MAKO Mako Surgical Corp. (MM)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

 Exchange Act of 1934 (Amendment No.   )

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MAKO Surgical Corp.

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2555 Davie Road

Ft. Lauderdale, Florida 33317

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Fort Lauderdale, Florida
April 28, 2011

This Notice of Annual Meeting of Stockholders, attached proxy statement and accompanying proxy card are being distributed on or about April 28, 2011.

PROXY STATEMENT
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_________________

PROXY STATEMENT
FOR
2011 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 16, 2011

_______ ______ ______________

QUESTIONS AND ANSWERS ABOUT
THE PROXY MATERIALS AND THE ANNUAL MEETING

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial ownership of our common stock as of April 18, 2011 by: (i) each director and nominee; (ii) each of the executive officers named in the 2010, 2009, and 2008 Summary Compensation Table set forth below under “Executive Compensation,” referred to as a named executive officer; (iii) all of the directors, nominees, and executive officers as a group; and (iv) each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock. Unless otherwise indicated, the persons or entities identified in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.

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Information with respect to beneficial ownership has been furnished by each director, executive officer or beneficial owner of more than 5% of our common stock. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules require inclusion of shares of common stock issuable pursuant to the exercise of stock options or warrants that are either immediately exercisable or exercisable within 60 days after April 18, 2011, which is June 17, 2011. These shares are deemed to be outstanding and beneficially owned by the person holding the options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Except as otherwise noted below, the address for each person or entity listed in the table is c/o MAKO Surgical Corp., 2555 Davie Road, Fort Lauderdale, FL 33317.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that our directors and officers, and persons who beneficially own more than 10% of our common stock, file with the SEC initial reports of ownership and reports of changes in ownership of our common stock.  Officers, directors and greater than 10% stockholders are required by SEC regulations to furnish our company with copies of all Section 16(a) reports they file. To our knowledge, based solely on a review of the copies of such reports furnished to the company and written representations of the reporting persons, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% stockholders were complied with during 2010.

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PROPOSAL ONE - ELECTION OF DIRECTORS

General Information

Our Board of Directors currently has nine authorized seats and is divided into three classes, with three Class I directors, three Class II directors, and three Class III directors.  The term of our three Class I directors will expire at the 2011 annual meeting and three Class I nominees are to be elected at the annual meeting to serve a three-year term expiring at the 2014 annual meeting of stockholders and until a successor has been elected and qualified. S. Morry Blumenfeld, Ph.D., John G. Freund, M.D., and William D. Pruitt have been nominated by our Board of Directors to serve as Class I directors.

Unless our stockholders specify otherwise, the shares represented by the accompanying proxy will be voted for the election of the nominees recommended by the Board of Directors. Our Board of Directors has no reason to believe that the listed nominees will be unable or unwilling to serve as directors if elected. However, if any nominee should be unable to serve or will not serve, then the shares represented by the accompanying proxy will be voted for another nominee, if any, selected by our Board of Directors.  

Each director will be elected by a plurality of the votes cast at the annual meeting (assuming a quorum is present). Consequently, any shares not voted at the annual meeting, whether due to abstentions, broker non-votes or otherwise, will have no impact on the election of directors.

The names of the nominees and directors, their ages as of April 18, 2011 and certain other information about them are set forth below.

Our Board of Directors unanimously recommends that the nominees identified below be elected as directors and urges you to vote “FOR” them. Shares of common stock represented by executed, but unmarked, proxies will be voted “FOR” these nominees.

Nominees and Directors Continuing in Office

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The principal occupations and positions for at least the past five years of our directors and director nominees are described below. There are no family relationships among any of our directors or executive officers.

Class I Director Nominees for Election for a Three-Year Term Expiring at the 2014 Annual Meeting of Stockholders

S. Morry Blumenfeld, Ph.D. has served as one of our directors since July 2005. In 2003, Dr. Blumenfeld founded Meditech Advisors LLC and Meditech Advisors Management LLC, a member of Ziegler MediTech Partners, LLC, the sole general partner of Ziegler Meditech Equity Partners, LP, a private equity fund specializing in investments in healthcare and medical device companies. In April 2002, Dr. Blumenfeld retired as Managing Director of GE Medical Systems in Israel after more than thirty-four years with the company, where he helped initiate both GE’s CT and MR business lines. Currently, he serves on the Board of Directors of a number of medical device and technology companies, including Oridion Systems Ltd., where he is a member of the compensation committee, Itamar Medical, Aposense LTD, and several private companies. Dr. Blumenfeld holds a B.A.Sc in engineering physics and a Ph.D. in molecular physics from the University of Toronto.  Dr. Blumenfeld’s leadership experience and international business, corporate transactions, and corporate governance expertise garnered from his business experience, as well as his familiarity with our industry, led to the conclusion that he should serve as a director of our company.

John G. Freund, M.D. has served as one of our directors since October 2008.  Since 1997, Dr. Freund has been a Managing Director of Skyline Ventures, a venture capital firm.  From September 1995 to September 1997, Dr. Freund was a Managing Director in the Alternative Assets Group at Chancellor Capital Management, an investment firm.  In 1995, Dr. Freund co-founded Intuitive Surgical, Inc., a medical device company, and served on Intuitive's board of directors until March 2000. From June 1988 to December 1994, Dr. Freund held various positions at Acuson Corporation, a medical device company, including Executive Vice President. From 1982 to 1988, Dr. Freund was at Morgan Stanley & Co., Inc., an investment banking firm, where he was the co-founder of the Healthcare Group in the Corporate Finance Department and later was the original healthcare partner at Morgan Stanley Venture Partners, a venture capital firm affiliated with Morgan Stanley.  Dr. Freund served on the board of directors of Hansen Medical, Inc., a medical device company, from November 2002 to March 2010 and is currently a director and member of the audit committee and the nominating and corporate governance committee of XenoPort Inc., a biotech company, a director and member of the nominating and corporate governance committee of MAP Pharmaceuticals, Inc., a biotech company, a director and member of the contracts and governance committee and the nominating committee of the SmallCap World Fund, and a director and member of the contracts committee and the nominating and governance committee of each of The Growth Fund of America, Inc. and Fundamental Investors, Inc., each of which are U.S.-registered investment funds.  Dr. Freund also is a director of a number of private companies. Dr. Freund received an M.D. from Harvard Medical School in 1980 and an M.B.A. from Harvard Business School in 1982, where he was a Baker Scholar.  Skyline Ventures was one of the investors in our October 2008 private placement.  In connection with the private placement, we agreed that Skyline Ventures was entitled to appoint one representative to our Board of Directors so long as its affiliated funds hold at least 25% of the shares of our common stock that they purchased in the private placement.  Dr. Freund was appointed to our Board pursuant to that agreement. We believe that Dr. Freund is qualified to serve as a director of our company due to his leadership experience in the life sciences industry, his experience as a director of several other medical device and biotech companies, his medical background, and his resulting skills in the areas of business development, corporate transactions, corporate communications, and enterprise risk management.

William D. Pruitt has served as one of our directors since June 2008.  Mr. Pruitt is president of Pruitt Enterprises, LP.  Mr. Pruitt is currently a director, chairman of the audit committee, and a member of the compensation committee of Swisher Hygiene, Inc., a provider of hygiene products. Mr. Pruitt served as chairman of the audit committee and a member of the compensation committee of The PBSJ Corporation, an international professional services firm, until its sale in 2010 and chairman of the audit committee of Kos Pharmaceuticals, Inc., a fully integrated specialty pharmaceutical company, until its sale in 2006. He also was chairman of the audit committee for Adjoined Consulting, Inc., a full-service management consulting firm, until it was merged into Kanbay International, a global consulting firm, in February 2006. Mr. Pruitt currently serves as a director and chairman of the audit committee of Coral Gables Trust Company and a director of Auxis, Inc. and Greensmith Energy Management Systems.  From 2002 to 2004, Mr. Pruitt provided market consultancy services to Ernst & Young LLP, our independent registered public accounting firm. From 1980 to 1999, Mr. Pruitt served as the managing partner for the Florida, Caribbean and Venezuela operations of the independent auditing firm of Arthur Andersen LLP.  Mr. Pruitt holds a Bachelor of Business

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Administration from the University of Miami and is a Certified Public Accountant (inactive). Mr. Pruitt’s experience in financial matters as a certified public accountant and as a former managing partner of an accounting firm and the skills he acquired through these positions in the areas of financial matters, public accounting, corporate transactions and enterprise risk management, as well as his background as a director and audit committee member of publicly-traded companies, led to the conclusion that he should serve as a director of our company.

Class II Directors with a Term Expiring at the 2012 Annual Meeting of Stockholders

Charles W. Federico , our independent Lead Director, has served as one of our directors since June 2007. From 2001 to April 2006, Mr. Federico served as President and Chief Executive Officer of Orthofix International N.V., a global diversified medical device company, and, from 1996 to 2001, President of Orthofix Inc. From 1985 to 1996, Mr. Federico was President of Smith & Nephew Endoscopy (formerly Dyonics, Inc.). From 1981 to 1985, Mr. Federico served as Vice President of Dyonics. Previously, he held management and marketing positions with General Foods Corporation, Puritan Bennett Corporation and LSE Corporation. Mr. Federico is a Trustee of the Orthopedic Research and Education Foundation and was a corporate governance panel member at the 2009 Florida Directors Institute.  Mr. Federico is a director of Orthofix International N.V., chairman of the board and a member of the nominating and corporate governance and compensation committees of SRI/Surgical Express, Inc., and a director, chairman of the compensation committee, and member of the audit committee of BioMimetic Therapeutics, Inc. Mr. Federico previously served as the lead director and a member of the compensation and audit committees of Power Medical Interventions, Inc. and as a director of Alveolus, Inc. Mr. Federico holds a B.S. in marketing from Fordham University.  Mr. Federico’s leadership experience in the public and private sectors, his substantial career as an executive of a publicly traded medical device company, his experience serving on the board of directors for both public and private companies, and his resulting skills in the areas of corporate governance, corporate transactions, and enterprise risk management, as well his familiarity with our industry, led to the conclusion that he should serve as a director of our company. 

Maurice R. Ferré, M.D. our founding President, Chief Executive Officer and Chairman of our Board of Directors, has been with us since our inception in November 2004. In May 2004, Dr. Ferré became Chief Executive Officer of Z-KAT, Inc., a surgical navigation medical device company that incorporated MAKO Surgical Corp. Dr. Ferré served as Vice President of Strategic Development at GE Navigation, a division of GE Healthcare, from April 2002 until April 2004. In 1993, Dr. Ferré founded Visualization Technology, Inc., a medical device company for image-guided surgery, and served as its Chief Executive Officer until the company was acquired by GE Healthcare in April 2002. Dr. Ferré holds a B.A. in biology from Bennington College and a Masters in Public Health and an M.D. from Boston University.  Dr. Ferré’s experience as an executive of our company and other medical device companies and his resulting skills in the areas of corporate transactions, operations and manufacturing, business development, brand marketing, corporate communications and enterprise risk management, along with his familiarity with our business and industry and role as our President and Chief Executive Officer, led to the conclusion that he should serve as a director of our company and Chairman of the Board.

Frederic H. Moll, M.D. has served as one of our directors since August 2007. Dr. Moll currently serves as executive chairman of the board of directors of Hansen Medical, Inc., a medical robotics company.  Dr. Moll co-founded Hansen Medical, Inc. in September 2002 and served as its Chief Executive Officer through June 2010.  In November 1995, Dr. Moll co-founded Intuitive Surgical, Inc., a medical device company, and served as its first Chief Executive Officer and later, its Vice President and Medical Director until September 2003. In 1989, Dr. Moll co-founded Origin Medsystems, Inc., a medical device company, which later became an operating company within Guidant Corporation, a medical device company, following its acquisition by Eli Lilly in 1992. Dr. Moll served as Medical Director of Guidant’s surgical device division until November 1995. Dr. Moll holds a B.A. from the University of California, Berkeley, an M.S. from Stanford University and an M.D. from the University of Washington School of Medicine.  Dr. Moll’s leadership experience in the medical device industry, his long career as an executive of a publicly-traded company, his medical background, and his resulting skills in the areas of business development, corporate transactions, corporate communications and enterprise risk management led to the conclusion that he should serve as a director of our company.

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Class III Directors with a Term Expiring at the 2013 Annual Meeting of Stockholders

Christopher C. Dewey has served as one of our directors since our inception in November 2004. From January 2007 to April 2011, Mr. Dewey served as Vice Chairman of the board of directors of National Holdings Corporation, a financial services organization operating through its subsidiary, National Securities. From December 2006 to December 2008, Mr. Dewey served as acting Chief Executive Officer and director of Z-KAT, Inc., a surgical navigation medical device company that incorporated MAKO Surgical Corp. Mr. Dewey has over twenty-five years of experience in finance, most recently as Executive Vice President of Jefferies & Company, Inc., the principal operating subsidiary of Jeffries Group, Inc., a securities and investment banking firm, from 1994 to December 2006. Mr. Dewey co-founded several companies, including Robotic Ventures LLC, Bonds Direct Securities LLC and Cannon Group Inc., a motion picture company that went public in 1972. Mr. Dewey currently serves on the board of Orthosensor, Inc., a medical device company. Mr. Dewey holds an M.B.A. from The Wharton School of the University of Pennsylvania. Mr. Dewey’s long career in the financial services industry and as the chief executive officer and a director of our predecessor company, and his resulting expertise in corporate transactions and financial markets, along with his familiarity with our business and industry, led to the conclusion that he should serve as a director of our company.

Richard R. Pettingill has served as one of our directors since August 2010.  Mr. Pettingill served as the President and Chief Executive Officer of Allina Hospitals and Clinics, Minnesota’s largest healthcare organization, from 2002 until his retirement in 2009.  While in this role, he also served on the board of directors of the Minnesota Hospital Association and the Minnesota Business Partnership. Prior to joining Allina Hospitals and Clinics, Mr. Pettingill served as Executive Vice President and Chief Operating Officer of Kaiser Foundation Health Plans and Hospitals from 1996 to 2002. From 1991 to 1995, he served as President and Chief Executive Officer of Camino Healthcare, a community based integrated delivery system.  Mr. Pettingill is a director and member of the compensation and quality, compliance and ethics committees of Tenet Healthcare Corporation.  Mr. Pettingill received a bachelor’s degree from San Diego State University and a master’s degree in health care administration from San Jose State University. He is currently a 2010 Fellow in the Advanced Leadership Initiative program at Harvard University.  A third-party search firm retained by the corporate governance and nominating committee to assist in identifying and assessing potential director candidates recommended Mr. Pettingill as a director.  Mr. Petttingill’s leadership experience in the healthcare industry, including his experience as an executive and board member of several large healthcare organizations, and his resulting familiarity with our industry and skills in the areas of business development, corporate transactions, and corporate governance, led to the conclusion that he should serve as a director of our company.

John J. Savarese, M.D. has served as one of our directors since October 2008.  Since June 2003, Dr. Savarese has been a Managing Director at Montreux Equity Partners, a healthcare investment firm.  Prior to joining Montreux Equity Partners, Dr. Savarese served as Director of Business Development and Marketing at NeurogesX and worked in the Life Sciences Investment Banking division of Credit Suisse First Boston.  Currently, Dr. Savarese serves on the board of directors of several private medical device and pharmaceutical companies. Dr. Savarese’s clinical experience in orthopedic and general surgery was gained at the Cornell Medical College/Hospital for Special Surgery.  Dr. Savarese holds an M.B.A. from Stanford University and an M.D. from Duke University Medical School.  Montreux Equity Partners was one of the investors in our October 2008 private placement.  In connection with the private placement, we agreed that Montreux Equity Partners was entitled to appoint one representative to our Board of Directors so long as its affiliated funds hold at least 25% of the shares of our common stock that they purchased in the private placement.  Dr. Savarese was appointed to our Board pursuant to that agreement.  We believe that Dr. Savarese is qualified to serve as a director of our company due to his historical experience as an executive and an investor in the healthcare industry, his governance experience as a director of several other medical device and healthcare companies, and his clinical background in orthopedic surgery.

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Independent Directors

Our Board of Directors has determined that eight of the nine directors currently serving on our Board are independent directors under the independence standards of The NASDAQ Global Market; specifically, Messrs. Dewey, Federico, Pettingill and Pruitt and Drs. Blumenfeld, Freund, Moll, and Savarese are independent. 

In making determinations of independence with respect to Drs. Blumenfeld, Freund, and Savarese, each of whom is affiliated with a principal stockholder of our company, our Board considered the relationship between the director and the respective stockholder and determined, in each case, that the relationship was not relevant to the director’s independence.

In accordance with the requirements of NASDAQ, our independent directors meet in regularly convened executive sessions at least twice per year, in conjunction with regularly scheduled Board meetings. 

BOARD LEADERSHIP STRUCTURE

Our Board of Directors does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board as our Board of Directors believes it is in the best interest of the company to make that determination based on the current position and direction of the company and the membership of the Board of Directors.  Dr. Ferré, our company’s Chief Executive Officer, currently serves as Chairman of the Board.  Our Board of Directors has determined that this combined role is in the best interests of the company’s stockholders at this time because Dr. Ferré is the person best qualified to serve as Chairman of the Board given his history with our company and his skills and experience within the industry that we operate.  Further, our Board of Directors believes that this leadership structure is appropriate at this time as it establishes a single leader with one vision setting the tone and direction for our company.  Our Board of Directors believes that there is no single best organizational model that would be most effective in all circumstances and therefore retains the authority to modify this structure to best address our company’s unique circumstances as and when appropriate. 

In March 2009, our Board of Directors established the position of independent Lead Director to supplement the combined Chief Executive Officer and Chairman of the Board position.  Charles W. Federico currently serves as our Lead Director.  The Lead Director works closely with the Chairman of the Board to assure that our Board is able to more effectively and pro-actively execute its fundamental duties on an ongoing basis and to enhance our Board’s ability to oversee and monitor the operations of our company. The primary responsibilities of the Lead Director include the following, among other things:

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THE BOARD’S ROLE IN RISK OVERSIGHT

Our Board of Directors is responsible for overseeing the operational and strategic risk management processes that have been designed and implemented by our company’s senior management. Our Board of Directors has delegated to its audit committee primary responsibility for reviewing the company’s policies with respect to risk assessment and risk management.  Each committee of our Board of Directors also oversees the management of company risks that fall within the committee’s areas of responsibility. For example, the audit committee addresses significant financial risk exposures facing the company and the steps management has taken to monitor, control and report such exposures; the compensation committee addresses significant risk exposures facing the company with respect to compensation; and the corporate governance and nominating committee oversees corporate governance risks.  Each committee reports to the full Board of Directors on a regular basis, including, as appropriate, an update on the committee’s risk oversight activities.  Our Board of Director’s role in our company’s risk oversight has not affected our leadership structure.

Our company has created a Risk Management Committee comprised of senior management from each operating division of the company that is responsible for identifying, assessing, and developing a mitigation strategy for significant enterprise risks that could impact our company’s ability to meet our objectives and execute our strategic plan.  Our Risk Management Committee periodically meets to identify, assess, and prioritize internal and external significant risks and to develop processes for responding to, mitigating, and monitoring such risks.  The Risk Management Committee provides a summary of its activities and findings directly to the audit committee and, as appropriate, to the other committees and the full Board of Directors. 

Meetings and Attendance

During 2010, our Board of Directors held eleven meetings. Each of our incumbent directors other than Richard R. Pettingill attended at least 75% of the aggregate number of meetings of the Board and the committees on which the director served, which were held during such director’s term of office. Mr. Pettingill, who joined our Board in August 2010, was unable to attend three Board meetings due to prior commitments scheduled prior to his election to our Board.  None of the members of the standing committees of our Board of Directors, described in detail below, was an officer or employee of our company.

We have no policy requiring our directors to attend our annual stockholders meetings; however, our corporate governance guidelines provide that directors should make every effort to attend all annual and special meetings of stockholders, as well as meetings of our Board of Directors and meetings of the Board committees of which they are members.  Seven of our directors attended our 2010 annual stockholders meeting. 

Board Committees and Meetings

Our Board of Directors has a standing audit committee, compensation committee, and corporate governance and nominating committee.  The Board has adopted, and may amend from time to time, a written charter for each of the committees. We maintain a website at www . makosurgical . com and make available on that website, free of charge, copies of each of the committee charters. We are not including the information contained on or available through our website as a part of, or incorporating such information by reference into, this proxy statement.

The following table reflects the current membership of each standing committee of our Board of Directors and the number of meetings held during 2010:

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As part of its standard practices, our Board of Directors will reconstitute the membership of each committee at our Board’s annual meeting immediately following the 2011 annual stockholders meeting.  We provide below information on each committee, including the functions. 

Audit Committee

The functions of our audit committee include, among other things:

Both our independent registered public accounting firm and management periodically meet privately with our audit committee.

Our Board of Directors has determined that each member of our audit committee is an independent director. Our Board of Directors has determined that Mr. Pruitt, the chair of the audit committee, qualifies as an audit committee financial expert within the meaning of SEC regulations and is financially sophisticated within the meaning of the NASDAQ listing standards. In making this determination, our Board considered the nature and scope of experience that Mr. Pruitt has previously had with reporting companies.

Compensation Committee

The functions of the compensation committee include, among other things:

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In making decisions concerning executive compensation, the compensation committee typically considers, but is not required to accept, the recommendations of Dr. Ferré, our President and Chief Executive Officer, regarding the performance and proposed base salary, bonus target and equity awards for our named executive officers, including Dr. Ferré. The compensation committee may also request the assistance of Fritz L. LaPorte, our Chief Financial Officer, and our human resources department in evaluating the financial, accounting and tax implications of various compensation awards paid to the named executive officers. Neither Mr. LaPorte nor our human resources employees, however, recommend or determine the amounts or types of compensation paid to the named executive officers. Dr. Ferré and certain of our other executive officers may attend compensation committee meetings, as requested by the chairman of the compensation committee and depending on the issues to be discussed by the compensation committee, but none of these executive officers, including Dr. Ferré, attends any portion of the compensation committee meetings during which his compensation is discussed and approved.

In late 2009, the compensation committee engaged Radford Surveys and Consulting, or Radford, an independent executive compensation consultant, to provide consulting services to the committee with respect to 2010 executive compensation. Radford only provides consulting services to the committee, reports directly to the committee, and only provides services that are requested by the committee. 

Our Board of Directors has determined that each member of our compensation committee is an independent director. Each member of our compensation committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, and an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986.

Additional information regarding the compensation committee and our policies and procedures regarding executive compensation, including the role of executive officers and compensation consultants in recommending executive compensation, is provided below under “Compensation Discussion and Analysis.”

Corporate Governance and Nominating Committee

The functions of the corporate governance and nominating committee include, among other things:

Our Board of Directors has determined that each member of our corporate governance and nominating committee is an independent director.

Nomination Process

Under our corporate governance guidelines, the corporate governance and nominating committee is responsible for identifying and recommending to our Board of Directors qualified candidates for Board membership. In considering potential candidates for Board membership, the corporate governance and nominating committee considers the entirety of each candidate’s credentials. Qualifications for consideration as a director nominee may vary according to the particular areas of expertise being sought as a complement to the existing composition of the Board. However, at a minimum, candidates for the Board must possess:

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In addition to the aforementioned minimum qualifications, the corporate governance and nominating committee may take into account other factors when considering whether to nominate a particular person.  These factors include:

A director candidate should have expertise, skills, knowledge and experience that, when taken together with that of other Board members, will lead to a Board of Directors that is effective, collegial and responsive to the needs of our company and our stockholders.

While the corporate governance and nominating committee does not have a formal policy relating specifically to the consideration of diversity in identifying director nominees, the committee does, as noted above, consider the importance of a diversified Board membership, including diversity of viewpoint, background, industry knowledge and perspective, as part of its overall evaluation of candidates for director nominees.

The corporate governance and nominating committee may seek to identify director candidates based on input provided by a number of sources, including (i) committee members, (ii) our other directors, (iii) our stockholders, (iv) our Chief Executive Officer and (v) third parties. The corporate governance and nominating committee also has the authority to consult with or retain advisors or search firms to assist in the identification of qualified director candidates.  In 2010, the corporate governance and nominating committee retained a search firm to assist it in identifying and assessing potential director candidates meeting the criteria established by the committee, interviewing and screening such candidates, and acting as an intermediary with such candidates.

The corporate governance and nominating committee gives appropriate consideration to candidates for Board membership recommended for nomination by stockholders and evaluates such candidates in the same manner as other candidates identified to the committee. Stockholders who wish to nominate director candidates for election by stockholders at the annual meeting may do so in the manner disclosed in the Questions and Answers section of this proxy statement in accordance with the provisions of our bylaws. Members of the corporate governance and nominating committee will discuss and evaluate possible candidates in detail prior to recommending them to the Board.

The corporate governance and nominating committee is also responsible for initially assessing whether a candidate would be an independent director.  Our Board of Directors, taking into consideration the recommendations of the corporate governance and nominating committee, is responsible for selecting the nominees for election to the Board by the stockholders and for appointing directors to the Board to fill vacancies and newly created directorships, with primary emphasis on the criteria set forth above.  The Board, taking into consideration the assessment of the corporate governance and nominating committee, also determines whether a nominee or appointee would be an independent director.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of our compensation committee is or has been an officer or employee of the company. None of our executive officers served on the board of directors or compensation committee of any other entity that has or has had an executive officer who served as a member of our Board of Directors or compensation committee during 2010. Each of Dr. Blumenfeld and Mr. Dewey had relationships with the company during 2010 that were disclosed as related person transactions.  See “Certain Relationships and Related Person Transactions – Sensor Agreement” and “Certain Relationships and Related Person Transactions – Z-KAT Asset Purchase” below.

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Corporate Governance Guidelines and Code of BUSINESS Conduct and Ethics

Our Board of Directors has adopted a Code of Business Conduct and Ethics applicable to all of our directors, officers, and employees, including, without limitation, our principal executive officer, principal financial officer, controller, and persons performing similar functions.  In addition, our Board of Directors also has adopted Corporate Governance Guidelines to assist our Board in exercising its duties.  The Code of Business Conduct and Ethics and our Corporate Governance Guidelines are available, free of charge, on the Investor Relations section our website at www . makosurgical . com .  We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any waivers from or amendments to any provision of the Code of Business Conduct and Ethics by disclosing such information on the same website.  We are not including the information contained on or available through our website as a part of, or incorporating such information by reference into, this proxy statement.

Communications with the Board of Directors

You can contact our Board of Directors to provide comments, to report concerns, or to ask a question, at the following address: Corporate Secretary, MAKO Surgical Corp., 2555 Davie Road, Fort Lauderdale, Florida, 33317. You may submit your concern anonymously or confidentially by postal mail. You may also indicate whether you are a stockholder, customer, supplier or other interested party. Communications are distributed to the Board of Directors, or to any individual director or directors as appropriate, depending on the facts and circumstances outlined in the communication. In that regard, our Board of Directors has requested that certain items that are unrelated to the duties and responsibilities of the Board should be excluded, such as:

In addition, material that is unduly hostile, threatening, illegal or similarly unsuitable will be excluded, with the provision that any communication that is filtered out must be made available to any non-management director upon request.

You may also communicate online with our Board of Directors as a group by visiting the Investor Relations section of our website at www.makosurgical.com .

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

Policies and Procedures for Related Person Transactions

We have adopted a Related Person Transactions Policy pursuant to which our executive officers, directors and principal stockholders, including their immediate family members, are not permitted to enter into a related person transaction with us without the consent of our audit committee, other independent committee of our Board of Directors, or the full Board. Any request for us to enter into a transaction with an executive officer, director, principal stockholder or any of such person’s immediate family members in which the amount involved exceeds $120,000 must be presented to our audit committee for review, consideration and approval. All of our directors, executive officers and employees are required to report to our audit committee any such related person transaction. In approving or rejecting the proposed transaction, our audit committee shall take into account, among other factors it deems appropriate, whether the proposed related person transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the person’s interest in the transaction and, if applicable, the impact on a director’s independence. After consideration of these and other factors, the audit committee may approve or reject the transaction. Under the policy, if we should discover related person transactions that have not been approved, the audit committee will be notified and will determine the appropriate action, including ratification, rescission or amendment of the transaction.

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SenSOR AGREEMENT

In August 2009, we entered into an agreement with a third-party sensor company associated with the potential future development of intellectual property and technology related to sensing devices in orthopedics. The agreement required an initial payment of $50,000 and required future payments in the event that we decided to enter into a licensing and supply agreement with the third-party sensor company following the end of the research and development period.  In August 2010, we exercised our option to enter into a non-exclusive license and supply agreement for an upfront payment of $250,000. In October 2010, we exercised our option to enter into an exclusive license and supply agreement which required an upfront payment of $500,000 and a future payment of $250,000 which is anticipated to be paid in 2011.

S. Morry Blumenfeld and Christopher C. Dewey, members of our Board of Directors, hold approximately five percent (5%) and ten percent (10%), respectively, of the issued and outstanding stock of the third-party sensor company. The members of the audit committee of our Board of Directors having no financial interest in the agreement approved the terms of the agreement. 

Z-KAT ASSET PURCHASE

In February 2010, we completed the acquisition of substantially all of the intellectual property assets of Z-KAT, Inc., or Z-KAT.  The terms of the asset purchase agreement between us and Z-KAT terminated our prior licenses with Z-KAT, including Z-KAT’s nonexclusive sublicense to a portion of our intellectual property portfolio, and transferred to us ownership rights to certain intellectual property assets for core technologies in computer assisted surgery, or CAS, haptics and robotics, including U.S. and foreign patents and patent applications, proprietary software and documentation, trade secrets and trademarks owned by Z-KAT, and certain contractual and other rights to patents, patent applications and other intellectual property licensed to Z-KAT under licenses.  We paid the purchase price in full at the time of closing by issuing 230,458 shares of our common stock to Z-KAT in a private placement.  In connection with the acquisition, we also entered into a new sublicense agreement with Z-KAT pertaining to certain intellectual property for technologies in CAS licensed by Z-KAT.  This license agreement was terminated by MAKO in December 2010.  Certain of our rights under the asset purchase agreement remain subject to any prior license granted by Z-KAT, including the license from Z-KAT to Biomet Manufacturing Corp. 

Z-KAT formed MAKO Surgical Corp. in November 2004 and Christopher C. Dewey, a member of our Board of Directors, Maurice R. Ferré, M.D., our President and Chief Executive Officer and Chairman of our Board of Directors, and Rony Abovitz, our Chief Visionary Officer and Co-Founder, collectively hold more than ten percent (10%) of the outstanding stock of Z-KAT.  The members of the audit committee of our Board of Directors having no financial interest in the asset purchase agreement and license agreement approved the terms of the asset purchase agreement and license agreement. 

Recent Sale of Securities

In November 2010, we completed a public offering of our common stock, issuing 6,325,000 shares at a price per share of $9.44, resulting in net proceeds, after expenses, of approximately $59.3 million. Set forth below is information regarding two of the participating investors who were existing stockholders deemed to be affiliates of our company by virtue of their representation on the Board.  

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Each of these existing stockholders participated in the public offering on the same terms as the other purchasers.  The members of the audit committee of our Board of Directors having no financial interest in the public offering approved the terms of the public offering and the participation of these existing stockholders. 

We do not believe that there has been any other transaction or series of similar transactions during 2010, or is any currently proposed transaction or series of similar transactions, to which we were or are to be a party in which the amount involved exceeds $120,000 and in which any director, executive officer or principal stockholder, or members of any such person’s immediate family, had or will have a direct or indirect material interest, other than compensation described in “Executive Compensation.” We intend that any such future transactions will be approved by our audit committee and will be on terms no less favorable to our company than could be obtained from unaffiliated third parties.

2010 DIRECTOR COMPENSATION

The following table sets forth information with respect to the compensation of all our non-employee directors during 2010.

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2010 Director Option Awards Table

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We reimburse all of our directors for their reasonable out-of-pocket travel expenses associated with attending Board or committee meetings in person.  Dr. Ferré, our only employee director, does not receive any compensation for his services as a director.   

Annual Cash Compensation

Each non-employee member of our Board received an annual retainer of $24,000, paid quarterly in arrears, a fee of $1,000 for each Board meeting or committee meeting attended in person during 2010, and $500 for each telephonic or video Board or committee meeting attended during 2010.  Our lead director also received an additional annual retainer of $16,000, paid quarterly in arrears. 

Equity Compensation

On a case-by-case basis, non-employee directors may be entitled to receive options, in an amount determined by our Board of Directors or its compensation committee in its respective discretion, to purchase shares of common stock upon initial election or appointment to the Board of Directors. In determining the number of options granted to a director upon initial election or appointment, the compensation committee uses its judgment and, consistent with our compensation objectives, maintains the flexibility necessary to recruit qualified and experienced directors. In connection with Mr. Pettingill’s election as a director on August 23, 2010, the compensation committee approved a grant of options to purchase 3,300 shares of our company’s common stock, with an exercise price per share of $10.27, which was the closing price per share of our common stock on the grant date, and vesting ratably quarterly over one year.

Furthermore, each non-employee director is entitled to an annual grant of options to purchase 3,300 shares of our company’s common stock, and, with respect to our lead director only, an additional annual grant of options to purchase 3,300 shares of our company’s common stock. In each case, the exercise price is equal to the fair market value of our common stock on the day of grant and the option grant vests ratably quarterly over one year.  Each annual anniversary grant and lead director annual grant is granted in connection with the annual meeting of our stockholders. Until February 2008, all outstanding options granted to our non-employee directors were issued under our 2004 Stock Incentive Plan. Thereafter, all options granted to our non-employee directors are issued under our 2008 Omnibus Incentive Plan.

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EXECUTIVE OFFICERS

Our executive officers, their respective ages as of April 18, 2011, and their positions with our company are as follows:

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The principal occupations and positions for at least the past five years of the executive officers named above are as follows:

Maurice R. Ferré, M.D. Please see “Election of Directors” above.

Fritz L. LaPorte , our Senior Vice President of Finance and Administration, Chief Financial Officer and Treasurer, has been with us since our inception in November 2004. From 2001 to November 2004, Mr. LaPorte served as Chief Financial Officer of Z-KAT, Inc. From 1997 to 2000, Mr. LaPorte served as the Director of Finance for Holy Cross Hospital, Inc., a 580-bed acute care facility in Fort Lauderdale, Florida. From 1993 to 1997, Mr. LaPorte served as a Senior Auditor in the Assurance Healthcare Group of Ernst & Young LLP, our independent registered public accounting firm. Mr. LaPorte holds a B.B.A. in accounting from Florida Atlantic University and is a Certified Public Accountant.

Ivan Delevic , our Senior Vice President of Strategic Marketing and Business Development, has been with us since April 2009. Beginning in 2007 through April 2009, Mr. Delevic was a business development consultant to medical device companies through ATID Group Inc. and IDAT LLC, companies he founded in 2007.  From 1996 to 2007, Mr. Delevic held various positions with General Electric’s healthcare division, both domestically and internationally, including as General Manager for Molecular Imaging EMEA, Global Marketing and Sales Manager for Surgical Navigation, Business Development Manager with GE Healthcare’s Global Business Development, Six Sigma Leader & Black Belt for Global Functional Imaging, and Sales Manager for Southeastern Europe.  From 1992 to 1996, Mr. Delevic worked for Johnson & Johnson, Inc. as a Business Manager in Budapest, Hungary.  Mr. Delevic holds a M.B.A. from the Technical University of Budapest through a joint program with Herriot-Watt University and a M.S. in Electrical Engineering from the Technical University of Budapest.       

Menashe R. Frank , our Senior Vice President, General Counsel and Secretary, has been with us since our inception in November 2004. From July 2004 to November 2004, Mr. Frank was a legal consultant to Z-KAT, Inc. Mr. Frank specialized in corporate transactions and governance as an attorney with the law firm of Hogan & Hartson (now Hogan Lovells) from 2001 to June 2004, and the law firm of Baker & McKenzie from 2000 to 2001. Mr. Frank served as Chief Legal Officer for Enticent.com, Inc. from 1998 to 2000 and was an associate in the business finance and restructuring department of the law firm of Weil, Gotshal & Manges LLP from 1996 to 1998. Mr. Frank holds a B.A. in political science from American University and a J.D. from the University of Miami School of Law.

James E. Keller , our Senior Vice President of Regulatory Affairs and Quality Assurance, has been with us since March 2010.  From 2008 to 2009, Mr. Keller served as VP of Regulatory Affairs & Pharmacovigilance for Medicis Pharmaceutical Corp., a mid-cap diversified drug and Class III medical device company for the aesthetic and dermatology markets, where his responsibilities included the development of a regulatory strategy for domestic and international registration of new and revised products, adverse event investigation, reporting, and trending. From 2007 to 2008, Mr. Keller served as Vice President of Regulatory Affairs & Quality Assurance for F. Dohmen Company, a small healthcare services company, where his responsibilities included providing regulatory affairs and quality and

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compliance services to early-stage biotechnology and medical device firms and developing and implementing a corporate quality management system. From 2005 to 2007, Mr. Keller served as the Vice President of Clinical Affairs for the Spinal & Biologics division of Medtronic, a large medical device company, where his responsibilities included reengineering the regulatory and clinical operations organization and creating regulatory and clinical strategies for new biologic and drug/device combination products, pharmaceuticals, and Class III implantable medical devices.  From 2001 to 2005, Mr. Keller served as Vice President of Regulatory Affairs & Quality Assurance for Light Sciences Corporation, an early-stage biotechnology development company and from 1996 to 2000, Mr. Keller served as Vice President of Regulatory Affairs for Mallinckrodt, a pharmaceutical and medical device company.  Beginning in 1987, Mr. Keller held various positions with E.I. Du Pont de Nemours. Mr. Keller holds a B.S. in Microbiology from Clemson University and an M.B.A. from John M. Olin School of Business, Washington University.

Richard Leparmentier , our Senior Vice President of Engineering, has been with us since March 2010.  From 2007 to 2010, Mr. Leparmentier served as U.S. VP of Design and Engineering for ASML, a Dutch lithography equipment company, where he managed a team of approximately 320 engineers across the U.S. and the Netherlands. From 1995 to 2006, Mr. Leparmentier held various positions with GE Healthcare, including Vice President of OEC-Surgery Engineering, a leader in surgical x-ray and navigation equipment, where he managed approximately 270 engineers and his responsibilities included new product development through both internal development and business development, Engineering Manager for radiography products in China, and Lead System Designer for radiographic products in Buc, France.  Mr. Leparmentier holds an engineering degree in Biology and Micromechanics from Ecole Politechnique in France and an M.B.A. from NYU Stern School of Management.

Duncan H. Moffat , our Senior Vice President of Operations, has been with us since April 2008. From 2001 to 2008, Mr. Moffat served as Vice President of Operations for the nuclear medicine business of Philips Medical Systems, a worldwide manufacturer of medical imaging equipment. From 1998 to 2001, Mr. Moffat served as Vice President of Operations for Lumisys, a start-up company providing digital x-ray products that was sold to Eastman Kodak in 2001. Beginning in 1982, Mr. Moffat held various positions with the Lucas companies, first with two Lucas affiliates in England, followed by a position as project manager with Lucas Control Systems Products, Hampton, Virginia, and then by a position as Director of Operations with Lucas Deeco Systems, Hayward, California, from 1995 to 1998. Mr. Moffat holds a Bachelor of Science in Electrical and Electronic Engineering, Strathclyde University, Glasgow, Scotland.

Steven J. Nunes , our Senior Vice President of Sales and Marketing, has been with us since May 2006. From September 2002 to May 2006, Mr. Nunes served as Director of Commercialization for GE Healthcare, a unit of General Electric Company, a diversified technology, media, and financial services company. From 1996 to April 2002, Mr. Nunes held various positions, including Vice President of Sales and Marketing, at Visualization Technology, Inc., a medical device company for image-guided surgery, which was later acquired by GE Healthcare. In 1990, Mr. Nunes established SJN Medical Inc., an independent distributor of surgical endoscopy products, and served as its President until the company was acquired in 1996. Mr. Nunes holds a B.A. in broadcast journalism from the University of Massachusetts-Amherst.

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COMPENSATION DISCUSSION AND ANALYSIS

Introduction

The purpose of this Compensation Discussion and Analysis is to provide material information about the compensation of our executive officers named below under the caption, “Executive Compensation—2010, 2009, and 2008 Summary Compensation Table,” whom we refer to as our named executive officers. In this section, we provide an analysis and explanation of our executive compensation program and the compensation derived by our named executive officers from this program.  All share numbers in this section and the tables that follow reflect our one-for 3.03 reverse split of our common stock effected in February 2008. 

Executive Summary

This Compensation Discussion and Analysis outlines our executive compensation program.  In particular, it explains our compensation philosophy, which is to provide performance-oriented incentives that fairly compensate our executive officers and enable us to attract, retain and motivate executives with outstanding ability and potential. We then discuss the elements of our executive compensation program including base salary, cash bonuses, and long-term equity compensation.  This Compensation Discussion and Analysis also provides a summary of the key provisions of our employments agreements with each of our named executive officers, including the change in control arrangements.

Compensation Philosophy and Objectives

Our compensation philosophy is to offer our executive officers, including the named executive officers, compensation and benefits that are competitive and that meet our goals of attracting, motivating, and retaining highly skilled management so that we can achieve our financial and strategic objectives to create long-term value for our stockholders. We believe that compensation should be determined within a framework that is intended to reward individual contribution and strong financial performance by our company. Within this overall philosophy, our objectives are to:

DETERMINING EXECUTIVE COMPENSATION

Role of the Compensation Committee and Input from Management

Our Board of Directors has delegated to its compensation committee the authority to make all final decisions regarding the compensation of our named executive officers, although on occasion the compensation committee has referred recommended actions to the Board of Directors for final resolution.  In making such decisions, the compensation committee considers the various factors described below in this Compensation Discussion and Analysis with respect to particular compensation elements.

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When making compensation decisions, the compensation committee also typically considers, but is not required to accept, the recommendations of Dr. Maurice R. Ferré, our President and Chief Executive Officer, regarding the performance and proposed base salary, bonus target and equity awards for our named executive officers, including Dr. Ferré. The compensation committee may also request the assistance of Mr. Fritz L. LaPorte, our Chief Financial Officer, and our human resources department in evaluating the financial, accounting and tax implications of various compensation awards paid to the named executive officers. Neither Mr. LaPorte nor our human resources employees, however, recommend or determine the amounts or types of compensation paid to the named executive officers. Dr. Ferré and certain of our other executive officers may attend compensation committee meetings, as requested by the chairman of the compensation committee and depending on the issues to be discussed by the compensation committee, but none of these executive officers, including Dr. Ferré, attends any portion of the compensation committee meetings during which his compensation is discussed and approved.

Role of the Compensation Consultant and Benchmarking

In making its 2010 compensation decisions, the compensation committee received input from Radford Surveys and Consulting, or Radford, an independent executive compensation consultant engaged by the committee in late 2009. The committee instructed Radford to provide advice and guidance to the committee regarding our executive compensation program and to conduct a competitive market review and analysis of our executive compensation program, including a comparison of the compensation of our executive officers relative to the compensation paid to similarly-situated executives at companies that we consider to be our peers, a practice often referred to as “benchmarking.”

The compensation committee believes that a benchmark should be just that—a point of reference for measurement—but not the determinative factor for the compensation of our executive officers. The committee recognizes that our executive compensation program must be competitive in the marketplace and believes that the comparative compensation information assists the committee in assessing the competitiveness of our executive compensation.  Because the comparative compensation information is just one tool used in setting executive compensation, the compensation committee has discretion in determining the nature and extent of its use. Further, given the limitations associated with comparative pay information for setting individual executive compensation, the committee may elect to not use the comparative compensation information at all in the course of making compensation decisions.

At the instruction of the compensation committee, Radford recommended, and the compensation committee approved, the following peer group of publicly traded medical device companies for use in benchmarking the compensation of our executive officers:

The committee believes that this peer group of companies is representative of the sector in which we operate, and the group was chosen because of each company’s relative size as measured by revenue, market capitalization, and number of employees.  Radford also utilized data from Radford’s Global Life Sciences and High Technology Executive Total Direct Compensation Surveys that relate to medical devices companies with revenues of less than $250 million.  These surveys are total compensation surveys that include total direct compensation, including base salary, annual short-term incentive compensation, and long-term incentive compensation and are widely used and known within the global sciences and high technology industries. For comparison data related to long-term incentive compensation, the scope of the surveys was expanded to medical device companies with revenues of less than $500 million due to the limited data available for companies with revenues of less than $250 million. The compensation committee was not aware of the identities of the individual participating companies in the surveys.  

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The compensation committee considered the executive compensation practices of our peer group as well as the survey data provided by Radford in connection with its determination of the elements of our executive compensation program, which elements are described in detail below.  The compensation committee did not, however, seek to offer compensation to our named executive officers at any specific level as measured against our selected peer group.  Rather, the compensation committee reviewed and analyzed the peer group and survey data to inform its decisions and provide it with a sense of the competitive landscape for executive talent.

Elements of Our Executive Compensation Program

The principal elements of our executive compensation program have traditionally been base salary, cash bonus compensation and long-term equity compensation in the form of stock options or shares of restricted stock. We also have provided some named executive officers with limited perquisites and other benefits that the compensation committee believes were reasonable and consistent with the objectives of our executive compensation programs, as discussed below. We made grants of performance-based compensation with respect to 2010 performance under our 2010 Leadership Cash Bonus Plan applicable to all employees in management positions, including the named executive officers, and we made other grants of incentive compensation to certain of our employees, including some of the named executive officers.  We discuss the grants more fully below.

As described more fully below, each of these forms of compensation enables the satisfaction of one or more of our compensation objectives: to attract and retain talented key employees, to reward superior individual and company performance and to align executive and stockholder interests. We combine the compensation elements for each executive officer in a manner that the compensation committee believes, in its discretion and judgment, is consistent with the executive’s contributions to our company and our overall goals with respect to executive compensation. We have not adopted any policies with respect to the mix of long-term versus currently-paid compensation, but believe that both elements are necessary for achieving our compensation objectives. Currently-paid compensation provides financial stability for each of our named executive officers and immediate reward for superior company and individual performance, while long-term compensation rewards achievement of strategic long-term objectives and contributes toward overall stockholder value. Similarly, while we have not adopted any policies with respect to the mix of cash versus equity compensation, we believe that it is important to encourage or provide for a meaningful amount of equity ownership by our named executive officers to help align their interests with those of our stockholders, one of our compensation objectives.

Base Salary

We believe that a competitive base salary is an important component of compensation as it provides a degree of financial stability for our executive officers and is critical to recruiting and retaining our executives. Base salary is also designed to recognize the scope of responsibilities placed on each executive officer and reward each executive for his unique leadership skills, management experience and contributions. We make a subjective determination of base salary after considering such factors collectively. Our compensation committee has historically reviewed the base salaries of our named executive officers on a periodic basis, as the facts and circumstances may warrant.

As discussed below under “Employment Agreements,” each of our named executive officers has entered into an employment agreement with us that established an initial base salary for such officer.  In March 2010, when Mr. James E. Keller, our Senior Vice President of Regulatory Affairs and Quality Assurance, and Mr. Richard Leparmentier, our Senior Vice President of Engineering, joined our company, we established their initial base salaries at an annual amount of $225,000 and $232,500, respectively, pursuant to such agreements.  We determined these salary amounts as a result of arm’s length negotiations with each of Messrs. Keller and Leparmentier over the terms of their respective employment.  The members of our compensation committee believe, based on their collective experience and general awareness of compensation practices, that these salary amounts are comparable to salaries offered by our competitors for similar positions.

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In February 2010, the compensation committee awarded merit pay increases, reflected in the table below, to each of our named executive officers except for Messrs. Keller and Leparmentier, who had not yet joined our company, to reflect the compensation committee’s subjective review of each named executive officer’s overall individual performances. 

Cash Bonuses

We have designed our cash bonus compensation arrangements to reward achievement of strategic and financial goals that support our objective of enhancing stockholder value and to motivate executives to achieve superior performance in their areas of responsibility.

Annually, management presents to our Board of Directors a proposed operating plan that includes the proposed performance goals and criteria for our company for the upcoming year.  Following an opportunity to review the operating plan and provide comments and suggested revisions, the Board of Directors adopts the operating plan, reserving the right, but not the obligation, to make modifications to the operating plan, and the related MAKO metrics scorecard, described below, throughout the upcoming year if any such modifications are required as a result of new information or changes in the company’s objectives or strategic plan.  Following our Board of Director’s approval of the operating plan, management presents to our compensation committee the proposed leadership cash bonus plan and MAKO metrics scorecard for the upcoming year.  The leadership cash bonus plan is the plan under which our management level employees, including our named executive officers, are eligible to be compensated in the form of a cash bonus with respect to performance in the upcoming year.  The MAKO metrics scorecard is a tool to measure our company’s overall performance and achievement of specific goals and objectives as set forth in our annual operating plan and is used in connection with determining employee compensation matters under the annual leadership cash bonus plan.

2010 Leadership Cash Bonus Plan

In December 2009, our Board of Directors reviewed and approved management’s proposed operating plan for 2010, which included the performance goals and criteria for our company for 2010.  Management then presented to our compensation committee the proposed 2010 Leadership Cash Bonus Plan and the proposed 2010 MAKO Metrics Scorecard as a tool to measure our company’s performance against the defined business objectives set forth in the operating plan.  After the compensation committee considered the proposals, it made recommendations to management concerning the performance goals and criteria and approved a revised version of the performance goals and criteria.  Thereafter, the compensation committee approved the 2010 Leadership Cash Bonus Plan, the 2010 MAKO Metrics Scorecard, and the use of the 2010 MAKO Metrics Scorecard in connection with determining employee compensation matters under the 2010 Leadership Cash Bonus Plan, reserving the right to exercise its discretion to authorize the payment of annual performance bonuses outside of the 2010 Leadership Cash Bonus Plan.

The 2010 Leadership Cash Bonus Plan provided that upon our achievement of nine specified measurable target performance goals derived from our 2010 operating plan and set forth in the 2010 MAKO Metrics Scorecard, each management level employee, including our named executive officers, will be paid a cash performance bonus amount. The amount of this bonus would be a percentage of the employee’s base salary, which is calculated by multiplying the percentage of the MAKO Metrics Scorecard Percentage achieved by our company for the year by a target percentage assigned to each management level employee based on the employee’s level of responsibility within our company. The 2010 MAKO Metrics Scorecard Percentage represents the weighted percentage of pre-defined performance goals that we achieved at the end of 2010, as determined by the compensation committee in its discretion.  Under the 2010 Leadership Bonus Plan, if we achieved the nine target performance goals set forth in the 2010 MAKO Metrics Scorecard, the MAKO Metrics Scorecard Percentage would range from 80% at a minimum up to a maximum of 200% if we achieved certain performance goals incremental to the nine target performance goals.

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For 2010, our compensation committee set the threshold, target and maximum percentages of base salary for our named executive officers at the following levels:

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Our compensation committee set these percentages based on management’s proposal and its subjective evaluation of the relative importance of our named executive officers’ positions, the officers’ past and expected future contributions, to the performance of our company, and, in the case of Dr. Ferré, the compensation committee also considered the terms of the executive officer’s employment agreement. 

The target performance goals and incremental performance goals that the committee chose to govern potential awards under the Leadership Cash Bonus Plan for 2010 related to the following:

The compensation committee believed it was more likely than not that we would achieve the target performance goals and reasonably possible that we would achieve the incremental performance goals. The determination of whether and to what extent these metrics were achieved during 2010 was made by the compensation committee. The metrics for several product and financial related target performance goals are set forth below; the specific metrics for our other target performance goals and our incremental performance goals involve confidential commercial or financial information, the disclosure of which would provide competitors and other third parties with insights into our confidential planning process and strategic plan, including related development timelines, that we believe would result in competitive harm to our company. 

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Following the compensation committee’s review in February 2011 of 2010 performance under the 2010 Leadership Cash Bonus Plan, the committee determined that the company achieved the target performance goals set forth in the 2010 MAKO Metrics Scorecard in the following categories:

The compensation committee noted that our 2010 achievements in the following three target performance goal categories, while not satisfying the particular target performance goal metrics set forth in the 2010 MAKO Metrics Scorecard, were substantial and meaningful:

Further, the compensation committee determined that the total revenue target performance goal was met, excluding the adjustment recorded in the fourth quarter of 2010 associated with the recognition of revenue and expenses associated with the initial warranty obligation and maintenance services included in all previous RIO system sales, which adjustment was previously disclosed in our Form 10-K for the year ended December 31, 2010.

The compensation committee also considered the following additional factors when determining whether to authorize the payment of discretionary annual performance bonuses to our named executive officers:

In recognition of the achievements described above, and in light of our overall 2010 performance and the contribution of all executive officers in achieving this performance,  the compensation committee exercised its discretion to authorize the payment of a discretionary annual performance bonus to each of the named executive officers in the amounts set forth below, which bonuses reflected a 2010 MAKO Metrics Scorecard Percentage of 120% (which was within the range of 80% to 200% originally contemplated by the compensation committee under the 2010 Leadership Cash Bonus Plan).

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Long-Term Equity Compensation

We grant stock options and restricted stock to our named executive officers, as we believe that such grants further our compensation objectives of aligning the interests of our named executive officers with those of our stockholders, encouraging long-term performance, and providing a simple and easy-to-understand form of equity compensation that promotes executive retention. We view such grants both as incentives for future performance and as compensation for past accomplishments.

We historically have made grants of equity to named executive officers in connection with their initial hire.  We continued this practice when Messrs. Keller and Leparmentier joined our company in March 2010, granting each of them an option to purchase 75,000 shares of our common stock.  The number of stock options or shares of restricted stock granted to each named executive officer, including Messrs. Keller and Leparmentier, in connection with such executive’s initial hire, was determined based upon negotiations with each executive, represented the number necessary to recruit each executive from his then-existing position and reflected the compensation committee’s subjective evaluation of the executive’s experience and potential for future performance. In addition, we have made annual grants and additional discretionary grants, from time to time, as determined by the compensation committee or our Board of Directors, as applicable, taking into consideration such factors as individual performance and competitive market conditions. The compensation committee determined the timing of any such equity grant based on the achievement by the named executive officer and not any effort to time the grants in coordination with changes in our stock price. 

We have traditionally granted stock options and performance-based restricted stock, rather than other forms of long-term incentives, because they create value for the executive only if stockholder value is increased through an increased market price of our common stock. We have also determined that the use of time-based restricted stock is appropriate in certain situations as a retention tool.  Prior to the completion of our initial public offering in February 2008, all stock option and restricted stock grants were made pursuant to our company’s 2004 Stock Incentive Plan and our Board of Directors, based on the recommendation of our compensation committee, determined the exercise price based on internal or third-party valuation reports. Since the completion of our initial public offering, all option grants have been approved by the compensation committee and made pursuant to our 2008 Omnibus Incentive Plan, and the exercise price of stock options is based on the fair market value of our common stock on the grant date, which is equal to the closing price of our common stock on that date.

In connection with the compensation committee’s annual review of each named executive officer’s individual performance, in February 2010, the committee approved the grant of incentive stock options, reflected in the table below, to each of our named executive officers except for Messrs. Keller and Leparmentier, who had not yet joined our company, and the grant of restricted stock, reflected in the table below, to Dr. Ferré.  All of the options and restricted stock vest ratably on a quarterly basis over a four-year period starting on the date of grant.

As discussed above, in late 2009, the compensation committee engaged Radford Surveys and Consulting to provide consulting services to the committee with respect to 2010 executive compensation, including an evaluation of the company’s policies with respect to Dr. Ferré’s long-term equity compensation. Radford proposed a long-term equity incentive strategy that will guide Dr. Ferré’s long-term equity compensation through the end of 2014.  The proposed strategy included awards to Dr. Ferré in 2010 and 2011, reflected in the table below, of restricted stock with vesting to occur upon the satisfaction of certain targets related to our stock price and completion of a certain period of service and incentive stock options that vest ratably on a quarterly basis over a four-year period.  Following its review of the long-term equity incentive strategy proposed by Radford, the compensation committee approved the 2010 components of the strategy in April 2010 and the 2011 components in February 2011 in order to retain Dr. Ferré and motivate his performance in an effort to continue to improve stockholder value. 

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Employee Stock Purchase Plan

We have not adopted any formal employee equity ownership requirements or guidelines. In 2007, we adopted the 2008 Employee Stock Purchase Plan to encourage equity ownership by all of our employees, which became effective immediately upon completion of our initial public offering in February 2008. We offer subscriptions for shares of our common stock pursuant to the plan to eligible employees, including our named executive officers.  Our named executive officers may participate in the plan on the same basis as all other eligible participants, who include substantially all of our salaried employees.    

Perquisites and Other Benefits

As a general matter, we do not intend to offer perquisites or other benefits to any executive officer, including the named executive officers, with an aggregate value in excess of $10,000, because we believe we can provide better incentives for desired performance with compensation in the forms described above. We recognize that, from time to time, it may be appropriate to provide some perquisites or other benefits in order to attract, motivate and retain our executives, with any such decision to be reviewed and approved by the compensation committee as needed.

In connection with our hiring of Messrs. Keller and Leparmentier, we agreed to reimburse each of them for reasonable relocation expenses up to a total gross amount of $100,000 and $129,000, respectively, subject to applicable payroll taxes for non-reimbursable items.  Additionally, we agreed to reimburse Mr. Leparmentier for reasonable expenses relating to his professional education up to a total net payment, after deduction of applicable payroll taxes, of $16,000.  We agreed to provide these benefits to Messrs. Keller and Leparmentier as a result of an arm’s length negotiation with each of them over the terms of their respective employment with our company, to encourage them to relocate to the Fort Lauderdale, Florida area and based on the compensation committee’s subjective evaluation of each of Messrs. Keller’s and Leparmentier’s likely contributions to the future performance of our company and the terms of the compensation packages provided to previously hired executives.  To protect us in the event Messrs. Keller’s and Leparmentier’s employment terminates within the first two years of employment, the relocation and professional education expense benefits are subject to prorated recoupment if their respective employment terminates for any reason, other than by Messrs. Keller and Leparmentier for good reason, within such period.

Employment Agreements and Change in Control Arrangements

Each of our named executive officers has an employment agreement that provides for severance payment arrangements following specified termination events.  We have entered into these employment agreements because we believe they are necessary to retain our named executive officers and to obtain their agreement to post-employment restrictions, such as non-competition, non-solicitation and confidentiality, that protect our interests.  We negotiated the severance provisions in the employment agreements with each of the named executive officers based on what the compensation committee believed, in its experience, to be a reasonable, but not overly generous, severance package to each executive and necessary to retain the executive.  The terms of the employment agreements are discussed below under “Executive Compensation – Employment Agreements.”

In February 2009, the compensation committee approved an amended and restated form of employment agreement for certain of our senior vice presidents because we believed it was necessary to expand the post-employment restrictions to provide greater protection to our company as it expands its business and to align our employment agreements with those utilized by similarly situated public companies. Following the committee’s approval, we entered into an amended and restated employment agreement with Mr. LaPorte and an amendment to Dr. Ferré’s existing employment agreement.  These amendments broadened the post-employment noncompetition and non-solicitation restrictions so that the restrictions apply to any image guided surgical device and/or software used in combination with any surgical robotic device and/or software in the field of orthopedics.  The employment agreements for Messrs. Delevic, Keller, and Leparmentier contain these expanded noncompetition and non-solicitation restrictions.  In consideration for these changes, we also agreed to the following modifications to the employment agreement of Mr. LaPorte:

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Dr. Ferré’s employment agreement already provided for accelerated vesting of equity awards upon a change in control of our company.  We had agreed to such accelerated vesting as a result of an arm’s length negotiation with Dr. Ferré over the terms of his agreement.  The severance arrangements for all of our named executive officers include a “double trigger,” meaning that they would not be entitled to severance payments under their employment agreements upon a change in control of our company, unless specific additional events occur, such as a material adverse change in responsibilities. 

The compensation committee does not take into account severance packages in determining the amounts of other elements of compensation, such as base salary, cash bonus, stock option grants and restricted stock grants. See “Executive Compensation—Termination and Change in Control Payments” below for a description of the severance and change in control arrangements for our named executive officers.

Effect of Accounting and Tax Treatment on Compensation Decisions

In the review and establishment of our compensation programs, we consider the anticipated accounting and tax implications to us and our named executive officers. While we consider the applicable accounting and tax treatment, these factors alone are not dispositive, and we also consider the cash and non-cash impact of the programs and whether a program is consistent with our overall compensation philosophy and objectives.

Section 162(m) of the Internal Revenue Code imposes a limit on the amount of compensation that we may deduct in any one year with respect to covered employees, unless specific and detailed criteria are satisfied. Performance-based compensation, as defined in the Internal Revenue Code, is fully deductible if the programs are approved by stockholders and meet other requirements. In general, we have determined that we will not seek to limit executive compensation so that all of such compensation is deductible under Section 162(m). However, from time to time, we monitor whether it might be in our interests to structure our compensation programs to satisfy the requirements of Section 162(m). We seek to maintain flexibility in compensating our executives in a manner designed to promote our corporate goals and, as a result, our compensation committee has not adopted a policy requiring all compensation to be deductible. Our compensation committee will continue to assess the impact of Section 162(m) on our compensation practices and determine what further action, if any, is appropriate.

Sections 280G and 4999 of the Internal Revenue Code impose an excise tax on certain payments to executives made in connection with a change in control and make such payments non-deductible to the company.  The effects of Sections 280G and 4999 generally are unpredictable and can have widely divergent and unexpected effects based on an executive officer’s personal compensation history.  To ensure that Dr. Ferré receives the level of benefits that we intend, the compensation committee determined that it would be appropriate to pay the cost of any excise tax imposed under Sections 280G and 4999, in the event such provisions became applicable, plus an amount needed to pay income taxes due on such additional payment.  Dr. Ferré’s employment agreement accordingly provides for such a gross-up payment, which the compensation committee believes is consistent with its goal of offering a total compensation program that takes into consideration competitive market requirements.

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COMPENSATION COMMITTEE REPORT

The compensation committee has reviewed and discussed the above Compensation Discussion and Analysis with our management and, based on such review and discussion, has recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

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EXECUTIVE COMPENSATION

The following table sets forth the compensation paid in 2010, 2009, and 2008 to our Chief Executive Officer, our Chief Financial Officer and each of the three other most highly compensated executive officers who were serving as executive officers on December 31, 2010. These five individuals are sometimes referred to collectively as the “named executive officers.”

2010, 2009, AND 2008 Summary Compensation Table