock Exchange which reports closing sale prices, the Fair Market
Value shall be the closing sale price on the date of valuation on the Nasdaq
National Market System or principal Stock Exchange on which the Common Stock
is
then listed or admitted to trading, or, if no closing sale price is quoted
or no
sale takes place on such day, then the Fair Market Value shall be the closing
sale price of the Common Stock on the Nasdaq National Market System or such
Stock Exchange on the next preceding day on which a sale occurred.
2. If
the
Common Stock is not then listed or admitted to trading on the Nasdaq National
Market System or a Stock Exchange which reports closing sale prices, the
Fair
Market Value shall be the average of the closing bid and asked prices of
the
Common Stock in the over-the-counter market on the date of
valuation.
3. If
neither (a) nor (b) is applicable as of the date of valuation, then the Fair
Market Value shall be determined by the Administrator in good faith using
any
reasonable method of valuation, which determination shall be conclusive and
binding on all interested parties
J. Grant
Date
shall
mean the start date of each Offering Period. The initial Grant Date shall
be the
first business day in August 2006.
K. Initial
Offering Period
shall
mean the five-month period from August 1, 2006 through December 31,
2006.
L. 1933
Act
shall
mean the Securities Act of 1933, as amended.
M. Offering
Period
shall
mean a
six-month period from January 1 through June 30 and from July 1 through December
31.
N. Participant
shall
mean any Eligible Employee of the Corporation who is actively participating
in
the Plan.
O. Plan
shall
mean the Corporation’s 2006 Employee Stock Purchase Plan, as set forth in this
document.
P. Plan
Administrator shall
mean the Board of Directors or a committee of two (2) or more Board members
appointed by the Board to administer the Plan.
Q. Purchase
Date
shall
mean the last business day of each Offering Period. The initial Purchase
Date
shall be the last business day in December 2006.
R. Stock
Exchange
shall
mean either the American Stock Exchange or the New York Stock
Exchange.
ENDOLOGIX,
INC.
2006
STOCK INCENTIVE PLAN
(AS
AMENDED, SUBJECT TO STOCKHOLDER APPROVAL, BY
RESOLUTION ADOPTED
BY
THE BOARD OF DIRECTORS ON APRIL 9,
2008)
The
2006
STOCK INCENTIVE PLAN (the “Plan”) is hereby established and adopted this 31st
day of March, 2006 (the “Effective Date”) by Endologix, Inc., a Delaware
Corporation (the “Company”).
ARTICLE
1.
PURPOSES
OF THE PLAN
1.1 Purposes.
The
purposes of the Plan are (a) to enhance the Company’s ability to attract and
retain the services of qualified employees, officers, directors, consultants
and
other service providers upon whose judgment, initiative and efforts the
successful conduct and development of the Company’s business largely depends,
and (b) to provide additional incentives to such persons or entities to
devote
their utmost effort and skill to the advancement and betterment of the
Company,
by providing them an opportunity to participate in the ownership of the
Company
and thereby have an interest in the success and increased value of the
Company.
ARTICLE
2.
DEFINITIONS
For
purposes of this Plan, the following terms shall have the meanings
indicated:
2.1 Administrator.
“Administrator”
means the Board or, if the Board delegates responsibility for any matter
to the
Committee, the term Administrator shall mean the Committee.
2.2 Affiliated
Company.“Affiliated
Company” means:
(a) with
respect to Incentive Options, any “parent corporation” or “subsidiary
corporation” of the Company, whether now existing or hereafter created or
acquired, as those terms are defined in Sections 424(e) and 424(f) of the
Code,
respectively; and
(b) with
respect to Awards other than Incentive Options, any entity described in
paragraph (a) of this Section 2.2 above, plus any other corporation, limited
liability company (“LLC”), partnership or joint venture, whether now existing or
hereafter created or acquired, with respect to which the Company beneficially
owns more than fifty percent (50%) of: (1) the total combined voting power
of
all outstanding voting securities or (2) the capital or profits interests
of an
LLC, partnership or joint venture.
2.3 Award.
“Award”
means an Option, a Restricted Stock award, a Stock Appreciation Right award,
a
Dividend Equivalents award, a Stock Payment award or a Restricted Stock
Unit
award granted to a Participant pursuant to the Plan.
2.4 Award
Agreement.“Award
Agreement” means a written or electronic agreement entered into between the
Company and a Participant setting forth the terms and conditions of an
Award
granted to a Participant.
2.5 Board.
“Board”
means the Board of Directors of the Company.
2.6 Change
in Control. “Change
in Control” shall mean:
(a) The
acquisition, directly or indirectly, in one transaction or a series of
related
transactions, by any person or group (within the meaning of
Section 13(d)(3) of the Exchange Act) of the beneficial ownership of
securities of the Company possessing more than fifty percent (50%) of the
total
combined voting power of all outstanding securities of the Company;
(b) A
merger
or consolidation in which the Company is not the surviving entity, except
for a
transaction in which the holders of the outstanding voting securities of
the
Company immediately prior to such merger or consolidation hold as a result
of
holding Company securities prior to such transaction, in the aggregate,
securities possessing more than fifty percent (50%) of the total combined
voting
power of all outstanding voting securities of the surviving entity (or
the
parent of the surviving entity) immediately after such merger or
consolidation;
(c) A
reverse
merger in which the Company is the surviving entity but in which the holders
of
the outstanding voting securities of the Company immediately prior to such
merger hold, in the aggregate, securities possessing less than fifty percent
(50%) of the total combined voting power of all outstanding voting securities
of
the Company or of the acquiring entity immediately after such
merger;
(d) The
sale,
transfer or other disposition (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company,
except
for a transaction in which the holders of the outstanding voting securities
of
the Company immediately prior to such transaction(s) receive as a distribution
with respect to securities of the Company, in the aggregate, securities
possessing more than fifty percent (50%) of the total combined voting power
of
all outstanding voting securities of the acquiring entity immediately after
such
transaction(s); or
(e) The
approval by the stockholders of a plan or proposal for the liquidation
or
dissolution of the Company.
2.7 Code.
“Code” means
the
Internal Revenue Code of 1986, as amended from time to time.
2.8 Committee.
“Committee”
means a committee of two or more members of the Board appointed to administer
the Plan, as set forth in Section 10.1 hereof.
2.9 Common
Stock. “Common
Stock” means
the
Common Stock of the Company, subject to adjustment pursuant to Section
4.2
hereof.
2.10 Covered
Employee. “Covered
Employee” means the Chief Executive Officer of the Company (or the individual
acting in a similar capacity) and the four (4) other individuals that are
the
highest compensated executive officers of the Company for the relevant
taxable
year for whom total compensation is required to be reported to stockholders
under the Exchange Act.
2.11 Disability.
“Disability”
means permanent and total disability as defined in Section 22(e)(3) of the
Code. The Administrator’s determination of a Disability or the absence thereof
shall be conclusive and binding on all interested parties.
2.12 Dividend
Equivalent.
“Dividend Equivalent” means a right to receive payments equivalent to the amount
of dividends paid by the Company to holders of shares of Common Stock with
respect to the number of Dividend Equivalents held by the Participant.
The
Dividend Equivalent may provide for payment in Common Stock or in cash,
or a
fixed combination of Common Stock or cash, or the Administrator may reserve
the
right to determine the manner of payment at the time the Dividend Equivalent
is
payable. Dividend Equivalents may be granted only in connection with a
grant of
Restricted Stock Units and shall be subject to the vesting conditions that
govern Restricted Stock Units as set forth in the applicable Restricted
Stock
Award Agreement.
2.13 DRO.
“DRO”
means a domestic relations order as defined in the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the regulations
thereunder.
2.14 Effective
Date. “Effective
Date” means
the
date on which the Plan was originally adopted by the Board, as set forth
on the
first page hereof.
2.15 Exchange
Act. “Exchange
Act” means the Securities and Exchange Act of 1934, as amended.
2.16 Exercise
Price. “Exercise
Price” means the purchase price per share of Common Stock payable upon exercise
of an Option.
2.17 Fair
Market Value. “Fair
Market Value” on
any
given date means the value of one share of Common Stock, determined as
follows:
(a) If
the
Common Stock is then listed or admitted to trading on a Nasdaq market system
or
a stock exchange which reports closing sale prices, the Fair Market Value
shall
be the closing sale price on the date of valuation on such Nasdaq market
system
or principal stock exchange on which the Common Stock is then listed or
admitted
to trading, or, if no closing sale price is quoted on such day, then the
Fair
Market Value shall be the closing sale price of the Common Stock on such
Nasdaq
market system or such exchange on the next preceding day on which a closing
sale
price is reported.
(b) If
the
Common Stock is not then listed or admitted to trading on a Nasdaq market
system
or a stock exchange which reports closing sale prices, the Fair Market
Value
shall be the average of the closing bid and asked prices of the Common
Stock in
the over-the-counter market on the date of valuation.
(c) If
neither (a) nor (b) is applicable as of the date of valuation, then the
Fair
Market Value shall be determined by the Administrator in good faith using
any
reasonable method of evaluation, which determination shall be conclusive
and
binding on all interested parties.
2.18 Incentive
Option. “Incentive
Option” means any Option designated and qualified as an “incentive stock option”
as defined in Section 422 of the Code.
2.19 Incentive
Option Agreement. “Incentive
Option Agreement” means an Option Agreement with respect to an Incentive
Option.
2.20 NASD
Dealer. “NASD
Dealer” means
a
broker-dealer that is a member of the National Association of Securities
Dealers, Inc.
2.21 Non-Employee
Director. “Non-Employee
Director” shall have the meaning given in Section 5.11 below.
2.22 Nonqualified
Option. “Nonqualified
Option” means
any
Option that is not an Incentive Option. To the extent that any Option designated
as an Incentive Option fails in whole or in part to qualify as an Incentive
Option, including, without limitation, for failure to meet the limitations
applicable to a 10% Stockholder or because it exceeds the annual limit
provided
for in Section 5.7 below, it shall to that extent constitute a Nonqualified
Option.
2.23 Nonqualified
Option Agreement. “Nonqualified
Option Agreement” means an Option Agreement with respect to a Nonqualified
Option.
2.24 Option.
“Option” means
any
option to purchase Common Stock granted pursuant to the Plan.
2.25 Option
Agreement. “Option
Agreement” means
the
written agreement entered into between the Company and the Optionee with
respect
to an Option granted under the Plan.
2.26 Optionee.
“Optionee”
means any Participant who holds an Option.
2.27 Participant.
“Participant”
means an individual or entity that holds an Option, Stock Appreciation
Right,
shares of Stock, Restricted Stock, Restricted Stock Units, Stock Payment
or
Dividend Equivalents under the Plan.
2.28 Performance
Criteria. “Performance
Criteria” means one or more of the following as established by the
Administrator, which may be stated as a target percentage or dollar amount,
a
percentage increase over a base period percentage or dollar amount or the
occurrence of a specific event or events:
(a) Sales;
(b) Operating
income;
(c) Pre-tax
income;
(d) Earnings
before interest, taxes, depreciation and amortization;
(e) Earnings
per share of Common Stock on a fully-diluted basis;
(f) Consolidated
net income of the Company divided by the average consolidated common
stockholders equity;
(g) Cash
and
cash equivalents derived from either (i) net cash flow from operations,
or (ii)
net cash flow from operations, financings and investing activities;
(h) Adjusted
operating cash flow return on income;
(i) Cost
containment or reduction;
(j) The
percentage increase in the market price of the Common Stock over a stated
period;
(k) Return
on
assets;
(l) New
Company product introductions;
(m) Obtaining
regulatory approvals for new or existing products; and
(n) Individual
business objectives.
2.29 Purchase
Price. “Purchase
Price” means
the
purchase price payable to purchase a share of Restricted Stock, or a Restricted
Stock Unit, which, in the sole discretion of the Administrator, may be
zero (0),
subject to limitations under applicable law.
2.30 Repurchase
Right. “Repurchase
Right” means
the
right of the Company to repurchase either unvested shares of Restricted
Stock
pursuant to Section 6.6 or to cancel unvested Restricted Stock Units pursuant
to
Section 7.6.
2.31 Restricted
Stock. “Restricted
Stock” means shares of Common Stock issued pursuant to Article 6 hereof, subject
to any restrictions and conditions as are established pursuant to such
Article
6.
2.32 Restricted
Stock Award. “Restricted
Stock Award” means either the issuance of Restricted Stock or the grant of
Restricted Stock Units or Dividend Equivalents under the Plan.
2.33 Restricted
Stock Award Agreement.“Restricted
Stock Award Agreement” means the written agreement entered into between the
Company and a Participant evidencing the issuance of Restricted Stock or
the
grant of Restricted Stock Units or Dividend Equivalents under the
Plan.
2.34 Restricted
Stock Unit. “Restricted
Stock Unit” means the right to receive one share of Common Stock issued pursuant
to Article 7 hereof, subject to any restrictions and conditions as are
established pursuant to such Article 7.
2.35 Service
Provider. “Service
Provider” means
a
consultant or other person or entity the Administrator authorizes to become
a
Participant in the Plan and who provides services to (i) the Company, (ii)
an
Affiliated Company, or (iii) any other business venture designated by the
Administrator in which the Company or an Affiliated Company has a significant
ownership interest.
2.36 Stock
Appreciation Right.
“Stock
Appreciation Right”
means a
contractual right granted to a Participant under Article 8 hereof entitling
such
Participant to receive a payment representing the difference between the
base
price per share of the right and the Fair Market Value of a share of Common
Stock, payable either in cash or in shares of the Company’s Common Stock, at
such time, and subject to such conditions, as are set forth in this Plan
and the
applicable Stock Appreciation Rights Award agreement.
2.37 Stock
Appreciation Rights Holder.
“Stock
Appreciation Rights Holder” means any Participant who holds a Stock Appreciation
Right.
2.38 Stock
Payment.“Stock
Payment” means a payment in the form of shares of Common Stock.
2.39 10%
Stockholder. “10%
Stockholder” means a person who, as of a relevant date, owns or is deemed to own
(by reason of the attribution rules applicable under Section 424(d) of
the Code)
stock possessing more than 10% of the total combined voting power of all
classes
of stock of the Company or of an Affiliated Company.
ARTICLE
3.
ELIGIBILITY
3.1 Incentive
Options.
Only
employees of the Company or of an Affiliated Company (including members
of the
Board if they are employees of the Company or of an Affiliated Company)
are
eligible to receive Incentive Options under the Plan.
3.2 Nonqualified
Options, Stock Appreciation Rights, Stock Payments and Restricted Stock
Awards.
Employees of the Company or of an Affiliated Company, members of the Board
(whether or not employed by the Company or an Affiliated Company), and
Service
Providers are eligible to receive Nonqualified Options, Stock Appreciation
Rights, Stock Payments or Restricted Stock Awards under the Plan.
3.3 Section
162(m) Limitation.
In no
event shall any Participant be granted Options or Stock Appreciation Rights
in
any one calendar year pursuant to which the aggregate number of shares
of Common
Stock that may be acquired thereunder exceeds 200,000 shares, subject to
adjustment as to the number and kind of shares pursuant to Section 4.2
hereof.
Notwithstanding the foregoing, in connection with his or her initial service
to
the Company, the aggregate number of shares of Common Stock with respect
to
which Options or Stock Appreciation Rights may be granted to any Participant
shall not exceed 300,000 shares of Common Stock during the calendar year
which
includes such individual’s initial service to the Company. The foregoing
limitations shall be applied on an aggregate basis taking into account
Awards
granted to a Participant under the Plan as well as awards of the same type
granted to a Participant under any other equity-based compensation plan
of the
Company or any Affiliated Company.
ARTICLE
4.
PLAN
SHARES
4.1 Shares
Subject to the Plan.
(a) The
number of shares of Common Stock that may be issued pursuant to Awards
under the
Plan shall be 5,814,478. The foregoing shall be subject to adjustment as to
the number and kind of shares pursuant to Section 4.2 hereof. In the event
that
(a) all or any portion of any Option granted under the Plan can no longer
under
any circumstances be exercised, or (b) any shares of Common Stock subject
to an
Award Agreement are reacquired by the Company, the shares of Common Stock
allocable to the unexercised portion of such Option or the shares so reacquired
shall again be available for grant or issuance under the Plan.
(b) The
maximum number of shares of Common Stock that may be issued under the Plan
as
Incentive Options shall be 5,814,478 shares, subject to adjustment as to
the number and kind of shares pursuant to Section 4.2 hereof.
(c) The
maximum number of shares of Common Stock that may be issued as Restricted
Stock,
Stock Payment awards, or subject to Restricted Stock Units shall be 500,000,
subject to adjustment as to the number and kind of shares pursuant to Section
4.2 hereof.
4.2 Changes
in Capital Structure.
In the
event that the outstanding shares of Common Stock are hereafter increased
or
decreased or changed into or exchanged for a different number or kind of
shares
or other securities of the Company by reason of a recapitalization, stock
split,
reverse stock split, reclassification, stock dividend, or other change
in the
capital structure of the Company, then appropriate adjustments shall be
made by
the Administrator to the aggregate number and kind of shares subject to
this
Plan, the number and kind of shares and the price per share subject to
outstanding Award Agreements and the limit on the number of shares under
Section
3.3, all in order to preserve, as nearly as practical, but not to increase,
the
benefits to Participants.
ARTICLE
5.
OPTIONS
5.1 Grant
of Stock Options. The
Administrator shall have the right to grant, pursuant to this Plan, Options
subject to such terms, restrictions and conditions as the Administrator
may
determine at the time of grant. Such conditions may include, but are not
limited
to, continued employment or the achievement of specified performance goals
or
objectives established by the Administrator with respect to one or more
Performance Criteria.
5.2 Option
Agreements.
Each
Option granted pursuant to this Plan shall be evidenced by an Option Agreement
which shall specify the number of shares subject thereto, vesting provisions
relating to such Option, the Exercise Price per share, and whether the
Option is
an Incentive Option or Nonqualified Option. As soon as is practical following
the grant of an Option, an Option Agreement shall be duly executed and
delivered
by or on behalf of the Company to the Optionee to whom such Option was
granted.
Each Option Agreement shall be in such form and contain such additional
terms
and conditions, not inconsistent with the provisions of this Plan, as the
Administrator shall, from time to time, deem desirable.
5.3 Exercise
Price.
The
Exercise Price per share of Common Stock covered by each Option shall be
determined by the Administrator, subject to the following: (a) the Exercise
Price of an Incentive Option shall not be less than 100% of Fair Market
Value on
the date the Incentive Option is granted, (b) the Exercise Price of a
Nonqualified Option shall not be less than 100% of Fair Market Value on
the date
the Nonqualified Option is granted, and (c) if the person to whom an Incentive
Option is granted is a 10% Stockholder on the date of grant, the Exercise
Price
shall not be less than 110% of Fair Market Value on the date the Incentive
Option is granted. However, an Option may be granted with an exercise price
lower than that set forth in the preceding sentence if such Option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424 of the Code.
5.4 Payment
of Exercise Price.
Payment
of the Exercise Price shall be made upon exercise of an Option and may
be made,
in the discretion of the Administrator, subject to any legal restrictions,
by:
(a) cash; (b) check; (c) the surrender of shares of Common Stock
owned by the Optionee (provided that shares acquired pursuant to the exercise
of
options granted by the Company must have been held by the Optionee for
the
requisite period necessary to avoid a charge to the Company’s earnings for
financial reporting purposes), which surrendered shares shall be valued
at Fair
Market Value as of the date of such exercise; (d) the cancellation of
indebtedness of the Company to the Optionee; (e) the waiver of compensation
due or accrued to the Optionee for services rendered; (f) provided that
a public
market for the Common Stock exists, a “same day sale” commitment from the
Optionee and an NASD Dealer whereby the Optionee irrevocably elects to
exercise
the Option and to sell a portion of the shares so purchased to pay for
the
Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt
of
such shares to forward the Exercise Price directly to the Company; (g)
provided
that a public market for the Common Stock exists, a “margin” commitment from the
Optionee and an NASD Dealer whereby the Optionee irrevocably elects to
exercise
the Option and to pledge the shares so purchased to the NASD Dealer in
a margin
account as security for a loan from the NASD Dealer in the amount of the
Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt
of
such shares to forward the Exercise Price directly to the Company; or
(h) any combination of the foregoing methods of payment or any other
consideration or method of payment as shall be permitted by applicable
law.
5.5 Term
and Termination of Options.
The term
and provisions for termination of each Option shall be as fixed by the
Administrator, but no Option may be exercisable more than ten (10) years
after
the date it is granted.
5.6 Vesting
and Exercise of Options.
Each
Option shall vest and become exercisable in one or more installments, at
such
time or times and subject to such conditions, including without limitation
the
achievement of specified performance goals or objectives established with
respect to one or more Performance Criteria, as shall be determined by
the
Administrator.
5.7 Annual
Limit on Incentive Options.
To the
extent required for “incentive stock option” treatment under Section 422 of the
Code, the aggregate Fair Market Value (determined as of the time of grant)
of
the Common Stock with respect to which Incentive Options granted under
this Plan
and any other plan of the Company or any Affiliated Company become exercisable
for the first time by an Optionee during any calendar year shall not exceed
$100,000.
5.8 Nontransferability
of Options. Except
as
otherwise provided in this Section 5.8, Options shall not be assignable
or
transferable except by will, the laws of descent and distribution or pursuant
to
a DRO entered by a court in settlement of marital property rights, and
during
the life of the Optionee, Options shall be exercisable only by the Optionee.
At
the discretion of the Administrator and in accordance with rules it establishes
from time to time, Optionees may be permitted to transfer some or all of
their
Nonqualified Options to one or more “family members,” which is not a “prohibited
transfer for value,” provided that (i) the Optionee (or such Optionee’s estate
or representative) shall remain obligated to satisfy all income or other
tax
withholding obligations associated with the exercise of such Nonqualified
Option; (ii) the Optionee shall notify the Company in writing that such
transfer
has occurred and disclose to the Company the name and address of the “family
member” or “family members” and their relationship to the Optionee, and (iii)
such transfer shall be effected pursuant to transfer documents in a form
approved by the Administrator. For purposes of the foregoing, the terms
“family
members” and “prohibited transfer for value” have the meaning ascribed to them
in the General Instructions to Form S-8 (or any successor form) promulgated
under the Securities Act of 1933, as amended.
5.9 Repricing
Prohibited.
Subject
to Section 4.2 hereof, without the prior approval of the Company’s stockholders,
evidenced by a majority of votes cast, the Administrator shall not cause
the
cancellation, substitution or amendment of an Option Agreement that would
have
the effect of reducing the exercise price of such an Option previously
granted
under the Plan, or otherwise approve any modification to such an Option
that
would be treated as a “repricing” under the then applicable rules, regulations
or listing requirements adopted by the Nasdaq Stock Market.
5.10 Rights
as a Stockholder.
An
Optionee or permitted transferee of an Option shall have no rights or privileges
as a stockholder with respect to any shares covered by an Option until
such
Option has been duly exercised and certificates representing shares purchased
upon such exercise have been issued to such person.
5.11 Unvested
Shares.
The
Administrator shall have the discretion to grant Options which are exercisable
for unvested shares of Common Stock. Should the Optionee cease being an
employee, officer or director of the Company while owning such unvested
shares,
the Company shall have the right to repurchase, at the exercise price paid
per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise
and
the appropriate vesting schedule for the purchased shares) shall be established
by the Administrator and set forth in the document evidencing such repurchase
right.
5.12 Option
Grants to Non-Employee Directors.
(a) Automatic
Grants.
Each
director of the Company who is not an employee or executive officer of
the
Company (a “Non-Employee Director”) shall automatically be granted (i) a
Nonqualified Option to purchase 50,000 shares of the Common Stock upon
commencement of service as a director of the Company, and (ii) a Nonqualified
Option to purchase 40,000 shares of Common Stock at each annual meeting
of the
Company’s stockholders (provided such individual has served as a Non-Employee
Director for at least six (6) months prior to such meeting); provided,
however,
that the Chairman of the Board shall automatically be granted a Nonqualified
Option to purchase a maximum of 50,000 shares of Common Stock at each annual
meeting of the Company’s stockholders, with the exact amount determined by the
Administrator. All such Non-Qualified Options shall be subject to the terms
and
conditions of this Plan, including Section 5.11 above.
(b) Vesting
of Options Granted to Non-Employee Directors.
Each
initial Nonqualified Option granted to a newly-elected or appointed Non-Employee
Director shall vest, in a series of three (3) successive equal annual
installments over the Non-Employee Director’s period of continued service as a
director, with the first such installment to vest upon the Non-Employee
Director’s completion of one (1) year of service as a Non-Employee Director
measured from the Nonqualified Option grant date. Each annual Nonqualified
Option granted to continuing Non-Employee Directors shall vest, upon the
Non-Employee Director’s completion of one (1) year of service as a Non-Employee
Director measured from the Nonqualified Option grant date.
ARTICLE
6.
RESTRICTED
STOCK
6.1 Issuance
of Restricted Stock.
The
Administrator shall have the right to issue pursuant to this Plan and at
a
Purchase Price determined by the Administrator, shares of Common Stock
subject
to such terms, restrictions and conditions as the Administrator may determine at
the time of grant. Such conditions may include, but are not limited to,
continued employment or the achievement of specified performance goals
or
objectives established by the Administrator with respect to one or more
Performance Criteria, which require the Administrator to certify in writing
whether and the extent to which such performance goals were achieved before
such
restrictions are considered to have lapsed.
6.2 Restricted
Stock Award Agreements.
A
Participant shall have no rights with respect to the shares of Restricted
Stock
covered by a Restricted Stock Award Agreement until the Participant has
paid the
full Purchase Price, if any, to the Company in the manner set forth in
Section
6.3(b) hereof and has executed and delivered to the Company the applicable
Restricted Stock Award Agreement. Each Restricted Stock Award Agreement
shall be
in such form, and shall set forth the Purchase Price, if any, and such
other
terms, conditions and restrictions of the Restricted Stock Award Agreement,
not
inconsistent with the provisions of this Plan, as the Administrator shall,
from
time to time, deem desirable. Each such Restricted Stock Award Agreement
may be
different from each other Restricted Stock Award Agreement.
6.3 Purchase
Price.
(a) Amount.
Restricted
Stock may be issued to Participants for such consideration as is determined
by
the Administrator in its sole discretion, including no consideration or
such
minimum consideration as may be required by applicable law.
(b) Payment.
Payment
of the Purchase Price, if any, may be made, in the discretion of the
Administrator, subject to any legal restrictions, by: (a) cash;
(b) check; (c) the surrender of shares of Common Stock owned by the
Participant (provided that shares acquired pursuant to the exercise of
options
granted by the Company shall have been held by the Participant for the
requisite
period necessary to avoid a charge to the Company’s earnings for financial
reporting purposes), which surrendered shares shall be valued at Fair Market
Value as of the date of such acceptance; (d) the cancellation of indebtedness
of
the Company to the Participant; (e) the waiver of compensation due or
accrued to the Participant for services rendered; or (f) any combination of
the foregoing methods of payment or any other consideration or method of
payment
as shall be permitted by applicable law. If payment for shares of Restricted
Stock is made by promissory note, any cash dividends paid with respect
to the
Restricted Stock may be applied, in the discretion of the Administrator,
to
repayment of such note.
6.4 Vesting
of Restricted Stock.
The
Restricted Stock Award Agreement shall specify the date or dates, the
performance goals, if any, established by the Administrator with respect
to one
or more Performance Criteria that must be achieved, and any other conditions
on
which the Restricted Stock may vest.
6.5 Rights
as a Stockholder.
Upon
complying with the provisions of Sections 6.2 and 6.3 hereof, a Participant
shall have the rights of a stockholder with respect to the Restricted Stock
acquired pursuant to a Restricted Stock Award Agreement, including voting
and
dividend rights, subject to the terms, restrictions and conditions as are
set
forth in such Restricted Stock Award Agreement. Unless the Administrator
shall
determine otherwise, certificates evidencing shares of Restricted Stock
shall
remain in the possession of the Company until such shares have vested in
accordance with the terms of the Restricted Stock Award Agreement.
6.6 Restrictions.
Shares
of Restricted Stock may not be sold, pledged or otherwise encumbered or
disposed
of and shall not be assignable or transferable except by will, the laws
of
descent and distribution or pursuant to a DRO entered by a court in settlement
of marital property rights, except as specifically provided in the Restricted
Stock Award Agreement or as authorized by the Administrator. In the event
of
termination of a Participant’s employment, service as a director of the Company
or Service Provider status for any reason whatsoever (including death or
disability), the Restricted Stock Award Agreement may provide, in the discretion
of the Administrator, that the Company may, at the discretion of the
Administrator, exercise a Repurchase Right to repurchase at the original
Purchase Price the shares of Restricted Stock that have not vested as of
the
date of termination.
ARTICLE
7.
RESTRICTED
STOCK UNITS
7.1 Grants
of Restricted Stock Units and Dividend Equivalents.
The
Administrator shall have the right to grant, pursuant to this Plan, Restricted
Stock Units and Dividend Equivalents, subject to such terms, restrictions
and
conditions as the Administrator may determine at the time of grant. Such
conditions may include, but are not limited to, continued employment or
the
achievement of specified performance goals or objectives established by
the
Administrator with respect to one or more Performance Criteria, which require
the Administrator to certify in writing whether and the extent to which
such
performance goals were achieved before such restrictions are considered
to have
lapsed.
7.2 Restricted
Stock Unit Agreements. A
Participant shall have no rights with respect to the Restricted Stock Units
or
Dividend Equivalents covered by a Restricted Stock Award Agreement until
the
Participant has executed and delivered to the Company the applicable Restricted
Stock Award Agreement. Each Restricted Stock Award Agreement shall be in
such
form, and shall set forth the Purchase Price, if any, and such other terms,
conditions and restrictions of the Restricted Stock Award Agreement, not
inconsistent with the provisions of this Plan, as the Administrator shall,
from
time to time, deem desirable. Each such Restricted Stock Award Agreement
may be
different from each other Restricted Stock Award Agreement.
7.3 Purchase
Price.
(a) Amount.
Restricted
Stock Units may be issued to Participants for such consideration as is
determined by the Administrator in its sole discretion, including no
consideration or such minimum consideration as may be required by applicable
law.
(b) Payment.
Payment
of the Purchase Price, if any, may be made, in the discretion of the
Administrator, subject to any legal restrictions, by: (a) cash;
(b) check; (c) the surrender of shares of Common Stock owned by the
Participant (provided that shares acquired pursuant to the exercise of
options
granted by the Company shall have been held by the Participant for the
requisite
period necessary to avoid a charge to the Company’s earnings for financial
reporting purposes), which surrendered shares shall be valued at Fair Market
Value as of the date of such acceptance; (d) the cancellation of indebtedness
of
the Company to the Participant; (e) the waiver of compensation due or
accrued to the Participant for services rendered; or (f) any combination of
the foregoing methods of payment or any other consideration or method of
payment
as shall be permitted by applicable law.
7.4 Vesting
of Restricted Stock Units and Dividend Equivalents.
The
Restricted Stock Award Agreement shall specify the date or dates, the
performance goals, if any, established by the Administrator with respect
to one
or more Performance Criteria that must be achieved, and any other conditions
on
which the Restricted Stock Units and Dividend Equivalents may vest.
7.5 Rights
as a Stockholder.
Holders
of Restricted Stock Units shall not be entitled to vote or to receive dividends
unless or until they become owners of the shares of Common Stock pursuant
to
their Restricted Stock Award Agreement and the terms and conditions of
the
Plan.
7.6 Restrictions.
Restricted Stock Units and Dividend Equivalents may not be sold, pledged
or
otherwise encumbered or disposed of and shall not be assignable or transferable
except by will, the laws of descent and distribution or pursuant to a DRO
entered by a court in settlement of marital property rights, except as
specifically provided in the Restricted Stock Award Agreement or as authorized
by the Administrator. In the event of termination of a Participant’s employment,
service as a director of the Company or Service Provider status for any
reason
whatsoever (including death or disability), the Restricted Stock Award
Agreement
may provide that all Restricted Stock Units and Dividend Equivalents that
have
not vested as of such date shall be automatically forfeited by the Participant.
However, if, with respect to such unvested Restricted Stock Units the
Participant paid a Purchase Price, the Administrator shall have the right,
exercisable at the discretion of the Administrator, to exercise a Repurchase
Right to cancel such unvested Restricted Stock Units upon payment to the
Participant of the original Purchase Price. The Participant shall forfeit
such
unvested Restricted Stock Units upon the Administrator’s exercise of such right.
ARTICLE
8.
STOCK
APPRECIATION RIGHTS
8.1 Grant
of Stock Appreciation Rights.
A Stock
Appreciation Right may be granted to any Participant selected by the
Administrator. Stock Appreciation Rights may be granted on a basis that
allows
for the exercise of the right by the Participant or that provides for the
automatic payment of the right upon a specified date or event. Stock
Appreciation Rights shall be exercisable or payable at such time or times
and
upon conditions as may be approved by the Administrator, provided that
the
Administrator may accelerate the exercisability or payment of a Stock
Appreciation Right at any time.
8.2 Vesting
of Stock Appreciation Rights.
Each
Stock Appreciation Right shall vest and become exercisable in one or more
installments at such time or times and subject to such conditions, including
without limitation the achievement of specified performance goals or objectives
established with respect to one or more Performance Criteria, as shall
be
determined by the Administrator. A
Stock
Appreciation Right will be exercisable or payable at such time or times
as
determined by the Administrator, provided that the maximum term of a Stock
Appreciation Right shall be ten (10) years from the date of grant. The
base
price of a Stock Appreciation Right shall be determined by the Administrator
in
its sole discretion; provided, however, that the base price per share of
any
Stock Appreciation Right shall not be less than one hundred percent (100%)
of
the Fair Market Value of the shares of Common Stock on the date of
grant.
8.3 Payment
of Stock Appreciation Rights.
A Stock
Appreciation Right will entitle the holder, upon exercise or other payment
of
the Stock Appreciation Right, as applicable, to receive an amount determined
by
multiplying: (i) the excess of the Fair Market Value of a share of Common
Stock
on the date of exercise or payment of the Stock Appreciation Right over
the base
price of such Stock Appreciation Right, by (ii) the number of shares as
to which
such Stock Appreciation Right is exercised or paid. Payment of the amount
determined under the foregoing shall be made either in cash or in shares
of
Common Stock, as determined by the Administrator in its discretion. If
payment
is made in shares of Common Stock, such shares shall be valued at their
Fair
Market Value on the date of exercise or payment, subject to applicable
tax
withholding requirements
and to
such conditions, as are set forth in this Plan and the applicable Stock
Appreciation Rights Award Agreement.
8.4 Nontransferability
of Stock Appreciation Rights. Except
as
otherwise provided in this Section 8.4, Stock Appreciation Rights shall
not be
assignable or transferable except by will, the laws of descent and distribution
or pursuant to a DRO entered by a court in settlement of marital property
rights, and during the life of the Stock Appreciation Rights Holder, Stock
Appreciation Rights shall be exercisable only by the Stock Appreciation
Rights
Holder. At the discretion of the Administrator and in accordance with rules
it
establishes from time to time, Stock Appreciation Rights Holders may be
permitted to transfer some or all of their Stock Appreciation Rights to
one or
more “family members,” which is not a “prohibited transfer for value,” provided
that (i) the Stock Appreciation Rights Holder (or such holder’s estate or
representative) shall remain obligated to satisfy all income or other tax
withholding obligations associated with the exercise of such Stock Appreciation
Right; (ii) the Stock Appreciation Rights Holder shall notify the Company
in
writing that such transfer has occurred and disclose to the Company the
name and
address of the “family member” or “family members” and their relationship to the
holder, and (iii) such transfer shall be effected pursuant to transfer
documents
in a form approved by the Administrator. For purposes of the foregoing,
the terms “family members” and “prohibited transfer for value” have the meaning
ascribed to them in the General Instructions to Form S-8 (or any successor
form)
promulgated under the Securities Act of 1933, as amended.
ARTICLE
9.
STOCK
PAYMENT AWARDS
9.1
Grant
of Stock Payment Awards.
A Stock
Payment award may be granted to any Participant selected by the Administrator.
A
Stock Payment award may be granted for past services, in lieu of bonus
or other
cash compensation, as directors’ compensation or for any other valid purpose as
determined by the Administrator. A Stock Payment award granted to a Participant
represents shares of Common Stock that are issued without restrictions
on
transfer and other incidents of ownership and free of forfeiture conditions,
except as otherwise provided in the Plan and the Award Agreement. The
Administrator may, in connection with any Stock Payment award, provide
that no
payment is required, or require the payment by the Participant of a specified
purchase price.
9.2
Rights
as Stockholder.
Subject
to the foregoing provisions of this Article 9 and the applicable Award
Agreement, upon the issuance of the Common Stock under a Stock Payment
award the
Participant shall have all rights of a stockholder with respect to the
shares of
Common Stock, including the right to vote the shares and receive all dividends
and other distributions paid or made with respect thereto.
ARTICLE
10.
ADMINISTRATION
OF THE PLAN
10.1 Administrator.
Authority to control and manage the operation and administration of the
Plan
shall be vested in the Board, which may delegate such responsibilities
in whole
or in part to a Committee. Members of the Committee may be appointed from
time
to time by, and shall serve at the pleasure of, the Board. The Board may
limit
the composition of the Committee to those persons necessary to comply with
the
requirements of Section 162(m) of the Code and Section 16 of the Exchange
Act.
10.2 Powers
of the Administrator.
In
addition to any other powers or authority conferred upon the Administrator
elsewhere in the Plan or by law, the Administrator shall have full power
and
authority: (a) to determine the persons to whom, and the time or times at
which, Awards shall be granted, the number of shares to be represented
by each
Award, and the consideration to be received by the Company upon the exercise
and/or vesting of such Awards; (b) to interpret the Plan; (c) to
create, amend or rescind rules and regulations relating to the Plan; (d) to
determine the terms, conditions and restrictions contained in, and the
form of,
Award Agreements; (e) to determine the identity or capacity of any persons
who may be entitled to exercise a Participant’s rights under any Award Agreement
under the Plan; (f) to correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Award Agreement; (g) to
accelerate the vesting of any Award or release or waive any repurchase
rights of
the Company with respect to Restricted Stock Awards; (h) to extend the
expiration date of any Option; (i) to amend outstanding Award Agreements
to provide for, among other things, any change or modification which the
Administrator could have included in the original Agreement or in furtherance
of
the powers provided for herein; and (j) to make all other determinations
necessary or advisable for the administration of the Plan, but only to
the
extent not contrary to the express provisions of the Plan. Any action,
decision,
interpretation or determination made in good faith by the Administrator
in the
exercise of its authority conferred upon it under the Plan shall be final
and
binding on the Company and all Participants. To the extent permitted by
applicable law, the Administrator may from time to time delegate to one
or more
members of the Board or one or more officers of the Company the authority
to
grant or amend Awards to Participants other than (a) senior executives
of the
Company who are subject to Section 16 of the Exchange Act, (b) Covered
Employees, or (c) officers of the Company (or members of the Board) to
whom
authority to grant or amend Awards has been delegated hereunder. Any delegation
hereunder shall be subject to the restrictions and limits that the Administrator
specifies at the time of such delegation, and the Administrator may at
any time
rescind the authority so delegated or appoint a new delegatee.
10.3 Limitation
on Liability.
No
employee of the Company or member of the Board or Administrator shall be
subject
to any liability with respect to duties under the Plan unless the person
acts
fraudulently or in bad faith. To the extent permitted by law, the Company
shall
indemnify each member of the Board or Administrator, and any employee of
the
Company with duties under the Plan, who was or is a party, or is threatened
to
be made a party, to any threatened, pending or completed proceeding, whether
civil, criminal, administrative or investigative, by reason of such person’s
conduct in the performance of duties under the Plan.
ARTICLE
11.
CHANGE
IN CONTROL
11.1 Impact
of Change in Control on Awards Under Plan.
In order
to preserve a Participant’s rights in the event of a Change in Control of the
Company:
(a) The
Administrator shall have the discretion to provide in each Award Agreement
the
terms and conditions that relate to (i) vesting of such Award in the event
of a
Change in Control, and (ii) assumption of such Awards or issuance of comparable
securities under an incentive program in the event of a Change in Control.
The
aforementioned terms and conditions may vary in each Award
Agreement.
(b) If
the
terms of an outstanding Option provide for accelerated vesting in the event
of a
Change in Control, or to the extent that a Option is vested and not yet
exercised, the Administrator in its discretion may provide, in connection
with
the Change in Control transaction, for the purchase or exchange of each
Option
for an amount of cash or other property having a value equal to the difference
(or “spread”) between: (x) the value of the cash or other property that the
Participant would have received pursuant to the Change in Control transaction
in
exchange for the shares issuable upon exercise of the Option had the Option
been
exercised immediately prior to the Change in Control, and (y) the Exercise
Price
of the Option.
(c) If
the
terms of an outstanding Stock Appreciation Right provide for accelerated
vesting
in the event of a Change in Control, or to the extent that a Stock Appreciation
Right is vested and not yet exercised, the Administrator in its discretion
may
provide, in connection with the Change in Control transaction, for the
purchase
or exchange of each Stock Appreciation Right for an amount of cash or other
property having a value equal to the value of the cash or other property
that
the Participant would have received pursuant to the Change in Control
transaction in exchange for the shares issuable upon exercise of the Stock
Appreciation Right had the Stock Appreciation Right been exercised immediately
prior to the Change in Control.
(d) Outstanding
Options and Stock Appreciation Rights shall terminate and cease to be
exercisable upon consummation of a Change in Control except to the extent
that
the Options or Stock Appreciation Rights are assumed by the successor entity
(or
parent thereof) pursuant to the terms of the Change in Control
transaction.
(e) The
Administrator shall cause written notice of a proposed Change in Control
transaction to be given to Participants not less than fifteen (15) days
prior to
the anticipated effective date of the proposed transaction.
ARTICLE
12.
AMENDMENT
AND TERMINATION OF THE PLAN
12.1 Amendments.
The
Board may from time to time alter, amend, suspend or terminate the Plan
in such
respects as the Board may deem advisable. No such alteration, amendment,
suspension or termination shall be made which shall substantially affect
or
impair the rights of any Participant under an outstanding Award Agreement
without such Participant’s consent. The Board may alter or amend the Plan to
comply with requirements under the Code relating to Incentive Options or
other
types of options which give Optionees more favorable tax treatment than
that
applicable to Options granted under this Plan as of the date of its adoption.
Upon any such alteration or amendment, any outstanding Option granted hereunder
may, if the Administrator so determines and if permitted by applicable
law, be
subject to the more favorable tax treatment afforded to an Optionee pursuant
to
such terms and conditions.
12.2 Plan
Termination.
Unless
the Plan shall theretofore have been terminated, the Plan shall terminate
on the
tenth (10th) anniversary of the Effective Date and no Awards may be granted
under the Plan thereafter, but Awards and Award Agreements then outstanding
shall continue in effect in accordance with their respective terms.
ARTICLE
13.
TAX
WITHHOLDING
13.1 Tax
Withholding.
The
Participant shall be responsible for payment of any taxes or similar charges
required by law to be withheld from an Award or an amount paid in satisfaction
of an Award, which shall be paid by the Participant on or prior to the
payment
or other event that results in taxable income in respect of an Award. The
Award
Agreement may specify the manner in which the withholding obligation shall
be
satisfied with respect to the particular type of Award.
ARTICLE
14.
MISCELLANEOUS
14.1 Benefits
Not Alienable.
Other
than as provided above, benefits under the Plan may not be assigned or
alienated, whether voluntarily or involuntarily. Any unauthorized attempt
at
assignment, transfer, pledge or other disposition shall be without
effect.
14.2 Awards
subject to Code Section 409A. Any
Award
that constitutes, or provides for, a deferral of compensation subject to
Section
409A of the Code (a “Section 409A Award”) shall satisfy the requirements of
Section 409A of the Code, to the extent applicable as determined by the
Administrator. The Award Agreement with respect to a Section 409A Award
shall
incorporate the terms and conditions required by Section 409A of the Code.
If
any deferral of compensation is to be permitted in connection with a 409A
Award,
the Administrator shall establish rules and procedures relating to such
deferral
in a manner intended to comply with the requirements of Section 409A of
the
Code, including, without limitation, the time when an election to defer
may be
made, the time period of the deferral and the events that would result
in
payment of the deferred amount, the interest or other earnings attributable
to
the deferral and the method of funding, if any, attributable to the deferred
amount.
14.3 No
Enlargement of Employee Rights.
This
Plan is strictly a voluntary undertaking on the part of the Company and
shall
not be deemed to constitute a contract between the Company and any Participant
to be consideration for, or an inducement to, or a condition of, the employment
of any Participant. Nothing contained in the Plan shall be deemed to give
the
right to any Participant to be retained as an employee of the Company or
any
Affiliated Company or to interfere with the right of the Company or any
Affiliated Company to discharge any Participant at any time.
14.4 Application
of Funds.
The
proceeds received by the Company from the sale of Common Stock pursuant
to
Option Agreements and Restricted Stock Award Agreements, except as otherwise
provided herein, will be used for general corporate purposes.
14.5 Unfunded
Plan.
The
adoption of the Plan and any reservation of shares of Common Stock or cash
amounts by the Company to discharge its obligations hereunder shall not
be
deemed to create a trust or other funded arrangement. Except upon the issuance
of Common Stock pursuant to an Award, any rights of a Participant under
the Plan
shall be those of a general unsecured creditor of the Company, and neither
a
Participant nor the Participant’s permitted transferees or estate shall have any
other interest in any assets of the Company by virtue of the Plan.
14.6 Annual
Reports.
During
the term of this Plan, the Company will furnish to each Participant who
does not
otherwise receive such materials, copies of all reports, proxy statements
and
other communications that the Company distributes generally to its
stockholders.