ENDOLOGIX INC /DE/ (Form: 10-K, Received: 03/03/2014 16:50:28)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________

Form 10-K

_______________________________

(Mark One)



x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transaction period from to .

Commission file number: 000-28440

_______________________________

Endologix, Inc.

(Exact name of registrant as specified in its charter)

_______________________________



Delaware		68-0328265
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

11 Studebaker, Irvine, California 92618

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (949) 595-7200

_______________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered
Common Stock, $0.001 par value		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 x No o

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 x

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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s 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. x

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):



Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

As of June 28, 2013 , the aggregate market value of the voting stock held by non-affiliates of the Registrant was $837,161,545 (based upon the $13.28 closing price for shares of the Registrant’s Common Stock as reported by the NASDAQ Global Select Market on June 28, 2013 , the last trading date of the Registrant’s most recently completed second fiscal quarter).

On February 24, 2014 , approximat ely 63,869,249 shares of the Registrant’s Common Stock, $0.001 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Part III of this Annual Report on Form 10-K are incorporated by reference into the Registrant’s Proxy Statement for its Annual Meeting of Stockholders to be held on May 22, 2014 .

Table of Contents

TABLE OF CONTENTS



Item	Description	Page
	PART I
1.	Business	1
1A.	Risk Factors	1
1B.	Unresolved Staff Comments	1
2.	Properties	1
3.	Legal Proceedings	1
4.	Mine Safety Disclosures	1

PART II
5.	Market for Endologix's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2
6.	Selected Financial Data	2
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation s	3
7A.	Quantitative and Qualitative Disclosures About Market Risk	3
8.	Financial Statements and Supplementary Data	4
9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	11
9A.	Controls and Procedures	11
9B.	Other Information	11

PART III
10.	Directors, Executive Officers and Corporate Governance	11
11.	Executive Compensation	11
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	11
13.	Certain Relationships and Related Transactions, and Director Independence	11
14.	Principal Accountant Fees and Services	11

PART IV
15.	Exhibits, Financial Statement Schedules	11
	Signatures	12

Table of Contents

Cautionary Note Concerning Forward-Looking Statements

In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements by the use of forward-looking terminology such as “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should” or “will” or the negative of these terms or other comparable terminology, or by discussions of strategies, opportunities, plans or intentions. In addition, any statements that refer to projections of our future financial performance, trends in our businesses, or other characterizations of future events or circumstances are forward-looking statements. We have based these forward-looking statements largely on our current expectations based on information currently available to us and projections about future events and trends affecting the financial condition of our business. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Actual results could differ materially from those projected in forward-looking statements as a result of the following factors, among others:


•	continued market acceptance of our products;


•	continued growth in the number of patients qualifying for treatment of abdominal aortic aneurysms through our products;


•	our ability to effectively compete with the products offered by our competitors;


•	the level and availability of third party payor reimbursement for our products;


•	our ability to successfully commercialize products which incorporate the technology obtained in our acquisition of Nellix, Inc. (“Nellix”);


•	our ability to effectively develop new or complementary technologies;


•	our ability to manufacture our endovascular systems to meet demand;


•	changes to our international operations;


•	our ability to effectively manage our business and keep pace with our anticipated growth;


•	our ability to develop and retain a direct sales force in the United States and select European countries;


•	the nature of and any changes to legislative, regulatory and other legal requirements that apply to us, our products, our suppliers and our competitors;


•	the timing of and our ability to obtain and maintain any required regulatory clearances and approvals;


•	our ability to protect our intellectual property rights and proprietary technologies;


•	our ability to operate our business without infringing the intellectual property rights and proprietary technology of third parties;


•	product liability claims and litigation expenses;


•	reputational damage to our products caused by mis-use or off-label use or government or voluntary product recalls;


•	our utilization of a single source supplier for specialized components of our product lines;


•	our ability to attract, retain, and motivate qualified personnel;


•	our ability to make future acquisitions and successfully integrate any such future-acquired businesses;


•	our ability to maintain adequate liquidity to fund our operational needs and research and developments expenses; and


•	general macroeconomic and world-wide business conditions.

You are urged to carefully review and consider the various disclosures made by us, which attempt to advise interested parties of the risks, uncertainties, and other factors that may affect our business, operating results and financial condition, including without limitation the risks set forth under “Risk Factors” in Item 1A of this Annual Report on Form 10-K, for a discussion of other important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, the forward-looking statements herein may not prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

Our forward-looking statements speak only as of the date each such statement is made. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations, except as required by applicable law or the rules and regulations of the SEC and The NASDAQ Stock Market, LLC.

The industry and market data contained in this Annual Report on Form 10-K are based either on our management’s own estimates or on independent industry publications, reports by market research firms, or other published independent sources. Although we believe these sources are reliable, we have not independently verified the information and cannot guarantee its accuracy and completeness, as industry and market data are subject to change and cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process, and other limitations and uncertainties inherent in any statistical survey of market shares. Accordingly, one should be aware that the industry and market data contained in this Annual Report on Form 10-K, and estimates and beliefs based on such data, may not be reliable. Unless otherwise indicated, all information contained in this Annual Report on Form 10-K concerning our industry in general or any segment thereof, including information regarding our general expectations and market opportunity, is based on management’s estimates using internal data, data from industry related publications, consumer research and marketing studies, and other externally obtained data.

PART I


Item 1.	Business

Company Overview

Endologix, Inc. ("Endologix," the "Company," "we," "us," or "our") is a Delaware corporation with corporate headquarters and production facilities located in Irvine, California. We develop, manufacture, market, and sell innovative medical devices for the treatment of aortic disorders. Our principal products are intended for the treatment of abdominal aortic aneurysms ("AAA"). Our AAA products are built on one of two platforms: (1) traditional minimally-invasive endovascular repair ("EVAR") or (2) endovascular sealing (“EVAS”), our innovative solution for sealing the aneurysm sac while maintaining blood flow through two blood flow lumens. Our current EVAR products include the Endologix AFX Endovascular AAA System (“AFX”), the VELA Proximal Endograft (“VELA”) and the Endologix Intuitrak Endovascular AAA System (“Intuitrak”). Our current EVAS product is the Nellix Endovascular Aneurysm Sealing System (“Nellix EVAS System”). Sales of our EVAR and EVAS platforms (including extensions and accessories) to hospitals in the U.S. and Europe, and to third-party international distributors, provide the sole source of our reported revenue.

Our EVAR products consist of (i) a cobalt chromium alloy stent covered by polytetrafluoroethylene (commonly referred to as "ePTFE") graft material (“Stent Graft”) and (ii) an accompanying delivery system. Once fixed in its proper position within the abdominal aorta, our EVAR device provides a conduit for blood flow, thereby relieving pressure within the weakened or “aneurysmal” section of the vessel wall, which greatly reduces the potential for the AAA to rupture.

Our EVAS product consists of (i) bilateral covered stents with endobags, (ii) a biocompatible polymer injected into the endobags to seal the aneurysm and (iii) a delivery system and polymer dispenser. Our EVAS product seals the entire aneurysm sac effectively excluding the aneurysm sac reducing the likelihood of future aneurysm rupture. Additionally, it has the potential to reduce post procedural re-interventions.

Within our EVAR platform, AFX is marketed in the United States, Europe and South America, VELA is approved in the United States and Intuitrak sales are currently limited to Japan. In February 2013, our EVAS device, the Nellix EVAS System, commenced limited market introduction in Europe and commercial release is currently underway. In December 2013, we received Investigational Device Exemption (“IDE”) approval in the United States to begin a clinical trial which commenced in January 2014.

Our Mission

Our mission is to be the leading innovator of medical devices to treat aortic disorders. Key elements of our strategy to accomplish this mission are as follows:


•	Focus exclusively on the aorta for the commercialization of innovative products.


•	Design and manufacture EVAR and EVAS products that are easy to use and deliver excellent clinical outcomes.


•	Design EVAR and EVAS products to expand into complex anatomies.


•	Provide exceptional clinical and technical support to physicians through an experienced and knowledgeable sales and marketing organization.

Market Overview and Opportunity

AAA Background

Atherosclerosis is a disease which results in the thickening and hardening of arteries, which generally is attributable to genetics, smoking, high blood pressure, and/or high cholesterol damage. This disease generally progresses with age. It affects 5 to 6% of the population over 65.

Atherosclerosis reduces the integrity and strength of blood vessel walls, causing the vessel to expand or balloon out, which is known as an "aneurysm". Aneurysms are commonly diagnosed in the aorta, which is the body’s largest artery, extending from the chest to the abdomen. The abdominal aorta is the segment between the renal (kidney) arteries and the area where the aorta divides into the two iliac arteries which travel down the legs. AAA occurs when a portion of the abdominal aorta bulges into an aneurysm because of a weakening of the vessel wall, which may result in life threatening internal bleeding upon rupture. AAA is more common in men than women.

Although AAA is one of the most serious cardiovascular diseases, many AAAs are never detected. Most AAA patients do not have symptoms at the time of their initial diagnosis. AAAs generally are discovered coincidentally during procedures to treat or diagnose unrelated medical conditions.

The overall patient mortality rate for ruptured AAA is approximately 80%, making it among the leading causes of death in the U.S. Once diagnosed, patients with AAA require either non-invasive monitoring, or, depending on the size and rate of growth of the AAA, EVAR or EVAS or open surgical repair.

EVAR and EVAS Versus Open Surgical Repair

Our EVAR and EVAS products are used exclusively for minimally-invasive procedures, as opposed to open surgical repair of AAA. Open surgical repair is a highly invasive procedure requiring (i) a large incision in the patient’s abdomen, (ii) withdrawal of the patient’s abdominal organs to provide access to the aneurysm, (iii) the cross clamping of the aorta to stop blood flow, and (iv) implantation of a synthetic graft which is sutured to the aorta, connecting one end above the aneurysm, to the other end below the aneurysm.

Open surgical repair typically lasts two to four hours, while the typical EVAR and EVAS procedure lasts one to two hours. After receiving open surgical repair, the patient usually requires a few days in the hospital's surgical intensive care unit, and the total hospital stay may be four to ten days. Post-procedure convalescence may take another four to six weeks due to the invasiveness of the operation. By comparison, patients are often discharged a day or two after their EVAR and EVAS procedure, and once discharged, most patients return to normal activity within two weeks.

Today, approximately 70% of all treated AAAs in the U.S. are repaired through EVAR, and 30% through open surgical repair. Although EVAR and EVAS have many key advantages over open surgical repair, many patients are not candidates for EVAR and EVAS due to the limitations of current EVAR devices to treat a wide range of AAA anatomies. We are developing new products to address these more complex anatomies, those with aortic neck length less than 10mm, that upon development will allow us to increase the treatable aneurysm market and address the vast majority of aneurysmal aortic anatomies.

An article published in the New England Journal of Medicine on January 31, 2008 compared the results of open surgical repair versus EVAR for the treatment of AAA on more than 45,000 patients over a three year period. Among the findings discussed in the article were:


•	The 30-day mortality rate of all patients in the study undergoing EVAR was approximately 1.2%, as compared to 4.8% for open surgical repair.


•	Patients treated by EVAR were three times as likely to be discharged to their homes rather than another rehabilitation facility as compared to patients treated with open repair.


•	The average hospital stay for patients in the study undergoing EVAR was 3.4 days versus 9.3 days for patients undergoing open surgical repair.

Market Size

We estimate the global Endovascular AAA market potential to be $3.3 billion. We estimate the traditional aneurysm market potential, defined as aneurysms with aortic neck length greater than or equal to 10mm, to be $1.7 billion. The majority of diagnosed aneurysms in this market can be treated with currently available EVAR products. We estimate an additional $1.6 billion market opportunity exists for the treatment of challenging anatomies, defined as aneurysms with neck length less than 10mm. Currently there are limited options with available EVAR products to treat these short or no aortic necks. Below is a table summarizing the market potential and penetration by aortic neck length.



Neck Length ($ in millions)	Penetrated	Unpenetrated	Total
Infrarenal Over 10mm	1,300	367	1,667
0 to 5mm Neck	39	1,050	1,089
5 to 10mm Neck	37	470	507
Total	1,376	1,887	3,263

In 2013, we estimate there were approximately 170,000 AAA (EVAR and surgical repair) procedures globally.

In the U.S. alone, it is estimated that between 1.2 million and 2.0 million people have an AAA. Over 200,000 people were diagnosed with AAA in the U.S. in 2011. Of those diagnosed with an AAA, approximately 78,000 people underwent an AAA repair procedure in the U.S., of which approximately 44,000 were addressed through EVAR.

The age 65 and over population in the U.S. presently numbers approximately 40 million, or 13% of the total population, and is expected to grow to 47 million by 2015. Accordingly, we believe that AAA treatments will naturally increase over time, given this demographic trend.

Since AAAs generally arise in people over the age of 65 and come with little warning, initiatives have been undertaken to increase its screening. The most prominent of these initiatives is the Screening Abdominal Aortic Aneurysms Very Efficiently Act (“SAAAVE”), which was signed into law in the U.S. on February 8, 2006, and began providing coverage on January 1, 2007. SAAAVE provides for a one-time free of charge AAA screening for men who have smoked some time in their life, and men or women who have a family history of the disease. This screening is provided as part of the “Welcome to Medicare” physical.

Our Products

Our EVAR Platform

Our EVAR products consist of our EVAR Stent Graft and catheter delivery system, branded under the names Powerlink, IntuiTrak, AFX and VELA. We believe that our EVAR Platform offers the following advantages over competitors:

•

Anatomical Fixation . Our EVAR products are unique in that the main body of the device sits on the patient's natural aortoiliac bifurcation. This provides a solid foundation for the long-term stability of the device. Alternative EVAR devices rely on hooks, barbs and radial force to anchor within the aorta (generally referred to as "proximal fixation") near the renal arteries. We have proven in our clinical studies that anatomical fixation inhibits device migration within the aorta due to the inherent foundational support of the patient’s own anatomy.


•	Unique, Minimally Invasive Delivery System . Our AFX product is the only EVAR device with 17F access on the Ipsilateral side and 9F access on the Contralateral side. Competitive products require between 18F and 22F access on the Ipsilateral side and between 12F and 18F on the Contralateral side.

•

Preserves Aortic Bifurcation. Our EVAR Stent Grafts allow for future endovascular procedures when continued access across the aortic bifurcation is required. Approximately 30% to 40% of AAA patients also have peripheral arterial disease (“PAD”). Our EVAR Stent Graft is the only one presently available that preserves the physician's ability to go back over the aortic bifurcation for future interventions. This is a meaningful feature of our EVAR Stent Graft, as many AAA patients are today living longer and returning to the hospital for PAD procedures.

•

PEVAR - Endologix is the only company that has conducted a US IDE randomized clinical trial and obtained FDA approval for a total percutaneous indication for use (“PEVAR”) specific to our EVAR System. We are now able to train physicians on PEVAR, thus enabling physicians to appropriately learn the technique and properly apply it. Unique to our EVAR System, physicians have the option of treating patients with PEVAR, or with a small incision in only one leg (and percutaneous placement of a non-surgical introducer sheath in the leg, 3mm in diameter).

Our EVAS Platform

Our EVAS product is based on the Nellix platform to seal the aneurysm and provide blood flow to the legs through two blood lumens.


•	Biostable Polymer provides extended fixation and long-term stability . Currently available devices leave the AAA sac untreated, yet intact, while the EVAS product seals the aneurysm sac.


•	Predictable Procedure. The device and procedure steps are relatively simple and intuitive, making procedure times predictable.


•	Potentially reduce endoloeaks and secondary interventions. Our EVAS product seals the entire aneurysm, reducing the likelihood of many causes of secondary intervention in EVAR procedures. This can potentially reduce long-term follow-up requirements.


•	Low profile introducer. Beneficial for the delivery of the devices in tight access arteries, reducing risk of vascular injuries to the patient.

Our EVAR and EVAS Extensions and Accessories

Aortic Extensions and Limb Extensions. We offer proximal aortic extensions and limb extensions which attach to the "main body" of our EVAR Device, allowing physicians to customize it to fit the patient's anatomy. In February 2014, we launched a new proximal extension, VELA, designed specifically for the treatment of proximal aortic neck anatomies. VELA features a circumferential graft line marker and controlled delivery system that enable predictable deployment and final positional adjustments.

Accessories. We offer various accessories to facilitate the optimal delivery of our EVAR products, including compatible guidewires, snares, and catheter introducer sheaths.

Our Product Evolution

Our core EVAR product was first commercialized in Europe in 1999 and in the U.S. in 2004. We initially branded it as the Powerlink System ("Powerlink System for AAA"). As our EVAR products evolved, we branded Powerlink under the names Powerlink System with Visiflex Delivery System, IntuiTrak, and AFX.

• Powerlink System for AAA. Powerlink System for AAA was our original EVAR Product.


•	IntuiTrak . In October 2008, we received FDA approval for IntuiTrak. We received CE Mark approval for IntuiTrak in March 2010, and Japanese Shonin approval in December 2012. IntuiTrak provided an updated delivery system that further simplified the implant procedure for physicians.


•	AFX. In June 2011 and November 2011, we received FDA approval and CE Mark approval, respectively, for AFX. We believe AFX provides physicians with improved vascular access and sealing, as compared to IntuiTrak. We began a full commercial launch of AFX in the U.S. in August 2011 and in numerous international markets in 2012.

Our core EVAS Platform, branded as the Nellix EVAS System, was first commercialized in Europe in February 2013.

•

Nellix EVAS System . In February 2013, we received CE Mark approval of the Nellix EVAS System. In February 2013, we commenced a limited market introduction of the Nellix EVAS System in Europe. In December 2013, we received IDE approval in the United States to begin a clinical trial which commenced in January 2014. Based upon current assumptions and timelines, we anticipate receiving FDA premarket approval in 2016.

Manufacturing and Supply

All of our commercial products are manufactured, assembled, and packaged at our 60,000 square foot leased facilities in Irvine, California. Starting at the end of 2014 and into the beginning of 2015 we will commence moving all operations into two co-located, leased buildings totaling 129,000 square feet in Irvine, California.

We rely on third parties for the supply of certain components used in our EVAR and EVAS Systems, such as the wire used to form our cobalt chromium alloy stent and the raw material used in the manufacturing of polymer. While we obtain many of these components from single source suppliers, we believe there are alternative vendors for the supply of the vast majority of our required components. Many of our third party manufacturers go through a formal qualification and approval process, including periodic renewal to ensure fitness for use and compliance with applicable FDA requirements and International Organization for Standardization ("ISO") 13485 requirements, and/or other required quality standards. Additionally, we actively manage supply risk with our key suppliers through a combination of negotiating favorable terms of supply agreements, maintaining strategic inventory levels, and maintaining frequent communications with our suppliers.

Marketing and Sales

We market and sell our products in the U.S. and in 11 Western European countries (Great Britain, France, Germany, Italy, Spain, Switzerland, Netherlands, Austria, Belgium, Luxembourg, and Monaco) through a direct sales force and network of agents. In 14 other European countries, Japan, 9 countries in South America, New Zealand and Mexico, we sell our EVAR products through exclusive independent distributors or agents. As of February 28, 2014, we marketed our EVAR products in 23 countries outside of the U.S. through a total of 13 independent distributors. We market our EVAS products through direct sales channels in Europe and our independent agent in New Zealand.

U.S. We market and sell our products in the U.S. through a direct sales force consisting of (as of December 31, 2013) 68 sales representatives and 20 clinical specialists. The primary customer and decision maker for EVAR and EVAS products in the U.S. is the vascular surgeon, and to a lesser extent, the the cardiovascular surgeon, interventional radiologist and interventional cardiologist. Through our direct sales force, we provide clinical support and service to many of the approximately 1,600 hospitals and approximately 4,000 physicians in the U.S. that perform EVAR. Approximately 78% of our revenues for the year ended December 31, 2013 were generated from sales of our EVAR products in the U.S.

Europe. Prior to September 2011, our reported revenue to customers outside of the U.S. had been generated exclusively through third-party distributors. As of September 1, 2011, upon mutual agreement for the termination of distribution rights with a significant European distributor, we began direct sales operations in most of Western Europe. Our direct sales, clinical specialists, agents and training personnel number 24 as of December 31, 2013. Approximately 12% of our revenues for the year ended December 31, 2013 were generated from sales of our EVAR and EVAS products in Europe.

Asia Pacific. We commenced commercial sales in Japan in February 2007 after receipt of Japanese regulatory, or Shonin, approval. We have had limited commercial sales in China since September 2009 and we terminated our distributor agreement with our Chinese distributor in 2013. Approximately 5% of our revenues for the year ended December 31, 2013 were generated from distributor sales of our EVAR products in Asia Pacific.

South and Central America and Mexico. We have applicable regulatory approvals for Mexico, Argentina, Brazil, Chile, Peru, Ecuador, Venezuela, Costa Rica, Panama and Colombia. We commenced sales in South America and in Mexico in December 2007. Approximately 5% of our revenues for the year ended December 31, 2013 were generated from distributor sales of our EVAR products in South America and Mexico.

See Note 7 of the Notes to the Consolidated Financial Statements for a tabular summary of our revenue by geographic region for the fiscal years 2013, 2012 and 2011.

Competition

The medical device industry is highly competitive. Any product we develop that achieves regulatory clearance or approval will have to compete for market acceptance and market share. We believe that the primary competitive factors in the AAA device market segment are:


•	clinical effectiveness;


•	product safety, reliability, and durability;


•	ease of use;


•	sales force experience and relationships; and


•	price.

We experience significant competition and we expect that the intensity of competition will increase over time. For example, our major competitors, Medtronic, Inc., W.L. Gore Inc., and Cook Medical Products, Inc., and new market entrants, TrvVascular, Inc. and Lombard Medical Technologies, each have obtained full regulatory approval for their EVAR products in the U.S. and other international markets including Europe. In addition to these major competitors, we also have smaller competitors, and emerging competitors with active EVAR system development programs.

Our major competitors have substantially greater capital resources than we do and also have greater resources and expertise in the areas of research and development, obtaining regulatory approvals, manufacturing, marketing, and sales. In addition, these competitors have multiple product offerings, which some physicians and hospitals may find more convenient when developing business relationships. We also compete with other medical device companies for clinical trial sites and for the hiring of qualified personnel, including sales representatives and clinical specialists.

Product Developments and Clinical Trials

Overview

We incurred expenses of $24.9 million in 2013, $22.9 million in 2012, and $21.2 million in 2011, on research and development activities and clinical studies. Our focus is to continually develop innovative and cost-effective medical devices for the treatment of aortic disorders. We believe that our ability to develop new technologies is a key to our future growth and success. Historically, we have focused on developing our EVAR and EVAS to treat infrarenal AAA including initial development of products to treat short neck. However, we expect to devote more resources in the future to continue to develop, enhance and obtain expanded indications for our current EVAR and EVAS products and to develop new product indications to treat more challenging anatomies including those aneurysms with aortic necks less than 10mm in length.

Nellix EVAS System

On December 10, 2010, we completed our acquisition of Nellix (refer to the "Nellix Acquisition and Private Placement Transaction" section below). Using the technology we acquired from this acquisition, we developed the Nellix EVAS System, a next-generation device, to treat infrarenal AAA. The following trials are in process to build independent and collective clinical and economic evidence of clinical safety and effectiveness.


•	EVAS Forward IDE - Pivotal Clinical trial to evaluate the safety and effectiveness of the Nellix EVAS System. It is approved to enroll 180 patients at up to 30 centers in the U.S., Canada and Europe, of which approximately 25 will be in the U.S. The first patient was treated in January 2014. Expanded indications will be pursued in the future as part of the EVAS Forward clinical programs.

•

EVAS Forward Global Registry - The study is designed to provide real world clinical results to demonstrate the effectiveness and broad applicability of the Nellix EVAS System. The registry is planned to include 300 patients enrolled in up to 30 international centers and provide real world clinical results to further demonstrate effectiveness and broad applicability of the Nellix technology. The first patient in the registry was treated in October 2013.

PEVAR

Vascular access for EVAR requires femoral artery exposure (commonly referred to as surgical “cut-down”) of one or both femoral arteries, allowing for safe introduction of the EVAR product. Complications from femoral artery exposure during EVAR procedures is an inherent risk of current surgical practice. PEVAR procedures do not require an open surgical cut-down of either femoral artery, as access to the femoral artery is achieved via a needle-puncture through the skin and closure with use of a suture-mediated device. Advantages to the patient and to the health care system of an entirely percutaneous procedure include reduced surgical procedure times, less post-operative pain, and fewer access-related wound complications.

In April 2013, we announced FDA approval of the PEVAR indication for use for our AFX and Intuitrak products. Trial results show the safety and effectiveness of our device and PEVAR procedure facilitated with a suture-mediated closure device, and showed significantly reduced surgical procedure time compared to surgical EVAR. Other trends favoring PEVAR include less medication prescribed for post-operative groin pain, reduced blood loss, less hospitalization time, and overall lower incidence of complications. To date, no other company has conducted a randomized prospective FDA trial to specifically obtain approval for a PEVAR indication.

Ventana

In January 2012, we received IDE approval from the FDA to begin U.S. clinical trials to evaluate Ventana Fenestrated Stent Graft System (“Ventana”) for the EVAR repair of juxtarenal abdominal aortic aneurysms and pararenal abdominal aortic aneurysms. In February 2012, we enrolled the first patient in our U.S. clinical trial to evaluate Ventana. We received CE Mark approval for Ventana in April 2013. In April 2013 the company announced that, after completing approximately half of the US IDE patients, it would temporarily suspend enrollment in the Ventana U.S. IDE clinical trial and delayed the limited market introduction of Ventana in Europe. Preliminary data suggested that the trial would not meet its efficacy endpoint, due to a higher number of renal re-interventions than were allowed. We announced in November 2013 that we plan to make product enhancements, while we developed and tested product enhancements and that it is likely Ventana will be back in clinical evaluation sometime in 2015.

Nellix Acquisition and Private Placement Transaction

On December 10, 2010, we completed our acquisition of Nellix, Inc. ("Nellix"), by way of a merger of a wholly-owned subsidiary of our company with and into Nellix. As a result of the merger, Nellix became, and is, a wholly-owned subsidiary of our company. Upon the closing of the merger, we issued an aggregate of 2.9 million unregistered shares of our common stock to the former stockholders of Nellix in exchange for all of the outstanding shares of Nellix stock immediately prior to the closing of the merger. In addition, we will be required to issue additional shares of our common stock to the former stockholders of Nellix as contingent consideration upon our achievement of certain defined revenue and regulatory approval milestones involving the technology obtained in the Nellix acquisition.

Also, on December 10, 2010, concurrent with the closing of our acquisition of Nellix, we issued and sold to Essex Woodlands Health Ventures Fund VII, L.P. (a significant stockholder of Nellix prior to the merger), an aggregate of 3.2 million unregistered shares of our common stock, resulting in gross proceeds to us of $15.0 million.

Patents and Proprietary Information

We believe that our intellectual property and proprietary information is key to protecting our technology. We continue to build a portfolio of apparatus and method patents covering various aspects of our current and future technology. In the area of aorta treatment systems (exclusive of Nellix technology), our rights include 39 U.S. issued patents, 15 pending U.S. applications, and 18 foreign patents. Our current aorta treatment related patents have expiration dates from 2014 to 2031. As a result of our acquisition of Nellix, we added additional patents to our portfolio which have evolved to currently include 12 U.S. patents and 10 foreign patents, with expiration dates from 2016 to 2030. We intend to continue to file patent applications to strengthen our intellectual property position as we continue to develop our technology, while simultaneously avoiding paying unnecessary fees to maintain patents and applications when we believe it is not in our best interest.

Our policy is to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications to protect technology, inventions and improvements that are important to the development of our business. We also own trademarks to protect the names of our products. In addition to patents and trademarks, we rely on trade secrets and proprietary know-how.

We seek protection of these trade secrets and proprietary know-how, in part, through confidentiality and proprietary information agreements. We make diligent efforts to require our employees, directors, consultants, and advisors to execute confidentiality agreements upon the start of employment, consulting, or other contractual relationships with us. These agreements provide that all confidential information developed or made known to the individual or entity during the course of the relationship is to be kept confidential and not be disclosed to third parties, except in specific circumstances. In the case of employees and certain other parties, the agreements also provide that all inventions conceived by the individual will be our company's exclusive property.

Third-Party Reimbursement

In the U.S., hospitals are the primary purchasers of our EVAR Systems. Hospitals in turn bill various third-party payors, such as Medicare, Medicaid, and private health insurance plans, for the total healthcare services required to treat the patient's AAA. Government agencies, private insurers and other payors determine whether to provide coverage for a particular procedure and to reimburse hospitals for medical treatment at a fixed rate based on the diagnosis-related group ("DRG") established by the U.S. Centers for Medicare and Medicaid Services ("CMS"). The fixed rate of reimbursement is based on the procedure performed, and is unrelated to the specific medical devices used in that procedure.

Reimbursement of procedures utilizing our EVAR products currently is covered under specific DRG codes. Some payors may deny reimbursement if they determine that the device used in a treatment was unnecessary, not cost-effective, or used for a non-approved indication.

In October 2000, the CMS issued ICD-9 procedure code 39.71, "Endovascular implantation of other graft in abdominal aorta" for the proper procedure coding of EVAR for billing purposes. For hospital reimbursement, patients treated with our EVAR System are classified under DRG codes 237 or 238, "Major Cardiovascular Procedures with Major Complications" and "Major Cardiovascular Procedures without Major Complications," respectively. In the latest data published by CMS, the national average reimbursement under DRG codes 237 and 238 is approximately $28,300 and $17,100, respectively.

Outside the U.S., market acceptance of medical devices, including EVAR and EVAS systems, depends partly upon the availability of reimbursement within the prevailing healthcare payment system. Reimbursement levels vary significantly by country, and by region within some countries. Reimbursement is obtained from a variety of sources, including government sponsored healthcare and private health insurance plans.

Presently, the European Union is considering a substantial updating of regulations for the sale and reimbursement of medical devices in EU countries. The legislation will harmonize such regulations throughout all EU countries. It is expected that the new regulations will require: (i) stricter guidelines for clinical evidence supporting device efficacy; (ii) more powers for regulatory assessment bodies; (iii) stronger supervision of manufacturers, importers and distributors; and (iv) an extended database for medical devices and better traceability throughout the supply chain. The Commission proposals are being discussed in the European Parliament and in the Council. They are expected to be adopted sometime in 2014 and would then gradually come into effect from 2015 to 2019.

Government Regulation - Medical Devices

Our medical devices are subject to regulation by various government agencies, including the U.S. Food and Drug Administration (FDA) and similar agencies within governments outside the U.S. Each of these agencies requires us to comply with laws and regulations governing the development, qualification, manufacturing, labeling, marketing, and distribution of our medical devices.

U.S.

In the U.S., medical devices are regulated by the FDA under the Federal Food, Drug and Cosmetic Act. The FDA classifies medical devices into one of three classes based upon controls the FDA considers necessary to reasonably ensure their safety and effectiveness. Class I devices are subject to general controls such as labeling, adherence to good manufacturing practices and maintenance of product complaint records, but are usually exempt from premarket notification requirements. Class II devices are subject to the same general controls and also are subject to special controls such as performance standards, and FDA guidelines, and may also require clinical testing prior to approval. Class III devices are subject to the highest level of controls because they are life-sustaining or life-supporting devices. Class III devices require rigorous clinical testing prior to their approval and generally require a premarket approval ("PMA") or PMA supplement approval prior to marketing for sale.

Authorization to commercially distribute a medical device in the U.S. is generally received in one of two ways. The first, known as premarket notification (i.e., the 510(k) process), requires us to submit data to the U.S. FDA to demonstrate that our medical device is substantially equivalent to another medical device that is legally marketed in the U.S. The U.S. FDA must issue a finding of substantial equivalence before we can commercially distribute our medical device. Devices that receive a finding of substantial equivalence are referred to as 510(k)-cleared devices. Modifications to medical devices cleared under the 510(k) process can be made under the 510(k) process, or without the 510(k) process if the changes do not significantly affect safety or effectiveness.

The second process, known as premarket approval (i.e., the PMA process), requires us to collect and submit nonclinical and human clinical data on the medical device for its intended use to demonstrate that it is safe and effective. Human clinical data must be collected in compliance with FDA IDE regulations. The IDE application must be supported by data, typically including the results of animal and engineering testing of the device. If the IDE application is approved by the FDA, human clinical studies may begin at a specific number of investigational sites with a maximum number of patients. The clinical studies must be conducted under the review of an independent institutional review board to ensure the protection of the patients’ rights. In the PMA process, the U.S. FDA will approve the medical device and thereby authorize its commercial distribution in the U.S. if it determines that the probable benefits outweigh the risks for the intended patient population, and therefore makes a determination of reasonable assurances of safety and effectiveness. The PMA process takes longer and is more expensive than the 510(k) process. Our Powerlink and AFX EVAR Systems were approved through this PMA process.

We are required to register as a medical device manufacturer with the FDA. Additionally, the California Department of Health Services ("CDHS") requires us to register as a medical device manufacturer. Because of this, the FDA and the CDHS inspect us on a routine basis for compliance with Quality System regulations. These regulations require that we manufacture our products and maintain related documentation in a prescribed manner with respect to manufacturing, testing and control activities. We have undergone and expect to continue to undergo regular Quality System inspections in connection with the manufacture of our products at our facility. Further, the FDA requires us to comply with various regulations regarding labeling. The Medical Device Reporting (“MDR”) laws and regulations require us to provide information to the FDA on deaths or serious injuries alleged to have been associated with the use of our devices, as well as product malfunctions that likely would cause or contribute to death or serious injury if the malfunction were to recur. Although physicians are permitted to use their medical judgment to apply medical devices to indications other than those cleared or approved by the FDA, we are prohibited from promoting products for such “off-label” uses, and can only market our products for the 510(k)-cleared or PMA-approved indications for use.

International

Internationally, our medical devices are subject to regulatory requirements in the countries in which they are sold. The requirements and regulatory approval processes vary from country to country.

In the European Union (EU), one regulatory approval process exists. We must comply with the requirements of the Medical Devices Directive ("MDD"), and appropriately affix the CE Mark on our products to attest to such compliance. To obtain a CE Mark, our products must meet minimum standards of safety, performance, and quality (i.e., “Essential Requirements”), and then comply with defined conformity assessment routes. A notified body, selected by us, assesses our Quality Management System and our product conformity to the Essential Requirements and the requirements of the MDD. The notified body must perform regular inspections to verify compliance. The EU government ministries of health (“Competent Authorities”) oversee human clinical studies and post-market surveillance of approved products, referred to as Vigilance Reporting. We are required to report device failures and serious adverse events potentially related to product use to responsible Competent Authorities. We also must comply with additional requirements of individual countries in which our products are marketed. Our Powerlink and AFX EVAR Systems and Nellix EVAS System were approved through the CE marking process.

To be sold in Japan, most medical devices must undergo thorough safety examinations and demonstrate medical efficacy before they are granted approval, or “S honin .” In Japan, the Ministry of Health, Labor, and Welfare (MHLW), with administration by the Pharmaceutical and Medical Devices Agency (PMDA), regulates medical devices under the Pharmaceutical Affairs Law (PAL). Our quality management system and product conformity to the PAL are overseen by MHLW and PMDA. Our Powerlink EVAR System was approved through the S honin process.

We are also subject to other local, state, federal and international regulations relating to a variety of areas including laboratory practices, manufacturing practices, medical device export, quality system practices, as well as health care reimbursement and delivery of products and services.

US and Foreign Government Regulations - Healthcare Fraud and Abuse and Privacy Laws

Healthcare Fraud and Abuse

We are subject to various U.S. and foreign governmental laws and regulations relating to the manufacturing, labeling, marketing and selling of our products, non-compliance with which could adversely affect our business, financial condition and results of operations. We have implemented and maintain a comprehensive program that includes ongoing risk assessment, development of relevant policies, monitoring, and training of our employees to ensure compliance with U.S. and foreign laws and regulations.

Various U.S. federal and state laws and regulations pertaining to health care fraud and abuse govern how we can and cannot do business in the U.S. and globally, including the federal False Claims Act, which prohibits the submission of false or otherwise improper claims for payment to a federally-funded health care program, the federal Anti-Kickback Statute, which prohibits offers to pay or receive remuneration of any kind for the purpose of inducing or rewarding referrals of items or services reimbursable by a Federal health care program, and similar state false claims and anti-kickback laws and regulations that apply to state funded health care programs. Violations of these laws and regulations are punishable by criminal and/or civil sanctions, including, in some instances, fines, imprisonment and, within the U.S., exclusion from participation in federal and/or state health care programs, including Medicare and Medicaid. The interpretation and enforcement of these laws and regulations are uncertain and subject to rapid change.

We conduct a significant amount of our sales activity outside of the U.S. We intend to continue to pursue growth opportunities in sales internationally, including in emerging markets. Our international operations are, and will continue to be, subject to a complex set of laws and regulations, including:


•	Foreign medical reimbursement policies and programs;


•	Complex data privacy requirements and laws;


•	Ever-changing country-specific guidelines, transparency requirements and laws;


•	The Foreign Corrupt Practices Act, which can be used to prosecute companies in the U.S. for arrangements with physicians, or other parties outside the U.S. if the physician or party is a government official of another country and the arrangement violates the law of that country;


•	Foreign anti-corruption laws, such as the UK Bribery Act; and


•	Trade protection measures, including import or export restrictions, that may restrict us from doing business in and/or shipping products to certain parts of the world.

The foregoing are subject to change and evolving interpretations and any violation thereof could subject us to financial or other penalties.

US and Foreign Privacy Laws

We are subject to various U.S. federal and state privacy and security laws and regulations that protect the security and privacy of individually identifiable health information. We are mindful that our systems require significant resources and oversight to protect patient and customer information. If we fail to maintain or protect our information systems and data integrity effectively, we could lose existing customers, have difficulty preventing, detecting, and controlling fraud, have disputes with customers, physicians, and other health care professionals, have regulatory sanctions or other penalties imposed, have increases in operating expenses, incur expenses or lose revenues as a result of a data privacy breach, or suffer other adverse consequences.

We are also impacted by the privacy and security requirements of countries outside the U.S. Privacy standards in Europe and Asia are becoming increasingly strict. Enforcement actions and financial penalties related to privacy in the EU are growing, and foreign governmental authorities are regularly passing new laws and restrictions relating to privacy requirements and standards. The management of cross border transfers of information among and outside of EU member countries is becoming more complex, which may complicate our clinical research activities, as well as product offerings that involve transmission or use of clinical data.

Any significant breakdown, intrusion, interruption, corruption, or destruction of our systems or information could have a material adverse effect on our business, results of operations and financial condition. Thus, we will continue our efforts to comply with all applicable privacy and security laws and regulations. To the best of our knowledge at this time, we do not expect that the ongoing cost and impact of assuring compliance with applicable privacy and security laws and regulations will have a material impact on our business, results of operations or financial condition.

Product Liability

The manufacture and marketing of medical devices carries the significant risk of financial exposure to product liability claims. Our products are used in situations in which there is a high risk of serious injury or death. Such risks will exist even with respect to those products that have received, or in the future may receive, regulatory approval for commercial sale. We are currently covered under a product liability insurance policy with coverage limits of $15 million per occurrence and $15 million per year in the aggregate, subject to typical self-insured retention amounts.

Employees

As of December 31, 2013, we had 482 employees (as compared to 411 employees as of December 31, 2012), including 182 in manufacturing, 31 in research and development, 21 in regulatory and clinical affairs, 53 in quality support, 142 in sales and marketing, and 53 in administration. We believe that the success of our business will depend, in part, on our ability to attract and retain qualified personnel. Our employees are not subject to a collective bargaining agreement, and we believe that we have good relations with our employees.

General Information

We were incorporated in California in March 1992 under the name Cardiovascular Dynamics, Inc. and reincorporated in Delaware in June 1993. In January 1999, Cardiovascular Dynamics, Inc. (by then a publicly-traded company) merged with privately held Radiance Medical Systems, Inc., and we changed our name to Radiance Medical Systems, Inc. In May 2002, we merged with then privately held Endologix, Inc., and we changed our name to Endologix, Inc.

Our principal executive office is located at 11 Studebaker, Irvine, California and our telephone number is (949) 595-7200. Our website is located at www.endologix.com. The information on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered to be a part hereof.

We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and related amendments to these reports, as applicable, available on our website, at www.endologix.com, free of charge as soon as practicable after filing or furnishing such reports with the U.S. Securities and Exchange Commission ("SEC").

All such reports are also available free of charge via EDGAR through the SEC website at www.sec.gov. In addition, the public may read and copy materials filed by us with the SEC at the SEC’s public reference room located at 100 F Street, NE, Washington, D.C., 20549. Information regarding operation of the SEC’s public reference room can be obtained by calling the SEC at 1-800-SEC-0330.


Item 1A.	Risk Factors

Before deciding to invest in our company, or to maintain or increase your investment, you should carefully consider the risks described below, in addition to the other information contained in this Annual Report on Form 10-K and other reports we have filed with the SEC. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also affect our business operations. If any of these risks are realized, our business, financial condition, or results of operations could be seriously harmed and in that event, the market price for our common stock could decline, and you may lose all or part of your investment.

These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K. These factors could cause actual results and conditions to differ materially from those projected in our forward-looking statements.

Risks Related to Our Business

All of our revenue is generated from a limited number of products, and any decline in the sales of these products will negatively impact our business.

We have focused heavily on the development and commercialization of a limited number of products for the treatment of AAA. If we are unable to continue to achieve and maintain market acceptance of these products and do not achieve sustained positive cash flow from operations, we will be constrained in our ability to fund development and commercialization of improvements and other product lines. In addition, if we are unable to market our products as a result of a quality problem or failure to maintain regulatory approvals, we would lose our only source of revenue and our business would be negatively affected.

We are in a highly competitive market segment, which is subject to rapid technological change. If our competitors are better able to develop and market products that are safer, more effective, less costly, easier to use, or otherwise more attractive than any products that we may develop, our business will be adversely impacted.

Our industry is highly competitive and subject to rapid and profound technological change. Our success depends, in part, upon our ability to maintain a competitive position in the development of technologies and products for use in the treatment of AAA and other aortic disorders. We face competition from both established and development stage companies. Many of the companies developing or marketing competing products enjoy several advantages to us, including:


•	greater financial and human resources for product development, sales and marketing and patent litigation;


•	greater name recognition;


•	long established relationships with physicians, customers, and third-party payors;


•	additional lines of products, and the ability to offer rebates or bundle products to offer greater discounts or incentives;


•	more established sales and marketing programs, and distribution networks; and


•	greater experience in conducting research and development, manufacturing, clinical trials, preparing regulatory submissions, and obtaining regulatory clearance or approval for products and marketing approved products.

Our competitors may develop and patent processes or products earlier than us, obtain regulatory clearance or approvals for competing products more rapidly than us, and develop more effective or less expensive products or technologies that render our technology or products obsolete or less competitive. We also face fierce competition in recruiting and retaining qualified scientific, sales, and management personnel, establishing clinical trial sites and patient enrollment in clinical trials, as well as in acquiring technologies and technology licenses complementary to our products or advantageous to our business. If our competitors are more successful than us in these matters, our business may be harmed.

If third-party payors do not provide reimbursement for the use of our products, our revenues may be negatively impacted.

Our success in marketing our products depends in large part on whether domestic and international government health administrative authorities, private health insurers and other organizations will reimburse customers for the cost of our products. Reimbursement systems in international markets vary significantly by country and by region within some countries, and reimbursement approvals must be obtained on a country-by-country basis. Further, many international markets have government managed healthcare systems that control reimbursement for new devices and procedures. In most markets there are private insurance systems as well as government-managed systems. If sufficient reimbursement is not available for our current or future products, in either the United States or internationally, the demand for our products will be adversely affected.

We may not realize all of the anticipated benefits of our acquisition of Nellix.

The success of our acquisition of Nellix will largely depend on our ability to realize the anticipated growth opportunities of the Nellix System. Our ability to realize these benefits, and the timing of this realization, depend upon a number of factors and future events, many of which we cannot control. These factors and events include, without limitation:


•	the results of future clinical trials of the Nellix System.


•	the receipt of further CE Mark approvals of enhanced versions of the Nellix System from our European Union notified body;


•	the receipt of approval from the FDA to sell the Nellix System in the United States;


•	obtaining and maintaining patent rights relating to the Nellix technology; and


•	further developing an effective direct sales and marketing organization in Europe.

Our success depends on the growth in the number of AAA patients treated with endovascular devices.

We estimate that over 200,000 people were diagnosed with AAA in the United States in 2013, and approximately 78,000 people underwent aneurysm repair, either via EVAR or open surgical repair. Our growth will depend upon an increasing percentage of patients with AAA being diagnosed, and an increasing percentage of those diagnosed receiving EVAR, as opposed to an open surgical procedure. Initiatives to increase screening for AAA include SAAAVE, which was signed into law on February 8, 2006 in the United States. SAAAVE will provide one-time AAA screening for men who have smoked some time in their life, and men or women who have a family history of the disease. Screening is provided as part of the “Welcome to Medicare” physical and such coverage began on January 1, 2007. Such general screening programs may never gain wide acceptance. The failure to diagnose more patients with AAA could negatively impact our revenue growth.

Our success depends on convincing physicians to use, and continue to use, our products in more endovascular AAA procedures.

Our AAA products utilize a different fixation approach within the patient’s anatomy than competitive products. Due to our favorable clinical results, and product improvements, and an increase in the size of our sales force, we have been able to increase sales at a rate higher than the general growth within our market segment. However, if we are unable to continue convincing physicians to use our products, our business could be negatively impacted.

Our international operations subject us to certain operating risks, which could adversely impact our net sales, results of operations, and financial condition.

Sales of our products outside the United States represented approximately 22% of our revenue in 2013. As of December 31, 2013, we sold our products through 14 distributors located in the following countries outside of the United States: Argentina, Brazil, Chile, Costa Rica, Venezuela, Peru, Panama, Ecuador, Colombia, Greece, Japan, Mexico, China, Latvia, Estonia, Lithuania, Romania, Bulgaria, Poland, Sweden, Denmark, Norway, Czech Republic, Portugal, and Turkey. The sales territories authorized within these various distribution agreements cover a total of 25 countries. As of September 1, 2011, we began selling our product in Europe through our own sales force. The sale and shipment of our products across international borders, as well as the purchase of components and products from international sources, subjects us to extensive United States and foreign governmental trade, import and export, and custom regulations and laws.

Compliance with these regulations is costly and exposes us to penalties for non-compliance. Other laws and regulations that can significantly impact us include various anti-bribery laws, including the United States Foreign Corrupt Practices Act and anti-boycott laws. Any failure to comply with applicable legal and regulatory obligations could impact us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments, restrictions on certain business activities, and exclusion or debarment from government contracting. Also, the failure to comply with applicable legal and regulatory obligations could result in the disruption of our shipping and sales activities.

In addition, many of the countries in which we sell our products are, to some degree, subject to political, economic or social instability. Our international operations expose us and our distributors to risks inherent in operating in foreign jurisdictions. These risks include:


•	difficulties in enforcing or defending intellectual property rights;


•	pricing pressure that we may experience internationally;


•	a shortage of high-quality sales people and distributors;


•	changes in third-party reimbursement policies that may require some of the patients who receive our products to directly absorb medical costs or that may necessitate the reduction of the selling prices of our products;


•	the imposition of additional United States and foreign governmental controls or regulations;


•	economic instability;


•	changes in duties and tariffs, license obligations and other non-tariff barriers to trade;


•	the imposition of restrictions on the activities of foreign agents, representatives and distributors;


•	scrutiny of foreign tax authorities which could result in significant fines, penalties and additional taxes being imposed on us;


•	laws and business practices favoring local companies;


•	longer payment cycles;


•	foreign currency translation adjustments;


•	difficulties in maintaining consistency with our internal guidelines;


•	difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;


•	the imposition of costly and lengthy new export licensing requirements;


•	the imposition of United States or international sanctions against a country, company, person or entity with whom we do business that would restrict or prohibit continued business with the sanctioned country, company, person or entity; and


•	the imposition of new trade restrictions.

If we experience any of these risks, our sales in international countries may be harmed and our results of operations would suffer.

If we fail to properly manage our anticipated growth, our business could suffer.

We may experience periods of rapid growth and expansion, which could place a significant strain on our limited personnel, information technology systems, and other resources. In particular, the increase in our direct sales force requires significant management and other supporting resources. Any failure by us to manage our growth effectively could have an adverse effect on our ability to achieve our development and commercialization goals.

To achieve our revenue goals, we must successfully increase production output as required by customer demand. In the future, we may experience difficulties in increasing production, including problems with production yields and quality control, component supply, and shortages of qualified personnel. These problems could result in delays in product availability and increases in expenses. Any such delay or increased expense could adversely affect our ability to generate revenues.

Future growth will also impose significant added responsibilities on management, including the need to identify, recruit, train, and integrate additional employees. In addition, rapid and significant growth will place a strain on our administrative and operational infrastructure.

In order to manage our operations and growth we will need to continue to improve our operational and management controls, reporting and information technology systems, and financial internal control procedures. If we are unable to manage our growth effectively, it may be difficult for us to execute our business strategy and our operating results and business could suffer.

Our transition to a direct sales force in certain European countries may not be successful or may cause us to incur additional expenses sooner than initially planned. If we are not successful or incur such additional expenses sooner than expected, then our business and results of operations may be materially and adversely affected.

Historically, a significant portion of our revenue to customers outside of the United States had been derived from sales to a significant European distributor. We completed the termination of our relationship with such significant distributor in September 2011, and have transitioned to a direct sales force in Austria, Belgium, the Czech Republic, Denmark, France, Germany, Luxembourg, The Netherlands, Romania, Sweden, Switzerland and the United Kingdom.

We may be unable to successfully transition to a direct sales force in such countries, or to continue to successfully place, sell and service our products in such countries through a direct sales force, or to successfully ensure the growth of our direct sales force that may be needed in the future. In addition, we may incur significant additional expenses. Our efforts to successfully expand our direct sales strategy in Europe or the failure to achieve our sales objectives in Europe may adversely impact our revenues, results of operations, and financial condition and negatively impact our ability to sustain and grow our business in Europe.

If we fail to develop and retain our direct sales force, our business could suffer.

We have a direct sales force in the United States and in certain European countries. We also utilize a network of third-party distributors for sales outside of the United States. As we launch new products and increase our marketing efforts with respect to existing products, we will need to retain and develop our direct sales personnel to build upon their experience, tenure with our products, and their relationships with customers. There is significant competition for sales personnel experienced in relevant medical device sales. If we are unable to attract, motivate, develop, and retain qualified sales personnel and thereby grow our sales force, we may not be able to maintain or increase our revenues.

Our third-party distributors may not effectively distribute our products.

We depend in part on medical device distributors and strategic relationships for the marketing and selling of our products outside of the United States. We depend on these distributors’ efforts to market our products, yet we are unable to control their efforts completely. In addition, we are unable to ensure that our distributors comply with all applicable laws regarding the sale of our products. If our distributors fail to effectively market and sell our products, and in full compliance with applicable laws, our operating results and business may suffer.

If clinical trials of our current or future products do not produce results necessary to support regulatory clearance or approval in the United States or elsewhere, we will be unable to commercialize these products.

We are currently conducting clinical trials. We will likely need to conduct additional clinical trials in the future to support new product approvals, or for the approval for new indications for the use of our products. Clinical testing is expensive, and typically takes many years, which carries an uncertain outcome. The initiation and completion of any of these studies may be prevented, delayed, or halted for numerous reasons, including, but not limited to, the following:


•	the FDA, institutional review boards or other regulatory authorities do not approve a clinical study protocol, force us to modify a previously approved protocol, or place a clinical study on hold;


•	patients do not enroll in, or enroll at the expected rate, or complete a clinical study;


•	patients or investigators do not comply with study protocols;


•	patients do not return for post-treatment follow-up at the expected rate;


•	patients experience serious or unexpected adverse side effects for a variety of reasons that may or may


•	not be related to our products such as the advanced stage of co-morbidities that may exist at the time of treatment, causing a clinical study to be put on hold;


•	sites participating in an ongoing clinical study may withdraw, requiring us to engage new sites;


•	difficulties or delays associated with establishing additional clinical sites;


•	third-party clinical investigators decline to participate in our clinical studies, do not perform the clinical studies on the anticipated schedule, or are inconsistent with the investigator agreement, clinical study protocol, good clinical practices, and other FDA and Institutional Review Board requirements;


•	third-party organizations do not perform data collection and analysis in a timely or accurate manner;


•	regulatory inspections of our clinical studies require us to undertake corrective action or suspend or terminate our clinical studies;


•	changes in federal, state, or foreign governmental statutes, regulations or policies;


•	interim results are inconclusive or unfavorable as to immediate and long-term safety or efficacy;


•	the study design is inadequate to demonstrate safety and efficacy; or


•	do not meet the study endpoints.

Clinical failure can occur at any stage of the testing. Our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and/or non-clinical testing in addition to those we have planned. Our failure to adequately demonstrate the efficacy and safety of any of our devices would prevent receipt of regulatory clearance or approval and, ultimately, the commercialization of that device or indication for use.

We rely on a single vendor to supply specialized graft material for our product lines, and any disruption in the supply of such material could impair our ability to manufacture our products or meet customer demand for our products in a timely and cost effective manner.

Our reliance on a single source supplier exposes our operations to disruptions in supply caused by:


•	failure of our supplier to comply with regulatory requirements;


•	any strike or work stoppage;


•	disruptions in shipping;


•	a natural disaster caused by fire, flood or earthquakes; or


•	a supply shortage experienced by our single source supplier.

Although the supplier is a well-established vendor to the medical device industry and we retain a significant stock of the strata graft material, the occurrence of any of the above disruptions in supply or other unforeseen events that could cause a disruption in the supply from this single source supplier may cause us to halt, or experience a disruption in, manufacturing of AFX, Nellix, Xpand, and Ventana, which would adversely affect our business, financial condition, and results of operations.

If we are unable to protect our intellectual property, our business may be negatively affected.

Our success depends significantly on our ability to protect our intellectual property and proprietary technologies. Our policy is to obtain and protect our intellectual property rights. We rely on patent protection, as well as a combination of copyright, trade secret and trademark laws, and nondisclosure, confidentiality and other contractual restrictions to protect our proprietary technology. However, these legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. Our pending U.S. and foreign patent applications may not issue as patents or may not issue in a form that will be advantageous to us. Any patents we have obtained or will obtain may be challenged by re-examination, inter partes review, opposition or other administrative proceeding, or in litigation. Such challenges could result in a determination that the patent is invalid. In addition, competitors may be able to design alternative methods or devices that avoid infringement of our patents. To the extent our intellectual property protection offers inadequate protection, or is found to be invalid, we are exposed to a greater risk of direct competition. If our intellectual property does not provide adequate protection against our competitors’ products, our competitive position could be adversely affected, as could our business. Both the patent application process and the process of managing patent disputes can be time consuming and expensive. Furthermore, the laws of some foreign countries may not protect our intellectual property rights to the same extent as do the laws of the United States. In addition, changes in U.S. patent laws could prevent or limit us from filing patent applications or patent claims to protect our products and/or technologies or limit the exclusivity periods that are available to patent holders.

We also own trade secrets and confidential information that we try to protect by entering into confidentiality agreements and intellectual property assignment agreements with our employees, consultants and other parties. However, such agreements may not be honored or, if breached, we may not have sufficient remedies to protect our confidential information. Further, our competitors may independently learn our trade secrets or develop similar or superior technologies. To the extent that our employees, consultants or others apply technological information to our projects that they develop independently or others develop, disputes may arise regarding the ownership of proprietary rights to such information, and such disputes may not be resolved in our favor. If we are unable to protect our intellectual property adequately, our business and commercial prospects will likely suffer.

If our products or processes infringe upon the intellectual property of third parties, the sale of our products may be challenged and we may have to defend costly and time-consuming infringement claims.

We may need to engage in expensive and prolonged litigation to assert or defend any of our intellectual property rights or to determine the scope and validity of rights claimed by other parties. With no certainty as to the outcome, litigation could be too expensive for us to pursue. Our failure to prevail in such litigation or our failure to pursue litigation could result in the loss of our rights that could substantially hurt our business. In addition, the laws of some foreign countries do not protect our intellectual property rights to the same extent as the laws of the United States, if at all.

Our failure to obtain rights to intellectual property of third parties, or the potential for intellectual property litigation, could force us to do one or more of the following:


•	stop selling, making, or using products that use the disputed intellectual property;


•	obtain a license from the intellectual property owner to continue selling, making, licensing, or using products, which license may not be available on reasonable terms, or at all;


•	redesign our products, processes or services; or


•	subject us to significant liabilities to third parties.

If any of the foregoing occurs, we may be unable to manufacture and sell our products and may suffer severe financial harm. Whether or not an intellectual property claim is valid, the cost of responding to it, in terms of legal fees and expenses and the diversion of management resources, could harm our business.

We may face product liability claims that could result in costly litigation and significant liabilities.

Manufacturing and marketing of our commercial products, and clinical testing of our products under development, may expose us to product liability claims. Although we have, and intend to maintain, product liability insurance, the coverage limits of our insurance policies may not be adequate and one or more successful claims brought against us may have a material adverse effect on our business and results of operations. Additionally, adverse product liability actions could negatively affect our reputation, continued product sales, and our ability to obtain and maintain regulatory approval for our products.

Our ability to maintain our competitive position depends on our ability to attract and retain highly qualified personnel.

We believe that our continued success depends to a significant extent upon the efforts and abilities of our executive officers, particularly:


•	John McDermott, our Chief Executive Officer and Chairman of our Board of Directors;


•	Robert D. Mitchell, our President; and.


•	Todd Abraham, our Vice President of Operations.

The loss of any of the foregoing individuals would harm our business. Our ability to retain our executive officers and other key employees, and our success in attracting and hiring additional skilled employees, will be critical to our future success.

If our facilities or systems are damaged or destroyed, we may experience delays that could negatively impact our revenues or have other adverse effects.

Our facilities and systems may be affected by natural or man-made disasters. We currently conduct all of our manufacturing, development and management activities at a single location in Irvine, California, near known earthquake fault zones. Our finished goods inventory is split between our Irvine location and our distribution centers in Memphis, Tennessee and Tilburg, The Netherlands. We have taken precautions to safeguard our facilities and systems, including insurance, health and safety protocols, and off-site storage of computer data. However, our facilities and systems may be vulnerable to earthquakes, fire, storm, power loss, telecommunications failures, physical and software break-ins, software viruses and similar events which could cause substantial delays in our operations, damage or destroy our equipment or inventory, and cause us to incur additional expenses. In addition, the insurance coverage we maintain may not be adequate to cover our losses in any particular case and may not continue to be available to use on acceptable terms, or at all.

We are subject to credit risk from our accounts receivable related to our product sales, which include sales within European countries that are currently experiencing economic turmoil.

The majority of our accounts receivable arise from product sales in the United States. However, we also have significant receivable balances from customers within the European Union, Japan, Brazil, and Argentina. Our accounts receivable in the United States are primarily due from public and private hospitals. Our accounts receivable outside of the United States are primarily due from independent distributors, and to a lesser extent, public and private hospitals. Our historical write-offs of accounts receivable have not been significant.

We monitor the financial performance and credit worthiness of our customers so that we can properly assess and respond to changes in their credit profile. Our independent distributors and sub-dealers operate in certain countries such as Greece and Italy, where economic conditions continue to present challenges to their businesses, and thus, could place in risk the amounts due to us from them. These distributors are owed amounts from public hospitals that are funded by their governments. Adverse financial conditions in these countries may continue, thus negatively affecting the length of time that it will take us to collect associated accounts receivable, or impact the likelihood of ultimate collection.

If any future acquisitions or business development efforts are unsuccessful, our business may be harmed.

As part of our business strategy to be an innovative leader in the treatment of aortic disorders, we may need to acquire other companies, technologies, and product lines in the future. Acquisitions involve numerous risks, including the following:


•	the possibility that we will pay more than the value we derive from the acquisition, which could result in future non-cash impairment charges;


•	difficulties in integration of the operations, technologies, and products of the acquired companies, which may require significant attention of our management that otherwise would be available for the ongoing development of our business;


•	the assumption of certain known and unknown liabilities of the acquired companies; and


•	difficulties in retaining key relationships with employees, customers, partners, and suppliers of the acquired company.

In addition, we may invest in new technologies that may not succeed in the marketplace. If they are not successful, we may be unable to recover our initial investment, which could include the cost of acquiring the license, funding development efforts, acquiring products, or purchasing inventory. Any of these would negatively impact our future growth and cash reserves.

Risks Related to Our Financial Condition

We have a history of operating losses and may be required to obtain additional funds to pursue our business strategy.

We have a history of operating losses and may need to seek additional capital in the future. We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next 24 months. However, we may need to obtain additional financing to pursue our business strategy, to respond to new competitive pressures or to act on opportunities to acquire or invest in complementary businesses, products or technologies. Our cash requirements in the future may be significantly different from our current estimates and depend on many factors, including:


•	the results of our commercialization efforts for our existing and future products;


•	the revenues generated by our existing and future products;


•	the need for additional capital to fund future development programs;


•	the need to adapt to changing technologies and technical requirements, and the costs related thereto;


•	the costs involved in obtaining and enforcing patents or any litigation by third parties regarding intellectual property;


•	the establishment of high volume manufacturing and increased sales and marketing capabilities; and


•	our success in entering into collaborative relationships with other parties.

In addition, we are required to make periodic interest payments to the holders of our senior convertible notes and to make payments of principal upon conversion or maturity. We may also be required to purchase our senior convertible notes from the holders thereof upon the occurrence of a fundamental change involving our company. To finance the foregoing, we may seek funds through borrowings or through additional rounds of financing, including private or public equity or debt offerings and collaborative arrangements with corporate partners. We may be unable to raise funds on favorable terms, or at all.

During the recent economic instability, it has been difficult for many companies to obtain financing in the public markets or to obtain debt financing on commercially reasonable terms, if at all. In addition, the sale of additional equity or convertible debt securities could result in additional dilution to our stockholders. If we borrow additional funds or issue debt securities, these securities could have rights superior to holders of our common stock, and could contain covenants that will restrict our operations. We might have to obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to our technologies, product candidates, or products that we otherwise would not relinquish. If we do not obtain additional resources, our ability to capitalize on business opportunities will be limited, and the growth of our business will be harmed.

Changes in the credit environment may adversely affect our business and financial condition.

Our ability to enter into or maintain existing financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products, or our customers become insolvent. Any deterioration in our key financial ratios, or non-compliance with financial covenants in existing credit agreements could also adversely affect our business and financial condition. While these conditions and the current economic instability have not meaningfully impaired our ability to access credit markets or our operations to date, continuing volatility in the global financial markets could increase borrowing costs or affect our ability to access the capital markets. Current or worsening economic conditions may also adversely affect the business of our customers, including their ability to pay for our products. This could result in a decrease in the demand for our products, longer sales cycles, slower adoption of new technologies, and increased price competition.

We have limited resources to invest in research and development and to grow our business and may need to raise additional funds in the future for these activities.

We believe that our growth will depend, in significant part, on our ability to develop new technologies for the treatment of AAA and other aortic disorders, and technology complementary to our current products. Our existing resources may not allow us to conduct all of the research and development activities that we believe would be beneficial for our future growth. As a result, we may need to seek funds in the future to finance these activities. If we are unable to raise funds on favorable terms, or at all, we may not be able to increase our research and development activities and the growth of our business may be negatively impacted.

The accounting method for convertible debt securities that may be settled in cash, such as our senior convertible notes, is the subject of recent changes that could have a material effect on our reported financial results.

In May 2008, the Financial Accounting Standards Board ("FASB"), issued FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement), which has subsequently been codified as Accounting Standards Codification 470-20, Debt with Conversion and Other Options, which we refer to as ASC 470-20. Under ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments (such as our senior convertible notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for our senior convertible notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of such notes. As a result, we will be required to record a greater amount of non-cash interest expense in current periods presented as a result of the accretion of the discounted carrying value of our senior convertible notes to their face amount over the term of such notes. We will report lower net income in our financial results because ASC 470-20 will require interest to include both the current period’s accretion of the debt discount and the instrument’s coupon interest, which could adversely affect our reported or future financial results and the market price of our common stock.

In addition, under certain circumstances, convertible debt instruments (such as the notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the notes, then our diluted earnings per share would be adversely affected.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our debt.

Our ability to make scheduled payments of the principal of, to pay interest on, to pay any cash due upon conversion of or to refinance our indebtedness, including the senior convertible notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

The expense and potential unavailability of insurance coverage for our company may have an adverse effect on our financial position and results of operations.

While we currently have insurance for our business, property, directors and officers, and product liability, insurance is increasingly costly and the scope of coverage is narrower, and we may be required to assume more risk in the future. If we are subject to claims or suffer a loss or damage in excess of our insurance coverage, we will be required to cover the amounts outside of or in excess of our insurance limits. If we are subject to claims or suffer a loss or damage that is outside of our insurance coverage, we may incur significant costs associated with loss or damage that could have an adverse effect on our financial position and results of operations. Furthermore, any claims made on our insurance policies may impact our ability to obtain or maintain insurance coverage at reasonable costs or at all. We do not have the financial resources to self-insure, and it is unlikely that we will have these financial resources in the foreseeable future. Our product liability insurance covers our products and business operations, but we may need to increase and expand this coverage commensurate with our expanding business.

Compliance with changing corporate governance and public disclosure regulations may result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act and new SEC regulations, are creating uncertainty for companies such as ours. To maintain high standards of corporate governance and public disclosure, we have invested, and intend to continue to invest, in reasonably necessary resources to comply with evolving standards. These investments have resulted in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities and may continue to do so in the future.

Risks Related to Regulation of Our Industry

Healthcare policy changes, including recent federal legislation to reform the United States healthcare system, may have a material adverse effect on us.

In response to perceived increases in health care costs in recent years, there have been and continue to be proposals by the federal government, state governments, regulators and third-party payors to control these costs and, more generally, to reform the United States healthcare system. Certain of these proposals could limit the prices we are able to charge for our products or the amounts of reimbursement available for our products and could limit the acceptance and availability of our products. Moreover, as discussed below, recent federal legislation would impose significant new taxes on medical device makers such as us. The adoption of some or all of these proposals, including the recent federal legislation, could have a material adverse effect on our financial position and results of operations.

On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (the “PPACA”). The total cost imposed on the medical device industry by the PPACA may be up to approximately $20 billion over ten years. The PPACA includes, among other things, a deductible 2.3% excise tax on any entity that manufactures or imports medical devices offered for sale in the United States, with limited exceptions, effective January 1, 2013. This excise tax will result in a significant increase in the tax burden on our industry, and if any efforts we undertake to offset the excise tax are unsuccessful, the increased tax burden could have an adverse affect on our results of operations and cash flows. Other elements of the PPACA, including comparative effectiveness research, an independent payment advisory board, payment system reforms including shared savings pilots and other provisions, may significantly affect the payment for, and the availability of, healthcare services and result in fundamental changes to federal healthcare reimbursement programs, any of which may materially affect numerous aspects of our business.

Our future success depends on our ability to develop, receive regulatory clearance or approval for, and introduce new products or product enhancements that will be accepted by the market in a timely manner.

It is important to our business that we continue to build a more complete product offering for treatment of AAA and other aortic disorders. As such, our success will depend in part on our ability to develop and introduce new products. However, we may not be able to successfully develop and obtain regulatory clearance or approval for product enhancements, or new products, or these products may not be accepted by physicians or the payors who financially support many of the procedures performed with our products.

The success of any new product offering or enhancement to an existing product will depend on several factors, including our ability to:


•	properly identify and anticipate physicians and patient needs;


•	develop and introduce new products or product enhancements in a timely manner;


•	avoid infringing upon the intellectual property rights of third parties;


•	demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials;


•	obtain the necessary regulatory clearances or approvals for new products or product enhancements;


•	be fully FDA-compliant with marketing of new devices or modified products;


•	provide adequate training to potential users of our products;


•	receive adequate coverage and reimbursement for procedures performed with our products; and


•	develop an effective and FDA-compliant, dedicated marketing and distribution network.

If we do not develop new products or product enhancements in time to meet market demand or if there is insufficient demand for these products or enhancements, our results of operations will suffer.

Our business is subject to extensive governmental regulation that could make it more expensive and time consuming for us to introduce new or improved products.

Our products must comply with regulatory requirements imposed by the FDA in the United States, and similar agencies in foreign jurisdictions. These requirements involve lengthy and detailed laboratory and clinical testing procedures, sampling activities, an extensive agency review process, and other costly and time-consuming procedures. It often takes several years to satisfy these requirements, depending on the complexity and novelty of the product. We also are subject to numerous additional licensing and regulatory requirements relating to safe working conditions, manufacturing practices, environmental protection, fire hazard control, and disposal of hazardous or potentially hazardous substances. Some of the most important requirements we face include:


•	FDA Regulations (Title 21 CFR);


•	European Union CE mark requirements;


•	Other international regulatory approval requirements;


•	Medical Device Quality Management System Requirements (21 CFR 820, ISO 13485:2003, IOS 13485:2012, and other similar international regulations);


•	Occupational Safety and Health Administration requirements; and


•	California Department of Health Services requirements.

Government regulation may impede our ability to conduct continuing clinical trials and to manufacture our existing and future products. Government regulation also could delay our marketing of new products for a considerable period of time and impose costly procedures on our activities. The FDA and other regulatory agencies may not approve any of our future products on a timely basis, if at all. Any delay in obtaining, or failure to obtain, such approvals could negatively impact our marketing of any proposed products and reduce our product revenues.

Our products remain subject to strict regulatory controls on manufacturing, marketing and use. We may be forced to modify or recall our product after release in response to regulatory action or unanticipated difficulties encountered in general use. Any such action could have a material effect on the reputation of our products and on our business and financial position.

Further, regulations may change, and any additional regulation could limit or restrict our ability to use any of our technologies, which could harm our business. We could also be subject to new international, federal, state or local regulations that could affect our research and development programs and harm our business in unforeseen ways. If this happens, we may have to incur significant costs to comply with such laws and regulations, which will harm our results of operations.

The misuse or off-label use of our products may harm our image in the marketplace; result in injuries that lead to product liability suits, which could be costly to our business; or result in FDA sanctions if we are deemed to have engaged in such promotion.

The products we currently market have been cleared or approved by the U.S. FDA and international regulatory authorities for specific treatments and anatomies. We cannot, however, prevent a physician from using our products outside of those cleared/approved indications for use, known as “off-label” use. There may be increased risk of injury if physicians attempt to use our products off-label. We train our sales force to not promote our products for off-label uses. Furthermore, the use of our products for indications other than those cleared/approved by the FDA or international regulatory authorities may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.

Physicians may also misuse our products or use improper techniques if they are not adequately trained, potentially leading to injury and an increased risk of product liability. If our products are misused or used with improper technique, we may become subject to costly litigation by our customers or their patients. Product liability claims could divert management’s attention from our core business, be expensive to defend, and result in sizable damage awards against us that may not be covered by insurance. If we are deemed by the FDA to have engaged in the promotion of our products for off-label use, we could be subject to FDA prohibitions on the sale or marketing of our products or significant fines and penalties, and the imposition of these sanctions could also affect our reputation and position within the industry. Any of these events could harm our business and results of operations and cause our stock price to decline.

Our products may in the future be subject to product recalls or voluntary market withdrawals that could harm our reputation, business and financial results.

The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture that could affect patient safety. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that the device would cause serious adverse health consequences or death. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found or suspected. A government-mandated recall or voluntary recall by us or one of our distributors could occur as a result of component failures, manufacturing errors, design or labeling defects or other issues. Recalls, which include corrections as well as removals, of any of our products would divert managerial and financial resources and could have an adverse effect on our financial condition, harm our reputation with customers, and reduce our ability to achieve expected revenues.

We are required to comply with medical device reporting (“MDR”) requirements and must report certain malfunctions, deaths, and serious injuries associated with our products, which can result in voluntary corrective actions or agency enforcement actions.

Under the FDA MDR regulations, medical device manufacturers are required to submit information to the FDA when they receive a report or become aware that a device has or may have caused or contributed to a death or serious injury or has or may have a malfunction that would likely cause or contribute to death or serious injury if the malfunction were to recur. All manufacturers placing medical devices on the market in the European Economic Area are legally bound to report any serious or potentially serious incidents involving devices they produce or sell to the regulatory agency, or Competent Authority, in whose jurisdiction the incident occurred. Were this to happen to us, the relevant regulatory agency would file an initial report, and there would then be a further inspection or assessment if there are particular issues.

Malfunction of our products could result in future voluntary corrective actions, such as recalls, including corrections, or customer notifications, or agency action, such as inspection or enforcement actions. If malfunctions do occur, we may be unable to correct the malfunctions adequately or prevent further malfunctions, in which case we may need to cease manufacture and distribution of the affected products, initiate voluntary recalls, and redesign the products. Regulatory authorities may also take actions against us, such as ordering recalls, imposing fines, or seizing the affected products. Any corrective action, whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financial results.

We may be subject to federal, state and foreign healthcare fraud and abuse laws and regulations, and a finding of failure to comply with such laws and regulations could have a material adverse effect on our business.

Our operations may be directly or indirectly affected by various broad federal, state or foreign healthcare fraud and abuse laws. In particular, the federal Anti-Kickback Statute prohibits any person from knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in return for or to induce the referring, ordering, leasing, purchasing or arranging for or recommending the ordering, purchasing or leasing of an item or service, for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs. We are also subject to the federal HIPAA statute, which created federal criminal laws that prohibit executing a scheme to defraud any health care benefit program or making false statements relating to health care matters, and federal “sunshine” laws that require transparency regarding financial arrangements with health care providers, such as the reporting and disclosure requirements imposed by PPACA on drug manufacturers regarding any “transfer of value” made or distributed to prescribers and other health care providers.

In addition, the federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements to obtain payment from the federal government. Suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals, commonly known as “whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Various states have also enacted laws modeled after the federal False Claims Act.

Many states have also adopted laws similar to each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers as well as laws that restrict our marketing activities with physicians, and require us to report consulting and other payments to physicians. Some states mandate implementation of commercial compliance programs to ensure compliance with these laws. We also are subject to foreign fraud and abuse laws, which vary by country. For instance, in the European Union, legislation on inducements offered to physicians and other healthcare workers or hospitals differ from country to country. Breach of the laws relating to such inducements may expose us to the imposition of criminal sanctions.

The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Moreover, recent health care reform legislation has strengthened these laws. Further, we expect there will continue to be federal and state laws and/or regulations, proposed and implemented, that could impact our operations and business. The extent to which future legislation or regulations, if any, relating to health care fraud abuse laws and/or enforcement, may be enacted or what effect such legislation or regulation would have on our business remains uncertain. If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us now or in the future, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from governmental health care programs, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.

We may be subject to federal health information privacy and security laws and regulations, and a finding of failure to comply with such laws and regulations could have a material adverse effect on our business.

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, and its implementing regulations safeguard the privacy and security of individually-identifiable health information. Certain of our operations may be subject to these requirements. Penalties for noncompliance with these rules include both criminal and civil penalties. In addition, the Health Information Technology for Economic and Clinical Health Act, or HITECH Act, expanded federal health information privacy and security protections. Among other things, HITECH makes certain of HIPAA’s privacy and security standards directly applicable to “business associates”-independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also set forth new notification requirements for health data security breaches, increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to enforce HIPAA and seek attorney's fees and costs associated with pursuing federal civil actions.

Risks Related to Our Common Stock and Convertible Notes

We will be obligated to issue additional shares of our common stock to the former stockholders of Nellix as a result of our satisfaction of certain milestones set forth in the merger agreement with Nellix and the other parties thereto, resulting in stock ownership dilution.

Under the terms of the merger agreement with Nellix and the other parties thereto, we agreed to issue additional shares of our common stock to the former stockholders of Nellix as contingent consideration upon our satisfaction of one or both of two milestones related to the Nellix System and described in the merger agreement, or upon a change of control of our company prior to our completion of one or both milestones. The maximum aggregate number of shares of our common stock issuable to the Nellix stockholders upon our achievement of both milestones, or upon a change of control of our company prior to our achievement of both milestones, assuming the average per share closing price of our common stock (as determined under the terms of the Nellix merger agreement) at such time is less than or equal to $3.50, is 10.2 million shares.

Issuing additional shares of our common stock to the former stockholders in satisfaction of contingent consideration will dilute the ownership interests of holders of our common stock on the dates of such issuances. If we are unable to realize the strategic, operational and financial benefits anticipated from our acquisition of Nellix, our stockholders may experience dilution of their ownership interests in our company upon any such future issuances of shares of our common stock without receiving any commensurate benefit.

Our operating results may vary significantly from quarter to quarter, which may negatively impact our stock price in the future.

Our quarterly revenues and results of operations may fluctuate due to, among others, the following reasons:


•	physician acceptance of our products;


•	the conduct and results of clinical trials;


•	the timing and expense of obtaining future regulatory approvals;


•	fluctuations in our expenses associated with expanding our operations;


•	the introduction of new products by our competitors;


•	supplier, manufacturing or quality problems with our devices;


•	the timing of stocking orders from our distributors;


•	changes in our pricing policies or in the pricing policies of our competitors or suppliers; and


•	changes in third-party payors’ reimbursement policies.

Because of these and possibly other factors, it is likely that in some future period our operating results will not meet investor expectations or those of public market analysts.

Any unanticipated change in revenues or operating results is likely to cause our stock price to fluctuate since such changes reflect new information available to investors and analysts. New information may cause investors and analysts to revalue our business, which could cause a decline in the trading price of our stock.

The price of our stock may fluctuate unpredictably in response to factors unrelated to our operating performance.

The stock market periodically experiences significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These broad market fluctuations may cause the market price of our common stock to drop. In particular, the market price of securities of small medical device companies, like ours, has been very unpredictable and may vary in response to:


•	announcements by us or our competitors concerning technological innovations;


•	introductions of new products;


•	FDA and foreign regulatory actions;


•	developments or disputes relating to patents or proprietary rights;


•	failure of our results of operations to meet the expectations of stock market analysts and investors;


•	changes in stock market analyst recommendations regarding our common stock;


•	the conversion of some or all of our senior convertible notes and any sales in the public market of shares of our common stock issued upon conversion of such notes;


•	changes in healthcare policy in the U.S. or other countries; and


•	general stock market and economic conditions and other factors unrelated to our operating performance.

These factors may materially and adversely affect the market price of our common stock.

Trading in our stock over the last twelve months has been limited, so investors may not be able to sell as much stock as they wish at prevailing prices.

The average daily trading volume in our common stock for the twelve months ended December 31, 2013 was approximately 425,000 shares. If limited trading in our stock continues, it may be difficult for investors to sell their shares in the public market at any given time at prevailing prices. Moreover, the market price for shares of our common stock may be made more volatile because of the relatively low volume of trading in our common stock. When trading volume is low, significant price movement can be caused by the trading of a relatively small number of shares. Volatility in our common stock could cause stockholders to incur substantial losses.

Some provisions of our charter documents and Delaware law may make takeover attempts difficult, which could depress the price of our stock and inhibit one’s ability to receive a premium price for their shares.

Provisions of our amended and restated certificate of incorporation could make it more difficult for a third party to acquire control of our business, even if such change in control would be beneficial to our stockholders. Our amended and restated certificate of incorporation allows our board of directors to issue up to five million shares of preferred stock and to fix the rights and preferences of such shares without stockholder approval. Any such issuance could make it more difficult for a third party to acquire our business and may adversely affect the rights of our stockholders. In addition, our board of directors is divided into three classes for staggered terms of three years. We are also subject to anti-takeover provisions under Delaware law, each of which could delay or prevent a change of control. Together these provisions may delay, deter or prevent a change in control of us, adversely affecting the market price of our common stock.

We do not anticipate declaring any cash dividends on our common stock.

We have never declared or paid cash dividends on our common stock and do not plan to pay any cash dividends in the near future. Our current policy is to retain all funds and any earnings for use in the operation and expansion of our business. Our revolving credit facility contains restrictions prohibiting us from paying any cash dividends without the lender’s prior approval. If we do not pay dividends, a return on one’s investment may only occur if our stock price rises above the price it was purchased.


Item 1B.	Unresolved Staff Comments

None.


Item 2.	Properties

We lease two adjacent facilities aggregating approximately 60,000 square feet in Irvine, California under separate lease agreements. These Irvine leases expire in September and December 2014, and may each be renewed at our option. We also lease an administrative office of approximately 2,400 square feet on a month-to-month basis in Den Bosch, The Netherlands.

During 2013 we entered into a lease for a new facility in Irvine with a commencement date of January 1, 2014 and a term of 15 years. Refer to Note 8 of the Notes to the Consolidated Financial Statements for further discussion of properties.

Item 3. Legal Proceedings

Refer to Note 8 of the Notes to the Consolidated Financial Statements for discussion of legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable.

Table of Contents

PART II


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities

Our common stock trades on the NASDAQ Global Select Market under the symbol “ELGX.” The following table sets forth the high and low close prices for our common stock as reported on the NASDAQ Global Select Market for the periods indicated.



	High		Low
Year Ended December 31, 2012
First Quarter	$	14.65	$	11.31
Second Quarter	15.44		13.23
Third Quarter	15.51		11.15
Fourth Quarter	14.66		12.11
Year Ended December 31, 2013
First Quarter	$	16.35	$	14.37
Second Quarter	15.84		12.60
Third Quarter	17.01		13.82
Fourth Quarter	18.21		16.10

On February 24, 2014 , the closing price of our common stock on the NASDAQ Global Select Market was $17.66 per share, and there were 200 holders of record of our common stock.

The following chart compares the yearly percentage change in the cumulative total stockholder return on our common stock for the period from December 31, 2008 through December 31, 2013 , with the cumulative total return on the NASDAQ Composite Index and the NASDAQ Medical Equipment Index for the same period. The comparison assumes $100 was invested on December 31, 2008 in our common stock at the then closing price of $1.20 per share.

Comparison of 5 Year Cumulative Total Return*

Among Endologix, Inc., the NASDAQ Composite Index, and the NASDAQ Medical Equipment Index

*$100 invested on 12/31/2008 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.

Dividend Policy

We have never paid any dividends. We currently intend to retain all earnings, if any, for use in the expansion of our business and therefore do not anticipate paying any dividends in the foreseeable future. Additionally, the terms of our credit facility with Wells Fargo Bank prohibit us from paying cash dividends without their consent.

Item 6. Selected Financial Data

The following selected consolidated financial data has been derived from our audited Consolidated Financial Statements. The audited Consolidated Financial Statements for the fiscal years ended December 31, 2013, 2012, and 2011 are included elsewhere in this Annual Report on Form 10-K. The information set forth below should be read in conjunction with "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 and the Consolidated Financial Statements and Notes thereto in Item 8 .



	Year Ended December 31,
	2013			2012			2011			2010			2009
	(In thousands, except per share data)
Consolidated Statement of Operations Data:
Revenue	$	132,257		$	105,946		$	83,417		$	67,251		$	52,441
Cost of goods sold	32,750			25,282			18,746			15,030			13,181
Gross profit	99,507			80,664			64,671			52,221			39,260
Operating expenses:
Research and development	16,199			16,571			16,738			8,997			4,454
Clinical and regulatory affairs	8,679			6,343			4,439			2,169			2,115
Marketing and sales	63,588			53,953			44,655			31,869			26,483
General and administrative	21,409			20,266			15,525			13,410			8,550
Contract termination and business acquisition expenses	—			422			1,730			—			—
Settlement costs	—			5,000			—			—			—
Total operating expenses	109,875			102,555			83,087			56,445			41,602
Loss from operations	(10,368		)	(21,891		)	(18,416		)	(4,224		)	(2,342		)
Total other expense	$	(5,710	)	$	(13,352	)	$	(10,400	)	$	(160	)	$	(71	)
Net loss before income tax (expense) benefit	(16,078		)	(35,243		)	(28,816		)	(4,384		)	(2,413		)
Income tax (expense) benefit	$	10		$	(531	)	$	86		$	15,037		$	(21	)
Net income (loss)	$	(16,068	)	$	(35,774	)	$	(28,730	)	$	10,653		$	(2,434	)
Basic net income (loss) per share	(0.26		)	(0.60		)	(0.51		)	0.22			(0.05		)
Diluted net income (loss) per share	(0.26		)	(0.60		)	(0.51		)	0.21			(0.05		)
Shares used in computing basic net income (loss) per share	62,607			59,811			56,592			48,902			45,194
Shares used in computing diluted net income (loss) per share	62,607			59,811			56,592			50,544			45,194



	December 31,
	2013			2012			2011			2010			2009
Consolidated Balance Sheet Data:	(In thousands)
Cash and cash equivalents and marketable securities	$	126,465		$	45,118		$	20,035		$	38,191		$	24,065
Accounts receivable, net	24,972			22,600			15,542			12,212			8,342
Total assets	$	256,197		$	165,103		$	130,255		$	134,375		$	51,292
Total liabilities	$	151,556		$	70,629		$	53,686		$	40,472		$	8,412
Accumulated deficit	(216,082		)	(200,014		)	(164,240		)	(135,510		)	(146,164		)
Total stockholders’ equity	$	104,641		$	94,474		$	76,569		$	93,903		$	(42,880	)

Table of Contents


Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with “Selected Financial Data” and our consolidated financial statements and the related notes included in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of various factors including the risks we discuss in Item 1A of Part I, “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Overview

Our Business

Our corporate headquarters and manufacturing facility is located in Irvine, California. We develop, manufacture, market, and sell innovative medical devices for the treatment of aortic disorders. Our principal products are intended for the treatment of abdominal aortic aneurysms ("AAA"). Our AAA products are built on one of two platforms: (1) traditional minimally-invasive endovascular repair ("EVAR") or (2) endovascular sealing (“EVAS”), our innovate solution for sealing the aneurysm sac while maintaining blood flow through two blood flow lumens.

We sell our products through (i) our direct U.S. and European sales forces and (ii) third-party international distributors and agents in other parts of the world.

See Item 1., "Business," for a discussion of:


•	Company Overview and Mission


•	Market Overview and Opportunity


•	Our Products


•	Manufacturing and Supply


•	Marketing and Sales


•	Competition


•	Product Development and Clinical Trials

2013 Overview

2013 was an important year of revenue growth, business expansion, and infrastructure development. We continued to gain market share in the U.S., while also building our direct sales operations in Europe. Combined with good results in other international markets, we achieved 25% annual revenue growth. We also made substantial progress with our new product pipeline, positioning us for product launches in 2014.

Characteristics of Our Revenue and Expenses

Revenue

Revenue is derived from sales of our EVAR and EVAS products (including extensions and accessories) to hospitals upon completion of AAA repair procedure, or from sales to distributors upon title transfer (which is typically at shipment), provided our other revenue recognition criteria have been met.

Cost of Goods Sold

Cost of goods sold includes compensation (including stock-based compensation) and benefits of production personnel and production support personnel. Cost of goods sold also includes depreciation expense for production equipment, production materials and supplies expense, allocated facilities-related expenses, and certain direct costs such as shipping.

Research and Development

Research and development expenses consist of compensation (including stock-based compensation) and benefits for research and development personnel, materials and supplies, research and development consultants, outsourced and licensed research and development costs, and allocated facilities-related costs. Our research and development activities primarily relate to the development and testing of new devices and methods to treat aortic disorders.

Clinical and Regulatory

Clinical and regulatory expenses consist of compensation (including stock-based compensation) and benefits for clinical and regulatory personnel, regulatory and clinical payments related to studies, regulatory costs related to registration and approval activities, and allocated facilities-related costs. Our clinical and regulatory activities primarily relate to gaining regulatory approval for the commercialization of our devices.

Marketing and Sales

Marketing and Sales expenses primarily consist of compensation (including stock-based compensation) and benefits for our sales force, clinical specialist, internal sales support functions, and marketing personnel. It also includes costs attributable to marketing our products to our customers and prospective customers.

General and Administrative

General and administrative expenses primarily include compensation (including stock-based compensation) and benefits for personnel that support our general operations such as information technology, executive management, financial accounting, and human resources. General and administrative expenses also include bad debt expense, patent and legal fees, financial audit fees, insurance, recruiting fees, other professional services, the federal Medical Device Excise Tax, and allocated facilities-related expenses.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. While management believes these estimates are reasonable and consistent, they are by their very nature, estimates of amounts that will depend on future events. Accordingly, actual results could differ from these estimates. Our Audit Committee of the Board of Directors periodically reviews our significant accounting policies. Our critical accounting policies arise in conjunction with the following:

• Revenue recognition and accounts receivable

• Inventory - lower of cost or market

• Goodwill and intangible assets - impairment analysis

• Income taxes

• Stock-based compensation

• Contingent consideration for business acquisition

• Litigation accruals

Revenue Recognition and Accounts Receivable

We recognize revenue when all of the following criteria are met:

• We have appropriate evidence of a binding arrangement with our customer;

• The sales price for our EVAR and EVAS products (including extensions and accessories) is established with our customer;

• Our EVAR and EVAS product has been used by the hospital in an AAA repair procedure, or our distributor has assumed title with no right of return, as applicable; and

• Collection from our customer is reasonably assured at the time of sale.

For sales made to a direct customer (i.e., hospitals), we recognize revenue upon completion of an AAA repair procedure, when our EVAR or EVAS product is implanted in a patient. For sales to distributors, we recognize revenue at the time of title transfer, which is typically at shipment. We do not offer any right of return to our customers, other than honoring our standard warranty.

In the event that we enter into a bill and hold arrangement with our customer, which is uncommon for us, though occurred in 2012 (as discussed in Note 13 to accompanying Consolidated Financial Statements), the following conditions must be met for revenue recognition:


(i)	The risks of ownership must have passed to our customer;


(ii)	The customer must have made a fixed and written commitment to purchase the EVAR or EVAS product;


(iii)	The customer must request that the transaction be on a bill and hold basis;


(iv)	There must be a fixed schedule for delivery of the EVAR or EVAS product. The date for delivery must be reasonable and must be consistent with the customer's business purpose;


(v)	We have no remaining specific performance obligations and our earnings process is complete;


(vi)	Our customer's ordered EVAR or EVAS product must be segregated from our inventory and cannot be used to fulfill other customer orders; and


(vii)	The EVAR or EVAS product must be complete and ready for shipment.

In addition to the above requirements, we also consider other pertinent factors prior to our recognition of revenue for bill and hold arrangements, such as:


(i)	The date by which we expect payment, and whether we have modified our normal billing and credit terms for the customer;


(ii)	Our past experiences with, and pattern of, bill and hold transactions;


(iii)	Whether the customer has the expected risk of loss in the event of a decline in the market value of the EVAR or EVAS product;


(iv)	Whether our custodial risks are insurable and insured; and


(v)	Whether extended procedures are necessary in order to assure that there are no exceptions to the customer's commitment to accept and pay for the EVAR or EVAS product (i.e., that the business reasons for the bill and hold have not introduced a contingency to the customer's commitment).

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to pay amounts due. These estimates are based on our review of the aging of customer balances, correspondence with the customer, and the customer's payment history.

Inventory - Lower of Cost or Market

We adjust our inventory value for estimated amounts of obsolete or unmarketable items. Such assumptions involve projections of future customer demand, as driven by economic and market conditions, and the product's shelf life. If actual demand, or economic or market conditions are less favorable than those projected by us, additional inventory write-downs may be required.

Goodwill and Intangible Assets - Impairment Analysis

Goodwill and other intangible assets with indefinite lives are not subject to amortization, but are tested for impairment

annually as of June 30, or whenever events or changes in circumstances indicate that the asset might be impaired.

We evaluate the possible impairment for goodwill and intangible assets (i) if/when events or changes in circumstances occur that indicate that the carrying value of assets may not be recoverable; or (ii) in the case of goodwill and indefinite lived intangible assets, our annual impairment assessment date of June 30.

Income Taxes

Our consolidated balance sheets reflect net deferred tax assets that primarily represent the tax benefit of net operating loss carryforwards and credits and timing differences between book and tax recognition of certain revenue and expense items, net of a valuation allowance. When it is more likely than not that all or some portion of deferred tax assets may not be realized, we establish a valuation allowance for the amount that may not be realized. Each quarter, we evaluate the need to retain all or a portion of the valuation allowance on our net deferred tax assets. Our evaluation considers historical earnings, estimated future taxable income and ongoing prudent and feasible tax planning strategies. Adjustments to the valuation allowance increase or decrease net income or loss in the period such adjustments are made. If our estimates require adjustments, it could have a significant impact on our consolidated financial statements.

Changes in tax laws and rates could also affect recorded deferred tax assets in the future. Management is not aware of any such changes that would have a material effect on our consolidated financial statements.

Stock-Based Compensation

We recognize stock-based compensation expense for employees over the equity award vesting period, based on its fair value at the date of grant. For awards granted to consultants, the award is marked-to-market each reporting period, with a corresponding adjustment to stock-based compensation expense. The fair value of equity awards that are expected to vest is amortized on a straight-line basis over (i) the requisite service period or (ii) the period from grant date to the expected date of the completion of the performance condition for vesting of the award. Stock-based compensation expense recognized is net of an estimated forfeiture rate, which is updated as appropriate.

We use the Black-Scholes option pricing model to value stock option grants. The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the expected volatility of our common stock, expected risk-free interest rate, and the option's expected life. The fair value of our restricted stock is based on the closing market price of our common stock on the date of grant.

A portion of restricted stock vesting is dependent on us achieving certain regulatory and financial milestones. We use significant judgment in estimating the likelihood and timing of achieving these milestones. Each period, we will reassess the likelihood and estimate the timing of reaching these milestones, and will adjust expense accordingly.

Contingent Consideration for Business Acquisition

We determine the fair value of contingently issuable common stock related to the Nellix acquisition using a probability-based income approach and an appropriate discount rate. Changes in the fair value of the contingently issuable common stock are determined each period end and recorded in the other income (expense) section of the Consolidated Statements of Operations and Comprehensive Loss and the current and non-current liabilities section of the Consolidated Balance Sheet. The fair value of the contingent consideration liability could be impacted by changes such as: (i) fluctuations in the price of our common stock, or (ii) the timing of achieving the underlining milestones.

Litigation Accruals

From time to time we are involved in various claims and legal proceedings of a nature considered normal and

incidental to our business. These matters may include product liability, intellectual property, employment, and other general

claims. We accrue for contingent liabilities when it is probable that a liability has been incurred and the amount can

be reasonably estimated. The accruals are adjusted periodically as assessments change or as additional information becomes

available.

Results of Operations

Operations Overview - 2013 , 2012 , and 2011

The following table presents our results of continuing operations and the related percentage of the period's revenue (in thousands):



	Year Ended December 31,
	2013				2012				2011
Revenue	$	132,257		100.0%	$	105,946		100.0%	$	83,417		100.0%
Cost of goods sold	32,750			24.8%	25,282			23.9%	18,746			22.5%
Gross profit	99,507			75.2%	80,664			76.1%	64,671			77.5%
Operating expenses:
Research and development	16,199			12.2%	16,571			15.6%	16,738			20.1%
Clinical and regulatory affairs	8,679			6.6%	6,343			6.0%	4,439			5.3%
Marketing and sales	63,588			48.1%	53,953			50.9%	44,655			53.5%
General and administrative	21,409			16.2%	20,266			19.1%	15,525			18.6%
Contract termination and business acquisition expenses	—			—%	422			0.4%	1,730			2.1%
Settlement costs	—			—%	5,000			4.7%	—			—%
Total operating expenses	109,875			83.1%	102,555			96.8%	83,087			99.6%
Loss from operations	(10,368		)	(7.8)%	(21,891		)	(20.7)%	(18,416		)	(22.1)%
Total other expense	(5,710		)	(4.3)%	(13,352		)	(12.6)%	(10,400		)	(12.5)%
Net loss before income tax	(16,078		)	(12.2)%	(35,243		)	(33.3)%	(28,816		)	(34.5)%
Income tax (expense) benefit	10			—%	(531		)	(0.5)%	86			0.1%
Net loss	$	(16,068	)	(12.1)%	$	(35,774	)	(33.8)%	$	(28,730	)	(34.4)%

Year Ended December 31, 2013 versus December 31, 2012

Revenue



	Year Ended December 31,
	2013		2012		Variance		Percent Change
	(in thousands)
Revenue	$	132,257	$	105,946	$	26,311	24.8%

Our 24.8% revenue increase of $26.3 million over the prior year period resulted from volume increases caused by:

(i) $15.8 million increase in U.S. sales due to the (a) the expansion of our U.S. sales force through the addition of clinical specialists, (b) the continued physician adoption of AFX which was launched in the U.S. in August 2011, and (c) our PEVAR physician training programs;

(ii) $7.7 million increase in Europe due to the expansion of our European sales force (which began direct sales activity in September 2011), and the limited market introduction of our Nellix System in February 2013; and

(iii) $2.8 million increase in ROW sales. ROW sales growth is attributable to a full year of AFX sales in Brazil and Argentina, and increased IntuiTrak orders by our distributor in Japan.

Cost of Goods Sold, Gross Profit, and Gross Margin Percentage



	Year Ended December 31,
	2013			2012			Variance			Percent Change
	(in thousands)
Cost of goods sold	$	32,750		$	25,282		$	7,468		29.5%
Gross profit	99,507			80,664			18,843			23.4%
Gross margin percentage (gross profit as a percent of revenue)	75.2		%	76.1		%	(0.9		)%

The $7.5 million increase in cost of goods sold was driven by our revenue increase of $26.3 million .

Gross margin for the year ended December 31, 2013 decreased to 75.2% from 76.1% for the twelve months ended December 31, 2013 . This decrease is primarily due to our product mix and the greater proportion of our total revenue being derived from international sales, as well as inventory obsolescence charges in 2013, aggregating to $1.6 million .

Operating Expenses



	Year Ended December 31,
	2013		2012		Variance			Percent Change
	(in thousands)
Research and development	$	16,199	$	16,571	$	(372	)	(2.2)%
Clinical and regulatory affairs	8,679		6,343		2,336			36.8%
Marketing and sales	63,588		53,953		9,635			17.9%
General and administrative	21,409		20,266		1,143			5.6%
Contract termination and business acquisition expenses	—		422		(422		)	(100.0)%
Settlement costs	—		5,000		(5,000		)	100.0%

Research and Development. The $0.4 million decrease in research and development expenses was primarily driven by a decrease in Ventana development activities, given the suspended enrollment in the Ventana U.S. IDE clinical trial and the planned limited market introduction of Ventana in Europe, partially offset by a new exclusive license agreement of $0.9 million for the future design of our Nellix System.

Clinical and Regulatory Affairs. The $2.3 million increase in clinical and regulatory affairs was primarily driven by increased personnel, the start-up costs associated with the EVAS Forward clinical studies, our ongoing clinical trials, in addition to an increase in FDA and CE regulatory activities.

Marketing and Sales . The $9.6 million increase in marketing and sales expenses was primarily related to (i) increased variable compensation in the U.S. due to our sales growth of 18%, (ii) costs related to the continued growth and development of our direct sales force and clinical personnel worldwide; and (iii) increased marketing costs to support our business.

General and Administrative . The $1.1 million increase in general and administrative expenses is attributable to (i) additional personnel to support our business growth; (ii) the federal Medical Device Excise Tax (which took effect January 1, 2013); and (iii) increased stock-based compensation expense.

Contract Termination and Business Acquisition Expenses . Prior period expense of $0.4 million is associated with professional fees incurred as part of the July 2012 acquisition of our Italian distributor's business. This transaction allowed us to begin selling our products through the acquired Italian sales force, and to directly contract with sub-dealers in Italy.

Settlement Costs . Settlement costs of $5.0 million in the prior period represents our payment to settle a patent dispute with Cook Incorporated.

Other income (expense), net



	Year Ended December 31,
	2013			2012			Variance	Percent Change
	(in thousands)
Other income (expense), net	$	(5,710	)	$	(13,352	)	7,642	(57.2)%

Other income (expense), Net. The other expense variance of $7.6 million between the twelve months ended December 31, 2013 and 2012 is primarily related to the fair value adjustment of contingent payment of $8.5 million associated with our acquisition of Nellix (see Note 9). Partially offsetting these fair value adjustments is $1.3 million in other income from a distribution from our former product liability carrier in the first quarter of 2013, and the remeasurement of certain assets and liabilities that were not transacted in the functional currency of the corresponding operating entity.

Provision for Income Taxes



	Year Ended December 31,
	2013		2012			Variance		Percent Change
	(in thousands)
Income tax (expense) benefit	$	10	$	(531	)	$	541	(101.9)%

For the twelve months ended December 31, 2013 , our provision for income taxes was a $10 thousand benefit and our effective tax rate was 0.06% for the year ended December 31, 2013. During the twelve months ended December 31, 2013 , we had operating legal entities in the U.S., Italy, New Zealand, and The Netherlands (plus registered sales branches of our Dutch entity in certain countries in Europe). We have certain minimum tax liabilities attributable to our operations in these countries and in the U.S.

Year Ended December 31, 2012 versus December 31, 2011

Revenue



	Year Ended December 31,
	2012	2011	Variance	Percent Change
	(in thousands)
Revenue	105,946	83,417	22,529	27.0%

Our 27.0% revenue increase of $22.5 million over the prior year period resulted from volume increases caused by:

(i) $15.4 million increase in U.S. sales due to the (a) expansion of our U.S. sales force through the addition of clinical specialists that exclusively provide field support to our sales representatives, having the impact of increasing overall sales force productivity and (b) the continued market traction of AFX, which was launched in the U.S. in August 2011;

(ii) $4.2 million increase in European sales due to our transition from a third-party distributor to a direct sales organization beginning in September 2011; and

(iii) $2.9 million increase in ROW sales. ROW sales growth is attributable to the July 2012 launch of AFX in Brazil and Argentina, and IntuiTrak orders by our distributor in Japan (in anticipation of its Japanese regulatory approval, which was received in December 2012).

Cost of Goods Sold, Gross Profit, and Gross Margin Percentage



	Year Ended December 31,
	2012			2011			Variance			Percent Change
	(in thousands)
Cost of goods sold	$	25,282		$	18,746		$	6,536		34.9%
Gross profit	80,664			64,671			15,993			24.7%
Gross margin percentage (gross profit as a percent of revenue)	76.1		%	77.5		%	(1.4		)%

The $6.5 million increase in cost of goods sold was driven by our revenue increase of $22.5 million .

Gross margin for the year ended December 31, 2013 decreased to 76.1% from 77.5% for the twelve months ended December 31, 2011 . This decrease is primarily due to (i) a greater proportion of the total revenue being derived from international sales in 2012 (which have an average sales price below the U.S. sales price); (ii) royalty expenses which were not present for the full prior year period; and (iii) a decline in the average value of the Euro relative to the U.S. dollar in 2012 from 2011. These unfavorable gross margin items were partially offset by a greater proportion of our current period revenue derived from direct sales, as opposed to distributor sales, which typically have a higher average sales price.

Operating Expenses



	Year Ended December 31,
	2012		2011		Variance			Percent Change
	(in thousands)
Research and development	$	16,571	$	16,738	$	(167	)	(1.0)%
Clinical and regulatory affairs	6,343		4,439		1,904			42.9%
Marketing and sales	53,953		44,655		9,298			20.8%
General and administrative	20,266		15,525		4,741			30.5%
Contract termination and business acquisition expenses	422		1,730		(1,308		)	(75.6)%
Settlement costs	5,000		—		5,000			100.0%

Research and Development. The $0.2 million decrease in research and development expenses was primarily driven by decreasing Ventana development activities, as this device reached the final stages of development and testing. This decrease was partially offset by a $1.0 million purchase in 2012 of an exclusive license to patents covering the polymer used in our Nellix System.

Clinical and Regulatory Affairs. The $1.9 million increase in clinical affairs was primarily driven by the continued enrollment and follow-up costs associated with our PEVAR and Ventana clinical trials and our efforts to achieve CE Mark approval of Ventana and the Nellix System.

Marketing and Sales . The $9.3 million increase in marketing and sales expenses was primarily related to marketing costs to support the growth of our U.S. business, costs related to our direct sales force in Europe (which was largely not present in the prior year period), and an increase in variable compensation expense of $1.2 million , driven by an increase in U.S. revenue of 21% .

General and Administrative . The $4.7 million increase in general and administrative expenses is attributable to (i) additional personnel to support our business growth; (ii) increased travel expenses associated with the expansion of our European operations; and (iii) professional service fees to develop our global legal structure.

Contract Termination and Business Acquisition Expenses . During 2012 expense of $0.4 million is associated with professional fees incurred as part of the July 2012 acquisition of our Italian distributor's business. In the prior year period we early terminated a distribution agreement with two former European distributors for aggregate termination fees of $1.7 million . These actions allowed us to begin selling our products through our direct sales force in most of western Europe, beginning September, 2011, and in Italy, beginning July, 2012.

Settlement Costs . Settlement costs of $5.0 million in 2012 represents our payment in full to settle a patent dispute with Cook Incorporated.

Other income (expense), net



	Year Ended December 31,
	2012			2011			Variance		Percent Change
	(in thousands)
Other income (expense), net	$	(13,352	)	$	(10,400	)	(2,952	)	28.4%

Other income (expense), Net. The other income variance of between the twelve months ended December 31, 2012 and 2011 is primarily related to the fair value adjustment of contingent payment of $13.7 million associated with our acquisition of Nellix. Partially offsetting these fair value adjustments is the remeasurement of certain assets and liabilities that were not transacted in the functional currency of the corresponding operating entity.

Provision for Income Taxes



	Year Ended December 31,
	2012			2011		Variance			Percent Change
	(in thousands)
Income tax (expense) benefit	$	(531	)	$	86	$	(617	)	(100.0)%

For the twelve months ended December 31, 2012 , our provision for income taxes was $0.5 million and our effective tax rate was 1.5% . During the twelve months ended December 31, 2012 , we had operating legal entities in the U.S., Italy, and The Netherlands (plus registered sales branches of our Dutch entity in certain countries in Europe). We had a single operating legal entity in the U.S. during 2011 until September 2011, when we formed operating legal entities in The Netherlands to begin direct sales activity in Europe. Accordingly, we have certain minimum tax liabilities attributable to our operations in these countries in 2012 that were not present in 2011.

Liquidity and Capital Resources

The chart provided below summarizes selected liquidity data and metrics as of December 31, 2013 and December 31, 2012 :



	December 31, 2013	December 31, 2012
	(in thousands, except financial metrics data)
Cash and cash equivalents	$95,152	$45,118
Marketable securities	$31,313	$—
Accounts receivable, net	$24,972	$22,600
Total current assets	$173,633	$87,567
Total current liabilities	$67,335	$17,194
Working capital surplus (a)	$106,298	$70,373
Current ratio (b)	2.6	5.1
Days sales outstanding ("DSO") (c)	65	71
Inventory turnover (d)	1.7	1.5

(a) total current assets minus total current liabilities as of the corresponding balance sheet date.

(b) total current assets divided by total current liabilities as of the corresponding balance sheet date.

(d) cost of goods sold divided by the average inventory balance for the corresponding period.

Operating Activities

Cash provided by operating activities was $1.5 million for the year ended December 31, 2013 , as compared to cash used in operating activities of $18.5 million in the prior year period. The increase in cash provided by operating activities is primarily a function of (i) increased collection levels; (ii) the receipt of a $1.3 million "deemed" dividend from our former products liability carrier; (iii) an increase in accrued payroll; offset in part by an increase in inventory expenditures and non-cash foreign exchange unrealized gains as compared to the prior year period.

During the twelve months ended December 31, 2013 and 2012 , our cash collections from customers totaled $129.7 million and $98.9 million , respectively, representing 98% and 93% of reported revenue for the same periods.

Investing Activities

Cash used in investing activities for the twelve months ended December 31, 2013 was $34.2 million and consisted of (i) machinery and equipment purchases for $2.9 million ; and (ii) purchases of marketable debt securities of $31.3 million . Cash used in investing activities for the twelve months ended December 31, 2012 was $3.5 million and consisted of (i) machinery and equipment purchases for the production of our EVAR and EVAS product; (ii) expenditures for various information technology enhancements; and (iii) the acquisition of our former Italian distributor's business.

Financing Activities

Cash provided by financing activities was $82.5 million for the twelve months ended December 31, 2013 , as compared to cash provided by financing activities of $47.4 million in the prior year period. The $82.5 million of cash provided by financing activities was attributable to our (i) $86.3 million of net proceeds from the public offering that occurred on December 10, 2013 (discussed in Note 6 of the Notes to the Consolidated Financial Statements); (ii) proceeds of $4.9 million from the exercise of stock options; (iii) proceeds of $2.4 million from our sale of stock through our employee stock purchase plan; offset in part by payment of $3.7 million in deferred financing costs; and payment of 7.4 million for the capped call transaction.

June 2012 Equity Raise

Refer to Note 12 of the Notes to the Consolidated Financial Statements for a discussion of the equity raise completed in June 2012.

Credit Arrangements

See Note 6 of the Notes to the Consolidated Financial Statements. We were in compliance with all debt covenants as of December 31, 2013 .

Credit Risk

The majority of our accounts receivable arise from product sales in the U.S. However, we also have significant

receivable balances from customers within the European Union, Japan, Brazil, Argentina, and Mexico. Our accounts

receivable in the U.S. are primarily due from public and private hospitals. Our accounts receivable outside of the U.S. are

primarily due from independent distributors, and to a lesser extent, public and private hospitals. Our historical write-offs of accounts receivable have not been significant.

We monitor the financial performance and credit worthiness of our customers so that we can properly assess

and respond to changes in their credit profile. Since our customers operate in certain countries such as Greece and Italy, where adverse economic conditions persist, it increases the risk of our inability to collect amounts due to us from them. To determine our allowance for doubtful accounts we consider these factors and other relevant considerations. Our allowance for doubtful accounts of $0.4 million as of December 31, 2013 , represents our best estimate of the amount of probable credit losses in our existing accounts receivable.

Future Capital Requirements

We believe that the future growth of our business will depend upon our ability to successfully develop new technologies for the treatment of aortic disorders and successfully bring these technologies to market. We expect to incur significant expenditures in completing product development and clinical trials for Ventana and the Nellix System.

The timing and amount of our future capital requirements will depend on many factors, including:


•	the need for working capital to support our sales growth;


•	the need for additional capital to fund future development programs;


•	the need for additional capital to fund our sales force expansion;


•	the need for additional capital to fund strategic acquisitions;


•	our requirements for additional facility space or manufacturing capacity;


•	our requirements for additional information technology infrastructure and systems; and


•	adverse outcomes from potential litigation and the cost to defend such litigation.

We believe that our world-wide cash resources are adequate to operate our business. We presently have several operating subsidiaries outside of the U.S. As of December 31, 2013, these subsidiaries hold an aggregate $7.1 million in foreign bank accounts to fund their local operations. These balances related to undistributed earnings, are deemed by management to be permanently reinvested in the corresponding country in which our subsidiary operates. Management has no present or planned intention to repatriate foreign earnings into the U.S. However, in the event that we required additional funds in the U.S. and had to repatriate any foreign earnings to meet those needs, we would then need to accrue, and ultimately pay, incremental income tax expenses on such “deemed dividend,” unless we then had sufficient net operating losses to offset this potential tax liability.

In the event we require additional financing in the future, it may not be available on commercially reasonable terms, if at all. Even if we are able to obtain financing, it may cause substantial dilution (in the case of an equity financing), or may contain burdensome restrictions on the operation of our business (in the case of debt financing). If we are not able to obtain required financing, we may need to curtail our operations and/or our planned product development.

Contractual Obligations

Contractual obligation payments by year with initial terms in excess of one year were as follows as of December 31, 2013 (in thousands):



	Payments due by period
Contractual Obligations	Total	Less than 1 Year	1-3 Years	3-5 Years	After 5 Years
Long-term debt obligations	$86,250	$—	$—	$86,250	$—
Interest on debt obligations	9,730	1,968	3,881	3,881	—
Operating lease obligations	36,407	1,010	4,060	4,308	27,029
Total	$132,387	$2,978	$7,941	$94,439	$27,029

Refer to Note 6 of the Notes to the Consolidated Financial Statements for a discussion of long-term debt obligations and Note 8 of the Notes to the Consolidated Financial Statements for a discussion of operating lease obligations.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements (except for operating leases) that provide financing, liquidity, market or credit risk support, or involve derivatives. In addition, we have no arrangements that may expose us to liability that are not expressly reflected in the accompanying Consolidated Financial Statements.

As of December 31, 2013 , we did not have any relationships with unconsolidated entities or financial partnerships, often referred to as "structured finance" or "special purpose entities," established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not subject to any material financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.


Item 7A.	Quantitative and Qualitative Disclosures About Market Risk

We do not believe that we currently have material exposure to interest rate, foreign currency exchange rate or other relevant market risks.

Interest Rate and Market Risk. We have investments in U.S. Government and agency securities, corporate bonds and other debt securities. As a result, we are exposed to potential loss from market risks that may occur as a result of changes in interest rates, changes in credit quality of the issuer or otherwise.

We generally place our marketable security investments in high quality credit instruments, as specified in our investment policy guidelines. A hypothetical 100 basis point decrease in interest rates would result in an approximate $125,106 increase in the fair value of our investments as of December 31, 2013 . We believe, however, that the conservative nature of our investments mitigates our interest rate exposure, and our investment policy limits the amount of our credit exposure to any one issue, issuer (with the exception of U.S. agency obligations) and type of instrument. We do not expect any material loss from our marketable security investments and therefore believe that our potential interest rate exposure is limited. We intend to hold the majority of our investments to maturity, in accordance with our business plans.

We do not use derivative financial instruments in our investment portfolio. We are averse to principal loss and try to ensure the safety and preservation of our invested funds by limiting default risk, market risk, and reinvestment risk. We attempt to mitigate default risk by investing in only high credit quality securities and by positioning our portfolio to appropriately respond to a significant reduction in the credit rating of any investment issuer or guarantor.

We are also exposed to market risk for changes in interest rates on the Wells Credit Facility. All outstanding amounts under the Wells Credit Facility bear interest at a variable rate equal to the Wells prime rate, plus 1.00%, which is payable on a monthly basis. As of December 31, 2013 , we had no amounts outstanding under the Wells Credit Facility. However, if we draw down the Wells Credit Facility, we may be exposed to market risk due to changes in the rate at which interest accrues.

Our Senior Notes bear fixed interest rates, and therefore, would not be subject to interest rate ris k. The capped call transactions are derivative instruments that qualify for classification within stockholders’ equity because they meet an exemption from mark-to-market derivative accounting. The settlement amounts for the capped call transactions are each determined based upon the difference between a strike price and a traded price of the Company’s common stock.

Foreign Currency Transaction Risk. While a majority of our business is denominated in the U.S. dollar, a portion of our revenues and expenses are denominated in foreign currencies. Fluctuations in the rate of exchange between the U.S. dollar and the Euro or the British Pound Sterling may affect our results of operations and the period-to-period comparisons of our operating results. Foreign currency transaction realized and unrealized gains and losses resulted in approximately $1.7 million of gains in 2013. During 2013, our primary exposure to foreign currency rates related to our Europe operations.

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Item 8. Financial Statements and Selected Supplementary Data

ENDOLOGIX, INC.

FORM 10-K ANNUAL REPORT

For the Fiscal Year Ended December 31, 2013

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



	Page No.
Reports of Independent Registered Public Accounting Firms	5
Consolidated Balance Sheets as of December 31, 2013 and 2012	6
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2013, 2012, and 2011	7
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013, 2012, and 2011	8
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012, and 2011	9
Notes to Consolidated Financial Statements	10
Financial Statement Schedule	11
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2013, 2012, and 2011	11

All other schedules are omitted because the required information is not applicable or the information is presented in the Consolidated Financial Statements or the notes thereto.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Endologix, Inc.:

We have audited the accompanying consolidated balance sheets of Endologix, Inc. and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2013. In connection with our audits of the consolidated financial statements, we also have audited the consolidated financial statement schedule of valuation and qualifying accounts. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Endologix, Inc. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Endologix, Inc’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 3, 2014 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

March 3, 2014

Irvine, California

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Endologix, Inc.:

We have audited Endologix, Inc.’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Endologix, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Endologix, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Endologix, Inc. and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2013, and our report dated March 3, 2014 , expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

March 3, 2014

Irvine, California

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Endologix, Inc.:

In our opinion, the consolidated statements of operations and comprehensive loss, of stockholders’ equity and of cash flows for the year ended December 31, 2011 present fairly, in all material respects, the results of operations and cash flows of Endologix, Inc. and its subsidiaries for December 31, 2011, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule for the year ended December 31, 2011 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Orange County, California

March 6, 2012

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ENDOLOGIX, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts)



	December 31,
	2013			2012
ASSETS
Current assets:
Cash and cash equivalents	$	95,152		$	45,118
Marketable securities	31,313			—
Accounts receivable, net of allowance for doubtful accounts of $399 and $472, respectively	24,972			22,600
Other receivables	310			320
Inventories	19,558			18,087
Prepaid expenses and other current assets	2,328			1,442
Total current assets	173,633			87,567
Property and equipment, net	7,338			4,984
Goodwill	29,103			29,022
Intangibles, net	43,096			43,356
Deposits and other assets	3,027			174
Total assets	$	256,197		$	165,103

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,265		$	6,348
Accrued payroll	11,476			7,825
Accrued expenses and other current liabilities	3,094			3,021
Contingently issuable common stock	46,500			—
Total current liabilities	67,335			17,194
Deferred income taxes	1,135			1,035
Deferred rent	1,585			—
Contingently issuable common stock	14,400			52,400
Convertible notes	67,101			—
Total liabilities	151,556			70,629
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 5,000,000 shares authorized. No shares issued and outstanding.	—			—
Common stock, $0.001 par value; 75,000,000 shares authorized, 63,866,392 and 63,068,463 shares issued, respectively. 63,866,392 and 62,573,763 shares outstanding, respectively.	64			63
Additional paid-in capital	321,756			295,338
Accumulated deficit	(216,082		)	(200,014		)
Treasury stock, at cost, 0 and 494,700 shares, respectively.	—			(661		)
Accumulated other comprehensive loss	(1,097		)	(252		)
Total stockholders’ equity	104,641			94,474
Total liabilities and stockholders’ equity	$	256,197		$	165,103

See accompanying notes to these consolidated financial statements.

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ENDOLOGIX, INC.

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except per share amounts)




	Year Ended December 31,
	2013			2012			2011
Revenue	$	132,257		$	105,946		$	83,417
Cost of goods sold	32,750			25,282			18,746
Gross profit	99,507			80,664			64,671
Operating expenses:
Research and development	16,199			16,571			16,738
Clinical and regulatory affairs	8,679			6,343			4,439
Marketing and sales	63,588			53,953			44,655
General and administrative	21,409			20,266			15,525
Contract termination and business acquisition expenses	—			422			1,730
Settlement costs	—			5,000			—
Total operating expenses	109,875			102,555			83,087
Loss from operations	(10,368		)	(21,891		)	(18,416		)
Other income (expense):
Interest income	50			30			23
Interest expense	(321		)	(7		)	(32		)
Gain on sale of equipment	—			—			141
Other income (expense), net	3,061			325			(32		)
Change in fair value of contingent consideration related to acquisition	(8,500		)	(13,700		)	(10,500		)
Total other expense	(5,710		)	(13,352		)	(10,400		)
Net loss before income tax (expense) benefit	$	(16,078	)	$	(35,243	)	$	(28,816	)
Income tax (expense) benefit	10			(531		)	86
Net loss	$	(16,068	)	$	(35,774	)	$	(28,730	)
Other comprehensive loss (foreign currency translation)	(845		)	(222		)	(30		)
Comprehensive loss	$	(16,913	)	$	(35,996	)	$	(28,760	)

Basic and diluted net loss per share	$	(0.26	)	$	(0.60	)	$	(0.51	)
Shares used in computing basic and diluted net loss per share	62,607			59,811			56,592

See accompanying notes to these consolidated financial statements.

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ENDOLOGIX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)



	Common Stock				Additional Paid-In Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
	Issued Shares		$0.001 Par Value		Additional Paid-In Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance at December 31, 2010	56,896		$	57	$	230,017		$	(135,510	)	$	(661	)	$	—		$	93,902
Exercise of common stock options	1,394		2		5,322			—			—			—			5,324
Employee stock purchase plan	287		—		1,965			—			—			—			1,965
Stock compensation expense	—		—		2,851			—			—			—			2,851
Restricted stock expense	—		—		877			—			—			—			877
Non-employee restricted stock expense	—		—		409			—			—			—			409
Net loss	—		—		—			(28,730		)	—			—			(28,730		)
Other comprehensive loss	—		—		—			—			—			(30		)	(30		)
Balance at December 31, 2011	58,577		$	59	$	241,441		$	(164,240	)	$	(661	)	$	(30	)	$	76,569
Exercise of common stock options	1,168		1		4,991			—			—			—			4,992
Employee stock purchase plan	224		—		2,369			—			—			—			2,369
Sale of common stock	3,105		3		40,066			—			—			—			40,069
Stock compensation expense	—		—		3,649			—			—			—			3,649
Issuance of restricted stock	13		—		—			—			—			—			—
Cancellation of restricted stock awards	(18	)	—		—			—			—			—			—
Restricted stock expense	—		—		1,906			—			—			—			1,906
Non-employee restricted stock expense	—		—		916			—			—			—			916
Net loss	—		—		—			(35,774		)	—			—			(35,774		)
Other comprehensive loss	—		—		—			—			—			(222		)	(222		)
Balance at December 31, 2012	63,069		63		295,338			(200,014		)	(661		)	(252		)	$	94,474
Exercise of common stock options	974		1		4,874			—			—			—			4,875
Employee stock purchase plan	216		—		2,444			—			—			—			2,444
Issuance of common stock	48		—		752			—			—			—			752
Treasury stock retired	(495	)	—		(661		)	—			661			—			—
Stock compensation expense	—		—		4,627			—			—			—			4,627
Issuance of restricted stock	54		—		—			—			—			—			—
Restricted stock expense	—		—		2,476			—			—			—			2,476
Non-employee restricted stock expense	—		—		819			—			—			—			819
Equity conversion option	—		—		19,324						—			—			19,324
Debt issuance costs allocated to equity	—		—		(819		)	—			—			—			(819		)
Capped call	—		—		(7,418		)	—			—			—			(7,418		)
Net loss	—		—		—			(16,068		)	—			—			(16,068		)
Other comprehensive loss	—		—		—									(845		)	(845		)
Balance at December 31, 2013	63,866		64		321,756			(216,082		)	—			(1,097		)	$	104,641

See accompanying notes to these consolidated financial statements.

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ENDOLOGIX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



	Year Ended December 31,
	2013			2012			2011
Cash flows from operating activities:
Net loss	$	(16,068	)	$	(35,774	)	$	(28,730	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Bad debt expense	204			325			62
Depreciation and amortization	2,351			2,183			2,729
Stock-based compensation	7,922			6,471			4,136
Change in fair value of contingent consideration related to acquisition	8,500			13,700			10,500
Common stock issued for business development	752			—			—
Accretion of interest on convertible note	175			—			—
Amortization of deferred financing costs	21			—			—
Gain on sale of equipment	—			—			(141		)
Non-cash foreign exchange gain	(1,731		)	—			—
Changes in operating assets and liabilities:
Accounts receivable and other receivables	(2,440		)	(8,319		)	(3,392		)
Inventories	(1,046		)	12			(9,801		)
Prepaid expenses and other current assets	(769		)	(408		)	(153		)
Accounts payable	(196		)	199			700
Accrued payroll	3,546			1,255			1,597
Accrued expenses and other current liabilities	273			1,827			111
Net cash provided by (used in) operating activities	$	1,494		$	(18,529	)	$	(22,382	)
Cash flows from investing activities:
Purchases of marketable securities	(31,313		)	—			—
Purchases of property and equipment	(2,862		)	(2,238		)	(3,033		)
Purchases of patent license	—			(100		)	—
Business acquisition	—			(1,156		)	—
Net cash used in investing activities	(34,175		)	(3,494		)	(3,033		)
Cash flows from financing activities:
Deferred financing costs	(3,657		)	—			—
Proceeds from sale of common stock under secondary offering, net of expenses	—			40,069			—
Proceeds from sale of common stock under employee stock purchase plan	2,444			2,369			1,965
Proceeds from exercise of stock options	4,875			4,992			5,324
Funding of restricted cash account	5,395			—			—
Release of restricted cash account	(5,395		)	—			—
Proceeds from convertible debt	86,250			—			—
Purchase of capped call	(7,418		)	$	—		$	—
Net cash provided by financing activities	$	82,494		$	47,430		$	7,289
Effect of exchange rate changes on cash and cash equivalents	221			(324		)	(30		)
Net increase (decrease) in cash and cash equivalents	50,034			25,083			(18,156		)
Cash and cash equivalents, beginning of year	45,118			$	20,035		$	38,191
Cash and cash equivalents, end of year	$	95,152		$	45,118		$	20,035
Supplemental disclosure of cash flow information:
Cash paid for interest	$	16		$	10		$	32
Cash paid for income taxes	171			16			24
Non-cash investing and financing activities:
Landlord funded leasehold improvements	$	1,485		$	—		$	—

See accompanying notes to these consolidated financial statements.

Table of Contents

ENDOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

1. Description of Business, Basis of Presentation, and Operating Segment


(a)	Description of Business

Endologix, Inc. (the "Company") is a Delaware corporation with corporate headquarters and production facilities located in Irvine, California. The Company develops, manufactures, markets, and sells innovative medical devices for the treatment of aortic disorders. The Company's products are intended for the treatment of abdominal aortic aneurysms ("AAA"). The Company's AAA products are built on one of two platforms: (1) traditional minimally-invasive endovascular repair ("EVAR") or (2) endovascular sealing (“EVAS”), the Company's innovative solution for sealing the aneurysm sac while maintaining blood flow through two blood flow lumens. The Company's current EVAR products include the Endologix AFX Endovascular AAA System (“AFX”), the VELA Proximal Endograft (“VELA”) and the Endologix Intuitrak Endovascular AAA System (“Intuitrak”). The Company's current EVAS product is the Nellix Endovascular Aneurysm Sealing System (“Nellix EVAS System”). Sales of the Company's EVAR and EVAS platforms (including extensions and accessories) to hospitals in the U.S. and Europe, and to third-party international distributors, provide the sole source of the Company's reported revenue.

The Company's EVAR products consist of (i) a cobalt chromium alloy stent covered by polytetrafluoroethylene (commonly referred to as "ePTFE") graft material (“Stent Graft”) and (ii) an accompanying delivery system. Once fixed in its proper position within the abdominal aorta, the Company's EVAR device provides a conduit for blood flow, thereby relieving pressure within the weakened or “aneurysmal” section of the vessel wall, which greatly reduces the potential for the AAA to rupture.

The Company's EVAS product consists of (i) bilateral covered stents with endobags, (ii) a biocompatible polymer injected into the endobags to seal the aneurysm and (iii) a delivery system and polymer dispenser. The Company's EVAS product seals the entire aneurysm sac effectively excluding the aneurysm sac reducing the likelihood of future aneurysm rupture. Additionally, it has the potential to reduce post procedural re-interventions.

(b) Basis of Presentation

The accompanying Consolidated Financial Statements in this Annual Report on Form 10-K have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). These financial statements include the financial position, results of operations, and cash flows of the Company, including its subsidiaries, all of which are wholly-owned. All inter-company accounts and transactions have been eliminated in consolidation. For years ended December 31, 2013, 2012, and 2011 there were no related party transactions.

The Company has one operating and reporting segment that is focused exclusively on the development, manufacture, marketing, and sale of EVAR and EVAS product for the treatment of aortic disorders. For the year ended December 31, 2013 , all of the Company's revenue and related expenses were solely attributable to these activities. Substantially all of the Company's long-lived assets are located in the U.S.

2. Use of Estimates and Summary of Significant Accounting Policies

The preparation of financial statements in conformity with GAAP requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, the Company's management evaluates its estimates, including those related to (i) collectibility of customer accounts; (ii) whether the cost of inventories can be recovered; (iii) the value of goodwill and intangible assets; (iv) realization of tax assets and estimates of tax liabilities; (v) likelihood of payment and value of contingent liabilities; and (vi) potential outcome of litigation. Such estimates are based on management's judgment which takes into account historical experience and various assumptions. Nonetheless, actual results may differ from management's estimates.

The following critical accounting policies and estimates were used in the preparation of the accompanying Consolidated Financial Statements:

(i) Cash and Cash Equivalents

We consider all highly liquid investments that are readily convertible into cash and have a maturity of three months or less at the time of purchase to be cash equivalents. The cost of these investments approximates their fair value.

(ii) Marketable securities

At December 31, 2013, the Company’s investments included short-term and long-term marketable securities, which are classified as held-to-maturity investments as the Company has the positive intent and ability to hold the investments to maturity. These investments are therefore recorded on an amortized cost basis. Discounts or premiums discounts are amortized to interest income using the interest method. Marketable securities are investments with original maturities of greater than 90 days. Long-term marketable securities are securities with maturities of greater than one year. The average remaining maturity of marketable securities at December 31, 2013 is approximately 6 months.

Management reviewed the Company’s investments as of December 31, 2013 and concluded that there are no securities with other than temporary impairments in the investment portfolio. The Company does not intend to sell any investments and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost bases at maturity.

(iii) Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount, inclusive of applicable value-added tax ("VAT"), and do not bear interest. Revenue is recorded net of VAT. The allowance for doubtful accounts is management's best estimate of the amount of probable credit losses in existing accounts receivable. Account balances are charged off against the allowance after appropriate collection efforts are exhausted.

(iv) Inventories

The Company values inventory at the lower of the actual cost to purchase or manufacture the inventory, or the market value for such inventory. Cost is determined on the first-in, first-out method (FIFO). The Company regularly reviews inventory quantities in process and on hand, and when appropriate, records a provision for obsolete and excess inventory. The provision is based on actual loss experience and a forecast of product demand compared to its remaining shelf life.

(v) Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over the following estimated useful lives:



	Useful Life
Office furniture	Seven years
Computer hardware	Three years
Computer software	Three to eight years
Production equipment and molds	Three to seven years
Leasehold improvements	Shorter of expected useful life or remaining term of lease

Upon sale or disposition of property and equipment, any gain or loss is included in the accompanying Consolidated Statements of Operations and Comprehensive Loss. Property and equipment are tested for impairment only when impairment indicators are present.

(vi) Goodwill and Intangible Assets

Intangible assets with definite lives are amortized over their estimated useful lives using a method that reflects the pattern over which the economic benefit is expected to be realized, and is as follows:



	Useful Life
Goodwill	Indefinite lived
Trademarks and tradenames	Indefinite lived
In-process research and development	Indefinite lived until commercial launch of underlying technology
Developed technology	Thirteen years
Patents & license	Three to five years
Customer relationships	Three years

Goodwill and other intangible assets with indefinite lives are not subject to amortization, but are tested for impairment annually or whenever events or changes in business circumstances suggest the potential of an impairment. The Company completed its annual indefinite lived intangible asset impairment test as of June 30, 2013 , with no resulting impairment based on the discounted cash flows expected to be generated in connection with underlying assets.

The Company most recently completed its annual test for impairment of goodwill as of June 30, 2013 , with no resulting impairment, as its market capitalization was in substantial excess of the value of its total stockholders' equity (the Company has one "reporting unit" for purposes of the goodwill impairment test).

Intangible assets with finite lives are tested for impairment only when impairment indicators are present.

(vii) Fair Value Measurements

In determining the fair value of its assets and liabilities, the Company uses various valuation approaches. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy distinguishes between (i) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (ii) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair value measurement.

The Company’s held-to-maturity securities, which are fixed income investments, are comprised of obligations of U.S. government agencies, corporate debt securities and other interest bearing securities. These held-to-maturity securities are recorded at amortized cost and are therefore not included in the Company’s market value measurement disclosure. Money market funds, which are cash and cash equivalents, are valued using quoted market prices with no valuation adjustments applied. Accordingly, these securities are categorized in Level 1. The recorded values of all our other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

The recorded values of all our accounts receivable and accounts payable approximate their current fair values because of their nature and respective relatively short maturity dates or durations.

(viii) Contingent Consideration for Business Acquisition

The Company's management determined the fair value of contingently issuable common stock on the Nellix acquisition date (see Note 9) using a probability-based income approach with an appropriate discount rate (determined using both Level 1 and Level 3 inputs). Changes in the fair value of this contingently issuable common stock are determined at each period end and are recorded in the other income (expense) section of the accompanying Consolidated Statements of Operations and Comprehensive Loss, and the current and non-current liabilities section of the accompanying Consolidated Balance Sheet.

(ix) Revenue Recognition

The Company recognizes revenue when all of the following criteria are met:

• Appropriate evidence of a binding arrangement exists with the customer;


•	The sales price for the EVAR or EVAS product (including device extensions and accessories) is established with the customer;


•	The EVAR or EVAS product has been used by the hospital in an EVAR procedure, or the distributor has assumed title with no right of return; and

• Collection of the corresponding receivable from the customer is reasonably assured at the time of sale.

For sales made to hospitals, the Company recognizes revenue upon completion of an EVAR or EVAS procedure, when the EVAR or EVAS products are implanted in a patient. For sales made to distributors, the Company recognizes revenue when title passes, which is typically at the time of shipment, as this represents the period that the customer has assumed custody of the EVAR or EVAS product, without right of return, and assumed risk of loss.

The Company does not offer rights of return, other than honoring a standard warranty.

In the event that the Company enters into a bill and hold arrangement with its customer, which is uncommon, though occurred in 2012, the following conditions must be met for revenue recognition:


(i)	The risks of ownership must have passed to the customer;


(ii)	The customer must have made a fixed and written commitment to purchase the EVAR or EVAS product;


(iii)	The customer must request that the transaction be on a bill and hold basis;


(iv)	There must be a fixed schedule for delivery of the EVAR or EVAS product. The date for delivery must be reasonable and must be consistent with the customer's business purpose;


(v)	The Company must have no remaining specific performance obligations and its earnings process must be complete;


(vi)	The customer's ordered EVAR or EVAS product must be segregated from the Company's inventory and cannot be used to fulfill other customer orders; and


(vii)	The EVAR or EVAS products must be complete and ready for shipment.

In addition to the above requirements, the Company also considers other pertinent factors prior to its recognition of revenue for bill and hold arrangements, such as:


(i)	The date by which payment is expected from the customer, and whether the Company has modified its normal billing and credit terms for the customer;


(ii)	The Company's past experiences with, and pattern of, bill and hold transactions;


(iii)	Whether the customer has the expected risk of loss in the event of a decline in the market value of the EVAR or EVAS product;


(iv)	Whether the Company's custodial risks are insurable and insured; and


(v)	Whether extended procedures are necessary in order to assure that there are no exceptions to the customer's commitment to accept and pay for the EVAR or EVAS product (i.e., that the business reasons for the bill and hold have not introduced a contingency to the customer's commitment).

(x) Shipping Costs

Shipping costs billed to customers are reported within revenue, with the corresponding costs reported within costs of goods sold.

(xi) Foreign Currency Transactions

The assets and liabilities of the Company's foreign subsidiaries are translated at the rates of exchange at the balance sheet date. The income and expense items of these subsidiaries are translated at average monthly rates of exchange. Gains and losses resulting from foreign currency transactions, which are denominated in a currency other than the respective entity’s functional currency are included in other income (expense), net, within the accompanying Consolidated Statements of Operations and Comprehensive Loss. Foreign currency translation adjustments between the respective entity's functional currency and the U.S. dollar are recorded to accumulated other comprehensive loss within the stockholders' equity section of the accompanying Consolidated Balance Sheets. There were no items reclassified out of accumulated other comprehensive loss and into net loss during the years ended December 31, 2013, 2012, and 2011 . The only activity in the accumulated other comprehensive loss was related to foreign currency translation.

(xii) Income Taxes

The Company records the estimated future tax effects of temporary differences between the tax basis of assets and

liabilities and amounts reported in the financial statements, as well as operating losses and tax credit carry forwards. The Company has recorded a valuation allowance to substantially reduce its net deferred tax assets, because the Company believes that, based upon a number of factors, it is more likely than not that substantially all the deferred tax assets will not be realized. If the Company were to determine that it would be able to realize additional deferred tax assets in the future, an adjustment to the valuation allowance on its deferred tax assets would increase net income in the period such determination was made. In the event that the Company were assessed interest and/or penalties from taxing authorities, such amounts would be included in "income tax expense" within the Consolidated Statements of Operations and Comprehensive Loss in the period the notice was received.

(xiii) Net Loss Per Share

Net loss per common share is computed using the weighted average number of common shares outstanding

during the periods presented. Because of the net losses during the years ended December 31, 2013, 2012, and 2011 , options to purchase the common stock, restricted stock awards, and restricted stock units of the Company were excluded from the computation of net loss per share for these periods because the effect would have been antidilutive.

(xiv) Research and Development Costs

Research and development costs are expensed as incurred.

(xv) Product Warranty

Within six months of shipment, certain customers may request replacement of products they receive that do not meet product specifications; no other warranties are offered. The Company contractually disclaims responsibility for any damages associated with physician's use of its EVAR or EVAS product. Historically, the Company has not experienced a significant amount of costs associated with its warranty policy.

Table of Contents

ENDOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

3. Balance Sheet Account Detail

(a) Property and Equipment

Property and equipment consisted of the following:



	December 31,
	2013			2012
Production equipment, molds, and office furniture	$	8,033		$	7,256
Computer hardware and software	3,290			2,265
Leasehold improvements	3,058			2,819
Construction in progress (software and related implementation, production equipment, and leasehold improvements)	2,594			556
Property and equipment, at cost	16,975			12,896
Accumulated depreciation	(9,637		)	(7,912		)
Property and equipment, net	$	7,338		$	4,984

Depreciation expense for property and equipment for the years ended December 31, 2013 , 2012 , and 2011 was $2.1 million , $1.5 million , and $1.3 million , respectively.

(b) Inventories

Inventories consisted of the following:



	December 31,
	2013		2012
Raw materials	$	3,793	$	3,901
Work-in-process	4,539		5,102
Finished goods	11,226		9,084
Inventories	$	19,558	$	18,087

The following table presents goodwill, indefinite lived intangible assets, finite lived intangible assets, and related accumulated amortization:



	December 31,
	2013			2012
Goodwill (1) (3)	$	29,103		$	29,022

Intangible assets:
Indefinite lived intangibles
In-process research and development (2)	$	—		$	40,100
Trademarks and trade names	2,708			2,708
Total indefinite lived intangibles	$	2,708		$	42,808

Finite lived intangibles
Developed technology (2)	$	40,100		$	—
Accumulated amortization	(48		)	—
Developed technology, net	$	40,052		$	—

Patent	$	100		$	100
Accumulated amortization	(95		)	(75		)
Patent, net	$	5		$	25

License	$	100		$	100
Accumulated amortization	(41		)	(12		)
License, net	$	59		$	88

Customer relationships	$	544		$	522
Accumulated amortization	(272		)	(87		)
Customer relationships, net	$	272		$	435

Intangible assets (excluding goodwill), net	$	43,096		$	43,356

(1) Difference in goodwill value between these dates is solely due to a foreign currency translation adjustment.

(2) Was reclassified in the first quarter of 2013 to finite lived intangibles, which coincided with the European commercial launch of the product (Nellix System) associated with this intangible asset. A significant portion of this intangible asset will not begin amortization until the U.S. launch of this product, currently scheduled for 2016.

(3) $2.0 million of goodwill is related to a 2012 acquisition.

Amortization expense for intangible assets for the years ended December 31, 2013 , 2012 , and 2011 was $0.3 million , $0.7 million , and $1.4 million , respectively.

Estimated amortization expense for the five succeeding years and thereafter (which includes amortization of intangible assets which commenced in February 2013 with the commercial launch of the Nellix System in Europe) is as follows:



	Amortization Expense
2014	$	436
2015	641
2016	953
2017	2,251
2018	3,867
2019 and thereafter	32,240
Total	40,388

(d) Marketable securities

Investments in held-to-maturity marketable securities, which all mature during 2014, consist of the following at December 31, 2013 :



	December 31, 2013
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
Corporate and other debt securities	$	31,313	$	3	$	(3	)	$	31,313

At December 31, 2013, the Company’s investments included 7 held-to-maturity debt securities in unrealized loss positions with a total unrealized loss of approximately $3 thousand and a total fair market value of approximately $15.2 million . All investments with gross unrealized losses have been in unrealized loss positions for less than 1 month. The unrealized losses were caused by interest rate fluctuations. There was no change in the credit risk of the securities. The Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell the securities before the expected recovery of their amortized cost bases. There were no realized gains or losses on the investments for year ended December 31, 2013 .

(e) Fair Value Measurements

The following fair value hierarchy table presents information about each major category of the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2013 :



	Fair value measurement at reporting date using:
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
At December 31, 2012
Cash and cash equivalents	$	45,118	$	—	$	—	$	45,118
Contingently issuable common stock					52,400		52,400
At December 31, 2013
Cash and cash equivalents	$	95,152	$	—	$	—	$	95,152
Contingently issuable common stock	—		—		60,900		60,900

There were no remeasurements to fair value during the years ended December 31, 2013 and 2012 of financial assets and liabilities that are not measured at fair value on a recurring basis. There were no transfers between Level 1, Level 2, or Level 3 securities during the years ended December 31, 2013 and 2012 .

(f) Instruments Not Recorded at Fair Value on a Recurring Basis

We measure the fair value of our Senior Notes carried at amortized cost quarterly for disclosure purposes. The estimated fair value of the Senior Notes is determined by Level 2 inputs and is based primarily on quoted market prices for the same or similar issues. Based on the market prices, the fair value of our long-term debt was $84.9 million as of December 31, 2013 .

We measure the fair value of our held-to-maturity marketable securities carried at amortized cost quarterly for disclosure purposes. The fair value of certain marketable securities is determined by Level 2 inputs and is based primarily on quoted market prices for the same or similar instruments.

4. Stock-Based Compensation

2006 Stock Incentive Plan

The Company has one active stockholder-approved stock-based compensation plan, the 2006 Stock Incentive Plan (the "2006 Plan"), which replaced the Company's former stockholder-approved plans. Incentive stock options, non-qualified options, restricted stock awards, restricted stock units, and stock appreciation rights may be granted under the 2006 Plan.

The maximum number of shares of the Company's common stock available for issuance under the 2006 Plan is 11.0 million shares. As of December 31, 2013, 2.2 million shares were available for grant. It is the Company's policy that before stock is issued through the exercise of stock options, the Company must first receive all required cash payment for such shares.

Stock-based awards are governed by agreements between the Company and the recipients. Incentive stock options and nonqualified stock options may be granted under the 2006 Plan at an exercise price of not less than 100% of the closing fair market value of the Company's common stock on the respective date of grant. The grant date is generally the date the award is approved by the Compensation Committee of the Board of Directors, though for aggregate awards of 50,000 or less in each quarter, the grant date is the date the award is approved by the Company's Chief Executive Officer.

The Company's standard stock-based award vests 25% on the first anniversary of the date of grant, or for new hires, the first anniversary of their initial date of employment with the Company. Awards vest monthly thereafter on a straight-line basis over three years. Stock options must be exercised, if at all, no later than 10 years from the date of grant. Upon termination of employment with the Company, vested stock options may be exercised within 90 days from the last date of employment. In the event of an optionee's death, disability, or retirement, the exercise period is 365 days from the last date of employment.

Employee Stock Purchase Plan

Under the terms of the Company's 2006 Employee Stock Purchase Plan (the "ESPP"), eligible employees can purchase common stock through payroll deductions. As of December 31, 2013, 0.4 million shares were available for grant. The purchase price is equal to the closing price of the Company's common stock on the first or last day of the offering period (whichever is less), minus a 15% discount. The Company uses the Black-Scholes option-pricing model, in combination with the discounted employee price, in determining the value of ESPP expense to be recognized during each offering period.

The table below summarizes the stock-based compensation recognized, common stock shares purchased by Company employees, and the average purchase price per share as part of the ESPP program during the years ended December 31, 2013, 2012, and 2011 .



	Year Ended December 31,
	2013		2012		2011
Stock-based compensation expense	$	750	$	759	$	733
Common stock shares purchased by Company employees	216		224		287
Average purchase price per share	$	11.48	$	10.59	$	6.84

Stock Options and Restricted Stock

The Company values stock-based awards, including stock options and restricted stock, as of the date of grant (and is marked-to-market at each reporting period for unvested grants issued to consultants).

The Company recognizes stock-based compensation expense (net of estimated forfeitures) using the straight-line method over the requisite or implicit service period, as applicable. Forfeitures of employee awards are estimated at the time of grant and the forfeiture assumption is periodically adjusted for actual employee exercise behavior.

Stock-Based Compensation Expense Summary

The Company classifies related compensation expense in the accompanying Consolidated Statements of Operations and Comprehensive Loss, based on the Company department to which the recipient belongs. Stock-based compensation expense included in cost of goods sold and operating expenses for years ended December 31, 2013, 2012, and 2011 was as follows:



	Year Ended December 31,
	2013		2012		2011
Cost of goods sold	$	680	$	597	$	209
Operating expenses:
Research and development	486		1,336		753
Clinical and regulatory affairs	1,169		320		113
Marketing and sales	3,117		1,558		1,097
General and administrative	2,470		2,641		1,740
Total operating expenses	$	7,242	$	5,855	$	3,703

Total	$	7,922	$	6,452	$	3,912

In addition, the Company had $0.4 million , $0.2 million , and $0.2 million of stock-based compensation capitalized in inventory as of December 31, 2013, 2012, and 2011 , respectively.

Employee stock-based compensation expense for the years ended December 31, 2013, 2012, and 2011 was recognized (reduced for estimated forfeitures) on a straight-line basis over the vesting period. The Company estimates forfeitures at the time of grant and prospectively revised if actual forfeitures differ from those estimates. The Company estimates forfeitures of stock options using the historical exercise behavior of its employees. For purposes of this estimate, the Company has applied an estimated forfeiture rate of 15% for the year ended December 31, 2013 and 30% for years ended 2012 and 2011.

Valuation Assumptions

The grant-date fair value per share for restricted stock awards was based upon the closing market price of the Company’s common stock on the award grant-date.

The fair value of stock options granted was estimated at the date of grant using the Black-Scholes option-pricing model. The following assumptions were used to determine fair value for the stock awards granted in the applicable year:



	Year Ended December 31,
	2013	2012	2011
Average expected option life (in years) (a)	5.6	6.0	6.0
Volatility (b)	54.0%	55.8%	56.6%
Risk-free interest rate (c)	1.7%	1.0%	2.0%
Dividend Yield (d)	—%	—%	—%
Weighted-average grant-date fair value per stock option	$7.41	$6.90	$4.55

(a) Determined by the historical stock option exercise behavior of the Company's employees (maximum term is 10

years).

(b) Measured using weekly price observations for a period equal to stock options' expected term.

(d) The Company has never paid cash dividends on its common stock and does not expect to declare any cash dividends.

Stock Option Activity

Stock option activity during the years ended December 31, 2013 and 2012 is as follows:



	Number of Stock Options	Weighted Average Exercise Price	Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding — January 1, 2013	4,956,730	$6.21
Granted	669,246	14.56
Exercised	(973,587)	5.01		(a)	$11,015
Forfeited	(281,563)	8.57
Expired	—	—
Outstanding — December 31, 2013	4,370,826	$7.60	6.5	(b)	$43,010
Vested and Expected to Vest — December 31, 2013	3,937,545	$7.06	6.3	(b)	$40,875
Vested — December 31, 2013	2,329,889	$5.13	5.3	(b)	$28,690

(a) Represents the total difference between the Company's stock price at the time of exercise and the stock option exercise price, multiplied by the number of options exercised.

(b) Represents the total difference between the Company's closing stock price on the last trading day of 2013 and the stock option exercise price, multiplied by the number of in-the-money options as of December 31, 2013 . The amount of intrinsic value will change based on the fair market value of the Company's stock.

As of December 31, 2013 there was $5.8 million of total unrecognized compensation expense related to granted, but unvested stock options, which are expected to be recognized over a weighted average period of 2.0 years .

The following table summarizes information regarding outstanding stock option grants as of December 31, 2013 :



			Outstanding			Exercisable
Range of Exercise Prices			Granted Stock Options Outstanding	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price	Granted Stock Options Exercisable	Weighted- Average Exercise Price
$1.64	—	$3.67	1,102,082	4.4	$2.87	1,101,874	$2.87
$3.68	—	$5.71	1,106,288	5.7	4.47	558,692	4.32
$5.72	—	$7.75	323,597	5.9	6.63	166,732	6.23
$7.76	—	$9.79	444,541	7.4	8.55	258,956	8.43
$9.80	—	$11.83	248,332	7.8	11.02	94,614	11.18
$11.84	—	$13.87	308,689	8.8	13.19	56,212	13.11
$13.88	—	$15.91	708,954	8.9	14.45	92,809	14.53
$15.92	—	$17.86	128,343	9.5	16.42	—	—
$1.64	—	$17.86	4,370,826	6.5	7.60	2,329,889	5.13

Non-employees - Stock Options

As of December 31, 2013, 2012, and 2011 , a total of 40,000 , 40,000 , and 40,000 non-employee stock options, respectively, were outstanding and fully vested.

Restricted Stock Award Activity

The following table summarizes activity and related information for the Company's restricted stock awards:



	Number of Restricted Stock Awards		Weighted Average Fair Value per Share at Grant Date		Grant Date Fair Value		Vest Date Fair Value*
Unvested as of January 1, 2013	944,845
Granted	129,155		$	14.60	$	1,885
Canceled	(72,360	)
Vested	(54,046	)					$	788
Unvested as of December 31, 2013	947,594

*Represents the Company's stock price on the vesting date multiplied by the number of vested shares.

The Company recognized restricted stock expense of $2.5 million , $2.8 million , and $0.9 million for the years ended December 31, 2013, 2012, and 2011 , respectively. As of December 31, 2013 , there was $4.0 million of unrecorded expense related to issued restricted stock that will be recognized over an estimated weighted average period of 1.4 years.

Non-employee Restricted Stock

During the years ended December 31, 2013, 2012, and 2011 , $0.8 million , $0.9 million , and $0.4 million , respectively, was recorded as compensation expense for the change in the fair value of unvested non-employee restricted stock. During the years ended December 31, 2013 and 2012 , the Company did not grant any restricted stock to non-employees.

As of December 31, 2013, 2012, and 2011 , a total of 135,000 , 135,000 , and 169,000 shares of unvested restricted stock, respectively, issued to non-employees were outstanding.

5. Net Loss Per Share

Net loss per share was computed by dividing net loss by the weighted average number of common shares outstanding for the years ended December 31, 2013, 2012, and 2011 :



	Year Ended December 31,
	2013			2012			2011
Net loss	$	(16,068	)	$	(35,774	)	$	(28,730	)
Shares used in computing basic and diluted net loss per share	62,607			59,811			56,592
Basic and diluted net loss per share	$	(0.26	)	$	(0.60	)	$	(0.51	)

The following outstanding Company securities, using the treasury stock method, were excluded from the above calculations of net loss per share because their impact would have been anti-dilutive due to the net losses during the years ended December 31, 2013, 2012, and 2011 :



	Year Ended December 31,
	2013	2012	2011
Common stock options	2,374	2,698	3,127
Restricted stock awards	403	405	640
Restricted stock units	234	492	—
Total	3,011	3,595	3,767

As discussed in Note 6, in December 2013, the Company issued $86.3 million aggregate principal amount of 2.25% convertible senior notes due 2018 (the “Notes”) in an underwritten public offering. Upon any conversion the Notes may be settled, at the Company’s election, in cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock. For purposes of calculating the maximum dilutive impact, it is presumed that the Notes will be settled in common stock with the resulting potential common shares included in diluted earnings per share if the effect is more dilutive. The effect of the conversion of the Notes is excluded from the calculation of diluted loss per share because the net loss for the year ended December 31, 2013 causes such securities to be anti-dilutive. The potential dilutive effect of these securities is shown in the chart below:



	Year Ended December 31,
	2013	2012	2011
Conversion of the Notes	3,588	—	—

The effect of the contingently issuable common stock is excluded from the calculation of basic loss per share until all necessary conditions for issuance have been satisfied. Refer to Note 9 of the Notes to the Consolidated Financial Statements for further discussion.

6. Credit Facilities

2.25% Convertible Senior Notes

On December 10, 2013, the Company issued $86.3 million aggregate principal amount 2.25% Convertible Senior Notes (the “Notes”) The Notes mature on December 15, 2018 unless earlier repurchased by the Company or converted. The Company received net proceeds from the sale of the Notes of approximately $82.6 million , after deducting underwriting discounts and commissions and offering expenses payable by the Company. Interest is payable on the Notes on June 15 and December 15 of each year, beginning June 15, 2014.

The Notes are governed by the terms of a base indenture (the “Base Indenture”), as supplemented by the first supplemental indenture relating to the Notes (the “First Supplemental Indenture,” and together with the Base Indenture, the “Indenture”), between the Company and Wells Fargo Bank, National Association (the “Trustee”), each of which were entered into on December 10, 2013.

The Notes are senior unsecured obligations and are: senior in right of payment to the Company’s future indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to the Company’s existing and future unsecured indebtedness that is not so subordinated; effectively junior to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries.

The Company may not redeem the Notes prior to December 15, 2016. On or after December 15, 2016, the Company may redeem for cash all or any portion of the Notes, at its option, but only if the closing sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the second trading day immediately preceding the date on which the Company provides notice of redemption, exceeds 130% of the conversion price on each applicable trading day. The redemption price will equal 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. No sinking fund is provided for the Notes.

Holders may convert their Notes at any time prior to the close of business on the business day immediately preceding September 15, 2018 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on March 31, 2014, if the closing sale price of the Company’s common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 130% of the conversion price of the Notes in effect on each applicable trading day; (2) during the five consecutive business-day period following any five consecutive trading-day period in which the trading price for the Notes for each such trading day was less than 98% of the closing sale price of the Company’s common stock on such date multiplied by the then-current conversion rate; (3) if the Company calls all or any portion of the notes for redemption, at any time prior to the close of business on the second scheduled trading day prior to the redemption date, or (4) upon the occurrence of specified corporate events. On or after September 15, 2018 until the close of business on the second scheduled trading day immediately preceding the stated maturity date, holders may surrender their Notes for conversion at any time, regardless of the foregoing circumstances.

Upon conversion, the Company will at its election pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock.

The initial conversion rate will be 41.6051 shares of the Company’s common stock for each $1,000 principal amount of Notes, which represents an initial conversion price of approximately $24.04 per share. Following certain corporate transactions that occur on or prior to the stated maturity date or the Company’s delivery of a notice of redemption, the Company will increase the conversion rate for a holder that elects to convert its Notes in connection with such a corporate transaction.

If a fundamental change (as defined in the Indenture) occurs prior to the stated maturity date, holders may require the Company to purchase for cash all or any portion of their Notes at a fundamental change purchase price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest to, but excluding, the fundamental change purchase date.

The Indenture contains customary terms and covenants and events of default with respect to the Notes. If an event of default, (as defined in the Indenture), occurs and is continuing, either the Trustee or the holders of at least 25% in aggregate principal amount of the outstanding Notes may declare the principal amount of the Notes to be due and payable immediately by notice to the Company (with a copy to the Trustee). If an event of default arising out of certain events of bankruptcy, insolvency or reorganization involving the Company or a significant subsidiary (as set forth in the Indenture) occurs with respect to us, the principal amount of the Notes and accrued and unpaid interest, if any, will automatically become immediately due and payable.

The Company was not required to separate the conversion option in the Notes under ASC 815, Derivatives and Hedging, and has the ability to settle the Notes in cash, common stock or a combination of cash and common stock, at its option. In accordance with cash conversion guidance contained in ASC 470-20, Debt with Conversion and Other Options, the Company accounted for the Notes by allocating the issuance proceeds between the liability and the equity component. The equity component is classified in stockholders’ equity and the resulting discount on the liability component is accreted such that interest expense equals the Company’s nonconvertible debt borrowing rate. The separation was performed by first determining the fair value of a similar debt that does not have an associated equity component. That amount was then deducted from the initial proceeds of the Notes as a whole to arrive at a residual amount, which was allocated to the conversion feature that is classified as equity. The initial fair value of the indebtedness was $66.9 million resulting in a $19.3 million allocation to the embedded conversion option. The embedded conversion option was recorded in stockholders’ equity and as debt discount, to be subsequently accreted to interest expense over the term of the Notes. Underwriting discounts and commissions and offering expenses totaled $3.7 million and were allocated between the liability and the equity component in proportion to the allocation of proceeds and accounted for as debt issuance costs and equity issuance costs, respectively. As a result, $2.9 million attributable to the indebtedness was recorded as deferred financing costs in other assets, to be subsequently amortized as interest expense over the term of the Notes, and $0.8 million attributable to the equity component was recorded a a reduction to additional paid-in-capital in stockholders’ equity.

For the year ended December 31, 2013 , total interest expense related to the outstanding principal balance of the Notes was $0.3 million of which $0.2 million related to accretion of debt discount, $0.1 million related to contractual coupon interest expense, and $21 thousand related to the amortization of debt issuance costs at the effective interest rate of 9.0% . As of December 31, 2013 , the Company had outstanding borrowings of $67.1 million , and deferred financing costs of $2.9 million , related to the Notes. There are no principal payments due during the term.

Annual interest expense on these notes will range from $5.7 million to $6.9 million through maturity.

Capped Call Transactions

On December 10, 2013 in connection with the pricing of the Notes and the exercise in full of their overallotment option by the underwriters, the Company entered into privately-negotiated capped call transactions (the “Capped Call Transactions”) with Bank of America, N.A., an affiliate of Merrill Lynch, Pierce, Fenner & Smith Incorporated. The Capped Call Transactions initial conversion rate and number of options substantially corresponds to each $1,000 principal amount of Notes. The Company used approximately $7.4 million of the net proceeds from the Notes offering to pay for the cost of the Capped Call Transactions.

The Capped Call Transactions are separate transactions entered into by the Company with Bank of America, N.A., are not part of the terms of the Notes and will not change the holders’ rights under the Notes. The Capped Call Transactions have anti-dilution adjustments substantially similar to those applicable to the Notes. The Capped Call Transactions are derivative instruments that qualify for classification within stockholders’ equity because they meet an exemption from mark-to-market derivative accounting.

The Capped Call Transactions are expected generally to reduce the potential dilution and/or offset potential cash payments that the Company is required to make in excess of the principal amount upon conversion of the Notes in the event that the market price per share of the Company’s common stock, as measured under the terms of the Capped Call Transactions, is greater than the strike price of the Capped Call Transactions, which initially corresponds to the $24.04 conversion price of the Notes. If, however, the market price per share of the Company’s common stock, as measured under the terms of the Capped Call Transactions, exceeds the initial cap price of $29.02 , there would nevertheless be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that such market price exceeds the cap price of the Capped Call Transactions.

The Company will not be required to make any cash payments to Bank of America, N.A. or any of its affiliates upon the exercise of the options that are a part of the Capped Call Transactions, but will be entitled to receive from Bank of America, N.A. (or an affiliate thereof) a number of shares of the Company’s common stock and/or an amount of cash generally based on the amount by which the market price per share of the Company’s common stock, as measured under the terms of the Capped Call Transactions, is greater than the strike price of the Capped Call Transactions during the relevant valuation period under the Capped Call Transactions. However, if the market price of the Company’s common stock, as measured under the terms of the Capped Call Transactions, exceeds the cap price of the Capped Call Transactions during such valuation period under the Capped Call Transactions, the number of shares of common stock and/or the amount of cash the Company expects to receive upon exercise of the Capped Call Transactions will be capped based on the amount by which the cap price exceeds the strike price of the Capped Call Transactions.

For any conversions of Notes prior to the close of business on the 55th scheduled trading day immediately preceding the stated maturity date of the Notes, including without limitation upon an acquisition of the Company or similar business combination, a corresponding portion of the Capped Call Transactions will be terminated. Upon such termination, the portion of the Capped Call Transactions being terminated will be settled at fair value (subject to certain limitations), as determined by Bank of America, N.A., in its capacity as calculation agent under the Capped Call Transactions, which the Company expects to receive from Bank of America, N.A., and no payments will be due Bank of America, N.A. The capped call expires on December 13, 2018.

Wells-Fargo line of credit

In October 2009, the Company entered into a revolving credit facility with Wells Fargo Bank (“Wells”), which was last amended on December 3, 2013, whereby the Company may borrow up to $20 million , subject to the calculation and limitation of a borrowing base (the “Wells Credit Facility”). All amounts owing under the Wells Credit Facility will become due and payable upon its expiration on November 15, 2014. A sub-feature in the line of credit allows for the issuance of up to $6 million in letters of credit. As of December 31, 2013, the Company issued a total of $5.4 million in letters of credit under the Wells Credit Facility. Any outstanding amounts under the Wells Credit Facility bear interest at a variable rate equal to the Wells prime rate, plus 1.0% , which is payable on a monthly basis. The Wells Credit Facility carried a 0.2% unused commitment fee though May 19, 2012, when this fee was eliminated. The Wells Credit Facility is collateralized by all of the Company's assets, except its intellectual property.

The Wells Credit Facility contains financial covenants requiring the Company to (i) maintain a minimum current ratio of 2.0 , equal to the quotient of modified current assets to current liabilities, as defined in the Wells Credit Facility (the "Current Ratio Covenant"), and (ii) not exceed pre-tax net loss (excluding non-cash contingent consideration associated with the acquisition of Nellix) of $9.0 million for the six months ended June 30, 2013; $13.0 million for the nine months ended September 30, 2013; $14.5 million for the year ended December 31, 2013; $1.5 million for the three months ending March 31, 2014; and a minimum adjusted pre-tax profit of at least One Dollar thereafter (the "Net Loss Covenant"). The Wells Credit Facility also included a negative covenant limiting 2013 capital expenditures to an aggregate $6.0 million and 2014 capital expenditures to an aggregate $9.0 million . The Company was in compliance with the financial covenants as of and for the year ended December 31, 2013.

The Wells Credit Facility also contains a “material adverse change” clause (“MAC”). If the Company encounters difficulties that would qualify as a MAC in its (i) operations, (ii) condition (financial or otherwise), or (iii) ability to repay amounts outstanding under the Wells Credit Facility, it could be canceled at Wells' sole discretion. Wells could then elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and proceed against any collateral securing such indebtedness. No borrowings were outstanding at December 31, 2013.

7. Revenue by Geographic Region

The Company's revenue by geographic region, was as follows:



	Year Ended December 31,
	2013				2012				2011
United States	$	102,937	77.8	%	$	87,092	82.2	%	$	71,695	85.9	%

Europe	$	16,101	12.2	%	$	8,404	7.9	%	$	4,178	5.0	%

Rest of World ("ROW"):
Latin America	$	6,118	4.6	%	$	4,859	4.6	%	$	4,395	5.3	%
Asia/Pacific	7,062		5.3	%	5,591		5.3	%	3,149		3.8	%
Canada	$	39	—	%	$	—	—	%	$	—	—	%
Total ROW	$	13,219	10.0	%	$	10,450	9.9	%	$	7,544	9.0	%

Revenue	$	132,257	100.0	%	$	105,946	100.0	%	$	83,417	100.0	%

8. Commitments and Contingencies

(a) Leases

The Company leases its administrative, research, and manufacturing facilities located in Irvine, California and an administrative office located in Den Bosch, The Netherlands. These facility lease agreements require the Company to pay operating costs, including property taxes, insurance, and maintenance. In addition, the Company has certain equipment, under long-term agreements that are accounted for as operating leases.

Future minimum payments by year under non-cancelable leases with initial terms in excess of one year were as follows as of December 31, 2013 :



2014	$	1,010
2015	2,000
2016	2,060
2017	2,122
2018	2,186
2019 and thereafter	27,029
Total	$	36,407

Facilities rent expense in 2013, 2012 and 2011 was $0.6 million , 0.6 million , and $0.8 million , respectively.

On June 12, 2013, the Company entered into a lease agreement for two adjacent office, research and development, and manufacturing facilities in Irvine, California. The premises consist of approximately 129,000 combined square feet. The lease has a 15 -year term beginning January 1, 2014 and provides for one optional five year extension. The initial base rent under the lease is $ 1.9 million per year, payable in monthly installments, and escalates by 3% per year for years 2015 through 2019, and 4% per year for years 2020 and beyond. The Company is entitled to rent abatement for the first nine months of the lease. These premises will replace the Company's existing Irvine facilities.

The terms of this lease agreement provide for $ 6.8 million of landlord-funded improvements (and certain other allowances) to this facility, in order to best suit the Company's requirements. In June 2013, the Company had Wells-Fargo issue the landlord two letters of credit in the aggregate amount of $5.4 million under its Wells Credit Facility, representing financial collateral while these facility improvements are completed. The Company placed the same amount in a restricted cash account with Wells-Fargo, in order to fully support these issued, but undrawn, letters of credit. In July 2013, this restricted cash account was fully released under the July 26, 2013 amendment to the Wells-Fargo Credit Facility.

(b) Employment Agreements and Retention Plan

The Company has entered into employment agreements with its officers and certain other “key employees” under which payment and benefits would become payable in the event of termination by the Company for any reason other than cause, upon a change in control of the Company, or by the employee for good reason. The payment will generally be equal to six months of the employee’s then current salary for termination by the Company without cause, and generally be equal to twelve months of salary upon a change in control of the Company.

On February 1, 2014, the Company entered into new employment agreements with certain of its executive officers under which payment and benefits would become payable in the event of termination by the Company for any reason other than cause, death or disability or termination by the employee for good reason (collectively, an “Involuntary Termination”) prior to, upon or following a change in control of the Company. The severance payment will generally be in a range of six to eighteen months of the employee’s then current salary for an Involuntary Termination prior to a change in control of the Company, and will generally be in a range of eighteen to twenty-four months of the employee’s then current salary for an Involuntary Termination upon or following a change in control of the Company.

We are from time to time involved in various claims and legal proceedings of a nature we believe are normal and incidental to a medical device business. These matters may include product liability, intellectual property, employment, and other general claims. Such cases and claims may raise complex factual and legal issues and are subject to many uncertainties, including, but not limited to, the facts and circumstances of each particular case or claim, the jurisdiction in which each suit is brought, and differences in applicable law. We accrue for contingent liabilities when it is probable that a liability has been incurred and the amount can be reasonably estimated. The accruals are adjusted periodically as assessments change or as additional information becomes available.

Cook Incorporated v. Endologix, Inc.

We had been involved in litigation with Cook Incorporated (“Cook”). Cook alleged that we infringed two of its patents, granted in 1991 and 1998, which expired on October 17, 2009 and October 25, 2011, respectively (the “Patent Dispute”). The lawsuit was filed by Cook in the U.S. District Court for the Southern District of Indiana, on October 8, 2009.

On October 16, 2012, the Company entered into a settlement agreement with Cook for the Patent Dispute (the “Settlement Agreement”), which included a full release from liability for all asserted claims. Without admitting any liability, we agreed to make a one-time cash payment to Cook of $5.0 million , which occurred in December 2012.

The $5.0 million Settlement Agreement is presented in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss) within operating expenses as "settlement costs" for the year ended December 31, 2012.

LifePort Sciences LLC v. Endologix, Inc.

On December 28, 2012, LifePort Sciences, LLC ("LifePort") filed a complaint against us in the U.S. District Court, District of Delaware, alleging that certain of our products infringe U.S. Patent Nos. 5,489,295, 6,117,167, 6,302,906, 5,993,481 and 5,676,696, which are alleged to be owned by LifePort. LifePort is seeking an unspecified amount of monetary damages for sale of our products and injunctive relief. We do not believe that we infringe on any of these patents and we intend to vigorously defend against this matter. As of December 31, 2013 we have filed a motion to transfer the case from Delaware to California. The motion remains pending and we cannot predict when, or on what basis, this matter will be resolved. We do believe, however, that the outcome will not have a material adverse effect on our financial position, results of operations, or cash flow. However, in order to avoid further legal costs and diversion of management resources, it is reasonably possible that we may reach a settlement with LifePort, which could result in a liability. However, we cannot presently estimate the amount, or range, of reasonably possible losses due to the nature of this potential litigation settlement.

9. Contingently Issuable Common Stock

On December 10, 2010 (the “Nellix Closing Date”), the Company completed its acquisition of Nellix, Inc., a pre-revenue, AAA medical device company. The purchase price consisted of 3.2 million of the Company's common shares, issuable to the former Nellix stockholders as of the Nellix Closing Date, then representing a value of $ 19.4 million . Additional payments, solely in the form of the Company's common shares (the “Contingent Payment”), will be made upon the achievement of a revenue milestone and a regulatory approval milestone (collectively, the “Nellix Milestones”).

The ultimate value of the Contingent Payment will be determined on the date that each Nellix Milestone is achieved. The number of issuable shares will be established using an applicable per share price, which is subject to a ceiling and/or floor, resulting in a maximum of 10.2 million shares issuable upon the achievement of the Nellix Milestones.

As of the Closing Date, the fair value of the Contingent Payment was estimated to be $ 28.2 million . At December 31, 2013 , the Company's stock price closed at $17.44 per share. Thus, had the Nellix Milestones been achieved on December 31, 2013 , the Contingent Payment would have comprised 3.5 million shares, representing a value of $61.0 million .

The value of the Contingent Payment is derived using a discounted income approach model, with a range of probabilities and assumptions related to the timing and likelihood of achievement of the Nellix Milestones (which include Level 3 inputs - see Note 2(vi) and the Company's stock price (Level 1 input) as of the balance sheet date. These varying probabilities and assumptions and changes in the Company's stock price have required fair value adjustments of the Contingent Payment in periods subsequent to the Nellix Closing Date.

The per share price of the Company's common stock increased by $3.20 , or 22% , between December 31, 2012 and December 31, 2013 . This increase in the value of the Company's common stock was the primary driver affecting the increase in the fair value of the Contingent Payment for the year ended December 31, 2013 .

The Contingent Payment fair value will continue to be evaluated on a quarterly basis until milestone achievement occurs, or until the expiration of the "earn-out period," as defined within the Nellix purchase agreement. Adjustments to the fair value of the Contingent Payment are recognized within "other income (expense)" in the Consolidated Statements of Operations and Comprehensive Loss.



	Fair Value of Contingently Issuable Common Stock
December 31, 2012	$	52,400
Fair value adjustment of Contingent Payment for year ended December 31, 2013	8,500
December 31, 2013	$	60,900

As of December 31, 2013, $46.5 million was presented in current liabilities due to the expected achievement of one of the Nellix Milestones in the second half of 2014.

10. Income Tax Expense

Net loss before income tax benefit attributable to U.S. and international operations, consists of the following:



	Year Ended December 31,
	2013			2012			2011
U.S.	$	(4,123	)	$	(22,270	)	$	(26,062	)
Foreign	(11,955		)	(12,973		)	(2,754		)
Net income (loss) before income tax	$	(16,078	)	$	(35,243	)	$	(28,816	)

Income tax expense (benefit) consists of the following:



	Year Ended December 31,
	2013			2012		2011
Current:
Federal	$	51		$	30	$	(148	)
State	138			176		27
Foreign	(300		)	319		35
Total current	$	(111	)	$	525	$	(86	)
Deferred:
Federal	$	(116	)	$	—	$	—
State	(16		)	—		—
Foreign	233			6		—
Total deferred	$	101		$	6	$	—
Total:
Federal	$	(65	)	$	30	$	(148	)
State	$	122		$	176	$	27
Foreign	$	(67	)	$	325	$	35
Income tax expense (benefit)	$	(10	)	$	531	$	(86	)

Income tax expense (benefit) was computed by applying the U.S. federal statutory rate of 34% to net income (loss) before taxes as follows:



	Year Ended December 31,
	2013			2012			2011
Income tax benefit at federal statutory rate	$	(5,467	)	$	(11,983	)	$	(9,797	)
State income tax expenses net of federal benefit	73			116			18
Meals and entertainment	298			210			264
Research and development credits	—			—			(342		)
Stock-based compensation	546			382			421
Contingent consideration	2,890			4,658			3,570
Foreign tax rate differential	656			4,736			1,025
Net change in valuation allowance	2,417			2,244			4,097
Return to provision true-up	(1,347		)	—			—
Other, net	(76		)	168			658
Income tax expense (benefit)	$	(10	)	$	531		$	(86	)

Significant components of the Company’s deferred tax assets and (liabilities) are as follows:



	Year Ended December 31,
	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	53,247		$	54,389
Accrued expenses	846			711
Tax credits	8,590			8,400
Bad debt	131			183
Inventory	597			578
Capitalized research and development	3,740			—
Deferred compensation	3,043			2,364
Deferred tax assets	70,194			66,625
Valuation allowance	(49,793		)	(50,866		)
Total deferred tax assets	20,401			15,759
Deferred tax liabilities:
Developed technology and trademark	(14,997		)	(15,575		)
Trademarks and tradenames	(1,012		)	(1,029		)
Depreciation and amortization	(1,034		)	(101		)
Convertible debt	(4,116		)	—
Other	(377		)	(89		)
Total deferred tax liabilities	(21,536		)	(16,794		)
Net deferred tax liability	(1,135		)	(1,035		)

The Company has evaluated the available evidence supporting the realization of its gross deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely than not that the domestic and foreign deferred tax assets will not be realized. Due to such uncertainties surrounding the realization of the domestic and foreign deferred tax assets, the Company maintains a valuation allowance of $(49.8) million against a substantial portion of its deferred tax assets as of December 31, 2013. For the year ended December 31, 2013, the total change in valuation allowance was $1.1 million , of which $2.4 million was recorded as a tax expense through the income statement. Realization of the deferred tax assets will be primarily dependent upon the Company's ability to generate sufficient taxable income prior to the expiration of its net operating losses.

At December 31, 2013 , the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $142.0 million and $109.0 million , respectively.

Federal and state net operating loss carryforwards begin expiring in 2013 and will continue to expire through 2033. The majority of the state net operating losses are attributable to California. In addition, the Company had research and development credits for federal and state income tax purposes of approximately $4.3 million and $4.1 million , respectively, which will begin to expire in 2020. The California research and development credits do not expire.

The table of deferred tax assets and liabilities shown above does not include certain deferred tax assets at December 31, 2013 and 2012 that arose directly from (or the use of which was postponed by) tax deductions related to equity compensation in excess of compensation recognized under GAAP. Those deferred tax assets include federal and state net operating losses. The Company utilizes the with-and-without approach in determining if and when such excess tax benefits are realized, and under this approach excess tax benefits of $7.3 million related to stock based compensation are the last to be realized.

In general, an "ownership change" results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. Since the Company's formation, the Company has raised capital through the issuance of capital stock on several occasions which, combined with the purchasing stockholders' subsequent disposition of those shares, may have resulted in such an ownership change, or could result in an ownership change in the future upon subsequent disposition.

The Company intends to complete a study in the future to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company's formation.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands):



	Year Ended December 31, 2013
Balance at January 1, 2013	$	152
Additions for tax positions related to prior periods	4
Decreases related to prior year tax positions	(126		)
Lapse of statute of limitations	—
Balance at December 31, 2013	$	30

Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. For the years ended December 31, 2013 and December 31, 2012, the amounts accrued or the payment of interest and penalties were not material.

The undistributed earnings of the Company's foreign subsidiaries are considered to be indefinitely reinvested. Accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been provided on such undistributed earnings. As of December 31, 2013, the cumulative amount of earnings upon which U.S. income taxes have not been provided is approximately $0 . Determination of the potential amount of unrecognized deferred U.S. income tax liability and foreign withholding taxes is not practicable because of the complexities associated with its hypothetical calculation; however, net operating losses and unrecognized foreign tax credits would be available to reduce some portion of the U.S. liability.

In general, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by taxing authorities for years before 2008, however, net operating loss and other tax attribute carryforwards utilized in subsequent years continue to be subject to examination by the tax authorities until the year to which the net operating loss and/or other tax attributes are carried forward is no longer subject to examination.

11. June 2012 Stock Sale

On May 30, 2012, the Company executed a common stock purchase agreement (the "Stock Purchase Agreement") with Piper Jaffray & Co. ("Piper"). As part of the Stock Purchase Agreement (pursuant to a shelf registration statement filed with the SEC on May 30, 2012, which became effective immediately upon filing), Piper purchased 2.7 million shares of the Company's common stock at $ 13.00 per share on June 5, 2012, and subsequently executed an option to purchase an additional 0.4 million shares at $ 13.00 per share, which closed on June 7, 2012.

These two transactions resulted in gross proceeds to the Company of $ 40.3 million (net of $0.1 million withheld by Piper to cover their applicable legal fees). The Company's direct costs to complete this transaction, substantially consisting of legal fees and accounting fees, totaled $ 0.2 million and are reflected as a reduction of "additional paid-in capital" in the accompanying Consolidated Balance Sheets as of December 31, 2013 .

12. Business Combination

GVT Acquisition Overview

On July 2, 2012 (the “GVT Closing Date”), the Company terminated its exclusive distribution agreement with its Italian distributor, Global Vascular Technologies S.r.l. ("GVT"). Immediately after termination, the Company closed an asset purchase agreement with GVT for its business for total consideration of $2.4 million (the “GVT Acquisition”), of which the Company's cash payment for GVT was offset by $1.0 million of trade receivables due to the Company from GVT. This business consists of (i) a trained and assembled Italian sales workforce (on the GVT Closing Date, four former GVT sales employees joined the Company to assume similar roles), and (ii) various active distribution and direct sales agreements in Italy, which were assumed by the Company.

Since July 2, 2012, the results of operations of the former GVT business, since renamed Endologix Italia S.r.l., have been included in the accompanying Consolidated Statements of Operations and Comprehensive Loss.

Direct Costs of the GVT Acquisition

The Company's direct costs of the GVT Acquisition included legal and accounting fees of $0.4 million . Such amount is included in "contract termination and business acquisition expenses" within the accompanying Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2012 .

GVT Business Purchase Price Allocation

The GVT business purchase price of $2.4 million was allocated based on the below fair value estimates of the acquired assets and liabilities:



Customer relationships	$	500
Total identifiable net assets	$	500
Goodwill	1,867
Total purchase price allocation	$	2,367

Amortization of the customer relationships intangible asset began in July 2012 and such expense of $0.3 million and $0.1 million is included in "general and administrative" expense within the Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2013 and 2012 , respectively. Amortization of the customer relationship intangible asset will continue to be recorded over its estimated period of benefit. To estimate fair value of the customer relationships, the Company used the “income approach” which is a valuation technique that converts future expected net cash flows to be derived from this asset into a single, present-valued amount.

Goodwill

Goodwill presented above of $1.9 million represents the difference of the GVT business purchase price of $2.4 million minus the net identifiable intangible asset acquired. This goodwill value has been recorded in Euros by the Company's wholly-owned Italian subsidiary, and will thus be subject to foreign currency translation adjustments at each balance sheet date.

13. Quarterly Results of Operations (Unaudited)



Three Months Ended:	Revenue		Gross Profit		Operating expenses		Net loss			Basic loss per share			Diluted loss per share
December 31, 2013	$	35,249	$	26,077	$	27,217	$	(3,412	)	$	(0.05	)	$	(0.05	)
September 30, 2013	33,260		25,898		28,116		(8,990		)	(0.14		)	(0.14		)
June 30, 2013	33,964		25,004		27,524		5,670			0.09			0.09
March 31, 2013	29,784		22,528		27,018		(9,335		)	(0.16		)	(0.16		)
Three Months Ended:
December 31, 2012 (a)	$	29,222	$	22,064	$	27,761	$	(6,518	)	$	(0.10	)	$	(0.10	)
September 30, 2012	26,696		20,252		27,185		(5,857		)	(0.10		)	(0.10		)
June 30, 2012	25,509		19,232		24,819		(6,696		)	(0.11		)	(0.11		)
March 31, 2012	24,519		19,116		22,790		(16,703		)	(0.29		)	(0.29		)

(a) Includes $0.6 million of operating expenses which was recorded to the Consolidated Statements of Operations and Comprehensive Loss for the three months ended December 31, 2012. This amount represents a cumulative correction of prior period errors which relate to the recognition of stock-based compensation, though is not material to any previously reported prior period.

Included in 2012 revenue for Asia/Pacific is $5.6 million of sales of IntuiTrak systems that were not shipped to the Company's distributor in Japan until January 2013 (i.e., representing 2012 “bill and hold” transactions). Due to applicable medical device regulations in Japan, these IntuiTrak systems could not pass Japanese customs until related Shonin approval was received - which ultimately occurred in late December 2012 (the distributor was solely responsible and bore all the risk for obtaining such approval). These IntuiTrak systems were subsequently shipped in full to Japan in January 2013. The Company determined that applicable revenue recognition criteria were achieved in the corresponding quarter that the distributor's written order was fulfilled, physically segregated (at the distributor's request), and ready for shipment (at which time full title and risk of loss passed to the distributor, who had no right of return).


Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A CONTROLS AND PROCEDURES.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended ("the Exchange Act"). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. This process includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Also, projections of any evaluation of the internal control over financial reporting to future periods are subject to risk that the internal control may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013 . In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (1992) . Based on our management's assessment, we have concluded that, as of December 31, 2013 , our internal control over financial reporting was effective based on those criteria.

The effectiveness of our internal control over financial reporting as of December 31, 2013 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in its report, which is included herein.

Disclosure controls and procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as of December 31, 2013 , pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures, as of such date, were effective.

Changes in internal control over financial reporting

There has been no change in our internal control over financial reporting during the fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Item 9B.	Other Information

Not applicable.

PART III


Item 10.	Directors, Executive Officers and Corporate Governance

The information required hereunder is incorporated herein by reference to our Proxy Statement to be filed within 120 days of December 31, 2013 and delivered to stockholders in connection with our Annual Meeting of Stockholders to be held on May 22, 2014 .


Item 11.	Executive Compensation


Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


Item 13.	Certain Relationships and Related Transactions, and Director Independence


Item 14.	Principal Accountant Fees and Services

PART IV


Item 15.	Exhibits and Financial Statement Schedules

(a) Financial Statements and Schedules

The following financial statements and schedules listed below are included in this Annual Report on Form 10-K:

Financial Statements

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of December 31, 2013 and 2012

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2013, 2012, and 2011

Consolidated Statements of Stockholders' Equity for the years ended 2013, 2012, and 2011

Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012, and 2011

Notes to the Consolidated Financial Statements

Financial Statement Schedule:

Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2013, 2012 and 2011. All other schedules are omitted, as required information is inapplicable or the information is presented in the consolidated financial statements.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2013 , 2012 , and 2011



Column A	Column B		Column C				Column D			Column E
			Additions (Reductions)
Description	Balance at Beginning of Period		Additions to Bad Debt Expense or Deferred Tax Asset		Charged to Other Accounts		Deductions (1)			Balance at End of Period
	(In thousands)
Year ended December 31, 2013
Allowance for doubtful accounts	$	472	$	204	$	—	$	(277	)	$	399
Year ended December 31, 2012
Allowance for doubtful accounts	$	161	$	325	$	—	$	(14	)	$	472
Year ended December 31, 2011
Allowance for doubtful accounts	$	118	$	62	$	—	$	(19	)	$	161


(1)	Deductions represent the actual write-off of accounts receivable balances.

(b) Exhibits

The following is a list of exhibits required by Item 601 of Regulation S-K filed as part of this Annual Report on Form 10-K. For exhibits that previously have been filed, the Company incorporates those exhibits herein by reference. The exhibit table below includes the Form Type and Filing Date of the previous filing and the original exhibit number in the previous filing which is being incorporated by reference herein.



Exhibit Number		Exhibit Description
2.1		Agreement and Plan of Merger and Reorganization, dated October 27, 2010, by and among Endologix, Inc., Nepal Acquisition Corporation, Nellix, Inc., certain of Nellix, Inc.’s stockholders listed therein and Essex Woodlands Health Ventures, Inc., as representative of Nellix, Inc.’s stockholders (Incorporated by reference to Exhibit 2.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on October 27, 2010).
3.1		Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on July 28, 2009).
3.2		Amended and Restated Bylaws, as amended (Incorporated by reference to Exhibit 3.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 14, 2010).
4.1		Specimen Certificate of Common Stock (Incorporated by reference to Exhibit 4.1 to Amendment No. 2 to Endologix, Inc. Registration Statement on Form S-1, No. 333-04560, filed with the SEC on June 10, 1996).
4.2		Indenture, dated December 10, 2013, between Endologix, Inc. and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 10, 2013).
4.3		First Supplemental Indenture, dated December 10, 2013, between Endologix, Inc. and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 10, 2013).
4.4		Form of 2.25% Convertible Senior Notes due 2018 (Incorporated by reference to Exhibit A to Exhibit 4.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 10, 2013).
10.1	(1)	1997 Supplemental Stock Option Plan (Incorporated by reference to Exhibit 99.1 to Endologix, Inc. Registration Statement on Form S-8, No. 333-42161, filed with the SEC on December 12, 1997).
10.2	(1)	1996 Stock Option/Stock Issuance Plan (Incorporated by reference to Exhibit 4.1 to Endologix, Inc. Registration Statement on Form S-8, No. 333-122491, filed with the SEC on February 2, 2005).
10.3	(1)	2006 Stock Incentive Plan, as amended (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on May 24, 2013).
10.4	(1)	Form of Stock Option Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 9, 2006).
10.5	(1)	Form of Restricted Stock Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 9, 2006).
10.6	(1)	Form of Employee Restricted Stock Unit Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 1, 2012).
10.7	(1)	Form of Director Restricted Stock Unit Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 1, 2012).
10.8	(1)	Amended and Restated 2006 Employee Stock Purchase Plan, as amended (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on May 24, 2013).
10.9	(1)	Offer Letter, dated April 28, 2008, between Endologix, Inc. and John McDermott (Incorporated by reference to Exhibit 10.1 to Endologix, Inc Current Report on Form 8-K, File No. 000-28440, filed with the SEC on May 16, 2008).
10.10	(1)	Employment Agreement, dated as of December 29, 2008, by and between Endologix, Inc. and John McDermott (Incorporated by reference to Exhibit 10.1 to Endologix, Inc Current Report on Form 8-K, File No. 000-28440, filed with the SEC on January 2, 2009).
10.11	(1)	Offer Letter, dated January 2, 2013, between Endologix, Inc. and Shelly B. Thunen (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on January 3, 2013).
10.12	(1)	Employment Agreement, dated January 2, 2013, between Endologix, Inc. and Shelly B. Thunen (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on January 3, 2013).
10.13	(1)	Employment Agreement, dated as of December 10, 2010, by and between Endologix, Inc. and Robert D. Mitchell (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 14, 2010).
10.14	(1)(2)	Offer Letter, dated June 8, 2010, between Endologix, Inc. and Todd Abraham.
10.15	(1)(2)	Employment Agreement, dated July 1, 2010, between Endologix, Inc. and Todd Abraham.
10.16	(1)	Employment Agreement, dated as of April 13, 2009, by and between Endologix, Inc. and Joseph DeJohn (Incorporated by reference to Exhibit 10.17 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed with the SEC on March 5, 2010).
10.17	(1)	Form of Indemnification Agreement entered into with Endologix, Inc. officers and directors (Incorporated by reference to Exhibit 10.41 to Endologix, Inc Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 13, 2002).
10.18	(1)(2)	Employment Agreement, dated February 1, 2014, by and between Endologix, Inc. and John McDermott.
10.19	(1)(2)	Employment Agreement, dated February 1, 2014, by and between Endologix, Inc. and Shelly B. Thunen.
10.20	(1)(2)	Employment Agreement, dated February 1, 2014, by and between Endologix, Inc. and Robert D. Mitchell.
10.21	(1)(2)	Employment Agreement, dated February 1, 2014, by and between Endologix, Inc. and Todd Abraham.
10.22	(1)(2)	Employment Agreement, dated February 1, 2014, by and between Endologix, Inc. and Joseph DeJohn.
10.23	(1)(2)	Form of Indemnification Agreement entered into with Endologix, Inc. officers and directors.
10.24		Standard Industrial/Commercial Single-Tenant Lease - Net, dated November 2, 2004, by and between Endologix, Inc. and Del Monico Investments, Inc. (Incorporated by reference to Exhibit 10.46 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on November 24, 2004).
10.24.1		Addendum No. 2 to Standard Industrial/Commercial Single-Tenant Lease - Net, by and between Endologix, Inc. and Del Monico Investments, Inc., dated June 9, 2009 (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 2, 2009).
10.25		Standard Industrial/Commercial Multi -Tenant Lease - Net, by and between Endologix, Inc. and Four-In-One Associates, dated August 28, 2009 (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 2, 2009).
10.26		Standard Industrial/Commercial Multi-Tenant Lease - Net, for 2 Musick, Irvine, California and 35 Hammond, Irvine, dated June 12, 2013, by and between Endologix, Inc. and The Northwestern Mutual Life Insurance Company (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on August 5, 2013).
10.27	(2)	Credit Agreement, dated October 30, 2009, by and between Endologix, Inc. and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 10.16 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed with the SEC on March 5, 2010).
10.27.1	†	Third Amendment to Credit Agreement, dated February 20, 2012, by and between Endologix, Inc. and Wells Fargo Bank, National Association. (Incorporated by reference to Exhibit 10.15.1 to Endologix Inc. Annual Report on Form 10-K, File No. 000-28440, filed with the SEC on March 6, 2012).
10.27.2		Seventh Amendment to Credit Agreement, dated December 3, 2013, by and among Wells Fargo Bank, National Association, Endologix, Inc., and Nellix, Inc. (Incorporated by reference to Exhibit 10.3 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 6, 2013).
10.28		Securities Purchase Agreement, dated as of October 27, 2010, by and between Endologix, Inc. and Essex Woodlands Health Ventures Fund VII, L.P. (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on October 27, 2010).
10.28.1		Amendment to Securities Purchase Agreement, dated as of December 9, 2010, by and between Endologix, Inc. and Essex Woodlands Health Ventures Fund VII, L.P. (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 14, 2010).
10.29	†	Cross License Agreement dated as of October 26, 2011, by and between Endologix, Inc. and Bard Peripheral Vascular, Inc. (Incorporated by reference to Exhibit 10.19 to Endologix Inc. Annual Report on Form 10-K, File No. 000-28440, filed with the SEC on March 6, 2012).
10.30	†	Settlement Agreement, dated October 16, 2012 by and among Endologix, Inc., Cook Incorporated, Cook Group and Cook Medical, Inc. (Incorporated by reference to Exhibit 10.22 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed with the SEC on March 14, 2013).
10.31		Base Capped Call Confirmation, dated December 4, 2013, between Endologix, Inc. and Bank of America, N.A. (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 6, 2013).
10.32		Additional Capped Call Confirmation, dated December 5, 2013, between Endologix, Inc. and Bank of America, N.A. (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on December 6, 2013).
12.1	(2)	Ratio of earnings to fixed charges.
14		Code of Ethics for Chief Executive Officer and Principal Financial Officers (Incorporated by reference to Exhibit 14 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed with the SEC on March 26, 2004).
16.1		Letter from PricewaterhouseCoopers LLP to the Securities and Exchange Commission, Dated August 15, 2012 (Incorporated by reference to Exhibit 16.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on August 15, 2012).
21.1	(2)	List of Subsidiaries.
23.1	(2)	Consent of Independent Registered Public Accounting Firm (KPMG LLP).
23.2	(2)	Consent of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP).
24.1	(2)	Power of Attorney (included on signature page hereto).
31.1	(2)	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.
31.2	(2)	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.
32.1	(3)	Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2	(3)	Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
101.INS	(2)	XBRL Instance Document
101.SCH	(2)	XBRL Taxonomy Extension Schema Document
101.CAL	(2)	XBRL Taxonomy Extension Calculation Link Base Document
101.DEF	(2)	XBRL Taxonomy Extension Definition Link Base Document
101.LAB	(2)	XBRL Taxonomy Extension Label Link Base Document
101.PRE	(2)	XBRL Taxonomy Extension Presentation Link Base Document

________________________


†	Portions of this exhibit are omitted and were filed separately with the Securities and Exchange Commission pursuant to Endologix application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.


(1)	These exhibits are identified as management contracts or compensatory plans or arrangements of Endologix pursuant to Item 15(a)(3) of Form 10-K.


(2)	Filed herewith


(3)	Furnished herewith and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Table of Contents

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.



ENDOLOGIX, INC.

By:		/ S / J OHN M C D ERMOTT
		John McDermott Chief Executive Officer and Chairman of the Board (Principal Executive Officer)

Date: March 3, 2014

POWER OF ATTORNEY

We, the undersigned directors and officers of Endologix, Inc., do hereby constitute and appoint John McDermott and Shelley B. Thunen, and each of them, as our true and lawful attorneys-in-fact and agents with power of substitution, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorney-in-fact and agent may deem necessary or advisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorney-in-fact and agent, shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Signature	Title	Date

/s/ JOHN McDERMOTT	Chief Executive Officer and Chairman of the Board	March 3, 2014
(John McDermott)	(Principal Executive Officer)

/s/ SHELLEY B. THUNEN	Chief Financial Officer	March 3, 2014
(Shelley B. Thunen )	(Principal Financial and Accounting Officer)


/s/ THOMAS F. ZENTY III	Director	March 3, 2014
(Thomas F. Zenty III)

/s/ DAN LEMAITRE	Director	March 3, 2014
(Dan Lemaitre)

/s/ THOMAS C. WILDER	Director	March 3, 2014
( Thomas C. Wilder )

/s/ GUIDO J. NEELS	Director	March 3, 2014
( Guido J. Neels )

/s/ GREGORY D. WALLER	Director	March 3, 2014
(Gregory D. Waller)

Exhibit 10.14

June 8, 2010

Todd G. Abraham

Dear Todd:

This letter will confirm our offer of employment to you for the Vice President, Operations position, reporting to the President & CEO at Endologix, Inc. The specifics of this offer are as follows:


Hire Date:	July 1, 2010


Salary:	Beginning August 1, 2010, an annual base salary of Two Hundred Sixty Thousand Dollars ($260,000) paid semi-monthly in the amount of Ten Thousand Eight Hundred Thirty Three Dollars and Thirty Three Cents ($10, 833.33).

The salary for the month of July 2010 will be Ten Thousand Eight Hundred Thirty Three Dollars and Thirty Three Cents ($10,833.33) and will be paid on the July 31, 2010 payroll.


Bonus:	Annual bonus target of 35% of base salary, contingent upon the achievement of company objectives. For 2010, you will be eligible for 50% of the annual bonus target or a minimum of $40,000 payable in January 2011.


Equity Participation:	Stock Option grant in the amount of 90,000 shares of common stock will be authorized under the Endologix Stock Option Plan. This grant will be priced on the first day of your employment and vest over a four (4) year period.


Group Benefits:	You will be eligible to participate in the company-sponsored insurance programs. Eligibility for you and your dependants is on the date of hire, following the return of all successfully completed enrollment applications.


401(k) Plan:	You will be eligible to participate in the Company’s 401(k) plan. Eligibility is on your date of hire, following the return of all successfully completed enrollment applications. You may contribute from 1 to 100% of your salary up to the annual limit of $16,500.00.

Employee Stock


Purchase Plan:	You will be eligible to participate in the ESPP according to the standard provisions of the plan.

Exhibit 10.14


Vacation:	You will be eligible for three weeks per full year accrued at a rate of 10 hours per month with a maximum accrual of 240 hours.


Formal Review:	A formal review process, including a salary review will occur on an annual basis beginning January 1, 2011.


Employment:	This offer is good for three working days after receipt of this letter and the terms of this offer are completely confidential in nature and may not be shared with any third party.

Endologix, Inc. abides by employment at-will, which permits the Company to change the terms and conditions of employment with or without cause or notice, including but not limited to termination, demotion, transfer, compensation, benefits, duties, and location of work. Employees are also free to quit at any time, with or without cause or prior notice. Neither this offer letter nor any other written or verbal communications are intended to create a guarantee of continued or long-term employment. All employment with the Company is at-will. This offer is also contingent upon your signing and complying with the Company’s Confidentiality Agreement which will be provided during orientation and needs to be signed and returned upon your first day of employment with the Company.

Among other terms, the Confidentiality Agreement contains a representation by you that you are not subject to any lawful agreements with any prior employer or other third party that would prevent you from accepting employment with the Company or performing your obligations under that Agreement. It also obligates you to preserve the Company’s trade secrets and intellectual property, and forbids you from using or disclosing any trade secrets or intellectual property belonging to a previous employer or other third party. The Immigration Reform and Control Act of 1986 requires all new employees to provide proof of citizenship and/or right to work documentation within three (3) days from the commencement of employment.

Todd, we look forward to having you join the management team at Endologix and helping us become a leader in the treatment of aortic disorders.


Sincerely,	Agreed and Accepted,


/s/ John McDermott	/s/ Todd G. Abraham

____________________

John McDermott Todd G. Abraham

President & Chief Executive Officer

Exhibit 10.15

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of July 1, 2010, by and between ENDOLOGIX, INC., a Delaware corporation (the “Company”), and Todd G. Abraham, an individual (the “Executive”).

R E C I T A L

The Company desires to employ Executive in the capacity hereinafter stated, and the Executive desires to enter into the employ of the Company in that capacity pursuant to the terms and conditions set forth herein.

A G R E E M E N T

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, the Company and the Executive, intending to be legally bound, hereby agree as follows:

1. Employment . The Company hereby agrees to employ the Executive as the Vice President, Operations of the Company, reporting to the Chief Executive Officer of the Company, and the Executive accepts such employment and agrees to devote substantially all his business time and efforts and skills on such reasonable duties as shall be assigned to him by the Company commensurate with such position.

2. Stock Options: Acceleration of Options . Notwithstanding any provisions of the Company’s option or stock incentive plan, or of the Executive’s stock option or restricted stock agreements, in the event of a “Corporate Transaction” or “Change in Control,” as defined below, during the period of the Executive’s employment with the Company, all of the Executive’s stock options shall vest in full and all rights of the Company to repurchase restricted stock of the Executive shall terminate.

For purposes hereof, “Change in Control” shall mean a change in ownership or control of the Company effected through the acquisition (other than in a public offering), directly or indirectly, by any person or related group of persons (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company), of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s stockholders which the Board does not recommend such stockholders to accept.

For purposes hereof, “Corporate Transaction” shall mean either of the following stockholder-approved transactions to which the Company is a party:

(a) A merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from the persons holding those securities immediately prior to such transaction; or

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(b) The sale, transfer or other disposition of all or substantially all of the Company’s assets; provided, that such transaction does not constitute a transfer to a related party under Treasury Regulation §1.409A-3(i)(5)(vii)(B).

3. Termination .

3.1 Termination by the Company for Cause . Any of the following acts or omissions shall constitute grounds for the Company to terminate the Executive’s employment pursuant to this Agreement for “cause”:

(a) Willful misconduct by Executive causing material harm to the Company but only if Executive shall not have discontinued such misconduct within 30 days after receiving written notice from the Company describing the misconduct and stating that the Company will consider the continuation of such misconduct as cause for termination of this Agreement;

(b) Any material act or omission by the Executive involving gross negligence in the performance of the Executive’s duties to, or material deviation from any of the policies or directives of, the Company, other than a deviation taken in good faith by the Executive for the benefit of the Company;

(c) Any illegal act by the Executive which materially and adversely affects the business of the Company, provided that the Company may suspend the Executive with pay while any allegation of such illegal act is investigated; or

(d) Any felony committed by Executive, as evidenced by conviction thereof, provided that the Company may suspend the Executive with pay while any allegation of such felonious act is investigated.

Termination by the Company for cause shall be accomplished by written notice to the Executive and, in the event of a termination pursuant to Sections 3.1(a), 3.1(b), and/or 3.1(c) above, shall be preceded by a written notice providing a reasonable opportunity for the Executive to correct his conduct.

3.2 Termination for Death or Disability . In addition to termination for cause pursuant to Section 3.1 hereof, the Executive’s employment pursuant to this Agreement shall be immediately terminated without notice by the Company (i) upon the death of the Executive or (ii) upon the Executive becoming totally disabled. For purposes of this Agreement, the term “totally disabled” means an inability of Executive, due to a physical or mental illness, injury or impairment, to perform a substantial portion of his duties for a period of one hundred eighty (180) or more consecutive days, as determined by a competent physician selected by the Company’s Board of Directors and reasonably agreed to by the Executive, following such one hundred eighty (180) day period.

3.3 Termination for Good Reason . Executive’s employment pursuant to this Agreement may be terminated by the Executive for “good reason” if the Executive voluntarily terminates his employment as a result of any of the following:

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Exhibit 10.15

(a) Without the Executive’s prior written consent, a material reduction in his then current Base Salary;

(b) Without the Executive’s prior written consent, a material reduction in the Executive’s authority, duties, or responsibilities; or

(c) Without Executive’s prior written consent, a material change in the geographic location of Executive’s principal place of employment.

In order for any of the foregoing conditions or events to constitute “good reason” under this Agreement, all of the following must occur: (i) the Executive must provide written notice to the Company of the occurrence of any of the foregoing events or conditions within ninety (90) days of the occurrence of such event or condition; (ii) the Company or any surviving entity shall have failed to cure such event or condition within the succeeding thirty (30) day period after the Company’s receipt of written notice of such event or condition from the Executive; and (iii) the Executive’s termination of employment following such thirty (30) day cure period must occur no later than the date that is two (2) years following the initial occurrence of one of the foregoing events or conditions

3.4 Termination Without Cause . The Company may terminate this Agreement, and the employment of the Executive under this Agreement, without cause, at any time upon at least thirty (30) days’ prior written notice to the Executive. This Section 3.4 shall not apply to a termination of the Executive by the Company as a result of a “Corporate Transaction” or “Change in Control,” but, instead, the provisions of Section 3.5 below shall apply.

3.5 Termination Due to Corporate Transaction or Change in Control . The Company may terminate this Agreement and the employment of the Executive under this Agreement, upon at least thirty (30) days’ prior written notice to the Executive in the event of a “Corporate Transaction” or “Change in Control,” as defined in Section 2, during the period of the Executive’s employment. Provided that subsections (i) through (iii) of Section 3.3 are satisfied, the Executive may terminate this Agreement and the employment of the Executive under this Agreement following the occurrence of a “Corporate Transaction” or “Change in Control,” as defined in Section 2, during the period of Executive’s employment if any of the following occur as a result of the “Corporate Transaction” or “Change in Control”: (i) a material reduction in Executive’s current Base Salary, or (ii) a material reduction in the Executive’s authority, duties, or responsibilities, or (iii) a material change in the geographic location of Executive’s principal place of employment.

3.6 Payments Upon Removal or Termination .

(a) If, during the term of this Agreement, the Executive resigns for one of the reasons stated in Section 3.3, or if the Company terminates Executive’s employment pursuant to Section 3.4 above, the Executive shall be entitled to the following compensation: (i) the portion of his then current Base Salary which has accrued through his date of termination; (ii) any payments for unused vacation and reimbursement expenses, which are due, accrued or payable at the date of Executive’s termination; (iii) severance payment in an amount equal to six-months of Executive’s then-current Base Salary (the “Severance Amount”); and (iv) to the extent not already vested under Section 2 or otherwise all of Executive’s options to purchase shares of the Company’s common stock and restricted stock shall vest by six additional months, and such options shall otherwise be exercisable in accordance with their terms. In addition, in such event, Executive shall be entitled to

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(a) a prorated payment equal to the target bonus amount for which Executive would be eligible for the year in which such resignation or termination occurred to be paid in lump sum within sixty (60) days after the Executive’s date of termination, and (b) continuation of the insurance benefits set forth in Exhibit A, for six-months. The payments provided by this paragraph 3.6(a) shall be Executive’s complete and exclusive remedy for any such termination.

(b) If, during the term of this Agreement, the Company terminates Executive’s employment pursuant to Section 3.5 above or the Executive terminates his employment pursuant to Section 3.5 above, the Executive shall be entitled to the following compensation: (i) the portion of his then current Base Salary which has accrued through his date of termination, (ii) any payments for unused vacation and reimbursement expenses, which are due, accrued or payable at the date of Executive’s termination, (iii) severance payment in an amount equal to twelve-months of Executive’s then-current Base Salary (the “Severance Amount”); and (iv) to the extent not already vested under Section 2 or otherwise all of Executive’s options to purchase shares of the Company’s common stock and restricted stock shall accelerate and automatically vest, and such options shall otherwise be exercisable in accordance with their terms. In addition, in such event Executive shall be entitled to (a) a prorated payment equal to the target bonus amount for which Executive would be eligible for the year in which such resignation or termination occurred to be paid in lump sum within sixty (60) days after the Executive’s date of termination, and (b) continuation of the insurance benefits set forth in Exhibit A, for twelve-months. The payments provided by this paragraph 3.6(b) shall be Executive’s complete and exclusive remedy for any such termination.

(c) All payments required to be made by the Company to the Executive pursuant to this Section 3 shall be paid on a regular basis in accordance with the Company’s normal payroll procedures and policies as in effect as of the date of Executive’s termination, including, without limitation, the Severance Amount which shall be paid in equal installments on the Company’s regular payroll dates in accordance with the Company’s normal payroll procedures and policies over the number of months immediately succeeding the date of termination that is equal to the number of months of Base Salary payable as the Severance Amount. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), the Executive’s right to receive the installment payments of the Severance Amount shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment shall at all times be considered a separate and distinct payment. Amounts payable to Executive under subsections (a)(ii) and (b)(ii) of this Section 3.6, as a reimbursement of expenses, shall be made in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and be paid on or before the last day of Executive’s taxable year following the taxable year in which Executive incurred the expenses. If the Company terminates the Executive’s employment pursuant to Sections 3.1 or 3.2, or if the Executive voluntarily resigns (except as provided in Section 3.3 or Section 3.5), then the Executive shall be entitled to only the compensation set forth in items (i) and (ii) of Section 3.6(a).

(d) To the extent that any or all of the payments and benefits provided for in this Agreement constitute “parachute payments” within the meaning of Section 280G of the Code and, but for this paragraph, would be subject to the excise tax imposed by Section 4999 of the Code, then at the Executive’s election:

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Exhibit 10.15

(i) The Executive shall receive all such payments and benefits the Executive is entitled to receive hereunder, and any liability for taxes pursuant to the above shall be the liability solely of the Executive; or

(ii) The aggregate amount of such payments and benefits shall be reduced such that the present value thereof (as determined under the Code and applicable regulations) is equal to 2.99 times the Executive’s “base amount” (as defined in Section 280G of the Code).

The determination of any reduction or increase of any payment or benefits under this paragraph pursuant to the foregoing provision shall be made by a nationally recognized public accounting firm chosen by the Company in good faith, and such determination shall be conclusive and binding on the Company and the Executive.

4. Section 409A .

4.1 Payment Delay . Notwithstanding anything herein to the contrary, to the extent any payments to Executive pursuant to Section 3 are treated as non-qualified deferred compensation subject to Section 409A of the Code, then (i) no amount shall be payable pursuant to such section unless Executive’s termination of employment constitutes a “separation from service” with the Company (as such term is defined in Treasury Regulation Section 1.409A-1(h) and any successor provision thereto) (a “Separation from Service”), and (ii) if Executive, at the time of her Separation from Service, is determined by the Company to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code and the Company determines that delayed commencement of any portion of the termination benefits payable to Executive pursuant to this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code (any such delayed commencement, a “Payment Delay”), then such portion of the Executive’s termination benefits described in Section 3 shall not be provided to Executive prior to the earlier of (A) the expiration of the six-month period measured from the date of the Executive’s Separation from Service, (B) the date of the Executive’s death, or (C) such earlier date as is permitted under Section 409A. Upon the expiration of the applicable Code Section 409A(a)(2)(B)(i) deferral period, all payments deferred pursuant to a Payment Delay shall be paid in a lump sum to Executive within 30 days following such expiration, and any remaining payments due under the Agreement shall be paid as otherwise provided herein. The determination of whether Executive is a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code as of the time of her Separation from Service shall made by the Company in accordance with the terms of Section 409A of the Code and applicable guidance thereunder (including without limitation Treasury Regulation Section 1.409A-1(i) and any successor provision thereto).

4.2 Exceptions to Payment Delay . Notwithstanding Section 4.1, to the maximum extent permitted by applicable law, amounts payable to Executive pursuant to Section 3 shall be made in reliance upon Treasury Regulation Section 1.409A-1(b)(9) (with respect to separation pay plans) or Treasury Regulation Section 1.409A-1(b)(4) (with respect to short-term deferrals). Accordingly, the severance payments provided for in Section 3 are not intended to provide for any deferral of compensation subject to Section 409A of the Code to the extent (i) the severance payments payable pursuant to Section 3, by their terms and determined as of the date of Executive’s Separation from Service, may not be made later than the 15 ^th day of the third calendar month

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following the later of (A) the end of the Company’s fiscal year in which Executive’s Separation from Service occurs or (B) the end of the calendar year in which Executive’s Separation from Service occurs, or (ii) (A) such severance payments do not exceed an amount equal to two times the lesser of (1) the amount of Executive’s annualized compensation based upon Executive’s annual rate of pay for the calendar year immediately preceding the calendar year in which Executive’s Separation from Service occurs (adjusted for any increase during the calendar year in which such Separation from Service occurs that would be expected to continue indefinitely had Executive remained employed with the Company) or (2) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) for the calendar year in which Executive’s Separation from Service occurs, and (B) such severance payments shall be completed no later than December 31 of the second calendar year following the calendar year in which Executive’s Separation from Service occurs.

4.3 Interpretation . To the extent the payments and benefits under this Agreement are subject to Section 409A of the Code, this Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) of the Code and the Treasury Regulations thereunder (and any applicable transition relief under Section 409A of the Code).

5. Assignment . This Agreement shall not be assignable, in whole or in part, by either party without the written consent of the other party, except that the Company may, without the consent of the Executive, assign its rights and obligations under this Agreement to an Affiliate or to any corporation, firm or other business entity (i) with or into which the Company may merge or consolidate, or (ii) to which the Company may sell or transfer all or substantially all of its assets. After any such assignment by the Company, the Company shall be discharged from all further liability hereunder and such assignee shall thereafter be deemed to be the Company for the purposes of all provisions of this Agreement including this Section 5.

6. Successors . This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts are still payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, or other designee or, if there be no such designee, to the Executive’s estate.

7. Miscellaneous .

7.1 Governing Law . This Agreement is made under and shall be governed by and construed in accordance with the laws of the State of California.

7.2 Prior Agreements . This Agreement contains the entire agreement of the parties relating to the subject matter hereof and supersedes all prior agreements and understanding with respect to such subject matter, including that certain Employment Agreement by and between the Company and Executive (the “Prior Employment Agreement”), and the parties hereto have made no agreements, representations or warranties relating to the subject matter of this Agreement which are not set forth herein. In addition, upon the execution of this Agreement, the Prior Employment Agreement shall automatically terminate and become null and void and of no force and effect

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without any further action by the parties thereto, and any rights or claims that Executive may have with respect to his employment shall be governed by this Agreement.

7.3 Arbitration . In the event of any controversy, claim or dispute between the parties hereto arising out of or relating to this Agreement, the matter shall be determined by arbitration, which shall take place in Orange County, California, under the rules of the American Arbitration Association. The arbitrator shall be a retired Superior Court judge mutually agreeable to the parties and if the parties cannot agree such person shall be chosen in accordance with the rules of the American Arbitration Association. The arbitrator shall be bound by applicable legal precedent in reaching his or her decision. Any judgment upon such award may be entered in any court having jurisdiction thereof. Any decision or award of such arbitrator shall be final and binding upon the parties and shall not be appealable. The parties hereby consent to the jurisdiction of such arbitrator and of any court having jurisdiction to enter judgment upon and enforce any action taken by such arbitrator. The fees payable to the American Arbitration Association and the arbitrator shall be paid by the Company.

7.4 Withholding Taxes . The Company may withhold from any salary and benefits payable under this Agreement all federal, state, city or other taxes or amounts as shall be required to be withheld pursuant to any law or governmental regulation or ruling.

7.5 Amendments . No amendment or modification of this Agreement shall be deemed effective unless made in writing signed by the parties hereto.

7.6 No Waiver . No term or condition of this Agreement shall be deemed to have been waived nor shall there be any estoppel to enforce any provisions of this Agreement, except by a statement in writing signed by the party against whom enforcement of the waiver or estoppel is sought. Any written waiver shall not be deemed a continuing waiver unless specifically stated, shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived.

7.7 Severability To the extent any provision of this Agreement shall be invalid or unenforceable, it shall be considered deleted herefrom and the remainder of such provision and of this Agreement shall be unaffected and shall continue in full force and effect.

7.8 Counterpart Execution . This Agreement may be executed by facsimile and in counterparts, each of which shall be deemed an original and all of which when taken together shall constitute but one and the same instrument.

7.9 Attorneys’ Fees . Should any legal action or arbitration be required to resolve any dispute over the meaning or enforceability of this Agreement or to enforce the terms of this Agreement, the prevailing party shall be entitled to recover its or his reasonable attorneys fees and costs incurred in such action, in addition to any other relief to which that party may be entitled.

7.10 Notices . Any notice required or permitted to be given hereunder shall be in writing and may be personally served or sent by United States Mail, and shall be deemed to have been given when personally served or two days after having been deposited in the United States Mail, registered mail, return receipt requested, with first class postage prepaid and properly addressed as follows:

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Exhibit 10.15



If to Executive:	Todd G. Abraham 11 Studebaker Irvine, CA 92618
If to the Company:	Endologix, Inc. 11 Studebaker Irvine, CA 92618 Attn: Chief Executive Officer

7.11 Proprietary Information and Inventions Agreement . Executive agrees to sign the Company’s standard form of employee proprietary information and inventions agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year set forth above.

“COMPANY”

ENDOLOGIX, INC., a Delaware corporation

/s/ John McDermott

John McDermott

President & Chief Executive Officer

“EXECUTIVE”

/s/ Todd G. Abraham

Todd G. Abraham

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Exhibit 10.15

EXHIBIT A

TODD G. ABRAHAM’S BENEFITS


•	Health Insurance


•	Dental Insurance


•	Vision Insurance


•	Prescription Drug Insurance


•	Group Life Insurance

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Exhibit 10.18

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “ Agreement ”), dated as of February 1, 2014 (the “ Effective Date ”), is entered into by and between ENDOLOGIX, Inc., a Delaware corporation (the “ Company ”), and John McDermott (the “ Executive ”).

RECITALS

WHEREAS, the Company and Executive previously entered into an Employment Agreement dated as of December 29, 2008 (the “ Prior Agreement ”); and

WHEREAS, the Company desires to continue to employ Executive and update certain terms and conditions of Executive’s employment, as evidenced by this Agreement, which is intended to supersede and replace the Prior Agreement in its entirety.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forth herein, the Company and Executive, intending to be legally bound, hereby agree as follows:

Employment; Term . The Company agrees to continue to employ Executive, and Executive agrees to continue to be employed by the Company, upon the terms and conditions set forth herein. This Agreement shall be for an initial term that continues in effect through the third anniversary of the Effective Date, which shall be extended automatically for one or more additional terms of one (1) year each, as of each anniversary of the Effective Date (such initial term or additional term referred to herein as the “ Term ”). The Agreement may be terminated by either party for any reason or no reason by providing the other party with at least thirty (30) days’ prior written notice.


2.	Definitions . For purposes of this Agreement, the following terms shall have the following meanings:


2.1	“ Board ” shall mean the Board of Directors of the Company.

2.2

“ Cause ” shall mean any of the following: (i) any act of fraud by Executive in connection with Executive’s responsibilities to the Company that is materially injurious to the Company; (ii) Executive’s conviction of a felony; (iii) a willful act by Executive that constitutes gross misconduct and is materially injurious to the Company; or (iv) Executive’s willful and material breach of a material obligation or material duty under this Agreement or the Company’s policies, which breach in the case of (iii) or (iv) is not cured within thirty (30) days after written notice thereof is received by Executive. Executive shall be afforded an opportunity to explain and defend such actions before the Board.


2.3	“ Change in Control ” includes each of the following events with respect to the Company:


(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

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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)

The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) the acquisition of assets or stock of another entity, in each case, other than a transaction which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least 50% of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction;

(c)

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


(d)	The approval by the stockholders of a plan or proposal for the liquidation or dissolution of the Company;

provided, that for purposes of this definition, a transaction or event described in paragraph (a), (b), (c) or (d) shall constitute a “Change in Control” only if such transaction or event occurs after the Effective Date and constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5), with respect to the Executive.


2.4	“ Code ” means the Internal Revenue Code of 1986, as amended.

2.5

“ Disability ” means the inability of Executive to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than six (6) months, as determined by a competent physician selected by the Board and reasonably agreed to by Executive following such six-month period.


2.6	“ Good Reason ” shall mean the occurrence of any of the following events or conditions without Executive’s written consent:

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(a)	a material reduction in Executive’s authority, duties or responsibilities including if Executive no longer holds the same position in the ultimate successor corporation following a Change in Control, whether the ultimate successor corporation is a public or private company;


(b)	a material diminution in the authority, duties, or responsibilities of the supervisor to whom Executive is required to report;


(c)	a material diminution in Executive’s Base Salary (as defined herein);


(d)	a material change in the geographic location at which Executive must perform Executive’s duties, except for reasonably required travel by the Company; or


(e)	any other action or inaction that constitutes a material breach by the Company of its obligations to Executive under this Agreement, including, without limitation, as specifically set forth herein.

Executive must provide written notice to the Company of the occurrence of any of the foregoing events or conditions without Executive’s written consent within ninety (90) days following the occurrence of such event. The Company shall have a period of thirty (30) days to cure such event or condition (if applicable) after receipt of written notice of such event from Executive. Any voluntary termination of Executive’s employment for Good Reason following such cure period must occur no later than the date that is two (2) years following the initial occurrence of one of the foregoing events or conditions without Executive’s written consent.


2.7	“ Involuntary Termination ” means Executive’s Separation from Service by reason of a (i) termination of Executive’s employment by the Company other than for Cause, death or Disability or (ii) Executive’s resignation for Good Reason.


2.8	“ Separation from Service, ” with respect to Executive, means Executive’s “separation from service,” as defined in Treasury Regulation Section 1.409A-1(h).


2.9	“ Specified Employee ” means a “specified employee,” as defined in Treasury Regulation Section 1.409A-1(i).


3.	Duties .

3.1

Position . Executive shall be employed as Chief Executive Officer, initially reporting to the Board of Directors of the Company, and shall have the duties and responsibilities customarily associated with such position and as may be reasonably assigned from time to time. Executive shall perform faithfully and diligently all functions associated with Executive’s position and all duties assigned to Executive.

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3.2

Exclusive Services . Executive shall devote such time as is reasonably necessary for Executive to fulfill Executive’s duties. This shall not preclude Executive from (a) devoting time to personal and family endeavors or investments, (b) serving on community and civic boards, (c) participating in industry or trade associations, or (d) serving on a board of a public or private company that does not directly compete with the Company; provided , that (x) such activities do not materially interfere with Executive’s duties to the Company, and (y) the Board of Directors shall approve Executive’s service on any board of directors.


3.3	Policies and Procedures . Executive agrees to comply with the Company’s policies and procedures as such may be modified from time to time.


4.	Compensation and Benefits . The Company shall pay or provide, as the case may be, to Executive the compensation and other benefits and rights set forth in this Section 4.

4.1

Base Salary . The Company shall pay to Executive an annual base salary of $520,000 per year (the “ Base Salary ”), payable in accordance with the Company’s usual payroll practices (and in any event no less frequently than monthly). Executive’s Base Salary shall be subject to an annual review by the Board following the Effective Date. In the event of an adjustment to the Base Salary, the term “Base Salary” shall refer to the adjusted amount.

4.2

Bonus . Executive shall be eligible to participate in such cash incentive compensation plan or program as may be approved by the Board (or committee thereof) from time to time for senior executives of the Company. Executive’s target bonus award under such plan(s) initially shall be ninety percent (90%) of Executive’s Base Salary but shall be adjusted annually in the sole and absolute discretion of the Board (or Compensation Committee thereof) (the “ Target Bonus ”). Any bonus amounts payable by the Company pursuant to this Section 4.2 shall be paid to Executive in accordance with the terms and conditions of the applicable cash incentive compensation plan or program.

4.3

Benefits . Executive shall be entitled to participate in all customary and usual benefits available to senior executive officers under the Company’s benefit plans and arrangements, including, without limitation, health, dental, vision and life insurance, premiums for which shall be paid by the Company and Executive, and any other employee benefit plan or arrangement made available in the future by the Company to its senior executives, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. The Company shall have the right to amend or delete any such benefit plan or arrangement made available by the Company to its senior executives and not otherwise specifically provided for herein.


4.4	Expenses; Travel . The Company shall reimburse Executive for all reasonable out-of-pocket business and travel expenses incurred in connection with the performance of Executive’s duties or professional activities on behalf of the Company in accordance with the Company’s reimbursement policies.

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4.5	Vacation . Executive shall be entitled to such periods of paid vacation each calendar year as provided from time to time under the Company’s vacation policy and consistent with vacation as afforded to the Company’s senior officers and commensurate with Executive’s position with the Company.

Acceleration of Equity Awards in the Event of a Change in Control . Upon a Change in Control, solely as a result of the Change in Control and without regard to Executive’s termination of employment (if any), all outstanding unvested equity awards held by Executive shall become fully vested and, if applicable, exercisable as to all shares of the Company’s common stock covered thereby, in each case as of the date of the Change in Control. In the event the Company’s equity incentive plan(s), the award agreements evidencing Executive’s outstanding equity awards, the definitive agreement effecting the Change in Control or any action by the Board or committee thereof provide for more favorable treatment to the Executive, Executive shall be entitled to the more favorable treatment. This provision shall apply notwithstanding anything to the contrary in any other written agreement between Executive and the Company (including any equity award agreement), which shall be deemed superseded to the extent necessary to give effect to this provision.


6.	Termination of Employment and Severance . Executive shall be entitled to receive benefits upon termination of Executive’s employment by the Company other than for Cause, death or disability or by Executive for Good Reason as set forth in this Section 6.


6.1	Involuntary Termination Prior to a Change in Control . In the event of Executive’s Involuntary Termination prior to a Change in Control, Executive shall be entitled to receive the benefits provided in this Section 6.1, subject to Executive’s compliance with Section 6.5:

(a)

The Company shall pay to Executive any fully earned but unpaid Base Salary, earned and accrued but unpaid bonus amounts for any calendar year prior to the calendar year in which Executive’s termination of employment occurs, unused and accrued vacation and unreimbursed business expenses through the date of termination at the rate then in effect, plus all other earned or accrued amounts to which Executive is entitled under any compensation plan or practice of the Company at the time of termination (the “ Accrued Obligations ”) as soon as practicable following the date of Executive’s Involuntary Termination.

(b)

Executive shall be entitled to receive a cash severance payment in an amount equal to 18 months of Executive’s Base Salary, payable in a lump sum cash payment on the first business day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service; provided, however , that if Executive is a Specified Employee of the date of Executive’s Separation from Service, such payment shall be made in accordance with Section 10.2 hereof.


(c)	Executive shall be entitled to receive a cash payment equal to the annual bonus for the year in which Executive’s Separation from Service occurs (as determined by the Company in its discretion based on estimated performance for such year as of the date

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of Executive’s Separation from Service), prorated for the number of calendar days worked in such calendar year, which shall be paid in a lump sum on the first business day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service.

(d)

Executive shall be entitled to receive continuation of group health insurance benefits for a period of 18 months, with the Company to continue to pay the same portion of the monthly premium for Executive and Executive’s eligible dependents as the Company paid immediately prior to Executive’s Involuntary Termination, provided, that Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), for Executive and Executive’s eligible dependents who were covered under the Company’s health plans as of the date of Executive’s Involuntary Termination.

(e)

Executive shall be entitled to receive reasonable outplacement services, on an in-kind basis, from a firm selected by the Company, suitable to Executive’s position and directly related to Executive’s Involuntary Termination, for a period of twelve (12) months following the date of the Involuntary Termination, in an aggregate amount of cost to the Company not to exceed $10,000. Notwithstanding the foregoing, Executive shall cease to receive outplacement services on the date Executive accepts employment with a subsequent employer.

(f)

Outstanding equity awards granted to Executive under the Company’s equity incentive plans on or prior to the Effective Date, to the extent unvested and unexercised (if applicable), shall receive additional vesting as follows (i) with respect to any outstanding stock option award that vests in installments, such award shall become vested and, if applicable, exercisable by an additional 12 months (the “ Additional Vesting Period ”), and (ii) with respect to any outstanding equity award that has performance-based (milestone) vesting, such award shall become fully vested and, if applicable, exercisable if the performance-based vesting date occurs during the Additional Vesting Period, in each case, as of the date of Executive’s Involuntary Termination. Outstanding equity awards granted to Executive under the Company’s equity incentive plans following the Effective Date shall not be entitled to any additional vesting as a result of Executive’s Involuntary Termination pursuant to this Agreement.

6.2

Involuntary Termination Upon or Following Change in Control . In the event of Executive’s Involuntary Termination upon or within twenty-four (24) months following a Change in Control, Executive shall be entitled to receive, in lieu of any severance benefits to which Executive may otherwise be entitled under Section 6.1 hereof, the benefits provided in this Section 6.2, subject to Executive’s compliance with Section 6.5:


(f)	The Company shall pay to Executive the Accrued Obligations as soon as practicable following the date of Executive’s Involuntary Termination;

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(g)

Executive shall be entitled to receive a cash severance payment in an amount equal to the sum of 24 months of Executive’s Base Salary plus Target Bonus, payable in a lump sum cash payment on the first business day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service; provided, however , that if Executive is a Specified Employee of the date of Executive’s Separation from Service, such payment shall be made in accordance with Section 10.2 hereof.


(h)	Executive shall be entitled to receive a cash payment equal to the Target Bonus for the year in which Executive’s Separation from Service occurs, which shall be paid in a lump sum on the first business day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service.

(i)

Executive shall be entitled to receive continuation of group health insurance benefits for a period of 24 months, with the Company to continue to pay the same portion of the monthly premium for Executive and Executive’s eligible dependents as the Company paid immediately prior to Executive’s Involuntary Termination, provided, that Executive elects continuation coverage pursuant to COBRA for Executive and Executive’s eligible dependents who were covered under the Company’s health plans as of the date of Executive’s Involuntary Termination.

(j)

(k)

All outstanding equity awards granted under the Company’s equity incentive plans held by Executive, to the extent unvested and unexercised, shall become fully vested and, if applicable, exercisable, in each case as of the date of Executive’s Involuntary Termination. This provision shall apply notwithstanding anything to the contrary in any other written agreement between Executive and the Company (including any equity award agreement), which shall be deemed superseded to the extent necessary to give effect to this provision.


6.3	Termination of Employment due to Executive’s Death or Disability . If Executive’s employment is terminated by the Company due to Executive’s death or Disability, the Company shall pay to Executive (or Executive’s estate or legal representative, if applicable) the Accrued Obligations as soon as practicable following the date of Executive’s termination of employment.


6.4	Other Terminations . If Executive’s employment is terminated at any time by the Company other than without Cause or due to Executive’s death or Disability (including a non-renewal

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of this Agreement) or by Executive without Good Reason, the Company shall not have any other or further obligations to Executive under this Agreement (including any financial obligations) except that Executive shall be entitled to receive the Accrued Obligations and any continuation of benefits required by COBRA or applicable law (for which Executive shall be solely responsible).

6.5

Release . As a condition to Executive’s receipt of any post-termination benefits pursuant to Section 6.1 or Section 6.2 hereof, Executive shall execute and deliver within fifty (50) days following the date of Executive’s Involuntary Termination, and not revoke within any revocation period required by law, a general release of all claims in favor of the Company (the “ Release ”) in the form attached hereto as Exhibit A .


6.6	Exclusive Remedy . Except as otherwise expressly required by law ( e.g. , COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other amounts hereunder (if any) accruing at the termination of Executive’s employment shall cease upon such termination.

6.7

No Mitigation . Except as otherwise set forth in Section 8, Executive shall not be required to mitigate the amount of any payment provided for in this Section 6 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 6 be reduced by any compensation earned by Executive as the result of employment by another employer or self-employment or by retirement benefits.

6.8

Payments in Lieu of COBRA Continuation . Notwithstanding Section 6.1(d) and Section 6.2(d), with regard to such COBRA continuation coverage, if the Company determines in its sole discretion that it cannot provide such coverage without potentially violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to Executive a taxable monthly payment in an amount equal to the monthly COBRA premium (which amount shall be based on the premiums for the first month of COBRA coverage).


7.	Limitation on Payments .

7.1

Notwithstanding any other provisions of this Agreement, in the event that any payment or benefit received or to be received by Executive (including any payment or benefit received in connection with a Change in Control or the termination of Executive’s employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payments and benefits, including the payments and benefits under Section 5 and Section 6 of this Agreement, being hereinafter referred to as the “ Total Payments ”) would be subject (in whole or part), to the excise tax imposed under Section 4999 of the Code (the “ Excise Tax ”), then, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, the cash severance payments shall first be reduced, and the non-cash severance payments shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments is

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subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced by the Company in its reasonable discretion in the following order: (A) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A of the Code, (B) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any stock option or other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code, (C) reduction of any other payments or benefits otherwise payable to Executive on a pro rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any stock option or other equity award with respect to the Company's common stock that are exempt from Section 409A of the Code, and (D) reduction of any payments attributable to the acceleration of vesting or payment with respect to any stock option or other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code.

7.2

For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of an accounting firm or compensation consulting firm with nationally recognized standing and substantial expertise and experience on Section 280G matters (“ Independent Advisors ”) selected by the Company, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of Independent Advisors, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base Amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.


8.	Certain Restrictive Covenants .

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8.1	Confidential Information . During the Term and thereafter, Executive shall continue to be bound by the restrictions in the Proprietary Information and Inventions Agreement with the Company (the “ Proprietary Rights Agreement ”).

8.2

Cooperation . During the Term and thereafter, Executive agrees to cooperate with the Company and its agents, accountants and attorneys concerning any matter with which Executive was involved during Executive’s employment. Such cooperation shall include, but not be limited to, providing information to, meeting with and reviewing documents provided by the Company and its agents, accountants and attorneys during normal business hours or other mutually agreeable hours upon reasonable notice and being available for depositions and hearings, if necessary and upon reasonable notice. If Executive’s cooperation is required after the termination of Executive’s employment, the Company shall reimburse Executive for any reasonable out of pocket expenses incurred in performing Executive’s obligations hereunder.

8.3

Return of the Company’s Property . Upon the termination of Executive’s employment in any manner, as a condition to Executive’s receipt of any post-termination benefits described in Section 6.1 or 6.2 of this Agreement, Executive shall immediately surrender to the Company all lists, books and records of, or in connection with, the Company’s business, and all other property belonging to the Company.

8.4

Non-Disparage . As an additional inducement for the Company to enter into this Agreement, Executive agrees that Executive shall refrain throughout the Term and for a period of one (1) year following the date of Executive’s termination of employment from publishing any oral or written statements about Company, any of its affiliates or any of the Company’s or such affiliates’ directors, officers, employees, consultants, agents or representatives that (a) are slanderous, libelous or defamatory, (b) disclose private information about or confidential information of the Company, any of its affiliates or any of Company’s or any such affiliates’ business affairs, directors, officers, employees, consultants, agents or representatives, or (c) place the Company, any of its affiliates, or any of the Company’s or any such affiliates’ directors, officers, employees, consultants, agents or representatives in a false light before the public. A violation or threatened violation of this prohibition may be enjoined by the courts. The rights afforded the Company and its affiliates under this provision are in addition to any and all rights and remedies otherwise afforded by law.

8.5

Non-Solicitation . As an additional inducement for the Company to enter into this Agreement, Executive agrees that for a period of one (1) year following the date of Executive’s termination of employment, Executive shall not, directly or indirectly knowingly induce any person in the employment of the Company to (A) terminate such employment, or (B) accept employment, or enter into any consulting arrangement, with anyone other than the Company.

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8.6	Rights and Remedies Upon Breach . If Executive breaches or threatens to commit a breach of any of the provisions of this Section 8 (the “ Restrictive Covenants ”), the Company shall have any rights and remedies available to the Company under law or in equity.

8.7

Severability of Covenants/Blue Penciling . If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions. If any court determines that any of the Restrictive Covenants, or any part thereof, are unenforceable because of the duration of such provision or the area covered thereby, such court shall have the power to reduce the duration or area of such provision and, in its reduced form, such provision shall then be enforceable and shall be enforced. Executive hereby waives any and all right to attack the validity of the Restrictive Covenants on the grounds of the breadth of their geographic scope or the length of their term.

8.8

Enforceability in Jurisdictions . The Company and Executive intend to and do hereby confer jurisdiction to enforce the Restrictive Covenants upon the courts of any jurisdiction within the geographical scope of such covenants. If the courts of any one or more of such jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the Company and Executive that such determination not bar or in any way affect the right of the Company to the relief provided above in the courts of any other jurisdiction within the geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, such covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants.

Indemnification . Executive shall be entitled to indemnification as an officer of the Company as provided in the Indemnification Agreement entered into with the Company dated February 1, 2014 (the “ Indemnification Agreement ”), along with the applicable provisions of the Company’s director and officer liability insurance (if any), bylaws and Delaware law, without regard to any future changes in Executive’s assignment or position.


10.	Section 409A of the Code .

10.1

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Executive deem reasonably necessary or appropriate, to comply with the requirements of Section 409A of the Code, while preserving the economic agreement of the parties. In the case of any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code, if any provision of the Agreement would cause such compensation, benefits or other payments to fail to so comply, such provision shall not be effective and shall be null and void with respect to such compensation, benefits or other payments, and such provision shall otherwise remain in full force and effect. The Executive’s right to receive installment payments of any severance payments or benefits under this Agreement shall be treated as a right to receive a series of separate payments, and accordingly, each installment payment shall at all times be considered a separate and distinct payment. To the extent any reimbursement of expenses under this Agreement is subject to Section 409A of the Code, the reimbursements shall be paid in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and be paid on or before the last day of Executive’s taxable year following the taxable year in which Executive incurred the expenses.

10.2

Delayed Distribution under Section 409A . If Executive is a Specified Employee on the date of Executive’s Separation from Service, any payments made under Section 6.1 or Section 6.2 and any other payments or benefits (or portion thereof) under this Agreement that are subject to Section 409A of the Code and payable upon Executive’s Separation from Service shall be delayed in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, and such payments or benefits shall be paid or distributed to Executive during the thirty (30) day period commencing on the earlier of (a) the expiration of the six-month period measured from the date of Executive’s Separation from Service or (b) the date of Executive’s death. Upon the expiration of the applicable six-month period under Section 409A(a)(2)(B)(i) of the Code, all payments deferred pursuant to this Section 10.2 shall be paid in a lump sum payment to Executive (or Executive’s estate, in the event of Executive’s death). Any remaining payments due under the Agreement shall be paid as otherwise provided herein.


11.	General Provisions .

11.1

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as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise. Executive shall not be entitled to assign any of Executive’s rights or obligations under this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amount is at such time payable to Executive hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee, or other designee or, if there be no such designee, to Executive’s estate.


11.2	Waiver . Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.

11.3

Attorneys’ Fees . Each side will bear its own attorneys’ fees in any dispute unless a statutory section at issue, if any, authorizes the award of attorneys’ fees to the prevailing party; provided , that in the event Executive’s employment is terminated by the Company without Cause or due to Executive’s death or Disability, or by Executive for Good Reason, in each case following a Change in Control, the Company shall pay the Executive’s attorneys’ fees, unless the arbitrator or court, as applicable, finds the claim to be frivolous, in bad faith or without merit.

11.4

Severability . In the event any provision of this Agreement is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby.

11.5

Interpretation; Construction . The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing the Company, but Executive has participated in the negotiation of its terms. Furthermore, Executive acknowledges that Executive has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.


11.6	Governing Law . This Agreement will be governed by and construed in accordance with the laws of the United States and the State of California applicable to contracts made and to be performed wholly within such State, and without regard to the conflicts of laws principles thereof.


11.7	Arbitration . In the event of any controversy, claim or dispute between the parties hereto arising out of or relating to this Agreement, the matter shall be determined by arbitration,

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which shall take place in Orange County, California, under the rules of the American Arbitration Association. The arbitrator shall be a retired Superior Court judge mutually agreeable to the parties and if the parties cannot agree such person shall be chosen in accordance with the rules of the American Arbitration Association. The arbitrator shall be bound by applicable legal precedent in reaching his or her decision. Any judgment upon such award may be entered in any court having jurisdiction thereof. Any decision or award of such arbitrator shall be final and binding upon the parties and shall not be appealable. The parties hereby consent to the jurisdiction of such arbitrator and of any court having jurisdiction to enter judgment upon and enforce any action taken by such arbitrator. The fees payable to the American Arbitration Association and the arbitrator shall be paid by the Company.

11.8

Notices . Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (a) by personal delivery when delivered personally; (b) by overnight courier upon written verification of receipt; (c) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to Executive at the last available address in the Company’s records and to the Company at its principal place of business, or such other address as either party may specify in writing.


11.9	Survival . Sections 2 (“Definitions”), 5 (“Termination and Severance”), 6 (“Acceleration of Equity Awards in the Event of a Change in Control”), 7 (“Limitation on Payment”), 8 (“Certain Restrictive Covenants”), 9 (“Indemnification”), and 11 (“General Provisions”) of this Agreement shall survive termination of Executive’s employment by the Company.

11.10

Entire Agreement . This Agreement, the Proprietary Rights Agreement, the Indemnification Agreement and any Company equity incentive plan and related award agreements evidencing outstanding equity awards held by Executive together constitute the entire agreement between the parties relating to this subject matter and supersede all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral, including the Prior Agreement; provided , that this Agreement shall supersede any other written agreement (including any equity award agreement) between Executive and the Company as expressly provided in Section 6.2(f). This Agreement may be amended or modified only with the written consent of Executive and an authorized representative of the Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever.


11.11	Counterparts . This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

(Signature Page Follows)

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THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.

EXECUTIVE

Dated: February 1, 2014 /s/ John McDermott

Print Name: John McDermott

ENDOLOGIX, INC.

Dated: February 1, 2014 By: /s/ Shelley B. Thunen

Name: Shelley B. Thunen

Title: Chief Financial Officer

EXHIBIT A

GENERAL RELEASE OF CLAIMS

THIS GENERAL RELEASE OF CLAIMS (“ Release ”) is entered into as of this _____ day of ________, ____, between [ ˜ ] (“ Executive ”), and Endologix, Inc., a Delaware corporation (the “ Company ”) (collectively referred to herein as the “ Parties ”).

WHEREAS, Executive and the Company are parties to that certain Employment Agreement dated as of February 1, 2014 (the “ Agreement ”);

WHEREAS, the Parties agree that Executive is entitled to certain severance benefits under the Agreement, subject to Executive’s execution of this Release; and

WHEREAS, the Company and Executive now wish fully and finally to resolve all matters between them.

NOW, THEREFORE, in consideration of, and subject to, the severance benefits payable to Executive pursuant to the Agreement, the adequacy of which is hereby acknowledged by Executive, and that Executive acknowledges that Executive would not otherwise be entitled to receive, Executive and the Company hereby agree as follows:


1.	General Release of Claims by Executive .

1.1

Executive, on behalf of himself or herself and his or her executors, heirs, administrators, representatives and assigns, hereby agrees to release and forever discharge the Company and all predecessors, successors and their respective parent corporations, affiliates, related, and/or subsidiary entities, and all of their past and present investors, directors, shareholders, officers, general or limited partners, employees, attorneys, agents and representatives, and the employee benefit plans in which Executive is or has been a participant by virtue of his or her employment with or service to the Company (collectively, the “ Company Releasees ”), from any and all claims, debts, demands, accounts, judgments, rights, causes of action, equitable relief, damages, costs, charges, complaints, obligations, promises, agreements, controversies, suits, expenses, compensation, responsibility and liability of every kind and character whatsoever (including attorneys’ fees and costs), whether in law or equity, known or unknown, asserted or unasserted, suspected or unsuspected (collectively, “ Claims ”), that Executive has or may have had against such entities based on any events or circumstances arising or occurring on or prior to the date hereof or on or prior to the date hereof, arising directly or indirectly out of, relating to, or in any other way involving in any manner whatsoever Executive’s employment by or service to the Company or the termination thereof, including any and all claims arising under federal, state, or local laws relating to employment, including without limitation claims of wrongful discharge, breach of express or implied contract, fraud, misrepresentation, defamation, or liability in tort, and claims of any kind that may be brought in any court or administrative agency including, without limitation, claims under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Section 2000, et seq .; the Americans with Disabilities Act, as amended, 42 U.S.C. § 12101 et seq .; the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 701 et seq .; the Civil Rights Act of 1866, and the Civil Rights Act of 1991; 42 U.S.C. Section 1981, et seq .; the Age Discrimination in Employment Act, as amended, 29 U.S.C. Section 621, et seq . (the “ ADEA ”); the Equal Pay Act, as amended, 29 U.S.C. Section 206(d); regulations of the Office of Federal Contract Compliance, 41 C.F.R. Section 60, et seq .; the Family and Medical Leave Act, as amended, 29 U.S.C. § 2601 et seq .; the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201 et seq .; the Employee Retirement Income Security Act, as amended, 29 U.S.C. § 1001 et seq .; and the California Fair Employment and Housing Act, California Government Code Section 12940, et seq .

Notwithstanding the generality of the foregoing, Executive does not release the following claims:


(a)	Claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law;


(b)	Claims for workers’ compensation insurance benefits under the terms of any worker’s compensation insurance policy or fund of the Company;


(c)	Claims pursuant to the terms and conditions of the federal law known as COBRA;


(d)	Claims for indemnity under the bylaws of the Company, as provided for by Delaware law or under any applicable insurance policy with respect to Executive’s liability as an employee, director or officer of the Company ;


(e)	Claims based on any right Executive may have to enforce the Company’s executory obligations under the Agreement; and


(f)	Claims Executive may have to vested or earned compensation and benefits.


1.2	EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS BEEN ADVISED OF AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH, IF KNOWN BY HIM OR HER, MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

BEING AWARE OF SAID CODE SECTION, EXECUTIVE HEREBY EXPRESSLY WAIVES ANY RIGHTS EXECUTIVE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

1.3

Executive acknowledges that this Release was presented to him or her on the date indicated above and that Executive is entitled to have 21 days’ time in which to consider it. Executive further acknowledges that the Company has advised Executive that Executive is waiving his or her rights under the ADEA, and that Executive may obtain advice concerning this Release from an attorney of his or her choice, and Executive has had sufficient time to consider the terms of this Release. Executive represents and acknowledges that if Executive executes this Release before 21 days have elapsed, Executive does so knowingly, voluntarily, and upon the advice and with the approval of Executive’s legal counsel (if any), and that Executive voluntarily waives any remaining consideration period.

1.4

Executive understands that after executing this Release, Executive has the right to revoke it within seven days after his or her execution of it. Executive understands that this Release will not become effective and enforceable unless the seven-day revocation period passes and Executive does not revoke the Release in writing. Executive understands that this Release may not be revoked after the seven-day revocation period has passed. Executive also understands that any revocation of this Release must be made in writing and delivered to the Company at its principal place of business within the seven-day period.

1.5

Executive understands that this Release shall become effective, irrevocable, and binding upon Executive on the eighth day after my execution of it, so long as Executive has not revoked it within the time period and in the manner specified in clause (d) above. Executive further understands that Executive will not be given any severance benefits under the Agreement until the effective date of this Release.

No Assignment . Executive represents and warrants to the Company Releasees that there has been no assignment or other transfer of any interest in any Claim that Executive may have against the Company Releasees, or any of them. Executive agrees to indemnify and hold harmless the Company Releasees from any liability, claims, demands, damages, costs, expenses and attorneys’ fees incurred as a result of any such assignment or transfer from Executive.


3.	Paragraph Headings . The headings of the several paragraphs in this Release are inserted solely for the convenience of the Parties and are not a part of and are not intended to govern, limit or aid in the construction of any term or provision hereof.


4.	Severability . The invalidity or unenforceability of any provision of this Release shall not affect the validity or enforceability of any other provision of this Release, which shall remain in full force and effect.


5.	Governing Law . This Release will be governed by and construed in accordance with the laws of the United States and the State of California applicable to contracts made and to be performed wholly within such State, and without regard to the conflicts of laws principles thereof.


6.	Counterparts . This Release may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.


7.	Construction . The language in all parts of this Release shall in all cases be construed simply, according to its fair meaning, and not strictly for or against any of the parties hereto. Without limitation, there shall be no presumption against any party on the ground that such party was responsible for drafting this Release or any part thereof.

Entire Agreement . This Release and the Agreement set forth the entire agreement of the Parties in respect of the subject matter contained herein and therein and supersede all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto, and any prior agreement of the Parties in respect of the subject matter contained herein.


9.	Amendment . No provision of this Release may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and such officer of the Company as may be specifically designated by the Board.

10.

Understanding and Authority . The Parties understand and agree that all terms of this Release are contractual and are not a mere recital, and represent and warrant that they are competent to covenant and agree as herein provided. The Parties have carefully read this Release in its entirety; fully understand and agree to its terms and provisions; and intend and agree that it is final and binding on all Parties.

IN WITNESS WHEREOF, and intending to be legally bound, the Parties have executed the foregoing Release as of the date first written above.

EXECUTIVE ENDOLOGIX, INC.

By:

Print Name: Print Name:

Title:

OC\1608076.7

Exhibit 10.19

EMPLOYMENT AGREEMENT

RECITALS

WHEREAS, the Company and Executive previously entered into an Employment Agreement dated as of January 2, 2013 (the “ Prior Agreement ”); and

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forth herein, the Company and Executive, intending to be legally bound, hereby agree as follows:


2.	Definitions . For purposes of this Agreement, the following terms shall have the following meanings:


2.1	“ Board ” shall mean the Board of Directors of the Company.

2.2


2.3	“ Change in Control ” includes each of the following events with respect to the Company:


(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

OC\1608076.7

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)

(c)


(d)	The approval by the stockholders of a plan or proposal for the liquidation or dissolution of the Company;


2.4	“ Code ” means the Internal Revenue Code of 1986, as amended.

2.5


2.6	“ Good Reason ” shall mean the occurrence of any of the following events or conditions without Executive’s written consent:

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(a)	a material reduction in Executive’s authority, duties or responsibilities including if Executive no longer holds the same position in the ultimate successor corporation following a Change in Control, whether the ultimate successor corporation is a public or private company;


(b)	a material diminution in the authority, duties, or responsibilities of the supervisor to whom Executive is required to report;


(c)	a material diminution in Executive’s Base Salary (as defined herein);


(d)	a material change in the geographic location at which Executive must perform Executive’s duties, except for reasonably required travel by the Company; or


(e)	any other action or inaction that constitutes a material breach by the Company of its obligations to Executive under this Agreement, including, without limitation, as specifically set forth herein.


2.7	“ Involuntary Termination ” means Executive’s Separation from Service by reason of a (i) termination of Executive’s employment by the Company other than for Cause, death or Disability or (ii) Executive’s resignation for Good Reason.


2.8	“ Separation from Service, ” with respect to Executive, means Executive’s “separation from service,” as defined in Treasury Regulation Section 1.409A-1(h).


2.9	“ Specified Employee ” means a “specified employee,” as defined in Treasury Regulation Section 1.409A-1(i).


3.	Duties .

3.1

Position . Executive shall be employed as Chief Financial Officer, initially reporting to the Chief Executive Officer of the Company, and shall have the duties and responsibilities customarily associated with such position and as may be reasonably assigned from time to time. Executive shall perform faithfully and diligently all functions associated with Executive’s position and all duties assigned to Executive.

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3.2


3.3	Policies and Procedures . Executive agrees to comply with the Company’s policies and procedures as such may be modified from time to time.


4.	Compensation and Benefits . The Company shall pay or provide, as the case may be, to Executive the compensation and other benefits and rights set forth in this Section 4.

4.1

Base Salary . The Company shall pay to Executive an annual base salary of $305,000 per year (the “ Base Salary ”), payable in accordance with the Company’s usual payroll practices (and in any event no less frequently than monthly). Executive’s Base Salary shall be subject to an annual review by the Board following the Effective Date. In the event of an adjustment to the Base Salary, the term “Base Salary” shall refer to the adjusted amount.

4.2

Bonus . Executive shall be eligible to participate in such cash incentive compensation plan or program as may be approved by the Board (or committee thereof) from time to time for senior executives of the Company. Executive’s target bonus award under such plan(s) initially shall be forty-five percent (45%) of Executive’s Base Salary but shall be adjusted annually in the sole and absolute discretion of the Board (or Compensation Committee thereof) (the “ Target Bonus ”). Any bonus amounts payable by the Company pursuant to this Section 4.2 shall be paid to Executive in accordance with the terms and conditions of the applicable cash incentive compensation plan or program.

4.3


4.4	Expenses; Travel . The Company shall reimburse Executive for all reasonable out-of-pocket business and travel expenses incurred in connection with the performance of Executive’s duties or professional activities on behalf of the Company in accordance with the Company’s reimbursement policies.

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4.5	Vacation . Executive shall be entitled to such periods of paid vacation each calendar year as provided from time to time under the Company’s vacation policy and consistent with vacation as afforded to the Company’s senior officers and commensurate with Executive’s position with the Company.


6.	Termination of Employment and Severance . Executive shall be entitled to receive benefits upon termination of Executive’s employment by the Company other than for Cause, death or disability or by Executive for Good Reason as set forth in this Section 6.


6.1	Involuntary Termination Prior to a Change in Control . In the event of Executive’s Involuntary Termination prior to a Change in Control, Executive shall be entitled to receive the benefits provided in this Section 6.1, subject to Executive’s compliance with Section 6.5:

(a)

(b)

Executive shall be entitled to receive a cash severance payment in an amount equal to six months of Executive’s Base Salary, payable in a lump sum cash payment on the first business day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service; provided, however , that if Executive is a Specified Employee of the date of Executive’s Separation from Service, such payment shall be made in accordance with Section 10.2 hereof.


(c)	Executive shall be entitled to receive a cash payment equal to the annual bonus for the year in which Executive’s Separation from Service occurs (as determined by the Company in its discretion based on estimated performance for such year as of the date

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(d)

Executive shall be entitled to receive continuation of group health insurance benefits for a period of six months, with the Company to continue to pay the same portion of the monthly premium for Executive and Executive’s eligible dependents as the Company paid immediately prior to Executive’s Involuntary Termination, provided, that Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), for Executive and Executive’s eligible dependents who were covered under the Company’s health plans as of the date of Executive’s Involuntary Termination.

(e)

(f)

Outstanding equity awards granted to Executive under the Company’s equity incentive plans on or prior to the Effective Date, to the extent unvested and unexercised (if applicable), shall receive additional vesting as follows (i) with respect to any outstanding stock option award that vests in installments, such award shall become vested and, if applicable, exercisable by an additional six months (the “ Additional Vesting Period ”), and (ii) with respect to any outstanding equity award that has performance-based (milestone) vesting, such award shall become fully vested and, if applicable, exercisable if the performance-based vesting date occurs during the Additional Vesting Period, in each case, as of the date of Executive’s Involuntary Termination. Outstanding equity awards granted to Executive under the Company’s equity incentive plans following the Effective Date shall not be entitled to any additional vesting as a result of Executive’s Involuntary Termination pursuant to this Agreement.

6.2


(f)	The Company shall pay to Executive the Accrued Obligations as soon as practicable following the date of Executive’s Involuntary Termination;

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(g)

Executive shall be entitled to receive a cash severance payment in an amount equal to the sum of 18 months of Executive’s Base Salary plus Target Bonus, payable in a lump sum cash payment on the first business day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service; provided, however , that if Executive is a Specified Employee of the date of Executive’s Separation from Service, such payment shall be made in accordance with Section 10.2 hereof.


(h)	Executive shall be entitled to receive a cash payment equal to the Target Bonus for the year in which Executive’s Separation from Service occurs, which shall be paid in a lump sum on the first business day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service.

(i)

Executive shall be entitled to receive continuation of group health insurance benefits for a period of 18 months, with the Company to continue to pay the same portion of the monthly premium for Executive and Executive’s eligible dependents as the Company paid immediately prior to Executive’s Involuntary Termination, provided, that Executive elects continuation coverage pursuant to COBRA for Executive and Executive’s eligible dependents who were covered under the Company’s health plans as of the date of Executive’s Involuntary Termination.

(j)

(k)


6.3	Termination of Employment due to Executive’s Death or Disability . If Executive’s employment is terminated by the Company due to Executive’s death or Disability, the Company shall pay to Executive (or Executive’s estate or legal representative, if applicable) the Accrued Obligations as soon as practicable following the date of Executive’s termination of employment.


6.4	Other Terminations . If Executive’s employment is terminated at any time by the Company other than without Cause or due to Executive’s death or Disability (including a non-renewal

OC\1608076.7

6.5


6.6	Exclusive Remedy . Except as otherwise expressly required by law ( e.g. , COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other amounts hereunder (if any) accruing at the termination of Executive’s employment shall cease upon such termination.

6.7

6.8


7.	Limitation on Payments .

7.1

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7.2


8.	Certain Restrictive Covenants .

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8.1	Confidential Information . During the Term and thereafter, Executive shall continue to be bound by the restrictions in the Proprietary Information and Inventions Agreement with the Company (the “ Proprietary Rights Agreement ”).

8.2

8.3

8.4

8.5

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8.6	Rights and Remedies Upon Breach . If Executive breaches or threatens to commit a breach of any of the provisions of this Section 8 (the “ Restrictive Covenants ”), the Company shall have any rights and remedies available to the Company under law or in equity.

8.7

8.8


10.	Section 409A of the Code .

10.1

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10.2


11.	General Provisions .

11.1

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11.2	Waiver . Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.

11.3

11.4

11.5


11.6	Governing Law . This Agreement will be governed by and construed in accordance with the laws of the United States and the State of California applicable to contracts made and to be performed wholly within such State, and without regard to the conflicts of laws principles thereof.


11.7	Arbitration . In the event of any controversy, claim or dispute between the parties hereto arising out of or relating to this Agreement, the matter shall be determined by arbitration,

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11.8


11.9	Survival . Sections 2 (“Definitions”), 5 (“Termination and Severance”), 6 (“Acceleration of Equity Awards in the Event of a Change in Control”), 7 (“Limitation on Payment”), 8 (“Certain Restrictive Covenants”), 9 (“Indemnification”), and 11 (“General Provisions”) of this Agreement shall survive termination of Executive’s employment by the Company.

11.10


11.11	Counterparts . This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

(Signature Page Follows)

OC\1608076.7

EXECUTIVE

Dated: February 1, 2014 /s/ Shelley B. Thunen

Print Name: Shelley B. Thunen

ENDOLOGIX, INC.

Dated: February 1, 2014 By: /s/ John McDermott

Name: John McDermott

Title: Chief Executive Officer

EXHIBIT A

GENERAL RELEASE OF CLAIMS

WHEREAS, Executive and the Company are parties to that certain Employment Agreement dated as of February 1, 2014 (the “ Agreement ”);

WHEREAS, the Parties agree that Executive is entitled to certain severance benefits under the Agreement, subject to Executive’s execution of this Release; and

WHEREAS, the Company and Executive now wish fully and finally to resolve all matters between them.


1.	General Release of Claims by Executive .

1.1

Notwithstanding the generality of the foregoing, Executive does not release the following claims:


(a)	Claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law;


(b)	Claims for workers’ compensation insurance benefits under the terms of any worker’s compensation insurance policy or fund of the Company;


(c)	Claims pursuant to the terms and conditions of the federal law known as COBRA;


(d)	Claims for indemnity under the bylaws of the Company, as provided for by Delaware law or under any applicable insurance policy with respect to Executive’s liability as an employee, director or officer of the Company ;


(e)	Claims based on any right Executive may have to enforce the Company’s executory obligations under the Agreement; and


(f)	Claims Executive may have to vested or earned compensation and benefits.


1.2	EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS BEEN ADVISED OF AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:

BEING AWARE OF SAID CODE SECTION, EXECUTIVE HEREBY EXPRESSLY WAIVES ANY RIGHTS EXECUTIVE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

1.3

1.4

1.5


3.	Paragraph Headings . The headings of the several paragraphs in this Release are inserted solely for the convenience of the Parties and are not a part of and are not intended to govern, limit or aid in the construction of any term or provision hereof.


4.	Severability . The invalidity or unenforceability of any provision of this Release shall not affect the validity or enforceability of any other provision of this Release, which shall remain in full force and effect.


5.	Governing Law . This Release will be governed by and construed in accordance with the laws of the United States and the State of California applicable to contracts made and to be performed wholly within such State, and without regard to the conflicts of laws principles thereof.


6.	Counterparts . This Release may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.


7.	Construction . The language in all parts of this Release shall in all cases be construed simply, according to its fair meaning, and not strictly for or against any of the parties hereto. Without limitation, there shall be no presumption against any party on the ground that such party was responsible for drafting this Release or any part thereof.


9.	Amendment . No provision of this Release may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and such officer of the Company as may be specifically designated by the Board.

10.

IN WITNESS WHEREOF, and intending to be legally bound, the Parties have executed the foregoing Release as of the date first written above.

EXECUTIVE ENDOLOGIX, INC.

By:

Print Name: Print Name:

Title:

OC\1608076.7

Exhibit 10.20

EMPLOYMENT AGREEMENT

RECITALS

WHEREAS, the Company and Executive previously entered into an Employment Agreement dated as of December 1, 2010 (the “ Prior Agreement ”); and

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forth herein, the Company and Executive, intending to be legally bound, hereby agree as follows:


2.	Definitions . For purposes of this Agreement, the following terms shall have the following meanings:


2.1	“ Board ” shall mean the Board of Directors of the Company.

2.2


2.3	“ Change in Control ” includes each of the following events with respect to the Company:


(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

OC\1608076.7

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)

(c)


(d)	The approval by the stockholders of a plan or proposal for the liquidation or dissolution of the Company;


2.4	“ Code ” means the Internal Revenue Code of 1986, as amended.

2.5


2.6	“ Good Reason ” shall mean the occurrence of any of the following events or conditions without Executive’s written consent:

OC\1608076.7


(a)	a material reduction in Executive’s authority, duties or responsibilities;


(b)	a material diminution in the authority, duties, or responsibilities of the supervisor to whom Executive is required to report;


(c)	a material diminution in Executive’s Base Salary (as defined herein);


(d)	a material change in the geographic location at which Executive must perform Executive’s duties, except for reasonably required travel by the Company; or


(e)	any other action or inaction that constitutes a material breach by the Company of its obligations to Executive under this Agreement, including, without limitation, as specifically set forth herein.


2.7	“ Involuntary Termination ” means Executive’s Separation from Service by reason of a (i) termination of Executive’s employment by the Company other than for Cause, death or Disability or (ii) Executive’s resignation for Good Reason.


2.8	“ Separation from Service, ” with respect to Executive, means Executive’s “separation from service,” as defined in Treasury Regulation Section 1.409A-1(h).


2.9	“ Specified Employee ” means a “specified employee,” as defined in Treasury Regulation Section 1.409A-1(i).


3.	Duties .

3.1

Position . Executive shall be employed as President, initially reporting to the Chief Executive Officer of the Company, and shall have the duties and responsibilities customarily associated with such position and as may be reasonably assigned from time to time. Executive shall perform faithfully and diligently all functions associated with Executive’s position and all duties assigned to Executive.


3.2	Exclusive Services . Executive shall devote such time as is reasonably necessary for Executive to fulfill Executive’s duties. This shall not preclude Executive from (a) devoting time to personal and family endeavors or investments, (b) serving on community and civic boards, (c) participating in industry or trade associations, or (d) serving on a board of a

OC\1608076.7

public or private company that does not directly compete with the Company; provided , that (x) such activities do not materially interfere with Executive’s duties to the Company, and (y) the Chief Executive Officer shall approve Executive’s service on any board of directors.


3.3	Policies and Procedures . Executive agrees to comply with the Company’s policies and procedures as such may be modified from time to time.


4.	Compensation and Benefits . The Company shall pay or provide, as the case may be, to Executive the compensation and other benefits and rights set forth in this Section 4.

4.1

Base Salary . The Company shall pay to Executive an annual base salary of $380,000 per year (the “ Base Salary ”), payable in accordance with the Company’s usual payroll practices (and in any event no less frequently than monthly). Executive’s Base Salary shall be subject to an annual review by the Board following the Effective Date. In the event of an adjustment to the Base Salary, the term “Base Salary” shall refer to the adjusted amount.

4.2

Bonus . Executive shall be eligible to participate in such cash incentive compensation plan or program as may be approved by the Board (or committee thereof) from time to time for senior executives of the Company. Executive’s target bonus award under such plan(s) initially shall be sixty percent (60%) of Executive’s Base Salary but shall be adjusted annually in the sole and absolute discretion of the Board (or Compensation Committee thereof) (the “ Target Bonus ”). Any bonus amounts payable by the Company pursuant to this Section 4.2 shall be paid to Executive in accordance with the terms and conditions of the applicable cash incentive compensation plan or program.

4.3


4.4	Expenses; Travel . The Company shall reimburse Executive for all reasonable out-of-pocket business and travel expenses incurred in connection with the performance of Executive’s duties or professional activities on behalf of the Company in accordance with the Company’s reimbursement policies.


4.5	Vacation . Executive shall be entitled to such periods of paid vacation each calendar year as provided from time to time under the Company’s vacation policy and consistent with vacation as afforded to the Company’s senior officers and commensurate with Executive’s position with the Company.

OC\1608076.7


6.	Termination of Employment and Severance . Executive shall be entitled to receive benefits upon termination of Executive’s employment by the Company other than for Cause, death or disability or by Executive for Good Reason as set forth in this Section 6.


6.1	Involuntary Termination Prior to a Change in Control . In the event of Executive’s Involuntary Termination prior to a Change in Control, Executive shall be entitled to receive the benefits provided in this Section 6.1, subject to Executive’s compliance with Section 6.5:

(a)

(b)

(c)

Executive shall be entitled to receive a cash payment equal to the annual bonus for the year in which Executive’s Separation from Service occurs (as determined by the Company in its discretion based on estimated performance for such year as of the date of Executive’s Separation from Service), prorated for the number of calendar days worked in such calendar year, which shall be paid in a lump sum on the first business day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service.

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(d)

(e)

(f)

Outstanding equity awards granted to Executive under the Company’s equity incentive plans on or prior to the Effective Date, to the extent unvested and unexercised (if applicable), shall receive additional vesting as follows (i) with respect to any outstanding stock option award that vests in installments, such award shall become vested and, if applicable, exercisable by an additional six months (the “ Additional Vesting Period ”), and (ii) with respect to any outstanding equity award that has performance-based (milestone) vesting, such award shall become fully vested and, if applicable, exercisable if the performance-based vesting date occurs during the Additional Vesting Period, in each case, as of the date of Executive’s Involuntary Termination. Outstanding equity awards granted to Executive under the Company’s equity incentive plans following the Effective Date shall not be entitled to any additional vesting as a result of Executive’s Involuntary Termination pursuant to this Agreement.

6.2


(f)	The Company shall pay to Executive the Accrued Obligations as soon as practicable following the date of Executive’s Involuntary Termination;


(g)	Executive shall be entitled to receive a cash severance payment in an amount equal to the sum of 18 months of Executive’s Base Salary plus Target Bonus, payable in a lump sum cash payment on the first business day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service; provided,

OC\1608076.7

however , that if Executive is a Specified Employee of the date of Executive’s Separation from Service, such payment shall be made in accordance with Section 10.2 hereof.


(h)	Executive shall be entitled to receive a cash payment equal to the Target Bonus for the year in which Executive’s Separation from Service occurs, which shall be paid in a lump sum on the first business day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service.

(i)

Executive shall be entitled to receive continuation of group health insurance benefits for a period of 18 months, with the Company to continue to pay the same portion of the monthly premium for Executive and Executive’s eligible dependents as the Company paid immediately prior to Executive’s Involuntary Termination, provided, that Executive elects continuation coverage pursuant to COBRA for Executive and Executive’s eligible dependents who were covered under the Company’s health plans as of the date of Executive’s Involuntary Termination.

(j)

(k)


6.3	Termination of Employment due to Executive’s Death or Disability . If Executive’s employment is terminated by the Company due to Executive’s death or Disability, the Company shall pay to Executive (or Executive’s estate or legal representative, if applicable) the Accrued Obligations as soon as practicable following the date of Executive’s termination of employment.

6.4

Other Terminations . If Executive’s employment is terminated at any time by the Company other than without Cause or due to Executive’s death or Disability (including a non-renewal of this Agreement) or by Executive without Good Reason, the Company shall not have any other or further obligations to Executive under this Agreement (including any financial obligations) except that Executive shall be entitled to receive the Accrued Obligations and

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any continuation of benefits required by COBRA or applicable law (for which Executive shall be solely responsible).

6.5


6.6	Exclusive Remedy . Except as otherwise expressly required by law ( e.g. , COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other amounts hereunder (if any) accruing at the termination of Executive’s employment shall cease upon such termination.

6.7

6.8


7.	Limitation on Payments .

7.1

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personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced by the Company in its reasonable discretion in the following order: (A) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A of the Code, (B) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any stock option or other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code, (C) reduction of any other payments or benefits otherwise payable to Executive on a pro rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any stock option or other equity award with respect to the Company's common stock that are exempt from Section 409A of the Code, and (D) reduction of any payments attributable to the acceleration of vesting or payment with respect to any stock option or other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code.

7.2


8.	Certain Restrictive Covenants .


8.1	Confidential Information . During the Term and thereafter, Executive shall continue to be bound by the restrictions in the Proprietary Information and Inventions Agreement with the Company (the “ Proprietary Rights Agreement ”).

OC\1608076.7

8.2

8.3

8.4

8.5


8.6	Rights and Remedies Upon Breach . If Executive breaches or threatens to commit a breach of any of the provisions of this Section 8 (the “ Restrictive Covenants ”), the Company shall have any rights and remedies available to the Company under law or in equity.


8.7	Severability of Covenants/Blue Penciling . If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the Restrictive

OC\1608076.7

Covenants shall not thereby be affected and shall be given full effect, without regard to the invalid portions. If any court determines that any of the Restrictive Covenants, or any part thereof, are unenforceable because of the duration of such provision or the area covered thereby, such court shall have the power to reduce the duration or area of such provision and, in its reduced form, such provision shall then be enforceable and shall be enforced. Executive hereby waives any and all right to attack the validity of the Restrictive Covenants on the grounds of the breadth of their geographic scope or the length of their term.

8.8


10.	Section 409A of the Code .

10.1

Compliance with Section 409A . To the maximum extent permissible by applicable law, the payments and benefits payable under this Agreement shall be interpreted to be exempt from Section 409A of the Code, including, without limitation, the exemptions pursuant to Treasury Regulation Sections 1.409A-1(b)(4) and 1.409A-1(b)(9). To the extent the payments and benefits under this Agreement are subject to Section 409A of the Code, this Agreement shall be interpreted, construed and administered in a manner that satisfies the requirements of Sections 409A(a)(2), (3) and (4) of the Code and the Treasury Regulations thereunder. If the Company and Executive determine that any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code do not comply with Section 409A of the Code, the Company and Executive agree to amend this Agreement, or take such other actions as the Company and Executive deem reasonably necessary or appropriate, to comply with the requirements of Section 409A of the Code, while preserving the economic agreement of the parties. In the case of any compensation, benefits or other payments that are payable under this Agreement and intended to comply with Sections 409A(a)(2), (3) and (4) of the Code, if any provision of the Agreement would cause such compensation, benefits or other payments to fail to so

OC\1608076.7

comply, such provision shall not be effective and shall be null and void with respect to such compensation, benefits or other payments, and such provision shall otherwise remain in full force and effect. The Executive’s right to receive installment payments of any severance payments or benefits under this Agreement shall be treated as a right to receive a series of separate payments, and accordingly, each installment payment shall at all times be considered a separate and distinct payment. To the extent any reimbursement of expenses under this Agreement is subject to Section 409A of the Code, the reimbursements shall be paid in accordance with Treasury Regulation Section 1.409A-3(i)(1)(iv) and be paid on or before the last day of Executive’s taxable year following the taxable year in which Executive incurred the expenses.

10.2


11.	General Provisions .

11.1

Successors and Assigns . The rights of the Company under this Agreement may, without the consent of Executive, be assigned by the Company, in its sole and unfettered discretion, to any person, firm, corporation or other business entity that at any time, whether by purchase, merger or otherwise, directly or indirectly, acquires all or substantially all of the assets or business of the Company. The Company will require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and to agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place; provided, however , that no such assumption shall relieve the Company of its obligations hereunder. As used in this Agreement, the “ Company ” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise. Executive shall not be entitled to assign any of Executive’s rights or obligations under this Agreement. This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amount is at such time

OC\1608076.7

payable to Executive hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee, or other designee or, if there be no such designee, to Executive’s estate.


11.2	Waiver . Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.

11.3

11.4

11.5


11.6	Governing Law . This Agreement will be governed by and construed in accordance with the laws of the United States and the State of California applicable to contracts made and to be performed wholly within such State, and without regard to the conflicts of laws principles thereof.

11.7

Arbitration . In the event of any controversy, claim or dispute between the parties hereto arising out of or relating to this Agreement, the matter shall be determined by arbitration, which shall take place in Orange County, California, under the rules of the American Arbitration Association. The arbitrator shall be a retired Superior Court judge mutually agreeable to the parties and if the parties cannot agree such person shall be chosen in accordance with the rules of the American Arbitration Association. The arbitrator shall be bound by applicable legal precedent in reaching his or her decision. Any judgment upon

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such award may be entered in any court having jurisdiction thereof. Any decision or award of such arbitrator shall be final and binding upon the parties and shall not be appealable. The parties hereby consent to the jurisdiction of such arbitrator and of any court having jurisdiction to enter judgment upon and enforce any action taken by such arbitrator. The fees payable to the American Arbitration Association and the arbitrator shall be paid by the Company.

11.8


11.9	Survival . Sections 2 (“Definitions”), 5 (“Termination and Severance”), 6 (“Acceleration of Equity Awards in the Event of a Change in Control”), 7 (“Limitation on Payment”), 8 (“Certain Restrictive Covenants”), 9 (“Indemnification”), and 11 (“General Provisions”) of this Agreement shall survive termination of Executive’s employment by the Company.

11.10


11.11	Counterparts . This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

(Signature Page Follows)

OC\1608076.7

EXECUTIVE

Dated: February 1, 2014 /s/ Robert Mitchell

Print Name: Robert Mitchell

ENDOLOGIX, INC.

Dated: February 1, 2014 By: /s/ John McDermott

Name: John McDermott

Title: Chief Executive Officer

EXHIBIT A

GENERAL RELEASE OF CLAIMS

WHEREAS, Executive and the Company are parties to that certain Employment Agreement dated as of February 1, 2014 (the “ Agreement ”);

WHEREAS, the Parties agree that Executive is entitled to certain severance benefits under the Agreement, subject to Executive’s execution of this Release; and

WHEREAS, the Company and Executive now wish fully and finally to resolve all matters between them.


1.	General Release of Claims by Executive .

1.1

Notwithstanding the generality of the foregoing, Executive does not release the following claims:


(a)	Claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law;


(b)	Claims for workers’ compensation insurance benefits under the terms of any worker’s compensation insurance policy or fund of the Company;


(c)	Claims pursuant to the terms and conditions of the federal law known as COBRA;


(d)	Claims for indemnity under the bylaws of the Company, as provided for by Delaware law or under any applicable insurance policy with respect to Executive’s liability as an employee, director or officer of the Company ;


(e)	Claims based on any right Executive may have to enforce the Company’s executory obligations under the Agreement; and


(f)	Claims Executive may have to vested or earned compensation and benefits.


1.2	EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS BEEN ADVISED OF AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:

BEING AWARE OF SAID CODE SECTION, EXECUTIVE HEREBY EXPRESSLY WAIVES ANY RIGHTS EXECUTIVE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

1.3

1.4

1.5


3.	Paragraph Headings . The headings of the several paragraphs in this Release are inserted solely for the convenience of the Parties and are not a part of and are not intended to govern, limit or aid in the construction of any term or provision hereof.


4.	Severability . The invalidity or unenforceability of any provision of this Release shall not affect the validity or enforceability of any other provision of this Release, which shall remain in full force and effect.


5.	Governing Law . This Release will be governed by and construed in accordance with the laws of the United States and the State of California applicable to contracts made and to be performed wholly within such State, and without regard to the conflicts of laws principles thereof.


6.	Counterparts . This Release may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.


7.	Construction . The language in all parts of this Release shall in all cases be construed simply, according to its fair meaning, and not strictly for or against any of the parties hereto. Without limitation, there shall be no presumption against any party on the ground that such party was responsible for drafting this Release or any part thereof.


9.	Amendment . No provision of this Release may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and such officer of the Company as may be specifically designated by the Board.

10.

IN WITNESS WHEREOF, and intending to be legally bound, the Parties have executed the foregoing Release as of the date first written above.

EXECUTIVE ENDOLOGIX, INC.

By:

Print Name: Print Name:

Title:

OC\1608076.7

Exhibit 10.21

EMPLOYMENT AGREEMENT

RECITALS

WHEREAS, the Company and Executive previously entered into an Employment Agreement dated as of July 1, 2010 (the “ Prior Agreement ”); and

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forth herein, the Company and Executive, intending to be legally bound, hereby agree as follows:


2.	Definitions . For purposes of this Agreement, the following terms shall have the following meanings:


2.1	“ Board ” shall mean the Board of Directors of the Company.

2.2


2.3	“ Change in Control ” includes each of the following events with respect to the Company:


(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

OC\1608076.7

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)

(c)


(d)	The approval by the stockholders of a plan or proposal for the liquidation or dissolution of the Company;


2.4	“ Code ” means the Internal Revenue Code of 1986, as amended.

2.5


2.6	“ Good Reason ” shall mean the occurrence of any of the following events or conditions without Executive’s written consent:

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(a)	a material reduction in Executive’s authority, duties or responsibilities;


(b)	a material diminution in the authority, duties, or responsibilities of the supervisor to whom Executive is required to report;


(c)	a material diminution in Executive’s Base Salary (as defined herein);


(d)	a material change in the geographic location at which Executive must perform Executive’s duties, except for reasonably required travel by the Company; or


(e)	any other action or inaction that constitutes a material breach by the Company of its obligations to Executive under this Agreement, including, without limitation, as specifically set forth herein.


2.7	“ Involuntary Termination ” means Executive’s Separation from Service by reason of a (i) termination of Executive’s employment by the Company other than for Cause, death or Disability or (ii) Executive’s resignation for Good Reason.


2.8	“ Separation from Service, ” with respect to Executive, means Executive’s “separation from service,” as defined in Treasury Regulation Section 1.409A-1(h).


2.9	“ Specified Employee ” means a “specified employee,” as defined in Treasury Regulation Section 1.409A-1(i).


3.	Duties .

3.1

Position . Executive shall be employed as Vice President, Operations, initially reporting to the Chief Executive Officer, and shall have the duties and responsibilities customarily associated with such position and as may be reasonably assigned from time to time. Executive shall perform faithfully and diligently all functions associated with Executive’s position and all duties assigned to Executive.


3.2	Exclusive Services . Executive shall devote such time as is reasonably necessary for Executive to fulfill Executive’s duties. This shall not preclude Executive from (a) devoting time to personal and family endeavors or investments, (b) serving on community and civic boards, (c) participating in industry or trade associations, or (d) serving on a board of a

OC\1608076.7


3.3	Policies and Procedures . Executive agrees to comply with the Company’s policies and procedures as such may be modified from time to time.


4.	Compensation and Benefits . The Company shall pay or provide, as the case may be, to Executive the compensation and other benefits and rights set forth in this Section 4.

4.1

4.2

Bonus . Executive shall be eligible to participate in such cash incentive compensation plan or program as may be approved by the Board (or committee thereof) from time to time for senior executives of the Company. Executive’s target bonus award under such plan(s) initially shall be forty percent (40%) of Executive’s Base Salary but shall be adjusted annually in the sole and absolute discretion of the Board (or Compensation Committee thereof) (the “ Target Bonus ”). In addition, for the year ended December 31, 2014 only, Executive will be eligible for a bonus of $50,000 for successful facility move and no missed surgery cases due to inventory shortages. Any bonus amounts payable by the Company pursuant to this Section 4.2 shall be paid to Executive in accordance with the terms and conditions of the applicable cash incentive compensation plan or program.

4.3


4.4	Expenses; Travel . The Company shall reimburse Executive for all reasonable out-of-pocket business and travel expenses incurred in connection with the performance of Executive’s duties or professional activities on behalf of the Company in accordance with the Company’s reimbursement policies.


4.5	Vacation . Executive shall be entitled to such periods of paid vacation each calendar year as provided from time to time under the Company’s vacation policy and consistent with

OC\1608076.7

vacation as afforded to the Company’s senior officers and commensurate with Executive’s position with the Company.


6.	Termination of Employment and Severance . Executive shall be entitled to receive benefits upon termination of Executive’s employment by the Company other than for Cause, death or disability or by Executive for Good Reason as set forth in this Section 6.


6.1	Involuntary Termination Prior to a Change in Control . In the event of Executive’s Involuntary Termination prior to a Change in Control, Executive shall be entitled to receive the benefits provided in this Section 6.1, subject to Executive’s compliance with Section 6.5:

(a)

(b)

(c)

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day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service.

(d)

(e)

(f)

Outstanding equity awards granted to Executive under the Company’s equity incentive plans on or prior to the Effective Date, to the extent unvested and unexercised (if applicable), shall receive additional vesting as follows (i) with respect to any outstanding stock option award that vests in installments, such award shall become vested and, if applicable, exercisable by an additional six months (the “ Additional Vesting Period ”), and (ii) with respect to any outstanding equity award that has performance-based (milestone) vesting, such award shall become fully vested and, if applicable, exercisable if the performance-based vesting date occurs during the Additional Vesting Period, in each case, as of the date of Executive’s Involuntary Termination. Outstanding equity awards granted to Executive under the Company’s equity incentive plans following the Effective Date shall not be entitled to any additional vesting as a result of Executive’s Involuntary Termination pursuant to this Agreement.

6.2


(f)	The Company shall pay to Executive the Accrued Obligations as soon as practicable following the date of Executive’s Involuntary Termination;


(g)	Executive shall be entitled to receive a cash severance payment in an amount equal to the sum of 18 months of Executive’s Base Salary plus Target Bonus, payable in a lump

OC\1608076.7

sum cash payment on the first business day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service; provided, however , that if Executive is a Specified Employee of the date of Executive’s Separation from Service, such payment shall be made in accordance with Section 10.2 hereof.


(h)	Executive shall be entitled to receive a cash payment equal to the Target Bonus for the year in which Executive’s Separation from Service occurs, which shall be paid in a lump sum on the first business day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service.

(i)

Executive shall be entitled to receive continuation of group health insurance benefits for a period of 18 months, with the Company to continue to pay the same portion of the monthly premium for Executive and Executive’s eligible dependents as the Company paid immediately prior to Executive’s Involuntary Termination, provided, that Executive elects continuation coverage pursuant to COBRA for Executive and Executive’s eligible dependents who were covered under the Company’s health plans as of the date of Executive’s Involuntary Termination.

(j)

(k)


6.3	Termination of Employment due to Executive’s Death or Disability . If Executive’s employment is terminated by the Company due to Executive’s death or Disability, the Company shall pay to Executive (or Executive’s estate or legal representative, if applicable) the Accrued Obligations as soon as practicable following the date of Executive’s termination of employment.


6.4	Other Terminations . If Executive’s employment is terminated at any time by the Company other than without Cause or due to Executive’s death or Disability (including a non-renewal of this Agreement) or by Executive without Good Reason, the Company shall not have any other or further obligations to Executive under this Agreement (including any financial

OC\1608076.7

obligations) except that Executive shall be entitled to receive the Accrued Obligations and any continuation of benefits required by COBRA or applicable law (for which Executive shall be solely responsible).

6.5


6.6	Exclusive Remedy . Except as otherwise expressly required by law ( e.g. , COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other amounts hereunder (if any) accruing at the termination of Executive’s employment shall cease upon such termination.

6.7

6.8


7.	Limitation on Payments .

7.1

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Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced by the Company in its reasonable discretion in the following order: (A) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A of the Code, (B) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any stock option or other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code, (C) reduction of any other payments or benefits otherwise payable to Executive on a pro rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any stock option or other equity award with respect to the Company's common stock that are exempt from Section 409A of the Code, and (D) reduction of any payments attributable to the acceleration of vesting or payment with respect to any stock option or other equity award with respect to the Company’s common stock that are exempt from Section 409A of the Code.

7.2


8.	Certain Restrictive Covenants .

OC\1608076.7


8.1	Confidential Information . During the Term and thereafter, Executive shall continue to be bound by the restrictions in the Proprietary Information and Inventions Agreement with the Company (the “ Proprietary Rights Agreement ”).

8.2

8.3

8.4

8.5

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8.6	Rights and Remedies Upon Breach . If Executive breaches or threatens to commit a breach of any of the provisions of this Section 8 (the “ Restrictive Covenants ”), the Company shall have any rights and remedies available to the Company under law or in equity.

8.7

8.8


10.	Section 409A of the Code .

10.1

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10.2


11.	General Provisions .

11.1

OC\1608076.7


11.2	Waiver . Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.

11.3

11.4

11.5


11.6	Governing Law . This Agreement will be governed by and construed in accordance with the laws of the United States and the State of California applicable to contracts made and to be performed wholly within such State, and without regard to the conflicts of laws principles thereof.


11.7	Arbitration . In the event of any controversy, claim or dispute between the parties hereto arising out of or relating to this Agreement, the matter shall be determined by arbitration,

OC\1608076.7

11.8


11.9	Survival . Sections 2 (“Definitions”), 5 (“Termination and Severance”), 6 (“Acceleration of Equity Awards in the Event of a Change in Control”), 7 (“Limitation on Payment”), 8 (“Certain Restrictive Covenants”), 9 (“Indemnification”), and 11 (“General Provisions”) of this Agreement shall survive termination of Executive’s employment by the Company.

11.10


11.11	Counterparts . This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

(Signature Page Follows)

OC\1608076.7

EXECUTIVE

Dated: February 1, 2014 /s/ Todd Abraham

Print Name: Todd Abraham

ENDOLOGIX, INC.

Dated: February 1, 2014 By: /s/ John McDermott

Name: John McDermott

Title: Chief Executive Officer

EXHIBIT A

GENERAL RELEASE OF CLAIMS

WHEREAS, Executive and the Company are parties to that certain Employment Agreement dated as of February 1, 2014 (the “ Agreement ”);

WHEREAS, the Parties agree that Executive is entitled to certain severance benefits under the Agreement, subject to Executive’s execution of this Release; and

WHEREAS, the Company and Executive now wish fully and finally to resolve all matters between them.


1.	General Release of Claims by Executive .

1.1

Notwithstanding the generality of the foregoing, Executive does not release the following claims:


(a)	Claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law;


(b)	Claims for workers’ compensation insurance benefits under the terms of any worker’s compensation insurance policy or fund of the Company;


(c)	Claims pursuant to the terms and conditions of the federal law known as COBRA;


(d)	Claims for indemnity under the bylaws of the Company, as provided for by Delaware law or under any applicable insurance policy with respect to Executive’s liability as an employee, director or officer of the Company ;


(e)	Claims based on any right Executive may have to enforce the Company’s executory obligations under the Agreement; and


(f)	Claims Executive may have to vested or earned compensation and benefits.


1.2	EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS BEEN ADVISED OF AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:

BEING AWARE OF SAID CODE SECTION, EXECUTIVE HEREBY EXPRESSLY WAIVES ANY RIGHTS EXECUTIVE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

1.3

1.4

1.5


3.	Paragraph Headings . The headings of the several paragraphs in this Release are inserted solely for the convenience of the Parties and are not a part of and are not intended to govern, limit or aid in the construction of any term or provision hereof.


4.	Severability . The invalidity or unenforceability of any provision of this Release shall not affect the validity or enforceability of any other provision of this Release, which shall remain in full force and effect.


5.	Governing Law . This Release will be governed by and construed in accordance with the laws of the United States and the State of California applicable to contracts made and to be performed wholly within such State, and without regard to the conflicts of laws principles thereof.


6.	Counterparts . This Release may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.


7.	Construction . The language in all parts of this Release shall in all cases be construed simply, according to its fair meaning, and not strictly for or against any of the parties hereto. Without limitation, there shall be no presumption against any party on the ground that such party was responsible for drafting this Release or any part thereof.


9.	Amendment . No provision of this Release may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and such officer of the Company as may be specifically designated by the Board.

10.

IN WITNESS WHEREOF, and intending to be legally bound, the Parties have executed the foregoing Release as of the date first written above.

EXECUTIVE ENDOLOGIX, INC.

By:

Print Name: Print Name:

Title:

OC\1608076.7

Exhibit 10.22

EMPLOYMENT AGREEMENT

RECITALS

WHEREAS, the Company and Executive previously entered into an Employment Agreement dated as of April 13, 2009 (the “ Prior Agreement ”); and

AGREEMENT

NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forth herein, the Company and Executive, intending to be legally bound, hereby agree as follows:


2.	Definitions . For purposes of this Agreement, the following terms shall have the following meanings:


2.1	“ Board ” shall mean the Board of Directors of the Company.

2.2


2.3	“ Change in Control ” includes each of the following events with respect to the Company:


(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

OC\1608076.7

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)

(c)


(d)	The approval by the stockholders of a plan or proposal for the liquidation or dissolution of the Company;


2.4	“ Code ” means the Internal Revenue Code of 1986, as amended.

2.5


2.6	“ Good Reason ” shall mean the occurrence of any of the following events or conditions without Executive’s written consent:

OC\1608076.7


(a)	a material reduction in Executive’s authority, duties or responsibilities;


(b)	a material diminution in the authority, duties, or responsibilities of the supervisor to whom Executive is required to report;


(c)	a material diminution in Executive’s Base Salary (as defined herein);


(d)	a material change in the geographic location at which Executive must perform Executive’s duties, except for reasonably required travel by the Company; or


(e)	any other action or inaction that constitutes a material breach by the Company of its obligations to Executive under this Agreement, including, without limitation, as specifically set forth herein.


2.7	“ Involuntary Termination ” means Executive’s Separation from Service by reason of a (i) termination of Executive’s employment by the Company other than for Cause, death or Disability or (ii) Executive’s resignation for Good Reason.


2.8	“ Separation from Service, ” with respect to Executive, means Executive’s “separation from service,” as defined in Treasury Regulation Section 1.409A-1(h).


2.9	“ Specified Employee ” means a “specified employee,” as defined in Treasury Regulation Section 1.409A-1(i).


3.	Duties .

3.1

Position . Executive shall be employed as Vice President, Global Sales, initially reporting to the President of the Company, and shall have the duties and responsibilities customarily associated with such position and as may be reasonably assigned from time to time. Executive shall perform faithfully and diligently all functions associated with Executive’s position and all duties assigned to Executive.


3.2	Exclusive Services . Executive shall devote such time as is reasonably necessary for Executive to fulfill Executive’s duties. This shall not preclude Executive from (a) devoting time to personal and family endeavors or investments, (b) serving on community and civic boards, (c) participating in industry or trade associations, or (d) serving on a board of a

OC\1608076.7


3.3	Policies and Procedures . Executive agrees to comply with the Company’s policies and procedures as such may be modified from time to time.


4.	Compensation and Benefits . The Company shall pay or provide, as the case may be, to Executive the compensation and other benefits and rights set forth in this Section 4.

4.1

4.2

Bonus . Executive shall be eligible to participate in such cash incentive compensation plan or program as may be approved by the Board (or committee thereof) from time to time for senior executives of the Company. Executive’s target bonus award under such plan(s) initially shall be fifty percent (50%) of Executive’s Base Salary but shall be adjusted annually in the sole and absolute discretion of the Board (or Compensation Committee thereof) (the “ Target Bonus ”). Any bonus amounts payable by the Company pursuant to this Section 4.2 shall be paid to Executive in accordance with the terms and conditions of the applicable cash incentive compensation plan or program.

4.3


4.4	Expenses; Travel . The Company shall reimburse Executive for all reasonable out-of-pocket business and travel expenses incurred in connection with the performance of Executive’s duties or professional activities on behalf of the Company in accordance with the Company’s reimbursement policies.


4.5	Vacation . Executive shall be entitled to such periods of paid vacation each calendar year as provided from time to time under the Company’s vacation policy and consistent with vacation as afforded to the Company’s senior officers and commensurate with Executive’s position with the Company.

OC\1608076.7


6.	Termination of Employment and Severance . Executive shall be entitled to receive benefits upon termination of Executive’s employment by the Company other than for Cause, death or disability or by Executive for Good Reason as set forth in this Section 6.


6.1	Involuntary Termination Prior to a Change in Control . In the event of Executive’s Involuntary Termination prior to a Change in Control, Executive shall be entitled to receive the benefits provided in this Section 6.1, subject to Executive’s compliance with Section 6.5:

(a)

(b)

(c)

OC\1608076.7

(d)

(e)

(f)

Outstanding equity awards granted to Executive under the Company’s equity incentive plans on or prior to the Effective Date, to the extent unvested and unexercised (if applicable), shall receive additional vesting as follows (i) with respect to any outstanding stock option award that vests in installments, such award shall become vested and, if applicable, exercisable by an additional six months (the “ Additional Vesting Period ”), and (ii) with respect to any outstanding equity award that has performance-based (milestone) vesting, such award shall become fully vested and, if applicable, exercisable if the performance-based vesting date occurs during the Additional Vesting Period, in each case, as of the date of Executive’s Involuntary Termination. Outstanding equity awards granted to Executive under the Company’s equity incentive plans following the Effective Date shall not be entitled to any additional vesting as a result of Executive’s Involuntary Termination pursuant to this Agreement.

6.2


(f)	The Company shall pay to Executive the Accrued Obligations as soon as practicable following the date of Executive’s Involuntary Termination;


(g)	Executive shall be entitled to receive a cash severance payment in an amount equal to the sum of 18 months of Executive’s Base Salary plus Target Bonus, payable in a lump sum cash payment on the first business day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service; provided,

OC\1608076.7

however , that if Executive is a Specified Employee of the date of Executive’s Separation from Service, such payment shall be made in accordance with Section 10.2 hereof.


(h)	Executive shall be entitled to receive a cash payment equal to the Target Bonus for the year in which Executive’s Separation from Service occurs, which shall be paid in a lump sum on the first business day of the calendar month occurring after the sixtieth (60 ^th ) day following the date of Executive’s Separation from Service.

(i)

Executive shall be entitled to receive continuation of group health insurance benefits for a period of 18 months, with the Company to continue to pay the same portion of the monthly premium for Executive and Executive’s eligible dependents as the Company paid immediately prior to Executive’s Involuntary Termination, provided, that Executive elects continuation coverage pursuant to COBRA for Executive and Executive’s eligible dependents who were covered under the Company’s health plans as of the date of Executive’s Involuntary Termination.

(j)

(k)


6.3	Termination of Employment due to Executive’s Death or Disability . If Executive’s employment is terminated by the Company due to Executive’s death or Disability, the Company shall pay to Executive (or Executive’s estate or legal representative, if applicable) the Accrued Obligations as soon as practicable following the date of Executive’s termination of employment.

6.4

OC\1608076.7

any continuation of benefits required by COBRA or applicable law (for which Executive shall be solely responsible).

6.5


6.6	Exclusive Remedy . Except as otherwise expressly required by law ( e.g. , COBRA) or as specifically provided herein, all of Executive’s rights to salary, severance, benefits, bonuses and other amounts hereunder (if any) accruing at the termination of Executive’s employment shall cease upon such termination.

6.7

6.8


7.	Limitation on Payments .

7.1

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7.2


8.	Certain Restrictive Covenants .


8.1	Confidential Information . During the Term and thereafter, Executive shall continue to be bound by the restrictions in the Proprietary Information and Inventions Agreement with the Company (the “ Proprietary Rights Agreement ”).

OC\1608076.7

8.2

8.3

8.4

8.5


8.6	Rights and Remedies Upon Breach . If Executive breaches or threatens to commit a breach of any of the provisions of this Section 8 (the “ Restrictive Covenants ”), the Company shall have any rights and remedies available to the Company under law or in equity.


8.7	Severability of Covenants/Blue Penciling . If any court determines that any of the Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the Restrictive

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8.8


10.	Section 409A of the Code .

10.1

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10.2


11.	General Provisions .

11.1

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11.2	Waiver . Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.

11.3

11.4

11.5


11.6	Governing Law . This Agreement will be governed by and construed in accordance with the laws of the United States and the State of California applicable to contracts made and to be performed wholly within such State, and without regard to the conflicts of laws principles thereof.

11.7

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11.8


11.9	Survival . Sections 2 (“Definitions”), 5 (“Termination and Severance”), 6 (“Acceleration of Equity Awards in the Event of a Change in Control”), 7 (“Limitation on Payment”), 8 (“Certain Restrictive Covenants”), 9 (“Indemnification”), and 11 (“General Provisions”) of this Agreement shall survive termination of Executive’s employment by the Company.

11.10


11.11	Counterparts . This Agreement may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

(Signature Page Follows)

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EXECUTIVE

Dated: February 1, 2014 /s/ Joe DeJohn

Print Name: Joe DeJohn

ENDOLOGIX, INC.

Dated: February 1, 2014 By: /s/ John McDermott

Name: John McDermott

Title: Chief Executive Officer

EXHIBIT A

GENERAL RELEASE OF CLAIMS

WHEREAS, Executive and the Company are parties to that certain Employment Agreement dated as of February 1, 2014 (the “ Agreement ”);

WHEREAS, the Parties agree that Executive is entitled to certain severance benefits under the Agreement, subject to Executive’s execution of this Release; and

WHEREAS, the Company and Executive now wish fully and finally to resolve all matters between them.


1.	General Release of Claims by Executive .

1.1

Notwithstanding the generality of the foregoing, Executive does not release the following claims:


(a)	Claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law;


(b)	Claims for workers’ compensation insurance benefits under the terms of any worker’s compensation insurance policy or fund of the Company;


(c)	Claims pursuant to the terms and conditions of the federal law known as COBRA;


(d)	Claims for indemnity under the bylaws of the Company, as provided for by Delaware law or under any applicable insurance policy with respect to Executive’s liability as an employee, director or officer of the Company ;


(e)	Claims based on any right Executive may have to enforce the Company’s executory obligations under the Agreement; and


(f)	Claims Executive may have to vested or earned compensation and benefits.


1.2	EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS BEEN ADVISED OF AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:

BEING AWARE OF SAID CODE SECTION, EXECUTIVE HEREBY EXPRESSLY WAIVES ANY RIGHTS EXECUTIVE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

1.3

1.4

1.5


3.	Paragraph Headings . The headings of the several paragraphs in this Release are inserted solely for the convenience of the Parties and are not a part of and are not intended to govern, limit or aid in the construction of any term or provision hereof.


4.	Severability . The invalidity or unenforceability of any provision of this Release shall not affect the validity or enforceability of any other provision of this Release, which shall remain in full force and effect.


5.	Governing Law . This Release will be governed by and construed in accordance with the laws of the United States and the State of California applicable to contracts made and to be performed wholly within such State, and without regard to the conflicts of laws principles thereof.


6.	Counterparts . This Release may be executed in several counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.


7.	Construction . The language in all parts of this Release shall in all cases be construed simply, according to its fair meaning, and not strictly for or against any of the parties hereto. Without limitation, there shall be no presumption against any party on the ground that such party was responsible for drafting this Release or any part thereof.


9.	Amendment . No provision of this Release may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and such officer of the Company as may be specifically designated by the Board.

10.

IN WITNESS WHEREOF, and intending to be legally bound, the Parties have executed the foregoing Release as of the date first written above.

EXECUTIVE ENDOLOGIX, INC.

By:

Print Name: Print Name:

Title:

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Exhibit 10.23

INDEMNIFICATION AGREEMENT

This Indemnification Agreement (“Agreement”) is made as of ________ __, 200_ by and between Endologix, Inc., a Delaware corporation (the “Company”), and ______________ (“Indemnitee”). This Agreement supersedes and replaces any and all previous Agreements between the Company and Indemnitee covering the subject matter of this Agreement.

RECITALS

WHEREAS, the Board of Directors of the Company (the “Board”) has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. The By-laws of the Company require indemnification of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (the “DGCL”). The By-laws and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification;

WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons;

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company and its stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;

WHEREAS, this Agreement is a supplement to and in furtherance of the By-laws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder;

WHEREAS, Indemnitee does not regard the protection available under the Company’s By-laws and insurance as adequate in the present circumstances, and may not be willing to serve as an officer or director without adequate protection, and the Company desires Indemnitee to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified; and

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

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Section 1. Services to the Company. Indemnitee agrees to serve as a [director] [officer] of the Company or any other Enterprise. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any other Enterprise) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee’s employment with the Company (or any other Enterprise), if any, is at will, and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee and the Company (or any other Enterprise), other applicable formal severance policies duly adopted by the Board, or, with respect to service as a director or officer of the Company, by the Company’s Certificate of Incorporation, the Company’s By-laws, and the DGCL. The foregoing notwithstanding, this Agreement shall continue in force after Indemnitee has ceased to serve as an [officer] [director] of the Company or any other Enterprise.

Section 2. Definitions. As used in this Agreement:

(a) References to “agent” shall mean any person who is or was a director, officer, or employee of the Company or other person authorized by the Company to act for the Company, to include such person serving in such capacity as a director, officer, employee, fiduciary or other official of another Enterprise.

(b) A “Change in Control” shall the earliest to occur of any of the following events:

i. 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 Securities Exchange Act of 1934, as amended) 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;

ii. 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;

iii. 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;

iv. 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

v. The approval by the stockholders of a plan or proposal for the liquidation or dissolution of the Company.

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(c) “Corporate Status” describes the status of a person who is or was a director, officer, employee or agent of the Company or of any other Enterprise.

(d) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

(e) “Enterprise” shall mean the Company, any of its subsidiaries and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan (including any deemed fiduciary thereto) or other enterprise of which Indemnitee is or was serving as a director, officer, employee, fiduciary or agent at the request of, for the convenience of, or to represent the interests of the Company.

(f) “Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise, in accordance with Section 12(d). The parties agree that for the purposes of any advancement of Expenses for which Indemnitee has made written demand to the Company in accordance with this Agreement, all Expenses included in such demand that are certified by affidavit of Indemnitee’s counsel as being reasonable shall be presumed conclusively to be reasonable. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(g) The term “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative legislative, or investigative (formal or informal) nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action taken by him or of any action on his part while acting as director or officer of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee or agent of another Enterprise, in each case whether or not serving in such capacity at the time any liability or expense is incurred for which indemnification, reimbursement, or advancement of expenses can be provided under this Agreement. If the Indemnitee believes in good faith that a given situation may lead to or culminate in the institution of a Proceeding, this shall be considered a Proceeding under this paragraph.

(h) Reference to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in manner “not opposed to the best interests of the Company” as referred to in this Agreement.

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Section 3. Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal proceeding had no reasonable cause to believe that his conduct was unlawful. The parties hereto intend that this Agreement shall provide to the fullest extent permitted by law for indemnification in excess of that expressly permitted by statute, including, without limitation, any indemnification provided by the Company’s Certificate of Incorporation, its Bylaws, vote of its stockholders or disinterested directors or applicable law.

Section 4. Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 4 in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

Section 5. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is a party to (or a participant in) and is successful, on the merits or otherwise, in any Proceeding or in defense of any claim, issue or matter therein, in whole or in part, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with or related to each successfully resolved claim, issue or matter to the fullest extent permitted by law. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

Section 6. Indemnification For Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the fullest extent permitted by applicable law and to the extent that Indemnitee is, by reason of his Corporate Status, a witness or otherwise asked to participate in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

Section 7. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

Section 8. Additional Indemnification.

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(a) Notwithstanding any limitation in Sections 3, 4, or 5, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee in connection with the Proceeding.

(b) For purposes of Section 8(a), the meaning of the phrase “to the fullest extent permitted by applicable law” shall include, but not be limited to:

i. to the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL, and

ii. to the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.

Section 9. Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any claim made against Indemnitee:

(a) to the extent that payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision; or

(b) for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act (as defined in Section 2(b) hereof) or similar provisions of state statutory law or common law; or

(c) except for Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, in connection with any Proceeding (or any part of any Proceeding) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

Section 10. Advances of Expenses. In accordance with the pre-existing requirement of Section 1 of Article VIII of the By-laws of the Company, and notwithstanding any provision of this Agreement to the contrary, the Company shall advance, to the extent not prohibited by law, the Expenses incurred by Indemnitee in connection with any Proceeding, and such advancement shall be made within ten (10) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement. Advances shall include any and all reasonable Expenses incurred pursuing an action to enforce this right of advancement, including Expenses incurred preparing and forwarding statements to the Company to support the advances claimed. The Indemnitee shall qualify for advances upon the execution and delivery to the Company of this Agreement, which shall constitute an undertaking providing that the Indemnitee undertakes to repay the amounts advanced (without interest) to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. No other form of undertaking shall be required other than the

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execution of this Agreement. This Section 10 shall not apply to any claim made by Indemnitee for which indemnity is excluded pursuant to Section 9.

Section 11. Procedure for Notification and Defense of Claim; Presumptions and Effect of Certain Proceedings.

(a) Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof. The written notification to the Company shall include a description of the nature of the Proceeding and the facts underlying the Proceeding. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such action, suit or proceeding. The omission by Indemnitee to notify the Company hereunder will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification.

(b) The Company will be entitled to participate in the Proceeding at its own expense.

(c) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 11(a) of this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(d) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful.

(e) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with the reasonable care by the Enterprise. The provisions of this Section 11(e) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

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(f) The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

Section 12. Remedies of Indemnitee.

(a) Subject to Section 12(e), in the event that (i) a determination is made by the Board or the Company that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 10 of this Agreement, (iii) payment of indemnification is not made pursuant to any of Sections 3-8 within ten (10) days after receipt by the Company of a written request therefor, or (iv) in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding designed to deny, or to recover from, the Indemnitee the benefits provided or intended to be provided to the Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided , however , that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his rights under Section 5 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b) In the event that a determination shall have been made by the Board or the Company that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 12 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 12 the Company shall have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

(c) If a determination shall have been made by the Board or the Company that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d) The Company shall, to the fullest extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. It is the intent of the Company that, to the fullest extent permitted by law, the Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee hereunder. The Company shall, to the fullest extent permitted by law, indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance, to the extent not prohibited by law, such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company if Indemnitee is wholly successful on the underlying claims; if Indemnittee is not wholly

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successful on the underlying claims, then such indemnification and advancement shall be only to the extent Indemnitee is successful on such underlying claims or otherwise as permitted by law, whichever is greater.

(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of the Proceeding.

Section 13. Non-exclusivity; Survival of Rights; Insurance; Subrogation.

(a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Company’s Certificate of Incorporation, the Company’s By-laws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s By-laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

(b) To the extent that the Company maintains any insurance policy providing liability insurance for directors, officers, employees, or agents of the Company or any other Enterprise, Indemnitee shall be covered by such policy in accordance with its terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy. If, at the time of the receipt of an Indemnification Notice pursuant to the terms hereof, the Company has director and officer liability or similar insurance (“D&O Insurance”) in effect, the Company shall give prompt notice of such claim or of the commencement of a Proceeding, as the case may be, to the applicable insurers in accordance with the procedures set forth in the applicable policy. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of each such policy.

(c) In the event (i) that the Company determines to reduce materially or not to renew its D&O Insurance coverage, the Company will purchase six (6) year tail coverage D&O Insurance, on terms and conditions substantially similar to the existing D&O Insurance (“Comparable Coverage”), for the benefit of the directors, officers, employees or agents of the Company or any other Enterprise who had served in such capacity prior to the reduction, termination or expiration of the coverage (the “Prior Directors and Officers”); or (ii) of a Change in Control, the Company will either (A) purchase six (6) year tail coverage D&O Insurance with Comparable Coverage for the benefit of the directors, officers, employees or agents of the Company or any other Enterprise who had served in such capacity prior to the closing of the transaction or the occurrence of the event constituting the Change in Control. Notwithstanding the foregoing, if the annual premium for any year of such tail coverage or other continuing D&O Insurance coverage would exceed 200% of the annual premium the Company paid for D&O Insurance in its last full fiscal year prior to the reduction, termination or expiration of the D&O Insurance or such Change in Control event, the Company (or the acquiror or successor, as the case may be) will be deemed to have satisfied its obligations under this Section 13(c) by purchasing as much D&O Insurance for such year as can be obtained for a premium equal to 200% such annual premium the Company paid for D&O Insurance in its last full fiscal year.

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(d) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

(e) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable (or for which advancement is provided hereunder) hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

(f) The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee in connection with any claim related to Indemnitee’s service as a director, officer, employee or agent of any Enterprise other than the Company shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such other Enterprise.

Section 14. Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (a) ten (10) years after the date that Indemnitee shall have ceased to serve as a [director] [officer] of the Company or any other Enterprise or (b) one (1) year after the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his heirs, executors and administrators.

Section 15. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

Section 16. Enforcement.

(a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director or officer of the Company.

(b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation of the Company, the By-laws of the Company and applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

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Section 17. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by the parties thereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver.

Section 18. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise.

Section 19. Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, (b) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, (c) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication shall have been directed or (d) sent by facsimile transmission, with receipt of oral confirmation that such transmission has been received:

(a) If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee shall provide to the Company.

(b) If to the Company to

[notice information]

or to any other address as may have been furnished to Indemnitee by the Company.

Section 20. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

Section 21. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 12(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) irrevocably appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, [name of agent for service of process] as its agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action

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or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

Section 22. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

Section 23. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. The headings of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.

ENDOLOGIX, INC.                    INDEMNITEE

By:
Name:                            Name:
Office:                            Address:

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Exhibit 10.27

CREDIT AGREEMENT

THIS CREDIT AGREEMENT (this “Agreement”) is entered into as of October 30, 2009, by and between ENDOLOGIX, INC. (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”).

RECITALS

Borrower has requested that Bank extend or continue credit to Borrower as described below, and Bank has agreed to provide such credit to Borrower on the terms and conditions contained herein.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Bank and Borrower hereby agree as follows:

ARTICLE I
CREDIT TERMS

SECTION 1.1 LINE OF CREDIT.

(a) Line of Credit . Subject to the terms and conditions of this Agreement, Bank hereby agrees to make advances to Borrower from time to time up to and including April 30, 2012, not to exceed at any time the aggregate principal amount of Ten Million Dollars ($10,000,000) (the “Line of Credit”), the proceeds of which shall be used for general working capital and corporate purposes. Borrower’s obligation to repay advances under the Line of Credit shall be evidenced by a promissory note dated as of October 30, 2009 (the “Line of Credit Note”), all terms of which are incorporated herein by this reference.

(b) Limitation on Borrowings . Outstanding borrowings under the Line of Credit, to a maximum of the principal amount set forth above, shall not at any time exceed an aggregate of Ten Million Dollars ($10,000,000).

(c) Letter of Credit Subfeature . As a subfeature under the Line of Credit, Bank agrees from time to time during the term thereof to issue or cause an affiliate to issue letters of credit for the account of Borrower (each, a “Letter of Credit” and collectively, “Letters of Credit”); provided however, that the aggregate undrawn amount of all outstanding Letters of Credit shall not at any time exceed Five Hundred Thousand Dollars ($500,000). The form and substance of each Letter of Credit shall be subject to approval by Bank, in its sole discretion. No Letter of Credit shall have an expiration date subsequent to the maturity date of the Line of Credit. The undrawn amount of all Letters of Credit shall be reserved under the Line of Credit and shall not be available for borrowings thereunder. Each Letter of Credit shall be subject to the additional terms and conditions of the Letter of Credit agreements, applications and any related

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Exhibit 10.27

documents required by Bank in connection with the issuance thereof. Each drawing paid under a Letter of Credit shall be deemed an advance under the Line of Credit and shall be repaid by Borrower in accordance with the terms and conditions of this Agreement applicable to such advances; provided however, that if advances under the Line of Credit are not available, for any reason, at the time any drawing is paid, then Borrower shall immediately pay to Bank the full amount drawn, together with interest thereon from the date such drawing is paid to the date such amount is fully repaid by Borrower, at the rate of interest applicable to advances under the Line of Credit. In such event Borrower agrees that Bank, in its sole discretion, may debit any account maintained by Borrower with Bank for the amount of any such drawing.

(d) Credit Card Services Subfeature . Subject to the terms and conditions of this Agreement, Borrower may request corporate credit cards from Bank (the “Credit Card Services”). The aggregate limit of the corporate credit cards shall not exceed Seven Hundred Fifty Thousand Dollars ($750,000), provided that availability under the Line of Credit shall be reduced by the aggregate limits of the corporate credit cards issued to Borrower. In addition, Bank may, in its sole reasonable discretion, charge as advances under the Line of Credit any amounts that become due or owing to Bank in connection with the Credit Card Services. The terms and conditions (including repayment and fees) of such Credit Card Services shall be subject to the terms and conditions of the Bank’s standard forms of application and agreement for the Credit Card Services, which Borrower hereby agrees to execute.

(e) Borrowing and Repayment . Borrower may from time to time during the term of the Line of Credit borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions contained herein or in the Line of Credit Note; provided however, that the total outstanding borrowings under the Line of Credit shall not at any time exceed the maximum principal amount available thereunder, as set forth above.

SECTION 1.2 INTEREST/FEES.

(a) The outstanding principal balance of each credit subject hereto shall bear interest, and the amount of each drawing paid under any Letter of Credit shall bear interest from the date such drawing is paid to the date such amount is fully repaid by Borrower, at the rate of interest set forth in the Line of Credit Note.

(b) Computation and Payment . Interest shall be computed on the basis of a 360-day year, actual days elapsed. Interest shall be payable at the times and place set forth in each promissory note or other instrument or document required hereby.

(c) Commitment Fee . Borrower shall pay to Bank a non-refundable commitment fee for the Line of Credit equal to Forty Thousand Dollars ($40,000), which fee shall be due and payable in full on October 30, 2009.

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Exhibit 10.27

(d) Unused Commitment Fee . Borrower shall pay to Bank a fee equal to one fifth of one percent (0.20%) per annum (computed on the basis of a 360-day year, actual days elapsed) on the average daily unused amount of the Line of Credit, which fee shall be calculated on a yearly basis by Bank and shall be due and payable by Borrower in arrears within ten (10) days after each billing is sent by Bank.

(e) Letter of Credit Fees . Borrower shall pay to Bank (i) fees upon the issuance of each Letter of Credit equal to one and one quarter percent (1.25%) per annum (computed on the basis of a 360-day year, actual days elapsed) of the face amount thereof, and (ii) fees upon the payment or negotiation of each drawing under any Letter of Credit and fees upon the occurrence of any other activity with respect to any Letter of Credit (including without limitation, the transfer, amendment or cancellation of any Letter of Credit) determined in accordance with Bank’s standard fees and charges then in effect for such activity. Notwithstanding the foregoing, with respect to any Letters of Credit that are cash secured to the satisfaction of Bank such Letter of Credit Fee shall be reduced to three quarters of one percent (0.75%).

SECTION 1.3 COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all principal, interest and fees due under each credit subject hereto by charging Borrower’s deposit account number 4828785279 with Bank, or any other deposit account maintained by Borrower with Bank, for the full amount thereof. Should there be insufficient funds in any such deposit account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower.

SECTION 1.4 COLLATERAL.

As security for all Indebtedness and other obligations of Borrower to Bank, Borrower has granted to Bank security interests in all Borrower’s personal property, as more fully described in that certain Security Agreement between Borrower and Bank dated as of the date hereof.

The foregoing shall be evidenced by and subject to the terms of such security agreements, financing statements, deeds or mortgages, and other documents as Bank shall reasonably require, all in form and substance satisfactory to Bank. Borrower shall pay to Bank immediately upon demand the full amount of all charges, costs and expenses (to include fees paid to third parties and all allocated costs of Bank personnel), expended or incurred by Bank in connection with any of the foregoing security, including without limitation, filing and recording fees and costs of appraisals, audits and title insurance.

SECTION 1.5 SUBORDINATION OF DEBT. All indebtedness and other obligations of Borrower to any other party shall be subordinated in right of repayment to all indebtedness and other obligations of Borrower to Bank, as evidenced by and subject to the terms of subordination agreements in form and substance satisfactory to Bank.

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Exhibit 10.27

ARTICLE II
REPRESENTATIONS AND WARRANTIES

Borrower makes the following representations and warranties to Bank, which representations and warranties shall survive the execution of this Agreement and shall continue in full force and effect until the full and final payment, and satisfaction and discharge, of all obligations of Borrower to Bank subject to this Agreement.

SECTION 2.1 LEGAL STATUS. Borrower is a corporation, duly organized and existing and in good standing under the laws of Delaware, and is qualified or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could reasonably be expected to have a material adverse effect on Borrower.

SECTION 2.2 AUTHORIZATION AND VALIDITY. This Agreement and each promissory note, contract, instrument and other document required hereby or at any time hereafter delivered to Bank in connection herewith (collectively, the “Loan Documents”) have been duly authorized, and upon their execution and delivery in accordance with the provisions hereof will constitute legal, valid and binding agreements and obligations of Borrower or the party which executes the same, enforceable in accordance with their respective terms.

SECTION 2.3 NO VIOLATION. The execution, delivery and performance by Borrower of each of the Loan Documents do not violate any provision of any law or regulation, or contravene any provision of the Certificate of Incorporation or By-Laws of Borrower, or result in any breach of or default under any contract, obligation, indenture or other instrument to which Borrower is a party or by which Borrower may be bound.

SECTION 2.4 LITIGATION. Except as disclosed in Schedule 2.4 hereof, there are no pending, or to the best of Borrower’s knowledge threatened, actions, claims, investigations, suits or proceedings by or before any governmental authority, arbitrator, court or administrative agency which could reasonably be expected to have a material adverse effect on the financial condition or operation of Borrower other than those disclosed by Borrower to Bank in writing prior to the date hereof or, in the case of any subsequent extension, prior to such date (and approved in writing by Bank, such approval not to be unreasonably withheld).

SECTION 2.5 CORRECTNESS OF FINANCIAL STATEMENT. The annual financial statement of Borrower dated December 31, 2008, and all interim financial statements delivered to Bank since said date, true copies of which have been delivered by Borrower to Bank prior to the date hereof, (a) are complete and correct and present fairly the

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Exhibit 10.27

financial condition of Borrower, (b) disclose all liabilities of Borrower that are required to be reflected or reserved against under generally accepted accounting principles, whether liquidated or unliquidated, fixed or contingent, and (c) have been prepared in accordance with generally accepted accounting principles consistently applied. Since the dates of such financial statements there has been no material adverse change in the financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except in favor of Bank or as otherwise permitted by Bank in writing.

SECTION 2.6 INCOME TAX RETURNS. Borrower has no knowledge of any pending assessments or adjustments of its income tax payable with respect to any year.

SECTION 2.7 NO SUBORDINATION. There is no agreement, indenture, contract or instrument to which Borrower is a party or by which Borrower may be bound that requires the subordination in right of payment of any of Borrower’s obligations subject to this Agreement to any other obligation of Borrower.

SECTION 2.8 PERMITS, FRANCHISES. Borrower possesses, and will hereafter possess, all permits, consents, approvals, franchises and licenses required and rights to all trademarks, trade names, patents, and fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged in compliance with applicable law.

SECTION 2.9 ERISA. Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended or recodified from time to time (“ERISA”); Borrower has not violated any provision of any defined employee pension benefit plan (as defined in ERISA) maintained or contributed to by Borrower (each, a “Plan”); no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under generally accepted accounting principles.

SECTION 2.10 OTHER OBLIGATIONS. Borrower is not in default on any obligation for borrowed money, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation.

SECTION 2.11 ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Bank in writing prior to the date hereof, Borrower is in compliance in all material respects with all applicable federal or state environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any of Borrower’s operations and/or properties, including without limitation, the

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Exhibit 10.27

Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any of the same may be amended, modified or supplemented from time to time. None of the operations of Borrower is the subject of any federal or state investigation evaluating whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment. Borrower has no material contingent liability in connection with any release of any toxic or hazardous waste or substance into the environment.

ARTICLE III
CONDITIONS

SECTION 3.1 CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Bank to extend any credit contemplated by this Agreement is subject to the fulfillment to Bank’s satisfaction of all of the following conditions:

(a) Approval of Bank Counsel . All legal matters incidental to the extension of credit by Bank shall be satisfactory to Bank’s counsel.

(b) Documentation . Bank shall have received, in form and substance satisfactory to Bank, each of the following, duly executed:

(i) This Agreement and each promissory note or other instrument or document required hereby, including the Line of Credit Note;

(ii) Certificate of Incumbency;

(iii) Corporate Resolution: Borrowing;

(iv) Security Agreement;

(v) Subject to Section 4.10, deposit and securities account control agreements for any accounts maintained outside of Bank;

(vi) an audit of the Collateral, the results of which shall be satisfactory to Bank; and

(vii) Such other documents as Bank may reasonably require under any other Section of this Agreement.

(c) Financial Condition . There shall have been no material adverse change, as determined by Bank, in the financial condition or business of Borrower, nor any material decline,

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Exhibit 10.27

as determined by Bank, in the market value of any collateral required hereunder or a substantial or material portion of the assets of Borrower.

(d) Insurance . Borrower shall have delivered to Bank evidence of insurance coverage on all Borrower’s property, in form, substance, amounts, covering risks and issued by companies satisfactory to Bank, and where required by Bank, with loss payable endorsements in favor of Bank, including without limitation, policies of fire and extended coverage insurance covering all real property collateral required hereby, with replacement cost and mortgagee loss payable endorsements, and such policies of insurance against specific hazards affecting any such real property as may be required by governmental regulation or Bank.

SECTION 3.2 CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank to make each extension of credit requested by Borrower hereunder shall be subject to the fulfillment to Bank’s satisfaction of each of the following conditions:

(a) Compliance . The representations and warranties contained herein and in each of the other Loan Documents shall be true on and as of the date of the signing of this Agreement and on the date of each extension of credit by Bank pursuant hereto, with the same effect as though such representations and warranties had been made on and as of each such date, and on each such date, no Event of Default as defined herein, and no condition, event or act which with the giving of notice or the passage of time or both would constitute such an Event of Default, shall have occurred and be continuing or shall exist.

(b) Documentation . Bank shall have received all additional documents which may be required in connection with such extension of credit.

ARTICLE IV
AFFIRMATIVE COVENANTS

Borrower covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower shall, unless Bank otherwise consents in writing:

SECTION 4.1 PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and place and in the manner specified therein, and immediately upon demand by Bank, the amount by which the outstanding principal balance of any credit subject hereto at any time exceeds any limitation on borrowings applicable thereto.

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Exhibit 10.27

SECTION 4.2 ACCOUNTING RECORDS. Maintain adequate books and records in accordance with generally accepted accounting principles consistently applied, and permit any representative of Bank, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect the properties of Borrower.

SECTION 4.3 FINANCIAL STATEMENTS. Provide to Bank all of the following, in form and detail satisfactory to Bank:

(a) not later than seventy-five (75) days after and as of the end of each fiscal year, cpa audited financial statements of Borrower;

(b) not later than forty-five (45) days after and as of the end of each calendar quarter, financial statements of Borrower, prepared by Borrower;

(c) contemporaneously with each annual and quarterly financial statement of Borrower required hereby, a certificate of the president or chief financial officer of Borrower that said financial statements are accurate and that there exists no Event of Default nor any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default;

(d) not later than sixty (60) days after the end of each fiscal year, financial projections approved by Borrower’s board of directors;

(e) not later than forty-five (45) days after and as of the end of each calendar quarter, a report of the dollar amount and location of Borrower’s inventory with third parties (including sales representatives and hospitals), in form and content reasonably acceptable to Bank and generally prepared by Borrower in the ordinary course of business; and

(f) from time to time such other information as Bank may reasonably request.

For purposes of this Section 4.3, any financial statements that have been included in an Annual Report on Form 10-K or a Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission’s Electronic Data Gathering Analysis & Retrieval system (or any successor system) shall be deemed delivered.

SECTION 4.4 COMPLIANCE. Preserve and maintain all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its business; and comply with the provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower’s continued existence and with the requirements of all laws, rules, regulations and orders of any governmental authority applicable to Borrower and/or its business.

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Exhibit 10.27

SECTION 4.5 INSURANCE. Maintain and keep in force, for each business in which Borrower is engaged, insurance of the types and in amounts customarily carried in similar lines of business, including but not limited to fire, extended coverage, public liability, flood, property damage and workers’ compensation, with all such insurance carried with companies and in amounts satisfactory to Bank, and deliver to Bank from time to time at Bank’s request schedules setting forth all insurance then in effect.

SECTION 4.6 FACILITIES. Keep all properties useful or necessary to Borrower’s business in good repair and condition, and from time to time make necessary repairs, renewals and replacements thereto so that such properties shall be fully and efficiently preserved and maintained.

SECTION 4.7 TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both real or personal, including without limitation federal and state income taxes and state and local property taxes and assessments, except (a) such as Borrower may in good faith contest or as to which a bona fide dispute may arise, and (b) for which Borrower has made provision, to Bank’s satisfaction, for eventual payment thereof in the event Borrower is obligated to make such payment.

SECTION 4.8 LITIGATION. Promptly give notice in writing to Bank of any litigation pending or threatened against Borrower with a claim in excess of One Hundred Thousand Dollars ($100,000).

SECTION 4.9 FINANCIAL CONDITION. Maintain Borrower’s financial condition as follows using generally accepted accounting principles consistently applied and used consistently with prior practices (except to the extent modified by the definitions herein):

(a) Modified Quick Ratio greater than (i) 1.75 to 1.0 at all times from October 30, 2009 through October 30, 2010 and (ii) 2.00 to 1.0 at all times thereafter, with “Modified Quick Ratio” defined as (I) the aggregate of Borrower’s unrestricted cash and receivables convertible into cash divided by (II) total current liabilities plus, to the extent not already included therein, all indebtedness owing from Borrower to Bank.

(b) Tangible Net Worth at all times greater than (i) Twenty Three Million Dollars ($23,000,000) plus (ii) fifty percent (50%) of any proceeds received by Borrower from the sale of its equity securities (other than sales under the Borrower’s equity incentive plans) after October 30, 2009, plus (iii) after Borrower achieves two (2) consecutive quarters of profitability, fifty percent (50%) of Borrower’s quarterly net profit, with “Tangible Net Worth” defined as the

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Exhibit 10.27

aggregate of total stockholders’ equity less any intangible assets and less any loans or advances to, or investments in, any related entities or individuals.

SECTION 4.10 ACCOUNTS. Borrower shall maintain its primary operating and other deposit accounts and securities accounts with Bank which accounts shall represent at least eighty percent (80%) of the dollar value of Borrower’s accounts at all financial institutions. Notwithstanding the foregoing, (i) Borrower shall maintain no less than One Million Dollars ($1,000,000) on deposit with Bank and Bank’s Affiliates as of the date of this Agreement; and (ii) Borrower shall transfer the balance of its accounts (in accordance with the preceding paragraph) to Bank by November 16, 2009. Borrower shall provide Bank five (5) days prior written notice before establishing any account at or with any bank or financial institution other than Bank. For each such account that Borrower at any time maintains, Borrower shall cause the applicable bank or financial institution at or with which any such account is maintained to execute and deliver an account control agreement with respect to such account to perfect Bank’s lien in such account which control agreement may not be terminated without the prior written consent of Bank.

SECTION 4.11 NOTICE TO BANK. Promptly (but in no event more than five (5) days after the occurrence of each such event or matter) give written notice to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or any condition, event or act which with the giving of notice or the passage of time or both would constitute an Event of Default; (b) any change in the name or the organizational structure of Borrower; (c) the occurrence and nature of any Reportable Event or Prohibited Transaction, each as defined in ERISA, or any funding deficiency with respect to any Plan; or (d) any termination or cancellation of any insurance policy which Borrower is required to maintain, or any uninsured or partially uninsured loss through liability or property damage, or through fire, theft or any other cause affecting Borrower’s property in excess of an aggregate of One Hundred Thousand Dollars ($100,000).

ARTICLE V
NEGATIVE COVENANTS

Borrower further covenants that so long as Bank remains committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents remain outstanding, and until payment in full of all obligations of Borrower subject hereto, Borrower will not without Bank’s prior written consent:

SECTION 5.1 USE OF FUNDS. Use any of the proceeds of any credit extended hereunder except for the purposes stated in Article I hereof.

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Exhibit 10.27

SECTION 5.2 CAPITAL EXPENDITURES. Make any additional investment in fixed assets in excess of (i) Five Hundred Thousand Dollars ($500,000) in fiscal year 2009; (ii) One Million Five Hundred Thousand Dollars ($1,500,000), in the aggregate, for fiscal years 2010 and 2011; and (ii) One Million Five Hundred Thousand Dollars ($1,500,000) in fiscal year 2012.

SECTION 5.3 LEASE EXPENDITURES. Incur operating lease expense in any calendar year in excess of an aggregate of Two Hundred Fifty Thousand Dollars ($250,000).

SECTION 5.4 OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances, whether secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, except (a) the liabilities of Borrower to Bank, (b) trade payables incurred in the ordinary course of business and (c) any other liabilities of Borrower existing as of, and disclosed to Bank prior to, the date hereof.

SECTION 5.5 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge or consolidate, or permit any of its subsidiaries to merge or consolidate, with or into any other business organization (other than mergers or consolidations of a subsidiary into another subsidiary or into Borrower), or acquire, or permit any of its subsidiaries to acquire, all or substantially all of the capital stock or property of another person except where (a) each of the following conditions is applicable: (i) the cash consideration paid in connection with such transactions (including assumption of liabilities) does not in the aggregate exceed $250,000 during any fiscal year, (ii) no Event of Default has occurred, is continuing or would exist after giving effect to such transactions, (iii) such transactions do not result in a change in control (as contemplated in Section 6.1(i) below), and (iv) Borrower is the surviving entity; or (b) the obligations of Borrower hereunder and under the other Loan Documents are repaid in full concurrently with the closing of any merger or consolidation of Borrower in which Borrower is not the surviving entity; nor sell, lease, transfer or otherwise dispose of all or a substantial or material portion of Borrower’s assets except in the ordinary course of its business (including non-exclusive licenses and similar arrangements for the use of Borrower’s property in the ordinary course of business). Notwithstanding the foregoing, Borrower may in-license intellectual property, at an expense to Borrower not to exceed $500,000 during any fiscal year, except as otherwise consented to in writing by Bank from time to time, such consent not to be unreasonably withheld.

SECTION 5.6 GUARANTIES. Guarantee or become liable in any way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in the ordinary course of business), accommodation endorser or otherwise for, nor pledge or hypothecate any assets of Borrower as security for, any liabilities or obligations of any other person or entity, except any of the foregoing in favor of Bank.

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Exhibit 10.27

SECTION 5.7 LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or investments in any person or entity, except any of the foregoing existing as of, and disclosed to Bank prior to, the date hereof.

SECTION 5.8 DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or distribution either in cash, stock or any other property on Borrower’s stock now or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire any shares of any class of Borrower’s stock now or hereafter outstanding.

SECTION 5.9 PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Borrower’s assets now owned or hereafter acquired, except any of the foregoing in favor of Bank or which is existing as of, and disclosed to Bank in writing prior to, the date hereof

ARTICLE VI
EVENTS OF DEFAULT

SECTION 6.1 The occurrence of any of the following shall constitute an “Event of Default” under this Agreement:

(g) Borrower shall fail to pay when due any principal, interest, fees or other amounts payable under any of the Loan Documents; provided that, it shall not constitute an Event of Default if Borrower shall have sufficient funds on deposit with Bank to satisfy any payment when due but Bank fails or refuses to debit such account for such amount.

(h) Any financial statement or certificate furnished to Bank in connection with, or any representation or warranty made by Borrower or any other party under this Agreement or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made.

(i) Any default in the performance of or compliance with any obligation, agreement or other provision contained herein or in any other Loan Document (other than those specifically described as an “Event of Default” in this section 6.1), and with respect to any such default that by its nature can be cured, such default shall continue for a period of twenty (20) days from its occurrence.

(j) Any default in the payment or performance of any obligation, or any defined event of default, under the terms of any contract, instrument or document (other than any of the Loan Documents) pursuant to which Borrower, any guarantor hereunder or any general partner or joint venturer in Borrower if a partnership or joint venture (with each such guarantor, general partner and/or joint venturer referred to herein as a “Third Party Obligor”) has incurred any debt or other liability to any person or entity, including Bank, in excess of $100,000 in the aggregate.

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Exhibit 10.27

(k) Borrower or any Third Party Obligor shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; Borrower or any Third Party Obligor shall file a voluntary petition in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time (“Bankruptcy Code”), or under any state or federal law granting relief to debtors, whether now or hereafter in effect; or Borrower or any Third Party Obligor shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition; or Borrower or any Third Party Obligor shall be adjudicated a bankrupt, or an order for relief shall be entered against Borrower or any Third Party Obligor by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors.

(l) The filing of a notice of judgment lien against Borrower or any Third Party Obligor; or the recording of any abstract of judgment against Borrower or any Third Party Obligor in any county in which Borrower or such Third Party Obligor has an interest in real property; or the service of a notice of levy and/or of a writ of attachment or execution, or other like process, against the assets of Borrower or any Third Party Obligor; or the entry of a judgment against Borrower or any Third Party Obligor; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against Borrower or any Third Party Obligor.

(m) There shall exist or occur any event or condition that Bank in good faith believes materially impairs, or is substantially likely materially to impair, the prospect of payment or performance by Borrower, any Third Party Obligor, or the general partner of either if such entity is a partnership, of its material obligations under any of the Loan Documents.

(n) The dissolution or liquidation of Borrower or any Third Party Obligor if a corporation, partnership, joint venture or other type of entity; or Borrower or any such Third Party Obligor, or any of its directors, stockholders or members, shall take action seeking to effect the dissolution or liquidation of Borrower or such Third Party Obligor.

(o) Any change in control of Borrower or any entity or combination of entities that directly or indirectly control Borrower, with “control” defined as ownership of an aggregate of fifty percent (50%) or more of the common stock, members’ equity or other ownership interest (other than a limited partnership interest).

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Exhibit 10.27

(p) The sale, transfer, hypothecation, assignment or encumbrance, whether voluntary, involuntary or by operation of law, without Bank’s prior written consent, of all or any part of or interest in any real property collateral required hereby.

SECTION 6.2 REMEDIES. Upon the occurrence of any Event of Default: (a) all indebtedness of Borrower under each of the Loan Documents, any term thereof to the contrary notwithstanding, shall at Bank’s option and without notice become immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are hereby expressly waived by Borrower; (b) the obligation, if any, of Bank to extend any further credit under any of the Loan Documents shall immediately cease and terminate; and (c) Bank shall have all rights, powers and remedies available under each of the Loan Documents, or accorded by law, including without limitation the right to resort to any or all security for any credit subject hereto and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law. All rights, powers and remedies of Bank may be exercised at any time by Bank and from time to time after the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity.

ARTICLE VII
MISCELLANEOUS

SECTION 7.1 NO WAIVER. No delay, failure or discontinuance of Bank in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Bank of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing.

SECTION 7.2 NOTICES. All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to each party at the following address:

BORROWER: ENDOLOGIX, INC.

11 Studebaker

Irvine, CA 92618

Attention: Robert Krist
Phone: 595-7200
bkrist@endologix.com

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Exhibit 10.27

BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION

2030 Main Street, Suite 900
                Irvine, CA 92614
                Attn: James Ligman
                Phone: 949-251-4122
                Fax: 866-967-9265
                james.ligman@wellsfargo.com

or to such other address as any party may designate by written notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon receipt.

SECTION 7.3 COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of Bank’s in-house counsel), expended or incurred by Bank in connection with (a) the negotiation and preparation of this Agreement and the other Loan Documents; Bank’s continued administration hereof and thereof, and the preparation of any amendments and waivers hereto and thereto, (b) the enforcement of Bank’s rights and/or the collection of any amounts which become due to Bank under any of the Loan Documents, and (c) the prosecution or defense of any action in any way related to any of the Loan Documents, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity.

SECTION 7.4 SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interests or rights hereunder without Bank’s prior written consent. Bank reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Bank’s rights and benefits under each of the Loan Documents. In connection therewith, Bank may disclose all documents and information which Bank now has or may hereafter acquire relating to any credit subject hereto, Borrower or its business, any guarantor hereunder or the business of such guarantor, or any collateral required hereunder.

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Exhibit 10.27

SECTION 7.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan Documents constitute the entire agreement between Borrower and Bank with respect to each credit subject hereto and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof. This Agreement may be amended or modified only in writing signed by each party hereto.

SECTION 7.6 NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party.

SECTION 7.7 TIME. Time is of the essence of each and every provision of this Agreement and each other of the Loan Documents.

SECTION 7.8 SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement.

SECTION 7.9 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same Agreement.

SECTION 7.10 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California.

SECTION 7.11 ARBITRATION.

(a) Arbitration . The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise in any way arising out of or relating to (i) any credit subject hereto, or any of the Loan Documents, and their negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit.

(b) Governing Rules . Any arbitration proceeding will (i) proceed in a location in California selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance

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Exhibit 10.27

with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the “Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure . The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.

(d) Arbitrator Qualifications and Powers . Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of California or a neutral retired judge of the state or federal judiciary of California, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of California and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil

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Exhibit 10.27

Procedure, the California Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

(e) Discovery . In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party’s presentation and that no alternative means for obtaining information is available.

(f) Class Proceedings and Consolidations . No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed any Loan Document, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.

(g) Payment Of Arbitration Costs And Fees . The arbitrator shall award all costs and expenses of the arbitration proceeding.

(h) Real Property Collateral; Judicial Reference . Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such dispute is not submitted to arbitration, the dispute shall be referred to a referee in accordance with California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA’s selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.

(i) Miscellaneous . To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days

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Exhibit 10.27

of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties.

(j) Small Claims Court . Notwithstanding anything herein to the contrary, each party retains the right to pursue in Small Claims Court any dispute within that court’s jurisdiction. Further, this arbitration provision shall apply only to disputes in which either party seeks to recover an amount of money (excluding attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.

[ Balance of Page Intentionally Left Blank ]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first written above.



		WELLS FARGO BANK, NATIONAL ASSOCIATION By: /s/ James Ligman Title: Vice President
		ENDOLOGIX, INC. By: /s/ Robert J. Krist Title: Chief Financial Officer

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Exhibit 10.27

[ Signature Page to Credit Agreement ]

DOCSOC/1656044v2/018854-0004

Exhibit 10.27

FIRST AMENDMENT TO CREDIT AGREEMENT

This First Amendment to Credit Agreement (this “Amendment”) is entered into as of April 13, 2010, by and between WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) and ENDOLOGIX, INC. (“Borrower”).

RECITALS

Borrower and Bank are parties to that certain Credit Agreement dated as of October 30, 2009, as amended from time to time (the “Agreement”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

NOW, THEREFORE, the parties agree as follows:

1. Section 1.1(d) of the Agreement is hereby amended and restated in its entirety to read as follows:

“(d) Credit Card Services Subfeature . Subject to the terms and conditions of this Agreement, Borrower may request corporate credit cards from Bank (the “Credit Card Services”). The aggregate limit of the corporate credit cards shall not exceed One Million Five Hundred Thousand Dollars ($1,500,000), provided that availability under the Line of Credit shall be reduced by the aggregate limits of the corporate credit cards issued to Borrower. In addition, Bank may, in its sole reasonable discretion, charge as advances under the Line of Credit any amounts that become due or owing to Bank in connection with the Credit Card Services. The terms and conditions (including repayment and fees) of such Credit Card Services shall be subject to the terms and conditions of the Bank’s standard forms of application and agreement for the Credit Card Services, which Borrower hereby agrees to execute.”

2. No course of dealing on the part of Bank or its officers, nor any failure or delay in the exercise of any right by Bank, shall operate as a waiver thereof, and any single or partial exercise of any such right shall not preclude any later exercise of any such right. Bank’s failure at any time to require strict performance by Borrower of any provision shall not affect any right of Bank thereafter to demand strict compliance and performance. Any suspension or waiver of a right must be in writing signed by an officer of Bank.

3. Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof.

4. Borrower represents and warrants that the Representations and Warranties contained in the Agreement are true and correct as of the date of this Amendment, and that no Event of Default has occurred and is continuing.

5. As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank:

(a) this Amendment, duly executed by Borrower; and

-21-

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(b) all reasonable fees and expenses incurred through the date of this Amendment, which may be debited from any of Borrower's accounts.

6. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

WEST\21934535.1
363363-000016

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Exhibit 10.27

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.



	ENDOLOGIX, INC.


	By: /s/ Robert Krist

	Title: CFO

	WELLS FARGO BANK, NATIONAL ASSOCIATION


	By: /s/ James Ligman

	Title: Vice President

-23-

DOCSOC/1656044v2/018854-0004

Exhibit 10.27

[Signature Page to First Amendment to Credit Agreement]

SECOND AMENDMENT TO CREDIT AGREEMENT

This Second Amendment to Credit Agreement (this “Amendment”) is entered into as of December 21, 2011, by and between WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) and ENDOLOGIX, INC. (“Borrower”).

RECITALS

Borrower and Bank are parties to that certain Credit Agreement dated as of October 30, 2009, as amended from time to time, including by that certain First Amendment to Credit Agreement dated as of April 13, 2010 (the “Agreement”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

NOW, THEREFORE, the parties agree as follows:

1. Section 4.9(b) of the Agreement hereby is amended and restated in its entirety to read as follows:

“(b) Net loss (excluding all non-cash contingent payments and/or accruals associated with Borrower’s acquisition of Nellix, approved by Bank) at all times of not more than (i) Twenty Million Dollars ($20,000,000) for the fiscal year ending December 31, 2011 and (ii) Seven Million Dollars ($7,000,000) for the quarter ending March 31, 2012.”

2. Section 5.2 of the Agreement hereby is amended and restated in its entirety to read as follows:

“SECTION 5.2 CAPITAL EXPENDITURES. Make any additional investment in fixed assets in excess of an aggregate of (i) Three Million Dollars ($3,000,000) in the fiscal year ending December 31, 2011; and (ii) One Million Five Hundred Thousand Dollars ($1,500,000) in the fiscal quarter ending March 31, 2012.”

3. Section 5.3 of the Agreement hereby is amended and restated in its entirety to read as follows:

“SECTION 5.3 LEASE EXPENDITURES. Incur operating lease expense in any calendar year in excess of an aggregate of One Million Dollars ($1,000,000).”

4. No course of dealing on the part of Bank or its officers, nor any failure or delay in the exercise of any right by Bank, shall operate as a waiver thereof, and any single or partial exercise of any such right shall not preclude any later exercise of any such right. Bank’s failure at any time to require strict performance by Borrower of any provision shall not affect any right of Bank thereafter to demand strict compliance and performance. Any suspension or waiver of a right must be in writing signed by an officer of Bank.

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Exhibit 10.27

5. Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof.

6. Borrower represents and warrants that the Representations and Warranties contained in the Agreement are true and correct as of the date of this Amendment, and that no Event of Default has occurred and is continuing.

7. As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank:

(a) this Amendment, duly executed by Borrower;

(b) Corporate Resolution: Borrowing, duly executed by the Secretary of Borrower; and

(c) all reasonable fees and expenses incurred through the date of this Amendment, which may be debited from any of Borrower's accounts.

8. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

[ Signature Page Follows ]

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Exhibit 10.27

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.



	ENDOLOGIX, INC.


	By: /s/ Robert Krist

	Title: CFO

	WELLS FARGO BANK, NATIONAL ASSOCIATION


	By: /s/ Stephen Cordani

	Title: VP/LTM

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Exhibit 10.27

[ Signature Page to Second Amendment to Credit Agreement]

THIRD AMENDMENT TO CREDIT AGREEMENT

[See Exhibit 10.28.1 to this Annual Report on Form 10-K]

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Exhibit 10.27

FOURTH AMENDMENT TO CREDIT AGREEMENT

THIS AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into as of

October 9, 2012, by and between ENDOLOGIX, INC., a Delaware corporation and NELLIX, INC., a Delaware corporation (each individually, a "Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"). Each reference to a "Borrower" herein shall mean each and every party individually and collectively defined as a Borrower above, and each Borrower herein shall be a co-borrower to every other Borrower.

RECITALS

WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Credit Agreement between Borrower andBank dated as of October 30, 2009, as amended from time to time ("Credit Agreement").

WHEREAS, Bank and Borrower have agreed to certain changes in the terms and conditions set forth in the Credit Agreement and have agreed to amend the Credit Agreement to reflect said changes.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree that the Credit Agreement shall be amended as follows:

1. Section 1.2 (d) is hereby deleted in its entirety, without substitution.

2. Section 1.2 (e) shall be renumbered as Section 1.2 (d).

3. Section 7.10 and 7.11 shall be renumbered as Section 7.11 and 7.12


4.	The following is hereby added to the Credit Agreement as Section 7.10: "SECTION 7.10. JOINT AND SEVERAL LIABILITY.

(a) Each Borrower has determined and represents to Bank that it is a

legitimate business purpose and in its best interests to induce Bank to extend credit pursuant to this Agreement. Each Borrower acknowledges and represents that its business is related to the business of every other Borrower hereunder, and all commitments, advances and other credit extensions under this Agreement will individually and collectively benefit of each Borrower hereunder.

(b) Each Borrower has determined and represents to Bank that it has, and after giving effect to the transactions contemplated by this Agreement will have, assets having a fair market value in excess of its liabilities, after giving effect to any available rights of contribution or subrogation, and each Borrower has, and will have, access to adequate capital for the conduct of its business and the ability to pay its debts as they mature.

(c) Each Borrower agrees that it is jointly and severally and unconditionally liable to Bank for, and will pay to Bank when due, the full amount of all

existing and future indebtedness arising in connection with any facility extended under

this Agreement, and all modifications, extensions and renewals thereto, including

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Exhibit 10.27

without limitation all principal and interest, and all fees, costs and expenses chargeable to each Borrower individually or collectively in connection with any facility hereunder. These obligations shall be in addition to any other obligations of under any other agreement with Bank entered into before or after the date of this Agreement, unless such other agreement is expressly modified or revoked in writing, and this Agreement shall

not affect or invalidate the terms of any such other agreement, unless otherwise expressly provided herein.

(d) The liability of a Borrower for indebtedness hereunder shall be reinstated

and revived and the rights of Bank shall continue if and to the extent that for any reason any amount at any time paid on account of any facility under this Agreement by any Borrower or any other person or entity is rescinded or must otherwise be restored by Bank, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid.

(e) Each Borrower authorizes Bank, without notice to or demand on such Borrower, and without affecting such Borrower's liability for indebtedness incurred under any facility extended under this Agreement, from time to time to: (i) alter, compromise, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of, the indebtedness of any other Borrower to Bank on account of any such facilities; (ii) take and hold security from any other Borrower for the payment of indebtedness incurred under any facility extended under this Agreement, and exchange, enforce, waive, subordinate or release any such security; (iii) apply such security and direct the order or manner of sale thereof, including without limitation, a

non-judicial sale permitted by the terms of the controlling security agreement, mortgage,

or deed of trust, as Bank in its discretion may determine; (iv) release or substitute any one or more of the endorsers or any guarantors of any facility hereunder, or any other party obligated thereon; and (v) apply payments received by Bank from any other Borrower to indebtedness of such other Borrower to Bank other than to any facility extended under this Agreement.

(f) Each Borrower represents and warrants to Bank that it has established adequate means of obtaining from every other Borrower on a continuing basis financial and other information relating to the financial condition of every other Borrower, and each Borrower agrees to keep adequately informed by such means of any facts, events or circumstances which might in any way affect its risks hereunder. Each Borrower further agrees that Bank shall have no obligation to disclose to it any information or material about any other Borrower which is acquired by Bank in any manner.

(g) Each Borrower waives any right to require Bank to: (i) proceed against any

other Borrower or any other person; (ii) proceed against or exhaust any security held from any other Borrower or any other person; (iii) pursue any other remedy in Bank's power; (iv) apply payments received by Bank from any other Borrower to any facility extended under this Agreement; or (v) make any presentments or demands for performance, or give any notices of nonperformance, protests, notices of protest or notices of dishonor in connection with any facility extended under this Agreement

(h) Each Borrower waives to the extent permitted by applicable law any defense to its liability for repaying any facility extended under this Agreement based upon or arising by reason of: (i) any

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Exhibit 10.27

disability or other defense of any other Borrower or any other person; (ii) the cessation or limitation from any cause whatsoever, other than payment in full, of the liability of any other

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Exhibit 10.27

Borrower for the facility extended under this Agreement; (iii) any lack of authority of any officer, director, partner, agent or other person acting or purporting to act on behalf of any other Borrower or any defect in the formation of any other Borrower; (iv) the application by any other Borrower of the proceeds of any facility extended under this Agreement for purposes other than the purposes intended or understood by Bank or each other Borrower; (v) any act or omission

by Bank which directly or indirectly results in or aids the discharge of any other Borrower by

operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of Bank against any other Borrower; (vi) any impairment of the value of any interest in any security for any facility extended under this Agreement, including without limitation, the failure to obtain or maintain perfection or recordation of any interest in any such security, the release of any such security without substitution, and/or the failure to preserve the value of, or to comply with applicable law in disposing of, any such security; or (vii) any modification of the indebtedness of any other Borrower for any facility extended under this Agreement, including without limitation the renewal, extension, acceleration or other change in time for payment of, or other change in the terms of, the indebtedness of any Borrower for any facility extended under this Agreement, including increase or decrease of the rate of interest thereon.

(i) Until each facility extended under this Agreement and all indebtedness arising under or in connection with this Agreement shall have been paid in full, no

Borrower shall have any right of subrogation. Each Borrower waives all rights and defenses it

may have arising out of (i) any election of remedies by Bank, even though that election of remedies, such as a non-judicial foreclosure with respect to any security for each facility extended under this Agreement, destroys its rights of subrogation or its rights to proceed

against any other Borrower for reimbursement, or (ii) any loss of rights it may suffer by reason of

any rights, powers or remedies of any other Borrower in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging any Borrower's indebtedness for each facility extended under this Agreement, whether by operation of Sections 726, 580a or 580d of the California Code of Civil Procedure as from time to time amended, or otherwise including any rights Borrower may have, in the event Borrower has given security, to a Section 580a fair market value hearing to determine the size of a deficiency following any foreclosure sale or

other disposition of any real property security for any portion of the indebtedness."

5. Except as specifically provided herein, all terms and conditions of the Credit Agreement remain in full force and effect, without waiver or modification. All terms defined in the Credit Agreement shall have the same meaning when used in this Amendment. This Amendment and the Credit Agreement shall be read together, as one document.

6. Borrower hereby remakes all representations and warranties contained in the Credit Agreement and reaffirms all covenants set forth therein. Borrower further certifies that as of the date of this Amendment there exists no Event of Default as defined in the Credit Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute any such Event of Default.

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Exhibit 10.27

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first written above.

ENDOLOGIX, INC.

By: /s/ Leo Greenstein

Title: VP Finance & Corporate Controller

NELLIX, INC.

By: /s/ Robert Krist

Title: CFO

WELLS FARGO BANK, NATIONAL ASSOCIATION

By: /s/ Jason Wells

Title: Vice President

[Signature Page to Fourth Amendment to Credit Agreement]

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Exhibit 10.27

FIFTH AMENDMENT TO CREDIT AGREEMENT

This Fifth Amendment to Credit Agreement (this “Amendment”) is entered into as of May 15, 2013, by and between WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”), ENDOLOGIX, INC. and NELLIX, INC. (each a “Borrower” and, collectively, “Borrowers”).

RECITALS

Borrowers and Bank are parties to that certain Credit Agreement dated as of October 30, 2009, as amended from time to time, including by that certain First Amendment to Credit Agreement dated as of April 13, 2010, that certain Second Amendment to Credit Agreement dated as of December 21, 2011, that certain Third Amendment to Credit Agreement dated as of February 21, 2012 and that certain Fourth Amendment to Credit Agreement dated as of October 9, 2012 (the “Agreement”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

NOW, THEREFORE, the parties agree as follows:

9. Section 1.1(a) of the Agreement hereby is amended and restated in its entirety to read as follows:

“(a) Line of Credit . Subject to the terms and conditions of this Agreement, Bank hereby agrees to make advances to Borrower from time to time up to and including November 15, 2014, not to exceed at any time the aggregate principal amount of Twenty Million Dollars ($20,000,000) (the “Line of Credit”), the proceeds of which shall be used for general working capital and corporate purposes. Borrower’s obligation to repay advances under the Line of Credit shall be evidenced by a promissory note dated as of October 30, 2009, as amended and restated on February 21, 2012 and as further amended and restated on May 15, 2013 (as may be further amended, restated, modified or supplemented from time to time, the “Line of Credit Note”), all terms of which are incorporated herein by this reference.”

10. Section 1.1(b) of the Agreement hereby is amend and restated in its entirety to read as follows:

“(b) Limitations on Borrowings . Outstanding borrowings under the Line of Credit, to a maximum of the principal amount set forth above, shall not at any time exceed an aggregate of eighty percent (80%) of Borrower's eligible accounts receivable, plus, upon completion of an appraisal of Borrower’s finished goods inventory the results of which are satisfactory to Bank in Bank’s sole discretion, thirty percent (30%) of the value of Borrower's finished goods (exclusive of work in process and inventory which is obsolete, unsaleable or damaged), with value defined as the lower of cost or market value; provided however, that outstanding borrowings against such finished goods inventory shall not at any time exceed an aggregate of Four Million Dollars ($4,000,000). All of the foregoing shall be

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Exhibit 10.27

determined by Bank upon receipt and review of all collateral reports required hereunder and such other documents and collateral information as Bank may from time to time require. Borrower acknowledges that said borrowing base was established by Bank with the understanding that, among other items, the aggregate of all returns, rebates, discounts, credits and allowances for the immediately preceding three (3) months at all times shall be less than five percent (5%) of Borrower's gross sales for said period. If such dilution of Borrower's accounts for the immediately preceding three (3) months at any time exceeds five percent (5%) of Borrower's gross sales for said period, or if there at any time exists any other matters, events, conditions or contingencies which Bank reasonably believes may affect payment of any portion of Borrower's accounts, Bank, in its sole discretion, may reduce the foregoing advance rate against eligible accounts receivable to a percentage appropriate to reflect such additional dilution and/or establish additional reserves against Borrower's eligible accounts receivable.

As used herein, "eligible accounts receivable" shall consist solely of trade accounts created in the ordinary course of Borrower's business, upon which Borrower's right to receive payment is absolute and not contingent upon the fulfillment of any condition whatsoever, and in which Bank has a perfected security interest of first priority, and shall not include:

(i) any account which is either (a) more than sixty (60) days past due or (b) has not paid within ninety (90) days of invoice date regardless of invoice payment period terms;

(ii) that portion of any account for which there exists any right of setoff, defense or discount (except regular discounts allowed in the ordinary course of business to promote prompt payment) or for which any defense or counterclaim has been asserted;

(iii) any account which represents an obligation of any state or municipal government or of the United States government or any political subdivision thereof (except accounts which represent obligations of the United States government and for which the assignment provisions of the Federal Assignment of Claims Act, as amended or recodified from time to time, have been complied with to Bank's satisfaction);

(iv) any account which represents an obligation of an account debtor located in a foreign country except to the extent any such account, in Bank's determination, is supported by a letter of credit or insured under a policy of foreign credit insurance, in each case in form, substance and issued by a party acceptable to Bank;

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(v) any account which arises from the sale or lease to or performance of services for, or represents an obligation of, an employee, affiliate, partner, member, parent or subsidiary of Borrower;

(vi) that portion of any account, which represents interim or progress billings or retention rights on the part of the account debtor;

(vii) any account which represents an obligation of any account debtor when twenty percent (20%) or more of Borrower's accounts from such account debtor are not eligible pursuant to (i) above;

(viii) that portion of any account from an account debtor which represents the amount by which Borrower's total accounts from said account debtor exceeds twenty-five percent (25%) of Borrower's total accounts;

(ix) any account deemed ineligible by Bank when Bank, in its sole discretion, deems the creditworthiness or financial condition of the account debtor, or the industry in which the account debtor is engaged, to be unsatisfactory.”

11. Section 4.9(a) of the Agreement hereby is amended and restated in its entirety to read as follows:

“(a) Modified Quick Ratio greater than (i) 2.00 to 1.00 at all times, measured quarterly beginning with the quarter ending June 30, 2013, with “Modified Quick Ratio” defined as (I) the sum of the aggregate of Borrower’s unrestricted cash at Bank or subject to an account control agreement in favor of, and in form and substance satisfactory to, Bank, plus accounts receivable, divided by (II) total current liabilities plus, to the extent not already included therein, all indebtedness owing from Borrower to Bank.”

12. Section 4.9(b) of the Agreement hereby is amended and restated in its entirety to read as follows:

“(b) Adjusted pre-tax net loss (excluding all non-cash contingent payments, accruals and/or income associated with ENDOLOGIX, INC.’s acquisition of NELLIX, INC. approved by Bank) at all times, measured cumulatively and on a quarterly basis, of not more than; (i) Nine Million Dollars ($9,000,000) through June 30, 2013, (ii) Thirteen Million Dollars ($13,000,000) through September 30, 2013, (iii) Fourteen Million Five Hundred Thousand Dollars ($14,500,000) through December 31, 2013, (iv) One Million Five Hundred Thousand Dollars ($1,500,000) through March 31, 2014; and a minimum adjusted pre-tax profit of at least One Dollar ($1) thereafter.”

13. Section 4.3(f) of the Agreement hereby is amended and restated in its entirety to read as follows:

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“(f) (x) not later than forty-five days after May 15, 2013, (y) not less than ten (10) days prior to requesting any advance under the Line of Credit (other than advances in respect of Letters of Credit or Credit Card Services); and (z) once Borrower has requested its first advance after May 15, 2013, not later than thirty (30) days after the end of each month, a borrowing base certificate, an aged listing of accounts receivable and accounts payable, and a reconciliation of accounts, and immediately upon each request from Bank, a list of the names and addresses of all Borrower’s account debtors;”

14. Section 5.2 of the Agreement hereby is amended and restated in its entirety to read as follows:

“SECTION 5.2 CAPITAL EXPENDITURES. Make any additional investment in fixed assets in excess of an aggregate of (a) Six Million Dollars ($6,000,000) in the fiscal year ending December 31, 2013 and (b) Nine Million Dollars ($9,000,000) in the fiscal year ending December 31, 2014; provided that for purposes of this Section 5.2, investments in fixed assets shall exclude amounts that are directly paid to contractors by Borrower’s landlord for leasehold improvements (i.e., not funded by Borrower for such expenditures), notwithstanding its potential capitalization to Borrower’s balance sheet under U.S. GAAP”.

15. Section 5.6 of the Agreement hereby is amended and restated in its entirety to read as follows:

“SECTION 5.6 GUARANTIES. Guarantee or become liable in any way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in the ordinary course of business), accommodation endorser or otherwise for, nor pledge or hypothecate any assets of Borrower as security for, any liabilities or obligations of any other person or entity in excess of an aggregate amount of Five Hundred Thousand Euro (€500,000) during the term of this Agreement, except any of the foregoing in favor of Bank.”

16. Section 6.1(f) of the Agreement hereby is amended and restated in its entirety to read as follows:

“(f) the filing of a notice of judgment lien against Borrower or any Third Party Obligor; or the recording of any abstract of judgment against Borrower or any Third Party Obligor in any county in which Borrower or such Third Party Obligor has an interest in real property; or the service of a notice of levy and/or of a writ of attachment or execution, or other like process, against the assets of Borrower or any Third Party Obligor; or the entry of a judgment(s) against Borrower or any Third Party Obligor in an aggregate amount in excess of Ten Million Dollars ($10,000,000) at any time; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other

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relief for debtors is filed or commenced against Borrower or any Third Party Obligor.”

17. No course of dealing on the part of Bank or its officers, nor any failure or delay in the exercise of any right by Bank, shall operate as a waiver thereof, and any single or partial exercise of any such right shall not preclude any later exercise of any such right. Bank’s failure at any time to require strict performance by Borrower of any provision shall not affect any right of Bank thereafter to demand strict compliance and performance. Any suspension or waiver of a right must be in writing signed by an officer of Bank.

18. Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof.

19. Borrower represents and warrants that the Representations and Warranties contained in the Agreement are true and correct as of the date of this Amendment, and that no Event of Default has occurred and is continuing.

20. As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank:

(a) this Amendment, duly executed by Borrower;

(b) a Second Amended and Restated Promissory Note dated as of even date herewith;

(d) all reasonable fees and expenses incurred through the date of this Amendment, which may be debited from any of Borrower's accounts.

21. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

[ Balance of Page Intentionally Left Blank ]

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Exhibit 10.27

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.



	ENDOLOGIX, INC.


	By: /s/ Shelley Thunen

	Title: Chief Financial Officer


	NELLIX, INC.


	By: /s/ Shelley Thunen

	Title: Chief Financial Officer


	WELLS FARGO BANK, NATIONAL ASSOCIATION


	By: /s/ Jason Wells

	Title: Vice President

[ Signature Page to Fifth Amendment to Credit Agreement ]

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Exhibit 10.27

SIXTH AMENDMENT TO CREDIT AGREEMENT

This Sixth Amendment to Credit Agreement (this “Amendment”) is entered into as of July 26, 2013, by and between WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”), ENDOLOGIX, INC. and NELLIX, INC. (each a “Borrower” and, collectively, “Borrowers”).

RECITALS

Borrowers and Bank are parties to that certain Credit Agreement dated as of October 30, 2009, as amended from time to time, including by that certain First Amendment to Credit Agreement dated as of April 13, 2010, that certain Second Amendment to Credit Agreement dated as of December 21, 2011, that certain Third Amendment to Credit Agreement dated as of February 21, 2012, that certain Fourth Amendment to Credit Agreement dated as of October 9, 2012 and that certain Fifth Amendment to Credit Agreement dated as of May 15, 2013 (the “Agreement”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

NOW, THEREFORE, the parties agree as follows:

1. Section 1.1(c) of the Agreement hereby is amended and restated in its entirety to read as follows:

“(c) Letter of Credit Subfeature . As a subfeature under the Line of Credit, Bank agrees from time to time during the term thereof to issue or cause an affiliate to issue letters of credit for the account of Borrower (each, a “Letter of Credit” and collectively, “Letters of Credit”); provided however, that the aggregate undrawn amount of all outstanding Letters of Credit shall not at any time exceed Six Million Dollars ($6,000,000). The form and substance of each Letter of Credit shall be subject to approval by Bank, in its sole discretion. No more than five (5) days after the date of each requested draw on a Letter of Credit, Borrower shall deliver a borrowing base certificate, an aged listing of accounts receivable and accounts payable, and a reconciliation of accounts to Bank unless such items were delivered to Bank in the thirty (30) days preceding such Letter of Credit draw request in accordance with the terms hereunder. Each Letter of Credit shall be issued for a term not to exceed three hundred sixty five (365) days, as designated by Borrower (subject to automatic renewal). If a Letter of Credit is issued and outstanding after the term of the Line of Credit (or after acceleration by Bank pursuant to the terms hereof), Borrower will cash collateralize the undrawn amount of such Letter of Credit in an amount equal to one hundred five percent (105%) of such undrawn amount. The undrawn amount of all Letters of Credit shall be reserved under the Line of Credit and shall not be available for borrowings thereunder. Each Letter of Credit shall be subject to the additional terms and conditions of the Letter of Credit agreements, applications and any related documents required by Bank in connection with the issuance thereof. Each drawing paid under a Letter of Credit shall be deemed an advance under the Line of Credit and shall be repaid by Borrower in accordance with the terms and conditions of this Agreement applicable to such advances; provided however, that if advances under the Line of Credit are not available, for any reason, at the time any drawing is paid, then Borrower shall immediately pay to Bank the full amount drawn, together with interest thereon from the date such drawing is paid to the date such amount is fully repaid by Borrower, at the rate of interest applicable to advances under the Line of Credit. In such event Borrower agrees that Bank, in its sole discretion, may debit any account maintained by Borrower with Bank for the amount of any such drawing.”

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2. Section 4.3(g) of the Agreement hereby is amended and restated in its entirety to read as follows:

“(g) (i) at any time a Letter of Credit is issued and outstanding, quarterly within sixty (60) days of the end of each fiscal quarter and (ii) at any time Borrower’s total unrestricted cash falls below Twenty Million Dollars ($20,000,000), monthly within thirty (30) days of the end of each month, a borrowing base certificate, an aged listing of accounts receivable and accounts payable, and a reconciliation of accounts, and immediately upon each request from Bank, a list of the names and addresses of all Borrower’s account debtors;”

3. New Section 4.3(h) hereby is added to the Agreement to read as follows:

“(h) from time to time such other information as Bank may reasonably request.”

7. As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank:

(d) this Amendment, duly executed by Borrower;

(e) all reasonable fees and expenses incurred through the date of this Amendment, which may be debited from any of Borrower's accounts.

8. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

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Exhibit 10.27

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.



	ENDOLOGIX, INC.


	By: /s/ Shelley Thunen

	Title: Chief Financial Officer


	NELLIX, INC.


	By: /s/ Shelley Thunen

	Title: Chief Financial Officer


	WELLS FARGO BANK, NATIONAL ASSOCIATION


	By: /s/ Dennis Kim

	Title: Vice President

DOCSOC/1656044v2/018854-0004

Exhibit 10.27

[ Signature Page to Sixth Amendment to Credit Agreement ]

SEVENTH AMENDMENT TO CREDIT AGREEMENT

This Seventh Amendment to Credit Agreement (this “Amendment”) is entered into as of December 3, 2013, by and between WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”), ENDOLOGIX, INC. and NELLIX, INC. (each a “Borrower” and, collectively, “Borrowers”).

RECITALS

Borrowers and Bank are parties to that certain Credit Agreement dated as of October 30, 2009, as amended from time to time, including by that certain First Amendment to Credit Agreement dated as of April 13, 2010, that certain Second Amendment to Credit Agreement dated as of December 21, 2011, that certain Third Amendment to Credit Agreement dated as of February 21, 2012, that certain Fourth Amendment to Credit Agreement dated as of October 9, 2012, that certain Fifth Amendment to Credit Agreement dated as of May 15, 2013 and that certain Sixth Amendment to Credit Agreement dated as of July 26, 2013 (the “Agreement”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.

NOW, THEREFORE, the parties agree as follows:

1. Section 1.5 of the Agreement hereby is amended and restated in its entirety to read as follows:

“SECTION 1.5 SUBORDINATION OF DEBT. All indebtedness and other obligations of Borrower to any other party other than any Permitted Convertible Indebtedness (as defined below) shall be subordinated in right of repayment to all indebtedness and other obligations of Borrower to Bank, as evidenced by and subject to the terms of subordination agreements in form and substance satisfactory to Bank”

2. Section 5.4 of the Agreement hereby is amended and restated in its entirety to read as follows:

“SECTION 5.4 OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, loans or advances, whether secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, except:

(a) the liabilities of Borrower to Bank;

(b) trade payables incurred in the ordinary course of business;

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Exhibit 10.27

(d) indebtedness (“Permitted Convertible Indebtedness”) of Existing Borrower pursuant to the Convertible Debt Documents in an aggregate principal amount not to exceed One Hundred Million Dollars ($100,000,000) (including any amount issued pursuant to any option to purchase additional notes, including, without limitation, any such option granted to cover over-allotments) that (i) is convertible into common stock of Existing Borrower and/or cash (in an amount determined by reference to the price of such common stock), (ii) matures after, and does not require any scheduled amortization or other scheduled payments of principal prior to, the maturity date of the Line of Credit (it being understood that such indebtedness may have mandatory prepayment, repurchase or redemptions provisions satisfying the requirement of clause (iii) hereof and may provide for cash payments upon conversion prior to the maturity date of such indebtedness provided that, for the avoidance of doubt, at the time of any such cash payment Existing Borrower shall be in compliance with the covenants set forth in Section 4.9), (iii) has terms and conditions (other than interest rate and redemption premiums), taken as a whole, that are not materially less favorable to Existing Borrower than the terms and conditions customary at the time for convertible debt securities issued in a broadly distributed offering and (iv) is incurred by Existing Borrower; provided, that both immediately prior and after giving effect to the incurrence thereof, (x) no Event of Default shall exist or result therefrom and (y) Existing Borrower shall be in compliance with the covenants set forth in Section 4.9; provided, further, that a certificate of the chief financial officer of Borrower delivered to Bank at least two Business Days prior to the incurrence of such indebtedness, together with a disclosure document containing the summary description of the material terms and conditions of such indebtedness, stating that Existing Borrower has determined in good faith that such terms and conditions satisfy the requirements of this clause (d), shall be conclusive evidence that such terms and conditions satisfy the foregoing requirement unless Bank notifies Existing Borrower within one Business Day of receipt of such certificate that it disagrees with such determination; and

(e) any Permitted Bond Hedge Transaction and any Permitted Warrant Transaction.

As used herein, “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are required or authorized to close under the laws of, or are in fact closed, in New York.

As used herein, “Convertible Debt Documents” means (i) an indenture, (ii) a global note and (iii) one or more transaction confirmations, in each case relating to an offering of Permitted Convertible Indebtedness by Existing Borrower and related

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Permitted Bond Hedge Transactions and Permitted Warrant Transactions entered into by Existing Borrower .

As used herein, “Existing Borrower” means ENDOLOGIX, INC.

As used herein, “Permitted Bond Hedge Transaction” means any call or capped call option (or substantively equivalent derivative transaction) on Existing Borrower’s common stock purchased by Existing Borrower in connection with the issuance of any Permitted Convertible Indebtedness; provided that the purchase price for such Permitted Bond Hedge Transaction, less the proceeds received by Existing Borrower from the sale of any related Permitted Warrant Transaction, does not exceed the net proceeds received by Existing Borrower from the issuance of such Permitted Convertible Indebtedness in connection with such Permitted Bond Hedge Transaction.

As used herein, “Permitted Warrant Transaction” means any call option, warrant or right to purchase (or substantively equivalent derivative transaction) on Existing Borrower’s common stock sold by Existing Borrower substantially concurrently with any purchase by Existing Borrower of a related Permitted Bond Hedge Transaction.”

3. Section 5.6 of the Agreement hereby is amended and restated in its entirety to read as follows:

4. Section 5.7 of the Agreement hereby is amended and restated in its entirety to read as follows:

“SECTION 5.7 LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or investments in any person or entity, except (a) any of the foregoing existing as of, and disclosed to Bank prior to, the date hereof and (b) pursuant to any Permitted Bond Hedge Transaction.”

5. Section 5.8 of the Agreement hereby is amended and restated in its entirety to read as follows:

DOCSOC/1656044v2/018854-0004

Exhibit 10.27

“SECTION 5.8 DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or distribution either in cash, stock or any other property on Borrower’s stock now or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire any shares of any class of Borrower's stock now or hereafter outstanding except:

(a) pursuant to any Permitted Bond Hedge Transaction;

(b) Existing Borrower may make (i) regularly scheduled payments of interest in respect of any Permitted Convertible Indebtedness and (ii) any required payments of principal in respect of any Permitted Convertible Indebtedness made in accordance with this Agreement;

(c) Existing Borrower may make cash payments in connection with any conversions of Permitted Convertible Indebtedness; provided that (1) both immediately prior and after giving effect to any such payment, (x) no Event of Default shall exist or result therefrom and (y) Borrower shall be in compliance with the covenants set forth in Section 4.9; and

(d) Existing Borrower may purchase a Permitted Bond Hedge Transaction and can settle any related Permitted Warrant Transaction by set-off against such related Permitted Bond Hedge Transaction (if such set-off is permitted under the terms thereof), by delivery of shares of its common stock and, subject to compliance with the proviso to paragraph (c) above, by payment of the amounts due under the Permitted Warrant Transaction in cash, securities or other property.”

6. Section 6.1(g) of the Agreement hereby is amended and restated in its entirety to read as follows:

“(g) There shall exist or occur any event or condition that Bank in good faith believes materially impairs, or is substantially likely materially to impair, the prospect of payment or performance by Borrower, any Third Party Obligor, or the general partner of either if such entity is a partnership, of its material obligations under any of the Loan Documents. For the avoidance of doubt, Borrower and Bank agree that Borrower’s entry into, performance of its obligations under and settlement (by early termination or otherwise) of any Permitted Convertible Indebtedness, any Permitted Bond Hedge Transaction or any Permitted Warrant Transaction entered into in accordance with this Agreement will not materially impair such prospect of payment or performance.”

7. No course of dealing on the part of Bank or its officers, nor any failure or delay in the exercise of any right by Bank, shall operate as a waiver thereof, and any single or partial exercise of any such right shall not preclude any later exercise of any such right. Bank’s failure at any time to require strict performance by Borrower of any

DOCSOC/1656044v2/018854-0004

Exhibit 10.27

provision shall not affect any right of Bank thereafter to demand strict compliance and performance. Any suspension or waiver of a right must be in writing signed by an officer of Bank.

8. Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof.

9. Borrower represents and warrants that the Representations and Warranties contained in the Agreement are true and correct as of the date of this Amendment, and that no Event of Default has occurred and is continuing.

10. As a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank:

(a) this Amendment, duly executed by Borrower;

(b) the certificate of the chief financial officer of Borrower contemplated by the proviso to Section 5.4 of the Agreement, as amended by this Amendment; and

(c) all reasonable fees and expenses incurred through the date of this Amendment, which may be debited from any of Borrower's accounts.

11. Promptly (and in any event, within three Business Days) following the closing of any offering of any Permitted Convertible Indebtedness and/or the entering into of any Permitted Bond Hedge Transaction or Permitted Warrant Transaction by Borrower, Borrower shall provide to Bank (i) executed copies of the applicable Convertible Debt Documents and (ii) a certificate of the chief financial officer of Borrower stating that the Convertible Debt Documents are consistent in all material respects with the summary description delivered with the certificate delivered pursuant to Section 10(b) hereof.

12. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

[ Balance of Page Intentionally Left Blank ]

DOCSOC/1656044v2/018854-0004

Exhibit 10.27

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.



	ENDOLOGIX, INC.


	By: /s/ Shelley Thunen

	Title: Chief Financial Officer & Secretary


	NELLIX, INC.


	By: /s/ Shelley Thunen

	Title: Chief Financial Officer & Secretary


	WELLS FARGO BANK, NATIONAL ASSOCIATION


	By: /s/ Dennis Kim

	Title: Vice President

DOCSOC/1656044v2/018854-0004

Exhibit 10.27

[ Signature Page to Seventh Amendment to Credit Agreement ]

DOCSOC/1656044v2/018854-0004

Exhibit 12.1



	Endologix, Inc.
	Computation of Ratios of Earnings to Fixed Charges
	(in thousands)
	Twelve Months Ended			Fiscal Years Ended December 31,
	31-Dec-13			2012			2011			2010			2009			2008
EARNINGS:
Loss before income taxes		($16,078	)		($35,243	)		($28,816	)		($4,384	)		($2,413	)		($11,992	)
Plus: Fixed charges (see below)		$321			$7			$32			$16			$192			$106
Total earnings/(loss) to cover fixed charges		($15,757	)		($35,236	)		($28,784	)		($4,368	)		($2,221	)		($11,886	)

FIXED CHARGES:
Interest expense		$321			$7			$32			$16			$192			$106
Interest portion of rental expense		$0			$0			$0			$0			$0			$0
Total Fixed charges		$321			$7			$32			$16			$192			$106
Preferred stock dividends		$0			$0			$0			$0			$0			$0
Combined fixed charges and preferred stock dividends		$321			$7			$32			$16			$192			$106

RATIO OF EARNINGS TO FIXED CHARGES	--			--			--			--			--			--
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS	--			--			--			--			--			--

DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES		($16,078	)		($35,243	)		($28,816	)		($4,384	)		($2,413	)		($11,992	)

DEFICIENCY OF EARNINGS TO COVER COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS		($16,078	)		($35,243	)		($28,816	)		($4,384	)		($2,413	)		($11,992	)

EXHIBIT 21.1

LIST OF SUBSIDIARIES


1.	CVD/RMS Acquisition Corp., a Delaware corporation.


2.	Nellix, Inc., a Delaware corporation.


3.	ELGX International Holdings GP, a Cayman Islands company.


4.	Endologix International Holdings B.V., a Dutch corporation.


5.	Endologix International B.V., a Dutch corporation.


6.	Endologix New Zealand Co., a New Zealand unlimited liability company.


7.	Endologix Bermuda L.P., a Bermuda partnership.


8.	Endologix International Holdings B.V., a Dutch corporation.


9.	Endologix Italia S.r.l., an Italian corporation.


10.	Endologix International B.V., a Dutch corporation.

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Endologix, Inc.:

We consent to the incorporation by reference in the registration statements (Nos. 333-190393, 333-187258, 333-168465, 333-160317, 333-152774, 333-136370, 333-122491, 333-114465, 333-52482, 333-72531, 333-59305, 333-42161, and 333-07959) on Form S-8, and (Nos. 333-181762, 333-171639, 333-159078, 333-133598, 333-107286, 333-35343, 333-33997, 333-71053, 333-52474, 333-90960, 333-126710, and 333-114140) on Form S-3 of Endologix, Inc. of our reports dated March 3, 2014 , with respect to the consolidated balance sheets of Endologix, Inc. and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2013, the related consolidated financial statement schedule, and the effectiveness of internal control over financial reporting as of December 31, 2013, which reports appear in the December 31, 2013 annual report on Form 10‑K of Endologix, Inc.

/s/ KPMG LLP

March 3, 2014

Irvine, California

EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Forms S-3 (Nos. 333-181762, 333-171639, 333-159078, 333-133598, 333-107286, 333-35343, 333-33997, 333-71053, 333-52474, 333-90960, 333-126710, and 333-114140) and Forms S-8 (Nos. 333-190393, 333-187258, 333-168465, 333-160317, 333-152774, 333-136370, 333-122491, 333-114465, 333-52482, 333-72531, 333-59305, 333-42161, and 333-07959) of Endologix, Inc of our report dated March 6, 2012 relating to the financial statements and financial statement schedule, which appears in this Form 10‑K.

/s/PricewaterhouseCoopers LLP

Orange County, California

March 3, 2014

Exhibit 31.1

Certification

I, John McDermott, certify that:


1.	I have reviewed this Annual Report on Form 10-K of Endologix, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principals;


c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



March 3, 2014	By:	/s/ JOHN MCDERMOTT
		John McDermott
		Chief Executive Officer and Chairman of the Board

Exhibit 31.2

Certification

I, Shelley B. Thunen, certify that:


1.	I have reviewed this Annual Report on Form 10-K of Endologix, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principals;


c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



March 3, 2014	By:	/s/ SHELLEY B. THUNEN
		Shelley B. Thunen
		Chief Financial Officer

Exhibit 32.1

CERTIFICATION

In connection with the Annual Report of Endologix, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John McDermott, Chief Executive Officer and Chairman of the Board, certify, pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 (15 U.S.C. 78m or 780(d)) and 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ JOHN MCDERMOTT

John McDermott

Chief Executive Officer and Chairman of the Board

This certification accompanies this Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934.

Date: March 3, 2014

Exhibit 32.2

CERTIFICATION

In connection with the Annual Report of Endologix, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Shelley B. Thunen, Chief Financial Officer of the Company, certify, pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 (15 U.S.C. 78m or 780(d)) and 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ SHELLEY B. THUNEN

Shelley B. Thunen

Chief Financial Officer

Date: March 3, 2014