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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K/A
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For Fiscal Year Ended December 31, 2008
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934 |
From the transition period from to
Commission File Number: 000-28440
ENDOLOGIX, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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68-0328265 |
(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
11 Studebaker, Irvine, California 92618
(Address of principal executive offices)
(949) 595-7200
(Registrants telephone number)
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class
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Name of Each Exchange on Which Registered |
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Common Stock, $0.001 par value
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The NASDAQ Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer o
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Accelerated filer þ
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of
the Act). Yes o No þ
As of June 30, 2008, the aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $72,068,232 (based upon the closing price for shares of the
Registrants Common Stock as reported by the NASDAQ Global Market for June 30, 2008, the last
trading date of the Registrants most recently completed second fiscal quarter).
On
February 10, 2009, approximately 43,870,449 shares of the Registrants Common Stock, $0.001
par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
EXPLANATORY NOTE
This Amendment No. 1 to the annual report on Form 10-K of Endologix, Inc. (Endologix, we,
our, us, or the Company) for the year ended December 31, 2008, which was originally filed
with the Securities and Exchange Commission, or SEC, on March 9, 2009, is being filed solely to
include responses to the items required by Part III. This Amendment No. 1 does not reflect events
occurring after March 9, 2009, the date of the filing of our original Form 10-K, or modify or
update those disclosures that may have been affected by subsequent events.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Our Board of Directors currently consists of seven persons. Our Board of Directors is divided
into three classes serving staggered terms of three years. The Class I director, Jeffrey F.
ODonnell, is scheduled to serve until the annual meeting of stockholders in 2011. The Class II
directors, Franklin D. Brown, Edward B. Diethrich, M.D. and John McDermott, are scheduled to serve
until the annual meeting of stockholders in 2009. The Class III directors, Paul McCormick, Roderick
de Greef and Gregory D. Waller, are scheduled to serve until the annual meeting of stockholders in
2010.
Information With Respect to Directors
Set
forth below for each of our directors is information regarding his age, business experience for the past five years, the
period he has served as a director, and the directorships currently held by him in corporations
whose shares are publicly registered.
Class II
(Directors continuing in office with a term expiring in 2009)
Franklin D. Brown, 65, serves as our Chairman and has been a director since 1997, and was
formerly a director of the private company Endologix, Inc., or the former Endologix, 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 had previously served as the
Chairman and Chief Executive Officer of the former Endologix from 1998 to 2002. From October 1994
until its sale in September 1997, Mr. Brown served as Chairman, President, and Chief Executive
Officer of 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., 73, has served on our Board of Directors since May 2002. Dr.
Diethrich was a Director for the former Endologix. 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.
John McDermott, 48, joined us in May 2008 as President and Chief Executive Officer. He has
nearly 20 years of executive management, sales, marketing, and finance experience in the vascular
device industry. From 2002 to 2007 he served as President of Bard Peripheral Vascular, a division
of C.R. Bard, Inc., that earned several corporate awards for global sales growth, business
development, income growth, and sales from new products during his tenure. He previously was
President of Global Sales for C.R. Bards vascular surgery and endovascular businesses with
responsibilities for managing a worldwide direct sales force with more than 200 representatives.
Prior to that, he served for four years as President of C.R. Bards division IMPRA, Inc., where he
was responsible for global operations, including sales, marketing, research and development,
manufacturing, and finance. From 1990 to 1996, he was Chief Financial Officer and later Vice
President and Chief Operating Officer of IMPRA, Inc., prior to its acquisition by C.R. Bard. He
has been an active leader within the vascular community and was formerly on the board of directors
of the International Society of Endovascular Specialists and the Vascular Disease Foundation.
1
Class III
(Directors continuing in office with a term expiring in 2010)
Paul McCormick, 56, has served on our Board of Directors since May 2002. Mr. McCormick has
more than 28 years of experience 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,
as Vice President of Sales and Marketing, served as President and Chief Operating Officer from
January 2001 until January 2003, and then President and Chief Executive Officer until May 2008.
Previously, he held various sales and marketing positions at Progressive Angioplasty Systems, Heart
Technology, Trimedyne Inc., and U.S. Surgical Corporation and is a director at two private medical
device companies, Cianna Medical and Embrella Cardiovascular.
Roderick de Greef, 48, 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. Since November 2008, Mr. de Greef has been Chairman of the board of directors of
Cambridge Heart, Inc., where he was previously the Chief Financial Officer 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, Inc., where he was instrumental in securing equity capital
beginning in 1997, and advising on merger and acquisition activity. 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 also serves on the boards of BioLife Solutions,
Inc., a public biotechnology company located in Owego, New York, and Elephant Talk Communications,
Inc., an international communications operator based in Amsterdam, the Netherlands.
Gregory D. Waller, 59, 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 M.B.A. with a
concentration in Accounting from California
State University, Fullerton. Mr. Waller also serves on the board of directors and as chairman of
the audit committee of each of Clarient, Inc., Cardiogenesis Corporation, Alsius Corporation, and
SenoRx, Inc., all of which are publicly traded companies.
Class I
(Director continuing in office with a term expiring in 2011)
Jeffrey F. ODonnell, 49, has served on our Board of Directors since June 1998. Mr. ODonnell
joined us in a management capacity in 1995, became President in January 1998 and Chief Executive
Officer that June. In November 1999, Mr. ODonnell joined PhotoMedix, 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. ODonnell held the position of President and
Chief Executive Officer 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. ODonnell currently serves on the board
of directors of Embrella Cardiovascular, Inc., a privately held medical device company. Mr.
ODonnell is a graduate of LaSalle University School of Business.
Executive Officers
Our executive officers, other than Mr. McDermott whose biography is set forth above, are as
follows:
Stefan G. Schreck, Ph.D., 49, 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 research and
development management positions in the medical device industry. From May 1995 to April 2000, Dr.
Schreck served as Director of Research in Baxter Healthcares Heart Valve Division. From April 2000
to August 2002, Dr. Schreck served as Senior Director Research and Development 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 and Chief
Executive Officer of MediMorph Solutions Inc., an engineering and management consulting firm for
the medical device industry, that he founded.
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Robert J. Krist, 60, 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 B.S. in Physics from Villanova University and an M.B.A.
from the University of Southern California.
Janet M. Fauls, 46, joined us in November 2005 as Director of Regulatory Affairs and Quality
Assurance. Assuming increasing responsibilities through the present time, she is currently our
Vice President, Regulatory 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
B.S. in Chemistry from the University of California, Santa Barbara.
Joseph A. DeJohn, 48, joined us in July 2008 as Vice President of Sales. He has more than 20
years of sales management experience in the medical device industry, including serving 17 years at
C.R. Bard. During his tenure at C.R. Bard, he held sales management positions with increasing
responsibilities, serving the last six years as Vice President of Sales of the Peripheral Vascular
Division. In this position, he was responsible for managing a 200-person sales organization and
played a leadership role in strategic planning, budgeting, recruitment, professional development,
national accounts, and customer service. Prior to that, Mr. DeJohn was Director of Sales of C.R.
Bards Peripheral Technologies Division. Before joining C.R. Bard, Mr. DeJohn served five years
with Bausch & Lomb Corporation in various sales management positions. He received a B.S. in
Education from Bowling Green State University.
Gary I. Sorsher, 44, joined us in October 2008 as Vice President, Quality, bringing 20 years
of quality assurance experience. Prior to that, he served for two years as Director of Quality
Engineering at Bard Peripheral Vascular, where he oversaw quality assurance operations for Bard
Peripheral Vascular and Bard Biopsy Systems. Prior to that, he spent 13 years at Cordis, a Johnson
& Johnson Company, holding several positions with increasing responsibility during his tenure.
Among these, he served as Director of Quality Assurance, New Product Development and as the senior
quality assurance representative for Cordis Global Commercialization Team responsible for drug
eluting stents, stent delivery systems, and angioplasty products.
Mr. Sorsher received an M.S. and a B.S. in Electrical
Engineering from Byeloryssian Polytechnic Institute, Minsk, Belarus.
Daniel Hawkins, 42, joined us in April 2009 as Vice President of Global Marketing. He brings
more than 15 years of marketing management and business development experience in the medical
device and biotechnology industries. He spent the past seven years in founder and leadership roles
developing and commercializing medical devices for incubators funded by Three Arch Partners,
Frazier Healthcare, Prospect Ventures, MPM Capital and Charter Ventures. He is a founder of
Calibra Medical, Inc., where he co-invented the core technology and was instrumental in creating a
new medical device category with a market opportunity in excess of several billion dollars
annually. He also played critical roles in developing product and marketing strategies for Restore
Medical, Inc. and EnteroMedics, Inc. Prior to that, he created the marketing and sales department
and played critical product development roles at Intuitive Surgical, Inc. He has an M.B.A. from
the Stanford Graduate School of Business and a B.S. in Economics from The Wharton School at the
University of Pennsylvania.
Family Relationships
There are no family relationships between any of our directors or executive officers.
Audit Committee and Audit Committee Financial Expert
We have a separately designated standing Audit Committee, established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The
Audit Committee consists of Messrs. Waller, de Greef and ODonnell. Each member of the Audit
Committee qualifies as an independent director in compliance with the applicable rules of the SEC
and the NASDAQ Listing 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 SEC.
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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 five times during
the year ended December 31, 2008. To ensure independence, the Audit Committee also meets separately
with our independent registered public accounting firm and members of management.
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 2008 fiscal year transactions in our 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 2008 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.
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., Attn:
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.
Item 11. Executive Compensation
COMPENSATION DISCUSSION AND ANALYSIS
General
This
discussion and analysis of compensation arrangements with our Named Executive Officers is
intended to provide context for the decisions underlying the
compensation paid to our Named
Executive Officers in 2008 and should be read together with the compensation tables and related
disclosures set forth below.
Our Compensation Objectives
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:
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motivation of our executive officers to cause us to achieve the best possible
financial and operational results; |
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attraction and retention of high quality executives who can provide effective
leadership, consistency of purpose and enduring relations with relevant stockholders;
and |
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alignment of long-term interests of our executive officers with those of our
stockholders. |
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Our executive compensation program primarily consists of a base salary, cash incentive
payments upon the achievement of corporate objectives and long-term equity-based incentive awards,
which historically are in the form of stock options. The equity component of our compensation
program is designed to align a portion of our executive officers compensation with the interests
of our stockholders to create long term value.
Role of Compensation Committee
The Compensation Committee of the Board of Directors is responsible for those policies and
decisions regarding the compensation and benefits for the named executive officers. The
Compensation Committee consists entirely of independent directors
under the NASDAQ Listing Rules,
outside directors for purposes of Section 162(m) of the Internal Revenue Code of 1986 and
non-employee directors for purposes of Rule 16b-3 under the Exchange Act.
The Compensation Committee solicits the input of our Chief Executive Officer in determining
compensation, in particular with respect to salary, cash incentive compensation and equity awards
for our executive officers other than our Chief Executive Officer. While our Chief Executive
Officer participates in the deliberations regarding compensation for
our other Named Executive
Officers, he does not participate in any deliberations regarding his own compensation. The
Compensation Committee evaluates the compensation paid to our executive officers each fiscal year,
analyzes achievement of our corporate objectives for purposes of determining incentive
compensation. The Compensation Committees charter authorizes the Compensation Committee to review
and approve the compensation arrangements for each of our executive officers. However, in 2008,
the Compensation Committee approved and recommended the 2008 base
salaries, the 2008 bonus plan, the bonus
payment under our 2007 bonus plan and the equity awards to be granted to Messrs. McCormick, Krist and Schreck and
Ms. Fauls for final approval by the Board of Directors. 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.
In making decisions about total compensation to each executive officer, the Compensation
Committee considers our performance against internal plans and our market in general. The
Compensation Committee has periodically engaged outside consultants in the past to conduct
compensation surveys, although it did not do so in 2008. The Compensation Committee makes a
subjective determination regarding total compensation packages for our executive officers based on
informal surveys of similar positions in the medical device industry and their own experience.
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 Components
Our executive compensation consists of the following components:
Base Salary
Base salary is a fixed component of compensation, and is reviewed annually. The goal is to
provide our executives with a stable, market-competitive base of income that is commensurate with
an executives skills, experience and contributions to the company. The Compensation Committee
generally reviews base salaries at the beginning of each calendar year and recommends to the Board
of Directors any changes in salaries based on market data, significant changes in responsibilities
during the prior calendar year and individual performance. The Compensation Committee generally
makes its recommendations on the basis of its understanding of the salary levels in effect for
similar positions within the medical device industry. However, the Compensation Committee does not
benchmark base salaries against those of any other company.
In 2008, the Compensation Committee approved an increase of 4.1% for the base salaries of
Messrs. McCormick, Krist and Schreck at the beginning of the year, which was established in part by
the increase in cost of living. Ms. Fauls was promoted to her current position of Vice President,
Regulatory, Quality and Clinical Affairs in November 2007. As a result, Ms. Fauls salary was
evaluated in July 2008 and was increased by 12.1% effective August 1, 2008. Mr. McDermott was hired
as our Chief Executive Officer in May 2008 and Mr. DeJohn was hired as our Vice President, Sales in
July 2008. Mr. McDermotts base salary was determined primarily from the Compensation Committees
review of base salaries for other comparable medical device companies
as well as the base salary of Paul McCormick, our former Chief Executive Officer. Mr. DeJohns base salary was recommended
by Mr. McDermott based on informal market analysis and approved by the Compensation Committee
without change.
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Incentive Bonus
It is the Compensation Committees objective to have a substantial portion of each executive
officers compensation contingent upon the achievement of corporate objectives. At the beginning
of each year, our Chief Executive Officer recommends corporate objectives to the Compensation
Committee to be used in the bonus plan. The Compensation Committee reviews the objectives with the
Chief Executive Officer and then recommends the objectives to the Board of Directors. In 2008,
both the Chief Executive Officers and Compensation
Committees recommendations as to the corporate
objectives were approved without change. In 2008, each of our Named Executive Officers was
eligible to receive a cash bonus up to a percentage of their base salary as follows:
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Named Executive |
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Target Bonus |
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Officer |
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Percentage |
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Target Bonus |
John
McDermott(1) |
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50 |
% |
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$ |
180,000 |
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Robert Krist |
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30 |
% |
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$ |
71,042 |
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Stefan Schreck |
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30 |
% |
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$ |
71,042 |
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Janet Fauls |
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30 |
% |
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$ |
55,000 |
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Joseph
DeJohn(2) |
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35 |
% |
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$ |
91,000 |
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Paul
McCormick(3) |
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35 |
% |
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$ |
122,500 |
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(1) |
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Mr. McDermott was appointed our President and Chief Executive Officer effective May
12, 2008. |
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(2) |
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Mr. DeJohn was appointed our Vice President, Sales, effective July 17, 2008. |
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Mr. McCormick resigned as our President and Chief Executive Officer effective May 12,
2008. Mr. McCormick continues to serve on our Board of Directors. |
The target bonus amounts are recommended by the Compensation Committee at the beginning of
each year and are based primarily on the Compensation Committees understanding of the compensation
arrangements for similar positions in the medical device industry. However, the Compensation
Committee does not benchmark the short-term incentive compensation against other companies nor does
it target a specific mix between short-term incentive compensation and base salary. At the end of
the year, our Chief Executive Officer evaluates the achievement of the corporate objectives and
then recommends an incentive payment for each of the executive officers to the Compensation
Committee, which in turn, makes a recommendation to the Board of Directors. In 2008, the corporate
objectives on which our executive compensation was based, and their achievement, were as follows:
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Objective |
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Weight* |
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Achievement |
Between $41 and $43 million revenue |
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60 |
% |
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Between $39 and $41 million revenue |
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50 |
% |
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Between $38 and $39 million revenue |
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45 |
% |
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Between $37 and $38 million revenue |
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40 |
% |
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40 |
% |
Between $36 and $37 million revenue |
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35 |
% |
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Cash Flow Breakeven in Fourth Quarter |
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35 |
% |
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Cash Flow Breakeven in Third Quarter |
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45 |
% |
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Cash Trough no lower than $5 million |
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15 |
% |
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15 |
% |
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* |
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In no event would the achievement of the objectives exceed 100%. |
In establishing the corporate objectives, the Compensation Committee believed that each of the
objectives would be challenging to achieve. Based on operating results in 2008, the Compensation
Committee determined that the objectives were achieved at a 55% level. As a result, each of our
Named Executive Officers received a bonus amount equal to 55% of his or her target bonus. In the
case of Messrs. McDermott and DeJohn, their bonus amount was prorated for the number of months they
were employed by us in 2008. In 2008, the Chief Executive Officers recommendations as to
achievement of the objections were approved without change.
Long-Term Incentives
Our 2006 Stock Incentive Plan provides for the equity awards to qualified employees and
officers. Equity awards, which may include stock options and restricted stock awards, are provided
to our executive officers in order to align the interests of our executive officers with those of
our 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.
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The number of shares subject to each option grant is based upon the officers 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 individuals position with us and his or her 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 we feel the circumstances warrant. Each stock
option 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 ten years from the date of
grant). Generally, each option vests in periodic installments over a four-year period, contingent
upon the executive officers 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. Stock option awards are intended to retain
executives by providing a compelling incentive for the participating executives to remain with us.
Although
we historically grant options to our Named Executive Officers in May of each year, we
granted stock options to Messrs. Krist and Schreck and Ms. Fauls in January as part of their
incentive compensation. In connection with Mr. McDermotts hiring as Chief Executive Officer, he
was granted 500,000 options to purchase shares of common stock and 500,000 shares of restricted
stock. Although we have not historically made restricted stock grants to our named executive
officers, the Compensation Committee determined that such a grant was appropriate to ensure we were
able to obtain Mr. McDermotts services and because Mr. McDermott did not have a pre-existing
equity ownership interest in our company.
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 Compensation
Committees assessment of our performance, business conditions, strategic goals and plans, and
executive retention risk.
Other Benefits
We
have a 401(k) plan for the benefit of all of our eligible employees, including the Named
Executive Officers. Employees eligible to participate in our 401(k) plan will be those employees
who have attained the age of 21. Employees may elect to defer their compensation up to the
statutorily prescribed limit. An employees interests in his or her deferrals will be 100% vested
when contributed. We do not provide for matching contributions under the 401(k) plan. Contributions
to the 401(k) plan and earnings on those contributions will not be taxable to the employees until
distributed from the 401(k) plan.
Eligible
employees, including our Named Executive Officers, are also entitled to participate
in our 2006 Employee Stock Purchase Plan. Employees are eligible if they are employed by us, or any
participating subsidiary, for at least 20 hours per week and more than five months in any calendar
year. Shares are offered pursuant to the Employee Stock Purchase Plan in six-month periods
commencing on the first trading day on or after January and July of each year, or on such other
date as the administrator may determine. Amounts deducted and accumulated by the participant are
used to purchase shares of our common stock at the end of each six-month purchase period. The
purchase price of the shares will be the lower of 85% of the fair market value of our common stock
on the purchase date or the beginning of the offering period.
We also provide health, dental, vision and life insurance and other customary employee
assistance plans to all full-time employees, including the Named
Executive Officers.
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 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 officers total compensation to exceed
$1,000,000.
7
Compensation Committee Interlocks and Insider Participation
The
Compensation Committee currently is comprised of Roderick de Greef,
Edward B. Diethrich,
M.D. and Jeffrey ODonnell. No member of the Compensation Committee during fiscal year 2008 served
as an officer, former officer or employee of us or any of our subsidiaries. During fiscal year
2008, no executive officer served as a member of the compensation committee of any other
entity, one of whose executive officers served as a member of our Board of Directors or
Compensation Committee, and no executive officer served as a member of the board of directors
of any other entity, one of whose executive officers served as a member of our Compensation
Committee.
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 Amendment No.
1 to Annual Report on Form 10-K/A 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 Amendment No. 1 to Annual Report on Form 10-K/A.
The Compensation Committee
Roderick de Greef
Edward B. Diethrich, M.D.
Jeffrey ODonnell
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.
Summary Compensation Table
The following table sets forth summary compensation information for the fiscal years ended
December 31, 2008, 2007 and 2006 for our principal executive officer, our principal financial
officer and each of our executive officers as of the end of the last fiscal year whose total
compensation exceeded $100,000, who we refer to as our Named Executive Officers.
|
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|
|
|
|
|
|
|
Stock |
|
Option |
|
Non-Equity |
|
All Other |
|
|
Name and Principal |
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|
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|
|
|
|
|
|
Awards |
|
Awards |
|
Incentive Plan |
|
Compensation |
|
Total |
Position |
|
Year |
|
Salary ($) |
|
($)(1) |
|
($)(2) |
|
Compensation ($) |
|
($)(6) |
|
($) |
John McDermott, |
|
|
2008 |
|
|
$ |
230,538 |
|
|
$ |
166,251 |
|
|
$ |
112,465 |
|
|
$ |
66,000 |
|
|
$ |
99,167 |
|
|
$ |
674,421 |
|
President and Chief |
|
|
2007 |
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer (3) |
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2006 |
|
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|
|
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|
|
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|
|
|
Paul McCormick, |
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2008 |
|
|
$ |
132,533 |
|
|
|
|
|
|
$ |
204,546 |
|
|
$ |
46,297 |
|
|
$ |
218,915 |
|
|
$ |
602,291 |
|
President and Chief |
|
|
2007 |
|
|
$ |
350,000 |
|
|
|
|
|
|
$ |
229,894 |
|
|
$ |
98,000 |
|
|
|
|
|
|
$ |
677,894 |
|
Executive Officer (4) |
|
|
2006 |
|
|
$ |
325,000 |
|
|
|
|
|
|
$ |
200.285 |
|
|
$ |
76,781 |
|
|
|
|
|
|
$ |
602,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Krist, |
|
|
2008 |
|
|
$ |
236,808 |
|
|
|
|
|
|
$ |
138,829 |
|
|
$ |
39,073 |
|
|
|
|
|
|
$ |
414,710 |
|
Chief Financial |
|
|
2007 |
|
|
$ |
227,700 |
|
|
|
|
|
|
$ |
114,084 |
|
|
$ |
54,648 |
|
|
|
|
|
|
$ |
396,432 |
|
Officer and
Secretary |
|
|
2006 |
|
|
$ |
207,000 |
|
|
|
|
|
|
$ |
121,424 |
|
|
$ |
53,872 |
|
|
|
|
|
|
$ |
382,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stefan G. Schreck, |
|
|
2008 |
|
|
$ |
236,808 |
|
|
|
|
|
|
$ |
141,295 |
|
|
$ |
39,073 |
|
|
|
|
|
|
$ |
417,176 |
|
Vice President, |
|
|
2007 |
|
|
$ |
227,700 |
|
|
|
|
|
|
$ |
125,168 |
|
|
$ |
54,648 |
|
|
|
|
|
|
$ |
407,516 |
|
Technology |
|
|
2006 |
|
|
$ |
194,000 |
|
|
|
|
|
|
$ |
149,645 |
|
|
$ |
41,526 |
|
|
|
|
|
|
$ |
385,171 |
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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Janet Fauls, |
|
|
2008 |
|
|
$ |
173,333 |
|
|
|
|
|
|
$ |
58,994 |
|
|
$ |
30,525 |
|
|
|
|
|
|
$ |
262,852 |
|
Vice President, |
|
|
2007 |
|
|
$ |
144,896 |
|
|
|
|
|
|
$ |
18,560 |
|
|
$ |
21,877 |
|
|
|
|
|
|
$ |
185,333 |
|
Regulatory, Quality
and Clinical
Affairs |
|
|
2006 |
|
|
$ |
125,000 |
|
|
|
|
|
|
$ |
12,629 |
|
|
$ |
15,938 |
|
|
|
|
|
|
$ |
153,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph A. DeJohn, |
|
|
2008 |
|
|
$ |
119,167 |
|
|
$ |
6,719 |
|
|
$ |
12,731 |
|
|
$ |
25,025 |
|
|
|
|
|
|
$ |
163,642 |
|
Vice President, |
|
|
2007 |
|
|
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|
Sales (5) |
|
|
2006 |
|
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8
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(1) |
|
These amounts do not correspond to the actual value that will be recognized by the executive
officer. Rather, they represent the accounting expense we recognized during the year
for the restricted stock awards then held by the officer, whether granted in that year or in
prior years, calculated in accordance with Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 123 (revised 2004) Share-Based Payment, or FAS 123R. The
amounts were determined by multiplying the number of shares being expensed by the closing
price of a share of our common stock on the awards date of grant, allocated over the service period of
the award. There were no estimated forfeitures for restricted stock. For both Mr. McDermott and Mr. DeJohn, the expense is recognized over a two year
service period. |
|
(2) |
|
Represents the proportionate amount of the total fair value of option awards recognized by us
as an expense for financial accounting purposes. The fair values of these awards and the
amounts expensed were determined in accordance with FAS
123R. The awards for which expense is shown in this table include the awards made in the
applicable year as well as awards granted in previous years for which we continued to
recognize expense in such year. Pursuant to SEC rules, the amounts shown exclude the impact
of estimated forfeitures related to service-based vesting conditions. The assumptions used to
calculate the FAS 123R fair value of option awards are disclosed in Note 10 to our
consolidated financial statements in included in our Annual Report on Form 10-K for the year
ended December 31, 2008. These amounts reflect our accounting expense for these awards, and
do not correspond to the actual value that will be recognized by the executive officer. |
|
(3) |
|
Mr. McDermott was appointed our President and Chief Executive Officer effective May 12, 2008. |
|
(4) |
|
Mr. McCormick resigned as our President and Chief Executive Officer effective May 12, 2008.
Mr. McCormick continues to serve on our Board of Directors. |
|
(5) |
|
Mr. DeJohn was appointed our Vice President, Sales, effective July 17, 2008. |
|
(6) |
|
The amounts shown below are reported in this column:
Mr. McDermott was paid $99,167 in relocation expenses; and
Mr. McCormick received $182,000 in severance pay and $36,915 in vacation accrual payout pursuant
to the separation agreement with us, effective May 12, 2008. |
Grants of Plan-Based Awards
The following table summarizes grants of awards pursuant to plans made to our Named Executive
Officers during the year ended December 31, 2008.
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All Other |
|
All Other |
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Option |
|
Stock |
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Awards: |
|
Awards: |
|
Exercise |
|
Grant |
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|
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|
|
|
|
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Number of |
|
Number |
|
or |
|
Date Fair |
|
|
|
|
|
|
Estimated Future Payouts Under Non- |
|
Securities |
|
of Shares |
|
Base Price |
|
Value of |
|
|
|
|
|
|
Equity Incentive Plan Awards (1) |
|
Underlying |
|
of Stock |
|
of Option |
|
Option |
|
|
Grant |
|
Threshold |
|
Target |
|
Maximum |
|
Options |
|
or Units |
|
Awards |
|
Awards |
Name |
|
Date |
|
($) |
|
($) |
|
($) |
|
(#) |
|
(#) |
|
($ / Sh) |
|
($ / Sh)(2) |
John McDermott |
|
|
5/12/2008 |
|
|
$ |
60,000 |
|
|
$ |
120,000 |
|
|
$ |
120,000 |
|
|
|
500,000 |
|
|
|
|
|
|
$ |
2.67 |
|
|
$ |
2.67 |
|
|
|
|
5/12/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
500,000 |
|
|
$ |
0.01 |
|
|
$ |
2.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paul McCormick |
|
|
|
|
|
$ |
0 |
|
|
$ |
122,500 |
|
|
$ |
122,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
Robert J. Krist |
|
|
2/12/2008 |
|
|
$ |
0 |
|
|
$ |
71,042 |
|
|
$ |
71,042 |
|
|
|
60,000 |
|
|
|
|
|
|
$ |
2.88 |
|
|
$ |
2.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stefan G. Schreck |
|
|
2/12/2008 |
|
|
$ |
0 |
|
|
$ |
71,042 |
|
|
$ |
71,042 |
|
|
|
60,000 |
|
|
|
|
|
|
$ |
2.88 |
|
|
$ |
2.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janet Fauls |
|
|
2/12/2008 |
|
|
$ |
0 |
|
|
$ |
55,500 |
|
|
$ |
55,500 |
|
|
|
35,000 |
|
|
|
|
|
|
$ |
2.88 |
|
|
$ |
2.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
Joseph A. DeJohn |
|
|
7/17/2008 |
|
|
$ |
0 |
|
|
$ |
45,500 |
|
|
$ |
45,500 |
|
|
|
100,000 |
|
|
|
|
|
|
$ |
2.16 |
|
|
$ |
2.16 |
|
|
|
|
7/17/2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
$ |
0.01 |
|
|
$ |
2.16 |
|
|
|
|
(1) |
|
The amounts reported in this column represent the range of potential awards under the
threshold, target, and maximum performance objectives established by the Compensation
Committee in February 2008 or upon hire in the case of Messrs. McDermott and DeJohn and represents
their prorated maximum. |
|
(2) |
|
Stock option awards are typically issued equal to fair market value at time of issuance. |
9
Outstanding Equity Awards at Fiscal Year-End
The following table summarizes outstanding equity awards held by our Named Executive Officers
as of December 31, 2008.
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Option Awards |
|
Stock Awards |
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Equity |
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Equity |
|
Incentive |
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Incentive |
|
Plan |
|
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Plan |
|
Awards; |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
Awards; |
|
Market or |
|
|
Number of |
|
Number of |
|
|
|
|
|
|
|
|
|
Number of |
|
Value of |
|
Number of |
|
Payout Value |
|
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
|
Shares or |
|
Shares or |
|
Unearned |
|
of Unearned |
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
|
Units of |
|
Units of |
|
Shares, Units |
|
Shares, Units |
|
|
Unexercised |
|
Unexercised |
|
Option |
|
|
|
|
|
Stock That |
|
Stock That |
|
or Other |
|
or Other |
|
|
Options |
|
Options |
|
Exercise |
|
Option |
|
Have Not |
|
Have Not |
|
Rights That |
|
Rights That |
|
|
(#)(1) |
|
(#)(1) |
|
Price |
|
Expiration |
|
Vested |
|
Vested |
|
Have Not |
|
Have Not |
Name |
|
Exercisable |
|
Unexercisable |
|
($) |
|
Date (2) |
|
(#)(3) |
|
($)(3) |
|
Vested (#) |
|
Vested (#) |
John McDermott(3) |
|
|
0 |
|
|
|
500,000 |
|
|
$ |
2.67 |
|
|
|
05/12/2018 |
|
|
|
500,000 |
|
|
|
1,335,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert J. Krist |
|
|
100,000 |
|
|
|
0 |
|
|
$ |
5.55 |
|
|
|
8/18/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,508 |
|
|
|
1,592 |
|
|
$ |
5.81 |
|
|
|
4/4/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,375 |
|
|
|
10,625 |
|
|
$ |
3.40 |
|
|
|
5/23/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,646 |
|
|
|
22,354 |
|
|
$ |
4.32 |
|
|
|
5/22/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
60,000 |
|
|
$ |
2.88 |
|
|
|
2/12/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stefan G. Schreck |
|
|
50,000 |
|
|
|
0 |
|
|
$ |
6.00 |
|
|
|
2/26/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000 |
|
|
|
0 |
|
|
$ |
4.70 |
|
|
|
6/17/2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,533 |
|
|
|
3,867 |
|
|
$ |
5.81 |
|
|
|
4/4/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,583 |
|
|
|
5,417 |
|
|
$ |
7.12 |
|
|
|
1/17/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,375 |
|
|
|
10,625 |
|
|
$ |
3.40 |
|
|
|
5/23/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,896 |
|
|
|
15,104 |
|
|
$ |
4.32 |
|
|
|
5/22/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
60,000 |
|
|
$ |
2.88 |
|
|
|
2/12/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janet Fauls |
|
|
11,563 |
|
|
|
3,437 |
|
|
$ |
5.25 |
|
|
|
11/7/2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,458 |
|
|
|
3,542 |
|
|
$ |
3.40 |
|
|
|
5/23/2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,167 |
|
|
|
4,833 |
|
|
$ |
4.32 |
|
|
|
5/22/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,542 |
|
|
|
36,458 |
|
|
$ |
2.87 |
|
|
|
11/16/2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
35,000 |
|
|
$ |
2.88 |
|
|
|
2/12/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph A. DeJohn(3) |
|
|
0 |
|
|
|
100,000 |
|
|
$ |
2.16 |
|
|
|
7/17/2018 |
|
|
|
25,000 |
|
|
|
54,000 |
|
|
|
|
|
|
|
|
|
|
|
|
(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 our Named Executive
Officers. |
|
(2) |
|
Options expire ten years from the grant date. |
|
(3) |
|
Each restricted stock award vests after two years of continuous service and has an exercise
price of $0.01 per share. The vesting of these options may fully accelerate upon a change in
control pursuant to written agreements entered into with each of our Named Executive Officers. |
10
Option Exercises and Stock Vested
There were no option exercises or shares of restricted stock vested by any of our Named
Executive Officers during the year ended December 31, 2008.
Severance and Change-in-Control Arrangements for Executive Officers
We have entered into agreements with each of our Named Executive Officers which provide that
if we terminate the executive officers employment without cause or he or she resigns for good
reason, each executive officer, other than Mr. McDermott, is entitled to the following
compensation: (i) the portion of his or her then current base salary which has accrued through the
date of termination, (ii) any payments for unused vacation and reimbursement expenses, which are
due, accrued or payable, (iii) a severance payment in an amount equal to six-months of the
executives then current base salary, (iv) to the extent not already vested, all of executives
options to purchase shares of our common stock and restricted stock will vest by an additional six
months, (v) a prorated payment equal to the target bonus amount for which executive would be
eligible for the year in which such termination or resignation occurred and (vi) continuation of
certain insurance benefits for six months. With respect to Mr. McDermott, if we terminate his
employment with us without cause or he resigns for good reason, he is entitled to the following
compensation: (i) the portion of his then current base salary which has accrued through the date
of termination, (ii) any payments for unused vacation and reimbursement expenses, which are due,
accrued or payable, (iii) a severance payment in an amount equal to 12-months of his then current
base salary, (iv) to the extent not already vested, all of his options to purchase shares of our
common stock and restricted stock will fully vest and become immediately exercisable, (v) a
prorated payment equal to the target bonus amount for which he would be eligible for the year in
which such termination or resignation occurred and (vi) continuation of certain insurance benefits
for 12 months.
In
the event the executive officer, including Mr. McDermott, is terminated or resigns for good
reason, in connection with a change in control, the executive officer is entitled to the following
compensation: (i) the portion of his or her then current base salary which has accrued through
the date of termination, (ii) any payments for unused vacation and reimbursement expenses, which
are due, accrued or payable, (iii) a severance payment in an amount equal to 12 months of the
executives then current base salary, (iv) to the extent not already vested, all of executives
options to purchase shares of our common stock and restricted stock will accelerate and
automatically vest, (v) a prorated payment equal to the target bonus amount for which executive
would be eligible for the year in which such termination or resignation occurred and (vi)
continuation of certain insurance benefits for 12 months.
On May 12, 2008, we entered into a Severance Agreement and General Release with Mr. McCormick,
our former President and Chief Executive Officer, in connection with his resignation, pursuant to
which he received (i) continued payments of his base salary for six months after the termination of
his employment, (ii) continued health insurance coverage for six months after the termination of
his employment and (iii) a pro-rated bonus equal to $46,297. In addition, Mr. McCormicks
outstanding options will continue to vest so long as he continues to serve on our Board of
Directors.
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, other than Mr. McCormick, pursuant to the change in control agreements
described above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Change in |
|
After Change in |
|
|
|
|
Control |
|
Control |
|
|
|
|
Termination |
|
Termination |
|
|
|
|
without Cause or for |
|
without Cause or |
Name |
|
Benefit |
|
Good Reason |
|
for Good Reason |
Robert J. Krist |
|
Severance Pay (1) |
|
$ |
121,500 |
|
|
$ |
243,000 |
|
|
|
Bonus Pay (2) |
|
$ |
36,450 |
|
|
$ |
72,900 |
|
|
|
Stock option vesting acceleration (3) |
|
|
29,967 |
|
|
|
94,571 |
|
|
|
Continuation of Benefits(4) |
|
$ |
2,629 |
|
|
$ |
5,258 |
|
|
|
|
|
|
|
|
|
|
|
|
Janet Fauls |
|
Severance Pay (1) |
|
$ |
102,500 |
|
|
$ |
205,000 |
|
|
|
Bonus Pay (2) |
|
$ |
30,750 |
|
|
$ |
61,500 |
|
|
|
Stock option vesting acceleration (3) |
|
|
22,042 |
|
|
|
83,270 |
|
|
|
Continuation of Benefits (4) |
|
$ |
8,275 |
|
|
$ |
16,549 |
|
|
|
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Before Change in |
|
After Change in |
|
|
|
|
Control |
|
Control |
|
|
|
|
Termination |
|
Termination |
|
|
|
|
without Cause or for |
|
without Cause or |
Name |
|
Benefit |
|
Good Reason |
|
for Good Reason |
Stefan G. Schreck |
|
Severance Pay (1) |
|
$ |
121,500 |
|
|
$ |
243,000 |
|
|
|
Bonus Pay (2) |
|
$ |
36,450 |
|
|
$ |
72,900 |
|
|
|
Stock option vesting acceleration (3) |
|
|
33,242 |
|
|
|
95,013 |
|
|
|
Continuation of Benefits(4) |
|
$ |
8,275 |
|
|
$ |
16,549 |
|
|
|
|
|
|
|
|
|
|
|
|
Joseph A. DeJohn |
|
Severance Pay (1) |
|
$ |
130,000 |
|
|
$ |
260,000 |
|
|
|
Bonus Pay (2) |
|
$ |
45,500 |
|
|
$ |
91,000 |
|
|
|
Stock option vesting acceleration (3) |
|
|
|
|
|
|
125,000 |
|
|
|
Continuation of Benefits(4) |
|
$ |
8,275 |
|
|
$ |
16,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Before Change in Control the executive is entitled to his or her base salary for six
months. After Change in Control the executive is entitled to his or her base salary for 12
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 12 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, 2008, as they will vest immediately. After Change in
Control shares represents all stock options as of December 31, 2008, 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 12 months. |
The following table summarizes the amounts that would become payable to Mr. McDermott,
pursuant to the change in control agreement described above.
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
|
|
|
without Cause or for |
Name |
|
Benefit |
|
Good Reason |
John McDermott |
|
Severance Pay (1) |
|
$ |
360,000 |
|
|
|
Bonus Pay (2) |
|
$ |
180,000 |
|
|
|
Stock option vesting acceleration (3) |
|
|
1,000,000 |
|
|
|
Continuation of Benefits(4) |
|
$ |
16,549 |
|
|
|
|
(1) |
|
Mr. McDermott is entitled to his base salary for 12 months. |
|
(2) |
|
Represents 12 month potential bonus amount, assuming 100% target was met, but would be
prorated equal to the target bonus amount for which he would be entitled for the year of
termination. |
|
(3) |
|
Represents all stock options as of December 31, 2008, as they will all vest immediately. |
|
(4) |
|
Represents continuation of benefits through COBRA payments for 12 months. |
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 $1,500. The chairman of the
Compensation Committee is entitled to an additional quarterly
retainer of $1,000. In addition, each individual who first becomes a
non-employee Board member, whether elected by the stockholders or appointed by the Board,
automatically will be granted, at the time of such initial
12
election or appointment, an option to purchase 50,000 shares of common stock at the fair
market value per share of common stock on the grant date, which vests in three equal annual
installments.
On the date of each annual meeting of stockholders, each individual who is to continue to
serve as a non-employee Board member after the annual meeting will receive an additional option
grant to purchase 40,000 shares of common stock, other than the Chairman of the Board who receives
an option grant to purchase up to 50,000 shares of common stock, which vests upon the completion of
one year of Board service.
Director Compensation Paid for the 2008 Fiscal Year
The following table summarizes the compensation paid to each of our directors during the
fiscal year ended December 31, 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or |
|
|
|
|
|
All Other |
|
|
|
|
Paid in Cash |
|
Option Awards |
|
Compensation |
|
Total |
Name |
|
($) (1) |
|
($) (2) |
|
($) (3) |
|
($) |
|
Franklin D. Brown |
|
|
|
|
|
$ |
96,187 |
|
|
$ |
118,750 |
|
|
$ |
214,937 |
|
Roderick de Greef |
|
$ |
23,000 |
|
|
$ |
54,934 |
|
|
|
|
|
|
$ |
77,934 |
|
Edward B. Diethrich |
|
$ |
9,500 |
|
|
$ |
54,934 |
|
|
|
|
|
|
$ |
64,434 |
|
Paul McCormick |
|
$ |
6,250 |
|
|
$ |
122,728 |
|
|
|
|
|
|
$ |
129,077 |
|
Jeffrey F. ODonnell |
|
$ |
12,500 |
|
|
$ |
54,934 |
|
|
|
|
|
|
$ |
67,434 |
|
Gregory D. Waller |
|
$ |
25,000 |
|
|
$ |
54,934 |
|
|
|
|
|
|
$ |
79,934 |
|
|
|
|
(1) |
|
Represents the proportionate amount of the total fair value of option awards recognized by us
as an expense for financial accounting purposes. The fair values of these awards and the
amounts expensed were determined in accordance with FAS 123R. The awards for which expense is shown in this table include the awards made in the
applicable year as well as awards granted in previous years for which we continued to
recognize expense in such year. Pursuant to SEC rules, the amounts shown exclude the impact
of estimated forfeitures related to service-based vesting conditions. The assumptions used to
calculate the FAS 123R fair value of option awards are disclosed in Note 10 to our
consolidated financial statements in included in our Annual Report on Form 10-K for the year
ended December 31, 2008. These amounts reflect our accounting expense for these awards, and
do not correspond to the actual value that will be recognized by the director. |
|
(2) |
|
Represents amounts that we recognized as compensation expense in our financial statements for
2008 as determined under FAS 123R, excluding the effect of the forfeiture estimate. The
amounts are the expense for options granted in 2008 and prior years. |
|
(3) |
|
Represents compensation for Mr. Brown providing consulting services during 2008. |
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 2008 fiscal year. Our
directors did not hold any unvested shares of restricted stock as of the end of the 2008 fiscal
year.
13
|
|
|
|
|
|
|
Shares underlying |
|
|
options at fiscal year |
Director |
|
end |
|
Franklin D. Brown |
|
|
292,500 |
|
Roderick de Greef |
|
|
145,000 |
|
Edward B. Diethrich |
|
|
120,000 |
|
Paul McCormick |
|
|
540,000 |
|
Jeffrey F. ODonnell |
|
|
145,417 |
|
Gregory D. Waller |
|
|
145,000 |
|
14
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The following table sets forth certain information known to us regarding the ownership of our
common stock as of April 24, 2009 by: (i) each stockholder known to us to be a beneficial owner of
more than 5% of our common stock; (ii) each director;
(iii) each Named Executive Officer; and (iv)
all current directors and officers as a group.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares |
|
Percentage of |
|
|
Beneficially Owned |
|
Outstanding Shares |
Name and Address (1) |
|
(2) |
|
(3) |
Federated Investors, Inc. (4) |
|
|
9,999,306 |
|
|
|
22.8 |
% |
Elliott Associates (5) |
|
|
5,984,656 |
|
|
|
13.6 |
% |
Franklin D. Brown (6) |
|
|
544,700 |
|
|
|
1.2 |
% |
Roderick de Greef (7) |
|
|
145,000 |
|
|
|
* |
|
Edward B. Diethrich, M.D. (8) |
|
|
673,775 |
|
|
|
1.5 |
% |
Paul McCormick (9) |
|
|
927,938 |
|
|
|
2.1 |
% |
Jeffrey F. ODonnell (10) |
|
|
160,417 |
|
|
|
* |
|
Gregory D. Waller (11) |
|
|
145,000 |
|
|
|
* |
|
John McDermott (12) |
|
|
656,379 |
|
|
|
1.5 |
% |
Robert J. Krist (13) |
|
|
408,517 |
|
|
|
* |
|
Joseph A. DeJohn |
|
|
56,500 |
|
|
|
* |
|
Janet M. Fauls (14) |
|
|
60,850 |
|
|
|
* |
|
Stefan G. Schreck, PhD. (15) |
|
|
267,388 |
|
|
|
* |
|
All
directors and officers as a group (13 persons) (16) |
|
|
4,071,464 |
|
|
|
8.9 |
% |
|
|
|
* |
|
Represents beneficial ownership of less than 1% |
|
(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
24, 2009. 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. |
|
(3) |
|
Applicable percentages are based on 43,895,449 shares outstanding on April 24, 2009, plus the
number of shares such stockholder can acquire within 60 days after April 24, 2009. |
|
(4) |
|
Based on information contained in a Schedule 13G/A filed with the Securities and Exchange
Commission on February 12, 2009. The address of Federated Investors, Inc. is Federated
Investors Tower, 5800 Corporate Drive, Pittsburgh, Pennsylvania 15222. |
|
(5) |
|
Based on information contained in a Schedule 13D/A filed with the Securities and Exchange
Commission on October 14, 2008. The address of Elliott Associates, L.P. is 712 Fifth Avenue,
36th Floor, New York, New York 10019. |
|
(6) |
|
Includes 280,000 shares subject to options exercisable within 60 days after April 24, 2009
and 214,700 shares held in a family trust. |
|
(7) |
|
Includes 145,000 shares subject to options exercisable within 60 days after April 24, 2009. |
|
(8) |
|
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 120,000 shares subject to options exercisable within
60 days after April 24, 2009. |
|
(9) |
|
Includes 421,250 shares subject to options exercisable within 60 days after April 24, 2009.
Mr. McCormick resigned as our President and Chief Executive Officer effective May 12, 2008.
Mr. McCormick continues to serve on our Board of Directors. |
|
(10) |
|
Includes 145,417 shares subject to options exercisable within 60 days after April 24, 2009. |
|
(11) |
|
Includes 145,000 shares subject to options exercisable within 60 days after April 24, 2009. |
|
(12) |
|
Includes 135,415 shares subject to options exercisable within 60 days after April 24, 2009. |
|
(13) |
|
Includes 181,496 shares subject to options exercisable within 60 days after April 24, 2009. |
|
(14) |
|
Includes 56,772 shares subject to options exercisable within 60 days after April 24, 2009. |
|
(15) |
|
Includes 194,629 shares subject to options exercisable within 60 days after April 24, 2009. |
|
(16) |
|
Includes 1,824,979 shares subject to options exercisable within 60 days after April 24, 2009. |
15
Item 13. Certain Relationships and Related Transactions, and Director Independence
Related Party Transactions
We have not entered into a transaction with any related person since the beginning of our 2008
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.
Director Independence
Our securities are listed on The NASDAQ Global Market and are governed by its listing
standards. Our Board of Directors has determined that all of the members of our Board of
Directors, other than Messrs. McDermott and McCormick, are independent as defined in the NASDAQ
Listing Rules. Our Board of Directors 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.
The Board of Directors has established three standing committees: the Audit Committee, the
Compensation Committee, and the Nominating and Governance Committee. Each member of the Audit
Committee, Compensation Committee and Nominating and Governance Committee, respectively, meets the
independence standards set forth in the NASDAQ Listing Rules.
Item 14. Principal Accounting Fees and Services Audit Fees
The following table sets forth the aggregate fees billed to us by PricewaterhouseCoopers LLP
for the fiscal years ended December 31, 2007 and December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2007 |
|
|
2008 |
|
Audit Fees (1) |
|
$ |
500,410 |
|
|
$ |
488,000 |
|
Audit-Related Fees |
|
|
|
|
|
|
|
|
Tax Fees |
|
|
|
|
|
|
|
|
All Other Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
500,410 |
|
|
$ |
488,000 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes fees for professional services rendered for the audit of our annual financial
statements, the audit of managements 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. |
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
limited exceptions. Such pre-approval is on a project by project basis. During 2008,
PricewaterhouseCoopers LLP did not provide us with any non-audit services.
16
PART IV
Item 15: Exhibits and Financial Statement Schedules.
(3) Exhibits
See Exhibit Index
17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on April 30, 2009.
|
|
|
|
|
|
|
|
|
By: |
/s/ John McDermott
|
|
|
|
John McDermott |
|
|
|
President and Chief Executive Officer |
|
|
18
EXHIBIT INDEX
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
31.1
|
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act
of 1934. |
|
|
|
31.2
|
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act
of 1934. |