NUVA Nuvasive Inc

PROPOSAL 4—ADVISORY VOTE ON

THE FREQUENCY OF FUTURE ADVISORY VOTES ON COMPENSATION OF

THE COMPANY’S NAMED EXECUTIVE OFFICERS

At the Annual Meeting, our stockholders will be asked to approve, on a non-binding advisory basis, the frequency of future advisory votes on the compensation of our NEOs. At the Company’s 2011 Annual Meeting of Stockholders, our stockholders approved an advisory vote providing for an annual vote on the compensation of our NEOs. The Dodd-Frank Wall Street Reform and Consumer Protection Act requires that we solicit stockholder approval on the frequency of such vote at least once every six years. Accordingly, stockholders are being asked at the Annual Meeting to vote as to whether future advisory votes on the compensation of our NEOs should occur every one, two or three years. You may vote for any one of the three options, or to abstain on the matter. For the reasons described below, our Board recommends our stockholders select a frequency of one year, or an annual vote.

Our Board believes that our current executive compensation programs directly link executive compensation to our financial performance and align the interests of our executive officers with those of our stockholders. Our Board believes that, of the three choices, an annual vote on the compensation of our NEOs is the most appropriate choice based on a number of considerations, including the following:

The Board believes that giving our stockholders the right to cast an advisory vote every year on their approval of the compensation arrangements of our NEOs is a good corporate governance practice and is in the best interests of our stockholders, by allowing our stockholders to provide us with their input on our executive compensation philosophy, policies and practices as disclosed in our Proxy Statement every year. We understand that our stockholders may have different views as to what is the best approach for the Company, and we look forward to hearing from our stockholders on this proposal. The Company will continue to engage with stockholders on executive compensation between stockholder votes.

You may cast your vote on your preferred voting frequency by choosing the option of one year, two years, or three years, or you can abstain from voting in response to the resolution set forth below.

“RESOLVED, that the Company’s stockholders determine, on an advisory basis, whether the preferred frequency of an advisory vote on the executive compensation of the Company’s Named Executive Officers, as disclosed pursuant to the compensation disclosure rules of the SEC should be every year, every two years or every three years.”

Because your vote is advisory, it will not be binding on the Board and will not overrule any decision by the Board or require the Board to take any action. In addition, your vote will not create or imply any additional fiduciary duty on the part of the Board and will not restrict or limit the ability of our stockholders to make proposals for inclusion in proxy materials related to executive compensation.

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Vote Required and Board Recommendation

Approval of the non-binding advisory vote on the frequency of future votes on the compensation of the Company’s Named Executive Officers will be determined by a plurality of votes, which means that the choice of frequency that receives the highest number of votes will be considered the advisory vote of the Company’s stockholders. As votes to “ABSTAIN” and broker non-votes are not counted as votes cast with respect to the resolution, they will have no effect on the outcome of the vote.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL (ON A NON-BINDING

ADVISORY BASIS) OF AN ANNUAL VOTE (EVERY ONE YEAR) FOR THE FREQUENCY OF

FUTURE ADVISORY VOTES ON THE COMPENSATION OF THE COMPANY’S NAMED

EXECUTIVE OFFICERS.

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides a detailed description of NuVasive’s executive compensation philosophy and programs in 2016, the decisions the Compensation Committee (referred to in this Compensation Discussion and Analysis as the “ Committee ”) made under those programs in 2016, and the factors considered in making those decisions. It focuses on the compensation provided to the Company’s Named Executive Officers during 2016 (the “ NEOs ”).

In accordance with SEC rules and regulations, our NEOs for 2016 include our Chief Executive Officer, Chief Financial Officer and the three other most highly compensated executive officers serving as executive officers on December 31, 2016. In addition, SEC rules require that we include up to two additional individuals who served as executive officers during the year and who otherwise would have been included as NEOs, but for the fact that they were no longer serving as an executive officer on December 31, 2016. As a result, our 2016 NEOs consisted of the following six individuals:

Patrick S. Miles is considered an NEO, based on his role as President and Chief Operating Officer through September 2016. In September 2016, Mr. Miles assumed the role of Vice Chairman, and the Company named Jason M. Hannon as President and Chief Operating Officer. In his new capacity as Vice Chairman, Mr. Miles’ responsibilities include: (1) serving as a strategic advisor to the Company’s management team; (2) providing thought leadership with regard to new products, technologies and business ventures; (3) continuing to foster the Company’s relations with key surgeon customers; and (4) serving as a mentor to other Company employees. While Mr. Miles’ was not serving in the capacity of an executive officer as of December 31, 2016, he met the criteria for being designated as an NEO in 2016 under SEC rules and regulations. Mr. Miles has also served as a member of our Board of Directors since August 2016.

A complete list of our current executive officers is included in this Proxy Statement under the caption “Corporate Governance—Executive Officers.”

Executive Summary

2016 Financial Highlights. In 2016, NuVasive delivered on its financial goals, continued to take market share in the U.S and significantly grew outside the U.S by driving adoption of our unique surgical products and procedures. Financial highlights for 2016 include the following:

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2016 Business Highlights. In 2016, NuVasive executed on four strategic acquisitions, made significant investments in our manufacturing and sales capabilities, and continued to bring innovative products to market. Business highlights for 2016 include the following:

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The graphs below illustrate our global revenue, non-GAAP operating margin, market share and stock price/TSR for fiscal years ended December 31, 2014, 2015 and 2016.

For more information about our financial and business performance in 2016, please see “Business”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and “Notes to Consolidated Financial Statements” in our Annual Report on Form 10-K for the year ended December 31, 2016.

2016 Executive Compensation Highlights. NuVasive’s executive compensation program emphasizes pay-for-performance. For our NEOs, the Committee sets a significant portion of target total annual direct compensation in the form of variable incentives that are designed to motivate our NEOs to achieve overall Company goals, specific business goals and individual performance goals. Below is a summary of the compensation decisions made in 2016.

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Summary of 2016 Compensation Decisions. After considering the Company’s operating performance, value creation for stockholders and individual accomplishments, including changes in roles and responsibilities, the Committee took the following actions with respect to base salary rates, annual cash incentive awards and long-term incentive awards:

Edmund J. Roschak joined NuVasive in February 2016 in connection with our acquisition of Ellipse Technologies and now leads our NSO division as Chief Executive Officer, NuVasive Specialized Orthopedics. Mr. Roschak’s new hire compensation package included the 2016 compensation listed in the table above, and Mr. Roschak was also provided with a one-time cash performance bonus targeted at $500,000 for successful achievement of the 2016 NSO business plan. This new hire package was designed to retain Mr. Roschak after consummation of the Ellipse Technologies acquisition, and the bonus parameters (established in connection with the closing of the transaction in February 2016) were intended to provide an incentive for achieving the NSO business plan in the year of acquisition. Specifically, NSO achieved 2016 net revenue (pro-forma for the period January 1, 2016—December 31, 2016 and calculated in accordance with the bonus award terms) of $64.1 million, which resulted in a one-time cash performance bonus payout of $636,900 to Mr. Roschak that is not reflected in the table above. In addition, as a former stockholder of Ellipse Technologies, Mr. Roschak received cash consideration from the Company for his equity interests in Ellipse Technologies in connection with the

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acquisition, as discussed further below under “Employment, Severance and Change in Control Arrangements.”

Patrick S. Miles is considered an NEO for 2016 based on his role as President and Chief Operating Officer through September 11, 2016. Mr. Miles’ annual base salary rate during this period was $575,000 and he received a pro-rated annual bonus payout of $412,000 for his contributions during this period. In March 2016, Mr. Miles’ received a long-term incentive (“ LTI ”) award with an economic value on the date of grant of $2,600,000. In connection with his role change to Vice Chairman in September 2016, Mr. Miles’ annual base salary was reduced to $500,000 and he no longer will participate in the Annual Performance Bonus Plan or Annual Long-Term Incentive Award Program. Rather, he was provided with an opportunity to receive a one-time performance restricted stock unit (“ PRSU ”) award based on a 1:1 match of the number of “Qualifying Shares” owned by Mr. Miles and held through the five-year performance period ending September 11, 2021. The matching PRSUs were granted based on a target number of shares (42,397) of Company common stock and will only vest if (i) the Company’s per share stock price achieves certain share price hurdles that range from $70—$100 per share at the end of the five-year performance period and (ii) Mr. Miles holds the Qualifying Shares for the duration of the five-year period. The Board believes that this PRSU award, which required Mr. Miles to make a sizeable upfront investment of his own funds, will incentivize Mr. Miles to continue to provide thought leadership on product development, maintain relationships with key surgeon customers and advise on business matters that will benefit the Company’s long-term stockholder value.

The charts below illustrate the target mix of total annual direct compensation for the CEO and other NEOs for 2016. As illustrated below, 88% of the CEO’s target annual direct compensation and 75% of other NEOs’ target annual direct compensation is variable with performance, including stock price performance.

2016 Target Total Annual Direct Compensation

For more information about the 2016 compensation decisions and the factors considered in making these decisions, please see pages 43-50.

Say on Pay Results and Stockholder Engagement . The Committee and the Board highly value the opinions of our stockholders, and in a continuing effort to better understand their views regarding the Company’s executive compensation practices, the Company continued its stockholder outreach and updated the Committee and Board on these efforts. These outreach efforts continue to enable the Committee to strengthen the executive compensation program by:

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At the 2016 Annual Meeting, approximately 52% of the votes cast were in favor of the advisory vote to approve the compensation of our NEOs for 2015. While this result was disappointing, we believe the lower support was due in large part to one-time events related to the CEO transition in 2015 as evidenced by (i) commentary from well-known proxy advisory firms about the departing package for the former CEO and sign-on compensation package for the new CEO and (ii) by dialog with our top investors about the CEO leadership transition during our stockholder outreach efforts.

During 2016, we reached out to our top stockholders and had conversations with corporate governance contacts representing approximately 50% of the shares outstanding. Additionally, senior management, including our Chairman and CEO, regularly engage in meaningful dialog with our stockholders throughout the year. The Committee takes into account the outcome of Say on Pay votes and discussions with investors when considering future executive compensation arrangements and potential changes to the executive compensation program. Aligned with the feedback received from continued stockholder outreach efforts, the Committee retained the core design features in 2016, but implemented additional enhancements that build upon the Company’s executive compensation and governance framework. The chart below summarizes the key points we heard, what action the Board has taken and when the changes are effective.

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The Committee will continue to closely monitor the outcome of future Say on Pay advisory votes and stockholder outreach and take it into account when reviewing the executive compensation program.

Executive Compensation Philosophy and Objectives

Compensation Philosophy. The Company’s executive compensation program is designed to promote long-term stockholder value creation and support its long-term strategy by: (i) profitably growing the business and prudently managing risk, while retaining key talent; (ii) aligning a significant portion of our NEOs’ targeted compensation to performance-based compensation; and (iii) appropriately aligning pay with short and long-term Company performance.

Since 2014, NuVasive has grown its total revenue from $762.4 million in 2014 to $962.1 million in 2016 (an increase of approximately 26%) and its non-GAAP Operating Margin from 11.4% in 2014 to 16.1% in 2016 (an increase of 470 basis points). Over the same period, we have increased our global market share from approximately 8.8% in 2014 to an estimated 10.9% in 2016. Our continued market share growth has us in the #3 spot in the global spine market and the largest pure spine company in the industry. This success and the deep leadership expertise that each NEO holds continues to make our NEOs highly valuable to many of our competitors, further making their retention a key priority. Furthermore, most of our competitors in the spine industry are divisions of much larger companies, which creates a highly competitive market for compensating executive talent. Additionally, our NEO compensation must remain an ongoing motivation for continuing to deliver strong performance results and optimizing stockholder returns. For these reasons, the Committee believes NEO compensation should be set at highly competitive levels to retain a valuable team. By setting highly competitive pay levels, we are also able to attract the necessary talent to keep pushing our leadership team forward to effectively manage the Company.

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Summary of Executive Compensation Best Practices. The Committee regularly reviews best practices in governance and executive compensation. The following is a high-level summary of certain executive compensation practices that the Committee believes (i) drive Company performance, and (ii) serve our stockholders’ long-term interests:

Primary Elements of the Company’s Executive Compensation Program

The target total compensation opportunity for NEOs is comprised of both fixed (base salary) and variable (annual and long-term incentives) compensation. In addition, each NEO is eligible for benefits that are generally offered to Company shareowners (our employees).

Base Salary. Base salary levels for our NEOs recognize the experience, skills, knowledge and responsibilities required of each officer. Each year, base salary is evaluated against those of our peer group, general competitive practices, and an internal assessment of the NEOs’ performance, both individually and relative to other officers. For our newly hired executive officers, the Committee considers competitive factors in the spine industry, and more broadly, the compensation of the individual at his or her prior employer, and other competitive hiring factors.

The Committee reviews each NEO’s salary once a year and may adjust each NEO’s salary to reflect promotions or changes in level of responsibility, performance-based factors, as well as competitive conditions. The Committee does not apply specific formulae to determine increases or decreases. If adjustments are made, they are typically made effective with the first pay period in March of each year.

Annual Incentives—Annual Performance Bonus Plan. Executive officers participate in an annual cash bonus plan intended to provide a direct financial incentive in the form of a cash bonus

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based on the achievement of specifically defined annual performance measures, including both Company-specific measures and individual performance measures. The Committee establishes an individual target bonus opportunity for each executive expressed as a percentage of his or her base salary. Target bonus percentages are established at the beginning of the fiscal year based on a review of:

In addition, the Committee may adjust each NEO’s target bonus opportunity during the year to reflect promotions or changes in level of responsibility, performance-based factors, as well as competitive conditions. The Committee evaluates the performance measures and targets related to the annual performance bonus plan each year to ensure they align with the Company’s short-term strategy and its long-term objective of creating sustainable stockholder value.

Annual Long-Term Incentive Awards (LTI). The Committee believes that the best interests of stockholders and executives will be more closely aligned by providing executives who have substantial responsibility for our Company’s management and growth with an opportunity to increase their ownership of our stock. Our LTI awards include grants of RSUs and PRSUs that enable our NEOs and other shareowners to participate in the long-term appreciation of our stockholder value, while feeling personally invested in the impact of any business setbacks, whether Company-specific or industry-based. Furthermore, LTI awards assist with retention since the awards are subject to vesting related to an individual’s continued employment.

In determining each NEO’s grant of LTI awards, the Committee considers a combination of Company performance, individual past performance and future potential, an analysis of competitive pay practices, and an evaluation of the sufficiency of the unvested LTI awards held by NEOs. It is the Committee’s policy to provide significant levels of LTI compensation to the Company’s NEOs as the Committee feels it is important to the Company’s long-term growth prospects to retain the Company’s executive management team.

Relationship Between Pay and Performance . The Committee monitors its pay-for-performance commitment by periodically testing the alignment between pay and performance. In November 2016, the Committee reviewed the relationship between CEO “realizable pay” (defined below) and Company performance over a one-year period (Fiscal 2015) and three-year period (Fiscal 2013 through Fiscal 2015) which was the period that both compensation and performance data was readily available for our peer group. The analysis compared our CEO’s realizable pay with corporate performance versus those of peer group companies during the respective period.

For this analysis, realizable pay is defined as aggregate salary plus aggregate bonuses paid plus “realizable gains” of long-term incentive awards granted in the relevant periods. Such “realizable gains” include in-the-money gains on stock options, the value of full-value shares (which includes the value of earned performance shares for performance periods that both began and ended in the relevant periods), and the target value of any performance shares with yet-to-be concluded performance periods. The Company believes that realizable compensation is a more relevant measure for analyzing the pay-for-performance alignment than grant date or target compensation. Realizable compensation focuses on the actual value of earned pay rather than pay opportunity by analyzing stock prices as of the most recent fiscal year end and actual payouts from short- and long-term incentives to provide an

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estimate of the actual compensation that executives realized during the period. Performance of the respective company is measured on the basis of sales growth, EPS growth, EBITDA growth and total stockholder return over each performance period with each metric being weighted equally and then ranked in order to form an overall performance percentile ranking of the companies. Certain peers may be excluded if their complete data is not available.

As illustrated in the charts below, NuVasive’s pay-for-performance is in the target zone, with the area between the gray lines representing the alignment between pay and performance.

For the one-year period (Fiscal 2015), realizable pay for our CEO ranked in the 81 ^st percentile of the peer group used for 2016 compensation benchmarking, and our overall performance ranked in the 71 ^st percentile. For the three-year period (Fiscal 2013 through 2015), realizable pay for our NEOs ranked in the 75th percentile of the peer group used for 2016 compensation benchmarking, and our composite performance ranked in the 93rd percentile. Based on this analysis, the Committee is satisfied with the alignment of realizable compensation for our CEO with the performance of the Company during the period reviewed. The Committee expects to continue to periodically review the alignment of pay and performance, including as may be required to comply with regulations issued by the SEC, which are currently in proposed form.

Process for Determining Named Executive Officer Compensation

Historically, the Committee had been ultimately responsible for decisions relating to compensation for our NEOs, including the CEO. In July 2016, the Committee re-evaluated the roles and responsibilities related to CEO compensation decisions and modified these responsibilities such that the Committee would recommend CEO compensation actions to the full Board for approval. While historically the Board had been consulted with and informed of CEO compensation actions, the Committee and the Board believes formalizing the process requiring Board approval of CEO compensation actions is best practice from a governance perspective. For compensation of the Company’s other NEOs, the Committee considers recommendations from, and discusses decisions with, its external consultant and the management team.

Role of the Committee . The Committee has the ultimate responsibility and decision-making authority over all aspects of the executive compensation programs for our NEOs, other than the CEO as described above. The Committee seeks advice from its independent compensation consultant, to assist in the assessment of executive pay elements in order to ensure that they are reasonable, aligned with stockholder interests, meet our key priorities, and are competitive. Additionally, the

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Committee takes into account guidance from our investor base that results from our stockholder outreach efforts noted above and the recommendations of the CEO referenced below. The Committee also oversees an annual risk assessment of the Company’s compensation programs to determine whether such programs are reasonably likely to have a material adverse effect on the Company. For 2016, the Committee concluded that the Company’s compensation programs were appropriately balanced to mitigate compensation-related risk with cash and stock elements, financial and non-financial goals, formal goals and discretion, and short-term and long-term rewards. The Company also has policies to mitigate compensation-related risk, including stock ownership guidelines, clawback provisions and prohibitions on employee hedging activities. Furthermore, the Committee believes the Company’s policies on ethics and compliance along with its internal controls also mitigate against unnecessary or excessive risk taking.

For a more detailed description of the Committee’s duties and responsibilities, please refer to the Committee Charter, which can be found under the “Highlights” tab of the Governance section of the Company’s Investor Relations website at  www.nuvasive.com .

Role of Management. The Committee has full access to the management team for assessing and taking action on executive compensation matters. The CEO works closely with other members of the management team to develop management’s recommendations and perspective on the alignment of executive compensation with the business strategy. The EVP, Global Human Resources, Chief Financial Officer, and EVP, General Counsel and their respective teams, regularly attend Committee meetings and are involved with providing input to the Committee. The Committee ultimately makes all compensation decisions, other than the CEO as described above, and may exercise its discretion in making decisions that may or may not reflect management’s recommendations.

Role of Consultants. Until August 2016, the Committee retained the services of Willis Towers Watson as its independent compensation consultant. Effective August 2016, the Committee retained a new independent compensation consultant, Frederic W. Cook & Co., Inc. (“ FW Cook ”), to advise the Committee on its executive and non-employee Director compensation practices and the 2017 compensation framework. In each case, the independent compensation consultant reports directly to the Committee and provides advice on program design, performs data and information analyses, and keeps the Committee apprised of changing trends and regulatory requirements in the executive pay arena. Representatives from Willis Towers Watson and FW Cook attended Committee meetings during 2016.

Additionally, the Committee engaged an independent consulting firm, RHR International, in 2016 to facilitate the CEO’s 2016 performance assessment. The Committee believes utilizing an independent consulting firm to facilitate the process is consistent with best practices and will yield an objective, robust CEO evaluation.

In 2016, the Committee concluded after careful assessment under applicable SEC and Nasdaq rules that the engagement of Willis Towers Watson, FW Cook and RHR International raised no conflict of interest that would prevent any one of them from independently providing services to the Committee.

Competitive Market Data. The Committee considers each element of compensation separately, and then reviews the total compensation package as a whole, to determine whether compensation for each NEO is consistent with the Committee’s compensation policies, is aligned with Company performance, and is competitive. In assessing whether NEO compensation is competitive, the Committee considers peer group data, as well as published survey data. While the Committee considers this data in setting executive compensation levels, the Committee does not solely rely upon

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a stated benchmarking percentile in relation to a specific peer group. The Committee considers multiple factors in making individual pay decisions, including the peer group and published survey sources listed below. This practice allows the Committee increased flexibility in determining the suitability of overall compensation (as opposed to being locked into a particular data set and/or percentile target).

Peer Group . On an annual basis, the Committee performs an assessment of the appropriate peer group for compensation benchmarking. In July 2015, the Committee reviewed our 2015 peer group in order to determine whether the companies included were appropriate for 2016 based on several criteria, including comparable size based on revenue and market capitalization, comparable industry, peer groups as listed by ISS Corporate Services and Glass Lewis and available compensation data.

As a result of this review, the Committee determined to add two companies, Stryker and Zimmer Biomet, resulting in a peer group comprised of 17 companies as set forth below (our “ 2016 Peer Group ”):

The resulting 2016 Peer Group reflects primarily medical device companies with comparable size in revenue and market capitalization. Specifically, as of December 31, 2016, all but five companies (Dentsply Sirona, Illumina, Intuitive Surgical, Stryker and Zimmer Biomet) met the peer group size constraints that a well-known proxy advisory firm has established, which are revenues between 0.4 to 2.5 times that of NuVasive and market capitalization between 0.25 and 4.0 times that of NuVasive. At the time the Committee established the peer group in July 2015, Sirona Dental Systems met such peer group size constraints, but as result of the merger of Sirona Dental Systems and DENTSPLY International in February 2016, Dentsply Sirona is a substantially larger company. Further, while Illumina (a local, San Diego headquartered biotechnology company), Intuitive Surgical (a manufacturer of minimally invasive surgical robotics), Stryker (a medical technologies company) and Zimmer Biomet (an orthopedic products company) each have revenues and/or market capitalizations in excess of the size constraints that ISS Corporate Services has established, we compete with these companies for recruitment and retention. Additionally, we compete directly with the spine divisions of Stryker and Zimmer Biomet and we often find ourselves in competition with these companies for the recruitment and retention of top talent.

As part of the annual peer group review process, the Committee reviewed the peer group again in July 2016 to establish the peer group for 2017 compensation benchmarking. For 2017, the Company determined to remove two companies: (i) Thoratec (acquired by St. Jude Medical in October 2015) and (ii) Sirona Dental Systems (merged with DENTSPLY International in February 2016). Additionally, the peer group was updated to reflect the following two name changes: (i) Greatbatch, Inc. changed its name to Integer Holdings Corporation in June 2016 and (ii) Wright Medical Group, Inc. merged with

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Tornier NV in October 2015 and was renamed Wright Medical Group, NV. No other changes were made for 2017.

Additional Published Survey Sources. As noted above, the Committee does not rely upon a stated benchmarking percentile in relation to this specific peer group alone, but rather relies upon varied sources of data and other factors in making individual pay decisions. In order to supplement market data gathered from publicly disclosed filings of our specific peer group, the Committee also considers market information from the Radford Global Technology published compensation survey, which is reflective of the market in which we compete for talent. The identity of the companies comprising the survey data is not disclosed to, or considered by, the Committee in its decision-making process and the Committee does not consider the identity of the companies comprising the survey data to be material for this purpose.

Determining Executive Compensation for 2016

In making compensation determinations for our NEOs for 2016, the Committee (and the Board in the case of the 2016 bonus payout to the CEO) considered competitive market pay-related data and other factors such as company performance, individual goals and objectives, realizable pay data, and tally sheets. Tally sheets include a multi-year look-back of total compensation, including annual cash compensation, long-term incentive awards granted and earned, and benefits and perquisites. Tally sheets also include a cumulative inventory of equity grants by fiscal year, including the value of outstanding equity at various stock prices. The tally sheets bring together in one place, all elements of NEO actual compensation and information about wealth accumulation so that the Committee can analyze the individual elements and mix of compensation and the aggregate total amount of annual and accumulated compensation.

For 2016, executive goals and objectives were established primarily based on the Company’s operating plan, but also included non-financial metrics and goals the Board believed were critical to the Company’s ongoing success. Mr. Lucier reviewed his actual performance with the Board periodically during the year, and at the end of the year, he participated in a formal review process with RHR International. RHR International gathered feedback from Board members and CEO direct reports and compiled a report based on that feedback. The final report was reviewed by the Board and discussed with Mr. Lucier in February 2016. The Committee utilized this report, the CEO’s self-assessment of his performance, actual financial performance results, as well as peer group and survey data in the CEO’s 2016 base salary, target annual bonus and annual LTI award. For our remaining NEOs, our CEO prepares and presents to the Committee performance assessments and compensation recommendations. Following consideration of the CEO’s presentation, the Committee may accept or adjust the CEO’s recommendations.

2016 Base Salary. In establishing the 2016 base salaries, the Committee determined to increase the base salaries of Mr. Blackford, EVP and CFO, Head of Strategy and Corporate Integrity, and Mr. Link, President, U.S. Commercial. Mr. Blackford received an increase in base salary of 1.4% and Mr. Link received an increase in base salary of 3%, in each case, to reflect performance and competitive pay dynamics effective with the first pay period in March 2016. While Mr. Hannon did not receive a base salary increase in March 2016, he did receive an annual base salary increase to $575,000 effective in September 2016 in connection with his increased responsibility and promotion to President and COO. As summarized above, the base salary for Mr. Roschak was determined in connection with the new hire compensation package designed to retain him after consummation of the Ellipse Technologies acquisition. Mr. Lucier did not receive a base salary increase in 2016.

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2016 Annual Performance Bonus. In February 2016, the Committee approved the terms of the 2016 Performance Bonus Plan (the “ 2016  Bonus Plan ”) under which our NEOs are eligible to receive a cash bonus (the “ 2016 NEO Cash Bonuses ”) based on the achievement of Company and individual performance goals. During the year, the Committee established an individual target bonus opportunity for each NEO based on peer group and survey data for similar positions, each executive officer’s role, including their ability to impact the Company’s overall performance, and internal pay equity among the executive officers. Consistent with 2015 Bonus Plan design, the maximum bonus opportunity is 200% of target.

The 2016 Bonus Plan was designed to be performance-based compensation, so that bonus awards could be tax deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “ Tax Code ”). The Committee approved a full-year non-GAAP earnings per share ( “ EPS ” ) hurdle applicable to NEOs at the beginning of 2016, which was intended to establish a performance condition in compliance with 162(m) of the Tax Code. This non-GAAP EPS performance hurdle had to be satisfied before any payout could be made under the 2016 Bonus Plan. As the performance hurdle was met for 2016, it allowed the Committee (and the Board in the case of the 2016 bonus payout to the CEO) to determine actual payouts based on achievement of the financial performance and individual contributions discussed below.

At the beginning of the year, the Committee approves funding guidelines that include payout scenarios for various levels of Company financial performance. For 2016, the Company selected revenue and non-GAAP operating margin as the performance metrics for the funding guidelines, each weighted equally, as the Committee believes these performance metrics closely align with both the Company’s short-term strategy and its long-term objective of creating sustainable stockholder value. The Company definition of these metrics for purposes of the 2016 Bonus Plan are as follows: (i) Revenue calculated from the year-end financial statements, excluding the effect of currency fluctuations and financial impact of substantial acquisitions and divestitures that close after January 1, 2016 and (ii) Non-GAAP (pro-forma) Operating Margin calculated from the year-end financial statements (which includes the cost of Annual Bonus payouts), excluding the financial impact of substantial acquisitions and divestitures that close after January 1, 2016. The purpose of these adjustments is to ensure the measurement of performance reflects factors that management can directly control and that payout levels are not artificially inflated or impaired by factors unrelated to the ongoing operation of the business. The Committee feels these definitions appropriately measure core growth in revenue and operating margin. Because Ellipse Technologies was a substantial acquisition that occurred early in the year (in February 2016) the Committee specifically approved the impact of the acquisition for inclusion in both the financial performance metrics and actual results.

The table below sets forth the Revenue and non-GAAP Operating Margin performance goals and funding guidelines at the threshold, target, and maximum funding levels for 2016, as well as the actual results.

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While the funding of the annual performance bonus is based on the Company’s financial performance, the Committee believes that it is important to differentiate actual payouts based on individual performance as reflected in each executive’s demonstrated leadership, business unit or functional achievements and demonstrated results against goals and objectives. The evaluation of an executive’s performance relative to these considerations is inherently subjective and is not based on any mathematical calculation or formula; rather, it is based on the collective business experience and judgment of the Committee (and the Board in the case of the CEO) to holistically consider the performance of each executive and their contribution to the overall success of the Company.

For 2016, the Committee (and the Board in the case of the CEO) determined that each NEO performed at a high level when compared against the executive’s individual performance goals and that strong operational performance of our NEOs had resulted in significant revenue and profitability growth, as well as the achievement of multiple strategic initiatives. During 2016, the Committee (and the Board in the case of the CEO) noted the following significant contributions by the NEOs:

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After considering the funding guidelines and each NEO’s contribution to the Company’s 2016 performance, the Board approved a bonus award payout to our CEO at 106% of target and the Committee approved bonus award payouts to our other NEOs that range from 100% to 115% of target, as set forth in the table below. As a comparison, bonus award payouts for the broader organization ranged from 0% to 200% of target.

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Following is a summary of the actual annual 2016 bonus awards for the NEOs and a comparison relative to their target awards. The bonuses were awarded under the NuVasive, Inc. 2014 Executive Incentive Compensation Plan approved by stockholders on May 14, 2014.

One-time Cash Performance Bonus related to Ellipse Technologies Acquisition: As summarized above, Mr. Roschak joined NuVasive in February 2016 in connection with our acquisition of Ellipse Technologies and now leads our NSO division as Chief Executive Officer, NuVasive Specialized Orthopedics. In connection with the new hire compensation package designed to retain him after consummation of the Ellipse Technologies acquisition, Mr. Roschak was provided with a one-time cash performance bonus targeted at $500,000 for successfully achieving the 2016 NSO business plan. Specifically, the NSO achieved 2016 net revenue (pro-forma for the period January 1, 2016—December 31, 2016 and calculated in accordance with the bonus award terms) of $64.1 million, which resulted in a one-time cash performance bonus payout of $636,900 to Mr. Roschak.

2016 Long-Term Incentive Awards—Annual Grant. To continue to directly align LTI awards with stockholder value creation while managing our burn rate and dilution, the Committee awarded the 2016 LTI awards to NEOs in a combination of RSUs (50% of total target award value), PRSUs (25% of total

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target award value) and performance cash awards (25% of total target award value). Following is a summary of the annual 2016 LTI awards for the NEOs.

2016 RSUs (50% of total target award value): The Committee believes RSUs provide NEOs an ownership stake in the Company and, by providing an ownership stake in the Company, RSUs align the financial interests of our NEOs with stockholders’ interests. The Committee also believes RSUs aid in retention and provide value to our executives. The RSUs granted to our NEOs as part of the annual 2016 LTI award were designed to be performance-based compensation, so that these RSUs could be tax deductible under Section 162(m) of the Tax Code. The Committee approved a non-GAAP EPS hurdle applicable to these RSUs, which was intended to establish a performance condition in

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compliance with 162(m) of the Tax Code. This non-GAAP EPS performance hurdle had to be satisfied before the RSUs will vest. As the performance hurdle was met, these RSUs will cliff vest after three years (as compared to RSUs granted in 2015, which were subject to ratable 25% annual vesting over four years).

2016 PRSUs (25% of total target award value): PRSUs are intended to reward our executives for the achievement of specified multi-year performance goals. As performance-based compensation, PRSUs will only vest if the performance goals are achieved during the specified performance period. For 2016, the Committee selected TSR over the three-year performance period as the sole performance metric under the 2016 PRSUs because it believes TSR is a good indicator of stockholder value creation.

The Company’s three-year TSR for the 2016 PRSUs is measured as the change in (i) the average closing price of the Company’s common stock over the last 20 trading days leading up to and including December 31, 2018 plus dividends paid during the three-year period relative to (ii) the average closing price of the Company’s common stock over the last 20 trading days immediately preceding March 1, 2016. The target TSR is the median TSR (using the same calculation methodology) of the companies comprising the S&P 500 Index. Achievement of a Company three-year TSR at the 100 ^th percentile of the index will result in shares equal to 250% of the target amount of PRSUs being awarded for this goal. Conversely, no shares would be awarded if the Company’s three-year TSR is below the 35 ^th percentile of the index. Earned awards will cliff vest on March 1, 2019. If the Company does not meet the minimum performance target, then the PRSUs will not vest and no shares will be delivered to the NEO.

2016 Performance Cash Awards (25% of total target award value): The performance cash awards granted to the NEOs in 2016 provide a potential cash payout (ranging from 0%—150% of the NEO’s target award value) in the first quarter of 2019 based on the Company’s performance relative to the Committee’s specific established non-GAAP Operating Margin target for 2018. Although the Committee recognized that using non-GAAP Operating Margin could potentially be duplicative if the same metric will be a component of the future 2018 annual bonus program, the Committee selected 2018 non-GAAP Operating Margin as the performance metric for the 2016 performance cash award because it believes management should be incentivized to provide multi-year operating margin expansion results and that non-GAAP Operating Margin is a key driver of stockholder value. The Committee believes that it has set a challenging, yet attainable, forward-looking 2018 non-GAAP Operating Margin goal.

2016 Long-Term Incentive Awards—Role Changes.

In addition to the 2016 annual LTI awards granted to Mr. Miles, as described above, the Board granted Mr. Miles a RSU award with a target economic value on the date of grant of $1,000,000 in recognition of his continued dedication and critical leadership on NuVasive’s executive team. The RSU award was granted on March 1, 2016 and will vest 25% annually over four years. In connection with his role change to Vice Chairman in September 2016 (see list of job duties on page 31), Mr. Miles was granted a one-time PRSU award that provided for a 1:1 share match, based on the number of “Qualifying Shares” owned by Mr. Miles and held through the five-year performance period ending September 11, 2021. Mr. Miles purchased 16,967 shares of Company common stock for an aggregate of approximately $1.0 million and agreed to hold an additional 25,430 shares of his existing Company common stock, for an aggregate of 42,397 Qualifying Shares. The PRSUs were granted based on a target number of shares (42,397 shares) and will only vest if (i) the Company’s per share stock price achieves certain share price hurdles that range from $70—$100 per share at the end of the five-year performance period ending September 11, 2021 and (ii) Mr. Miles holds the Qualifying Shares for the

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duration of the five-year period. Achievement of a Company stock price of $100 per share or greater will result in Mr. Miles receiving shares equal to 200% of the target amount of PRSUs. Conversely, Mr. Miles would receive no shares if the Company’s stock price is below $70 per share. These matching PRSUs will be forfeited if Mr. Miles sells, or otherwise disposes of the Qualifying Shares prior to September 11, 2021. The Board believes that this PRSU award, which provided for a sizeable upfront investment and long-term commitment to the Company will retain and incentivize Mr. Miles and drive significant focus on the goal of creating long-term stockholder value.

The following table sets forth the Company’s per share stock price targets for the matching PRSUs granted to Mr. Miles.

Responsible Share Usage

As illustrated in the chart below, the Company’s annual share usage rate has remained below 2% since stockholders approved the 2014 Equity Incentive Plan.

Other Elements of the Executive Compensation Program

Perquisites and Other Benefits. Our NEOs participate in our benefit plans on the same terms as our other shareowners, which include the Company’s 401(k) plan and medical and dental insurance. In

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addition to these benefits, executives may be provided with certain other incidental benefits (including participation in an executive healthcare program and financial planning benefit) that do not comprise a material portion of any executive’s compensation package. We generally do not provide significant recurring perquisites to the executives that are not available to our other shareowners. We do not provide tax gross-ups to our executives for company benefits, personal expenses or in the event that excise taxes are incurred following a qualifying termination in connection with a change in control.

We may provide additional benefits to our NEOs in special circumstances, such as the payment of cost-of-living adjustments, tax preparation fees and tax equalization costs in the event of an expatriate assignment, or relocation benefits in the event of a new hire or transfer. Prior to being named President and Chief Operating Officer in September 2016, Mr. Hannon served as Executive Vice President, International, and was based in our offices in Amsterdam, the Netherlands. In that role, Mr. Hannon received certain expatriate benefits under our Expatriate Policy that are consistent with benefits provided to other Company expatriates. During fiscal 2016, Mr. Hannon was the only NEO on an expatriate assignment. The perquisites and other personal benefits we provided to our NEOs during 2016, including detailed information on Mr. Hannon’s expatriate benefits, are further quantified below in the Summary Compensation Table.

We do not provide defined benefit pension arrangements or post-retirement health coverage for our U.S. executives or shareowners. Our NEOs are eligible to participate in our 401(k) defined contribution plan. We do provide a company matching contribution up to 3.0% of compensation for all shareowners, including our NEOs, to help attract and retain top talent as well as support our shareowners’ retirement readiness. Also, on January 1, 2016, the Deferred Compensation Plan became effective which is a non-qualified defined contribution plan that provides for the voluntary deferral of cash compensation for individuals holding a position of Vice President or higher, as well as non-employee members of the Board. Eligible employees may defer up to 75% of base salary and/or up to 100% of their annual bonus into the plan and contributions may be directed into a selection of underlying investment funds. Non-employee members of the Board may defer all or a portion of their cash retainer into the plan.

Historically, our NEOs have participated in our ESPP, which is available to all of our shareowners, pursuant to which they may purchase shares of our common stock at a discount to market prices (but within limits of Section 423 of the Tax Code). Additionally, our executive travel and expense policy sets forth guidelines for our NEOs with respect to reimbursable expenses and generally requires: (i) a business purpose for business meals reimbursed by the Company, and (ii) personal aspects of business travel (other than incidental meals and other expenses) are paid by the executive.

Attributed costs of the personal benefits described above for the NEOs for the fiscal year ended December 31, 2016, if required to be disclosed, are included in the column captioned “All Other Compensation” of the “Summary Compensation Table” below.

Equity Grant Practices. The Company’s practice is to grant annual equity awards to eligible shareowners, including our NEOs, during the first quarter of the year. In the event of grants related to new hires or other off-cycle awards, the grants are generally made on the first trading day of the month following approval of the award.

Stock Ownership Guidelines. All of our non-employee Directors, our CEO, and individuals holding a position of Vice President or higher are subject to stock ownership guidelines, which form a part of our Corporate Governance Guidelines. In November 2015, the Board approved the amendment of our Corporate Governance Guidelines, including changes to our stock ownership guidelines, which resulted in an increase in stock ownership requirements for our executives and our non-employee

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Directors. Our Board believes strongly in aligning executive and board member interests with that of our stockholders and believes increasing stock ownership guidelines for our executives and non-employee Directors furthers that alignment. Our CEO is now required to hold a number of shares of the Company’s common stock with a value equal to five times (5x) the CEO’s base salary. All other NEOs, as well as other executives holding the title of Executive Vice President, are required to hold a number of shares with a value equal to two times (2x) their base salary. All other individuals holding a position of Vice President or higher are required to hold a number of shares of the Company’s common stock with a value equal to one times (1x) their base salary. Non-employee Directors are required to hold a number of shares of the Company’s common stock with a value equal to five times (5x) the annual cash retainer paid to them for service as a member of our Board. Each such shareowner, including the CEO and other executive officers, and non-employee Directors, is required to achieve this ownership guideline within five years of being designated to the respective position. Any person who was already an officer or non-employee Director on the date the stock ownership guidelines were adopted is required to achieve this ownership guideline by January 4, 2017. All NEOs achieved their stock ownership guideline requirement prior to or promptly after becoming an NEO.

Holding Periods on Employee Stock Purchase Plan (ESPP) Purchases . In July 2014, the Committee approved an amendment to our ESPP that requires shares purchased through the ESPP to be held for a minimum of six months. This policy applies to all ESPP purchases made after November 1, 2014 and is in addition to the share ownership guidelines described above.

Clawback Policy. The Board has adopted the NuVasive Incentive Compensation Recoupment Policy, under which our Board has authority to recover excess executive officer incentive compensation cash and equity awards in the event of a material restatement of our financial statements. We believe that our strong financial controls in place provide a substantial safeguard against the risk of a financial restatement; however, if an extraordinary event were to occur and require a material restatement of the Company’s financial performance, the Committee is authorized to seek recovery of executive officer compensation achieved based upon any misstated financial information.

Employment, Severance and Change in Control Arrangements

CEO Letter Agreement (Gregory T. Lucier). On May 22, 2015, the Company entered into a Letter Agreement (the “ Lucier Agreement ”) with Mr. Lucier to serve as the Company’s Chief Executive Officer and Chairman of the Board. The Lucier Agreement set out certain terms of Mr. Lucier’s new hire employment package, including an initial annual base salary of $800,000 and a bonus target opportunity for 2015 equal to 115% of base salary. The Lucier Agreement also provides for the grant of LTI awards to Mr. Lucier that the Board structured in a manner to be highly tied to the Company achieving specific financial and operational targets, including TSR performance, specific stock price hurdles, revenue growth, and growth in non-GAAP operating margins. The Lucier Agreement provided for annual 2015 LTI awards with a target economic grant value of $5.0 million, as well as a one-time PRSU with a target economic grant value of $7.0 million that will vest only if certain TSR performance is achieved relative to the S&P 500 Index over the four year performance period beginning May 1, 2015 and ending April 30, 2019. If the Company’s TSR performance relative to the S&P 500 Index is between the 35 ^th percentile and the 100 ^th percentile, these awards will cliff vest on May 22, 2019, ranging between 25%-200% of the target amount of PRSUs. Mr. Lucier was also granted a one-time PRSU award that provided for a 1:1 share match, based on the number of shares purchased by Mr. Lucier and held through the five-year performance period. Mr. Lucier purchased 112,491 shares of Company common stock for an aggregate of approximately $5.0 million (the “ Purchased Shares ”) for purposes of the matching PRSU award. The PRSUs were granted based on a target number of shares (112,491 shares) and will only vest if (i) the Company’s per share stock price

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achieves certain share price hurdles that range from $70—$100 per share at the end of the five-year performance period ending May 22, 2020 and (ii) Mr. Lucier holds such Purchased Shares for the duration of the five-year period. Achievement of a Company stock price of $100 per share or greater will result in Mr. Lucier receiving shares equal to 200% of the target amount of PRSUs. Conversely, Mr. Lucier would receive no shares if the Company’s stock price is below $70 per share. These matching PRSUs will be forfeited if Mr. Lucier sells, or otherwise disposes of the Purchased Shares prior to May 22, 2020. The Lucier Agreement provides these awards, and all future LTI awards granted to Mr. Lucier, shall be subject to accelerated vesting based on service and performance achieved in the event that Mr. Lucier’s employment is involuntarily terminated without cause, and for full accelerated vesting at target in the event of death or disability. The foregoing information is a summary of select terms from agreements entered into with Mr. Lucier, is not complete, and is qualified in its entirety by reference to the pertinent text of the pertinent agreements, copies of which have been filed with the SEC in Current Reports on Form 8-K or an exhibit to the respective Quarterly Filing on Form 10-Q, as appropriate.

Letter Agreement (Patrick S. Miles). On September 11, 2016, the Company entered into a Letter Agreement (the “ Miles Agreement ”) with Mr. Miles to serve as the Company’s Vice Chairman. The Miles Agreement set out certain terms of Mr. Miles’s employment and provides for a three-year term of employment during which Mr. Miles’ annual compensation will be $500,000, payable in a combination of cash and LTI awards, at Mr. Miles’ election. In the event Mr. Miles’ employment and his membership on our Board of Directors terminates during the three-year term, other than as a result of his voluntary resignation or a termination as the result of his breach of the Miles Agreement, or if his tenure as a Board member ends after the three-year term, other than as the result of his breach of the Miles Agreement, Mr. Miles will be offered the opportunity to serve as a consultant for the Company for a period up to September 11, 2021. The Miles Agreement also provided for a one-time PRSU award that provided for a 1:1 share match, based on the number of “Qualifying Shares” owned by Mr. Miles and held through the five-year performance period ending September 11, 2021. As further discussed above under the heading “2016 Long-Term Incentive Awards—Role Changes”, the PRSUs were granted based on a target number of shares (42,397 shares) and will only vest if (i) the Company’s per share stock price achieves certain share price hurdles that range from $70—$100 per share at the end of the five-year performance period ending September 11, 2021 and (ii) Mr. Miles holds the Qualifying Shares for the duration of the five-year period. Pursuant to the Miles Agreement, Mr. Miles agreed that, for a one year period following the termination of his employment for any reason, he will not engage in certain activities competitive with the Company’s business, nor will he hire or solicit former or current employees nor solicit the business of any customers. The foregoing information is a summary of select terms from agreements entered into with Mr. Miles, is not complete, and is qualified in its entirety by reference to the pertinent text of the pertinent agreements, copies of which have been filed with the SEC in Current Reports on Form 8-K or an exhibit to the respective Quarterly Filing on Form 10-Q, as appropriate.

Vesting Agreement (Edmund J. Roschak). On January 4, 2016, the Company entered into a Vesting Agreement (the “ Vesting Agreement ”) with Mr. Roschak in connection with the acquisition of Ellipse Technologies. As a stockholder of Ellipse Technologies at the time of the acquisition, Mr. Roschak was entitled to receive cash consideration from the Company for his equity interests in Ellipse Technologies in connection with the acquisition. The Vesting Agreement provided that a portion of the consideration payable to Mr. Roschak at the closing of the acquisition would be held back and become payable subject to Mr. Roschak’s continued employment with the Company for a period of six months following the closing. As Mr. Roschak remained employed with the Company throughout this period, the hold back, in the amount of $1.7 million, was paid to Mr. Roschak in August 2016. Although this amount relates directly to Mr. Roschak’s equity interests in Ellipse Technologies, since the hold

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back was subject to Mr. Roschak’s continued employment with the Company, the amount of the hold back is reflected as compensation in the Summary Compensation Table. This amount reflects a portion of the cash consideration received by Mr. Roschak in the acquisition. Mr. Roschak, like other former stockholders of Ellipse Technologies, received cash consideration for his equity interests at the closing of the acquisition in February 2016, and he will receive his share of the contingent consideration payable to the former stockholders of Ellipse Technologies, which is expected to occur in April 2017. As discussed above, Mr. Roschak was also provided with a one-time cash performance bonus targeted at $500,000 for successful achievement of the 2016 NSO business plan. As NSO achieved 2016 net revenue (pro-forma for the period January 1, 2016—December 31, 2016 and calculated in accordance with the bonus award terms) of $64.1 million, Mr. Roschak received a one-time cash performance bonus payout of $636,900.

NuVasive, Inc. Executive Severance Plan. The Company maintains the NuVasive, Inc. Executive Severance Plan (the “ Executive Severance Plan ”), which was designed to cover the CEO and all of the Company’s other NEOs (as well as certain other executives as designated by the Committee). The Executive Severance Plan provides certain severance benefits upon an involuntary termination of employment by the Company that is not for cause (as defined in the Executive Severance Plan). With respect to Mr. Lucier, termination shall be treated as involuntary in the event he terminates his employment within ninety (90) days of being dismissed from the Board. Executive Severance Plan benefits are not provided in the event of termination of employment due to retirement, death or disability. Furthermore, no benefits are provided under the Executive Severance Plan in any situation in which the executive is provided with severance benefits under any change in control agreement in connection with such a transaction.

Pursuant to the Executive Severance Plan, benefits for plan-participating executives other than our CEO consist of customary outplacement assistance and a lump-sum cash payment equal to the sum of (i) the executive’s annual base salary, (ii) a pro rata portion (based on service from the beginning of the year until the date of termination of employment) of his/her annual incentive bonus target for the year in which the termination of employment occurs, and (iii) the after-tax cost of health benefits for a period of one (1) year from the date of termination of employment. The Executive Severance Plan provides benefits specific to the CEO that include customary outplacement assistance and a lump-sum cash severance payment equal to the sum of: (i) two times (2x) the sum of his/her annual base salary and annual target incentive bonus in effect for the calendar year in which the termination of employment occurs; (ii) a pro rata portion (based on service from the beginning of the year until the date of termination of employment) of his/her cash performance award for the year in which termination of employment occurs based on actual performance for the relevant performance period; and (iii) the after-tax cost of health benefits for a period of two (2) years from the date of termination of employment. All severance benefits under the Executive Severance Plan are conditioned upon the executive providing an effective release of claims against the Company.

The specific amounts of compensation payable to each NEO upon the occurrence of the respective, above-described employment termination events—presumed, for illustrative purposes, to have been effective at December 31, 2016—are shown in the tables below under the caption “Executive Compensation—Potential Payments Upon Termination or Change in Control.”

Change in Control Arrangements. On May 13, 2014, the Committee approved and adopted a form of change in control agreement (the “ Change in Control Agreements ”), which was designed to cover the Company’s CEO and the Company’s other NEOs (as well as certain other executives as designated by the Committee).

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The Change in Control Agreements require a “double-trigger” of events before any respective severance benefits are payable; there must be a change in control of the Company (as defined in the Change in Control Agreements) and the executive’s employment must be involuntarily terminated by the Company for reasons other than death, disability or cause (as defined in the Change in Control Agreements) or by the executive for good reason (as defined in the Change in Control Agreements) either in contemplation of the change in control or within a period of twenty-four (24) months following the change in control. The severance benefits under the Change in Control Agreement consists of (i) a lump-sum cash severance payment equal to the sum of (A) two times (2x) the sum of the executive’s annual base salary plus the greater of the executive’s target annual bonus for the year of termination or the highest of the three (3) annual bonuses paid to the executive prior to the termination of employment; (B) a pro rata portion (based on the number of full and partial months in the calendar year prior to the executive’s termination date but not exceeding six (6) months’ worth) of the highest grant date fair value of the long-term cash and/or equity awards granted to the executive over the three (3) calendar year period prior to the calendar year of the termination of employment; (C) the after-tax cost of continued participation in the Company’s benefit plans for a period of twenty-four (24) months; and (D) a pro rata portion (based on the number of full and partial months in the calendar year prior to the executive’s termination date) of the greater of the executive’s target annual bonus for the year of termination or the highest of the three (3) annual bonuses paid to the executive prior to the termination of employment; (ii) full vesting of all Company equity and long-term incentive awards granted to the executive to the extent vesting is based on service with the Company; and (iii) the right to exercise all outstanding stock options or stock appreciation rights until the later of twenty-four (24) months following the executive officer’s separation from service or such later date as may be applicable under the terms of the award agreement, but by no later than the end of the maximum full term of the award; provided, however, that, if any stock option or stock appreciation right is cashed-out in connection with a change in control, the executive officer will receive a lump-sum cash payment equal to the time value of the right to exercise those awards for that period (based on the Black Scholes option pricing model).

The specific amounts of compensation payable to each applicable NEO upon a benefit-triggering termination in connection with a change in control are shown in the tables below under the caption “Executive Compensation—Potential Payments Upon Termination or Change in Control.”

Effect of Tax and Accounting Considerations on Compensation Design. Section 162(m) of the Tax Code (“ Section  162(m) ”), generally limits the deductibility of certain non “performance-based” compensation in excess of $1,000,000 paid in any one (1) year to our NEOs. Qualifying performance-based compensation is not subject to this deduction limit if certain requirements are met. The Committee periodically reviews and considers the deductibility of executive compensation under Section 162(m) as a factor in designing our compensation programs and arrangements. As described above, our annual and long-term incentive awards are determined in part based upon the achievement of certain predetermined financial performance goals of the Company, which is intended to better enable the Company to deduct such amounts pursuant to Section 162(m). In addition, our equity incentive plans contain limits on the number of equity awards that are intended to qualify as “performance-based” compensation under Section 162(m). The rules and regulations promulgated under Section 162(m) are complex and subject to change from time to time, sometimes with retroactive effect. There can be no guarantee, therefore, that amounts potentially subject to the Section 162(m) limitations will be treated by the Internal Revenue Service as “qualified performance-based compensation” under Section 162(m) and/or deductible by the Company.

While we will continue to monitor our compensation programs in light of Section 162(m), the Committee considers it important to retain the flexibility to design compensation programs that are in the best long-term interests of the Company’s stockholders. As a result, the Committee may conclude

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that paying compensation at levels that are not deductible under Section 162(m) is nevertheless in the best interests of the Company’s stockholders. In addition to the foregoing, the Committee also considers the accounting consequences to the Company of different compensation decisions and programs. While factors in the decision making process, neither Section 162(m), nor accounting consequences, compels any particular decision.

Trading Controls and Hedging, Short Sale and Pledging Policies. Executive officers, including our NEOs, are required to pre-clear transactions in Company securities with the Company’s legal department. Generally, trading is permitted only during announced trading periods. Our NEOs may enter into a trading plan under Rule 10b5-1 of the Securities Exchange Act of 1934. These trading plans may be entered into only during an open trading period, must be approved by the Company‘s legal department and must include a waiting period prior to commencement of trading under the plan. The NEO bears the full responsibility if he or she violates the Company policy by permitting shares to be bought or sold without pre-clearance or when trading is restricted.

In addition, the Company prohibits its Directors, officers and other shareowners from (i) purchasing financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) that are designed to hedge or offset any decrease in the market value of equity securities, or (ii) otherwise engage in transactions that are designed to or have the effect of hedging or offsetting any decrease in the market value of equity securities that are granted to a shareowner or Director as compensation (or any designee of such shareowner or Director) or held, directly or indirectly by, a shareowner or Director. Further, the Company prohibits its Directors, officers and other shareowners from pledging Company securities as collateral for margin loans.

A Look Ahead

As mentioned previously, the Committee values feedback from stockholders and has made additional design changes to the 2017 Annual Long-Term Incentive Award program to further align the interests of our NEOs with internal financial metrics that drive our strategy while still incorporating relative TSR through the following mix.

RSUs, PRSUs and performance cash awards granted to NEOs as part of the 2017 Annual Long-Term Incentive Award are designed to be performance-based compensation under the Tax Code and to be fully tax deductible, and they include a 2017 non-GAAP EPS performance goal, which must be satisfied before they will vest.

The Committee believes this aligns with stockholder feedback in that it (i) further aligns the interests of our NEOs with internal financial metrics that drive our strategy (while still incorporating relative TSR as a modifier), (ii) supports an annual expected share usage burn rate of 2.0% or less, and (ii) balances retention with performance-based awards that focus NEOs on metrics that drive long-term stockholder value.

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