Appointment of PricewaterhouseCoopers LLP (US) as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2014.2017; and

Approval of the 2017 Omnibus Incentive Plan.

You may submit another properly completed proxy card with a later date.

You may send a timely written notice that you are revoking your proxy to Sophiris Bio Inc. at 1258 Prospect Street, La Jolla, California 92037, Attention: Peter SloverCorporate Secretary or to our registered office at 2900-550 Burrard Street, Vancouver, British Columbia, V6C 0A3.

You may attend the Annual Meeting and vote in person. Simply attending the meeting will not, by itself, revoke your proxy.

You may revoke your proxy in any other manner allowed by law.

For the appointment of PricewaterhouseCoopers LLP (US) as the independent registered public accounting firm of the Company for its fiscal year ending 2014,December 31, 2017, the resolution must receive at least one “For” vote from the holders of shares present and entitled to vote either in person or represented by proxy.

For the approval of the 2017 Omnibus Incentive Plan, the resolution must receive “For” votes from the holders of a majority of shares present and entitled to vote either in person or represented by proxy. If you mark your proxy to “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes will have no effect.

the adoption of a strategic planning process and the approval and review, at least annually, of our strategic business plan proposed by management, including a statement of vision, mission and values, and to adopt such a plan with such changes as the Board deems appropriate;

the identification of the principal risks of our business and overseeing the implementation of appropriate systems to manage these risks;

succession planning, including appointing, training and monitoring senior management and, in particular, the Chief Executive Officer;

overseeing the integrity of members of management and a culture of integrity throughout the company; and

overseeing the development and application of our internal control and management information systems.

recommending the following to the Board: (i) the independent registered public accounting firm to be nominated for the purpose of preparing or issuing an auditor’s report or performing other audit, review or attest services for the company; and (ii) the compensation of the independent registered public accounting firm;

overseeing the work of the independent registered public accounting firm engaged for the purpose of preparing or issuing an auditor’s report or performing other audit, review or attest services for the company, including the resolution of disagreements between management and the independent registered public accounting firm regarding financial reporting;

pre-approving all non-audit services to be provided to the company or its subsidiary entities by our independent registered public accounting firm in accordance with the pre-approval process noted below;

reviewing our financial statements, management’s discussion and analysis of financial condition and results of operations and annual and interim earnings press releases before the company publicly discloses this information;

ensuring that adequate procedures are in place for the review of our public disclosure of financial information extracted or derived from our financial statements, and must periodically assessing the adequacy of those procedures;

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Our Board has determined that Messrs. Turner andMr. Proehl qualifyqualifies as an Audit Committee financial expertsexpert within the meaning of Securities and Exchange Commission (“SEC”)SEC regulations and meets the financial sophistication requirements of the NASDAQ Listing Rules. In making this determination, our boardBoard has considered formal education and the nature and scope of experience that they haveMr. Proehl previously had with public companies. Both our independent registered public accounting firm and management periodically meet privately with our Audit Committee.

Our Board has adopted a written charter for the Audit Committee that is available on our website at http://investors.sophiris.com/investor.sophirisbio.com/governance.cfm.

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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS⁽¹⁾

The primary purpose of the Audit Committee is to oversee our financial reporting processes on behalf of our Board. The Audit Committee’sCommittee's functions are more fully described in its charter, which is available on our website at http://investors.sophiris.com/investor.sophirisbio.com/governance.cfm. Management has the primary responsibility for our financial statements and reporting processes, including our systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management Sophiris’Sophiris' audited financial statements as of and for the year ended December 31, 2013.2016.

The Audit Committee has discussed with PricewaterhouseCoopers LLP, (US), the Company’sCompany's independent registered public accounting firm, the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380) as adopted by the Public Company Accounting Oversight Board (“PCAOB”("PCAOB") in Rule 3200T. In addition, the Audit Committee discussed with PricewaterhouseCoopers LLP (US) their independence, and received from PricewaterhouseCoopers LLP (US) the written disclosures and the letter required by Ethics and Independence Rule 3526 of the PCAOB. Finally, the Audit Committee discussed with PricewaterhouseCoopers LLP, (US), with and without management present, the scope and results of PricewaterhouseCoopers LLP (US)’sLLP's audit of such financial statements.

Based on these reviews and discussions, the Audit Committee has recommended to our Board that such audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 20132016 for filing with the SEC. The Audit Committee also has recommended to the Board that PricewaterhouseCoopers LLP (US) be engaged as our independent registered public accounting firm for the fiscal year ended December 31, 2014.2017. Shareholders are being asked to reappoint PricewaterhouseCoopers LLP (US) at the Annual Meeting.

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Compensation Committee

Our Compensation Committee currently consists of Dr. Geltosky (chair) and Messrs. Heppell and Turner.Proehl. Our Board has determined that each of Dr. Geltosky and Messrs. TurnerHeppell and HeppellProehl are independent under the NASDAQ listing standardsListing Rules and Canadian securities laws, is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act and is an “outside director” as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended.amended (the “Code”). The functions of the Compensation Committee, as set forth in the committee’s written charter adopted by our Board, include:

Our Board has adopted a written charter for the Compensation Committee that is available on our website at http://investors.sophiris.com/investor.sophirisbio.com/governance.cfm.

CompensationCompensation Committee Processes and Procedures

Typically, the Compensation Committee meets at least two times annually and with greater frequency if necessary. The agenda for each meeting is usually developed by the Chair of the Compensation Committee, in consultation with the Chief Executive Officer. The Compensation Committee meets regularly in executive session. However, from time to time, various members of management and other employees as well as outside advisors or consultants may be invited by the Compensation Committee to make presentations, to provide financial or other background information or advice or to otherwise participate in Compensation Committee meetings. The Chief Executive Officer may not participate in, or be present during, any deliberations or determinations of the Compensation Committee regarding his compensation. The charter of the Compensation Committee grants the Compensation Committee full access to all books, records, facilities and personnel of the Company, as well as authority to obtain, at the expense of the Company, advice and assistance from internal and external legal, accounting or other advisors and consultants and other external resources that the Compensation Committee considers necessary or appropriate in the performance of its duties. In particular, the Compensation Committee has the sole authority to retain compensation consultants to assist in its evaluation of executive and director compensation, including the authority to approve the consultant’s reasonable fees and other retention terms.

During the past fiscal year, the Compensation Committee did not independently engage anyan outside consultant as a compensation consultant. During the year ended December 31, 2013,2016, the Company engaged Barney & Barney LLC, an outside compensation consulting firm and Frederic W. Cook, an outside compensation consulting firm, to review the Company’s compensation policies and to conduct a competitive compensation assessment for the Company’s employees including its named executive officers. The assessmentsassessment completed by both Barney & Barney LLC and Frederic W. Cook werewas presented to the Compensation Committee in conjunction with the Compensation Committee’s review of the compensation of the Company’s named executive officers.

During the year ended December 31, 2016 the Company paid approximately $28,000 to Frederic W. Cook to review the Company’s compensation policies.

The Compensation Committee received information from Barney & Barney LLC and Frederic W. Cook about potential conflicts of interest and has analyzed whether the work of Barney & Barney LLC and Frederic W. Cook as a compensation consultant has raised any conflict of interest, taking into consideration the following factors: (i) the provision of other services to the Company by Barney & Barney LLC and Frederic W. Cook ;Cook; (ii) the amount of fees from the Company paid to Barney & Barney LLC and Frederic W. Cook as a percentage of each firm’sits total revenue; (iii) Barney & Barney LLC’s and Frederic W. Cook’sCook's policies and procedures that are designed to prevent conflicts of interest; (iv) any business or personal relationship of Barney & Barney LLC and Frederic W. Cook or the individual compensation advisors employed by Barney & Barney LLC and Frederic W. Cook with an executive officer of the Company; (v) any business or personal relationship of the individual compensation advisors with any member of the Compensation Committee; and (vi) any stock of the Company owned by the individual compensation advisors employed by Barney & Barney LLC and Frederic W. Cook. Based on these factors, the Compensation Committee determined that there were no conflicts of interest with respect to Barney & Barney LLC and Frederic W. Cook providing services to the Compensation Committee.

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Historically, the Compensation Committee has made most of the significant adjustments to annual compensation, determined bonus and equity awards and established new performance objectives at one or more meetings held around the end of each fiscal year. Generally, the Compensation Committee’s process comprises two related elements: the determination of compensation levels and the establishment of performance objectives for the current year. For executives other than the Chief Executive Officer, the Compensation Committee solicits and considers evaluations and recommendations submitted to the Committee by the Chief Executive Officer.In the case of the Chief Executive Officer, the evaluation of his performance is conducted by the Compensation Committee, which determines any adjustments to his compensation as well as awards to be granted. For all executives as part of its deliberations, the Compensation Committee may review and consider, as appropriate, materials such as financial reports and projections, operational data, tax and accounting information, executive share ownership information, company share performance data, analyses of historical executive compensation levels and current Company-wide compensation levels and recommendations of the Chief Executive Officer.

Compensation Committee Interlocks and Insider Participation

We have established a Compensation Committee, which has and will make decisions relating to compensation of our executive officers. None of our current or former executive officers serves as a member of the Compensation Committee. None of our executive officers currently serves, or has served during the last completed fiscal year, on the Compensation Committee or Board of any other entity that has one or more executive officers serving as a member of our Board or Compensation Committee.

Corporate Governance and Nomination Committee

Our Corporate Governance and Nomination Committee currently consists of Messrs. Heppell (chair) and Proehl and Dr. Geltosky. Mr. Rohn resigned from our Corporate Governance and Nomination Committee effective April 1, 2014.Ekman. Our Board has determined that each of Dr. Geltosky and Messrs. Heppell and Proehl and Dr. Ekman are independent under the NASDAQ listing standardsListing Rules and Canadian securities laws, is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act and is an “outside director” as that term is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended.Code.

The functions of the Corporate Governance and Nomination Committee, as set forth in the committee’s written charter adopted by our Board, include, among other things:

The Corporate Governance and Nomination Committee will consider director candidates recommended by shareholders. Candidates recommended by the Company’s shareholders shall be evaluated in the same manner as all other director nominees. Ultimately, the Corporate Governance and Nomination Committee will select the most qualified candidates and make its recommendations to the full Board, who will formally decide whether to nominate the recommended candidates for election or appointment to the Board.

Shareholders may recommend nominees for consideration by the Corporate Governance and Nomination Committee by submitting the names and supporting information as specified below to:

Chair of the Corporate Governance and Nomination Committee
Sophiris Bio Inc.

1258 Prospect Street
La Jolla, California 92037

Submissions with respect to recommended nominees for director should include a current résumé and curriculum vitae of the candidate, a statement describing the candidate’s relevant qualifications, including any specific public company experience within the Company’s industry, and contact information for the nominee and the nominee’s personal and professional references. The submission should also include the name and address of the shareholder who is submitting the nominee for consideration, the number of shares of the Company which are owned, directly or indirectly, and/or controlled by the submitting shareholder (and the name of the registered holder of such shares, if the submitting shareholder is not a registered holder), a description of any arrangement or understanding between the submitting shareholder and the nominee and a description of any known or potential conflicts of interest or related party transactions that may be exist as between the Company and either the nominee or the shareholder submitting the nominee for consideration.

Our Board has adopted a written charter for the Corporate Governance and Nomination Committee that is available on our website at http://investors.sophiris.com/investor.sophirisbio.com/governance.cfm.

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Other Matters Regarding the Board of Directors and Corporate Governance

Shareholder Communications With Thewith the Board Ofof Directors

The Company’s Board has adopted a formal process by which shareholders may communicate with the Board or any of its directors. Shareholders who wish to communicate with the Board may do so by sending written communications addressed to the Corporate Secretary of Sophiris Bio Inc. at 1258 Prospect Street, La Jolla, California 92037, Attention: Peter T. Slover.Corporate Secretary. Each communication must set forth: the name and address of the Company shareholder on whose behalf the communication is sent; and, the number of Company shares that are owned beneficially by such shareholder as of the date of the communication. Each communication will be reviewed by the Company’s Secretary to determine whether it is appropriate for presentation to the Board or such director. Communications determined by the Company’s Secretary to be appropriate for presentation to the Board or such director will be submitted to the Board or such director on a periodic basis.

Code of Business Conduct and Ethics

The Company has adopted a written codeCode of business conductBusiness Conduct and ethicsEthics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or person performing similar functions. A copy of the codeCode of Business Conduct and Ethics is available on our website at www.sophiris.com.http://investor.sophirisbio.com/governance.cfm. If the Company makes any substantive amendments to the Code of Business Conduct and Ethics or grants any waiver from a provision of the Code of Business Conduct and Ethics to any executive officer or director, the Company will promptly disclose the nature of the amendment or waiver on its website.

Corporate Cease Trade Orders or Bankruptcies

During the ten years preceding the date of this proxy statement, no nominee for director of the Company is currently or has been:

Individual Bankruptcies

During the ten years preceding the date of this proxy statement, no nominee for director of the Company has become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of that individual.

Penalties and Sanctions

None of the proposed nominees for election as a director of the Company has been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority, has entered into a settlement agreement with any securities regulatory authority or has been subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable securityholder in deciding whether to vote for the proposed director.

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Disclosure of Corporate Governance Practices

National Instrument 58-101Disclosure of Corporate Governance Practices requires companies to disclose the corporate governance practices that they have adopted. A description of the corporate governance practices adopted by the Company is set out in the attached Appendix “A”.

Proposal 2

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Proposal 3

Appointment of Independent Registered Public Accounting Firm

The Audit Committee and the Board have recommended that PricewaterhouseCoopers LLP (US) be reappointed as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2014 .2017. Representatives of PricewaterhouseCoopers, LLP (US)are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions. PricewaterhouseCoopers LLP has audited the Company’s financial statements since 2013. BCBCA requires the shareholders of the Company to appoint the Independent Registered Public Accounting Firm for the Company.

The Board Ofof Directors Recommends a Vote “FOR” Proposal 2.

A Vote “For” Proposal 3.

Principal

Principal Accountant Fees and Services

PricewaterhouseCoopers (US)LLP was first appointed as the independent registered public accounting firm of the Company for our financial statement audit for the year ended December 31, 2012, effective January 10, 2013, in connection with the relocation of the head office of the Company to San Diego, California. At the request of the Audit Committee, PricewaterhouseCoopers LLP (Canada) resigned as the external auditors of the Company effective as of the same date. There were no disagreements and no reportable events in connection with the resignation of PricewaterhouseCoopers LLP (Canada). The Audit Committee of the Company approved the appointment of PricewaterhouseCoopers LLP (US).

The amounts included for the year ended December 31, 2013 represent aggregate fees billed, through the datefollowing is a summary of the filing of this Proxy Statement, to the Company by PricewaterhouseCoopers LLP (US) related to their engagement for services performed for the year ended December 31, 2013. The amounts included for the year ended December 31, 2012 represent the aggregate fees billed to the Company by both PricewaterhouseCoopers LLP (US)for professional services rendered for 2016 and PricewaterhouseCoopers LLP (Canada) related to their engagement for services performed for the year ended December 31, 2012.2015. All fees described below were pre-approved by the Audit Committee.

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Pre-ApprovalPre-Approval Policies and Procedures

The Audit Committee pre-approves all audit and non-audit services rendered by our independent registered public accounting firm, PricewaterhouseCoopers LLP (US).LLP. The Audit Committee has not adopted a formal written policy for the pre-approval of audit and non-audit services, but generally pre-approves specified services in the defined categories of audit services, audit-related services, tax services and other services up to specified amounts. Pre-approval may also be given as part of the Audit Committee’s approval of the scope of the engagement of the independent registered public accounting firm or on an individual explicit case-by-case basis before the independent registered public accounting firm is engaged to provide each service. The pre-approval of services may also be given by Mr. Turner,Proehl, the Chair of the Audit Committee who has been delegated pre-approval authority by the Audit Committee, but the pre-approval decision must be communicated to the full Audit Committee at its next scheduled meeting.

EXECUTIVE OFFICERSPROPOSAL 3

APPROVAL OF THE 2017 OMNIBUS INCENTIVE PLAN

On March 29, 2017, the Board of Directors adopted the Company’s 2017 Omnibus Incentive Plan (the “Plan”), subject to the approval of the shareholders at this Annual Meeting. The following summary of the principal features of the Plan is qualified in its entirety by reference to the full text of the Plan which is attached to this proxy statement as Appendix C. If shareholders approve the Plan, we will cease granting awards under the Company’sAmended and Restated 2011 Stock Option Plan (the “Prior Plan”).

The Plan is designed to enable the Company to attract, retain and motivate its officers, executives, management, non-employee directors and other key personnel, to further align the interests of such persons with those of our shareholders by providing for or increasing their proprietary interest in the Company, and to help promote a pay-for-performance linkage for such persons. The Plan authorizes the grant and issuance of awards that may take the form of stock options, stock appreciation rights, restricted stock, stock units, and performance-based incentive awards. The Plan has various provisions so that awards granted under it may, but need not, qualify as “performance-based compensation” that is exempt from the $1,000,000 limitation on the deductibility of compensation under Section 162(m) of the Code.

We are asking shareholders to approve the Plan.As of the effective date of the Plan, a total of 3,142,566 shares of the Company’s common stock will be authorized for awards granted under the Plan, less one share for every one share that was subject to an option or stock appreciation right granted after December 31, 2016 under the Prior Plan and prior to the effective date of the Plan and 2.0 shares for every one share that was subject to an award other than an option or stock appreciation right granted after December 31, 2016 under the Prior Plan and prior to the effective date of the Plan. Sophiris believes the Plan, including the maximum number of shares available for awards under the Plan, is necessary to ensure that we have adequate capacity to continue to attract and retain talented employees and non-employee directors. We believe that this number represents a reasonable amount of potential equity dilution and allows the Company to continue to award equity incentives, which are an important component of our overall compensation program.

As of December 31, 2016, there were142,566 shares available for grant under the Prior Plan. If the Plan is approved by shareholders, the total number of shares available for awards to employees, non-employee directors and other key personnel will increase by 3,000,000, which increase represents approximately 10.0% of the Company’s outstanding common equity as of December 31, 2016.

Section 162(m)

The Plan has been structured in a manner such that awards granted under it can satisfy the requirements for “performance-based” compensation within the meaning of Section 162(m) of the Code (“Section 162(m)”). However, there can be no guarantee that amounts payable under the Plan will be treated as qualified “performance-based” compensation under Section 162(m). In general, under Section 162(m), in order for the Company to be able to deduct compensation in excess of $1,000,000 paid in any one year to the Company’s chief executive officer or any of the Company’s three other most highly compensated executive officers (other than the Company’s chief financial officer), such compensation must qualify as “performance-based.” One of the requirements of “performance-based” compensation for purposes of Section 162(m) is that the material terms of the performance goals under which compensation may be paid be disclosed to, and approved by, the Company’s shareholders every five years. For purposes of Section 162(m), the material terms include (i) the individuals eligible to receive compensation, (ii) a description of the business criteria on which the performance goal is based, and (iii) the maximum amount of compensation that can be paid to an individual under the performance goal. With respect to the various types of awards under the Plan, each of these aspects is discussed below, and shareholder approval of the Plan will be deemed to constitute approval of each of these aspects of the Plan for purposes of the approval requirements of Section 162(m).

Share Usage and Key Data

The authorization will also be reduced by the number of shares granted between December 31, 2016 under the Prior Plan and the date of shareholder approval at the fungible ratio. 

A company’s burn rate is equal to the total number of equity awards the company granted in a fiscal year divided by the weighted average common shares outstanding for that year. Our three-year average burn rate, at the time the Board approved the Plan, was approximately 2.64%, as further outlined in the table below:

We manage our long-term shareholder dilution by limiting the number of equity incentive awards granted annually. We carefully monitor our annual burn rate, dilution, and equity expense to ensure that we maximize shareholders’ value by granting only the appropriate number of equity incentive awards necessary to attract, reward, and retain employees, directors and consultants. We believe that the number of shares available for issuance under the Plan will be sufficient for at least two years of equity grant activity under our current compensation program, organizational structure and capital structure. However, nothing is guaranteed and circumstances may change.

Key Features of the Plan

The Plan has a number of special terms and limitations that are supportive of sound corporate governance practices, including:

Summary of the Plan

Set forth below is a summary of the features of the Plan. A copy of the Plan is set forth as Appendix “C” to this proxy statement. Because this is a summary, it may not contain all the information that you consider important, and thus, we encourage you to read the full text of the Plan.

Purpose of the Plan. The purpose of the Plan is to assist us and our affiliates in attracting and retaining selected individuals who, serving as our employees, directors, consultants and/or advisors, are expected to contribute to our success and to achieve long-term objectives which will benefit our shareholders through the additional incentives inherent in the awards under the Plan.

Shares Available. The maximum number of shares of Common Stock that are available for awards under the Plan (subject to the adjustment provisions described under “Adjustments upon Changes in Capitalization” below) is 3,142,566 shares, less one (1) share of common stock for every one share that was subject to a stock option or SAR granted after December 31, 2016 under our Prior Plan and 2.0 shares for every one share that was subject to an award other than an option or SAR granted after December 31, 2016 under the Prior Plan. Any shares that are subject to options or SARs granted under the Plan shall be counted against this limit as one share for every one share granted. Any shares that are subject to awards other than options or SARs granted under the Plan shall be counted against this limit as 2.0 shares for every one share granted. After the date of the approval of the Plan by shareholders, no awards may be granted under the Prior Plan.

If any shares subject to an award under the Plan or, after December 31, 2016 any shares subject to an award under the Prior Plan, are forfeited, expire or are settled for cash, the shares subject to the award may be used again for awards under the Plan to the extent of the forfeiture, expiration or cash settlement. The shares will be added back as one share for every share if the shares were subject to options or SARs granted under the Plan or under the Prior Plan and (ii) as 2.0 shares for every share if the shares were subject to awards other than options or SARs granted under the Plan or under the Prior Plan. The following shares will not be added to the shares authorized for grant as described above: (i) shares tendered by the participant or withheld by us in payment of the purchase price of an option, (ii) shares tendered by the participant or withheld by us to satisfy tax withholding with respect to an award, (iii) shares subject to a SAR that are not issued in connection with the stock settlement of the SAR on exercise and (iv) shares repurchased in the open market with the proceeds from the exercise of an option.

Shares of common stock under awards made under the Plan in substitution or exchange for awards granted by a company acquired by us or an affiliate, or with which we or an affiliate combine (“Substitute Awards”), do not reduce the maximum number of shares that are available for awards under the Plan. In addition, if a company acquired by us or an affiliate, or with which we or an affiliate combine, has shares remaining available under a pre-existing plan approved by its shareholders, the available shares (adjusted to reflect the exchange or valuation ratio in the acquisition or combination) may be used for awards under the Plan and will not reduce the maximum number of shares of common stock that are available for awards under the Plan; provided, however that awards using such available shares shall not be made after the date awards or grants could have been made under the pre-existing plan, absent the acquisition or combination, and will only be made to individuals who were not our employees or directors prior to the acquisition or combination.

The maximum number of shares that may be issued under the Plan pursuant to the exercise of “incentive stock options,” as defined in Section 422 of the Code is 3,142,566 shares.

Eligibility. Options, SARs, restricted stock awards, restricted stock unit awards, other share-based awards and performance awards (including performance shares, performance units, and performance cash) may be granted under the Plan. Options may be either incentive stock options, or nonstatutory stock options. Awards may be granted under the Plan to any employee and non-employee member of the Board of Directors, and any consultant or advisor who is a natural person and provides services to us and/or an affiliate (subject to certain requirements as described in the Plan); incentive stock options may be granted only to our employees (or to employees of a “parent corporation” or “subsidiary corporation” as defined under the Code and in accordance with applicable rules).

Awards to be Granted to Certain Individuals and Groups. As of March 30, 2017, approximately five employees, 10 consultants, and four non-employee directors would have been eligible to participate in the Plan had it been effective. The Compensation Committee of the Board of Directors (the “Committee”), in its discretion, selects the persons to whom awards may be granted, determines the type of awards, determines the times at which awards will be made, determines the number of shares subject to each such award (or the dollar value of certain performance awards), and determines the other terms and conditions relating to the awards. For this reason, it is not possible to determine the benefits or amounts that will be received by any particular person in the future.

Limits on Awards to Participants. Subject to certain equitable adjustments, the Plan provides that no participant may be granted (i) options or SARs during any calendar year with respect to more than 1,000,000 shares and (ii) restricted stock awards, restricted stock unit awards, performance awards and/or other share-based awards during any calendar year that are intended to comply with the performance-based exception under Section 162(m) and are denominated in shares under which more than 1,000,000 shares may be earned for each 12 months in the vesting period or performance period. During any calendar year, no participant may be granted performance awards that are intended to comply with the performance-based exception under Section 162(m) and are denominated in cash under which more than may $5,000,000maybe earned for each 12 months in the performance period. Each of these limitations will be multiplied by two with respect to awards granted to a participant during the first calendar year in which the participant commences employment with the Company and its affiliates. If an award is cancelled, the cancelled award will continue to be counted toward the applicable limitations.

Notwithstanding any other provision of the Plan to the contrary, the aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all awards granted to any non-employee director during any single calendar year, plus all cash paid or payable to such director for the same calendar year (whether or not paid under this Plan, and including, for example, annual retainers and other fees), will not exceed $500,000; provided, however, that this limitation will be $750,000 in the first year a person becomes a non-employee director.

Administration. The Plan will be administered by the Committee (or a subcommittee) which will consist of at least two members of the Board of Directors, each of whom must qualify as a “non-employee director” under Rule 16b-3 under the Securities Exchange Act of 1934, an “outside director” under Section 162(m) and an “independent director” under the rules of the principal U.S. national securities exchange on which the Company’s common stock is traded (the “Principal Exchange”), to the extent required by such rules. The Committee has the authority to determine the terms and conditions of awards (including, but not limited to, determining whether awards may be settled in cash, shares or other property, determining whether amounts payable with respect to an award can be deferred, and determining whether any award will be canceled or suspended, or vesting terms or other restrictions waived or accelerated), and to interpret and administer the Plan. The Committee may to the extent not inconsistent with applicable law, including Section 162(m), and the rules of the Principal Exchange (i) delegate to a committee of one or more directors the right to make awards and to cancel or suspend awards and otherwise take action on its behalf under the Plan, and (ii) authorize an executive officer or a committee of executive officers the right to make awards to employees who are not directors or executive officers and cancel or suspend awards under the Plan to such employees.

Stock Options. The Committee may grant either non-qualified stock options or incentive stock options. A stock option entitles the recipient to purchase a specified number of shares of common stock at a fixed price subject to terms and conditions set by the Committee, including conditions for exercise that must be satisfied, which typically will be based solely on continued provision of services. The purchase price of shares of common stock covered by a stock option cannot be less than 100% of the fair market value of the common stock on the date the option is granted (except for Substitute Awards). Fair market value of the common stock is generally equal to the closing price for the common stock on the Principal Exchange on the date the option is granted (or if there was no closing price on that date, on the last preceding date on which a closing price was reported), except for Substitute Awards. As of March 30, 2017, the closing price of one share of our common stock as reported on the NASDAQ Stock Market was $2.85 per share.

The Plan permits payment of the purchase price of stock options to be made by cash or cash equivalents, shares previously acquired by the participant, any other form of consideration approved by the Committee and permitted by applicable law (including withholding of shares that would otherwise be issued on exercise), or any combination thereof. Options granted under the Plan expire no later than ten years from the date of grant except in the event of the participant’s death or disability. If on the last day of the term the exercise of the option is prohibited by applicable law or the holder cannot purchase or sell shares due a “black-out period” under the Company’s insider trading policy or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, the term will be automatically extended for a 30-day period from the end of the prohibition or black-out period, but not to exceed the expiration of the option as set forth in the award agreement.

Stock Appreciation Rights. The Committee is authorized to grant SARs in conjunction with a stock option or other award granted under the Plan, and to grant SARs separately. The grant price of a SAR may not be less than 100% of the fair market value of a share of common stock on the date the SAR is granted (except for Substitute Awards). The term of an SAR may be no more than ten years from the date of grant except in the event of the participant’s death or disability. If on the last day of the term the exercise of the SAR is prohibited by applicable law or the holder cannot purchase or sell shares due a “black-out period” under the Company’s insider trading policy or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, the term will be automatically extended for a 30-day period from the end of the prohibition or black-out period, but not to exceed the expiration of the SAR as set forth in the award agreement. SARs are subject to terms and conditions set by the Committee, including conditions for exercise that must be satisfied.

Upon exercise of an SAR, the participant will have the right to receive the excess of the fair market value of the shares covered by the SAR on the date of exercise over the grant price. Payment may be made in cash, shares or other property, or any combination thereof, as the Committee may determine. Shares issued upon the exercise of SARs are valued at their fair market value as of the date of exercise.

Restricted Stock Awards. Restricted stock awards may be issued either alone or in addition to other awards granted under the Plan, and are also available as a form of payment of performance awards and other earned cash-based incentive compensation. The Committee determines the terms and conditions of restricted stock awards, including the number of shares granted, and conditions for vesting that must be satisfied, which may be based principally or solely on continued provision of services, and also may include a performance-based component. Unless otherwise provided in the award agreement, the holder of a restricted stock award will have the rights of a shareholder from the date of grant of the award, including the right to vote the shares of common stock subject to the award and the right to ultimately receive cash dividends and share and property distributions on the shares (subject to the requirements for dividends on unvested awards as described under “Dividends; Dividend Equivalents” below).

Restricted Stock Unit Awards. Awards of restricted stock units having a value equal to an identical number of shares of common stock may be granted either alone or in addition to other awards granted under the Plan, and are also available as a form of payment of performance awards granted under the Plan and other earned cash-based incentive compensation. The Committee determines the terms and conditions of restricted stock units, including conditions for vesting that must be satisfied, which may be based principally or solely on continued provision of services, and also may include a performance-based component. The holder of a restricted stock unit award will not have voting rights with respect to the award. Any cash dividends and share and other property distributed with respect to the award will be subject to the same restrictions as the award.

Other Share-Based Awards. The Plan also provides for the award of shares of and other awards that are valued by reference to common stock or other property (“Other Share-Based Awards”). Such awards may be granted alone or in addition to other awards under the Plan. Other Share-Based Awards may be paid in cash, shares or other property, or a combination thereof, as determined by the Committee. The Committee determines the terms and conditions of Other Share-Based Awards, including any conditions for vesting that must be satisfied.

Director Fees. Non-employee directors may, if determined by the Board of Directors, receive Other Share-Based Awards in the form of deferred stock units (or any other type of award, as determined by the Board), in lieu of all or a portion of their annual retainer and/or other meeting fees, provided any such election is made in accordance with the requirements of Section 409A of the Code. The Committee will, in its absolute discretion, establish such rules and procedures as it deems appropriate for such elections.

Performance Awards. Performance awards provide participants with the opportunity to receive shares of common stock, cash or other property based on performance and other vesting conditions. Performance awards may be granted from time to time as determined at the discretion of the Committee. Subject to the share limit and maximum dollar value set forth above under “Limits on Awards to Participants,” the Committee has the discretion to determine (i) the number of shares of common stock under, or the dollar value of, a performance award and (ii) the conditions that must be satisfied for grant or for vesting.

Performance Criteria.At the Committee’s discretion, performance goals for restricted stock awards, restricted stock units, performance awards or other share-based awards may be based on the attainment of specified levels of one or more of the following criteria:

sales (including same store or comparable sales); net sales; return on sales; revenue, net revenue, product revenue or system-wide revenue (including growth of such revenue measures); operating income (before or after taxes); pre- or after-tax income or loss (before or after allocation of corporate overhead and bonus); earnings or loss per share; net income or loss (before or after taxes); return on equity; total shareholder return; return on assets or net assets; appreciation in and/or maintenance of the price of the Shares or any other publicly-traded securities of the Company; market share; gross profits; gross or net profit margin; gross profit growth; net operating profit (before or after taxes); operating earnings; earnings or losses or net earnings or losses (including earnings or losses before taxes, before interest and taxes, or before interest, taxes, depreciation and amortization); economic value-added models or equivalent metrics; comparisons with various stock market indices; reductions in costs; cash flow (including operating cash flow and free cash flow) or cash flow per share (before or after dividends); return on capital (including return on total capital or return on invested capital); cash flow return on investment; cash flow return on capital; improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; general and administrative expense savings; inventory control; operating margin; gross margin; year-end cash; cash margin; debt reduction; shareholders equity; operating efficiencies; cost reductions or savings; market share; customer satisfaction; customer growth; employee satisfaction; productivity or productivity ratios; regulatory achievements (including submitting or filing applications or other documents with regulatory authorities or receiving approval of any such applications or other documents and passing pre-approval inspections (whether of the Company or the Company’s third-party manufacturer) and validation of manufacturing processes (whether the Company’s or the Company’s third-party manufacturer’s)); clinical achievements (including initiating clinical studies; initiating enrollment, completing enrollment or enrolling particular numbers of subjects in clinical studies; completing phases of a clinical study (including the treatment phase); or announcing or presenting preliminary or final data from clinical studies; in each case, whether on particular timelines or generally); strategic partnerships or transactions (including in-licensing and out-licensing of intellectual property; establishing relationships with commercial entities with respect to the marketing, distribution and sale of the Company’s products (including with group purchasing organizations, distributors and other vendors); supply chain achievements (including establishing relationships with manufacturers or suppliers of component materials and manufacturers of the Company’s products); co-development, co-marketing, profit sharing, joint venture or other similar arrangements); financial ratios, including those measuring liquidity, activity, profitability or leverage; cost of capital or assets under management; financing and other capital raising transactions (including sales of the Company’s equity or debt securities; debt level year-end cash position; book value; factoring transactions; competitive market metrics; timely completion of new product roll-outs; timely launch of new facilities (such as new store openings, gross or net); sales or licenses of the Company’s assets, including its intellectual property, whether in a particular jurisdiction or territory or globally; or through partnering transactions); bookings; royalty income; implementation, completion or attainment of measurable objectives with respect to research, development, manufacturing, commercialization, products or projects, production volume levels, acquisitions and divestitures, succession and hiring projects, reorganization and other corporate transactions, expansions of specific business operations and meeting divisional or project budgets; factoring transactions; and recruiting and maintaining personnel.

Any performance goals that are financial metrics, may be determined in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), in accordance with accounting principles established by the International Accounting Standards Board (“IASB Principles”), or may be adjusted when established to include or exclude any items otherwise includable or excludable under GAAP or under IASB Principles. Such performance goals also may be based solely by reference to the Company’s performance or the performance of an affiliate, division, business segment or business unit of the Company or an affiliate, or based upon performance relative to performance of other companies or upon comparisons of any of the indicators of performance relative to performance of other companies. The Committee may provide for exclusion of the impact of an event or occurrence which the Committee determines should appropriately be excluded, including (a) restructurings, discontinued operations, or items that are “unusual” in nature or occur “infrequently” as determined under generally accepted accounting principles, (b) asset write-downs, (c) litigation or claim judgments or settlements, (d) acquisitions or divestitures, (e) reorganization or change in the corporate structure or capital structure of the Company, (f) an event either not directly related to the operations of the Company, affiliate, division, business segment or business unit or not within the reasonable control of management, (g) foreign exchange gains and losses, (h) a change in the fiscal year of the Company, (i) the refinancing or repurchase of bank loans or debt securities, (j), unbudgeted capital expenditures, (k) the issuance or repurchase of equity securities and other changes in the number of outstanding shares, (l) conversion of some or all of convertible securities to common stock, (m) any business interruption event (n) the cumulative effects of tax or accounting changes in accordance with U.S. generally accepted accounting principles, or (o) the effect of changes in other laws or regulatory rules affecting reported results. Such performance goals (and any exclusions) will (i) be set by the Committee prior to the earlier of (i) 90 days after the commencement of the applicable performance period and the expiration of 25% of the performance period, and (ii) otherwise comply with the requirements of, Section 162(m).

Adjustments to Awards Subject to Performance Criteria.The Committee may make downward, but not upward, adjustments with respect to any amount payable pursuant to any award that is subject to performance criteria and is intended to be treated as performance-based compensation under Section 162(m). The Committee may not waive achievement of performance goals for such awards, except in the case of death, disability or as otherwise determined by the Committee in special circumstances and in accordance with Section 162(m). Awards may, but need not, be designed in order to qualify as “performance-based” under Section 162(m), and for awards that are not intended to constitute qualified performance-based compensation, the Committee may designate performance goals other than those set forth above.

Change in Control.In the event of a change in control of the Company (as defined in the Plan), unless otherwise provided in an award agreement or any other written agreement between the Company or any affiliate and a participant, or unless otherwise expressly provided by the Board at the time of grant, the Board will take one or more of the following actions with respect to an award, contingent upon the closing or completion of the change in control:

In addition, any escrow, holdback, earnout or similar provisions in the definitive agreement for the change in control may apply to such payment to the holder of the award to the same extent and in the same manner as such provisions apply to the holders of Company shares. The Board need not take the same action or actions with respect to all awards or portions thereof or with respect to all participants.

Dividends; Dividend Equivalents. Awards other than options and SARs may, if determined by the Committee, provide that the participant will be entitled to receive, currently or on a deferred basis, cash, stock or other property dividends, or cash payments in amounts equivalent to cash, stock, or other property dividends declared with respect to shares of common stock covered by an award. The Committee may provide that the dividend equivalents (if any) will be deemed to have been reinvested in additional shares or otherwise reinvested or accumulated and credited to a bookkeeping account, but in any event will be subject to the same restrictions and risk of forfeiture as the underlying award and will not be paid unless and until the underlying award is vested.

No Repricing. The Plan prohibits option and SAR repricings (other than to reflect stock splits, spin-offs or other corporate events described under “Adjustments upon Changes in Capitalization” below, or in connection with a change in control of the Company) unless shareholder approval is obtained. For purposes of the Plan, a “repricing” means a reduction in the exercise price of an option or the grant price of a SAR, the cancellation of an option or SAR in exchange for cash or another award under the Plan if the exercise price or grant price of the option of SAR is greater than the fair market value of the common stock, or any other action with respect to an option or SAR that may be treated as a repricing under the rules of the Principal Exchange.

Nontransferability of Awards. No award under the Plan, and no shares subject to awards that have not been issued or as to which any applicable restriction, performance or deferral period has not lapsed, is transferable other than by will or the laws of descent and distribution, and an award may be exercised during the participant’s lifetime only by the participant or the participant’s guardian or legal representative, except that the Committee may provide in an award agreement that a participant may transfer an award without consideration to certain family members, family trusts, or other family-owned entities, or for charitable donations under such terms and conditions determined by the Committee.

Adjustments upon Changes in Capitalization. In the event of any merger, reorganization, consolidation, recapitalization, dividend or distribution (whether in cash, shares or other property, other than a regular cash dividend), stock split, reverse stock split, spin-off or similar transaction or other change in our corporate structure affecting our common stock or the value thereof, appropriate adjustments to the Plan and awards will be made as the Committee determines to be equitable and appropriate, including adjustments in the number and class of shares of stock available for awards under the Plan, the number, class and exercise or grant price of shares subject to awards outstanding under the Plan, and the limits on the number of awards that any person may receive.

Termination of Employment.The Committee will determine and set forth in the award agreement whether any awards will continue to be exercisable and continue to vest or be earned, and the terms of such exercise, vesting or earning, on and after the date the participant ceases to be employed by, or to otherwise provide services to, us, whether by reason of death, disability, voluntary or involuntary termination of employment or service, or otherwise. Notwithstanding the foregoing, and except as provided otherwise in an award agreement or other written agreement between the Company or any affiliate and the participant, upon a termination for cause (as defined in the Plan), any and all outstanding awards (whether or not vested, and including vested but unexercised options) will be forfeited and cancelled without consideration.

Deferral. The Committee is authorized to establish procedures pursuant to which the payment of any award may be deferred.

Tax Withholding. The Company will have the right to make all payments or distributions pursuant to the Plan net of any applicable federal, state and local taxes required to be paid or withheld as a result of (a) the grant of any award, (b) the exercise of an option or SAR, (c) the delivery of shares or cash, (d) the lapse of any restrictions in connection with any award or (e) any other event occurring pursuant to the Plan. The Company or any affiliate will have the right to withhold from wages or other amounts otherwise payable to a participant (or permitted assignee) such withholding taxes as may be required by law, or to otherwise require the participant (or permitted assignee) to pay such withholding taxes. The Committee is authorized to establish procedures to satisfy obligations for the payment of such taxes by tendering previously acquired shares (either actually or by attestation, valued at their then fair market value), or by directing the Company to retain shares (up to the minimum required tax withholding rate or such other rate that will not cause an adverse accounting consequence or cost, in accordance with Company policy and at the discretion of the Committee) otherwise deliverable in connection with the Award.

Recoupment. All awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the Principal Exchange or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Committee may impose such other clawback, recovery or recoupment provisions in an award agreement as the Committee determines necessary or appropriate, including but not limited to a reacquisition right in respect of previously acquired shares or other cash or property upon the occurrence of “cause” (as defined in the Plan). No recovery of compensation under such a clawback policy will be an event giving rise to a right to voluntary terminate employment upon a “resignation for good reason,” or for a “constructive termination” or any similar term under any plan of or agreement with the Company.

Amendment and Termination. The Plan may be amended or terminated by the Board except that shareholder approval is required for any amendment to the Plan which increases the number of shares of available for awards under the Plan, expands the types of awards available under the Plan, materially expands the class of persons eligible to participate in the Plan, permits the grant of options or SARs with an exercise or grant price of less than 100% of fair market value on the date of grant, amends the provisions prohibiting the repricing of stock options and SARs as described above under “No Repricing,” increases the limits on shares subject to awards or the dollar value payable with respect to performance awards (or adds any performance goals to be used for Section 162(m) performance-based compensation awards), or takes any action with respect to an option or SAR that may be treated as a repricing under the rules of the Principal Exchange. No amendment or termination may materially impair a participant’s rights under an award previously granted under the Plan without the written consent of the participant.

Awards may be granted under the Plan at any time and from time to time until the Plan is terminated by the Board, on which date the Plan will expire except as to Awards then outstanding under the Plan; provided, however, in no event may an incentive stock option be granted more than ten years after the Plan is approved by the Board.

Federal Income Tax Consequences

The following discussion summarizes certain federal income tax considerations of awards under the Plan. However, it does not purport to be complete and does not describe the state, local or foreign tax considerations or the consequences for any particular individual. Because the U.S. federal income tax rules governing stock options and related payments are complex and subject to frequent change, optionees are advised to consult their tax advisors prior to exercise of stock options or dispositions of stock acquired pursuant to option exercise.

Stock Options. A participant does not realize ordinary income on the grant of a stock option. Upon exercise of a non-qualified stock option, the participant will realize ordinary income equal to the excess of the fair market value of the shares of common stock over the option exercise price. The cost basis of the shares acquired for capital gain treatment is their fair market value at the time of exercise. Upon exercise of an incentive stock option, the excess of the fair market value of the shares of common stock acquired over the option exercise price will be an item of tax preference to the participant, which may be subject to an alternative minimum tax for the year of exercise. If no disposition of the shares is made within two years from the date of granting of the incentive stock option or within one year after the transfer of the shares to the participant, the participant does not realize taxable income as a result of exercising the incentive stock option; the tax basis of the shares received for capital gain treatment is the option exercise price; any gain or loss realized on the sale of the shares is long-term capital gain or loss. If the participant disposes of the shares within the two-year or one-year periods referred to above, the participant will realize ordinary income at that time in an amount equal to the excess of the fair market value of the shares at the time of exercise (or the net proceeds of disposition, if less) over the option exercise price. For capital gain treatment on such a disposition, the tax basis of the shares will be their fair market value at the time of exercise.

To the extent that options designated as incentive stock options (granted under all stock option plans of the Company or any affiliate) become exercisable by a participant for the first time during any calendar year for stock having a fair market value greater than one hundred thousand dollars ($100,000) or otherwise does not comply with all the requirements to be treated as incentive stock options, the portion of such options which exceeds such amount or do not meet such additional requirements will be treated as non-qualified (nonstatutory) stock options notwithstanding any contrary provisions in the award agreement or any other agreement with the participant, and by accepting any option grant under the Plan, the participant expressly acknowledges such restriction. For purposes of the Plan, options designated as incentive stock options will be taken into account in the order in which they were granted, and the fair market value of shares will be determined as of the time the option with respect to such shares is granted. If the Code is amended to provide for a different limitation, such different limitation will be deemed incorporated in the Plan effective as of the date and with respect to such options as required or permitted by such amendment to the Code.

Stock Appreciation Rights. No ordinary income will be realized by a participant in connection with the grant of a SAR. When the SAR is exercised, the participant will realize ordinary income in an amount equal to the sum of the amount of any cash received and the fair market value of the shares of common stock or other property received upon the exercise.

Restricted Stock, Performance and Restricted Stock Unit Awards. The participant will not realize ordinary income on the grant of a restricted stock award (or a performance award if the shares of common stock are issued on grant), but will realize ordinary income when the shares subject to the award become vested in an amount equal to the excess of (i) the fair market value of the shares on the vesting date over (ii) the purchase price, if any, paid for the shares. The participant may, however, elect under Section 83(b) of the Code to include as ordinary income in the year the shares are granted an amount equal to the excess of (i) the fair market value of the shares on the date of issuance, over (ii) the purchase price, if any, paid for the shares. If the Section 83(b) election is made, the participant will not realize any additional taxable income when the shares become vested.

The participant will not realize ordinary income on the grant of a restricted stock unit award, (or a performance award under which shares of common stock are not issued on grant), but will realize ordinary income when the shares subject to the award are issued to the participant after they become vested. The amount of ordinary income will be equal to the excess of (i) the fair market value of the shares on the date they are issued over (ii) the purchase price, if any, paid for the award.

Upon disposition of shares of common stock acquired under a restricted stock award, performance award or restricted stock unit award, the participant will realize a capital gain or loss equal to the difference between the selling price and the sum of the amount paid for the shares plus any amount realized as ordinary income upon grant (or vesting) of the shares.

Company Tax Deduction. We generally will be entitled to a tax deduction in connection with an award under the Plan, subject to the provisions of Section 162(m), in an amount equal to the ordinary income realized by a participant and at the time the participant realizes such income (for example, on the exercise of a nonqualified stock option). Section 162(m) may limit the deductibility of compensation paid to the Company’s chief executive officer and to each of the next three most highly compensated executive officers other than the chief financial officer. Under Section 162(m), the annual compensation paid to any of these executives will be deductible to the extent that it does not exceed $1,000,000 or if the compensation is treated as performance-based compensation under Section 162(m). Compensation attributable to stock options and SARs under the Plan should qualify as performance-based compensation if the awards are made by the Committee and the exercise or grant price of the award is no less than the fair market value of the common stock on the date of grant. Compensation attributable to restricted stock awards, restricted stock unit awards and performance awards may qualify as performance-based compensation if (i) the compensation is approved by the Committee, (ii) the compensation is paid only upon the achievement of an objective performance goal established in writing by the Committee while the outcome is substantially uncertain, and (iii) the Committee certifies in writing prior to the payment of the compensation that the performance goal has been satisfied. However, the rules and regulations promulgated under Section 162(m) are complicated and subject to change from time to time, sometimes with retroactive effect. In addition, a number of requirements must be met in order for particular compensation to so qualify. As such, there can be no assurance that any compensation awarded or paid under the Plan will be deductible under all circumstances.

Excess Parachute Payments.Upon accelerated exercisability, vesting, or payment of award contingent upon or in connection with a change of control of the Company, certain amounts associated with such awards could, depending upon the individual circumstances of the recipient participant, constitute “excess parachute payments” under the golden parachute provisions of the Code. Pursuant to these provisions a participant will be subject to a 20% excise tax on any excess parachute payment and the Company may be denied any deduction with respect to such excess parachute payment. The limit on the deductibility of compensation under Section 162(m) is also reduced by the amount of any excess parachute payments. Whether amounts constitute excess parachute payments depends upon, among other things, the value of the awards accelerated and the past compensation of the participant.

Section 409A.It is the intention of the Company that awards will comply with Section 409A of the Code regarding nonqualified deferred compensation arrangements or will satisfy the conditions of applicable exemptions. However, if an award is subject to and fails to comply with the requirements of Section 409A of the Code, the participant may recognize ordinary income on the amounts deferred under the award, to the extent vested, prior to the time when the compensation is received. In addition, Section 409A of the Code imposes a 20% penalty tax, as well as interest, on the participant with respect to such amounts.

New Plan Benefits

No awards will be granted under the Plan prior to its approval by the shareholders of Sophiris.We have made certain grants under the Prior Plan to our executive officers and non-employee directors, as discussed below under “Executive and Director Compensation” and we expect to make additional grants to certain of our executive officers later this year as well as to our non-employee directors. However, we cannot currently determine the total amount of benefits or number of shares subject to equity awards that may be granted in the future to executive officers, directors and employees under the Plan. Accordingly, in lieu of providing information regarding benefits that will be received under the Plan, the following table provides information concerning the benefits that were received by the following persons and groups during 2016 under the Prior Plan: each named executive officer; all current executive officers, as a group; all current directors who are not executive officers, as a group; and all current employees who are not executive officers, as a group.

Required Vote

To be approved, this Proposal 3 must receive a “For” vote from the majority of shares present and entitled to vote at the Annual Meeting or by proxy. Abstentions will not be counted toward the tabulation of votes cast on proposals presented to the shareholders and will have the same effect as “Against” votes. Broker non-votes will be counted towards a quorum, but will not be counted for any purpose in determining whether this proposal has been approved.

The Board of Directors Recommends a Vote “FOR” the Approval of the 2017 Omnibus Incentive Plan.

EXECUTIVE OFFICERS

The following table sets forth certain information regarding our executive officers:

Randall E. Woods, Chief Executive Officer, President and Director

Mr. Woods’ biographical informationWoods has been our Chief Executive Officer and President since August 2012 and a member of our Board since October 2012 and brings with him more than 40 years of biotech and pharmaceutical leadership experience. Prior to joining Sophiris, Mr. Woods was serving as a consultant to a number of private biotechnology companies. From September 2007 until September 2011, Mr. Woods was President and Chief Executive Officer of Sequel Pharmaceuticals, a private biotechnology company. Mr. Woods was the President and Chief Executive Officer of NovaCardia, Inc., a pharmaceutical company focused on cardiovascular diseases, until its acquisition by Merck & Co. From May 1996 until July 2003 and prior to NovaCardia, Mr. Woods was President and Chief Executive Officer of Corvas International, Inc., a publicly held biopharmaceutical company focused on cardiovascular disease and cancer, until its acquisition by Dendreon Corporation in July 2003. Before joining Corvas, he served as President of Boehringer Mannheim’s U.S. pharmaceutical operations from March 1994 until March 1996 and was Vice President of Marketing and Sales at Boehringer Mannheim from December 1993 to February 1994. Prior to that he spent 20 years at Eli Lilly & Company in various sales and marketing positions from 1973 to December 1993. Mr. Woods is set forth above under Proposal 2.a past Chairman for the advisory board of UC San Diego’s Sulpizio Family Cardiovascular Center and is a past Chairman of the Board of Directors for BIOCOM, a life science industry association in Southern California. Mr. Woods serves on the Board of Directors of Arena Pharmaceuticals. He received his B.S. in biology and chemistry from Ball State University and an M.B.A. in marketing from Western Michigan University. 

Dr.Allison Hulme, Chief Operating Officer, and Head of Research and Development and Director

Dr. Hulme has been our Chief Operating Officer and Head of Research and Development since April 2011 and shea member of our Board since October 2016. Dr. Hulme brings over 20 years of drug development experience to the company. From January 2005 to October 2009, Dr. Hulme served as Executive Vice President of Autoimmune, Tysabri, Global Development and Head of Autoimmune and Tysabri Franchise at Elan Corporation, plc (also known as Elan Pharmaceuticals), a neuroscience-focused biotechnology company. She served as Executive Vice President and head of global development at Elan Pharmaceuticals from October 1995 to January 2005. Previously, Dr. Hulme held several positions in clinical research at Glaxo Wellcome Pharmaceuticals and served as lecturer at Luton University. Dr. Hulme holds a first class honors Degree in Science from Luton University and a Ph.D. from Cranfield Institute of Technology.

Peter T. Slover, Chief Financial Officer

Mr. Slover has been our Chief Financial Officer since January 2013. He served as our Head of Finance and Principal Accounting Officer from April 2012 to January 2013. From April 2004 to April 2012, Mr. Slover held a variety of significant management positions at Anadys Pharmaceuticals, Inc., a public biotechnology company, including Vice President, Finance and Operations, a position that he held from July 2009 to April 2012, Senior Director, Finance and Corporate Controller, Senior Manager, Financial Reporting and Internal Controls and Manager of Financial Reporting. Prior to joining Anadys, Mr. Slover was an auditor at KPMG LLP, where he spent seven years in public accounting. Mr. Slover is a Certified Public Accountant in the State of California. He received a B.S. in Business Administration from Shippensburg University.

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EXECUTIVE AND DIRECTOR COMPENSATION

Our principal executive officer and our next two highest compensated executive officers other than the principal executive officer for the year ended December 31, 20132016 (the “named executive officers”) are:

Summary Compensation Table

The following table sets forth total compensation awarded to, earned by or paid to our named executive officers for the last two completed fiscal years.years:

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Also included as a component of other compensation is (i) $10,200$10,600 of matching contributions paid under the terms of our 401(k) plan, (ii) the value of company paid premiums of $2,053$2,564 for life, accidental death and dismemberment and long-term disability insurance and (iii) $1,683$1,822 as the benefit of group term life insurance in excess of Internal Revenue Service Limits.

Also included as a component of other compensation is (i) $10,600 of matching contributions paid under the terms of our 401(k) plan, (ii) the value of company paid premiums of $2,539 for life, accidental death and dismemberment and long-term disability insurance and (iii) $1,822 as the benefit of group term life insurance in excess of Internal Revenue Service Limits.

Annual Base Salary.Salary

The Compensation Committee of the Board approved the following 20132016 and 2015 base salaries for our named executive officers, which became effective on January 1^st, except as provided below with respect to Mr. Slover. of each fiscal year:

Annual Performance-Based Bonus Opportunity.Opportunity

In addition to base salaries, our named executive officers are eligible to receive an annual performance-based cash bonus, which is designed to provide an appropriate incentive to our executives to achieve defined annual corporate goals and to reward our executives for individual achievement towards these goals. The annual performance-based bonus each executive officer is eligible to receive is based on the individual’s target bonus, as a percentage of base salary. The amount of the performance-based bonus, if any, an executive earns is based on the achievement of certain corporate and individual performance goals recommended by the Compensation Committee and approved by the Board in the beginning of the year to which the bonus relates. There is no minimum or maximum bonus established for the named executive officers and, as a result, the bonus amounts vary from year to year based on corporate and individual performance. At the end of the year, the Compensation Committee recommends and our Board approves the extent to which the corporate and individual goals have been achieved, based on achievement of the corporate and individual goals and management’s review and recommendation, except our executives do not make recommendations with respect to their own achievement. The Board may award a bonus in an amount above or below the target bonus, based on factors that the Board determines, with input from the Compensation Committee, are material to our corporate performance and provide appropriate incentives to our executives. Bonuses are not earned or vested until they are awarded and paid. Pursuant to their employment agreements or offer letters, each named executive officer has a target bonus represented as a percentage of base salary, or a target bonus percentage, each of which is set forth below.

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The corporate and individual goals are determined by the Board based on the recommendation of the Compensation Committee and communicated to the named executive officers shortly following the beginning of each fiscal year. The corporate goals relate to our annual company goals and various business accomplishments which vary from time to time depending on our overall strategic objectives. The individual goals relate to each named executive officer’s specific job responsibilities and often to the executive’s performance towards reaching our corporate goals for the designated year. The proportional emphasis between corporate and individual goals does not necessarily involve a mathematical analysis or pre-established weighting of each goal. The Board may, but need not, establish a specific weighting amongst various corporate goals. The emphasis placed on goals may vary from time to time depending on our overall strategic objectives and the Compensation Committee’s and Board’s subjective determination of which goals have more impact on our performance.

2015 Performance-Based Bonus

For 2013,2015, the corporate goals and relative overall weighting towards total corporate goal achievement were as follows:

No individual goals were established for our named executive officers for 2013.2015.

In early 2014,

Notwithstanding our 2015 corporate performance, the Compensation Committee determined that evaluation and payment of any 2015 performance bonuses to our executives would also be contingent upon our completion of a financing or strategic transaction during 2016. In May 2016, following the completion of a financing in which we raised approximately an additional $7.0 million in proceeds, the Compensation Committee of our Board reviewed the 20132015 corporate goals outlined above in detail, taking into consideration all circumstances, and determined that we achieved allcertain of our 20132015 corporate goals. The Compensation Committee recommended to the Board and the Board approved a 100%45% overall achievement of our 20132015 corporate goals due to the following:

The Compensation Committee recommended to the Board and our Board determined that each of our named executive officers had contributed towards our corporate goal achievement and therefore should receive 45% of their full target bonus. In addition, the Board, based upon the recommendation from the Compensation Committee, determined that Mr. Slover earned a 2013 bonus above his target bonus amount (specifically, 25% more than his target, resulting in a total bonus equivalent to 50% of his base salary earned during 2013 in recognition of Mr. Slover’s exemplary individual performance in managing the IPO process and the listing requirements of both the Toronto Stock Exchange and the NASDAQ. Accordingly, the Board authorized the payment of the 20132015 bonuses to our named executive officers in February 2014.May 2016. Such bonus amounts were $218,875, $146,705$104,493, $70,417 and $169,950$81,136 for Messrs. Woods and Slover and Dr. Hulme, respectively.

Retention Bonus Payments

22On May 25, 2016, our Board of Directors, based on the recommendation of the Compensation Committee, adopted a retention plan that would enable the Company’s named executive officers to receive cash retention payments equal to 55% of their 2015 target bonus if they remained employees of the Company on the earlier of December 31, 2016 or the closing of a change of control transaction for the Company. All named executive officers remained at the Company through December 31, 2016 and therefore these amounts were paid out in early 2017. Such bonus amounts were $127,713, $86,066 and $99,166 for Messrs. Woods and Slover and Dr. Hulme, respectively.

2016 Performance-Based Bonus

For 2016, the corporate goals and relative overall weighting towards total corporate goal achievement were as follows:

No individual goals were established for our named executive officers for 2016.

In December 2016, the Compensation Committee of our Board reviewed the 2016 corporate goals outlined above in detail, taking into consideration all circumstances, and determined that we achieved our 2016 corporate goals. The Compensation Committee recommended to the Board and the Board approved a 130% overall achievement of our 2016 corporate goals due to the following:

The Compensation Committee recommended to the Board and our Board determined that each of our named executive officers had contributed towards our corporate goal achievement and therefore should receive 130% of their target bonus (with Mr. Slover’s target bonus based on 50% of his base salary rather than 40% of his base salary as set forth in his employment agreement). Accordingly, the Board authorized the payment of the 2016 bonuses to our named executive officers in January 2017. Such bonus amounts were $310,924, $209,530 and $241,424 for Messrs. Woods and Slover and Dr. Hulme, respectively.

Long-Term Incentive Compensation.Compensation

Our long-term, equity-based incentive awards are designed to align the interests of our named executive officers and our other employees, non-employee directors and consultants with the interests of our shareholders. Because vesting is based on continued service, our equity-based incentives also encourage the retention of our named executive officers through the vesting period of the awards.

We use stock options as the primary incentive vehicle for long-term compensation to our named executive officers because they are able to profit from stock options only if our stock price increases relative to the stock option’s exercise price. We generally provide initial grants in connection with the commencement of employment of our named executive officers and from time to time as our Board, often through recommendation by our Compensation Committee, determines appropriate. We also provide annual retention grants at shortly following the end of each year and performance-based grants when necessary to encourage our named executive officers to meet specific performance goals.

As of the date of the filing of this proxy statement, we have only granted stock options pursuant to our stock option plan, the terms of which are described below under “– Equity Compensation Plans and Other Benefit Plans – Stock Option Plan.” All options are granted with an exercise price no less than the fair market value of our common shares on the date of grant of each award.

The Board, often through recommendation by the compensation committee, determines the number of stock options to be awarded to our executive officers and directors. Stock options are awarded to our directors as described below under the section “– Non-Employee Director Compensation.” Stock options are granted to reward individuals for current performance, expected future performance and value to the company. The size of awards made subsequent to the commencement of employment takes into account stock options already held by the individual. Stock options granted to our employees typically vest over a three-year period and may also vest subject to certain performance criteria.

In January 2013, the Board awarded a stock option grant to Mr. Slover of 24,153 shares in conjunction with his promotion to Chief Financial Officer. In addition, the Board awarded an adjustment stock option grant to Dr. Hulme of 16,306 shares to align her outstanding equity with the other named executive officers. In October 2013,May 2016, the Board awarded stock option retention grants to our named executive officers. Messrs.officers in conjunction with the Board’s review of the 2015 corporate goals. Messers. Woods and Slover and Dr. Hulme were granted stock optionoptions awards covering 430,375103,467 shares, 178,641103,467 shares and 147,727shares,103,467 shares, respectively. The purpose of theseIn December 2016, the Board awarded stock option grants was to increase our named executive officer’s outstanding stock option balances to levels that are consistentofficers in conjunction with other life science companies that are of a similar size and stage of development as our company, based on market data that our outside compensation consultants provided to the Compensation Committee. EachBoard’s review of the 20132016 corporate goals. Messers. Woods and Slover and Dr. Hulme were granted stock options have a maximum term of five years from the date of grant. The vesting terms of the 2013 stock options are described further in the footnotes to the “– Outstanding Equity Awards at Fiscal Year End” table below.

covering 398,000 shares, 154,000 shares and 206,000 shares, respectively. In future periods, the need to grant additional stock option grants in the form of annual retention grants will be reviewed by the Compensation Committee or Board on at least an annual basis.

Perquisites, Health, Welfare and Retirement Benefits

Perquisites

In conjunction with the hiring of Dr. Hulme, we agreed to reimburse Dr. Hulme for regular travel costs from her residence to San Diego and for temporary housing in San Diego for a period of one year from her hire date. This reimbursement was extended for fiscal year 2013.2016. All amounts are grossed up for applicable federal and state taxes. In conjunction with the hiring of Mr. Woods, we agreed to pay to Mr. Woods an amount necessary to reimburse him for the cost of his medical insurance in lieu of Mr. Woods receiving such insurance under our employee benefit plans. This payment is grossed up for applicable federal and state taxes. A schedule of reimbursed expenses and the related tax gross-ups for Dr. Hulme and Mr. Woods areis included in the footnotes to our Summary Compensation Table.

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Other than what is outlined above, we do not provide perquisites or personal benefits to our named executive officers.

Health and Welfare Benefits

Our named executive officers are eligible to participate in all of our employee benefit plans, including our medical, dental, vision, group life and disability insurance plans, in each case on the same basis as other employees.

We also pay the premiums for term life insurance, accidental death and dismemberment and long-term disability insurance for all of our employees, including our named executive officers.

Retirement Benefits

In 2012, the Board authorized and directed management of the company to implement and maintain the Sophiris Bio Inc. 401(k) Plan, (the “401(k) Plan”), a retirement savings defined contribution plan established in accordance with Section 401(a) of the U.S. Internal Revenue Code, of 1986, as amended, (the “Code”), for the eligible employees of the company, including the current employee named executive officers. The 401(k) Plan was established effective as of January 1, 2012. Under this 401(k) Plan we provide safe harbor 401(k) matching contributions as discussed in the section below entitled “– Equity Compensation Plans and other Benefit Plans – 401(k) Plan.”

None of our named executive officers participate in or have account balances in qualified or non-qualified defined benefit plans, non-qualified defined contribution plans or pension plans sponsored by us.

Outstanding Equity Awards at Fiscal Year End

The following table sets forth specified information concerning unexercised stock options and equity incentive plan awards for each of the named executive officers outstanding as of December 31, 2013.2016:

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Employment Agreements with Executive Officers

We entered into an employment agreement with Mr. Woods on August 16, 2012, in connection with his commencement of employment as our Chief Executive Officer and President. Pursuant to the employment agreement, Mr. Woods is entitled to an annual base salary of $425,000, (as Mr. Woods was hired on August 16, 2012, he earned $159,375 of his annual salary during 2012), a discretionary performance bonus of 40% of Mr. Woods’ annual base salary, pro-rated for his partial year of service in 2012.salary. In early 2013, the Board increased Mr. Woods’ target bonus percentage to 50% beginning with Mr. Woods’ 2012 bonus. Additionally, Mr. Woods’ employment agreement provided for a stock option grant and certain severance benefits upon a termination by us without cause and termination without cause or resignation for good reason in connection with a change of control of the company. The employment agreement also provides that Mr. Woods is subject to certain confidentiality and non-competition restrictions during and following the term of his employment with us and is further described in detail in the section below entitled “– Termination and Change of Control Benefits.”

We entered into an employment agreement with Mr. Slover on March 19, 2012, in connection with his commencement of employment as our Head of Finance and Principal Accounting Officer. Pursuant to the employment agreement, Mr. Slover is entitled to an annual base salary of $235,000, (as Mr. Slover was hired on April 4, 2012, he earned $174,292 of his annual salary during 2012), a discretionary performance bonus of 40% of Mr. Slover’s annual base salary, pro-rated for his partial year of service in 2012.salary. Additionally, Mr. Slover’s employment agreement provided for stock option grants and that Mr. Slover is subject to certain confidentiality and non-competition restrictions during the term of his employment with us.

We entered into an employment agreement with Dr. Hulme on March 31, 2011, pursuant to which Dr. Hulme was entitled to an annual salary of $330,000, a discretionary performance bonus of 50% of Dr. Hulme’s annual base salary, pro-rated for her partial year of service in 2011.salary. Additionally, Dr. Hulme’s employment agreement provided for additional benefits, including the stock option grants received in 2011and2011 and reimbursement for Dr. Hulme’s travel and temporary living costs from her hire date through July 1, 2012 while she is required to work at our offices in San Diego, plus a gross up payment for such expenses. In January 2014, the Board of Directors, based on a recommendation from the Compensation Committee, approved the reimbursement of Dr. Hulme’s travel and living costs, plus a gross up payment for such expenses, for 2013 and 2014 without making any change to her employment agreement or committing to reimbursement of these costs for periods beyond 2014. In February 2015, the Board of Directors, based on a recommendation from the Compensation Committee, approved the reimbursement of Dr. Hulme’s travel and living costs, plus a gross up payment for such expenses for 2015 without making any changes to her employment agreement or committing to reimbursement of these costs for periods beyond 2015. In December 2016, the Board of Directors, based on a recommendation from the Compensation Committee, approved the reimbursement of Dr. Hulme’s travel and living costs, plus a gross up payment for such expenses for 2016 and 2017 without making any changes to her employment agreement or committing to reimbursement of these costs for periods beyond 2017. Dr. Hulme is subject to certain confidentiality and non-competition restrictions during and following the term of her employment with us.

Compensation Recovery Policies

The Board and the Compensation Committee have not determined whether they would attempt to recover bonuses from our executive officers if the performance objectives that led to the bonus determination were to be restated, or found not to have been met to the extent originally believed by the Compensation Committee. However, as a public company subject to the provisions of Section 304 of the Sarbanes-Oxley Act of 2002, if we will be required as a result of misconduct to restate our financial results due to our material noncompliance with any financial reporting requirements under the federal securities laws, our president and chief financial officer may be legally required to reimburse us for any bonus or other incentive-based or equity-based compensation they receive. In addition, we will comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and will adopt a compensation recovery policy once final regulations on the subject have been adopted.

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Equity Compensation Plans and Other Benefit Plans

Stock Option Plan

Our Amended and Restated 2011 Stock Option Plan, (“Prior Plan”), was last approved by our shareholders on June 6, 2012. The purpose of the Prior Plan is to provide a share-related mechanism to attract, retain and motivate qualified executives (including directors), employees and consultants of the company, each referred to herein as a “Participant,” to incent such individuals to contribute toward the long-term goals of the company, and to encourage such individuals to acquire shares of the company as long-term investments. The Prior Plan is administered by a committee which shall, from time to time and in its sole discretion, determine those executives, employees and consultants of the company, if any, to whom options are to be granted. Presently, such committee is comprised of the members of the Compensation Committee, who make recommendations to the Board with respect to grants of options.

Subject to certain adjustments, the number of common shares which will be available for purchase pursuant to options granted under the Prior Plan is 10% of the number of issued and outstanding common shares (on a non-diluted basis) on the particular grant date, (“Outstanding Issue”). If any option expires or otherwise terminates for any reason without having been exercised in full, the number of shares in respect of such expired or terminated option shall again be available for the purposes of granting options pursuant to the Prior Plan. The maximum number of options which may be granted to any one Participant under the Prior Plan within any 12-month period is 5% of the Outstanding Issue.

As of December 31, 2013,2016, a total of 1,362,4582,868,198 options have been granted and remain outstanding under the Prior Plan (representing approximately 8.4%9.53% of the issued and outstanding common shares on a non-diluted basis) and a total of 252,529142,566 options remain available for grant under the Prior Plan (representing approximately 1.6%0.47% of the issued and outstanding common shares on a non-diluted basis).

The exercise price at which a Participant may purchase a common share upon the exercise of an option is the Market Value of such shares as of the grant date. The “Market Value” of the shares for a particular grant date is the closing trading price of the shares on the primary organized trading facility, as determined by the committee, on which the shares are listed on the trading day immediately preceding the grant date, subject to any adjustments as may be required to secure all necessary regulatory approvals; provided that if the shares are not listed on any organized trading facility, then the Market Value will be, subject to any adjustments as may be required to secure all necessary regulatory approvals, such value as is determined by the committee to be the fair value of the shares, taking into consideration all factors that the committee deems appropriate, including, without limitation, recent sale and offer prices of the shares in private transactions negotiated at arms’ length.

The vesting schedule for an option, if any, shall be determined by the committee. Notwithstanding the foregoing, the committee may elect, at any time, to accelerate the vesting schedule of one or more options in the event of certain triggering events set out in the Prior Plan. Additionally, in the event of a change of control of the company, the options outstanding shall become immediately exercisable on such date the change of control has been deemed to have occurred. The Prior Plan generally defines a change in control as the occurrence of either: (1) a person or entity, or a group thereof acting in concert, directly or indirectly acquires beneficial ownership of more than 50% of our then outstanding shares (on a non-diluted basis); or (2) a majority of the directors elected at any annual or extraordinary general meeting of shareholders of the company are not individuals nominated by our then-incumbent Board.

The expiration date of an option granted under the Prior Plan shall be no later than the 10th anniversary of the grant date of such option, except where an option expires during an black-out period in which case it will expire 10 business days after the black-out period is lifted and the company notifies the Participant of the extension of the expiration date. In the event that a Participant holds his or her option as a director or officer of the company and such Participant ceases to hold such position other than by reason of death or disability, the expiration date of the option shall be, unless otherwise expressly provided for in the option certificate, the 90th day following the date the Participant ceases to hold such position unless the Participant ceases to hold such position as a result of: (i) ceasing to meet the qualifications set forth in the corporate legislation applicable to the company; (ii) a special resolution having been passed by the shareholders of the company removing the Participant as a director of the company; or (iii) an order made by any regulatory authority having jurisdiction to so order, in which case the expiration date shall be the date the Participant ceases to hold such position.

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In the event that a Participant holds his or her option as an employee or consultant of the company and such Participant ceases to hold such position other than by reason of death or disability, the expiration date of the option shall be, unless otherwise expressly provided for in the option certificate, the 90th day following the date the Participant ceases to hold such position, unless the Participant ceases to hold such position as a result of: (i) termination for cause; or (ii) an order made by any regulatory authority having jurisdiction to so order, in which case the expiration date shall be the date the Participant ceases to hold such position. If the Participant ceases to hold such position as a result of resigning or terminating his or her position, the expiration date shall be the 30th day following the date the Participant ceases to hold such position.

Subject to certain limited circumstances, options granted under the Prior Plan are non-assignable and non-transferable.

Subject to the requisite shareholder and regulatory approvals set forth below, the committee may from time to time amend or revise an existing option or the Prior Plan or the terms and conditions of any option thereafter to be granted provided however that no such amendment or revision may, without the consent of the Participant, (i) materially decrease the rights or benefits accruing to a Participant or (ii) materially increase the obligations of a Participant.

The committee may, subject to receipt of requisite shareholder and regulatory approval, make the following amendments to the Prior Plan:

The committee may without shareholder approval, subject to receipt of regulatory approval, where required, in its sole discretion make all other amendments to the Prior Plan or any option that are not of the type contemplated above including, without limitation:

Notwithstanding the foregoing, the company shall additionally obtain requisite shareholder approval in respect of amendments to the Prior Plan or any option that are contemplated immediately above to the extent such approval is required by any applicable regulatory rules. Furthermore, if the exercise price of an option held by a Participant who is an insider of the company is reduced or if the term of an option held by a Participant who is an insider of the company is extended, the insider must not exercise the option at the reduced exercise price or with the extended term, as the case may be, until the reduction in exercise price or extension of the term has been approved by the disinterested shareholders of the company.

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Equity Compensation PlanInformation

The following table provides certain information with respect to all of our equity compensation plans in effect as of December 31, 2013:2016:

401(k) Plan

All of our full-time employees are eligible to participate in our 401(k) Plan, which is a retirement savings defined contribution plan established in accordance with Section 401(a) of the Code. Pursuant to our 401(k) Plan, employees may elect to defer their eligible compensation into the plan on a pre-tax basis, up to the statutorily prescribed annual limit of $17,500$18,000 in 20132016 (additional salary deferrals not to exceed $5,500$6,000 are available to those employees 50 years of age or older) and to have the amount of this reduction contributed to our 401(k) Plan. We provide a $1.00 match for every dollar our employees elect to defer up to 3% of their eligible compensation and a $0.50 match for every dollar our employees elect to defer in excess of 3% and up to 5% of their eligible compensation. In general, eligible compensation for purposes of the 401(k) plan includes an employee’s wages, salaries, fees for professional services and other amounts received for personal services actually rendered in the course of employment with us, to the extent the amounts are included in gross income, and subject to certain adjustments and exclusions required under the Code. The 401(k) Plan currently does not offer the ability to invest in our securities.

Termination and Change of Control Benefits

Pursuant to our Plan, all outstanding unvested stock options of our named executive officers shall become immediately exercisable on the date of a change of control, as further described in the section above entitled “– Equity Compensation Plans and other Benefit Plans – Stock Option Plan”.

The employment agreement we entered into with Mr. Woods in 2012 provides that upon a termination by us without cause (and other than due to Mr. Woods’ death or disability), Mr. Woods will be entitled to continued base salary for a severance period equal to 12 months and continued payment of health insurance benefits for up to 12 months. The base salary payments may be accelerated and paid in a lump sum if such payments would be subject to Section 409A of the Code. Additionally, in the event that Mr. Woods is terminated by us without cause (and other than due to Mr. Woods’ death or disability) or Mr. Woods resigns for good reason (including Mr. Woods’ resignation due to a relocation of his principle place of employment or material reduction of his base salary) within the one month period preceding or the twelve month period following a change of control (as defined in the Plan), all of Mr. Woods’ unvested stock options and other compensatory stock awards will become immediately vested and exercisable in full. The severance benefits provided under Mr. Woods’ employment agreement require that Mr. Woods agree to a release of claims against the company.

On September 9, 2014 the Board of Directors of Sophiris Bio Inc. approved certain change in control severance benefit agreements for its named executive officers. With respect to the Company’s executive officers, the severance benefits will become payable in the event that (i) a qualifying change in control event occurs and (ii) a termination without cause or resignation for good reason of the executive officer occurs within the period commencing one month prior to and ending 18 months following the qualifying change in control event. With respect to the Company’s executive officers, the severance benefits consist of (i) a lump sum payment of 18 months base salary and 150% of the annual target bonus (or 150% the amount of the last annual bonus actually paid, if higher) less standard deductions and withholdings, (ii) 18 months of COBRA premium benefits, and (iii) full acceleration of the vesting and exercisability of all then outstanding time-based vesting stock options and other time-based vesting equity awards. Payment of severance benefits is in all cases conditioned upon the executive officer providing a timely and effective release of claims against the Company. These new severance benefits will not duplicate the severance benefits currently available to Mr. Woods under the terms of his employment agreement with the Company entered into on August 16, 2012, such that Mr. Woods will receive benefits under his change in control severance benefit agreement only to the extent those benefits are additional to any severance benefits that become payable to him under the terms of his employment agreement.

28For purposes of these agreements, a qualifying change of control event generally includes any of the following events: (i) an acquisition by any person, entity or group of the beneficial ownership of securities of the Company representing more than fifty percent of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction; (ii) a merger, consolidation, plan of arrangement or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such transaction, the shareholders of the Company immediately prior thereto do not own, directly or indirectly, outstanding voting securities representing more than fifty percent of the combined outstanding voting power of the surviving entity or its parent entity; and (iii) a sale or other disposition of all or substantially all of the consolidated assets of the Company and its subsidiaries.

Non-Employee Director Compensation

Pursuant to our non-employee director compensation program, we compensate non-employee members of our Board for their services in the form of cash retainers and option grants under our Plan. From January 1, 2013 through September 30, 2013, we provided annual cash retainers of $30,000 to each of our non-employee members ofFor the Board. The Chairman ofyear ended December 31, 2016 the Board was entitled to receive an additional $15,000 cash retainer and the Chairman of the Audit Committee and the Chairman of the Compensation Committee received an additional $7,000 and $3,000 cash retainer, respectively. The director fees were paid quarterly in arrears, as perbased on the terms of the non-employee director’s compensation program.schedule below:

On October 25, 2013, the Board of Directors approved changes to our non-employee director compensation program as outlined below which was retroactively effective to October 1, 2013.

Cash Payments

Annual retainer: $35,000

Additional Chairman of the Board annual retainer: $35,000

Additional Audit Committee Chair/member annual retainers: $15,000 and $7,500, respectively

Additional Compensation Committee Chair/member annual retainers: $10,000 and $5,000, respectively

Additional Corporate Governance and Nomination Committee Chair/member annual retainers: $7,000 and $3,500, respectively

All cash payments above will be paid in four equal quarterly payments.

Any quarterly payment made to a non-employee director who has served less than 3 months at the time of each payment will be reduced pro-rata for the time that the individual did not serve in their respective capacity.

Equity Compensation

The last annual equity award granted to our Board of Directors was in 2011 for their service provided in 2010. In October 2013, the Board, after recommendation by the Compensation Committee, awarded a stock option grant covering16,500 shares to each of our directors, with the exception of Mr. Turner, in recognition of their service provided to the Company during fiscal years 2011 and 2012. In October 2013, Mr. Turner was awarded his initial appointment equity award in accordance with the 2013 Non-Employee Director Compensation Plan. In March 2014, Mr. Proehl was awarded his initial appointment equity award in accordance with the 2013 Non-employee Director Compensation Plan.

As part of the changesPursuant to our non-employee director compensation program, that became effective in October, 2013, the Board determined thatwe grant each non-employee director, would be granted the following initial and annual equity awards. Upon theupon their appointment of each non-employee director to the Board, each such director will be granted an initial optionequity award to purchase 16,500 shares of the Company’s common stock, which shares shall vest at the rate of 1/36th per month subject to the individual’s continued service through each such date.service.

On the date of each annual meeting of our stockholders,shareholders, each continuing non-employee director will be granted an annual option to purchase 8,250 shares of the Company’s common stock, which shares shall vest at the rate of 1/12th per month, at the end of each month following the date of grant, subject to the individual’s continued service through each such date.service. The size of an annual grant made to a non-employee director who has served less than 12 months at the time of the annual meeting will be reduced pro-rata for the time that the individual did not serve as a non-employee director.

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Stock options granted to our non-employee directors are granted under and subject to the terms of our Prior Plan, as further described in the section above entitled “– Equity Compensation Plans and other Benefit Plans – Stock Option Plan” and generally vest over a one year period.Plan.”

Director Compensation

The following table discloses all compensation provided to the non-employee directors for the most recently completed fiscal year ending December 31, 2013:2016:

All outstanding option-based awards for the non-employee directors of the company as of December 31, 20132016 are set out in the following table:

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PRINCIPAL SHAREHOLDERS

The following table sets forth information regarding beneficial ownership of our share capital as of February 29, 2014March 1, 2017 by: (1) each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common shares; (2) each of our directors; (3)(2) each of our named executive officers; and (4)(3) all of our directors and current executive officers as a group. As of March 1, 2017, the Company was not aware of any person, or group of affiliated persons to beneficially own more than 5% of our common shares.

Except as otherwise noted below, the

The address for each person or entity listed in the table is c/o Sophiris Bio Inc., 1258 Prospect Street, La Jolla, California 92037.