exv10w3






Exhibit 10.3




EMPLOYMENT AGREEMENT




     THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of December 29, 2008,
by and between ENDOLOGIX, INC., a Delaware corporation (the “Company”), and Stefan Schreck, 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 of Technology 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



 









 





               (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:




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



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               (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.




          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 (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.



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               (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:



                    (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).



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     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 his
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 his Separation from Service
shall be 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 15th day of the third calendar month 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




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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 without
any further action by the parties thereto, and any rights or claims that Executive may have with
respect to her 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




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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:




	 	 	 
	     If to Executive:

	 	Stefan Schreck
	 

	 	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.




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



	 	 	 	 	 	 	 
	 	 	“COMPANY”	 	 
	 
	 	 	 	 	 	 
	 	 	ENDOLOGIX, INC., a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Its:
	 	/s/ John McDermott
 

President and Chief Executive Officer
	 	 






	 	 	 	 	 	 	 
	 

	 	“EXECUTIVE”	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	/s/ Stefan Schreck
 

Stefan Schreck
	 	 	 	 






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EXHIBIT A




STEFAN SCHRECK’S BENEFITS





	•	 	Health Insurance






	•	 	Dental Insurance






	•	 	Prescription Drug Insurance






	•	 	Group Life Insurance