<PAGE>
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. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Fischer Imaging Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[Logo of Fischer Imaging here]
12300 North Grant Street
Denver, Colorado 80241
(303) 452-6800
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 27, 2000
----------------
Notice is hereby given that the Annual Meeting of Stockholders of Fischer
Imaging Corporation (the "Company") will be held at the Company's headquarters,
12300 North Grant Street, Denver, Colorado 80241, on Tuesday, June 27, 2000, at
1:00 p.m., for the following purposes, as more fully described in the proxy
statement accompanying this notice:
(1) To elect two Class III directors to the Board of Directors to serve
for a three-year term ending in the year 2003 or until their successors are
duly elected and qualified;
(2) To approve an amendment to the Company's 1991 Stock Option Plan (the
"Plan") to increase the number of shares of common stock authorized for
issuance under the Plan by an additional 500,000 shares;
(3) To ratify the appointment of Arthur Andersen LLP as independent
auditors of the Company for the fiscal year ending December 31, 2000; and
(4) To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
Only stockholders holding shares of Common Stock of record at the close of
business on May 23, 2000, will be entitled to notice of, or to vote at, the
Annual Meeting or any adjournment or postponement thereof. A list of
stockholders entitled to vote at the annual meeting will be available for
inspection at the executive offices of the Company.
STOCKHOLDERS, WHETHER OR NOT THEY EXPECT TO BE PRESENT AT THE ANNUAL
MEETING, ARE REQUESTED TO SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY PERSON GIVING A PROXY
HAS THE POWER TO REVOKE IT AT ANY TIME, AND STOCKHOLDERS WHO ARE PRESENT AT THE
ANNUAL MEETING MAY WITHDRAW THEIR PROXIES AND VOTE IN PERSON. PLEASE NOTE,
HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK, OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
Sincerely,
/s/ Louis E. Rivelli
Louis E. Rivelli,
President and Chief Operating
Officer
Denver, CO
May 26, 2000
YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU
OWN. PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY, COMPLETE, SIGN
AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND RETURN IT IN
THE ENCLOSED ENVELOPE.
<PAGE>
FISCHER IMAGING CORPORATION
12300 North Grant Street
Denver, Colorado 80241
----------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 27, 2000
----------------
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors of Fischer Imaging Corporation (the "Company"), a Delaware
corporation, for use at the Annual Meeting of Stockholders to be held on
Tuesday, June 27, 2000 at 1:00 p.m., or at any adjournment or postponement
thereof, at the Company's headquarters, 12300 North Grant Street, Denver,
Colorado 80241. This Proxy Statement and the enclosed proxy, together with the
Company's Annual Report for the year ended December 31, 1999, are being mailed
to all stockholders entitled to vote at the annual meeting on or about May 26,
2000.
Voting
The specific proposals to be considered and acted upon at the Annual Meeting
are summarized in the accompanying Notice and are described in more detail in
this Proxy Statement. On May 23, 2000, the record date for determination of
stockholders entitled to notice of and to vote at the Annual Meeting, 7,073,242
shares of the Company's common stock, par value $0.01 ("Common Stock"), were
issued and outstanding and 506,667 shares of the Company's Series D preferred
stock, par value $0.01 ("Preferred Stock"), were issued and outstanding. Each
stockholder is entitled to one vote for each share of Common Stock held by such
stockholder on May 23, 2000. Shares of Preferred Stock are non-voting but are
convertible into shares of Common Stock at the option of the stockholder.
Stockholders may not cumulate votes in the election of directors.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes are counted
as present for purposes of determining the presence or absence of a quorum for
the transaction of business. Abstentions will be counted towards the tabulation
of votes cast on proposals to the stockholders and will have the same effect as
negative votes, whereas broker non-votes will not be counted for purposes of
determining whether a proposal has been approved.
Proxies
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If the proxy does not specify how the shares
represented thereby are to be voted, the proxy will be voted FOR the election
of the directors proposed by the Board unless the authority to vote for the
election of such director is withheld and, if no contrary instructions are
given, the proxy will be voted FOR the approval of Proposals Two and Three
described in the accompanying Notice and Proxy Statement. You may revoke or
change your Proxy at any time before the Annual Meeting by filing with the
Chief Operating Officer of the Company at the Company's principal executive
offices at 12300 North Grant Street, Denver, Colorado 80241a notice of
revocation or another signed Proxy with a later date. You may also revoke your
Proxy by attending the Annual Meeting and voting in person.
Solicitation
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional solicitation materials furnished to the
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stockholders. Copies of solicitation materials will be furnished to brokerage
houses, fiduciaries and custodians holding shares in their names that are
beneficially owned by others so that they may forward this solicitation
material to such beneficial owners. In addition, the Company may reimburse such
persons for their costs in forwarding the solicitation materials to such
beneficial owners. The original solicitation of proxies by mail may be
supplemented by a solicitation by telephone, telegram or other means by
directors, officers or employees of the Company. No additional compensation
will be paid to these individuals for such services. Except as described above,
the Company does not presently intend to solicit proxies other than by mail.
Deadline for Receipt of Stockholder Proposals
Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 2001 Annual Meeting must be received no
later than January 23, 2001, in order that they may be included in the proxy
statement and form of proxy relating to that meeting. In addition, the proxy
solicited by the Board of Directors for the 2000 Annual Meeting will confer
discretionary authority to vote on any stockholder proposal presented at that
meeting, unless the Company received notice of such proposal not later than
March 25, 2000.
PROPOSAL ONE: ELECTION OF DIRECTORS
At the meeting, two Class III directors are to be elected to hold office for
a term of three years, or until their successors have been duly elected and
qualified. Proxies submitted pursuant to this solicitation will be voted,
unless specified otherwise, for the election of Morgan W. Nields and Fred
Burbank, M.D. Information with respect to each nominee is set forth in the
section entitled "Board of Directors." Mr. Nields is a current director of the
Company. Dr. Burbank is currently a director of the Company, having been
elected by the Company's Board of Directors in September 1999 to fill the
remainder of the term left vacant by the resignation of Kinney L. Johnson. In
the event either of the nominees, who have expressed an intention to serve if
elected, fail to stand for election, the persons named in the enclosed form of
proxy may vote for a substitute nominee in their discretion. The proxy cannot
be voted for more than two nominees.
Election of the directors will require the affirmative vote of a plurality
of the shares of Common Stock voted at the Annual Meeting, assuming a quorum is
present. Brokerage firms who hold shares in "street name" for customers have
the authority to vote those shares with respect to the election of directors if
such firms have not received voting instructions from a beneficial owner.
Stockholders do not have a right to cumulate votes in the election of
directors.
If a stockholder abstains from voting on any matter, the Company intends to
count such stockholder as present for purposes of determining whether a quorum
is present at the Annual Meeting for the transaction of business. Additionally,
the Company intends to count broker "nonvotes" as present for determining the
presence or absence of a quorum for the transaction of business. A nonvote
occurs when a nominee holding shares for a beneficial owner votes on one
proposal, but does not vote on another proposal because the nominee does not
have discretionary voting power and has not received instructions from the
beneficial owner. Abstentions and nonvotes will not be counted as votes cast
for or against items submitted for a vote of stockholders. Abstentions and
broker nonvotes, therefore, have the same effect as votes against a proposal.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF THE NOMINEES LISTED ABOVE.
BOARD OF DIRECTORS
Nominees and Members of the Board of Directors
The Board of Directors consists of three classes of directors, each class
serving for a three-year term ending in successive years. The authorized number
of directors is currently six. The Class III directors, whose
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terms will expire at the 2000 Annual Meeting, are Morgan W. Nields and Fred
Burbank, M.D. The Class I directors, whose terms will expire at the 2001 Annual
Meeting, are Kathryn A. Paul and Louis E. Rivelli. The Class II directors,
whose terms will expire at the 2002 Annual Meeting, are David G. Bragg, M.D.
and Thomas J. Cable.
The following table lists the proposed members of the Board of Directors and
their ages, positions with the Company, terms of office and the years they were
first elected as directors:
<TABLE>
<CAPTION>
Position with the Director
Name Age Company Since
---- --- ----------------- --------
<C> <S> <C> <C> <C>
Class III Nominees For a Three Year
Term Expiring in 2000:
Morgan W. Nields 54 Chairman of the Board 1973
and Chief Executive
Officer
Fred Burbank, M.D. 58 Director 1999
Class I Directors Whose Terms Expire
in 2001:
Kathryn A. Paul 53 Director 1998
Louis E. Rivelli 56 President and Chief 1999
Operating Officer
Class II Directors Whose Terms Expire
in 2002:
David G. Bragg, M. D. 67 Director 1985
Thomas J. Cable 60 Director 1984
</TABLE>
Directors
Morgan W. Nields has served as Chief Executive Officer and Chairman of the
Board since the Company's incorporation in 1973 and served as President from
August 1990 until December 1992. Mr. Nields is a Director and member of the
Board of Governors of the National Electrical Manufacturers Association (NEMA).
He is also a director of Breast Health Care Management, Inc. He holds a BA
degree from Williams College and an MBA from the Amos Tuck School of Business
Administration at Dartmouth College.
Fred Burbank, M.D. has been a director of the Company since September 1999,
when he was elected by the Company's Board of Directors to fill the remainder
of the term left vacant by the resignation of Kinney L. Johnson. Dr. Burbank
finished a three-year psychiatry residency at Stanford and practiced psychiatry
for ten years in Northern California. He then completed a combined three-year
diagnostic radiology and two-year cardiac, vascular, and interventional
radiology fellowship at Stanford. After serving on the Stanford faculty, he
entered private practice in radiology in Southern California where he practiced
for ten years. Following his radiology practice, he worked developing medical
devices in women's health areas. During that time, he was primary inventor of
the Mammotome, a breast biopsy instrument. Dr. Burbank received his bachelor's
degree and his M.D. degree from Stanford University. He is a member of the
Compensation Committee and the Regulatory Oversight Committee of the Board of
Directors.
Kathryn A. Paul has been a director of the Company since March 1998. Ms.
Paul began her career with Kaiser Permanente in 1970, and has held a variety of
management positions since that time, including serving as Senior Vice
President and Regional Manager, Kaiser Permanente Ohio Region from 1986 to
1994, President of the Colorado and Kansas City regions from 1994 to 1996,
President of Kaiser Permanente's Rocky Mountain Division from 1996 to March
1999 and, from March 1999 until her retirement in December 1999, President
Group Operations West, with responsibility for Kaiser Permanente operations in
Colorado, Hawaii, Seattle, Portland, and Kansas City. Ms. Paul is also
Chairperson of the Board of Directors of the Federal Reserve Board of Denver,
and serves on the boards of a variety of civic and charitable organizations.
She is a member of the Compensation Committee and the Regulatory Oversight
Committee of the Board of Directors.
Louis E. Rivelli has served as President and Chief Operating Officer for the
Company since September 1999, when he was elected by the Company's Board of
Directors to fill a vacancy left by the resignation of R. John Fletcher. Mr.
Rivelli has a strong background in operations and general management. From 1997
to 1999, he was a Director at Logistix, a company specializing in state of the
art supply chain management. From 1990
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to 1997, Mr. Rivelli served as President of Olsen Electric Motors. From 1976
through 1990, he served as Director of Operations for Philips Medical Systems,
a manufacturer of medical diagnostic equipment. He holds an MBA degree from the
University of New Haven.
David G. Bragg, M.D. has been a director of the Company since 1985. Dr.
Bragg is Professor Emeritus and former Chairman of the Department of Radiology,
University of Utah School of Medicine, with which he has been affiliated since
1970. He is also currently Special Assistant to the Director, Diagnostic
Imaging Program of the National Cancer Institute, a member of the American
Board of Radiology, and a director of the American Investment Bank, N.A. Dr.
Bragg is a member of the Audit Committee of the Board of Directors.
Thomas J. Cable has been a director of the Company since 1984. Mr. Cable
founded and has been general partner of Cable & Howse Ventures, Inc., a venture
capital firm, since 1977. He is also a director of EndoSonics Corporation,
Ostex International Corporation and Mycogen Corporation. Mr. Cable is a member
of the Audit Committee of the Board of Directors.
Board Meetings and Committees
The Board of Directors held 7 meetings in 1999. Each director attended at
least 75% of the meetings of the Board of Directors and committees of which he
was a member during 1999.
The Board of Directors has an Audit Committee, which is presently composed
of Mr. Cable and Dr. Bragg. The Audit Committee met once in 1999 to consider
various accounting and auditing matters related to the Company, to review the
Company's financial statements, to review the services rendered by the
Company's independent public accountants and to recommend the selection of
independent public accountants for the Company.
The Board of Directors also has a Compensation Committee, which is presently
composed of Dr. Burbank and Ms. Paul. The Compensation Committee met 3 times in
1999 to review and recommend compensation for the Company's senior officers.
The Compensation Committee also administers the Company's 1991 Stock Option
Plan and Employee Stock Purchase Plan.
In October 1998, the Board formed a Regulatory Oversight Committee to
monitor the Company's regulatory compliance and quality control activities. The
Regulatory Oversight Committee presently consists of Dr. Burbank and Ms. Paul.
The Regulatory Oversight Committee met once in 1999 to review the regulatory
compliance status of the Company.
The Board of Directors does not have a nominating committee.
Compensation of Directors
All nonemployee directors of the Company are reimbursed for expenses
incurred for attendance at meetings of the Board of Directors and each receives
an annual director's fee of $10,000.
Pursuant to the Director Plan, which was adopted in 1993 and amended in
1998, and is administered by the Board of Directors, a director who is not an
employee of the Company automatically receives a grant of options to purchase
5,000 shares of Common Stock upon his or her election to the Board of
Directors, plus an additional grant of options to purchase 5,000 shares on each
February 26th thereafter (if the person remains a director on such date).
Members of the Board of Directors serving on the Compensation and Audit
Committees receive additional options to purchase 1,000 shares of Common Stock
upon election to these committees and each February 26th thereafter. The
options automatically granted under the Director Plan have an exercise price
equal to the fair market value of the Common Stock on the date of grant, are
immediately exercisable and expire ten years from their date of grant. If a
person ceases to be a director for any reason other than death or disability,
the options remain exercisable for a period equal to the director's length of
service, but not less than
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one year and not greater than five years. If the event of death or disability,
the options remain exercisable for a period of twelve months, but in no event
beyond ten years from the date of grant. A total of 300,000 shares of Common
Stock has been reserved for issuance under the Director Plan. As of December
31, 1999, options to purchase 125,000 shares of Common Stock were outstanding
under the Director Plan at an average price of $3.52 per share.
In August 1999, Louis E. Rivelli accepted the Company's offer of employment.
The terms of Mr. Rivelli's employment agreement provide that if the Company
terminates his employment without cause prior to the first anniversary of his
employment, Mr. Rivelli would receive a severance pay equal to the remaining
balance of his first year's salary, and if the Company terminates his
employment without cause after eight months of employment, Mr. Rivelli would
receive a severance pay equal to a minimum of four months' salary. If the
Company terminates Mr. Rivelli for cause or if Mr. Rivelli resigns at any time,
the Company must pay him four months' salary as severance.
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EXECUTIVE OFFICERS
The current executive officers of the Company, who serve at the pleasure of
the Board of Directors, are as follows:
<TABLE>
<CAPTION>
Name Age Position with Company
---- --- ---------------------
<S> <C> <C>
Morgan W. Nields.......... 54 Chairman of the Board and Chief Executive Officer
Louis E. Rivelli.......... 56 President and Chief Operating Officer
Mike Tesic, Ph. D......... 62 Vice President, Engineering
</TABLE>
Biographical information regarding Messrs. Nields and Rivelli are set forth
above under the heading "Directors."
Dr. Tesic joined the Company in November 1993 as Vice President,
Engineering. Prior to joining the Company, Dr. Tesic served as Vice President
of Engineering and Strategic Development of Lunar Corporation, a medical
capital equipment manufacturer, from January 1992 to November 1993. Dr. Tesic
was also previously Manager of Research and Development for Varian
Corporation's Magnetic Resonance Spectroscopy business from July 1986 to
January 1992 and, prior to that, held several management positions with Picker
International. Dr. Tesic holds a Ph.D. degree in physics from Case Western
Reserve University.
EXECUTIVE COMPENSATION
The following table sets forth the compensation to the Company's Chief
Executive Officer and the Company's executive officers whose salary and bonus
exceeded $100,000 for services rendered during the fiscal years ended December
31, 1999, 1998, and 1997 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Annual # of
Compensation Securities
----------------- Underlying All Other
Name and Principal Position Year Salary(1) Bonus Options Compensation(2)
--------------------------- ---- --------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Morgan W. Nields........... 1999 $237,616 $13,249 25,000 $75,750
Chairman of the Board 1998 239,970 0 25,000 75,750
Chief Executive Officer 1997 234,018 0 25,000 75,750
Louis E. Rivelli(3)........ 1999 63,165 80,000 200,000 18,750
President and Chief 1998 0 0 0 0
Operating Officer 1997 0 0 0 0
Anthony G. DeCarolis(4).... 1999 150,402 10,000 20,000 0
Vice President, Sales, 1998 152,266 35,000 20,000 0
Marketing and Service 1997 141,362 70,000 20,000 0
William C. Fee(5).......... 1999 112,704 0 20,000 0
Vice President, Finance/ 1998 114,380 24,000 20,000 0
and Secretary 1997 102,705 20,000 30,000 0
Mike Tesic, Ph.D........... 1999 169,334 5,000 20,000 21,577
Vice President, 1998 164,845 16,875 20,000 21,577
Engineering 1997 158,894 40,000 20,000 21,577
</TABLE>
--------
(1) The amount includes payouts, if any, for excess accrued vacation.
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(2) These amounts principally represent the premiums paid under "split-dollar"
life insurance on behalf of certain officers under which the Company will
be reimbursed for premiums paid upon the officer's death. The executive
receives no ownership in the portion of cash surrender value representing
premiums paid under the policies until retirement, and then only if minimum
service requirements have been met. Mr. Rivelli was granted 100,000 options
on August 30, 1999 below market value resulting in total compensation of
$18,750.
(3) Mr. Rivelli joined the Company in August 1999.
(4) Mr. DeCarolis resigned from the Company in April 2000.
(5) Mr. Fee resigned from the Company in October 1999.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to
individual grants of stock options to the Company's Named Executive Officers
during the fiscal year ended December 31, 1999:
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed Annual
Rates of Stock
Percent of Price
Number of Total Appreciation for
Securities Options Exercise Option Term (2)
Underlying Granted to or Base -----------------
Options Employees Price Expiration At
Name Granted(#)(1) in 1999 ($/Share) Date 5%($) At 10%($)
---- ------------- ---------- --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Morgan W. Nields........ 25,000 5.7% $1.875 3/10/09 $29,479 $ 74,707
Louis E. Rivelli(3)..... 100,000 22.7% 1.000 8/30/09 62,889 159,374
100,000 22.7% 1.000 11/5/09 62,889 159,374
Anthony G.
DeCarolis(4)........... 20,000 4.5% 1.875 3/10/09 23,584 59,765
William C. Fee(5)....... 20,000 4.5% 1.875 3/10/09 23,584 59,765
Mike Tesic.............. 20,000 4.5% 1.875 3/10/09 23,584 59,765
</TABLE>
--------
(1) Options granted to executive officers in 1999, with the exception of the
options granted to Mr. Rivelli, vest in equal monthly increments over a
four-year period, except that the initial 25% vests in its entirety only
after one year. The options granted to Mr. Rivelli vest in equal monthly
increments over a four-year period commencing on the date of the grant.
(2) Potential realizable values are reported net of the option exercise price,
but before taxes associated with the exercise of the option. These amounts
are based on the total of all option grants to the executive for the year
and upon the assumed rates of appreciation over the 10 year option term.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock, as well as the option holder's continued
employment through the vesting period. The amounts reflected in this table
may not necessarily be achieved.
(3) Mr. Rivelli was granted 100,000 options on August 30, 1999, with an
exercise price of $1.000, below the market value of $1.1875 resulting in
total compensation of $18,750.
(4) Mr. DeCarolis resigned from the Company in April 2000.
(5) Mr. Fee resigned from the Company in October 1999.
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AGGREGATED STOCK OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END STOCK OPTION VALUES
The table below sets forth information concerning exercises of stock options
during 1999 and the value of stock options held at the end of the fiscal year
ended December 31, 1999 by the Company's Named Executive Officers:
<TABLE>
<CAPTION>
# of Securities
Underlying Unexercised Value of Unexercised In-
Value Realized Options at December 31, the-Money Options At
# of Shares (market price 1999 December 31, 1999(1)
Acquired on at exercise, less ------------------------- -------------------------
Name Exercise Exercise price) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Morgan W. Nields........ 0 $ 0 152,396 132,604 $ 0 $ 0
Louis E. Rivelli........ 0 0 10,417 189,583 9,115 165,885
Anthony G.
DeCarolis(2)........... 0 0 73,917 82,083 0 0
William C. Fee(3)....... 0 0 46,917 42,083 0 0
Mike Tesic.............. 0 0 73,917 82,083 0 0
</TABLE>
--------
(1) Based on the closing stock price at December 31, 1999 of $1.875 per share,
as reported on the Nasdaq Stock Market, less exercise price.
(2) Mr. DeCarolis resigned from the Company in April 2000.
(3) Mr. Fee resigned from the Company in October 2000.
RETENTION BONUS PLAN
In December 1995, the Board of Directors adopted a Retention Bonus Plan (the
"Retention Plan"). Under the Retention Plan, all employee options to purchase
shares of Common Stock will vest immediately and the Company make payments to
executive officers and other key employees of the Company (the "Participants")
in the event of a change of control of the Company. A "change of control" under
the Retention Plan is defined to occur upon the acquisition of 35% or more of
the Company's outstanding Common Stock by a single person or group, the
occurrence of specified changes in the composition of the Board of Directors
within specified time periods, a consolidation or merger in which the Company
is not the surviving corporation, the sale or other transfer of 50% or more of
the assets or earnings power of the Company, the adoption of a plan of
liquidation or dissolution of the Company, or certain other similar events.
Payments made to a Participant under the Retention Plan will not exceed an
amount equal to his or her annual base salary in effect immediately prior to
the change of control. The Participants, which presently include the executive
officers of the Company, are selected by the Board of Directors, which may
select additional Participants in the future.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Director's currently
consists of Dr. Burbank and Ms. Paul. Neither of these individuals was an
officer or employee of the Company at any time during the 1999 fiscal year or
at any other time.
No current executive officer of the Company has ever served as a member of
the board of directors or compensation committee of any other entity that has
or has had one or more executive officers serving as a member of the Company's
Board of Directors or Compensation Committee.
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors (the "Committee"). The
Committee is composed of two nonemployee Directors.
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<PAGE>
The Committee's executive compensation policies are designed to provide
competitive levels of compensation that integrate compensation with the
Company's performance, recognize individual initiative and achievements, and
assist the Company in attracting and retaining qualified executives.
Since its inception, the Company has maintained the philosophy that
compensation of its executive officers and others should be directly and
materially linked to the Company's operating performance. To achieve this
linkage, executive compensation is partially weighted towards incentive
compensation bonuses paid on the basis of the Company's operating performance.
After its review of the Company's programs, the Committee believes that the
total compensation program for executives of the Company during 1999 was
adequate.
1999 Executive Officer Compensation
In 1999, the compensation packages paid to the executives consisted of base
salary, incentive compensation (in the form of cash bonuses), and long-term
incentive compensation (in the form of stock options).
Base Salary
The Compensation Committee reviews the base salary levels for the Company's
executive officers annually based on the Chief Executive Officer's
recommendations. Base salaries are set to be competitive with the salaries paid
by other publicly-traded medical capital equipment manufacturers with similar
revenues (as determined by a review of publicly available information). These
manufacturers include some of the companies that comprise the Company's Peer
Index on page 21. Base salaries are also set based on each particular
executive's experience, expertise, responsibilities, potential for advancement,
and other factors. The Compensation Committee has not found it practicable, nor
has it attempted, to assign relative weights to the specific factors used in
determining base salary levels, and the specific factors used may vary among
individual officers. As is typical for most companies, payment of base salary
is not conditioned upon the achievement of any specific, pre-determined
performance targets.
Incentive Compensation
The incentive compensation program provides the potential for the executive
officers and other key employees to earn cash incentive bonuses based on the
Company's performance for the year, as well as on the basis of individual
initiatives and achievements. The incentive bonus pool for 1999 was based on
the Company's achievement of certain earnings targets and values assigned to
individual objectives established at the beginning of 1999. These targets were
set by the Compensation Committee, based on the recommendations of the Chief
Executive Officer. Executive officers and other key employees generally share
in the bonus pool in proportion to their base salary.
The Compensation Committee may also approve, in its sole discretion, bonus
payments to executive officers that are not directly linked to previously
established performance objectives. In 1999, such bonuses were paid to Mr.
Rivelli in connection with his recruitment and employment by the Company.
Additionally, the Compensation Committee has authorized the Chief Executive
Officer, where appropriate to an executive's specific employment
responsibilities, to establish bonus opportunities based upon individual
performance objectives. Under such arrangements, Messrs. DeCarolis, Rivelli and
Tesic received cash bonuses in 1999.
Long-Term Incentive Compensation
The Company provides long-term incentive compensation through its 1991 Stock
Option Plan (the "Plan"), which provides for grants of stock options to
executive officers and other key employees. The Compensation Committee uses
stock options as a significant element of the executive officers' compensation
packages. Because the executive officers receive no benefit from the stock
options unless the Company's stock price appreciates, the options are intended
to provide incentives for the executive officers to enhance long-term Company
performance, as reflected in stock price appreciation, thereby increasing
stockholder value.
9
<PAGE>
The Compensation Committee approved the stock options granted to the
executive officers in 1999 based on the objectives described above. The options
granted in 1999 vest 25% on the date which is one year from date of grant, with
the remainder vesting in equal monthly installments over the following 36
months, with the exception of the options granted to Mr. Rivelli, which vest in
equal monthly installments over 48 months. The size and nature of the option
grants made to the executive officers in 1999 were determined based on a
subjective evaluation of the appropriate level of incentive necessary to retain
on a long-term basis the services of executives with the experience, expertise,
and responsibilities of the executive group.
Compensation of Chief Executive Officer
1n 1999, the Compensation Committee structured the compensation package of
Morgan Nields, the Company's Chief Executive Officer, in the same manner and
based upon similar objectives as the Company's other executive officers. Mr.
Nields received $13,249 of cash incentive bonuses for 1999. The Compensation
Committee believes that Mr. Nields' total compensation package for 1999
appropriately reflects his importance and contributions to the Company.
Section 162 (m)
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
federal income tax deductions of publicly traded companies to the extent that
total compensation (including base salary, annual bonus, restricted stock
awards, stock option exercises, and non-qualified benefits) for certain
executive officers exceeds $1 million in any one year. The Compensation
Committee intends to design the Company's compensation program so that the
compensation paid to its employees will be completely deductible by the
Company.
Submitted by the Compensation Committee of the Company's Board of Directors:
Fred Burbank, M.D. Kathryn A. Paul
Compensation Committee Member Compensation Committee Member
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's officers and directors and persons who are beneficial owners
of more than 10% of the Company's Common Stock ("10% beneficial owners") are
required to file reports of their holdings and transactions in the Company's
Common Stock with the SEC and the Nasdaq Stock Market and to furnish the
Company with copies of such reports.
Based solely upon its review of the reports it has received and upon written
representations it has obtained from these persons, the Company believes that
the Company's officers, directors and 10% beneficial owners have complied with
all such filing requirements in 1999.
PROPOSAL TWO: APPROVAL OF AMENDMENT TO THE 1991 STOCK OPTION PLAN
The Company's stockholders are being asked to approve an amendment to the
Company's 1991 Stock Option Plan (the "Plan") that will increase the maximum
number of shares of Common Stock authorized over the term of the 1991 Plan by
an additional 500,000 shares to 1,750,000 shares. The Plan was adopted by the
Board of Directors of June 1991 and was approved by stockholders in June 1991.
The Plan became effective in June 1991. In June 1993, the stockholders approved
an amendment to the Plan to increase the number of authorized shares from
300,000 to 500,000. In June 1996, the stockholders approved an amendment to the
Plan to increase the number of authorized shares from 500,000 to 1,250,000. The
amendments to the plan for which stockholder approval is sought under Proposal
Two were adopted by the Board on March 7, 2000, subject to stockholder approval
at the Annual Meeting.
10
<PAGE>
The proposed share increase will assure that a sufficient reserve of Common
Stock is available under the Plan to attract and retain the services of key
individuals, including through acquisitions, essential to the Company's long-
term growth and success.
Following is a summary of the principal features of the Plan, including the
amendments that will become effective upon stockholder approval of Proposal
Two, together with the applicable tax and accounting implications for the
Company and the participants. However, the summary does not purport to be a
complete description of all of the provisions of the Plan. Any stockholder of
the Company who wishes to obtain a copy of the actual plan document may do so
upon written request to the Company's Chief Operating Officer at the Company's
principal executive offices in Denver, Colorado.
Purpose
The purpose of the Plan is to provide for long-term incentives and rewards
to the Company's employees and consultants of the Company, in order to advance
the interests of the Company through the motivation, attraction and retention
of their respective employees and the provision of equity incentives to their
consultants. The stock options granted under the Plan may be either: (1)
incentive stock options ("ISOs") which are intended to be "incentive stock
options" as that term is defined in Section 422 of the Internal Revenue Code
(the "Code"); or nonstatutory stock options ("NSOs") which are intended to be
options that do not qualify as "incentive stock options" under Section 422 of
the Code.
All stock options granted to employees shall be ISOs unless the Option
Agreement clearly designates the stock options granted thereunder, or a
specified portion thereof, as NSOs. Subject to the other provisions of the
Plan, and employee participant may receive ISOs and NSOs at the same time,
provided that the ISOs and NSOs are clearly designated as such.
Administration
The Plan is administered by the Compensation Committee, composed of at least
two members of the Board of Directors. Subject to the terms of the Plan, the
Committee determines the persons to whom options are granted, the number of
shares covered by the options, the term of any option (which cannot, as to
incentive stock options, exceed ten years and, as to incentive stock options
granted to holders of more than 10% of the Company's outstanding Common stock,
exceed 5 years), and the time during which any option is exercisable
Eligibility
Employees and independent consultants and advisors to the Company and its
subsidiaries (whether now existing or subsequently established) are eligible to
participate in the Plan. As of April 2, 2000, four (4) executive officers and
approximately 164 other employees were eligible to participate in the Plan.
Valuation
The fair market value per share of Common Stock on any relevant date under
the Plan will be the closing selling price per share on that date on the Nasdaq
National Market. On April 2, 2000, the closing selling price of the Company's
Common Stock was $3.75 per share.
Price and Exercisability
Options under the Plan may not be granted after June 2001. Incentive stock
options may not be granted under the Plan at an exercise price of less than the
fair market value of the Common stock on the date of the grant. Incentive stock
options may be granted to holders of more than 10% of the Common Stock only at
an exercise price of at least 110% of the fair market value of the Common Stock
on the date of the grant. No incentive stock options granted pursuant to the
Plan may be exercised more than three months after the option
11
<PAGE>
holder ceases to be an employee of the Company, except that in the event of
permanent and total disability of the option holder, the option may be
exercised by the holder for a period of up to one year after the date of such
permanent or total disability. The exercise price of the option (and any
withholding taxes payable upon exercise) may be paid in cash, in shares of
Common Stock (valued at fair market value at the date of exercise), by delivery
of a promissory note, or by a combination of such means of payment.
With respect to incentive stock options, to the extent that the aggregate
fair market value of the Common Stock (measured at the time of grant) with
respect to which incentive stock options (granted under the Plan or any other
Company plan) are first exercisable exceeds $100,000 during any calendar year,
such incentive stock options shall be treated as non-qualified stock options.
Stock Appreciation Rights
The Plan provides for the grant of stock appreciation rights. A stock
appreciation right permits the participant to surrender a specified portion of
his or her options in exchange for a payment representing the unrealized
appreciation of those options. The Plan also provides for the payment of
supplemental bonuses. A supplemental bonus grants the participant the right to
receive payment, in shares of Common Stock, cash or a combination of shares of
Common Stock and cash, for the amount necessary to reimburse the participant
for the income tax liability incurred by him or her upon the exercise of a
stock option or stock appreciation right.
Acceleration
The Plan provides that all outstanding options shall vest immediately upon
the occurrence of a change of control of the Company, which is defined in the
Plan to include the acquisition of 35% or more of the Company's outstanding
Common Stock, certain changes in the composition of the Board of Directors, a
consolidation or merger in which the Company is not the surviving corporation,
the sale of most of the Company's assets, the adoption of a plan of liquidation
and certain other similar events.
Stock Awards
The table below shows, as to each of the Company's executive officers named
in the Summary Compensation Table of the Executive Compensation and Related
Information section of this Proxy Statement and various indicated individuals
and groups, the number of shares of Common Stock subject to options granted
under the Plan between the June 26, 1991 effective date of the Plan and April
2, 2000, together with the weighted average exercise price payable per share.
No direct stock issuances have been made to date under the Plan.
As of April 2, 2000, options covering 1,095,575 shares of Common Stock were
outstanding under the Plan, 528,938 remained available for future option grants
or direct issuance (assuming stockholder approval of the increase which forms
part of this Proposal), and 125,487 shares have been issued pursuant to the
exercise of outstanding options under the Plan.
Amendment and Termination
The Board of Directors may amend the Plan at any time or may terminate such
plan without approval of the stockholders. However, stockholder approval is
required for any amendment to the Plan that would increase the maximum number
of shares of Common Stock that may be made subject to stock options (unless
necessary to effect certain adjustments as a result of a stock split, stock
dividend or similar event), materially increase the benefits accruing to
participants under the plan, or materially modify the requirements as to
eligibility for participation under the Plan. However, no action by the Board
of Directors or stockholders may alter or impair any award previously granted
without the consent of the award holder.
12
<PAGE>
Federal Income Tax Consequences of the Plan
The following is a general summary of the federal income tax consequences
that may apply to the recipients of options, stock appreciation rights, and
supplemental bonuses under the Plan. Because the application of tax laws may
vary according to individual circumstances, a participant should seek
professional tax advice concerning the tax consequences to him or her of
participating in the Plan, including the potential application and effect of
state, local and foreign tax laws and estate and gift tax considerations.
Incentive Stock Options
A participant who is granted an incentive stock option recognizes no taxable
income when the incentive stock option is granted. Generally, no taxable income
is recognized upon the exercise of an incentive stock option unless the
alternative minimum tax applies as described below. Instead, a participant who
exercises an incentive stock option recognizes taxable gain or loss upon the
sale of his or her shares. Any gain or loss recognized on the sale of shares
acquired upon exercise of an incentive stock option is taxed as capital gain or
loss if the disposition of shares occurs more than one year after the option
was exercised and more that two years after the option was granted. In this
event, the Company receives no deduction with respect to the incentive stock
option shares. Long-term capital gains of individuals presently may be taxed at
lower rates than ordinary income, but the deductibility of capital losses
remains subject to limitation.
If the participant disposes of the shares before the required holding
periods have elapses (a "disqualifying disposition"), he or she recognizes
ordinary income on disposition of the shares to the extent of the difference
between the fair market value on the date of exercise (or potentially up to six
months thereafter if the participant is subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) and the
exercise price of the option; provided, in the case of a sale or exchange on
which a loss (if sustained) would be recognized, not exceeding the net gain
upon such disposition. Any additional gain will be taxed as capital gain; any
loss will be treated as a capital loss. The Company generally receives a
corresponding deduction in the year of disposition equal to the amount of the
ordinary income recognized by the participant.
Non-Statutory Stock Options
The tax treatment of non-statutory stock options differs significantly from
the tax treatment of incentive stock options. Any person who is granted a non-
statutory stock option recognizes no taxable income at the time of grant.
However, upon the exercise of a non-statutory stock option, the difference
between the fair market value of the shares on the date of exercise and the
option price is taxable as ordinary income and generally is deducted by the
Company. If the participant is subject to Section 16(b) of the Exchange Act,
the date for measuring taxable income potentially may be deferred for up to six
months after the date of exercise (unless the optionee makes an election under
Section 83(b) of the Code within 30 days after exercise), in which case, the
participant will be taxed upon exercise of the non-statutory stock option in an
amount equal to the excess, if any, of the fair market value of the shares at
that time over the option price. Any future appreciation in the shares will be
treated as capital gain upon the sale or exchange of the shares.
Upon the disposition of shares acquired pursuant to the exercise of a non-
statutory stock option, the participant will recognize a capital gain or loss
in an amount equal to the difference between the selling price and the
participant's adjusted basis in such shares. There are no tax consequences to
the Company as a result of the participant's disposition of shares acquired
upon exercise of a non-statutory stock option.
Effect of Alternative Minimum Tax
Certain taxpayers who have significant tax preferences (and other items
allowed favorable treatment for regular tax purposes) may be subject to the
alternative minimum tax. The alternative minimum tax is payable only if and to
the extent that it exceed the taxpayer's regular tax liability, and any
alternative minimum tax paid
13
<PAGE>
generally may be credited against subsequent regular tax liability. For
purposes of the alternative minimum tax, an incentive stock option is treated
as if it were a non-statutory stock option. Thus, the difference between fair
market value on the date of exercise (or potentially up to six months
thereafter) and the option price is included in income for alternative minimum
tax purposes and the taxpayer receives a basis equal to such fair market value
for subsequent alternative minimum tax purposes. However, regular tax treatment
(see above) will apply for alternative minimum tax purposes if a disqualifying
disposition, where a loss (if sustained) would be recognized, occurs in the
same taxable year as the options exercised.
Stock Appreciation Rights and Supplemental Bonuses
No taxable income is recognized upon the grant of stock appreciation rights.
Upon the payment of a stock appreciation right or supplemental bonus, the
recipient has ordinary income in the amount of such payment, and the Company
generally receives a corresponding deduction.
Withholding
The Company may withhold any taxes required by any law or regulation of any
governmental authority, whether federal, state or local, in connection with any
stock option or other award under the Plan, including, but not limited to,
withholding of any portion of any payment or withholding from other
compensation payable to the participant, unless such person reimburses the
Company for such amount.
Accounting Treatment
Options grants or stock issuances with exercise or issue prices less than
the fair market value of the shares on the grant or issue date will result in a
direct compensation expense to the Company's earning equal to the difference
between the exercise or issue price and the fair market value of the shares on
the grant or issue date. Such expense will be accruable by the Company over the
period that the option shares or issued shares are to vest. Option grants or
stock issuances at 100% of fair market value will not result in any direct
charge to the Company's earnings. However, the fair value of the option is
required to be disclosed in the notes to the Company's financial statements,
and the Company must also disclose, in pro-forma statements to the Company's
financial statements, the impact those option's would have upon the Company's
reported earnings were the value of those options at the time of grant treated
as compensation expense. Whether or not granted at a discount, the number of
outstanding options may be a factor in determining the Company's earnings per
share on a fully diluted basis.
Should one or more optionees be granted stock appreciation rights that have
no conditions upon exercisability other than a service or employment
requirement, then such rights will result in compensation expense to the
Company's earnings.
Stockholder Approval
The affirmative vote of a majority of the outstanding voting shares of the
Company present or represented and entitled to vote at the 2000 Annual Meeting
is required for approval of the amendment to the Plan. Should such stockholder
approval not be obtained, then the 500,000-share increase to the share reserve
will not be implemented, and any stock options granted on the basis of the
500,000-share increase to the Plan will immediately terminate without becoming
exercisable for the shares of Common Stock subject to those options, and no
additional options will be granted on the basis of such share increase. The
Plan will, however, continue to remain in effect, and option grants and direct
stock issuances may continue to be made pursuant to the provisions of the Plan
in effect prior to the amendments summarized in Proposal Two, until the
available reserve of Common Stock as last approved by the stockholders has been
issued pursuant to option grants and direct stock issuances made under the
Plan.
14
<PAGE>
New Plan Benefits
As of April 2, 2000, no options have been granted, and no direct stock
issuances have been made, on the basis of the 500,000-share increase which form
Proposal Two.
A copy of the Plan is attached hereto as Exhibit A.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE AMENDMENT TO THE PLAN.
PROPOSAL THREE: RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Arthur Andersen LLP,
independent public auditors for the Company during the 1999 Fiscal Year, to
serve in the same capacity for the year ending December 31, 2000, and is asking
the stockholders to ratify this appointment. The affirmative vote of a majority
of the shares represented and voting at the Annual Meeting is required to
ratify the selection of Arthur Andersen LLP.
In the event the stockholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board of Directors in its discretion may direct the appointment of a different
auditing firm at any time during the year if the Board of Directors believes
that such a change would be in the best interest s of the Company and its
stockholders.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting, will have the opportunity to make a statement if he or she
desires to do so, and will be available to respond the appropriate questions.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP TO SERVE AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of April 2, 2000,
with respect to the beneficial ownership of the Company's Common Stock by (i)
each stockholder known by the Company to be the beneficial owner of more than
5% of the Company's Common Stock; (ii) each director and director nominee of
the Company; (iii) the Company's Chief Executive Officer and those executive
officers of the Company other than the Chief Executive Officer whose salary and
bonus exceeded $100,000 as of the end of the Company's fiscal year; and (iv)
all directors and executive officers as a group.
<TABLE>
<CAPTION>
Shares Beneficially
Owned(1)
------------------------
Name and Address of Beneficial Owner Number Percentage
------------------------------------ ------------ ----------
<S> <C> <C> <C>
Arnold H. Snider................................. 525,000(2) 7.4%
Deerfield Capital L.P. and Deerfield Partners, L.
P. (2) (2)
450 Lexington Avenue, Suite 1450
New York, NY 10017
GE Medical Systems, a division of
General Electric Company....................... 506,667(3) 6.7
P. O. Box 414
Milwaukee, Wisconsin 53201
Dimensional Fund Advisors Inc.................... 448,000(4) 6.3
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Directors and officers:
Morgan W. Nields................................ 1,220,539(5) 16.9
12300 North Grant St.
Denver, CO 80241
Louis E. Rivelli................................ 81,250(6) 1.1
David G. Bragg, M.D............................. 28,000(7) *
Fred Burbank, M.D............................... 12,000(8) *
Thomas J. Cable................................. 37,064(9) *
Kathryn A. Paul................................. 16,000(10) *
Mike Tesic...................................... 83,917(11) 1.2
All directors and executive officers
as a group (7 persons).......................... 1,478,770(12) 19.7%
</TABLE>
--------
* Less than 1%
(1) This table is based upon information supplied by officers and directors and
Schedules 13G filed by principal stockholders with the Securities and
Exchange Commission (the "SEC") in February 1999. Unless otherwise noted,
each person identified possesses sole voting and investment power with
respect to the shares listed. A beneficial owner is any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares voting power or investment power
over the shares. Number of shares includes all shares underlying options
that will be exercisable prior to June 1, 2000.
(2) Based upon the joint Schedule 13G filed with the SEC on February 10, 2000,
Arnold H. Snider, President of Deerfield Capital, L.P., has shared voting
and investment power over 525,000 shares, Deerfield Capital, L.P. and
Deerfield Partners, L.P. have shared voting and investment power over
388,500 shares and Deerfield Management Company and Deerfield International
Limited have shared voting and investment power over 136,500 shares.
16
<PAGE>
(3) Represents 506,667 shares of Series D Convertible Preferred Stock
("Preferred Stock") that are immediately convertible into 506,667 shares of
Common Stock at the option of their holder. Until converted, the Preferred
Stock is non-voting, except as required by law.
(4) Based upon the Schedule 13G filed with the SEC on February 11, 2000,
Dimensional Fund Advisors Inc. ("DFAI") has sole voting and investment
power over 448,000 shares. The reported shares are owned by advisory
clients of DFAI; DFAI disclaims beneficial ownership of all reported
shares.
(5) Includes 170,523 and 118,943 shares held by The Robert L. Nields Trust and
the Florence Wesson Nields Irrevocable Trust, respectively. Mr. Nields is a
co-trustee and a beneficiary of both trusts and exercises shared voting and
investment power as to such shares. Mr. Nields disclaims beneficial
ownership of the shares held by both trusts except to the extent of his
proportionate interest as beneficiary of the trusts. The amount shown also
includes 164,896 shares that may be purchased pursuant to options
exercisable prior to June 1, 2000.
(6) Represents 81,250 shares that may be purchased pursuant to options
exercisable prior to June 1, 2000.
(7) Represents 28,000 shares that may be purchased pursuant to options
exercisable prior to June 1, 2000.
(8) Represents 12,000 shares that may be purchased pursuant to options
exercisable prior to June 1, 2000.
(9) Includes 34,000 shares that may be purchased pursuant to options
exercisable prior to June 1, 2000.
(10) Represents 16,000 shares that may be purchased pursuant to options
exercisable prior to June 1, 2000.
(11) Represents 83,917 shares that may be purchased pursuant to options
exercisable prior to June 1, 2000.
(12) Includes 420,063 shares that may be purchased pursuant to options
exercisable prior to June 1, 2000.
17
<PAGE>
FIVE YEAR STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph set forth below compares the cumulative
total stockholder return on the Company's Common stock for the five year period
from December 31, 1994 to December 31, 1999, with the cumulative total return
on the Nasdaq National Market Index and a Peer Group Index over the same
period. (Assumes the investment of $100 in the Company's Common Stock and the
respective indexes on December 31, 1994, with all dividends reinvested).
Five Year Stock Price Performance Graph
Fischer Imaging Nasdaq Stock Self-Determined
Corporation Market Peer Group
--------------- ------------ ----------------
Date Company Index Market Index
-----------------------------------------------------------------------
12/30/94 100 100 100
1/31/95 97.674 100.527 96.161
2/28/95 69.767 100.809 90.857
3/31/95 95.349 108.953 88.063
4/28/95 88.372 112.385 90.664
5/31/95 97.674 115.289 93.999
6/30/95 104.651 124.622 107.652
7/31/95 81.395 133.774 112.951
8/31/95 139.535 136.490 111.974
9/29/95 162.791 139.634 127.290
10/31/95 174.419 138.829 120.901
11/30/95 200 142.086 132.772
12/29/95 186.046 141.335 134.727
1/31/96 253.488 142.042 149.625
2/29/96 239.535 147.457 157.994
3/29/96 269.767 147.952 171.116
4/30/96 248.837 160.210 187.758
5/31/96 241.860 167.557 197.160
6/28/96 223.256 160.004 210.144
7/31/96 197.674 145.764 185.615
8/30/96 246.511 153.954 202.817
9/30/96 104.651 165.721 183.608
10/31/96 141.860 163.882 177.450
11/29/96 127.907 174.044 175.337
12/31/96 109.302 173.898 179.007
1/31/97 113.953 186.240 191.522
2/28/97 123.256 175.937 183.109
3/31/97 95.349 164.466 161.524
4/30/97 76.744 169.591 158.687
5/30/97 119.767 188.793 181.238
6/30/97 111.628 194.600 176.970
7/31/97 134.884 215.102 174.003
8/29/97 139.535 214.784 180.748
9/30/97 104.651 227.516 189.801
10/31/97 100 215.662 167.743
11/28/97 104.651 216.799 175.144
12/31/97 91.860 213.068 161.077
1/30/98 90.698 219.812 156.373
2/27/98 77.907 240.480 175.703
3/31/98 72.674 249.367 181.984
4/30/98 67.442 253.569 176.777
5/29/98 83.721 239.480 168.023
6/30/98 60.465 256.207 166.192
7/31/98 67.442 253.220 170.622
8/31/98 48.837 203.026 141.645
9/30/98 39.535 231.195 148.875
10/30/98 52.326 241.359 160.422
11/30/98 46.512 265.895 149.942
12/31/98 39.535 300.440 137.380
1/29/99 32.558 344.027 141.85
2/26/99 36.047 313.222 128.288
3/31/99 24.419 336.872 110.578
4/30/99 30.814 347.549 94.100
5/28/99 31.977 338.151 103.285
6/30/99 32.558 368.62 104.921
7/30/99 24.419 362.005 103.965
8/31/99 24.419 377.257 93.693
9/30/99 17.442 377.473 89.902
10/29/99 18.605 407.442 71.444
11/30/99 32.558 456.758 92.801
12/31/99 34.884 556.913 93.789
18
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Denver headquarters and manufacturing facility is leased from
JN Properties, a partnership whose general partners are Morgan W. Nields, Chief
Executive Officer and Chairman of the Board of Directors of the Company, and
another stockholder of the Company, under a lease effective August 1, 1992,
which expires July 31, 2012. The lease requires the Company to pay all taxes,
insurance, operating and maintenance expenses for the facility, and provides
for an annual base rent which is subject to adjustment at the beginning of the
8th, 13th and 18th lease year based on the then current market rent for similar
premises, provided the base rent may not be increased at any one time by more
than 7%. The Company made total lease payments of $744,000 in 1999.
The foregoing lease was approved by a majority of the Company's
disinterested directors at the time it was entered into by the Company. The
Company believes that this lease was entered into for bona fide business
purposes and was on terms no less favorable to the Company than could have been
obtained from unaffiliated third parties.
In August 1999, Louis E. Rivelli accepted the Company's offer of employment.
The terms of Mr. Rivelli's employment agreement provide that if the Company
terminates his employment without cause prior to the first anniversary of his
employment, Mr. Rivelli would receive a severance pay equal to the remaining
balance of his first year's salary, and if the Company terminates his
employment without cause after eight months of employment, Mr. Rivelli would
receive a severance pay equal to a minimum of four months' salary. If the
Company terminates Mr. Rivelli for cause or if Mr. Rivelli resigns at any time,
the Company must pay him four months' salary as severance.
During 1999, the Company extended an interest-free loan in the amount of
$252,000 to the President and Chief Operating Officer, in consideration for his
agreement to relocate to Colorado immediately. At December 31, 1999, $100,000
of the loan was outstanding and is to be repaid in full by August 2004.
In the second quarter of 1995, the Company issued 1,333,333 shares of Series
D Convertible Preferred Stock to GE Medical Systems ("GEMS"), a division of
General Electric Company. On March 29, 1999, the company announced an agreement
with General Electric Company, on behalf of GE Medical Systems, under which
826,666 or 62% of the 1,333,333 shares of Convertible Preferred Stock owned by
GE Medical Systems were exchanged for a non-exclusive right to manufacture the
Tilt-C system leaving 506,667 shares of Series D Preferred Stock outstanding,
currently representing a 7% ownership interest in the Company on an if-
converted basis. In addition to other terms, the agreement amends certain terms
of the Company's Series D Preferred Stock in the event of a change of control
transaction. As to the remaining 506,667 outstanding shares of Series D
Preferred Stock, change of control rights will expire on March 24, 2002. For
these purposes, a change of control transaction generally includes any
transaction involving a transfer of more than 50% of the combined voting power
of the Company's capital stock or a sale by the Company of all or substantially
all of its assets to any one or more of Picker International, Inc., Siemens
Medical Systems, Toshiba America Medical Systems, Inc., or Philips Medical
Systems, or any affiliate thereof. GEMS is also a significant customer,
providing revenues to the Company of approximately $13.4 million or 20.3% of
total revenues in 1999, $3.5 million or 5.9% of total revenues in 1998 and $4.3
million or 7.5% of total revenues in 1997.
In December 1997, the Company filed a lawsuit seeking the determination of a
reasonable price for the Tilt-C units that the Company had contracted to
deliver to GEMS under the extension of a purchase and sale agreement. However,
the contract did not contain a price for the Tilt-C units produced during the
extended term. The trial court, through an advisory jury, rendered a verdict
finding the reasonable price per Tilt-C unit to be $157,400. The court rendered
its own finding that the reasonable price per Tilt-C unit should be $124,000
and entered the judgement to that effect. GEMS has been paying the price set by
the court on the approximately 75 units that have been produced under the
extended term.
19
<PAGE>
The Company appealed the court's judgement to the Tenth Circuit Court of
Appeals, which found that the issue should have been tried to a jury (rather
than an advisory jury) and remanded the case for a new jury trial. The case
will probably be tried during the late summer of 2000.
OTHER MATTERS
The Company knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters come before the
Annual Meeting, it is the intention of the persons named in the enclosed form
of Proxy to vote the shares they represent as the Board of Directors may
recommend. Discretionary authority with respect to such other matters is
granted by the execution of the enclosed Proxy.
Any stockholder who executes and returns the Proxy may revoke the same at
any time before it is exercised by filing with the Secretary of the Company
written notice of such revocation or a duly executed Proxy bearing a later
date, or by attending the Annual Meeting and voting in person. Attendance at
the Annual Meeting will not in and of itself constitute revocation of a Proxy.
ANNUAL REPORT
A copy of the Annual Report of the Company for the 1999 Fiscal Year has been
mailed concurrently with this Proxy Statement to all stockholders entitled to
notice of and to vote at the Annual Meeting. The Annual Report is not
incorporated into this Proxy Statement and is not considered proxy solicitation
material.
THE COMPANY FILED AN ANNUAL REPORT ON FROM 10-K WITH THE SEC ON OR ABOUT
APRIL 14, 2000. UPON WRITTEN REQUEST BY ANY STOCKHOLDER TO LOUIS E. RIVELLI,
PRESIDENT AND CHIEF OPERATING OFFICER, FISCHER IMAGING CORPORATION, 12300 NORTH
GRANT STREET, DENVER, COLORADO 80241, A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 WILL BE PROVIDED WITHOUT CHARGE.
The Board of Directors of Fischer
Imaging Corporation
Denver, Colorado
May 26, 2000
20
<PAGE>
EXHIBIT A
FISCHER IMAGING CORPORATION
STOCK OPTION PLAN
I. Purpose
The Fischer Imaging Corporation Stock Option Plan (the "Plan") provides
for the grant of Stock Options, Stock Appreciation Rights and Supplemental
Bonuses to Employees and Consultants of Fischer Imaging Corporation (the
"Company"), and such of its subsidiaries (as defined in Section 424(f) of the
Internal Revenue Code of 1986, as amended (the "Code")), as the Board of
Directors of the Company (the "Board") shall from time to time designate
("Participating Subsidiaries"), in order to advance the interests of the Company
and its Participating Subsidiaries through the motivation, attraction and
retention of their respective Employees and the provision of equity incentives
to their Consultants.
II. Incentive Stock Options and Non-Incentive Stock Options
The Stock Options granted under the Plan may be either:
(a) Incentive Stock Options ("ISOs") which are intended to
be "Incentive Stock Options" as that term is defined in Section 422 of
the Code; or
(b) Nonstatutory Stock Options (IINSOs") which are intended to
be options that do not qualify as "Incentive Stock Options" under
Section 422 of the Code.
All Stock Options granted to Employees shall be ISOs unless the Option Agreement
clearly designates the Stock Options granted thereunder, or a specified portion
thereof, as NSOs. Subject to the other provisions of the Plan, an Employee
Participant may receive ISOs and NSOs at the same time, provided that the IS0s
and NSOs are clearly designated as such.
Except as otherwise expressly provided herein, all of the provisions
and requirements of the Plan relating to Stock Options shall apply to ISOs and
NSOs.
III. Administration
3.1 Committee. With respect to grants of Stock options, Stock
-----------
Appreciation Rights and Supplemental Bonuses to Employees other than officers
and directors of the Company and to Consultants, the Plan shall be administered
by a committee (the "Committee") composed of at least two members of the Board
of Directors. With respect to grants of Stock Options, Stock
<PAGE>
Appreciation Rights and Supplemental Bonuses to officers and directors, the Plan
shall be administered by the Board of Directors, if each director is a
Disinterested Person or by a committee of two or more directors all of whom are
Disinterested Persons. Such committee may be the Committee if all of the members
thereof are Disinterested Persons, or a special committee appointed by the Board
of Directors composed of at least two Disinterested Persons. The Committee or
the Board, as the case may be, shall have full authority to administer the Plan,
including authority to interpret and construe any provision of the Plan and any
Stock Option, Stock Appreciation Right or Supplemental Bonus granted thereunder,
and to adopt such rules and regulations for administering the Plan as it may
deem necessary in order to comply with the requirements of the Code, in order
that Stock Options that are intended to be ISOs will be classified as incentive
stock options under the Code, or in order to conform to any regulation or to any
change in any law or regulation applicable thereto. The Committee or the Board
may delegate any of its responsibilities under the Plan, other than its
responsibility to grant Stock Options, to determine whether the Stock
Appreciation Rights or Supplemental Bonuses, if any, payable to a Participant
shall be paid in cash, in shares of Common Stock or a combination thereof, or to
interpret and construe the Plan. If the Board of Directors is composed entirely
of Disinterested Persons, the Board of Directors may reserve to itself any of
the authority granted to the Committee as set forth herein, and it may perform
and discharge all of the functions and responsibilities of the Committee at any
time that a duly constituted Committee is not appointed and serving. All
references in the Plan to the "Committee" shall be deemed to refer to the Board
of Directors whenever the Board is discharging the powers and responsibilities
of the Committee, and to any special committee appointed by the Board to
administer particular aspects of the Plan.
3.2 Actions of Committee. All actions required or permitted to be
----------------------
taken by the Board or the Committee hereunder shall be effective when approved
by a majority of the members of the Committee, as the case may be, who are
present at a meeting duly called and held at which a quorum is present. All
actions taken and all interpretations and determinations made by the Committee
in good faith (including determinations of Fair Market Value) shall be final and
binding upon all Participants, the Company and all other interested persons. No
member of the Committee shall be personally liable for any action, determination
or interpretation made in good faith with respect to the Plan, and all members
of the Committee shall, in addition to their rights as directors, be fully
protected by the Company with respect to any such action, determination or
interpretation.
- 2 -
<PAGE>
IV. Definitions
4.1 "Stock Option." A Stock option is the right granted under the
---------------
Plan to a Participant to purchase, at such time or times and at such price or
prices ("Option Price") as are determined by the Committee, the number of shares
of Common Stock determined by the Committee.
4.2 "Stock Appreciation Right." A Stock Appreciation Right is the
---------------------------
right to receive payment, in shares of Common Stock, cash or a combination of
shares of Common Stock and cash, of the Redemption Value of a specified number
of shares of Common Stock then purchasable under a Stock Option.
4.3 "Redemption Value." The Redemption Value of shares of Common
-------------------
Stock purchasable under a Stock Option shall be the amount, if any, by which the
Fair Market Value of one share of Common Stock on the date on which the Stock
Option is exercised exceeds the Option Price for such share.
4.4 "Common Stock." A share of Common Stock means a share of
---------------
authorized but unissued or reacquired Common Stock (par value $.01 per share) of
the Company.
4.5 "Fair Market Value." If the Common Stock is not traded publicly,
--------------------
the Fair Market Value of a share of Common Stock on any date shall be
determined, in good faith, by the Committee after such consultation with outside
legal, accounting and other experts as the Committee may deem advisable, and the
Committee shall maintain a written record of its method of determining such
value. If the Common Stock is traded publicly, the Fair Market Value of a share
of Common Stock on any date shall be the average of the representative closing
bid and asked prices, as quoted by the National Association of Securities
Dealers through NASDAQ (its automated system for reporting quotes), for the date
in question or, if the Common Stock is listed on the NASDAQ National Market
System or is listed on a national stock exchange, the officially quoted closing
price on NASDAQ or such exchange, as the case may be, on the date in question.
4.6 "Employee." An Employee is an employee of the Company or any
-----------
Participating Subsidiary.
4.7 "Participant." A Participant is an Employee or Consultant of the
--------------
Company or a Participating Subsidiary to whom a Stock Option, Stock Appreciation
Right or Supplemental Bonus is granted.
4.8 "Disinterested Person." A Disinterested Person is a director of
-----------------------
the Company who, during the one year prior to service as an administrator of the
Plan, has not been granted or awarded equity securities pursuant to the Plan or
any other plan of the Company or any of its affiliates except as may be
- 3 -
<PAGE>
permitted by Rule 16b-3(c)(2) under the Securities Exchange Act of 1934 or any
successor to such Rule.
4.9 "Supplemental Bonus." A Supplemental Bonus is the right to
---------------------
receive payment, in shares of Common Stock, cash or a combination of shares of
Common Stock and cash, of an amount determined under Section 7.9.
4.10 "Change of Control." The term "Change of Control" shall mean
--------------------
any of the following events:
(a) The acquisition by any person as Beneficial Owner (as
defined in Rule 13d-3 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended), directly or indirectly,
in one or more transactions, without the consent of the Company's Board
of Directors, of thirty-five percent (35%) or more of the combined
voting power of the outstanding shares of capital stock of the Company
entitled to vote generally in the election of directors.
(b) Individuals who at the beginning of any period of three
(3) consecutive years constitute the entire Board of Directors of the
Company shall for any reason, other than for reasons of death,
disability or voluntary resignation, during such period cease to
constitute a majority thereof.
(c) A change of control of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended.
(d) The stockholders of the Company approve a Transaction.
For purposes of this Plan, the Board of Directors may, by resolution, clarify
the date as of which a Change of Control shall be deemed to have occurred.
4.11 "Transaction." A Transaction is (a) any consolidation or merger
--------------
of the Company in which the Company is not the surviving corporation other than
a merger solely to effect a reincorporation or a merger of the Company as to
which stockholder approval is not required pursuant to Sections 251(f) or 253 of
the Delaware General Corporation Law, or (b) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of fifty
percent (50%) or more of the assets or earnings power of the Company, or (c) the
adoption of any plan or proposal for the liquidation or dissolution of the
Company.
4.12 "Consultant." A Consultant is an individual who performs
-------------
consulting services for the Company or any Participating
- 4 -
<PAGE>
Subsidiary, including, but not limited to, any member of the Company's Medical
Advisory Board.
V. Eligibility and Participation
Grants of Stock Options, Stock Appreciation Rights and Supplemental
Bonuses may be made to Consultants and to Employees of the Company or any
Participating Subsidiary, including directors of the Company who are also
Employees, but directors who are not Employees shall not be eligible to receive
Stock Options, Stock Appreciation Rights or Supplemental Bonuses under the Plan.
The Committee shall from time to time determine the Participants to whom Stock
Options shall be granted, the number of shares of Common Stock subject to each
Stock Option to be granted to each such Participant, the Option Price of such
Stock Options and the terms and provisions of such Stock Options, all as
provided in the Plan. The Option Price of any ISO shall be not less than the
Fair Market Value of a share of Common Stock on the date on which the Stock
Option is granted, but the Option Price of an NSO may be less than the Fair
Market Value on the date the NSO is granted if the Committee so determines. If
an ISO is granted to a Participant who then owns stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or any
parent or subsidiary corporation of the Company, the option Price of such ISO
shall be at least 110% of the Fair Market Value of the Common Stock subject to
the ISO at the time such ISO is granted, and such ISO shall not be exercisable
after five years after the date on which it was granted. Each Stock Option shall
be evidenced by a written agreement ("Option Agreement") containing such terms
and provisions as the Committee may determine, subject to the provisions of the
Plan. ISOs may be granted only to Employees.
V1. Shares of Common Stock Subject to the Plan
6.1 Maximum Number. The maximum aggregate number of shares of Common
---------------
Stock that may be made subject to Stock Options shall be 1,750,000 authorized
but unissued shares. The aggregate Fair Market Value (determined as of the time
the ISO is granted) of the Common Stock as to which all ISOs granted to an
Employee may first become exercisable in a particular calendar year may not
exceed $100,000. If any shares of Common Stock subject to Stock Options are not
purchased or otherwise paid for before such Stock Options expire, such shares
may again be made subject to Stock Options.
6.2 Capital Changes. In the event any changes are made to the shares
----------------
of Common Stock (whether by reason of merger, consolidation, reorganization,
recapitalization, stock dividend in excess of ten percent (10%) at any single
time, stock split, combination of shares, exchange of shares, change in
corporate structure or otherwise), appropriate adjustments shall be made in: (i)
the number of shares of Common Stock theretofore made subject to Stock Options,
and in the purchase price of said
- 5 -
<PAGE>
shares; and (ii) the aggregate number of shares which may be made subject to
Stock Options. If any of the foregoing adjustments shall result in a fractional
share, the fraction shall be disregarded, and the Company shall have no
obligation to make any cash or other payment with respect to such a fractional
share.
VII. Exercise of Stock Options
7.1 Time of Exercise. Subject to the provisions of the Plan,
-----------------
including without limitation Section 7.6, the Committee, in its discretion,
shall determine the time when a Stock Option, or a portion of a Stock Option,
shall become exercisable, and the time when a Stock Option, or a portion of a
Stock Option, shall expire. Such time or times shall be set forth in the Option
Agreement evidencing such Stock Option. An ISO shall expire, to the extent not
exercised, no later than the tenth anniversary of the date on which it was
granted, and an NSO shall expire, to the extent not exercised, no later than ten
years after the date on which it was granted. The Committee may accelerate the
vesting of any Participant's Stock Option by giving written notice to the
Participant. Upon receipt of such notice, the Participant and the Company shall
amend the Option Agreement to reflect the new vesting schedule. Except as
otherwise provided in Article XII, the acceleration of the exercise period of a
Stock Option shall not affect the expiration date of that Stock Option.
7.2 Six-Month Holding Period. The shares of Common Stock issued upon
-------------------------
the exercise of a Stock Option to an officer or director of the Company, or to a
person who is directly or indirectly the beneficial owner of more than ten
percent of the Company's Common Stock, may not be sold or otherwise disposed of
within six months after the date of grant of the Stock Option.
7.3 Exchange of Outstanding Stock. The Committee, in its sole
-------------------------------
discretion, may permit a Participant to surrender to the Company shares of
Common Stock previously acquired by the Participant as part or full payment for
the exercise of a Stock Option. Such surrendered shares shall be valued at their
Fair Market Value on the date of exercise.
7.4 Use of Promissory Note; Exercise Loans. The Committee may, in its
---------------------------------------
sole discretion, impose terms and conditions, including conditions relating to
the manner and timing of payments, on the exercise of Stock Options. Such terms
and conditions may include, but are not limited to, permitting a Participant to
deliver to the Company his promissory note as full or partial payment for the
exercise of a Stock Option; provided that, with respect to any promissory note
given as payment or partial payment for the exercise of an ISO, all terms of
such note shall be determined at the time a Stock Option is granted and set
forth in the Option Agreement. The Committee, in its sole discretion, may
authorize the Company to make a loan to a Participant in connection with the
exercise of Stock Options, or
- 6 -
<PAGE>
authorize the Company to arrange or guaranty loans to a Participant by a third
party.
7.5 Stock Restriction Agreement. The Committee may provide that
----------------------------
shares of Common Stock issuable upon the exercise of a Stock Option shall, under
certain conditions, be subject to restrictions whereby the Company has a right
of first refusal with respect to such shares or a right or obligation to
repurchase all or a portion of such shares, which restrictions may survive a
Participant's term of employment with the Company. The acceleration of time or
times at which a Stock Option becomes exercisable may be conditioned upon the
Participant's agreement to such restrictions.
7.6 Termination of Employment Before Exercise. If a Participant's
------------------------------------------
employment or engagement with the Company or a Participating Subsidiary shall
terminate for any reason other than the Participant's disability, any Stock
Option then held by the Participant, to the extent then exercisable under the
applicable Option Agreement(s), shall remain exercisable after the termination
of his employment or engagement for a period of three months (but, in the case
of an ISO, in no event beyond ten years from the date of grant of the ISO). If
the Participant's employment or engagement is terminated because the Participant
is disabled within the meaning of Section 22(e)(3) of the Code, any Stock Option
then held by the Participant, to the extent then exercisable under the
applicable Option Agreement(s), shall remain exercisable after the termination
of his employment or engagement for a period of twelve months (but, in the case
of an ISO, in no event beyond ten years from the date of grant of the ISO). If
the Stock Option is not exercised during the applicable period, it shall be
deemed to have been forfeited and of no further force or effect.
7.7 Disposition of Forfeited Stock Options. Any shares of Common
---------------------------------------
Stock subject to Stock Options forfeited by a Participant shall not thereafter
be eligible for purchase by the Participant but may be made subject to Stock
Options granted to other Participants.
7.8 Option Vesting Upon Change of Control of the Company. In the
------------------------------------------------------
event of a Change of Control of the Company, as that term is defined in Section
4.10 of this Plan, the vesting of Stock Options granted pursuant to the Plan
shall automatically be accelerated, so that all Stock Options outstanding at the
time of such Change of Control will be exercisable immediately.
7.9 Grant of Supplemental Bonuses. The Committee, either at the time
------------------------------
of grant or at any time prior to exercise of any Stock Option or Stock
Appreciation Right, may provide for a Supplemental Bonus from the Company or
Participating Subsidiary in connection with a specified number of shares of
Common Stock then purchasable, or which may become purchasable, under a Stock
Option, or a specified number of Stock Appreciation Rights which
- 7 -
<PAGE>
may be or become exercisable. Such Supplemental Bonus shall be payable upon the
exercise of the Stock Option or Stock Appreciation Right with regard to which
such Supplemental Bonus was granted. A Supplemental Bonus shall not exceed the
amount necessary to reimburse the Participant for the income tax liability
incurred by him upon the exercise of the Stock Option or upon the exercise of
such Stock Appreciation Right, calculated using the maximum combined federal and
applicable state income tax rates then in effect and taking into account the tax
liability arising from the Participant's receipt of the Supplemental Bonus. The
Committee may, in its discretion, elect to pay any part or all of the
Supplemental Bonus in: (i) cash; (ii) shares of Common Stock; or (iii) any
combination of cash and shares of Common Stock. The provisions of Section 8.3
shall apply to the giving of notice, the determination of the number of shares
to be delivered, and the time for delivering shares. In applying Section 8.3,
the Supplemental Bonus shall be treated as if it were a Stock Appreciation Right
that the Participant exercised on the day the Supplemental Bonus became payable.
Shares of Common Stock issued pursuant to this Section 7.8 shall not be deemed
to have been issued upon the exercise of a Stock Option for purposes of the
limitations imposed by Section 6.1 of the Plan.
VIII. Stock Appreciation Rights
8.1 Grant of Stock Appreciation Rights. The Committee may, from
-------------------------------------
time to time, grant Stock Appreciation Rights to a Participant with respect to
not more than the number of shares of Common Stock which are, or may become,
purchasable under any Stock Option held by the Participant. The Committee may,
in its sole discretion, specify the terms and conditions of such rights,
including without limitation the time period or time periods during which such
rights may be exercised and the date or dates upon which such rights shall
expire and become void and unexercisable; provided, however, that in no event
shall such rights expire and become void and unexercisable later than the time
when the related Stock Option is exercised, expires or terminates. Each
Participant to whom Stock Appreciation Rights are granted shall be given written
notice advising him of the grant of such rights and specifying the terms and
conditions of the rights, which shall be subject to all the provisions of this
Plan.
8.2 Exercise of Stock Appreciation Rights. Subject to Section 8.3,
---------------------------------------
and in lieu of purchasing shares of Common Stock upon the exercise of a Stock
Option held by him, a Participant may elect to exercise the Stock Appreciation
Rights, if any, he has been granted and receive payment of the Redemption Value
of all, or any portion, of the number of shares of Common Stock subject to such
Stock Option with respect to which he has been granted Stock Appreciation
Rights; provided, however, that the Stock Appreciation Rights may be exercised
only when the Fair Market Value of the Common Stock subject to such Stock Option
- 8 -
<PAGE>
exceeds the exercise price of the Stock Option. A Participant shall exercise his
Stock Appreciation Rights by delivering a written notice to the Committee
specifying the number of shares with respect to which he exercises Stock
Appreciation Rights and agreeing to surrender the right to purchase an
equivalent number of shares of Common Stock subject to his Stock Option. If a
Participant exercises Stock Appreciation Rights, payment of his Stock
Appreciation Rights shall be made in accordance with Section 8.3 on or before
the 90th day after the date of exercise of the Stock Appreciation Rights.
8.3 Form of Payment. If a Participant elects to exercise Stock
----------------
Appreciation Rights as provided in Section 8.2, the Committee may, in its
absolute discretion, elect to pay any part or all of the Redemption Value of the
shares with respect to which the Participant has exercised Stock Appreciation
Rights in: (i) cash; (ii) shares of Common Stock; or (iii) any combination of
cash and shares of Common Stock. The Committee's election pursuant to this
Section 8.3 shall be made by giving written notice to the Participant within
said 90-day period, which notice shall specify the portion which the Committee
elects to pay in cash, shares of Common Stock or a combination thereof. In the
event any portion is to be paid in shares of Common Stock, the number of shares
to be delivered shall be determined by dividing the amount which the Committee
elects to pay in shares of Common Stock by the Fair Market Value of one share of
Common Stock on the date of exercise of the Stock Appreciation Rights. Any
fractional share resulting from any such calculation shall be disregarded. Said
shares, together with any cash payable to the Participant, shall be delivered
within said 90-day period.
IX. No Contract of Employment
Nothing in this Plan shall confer upon the Participant the right to
continue in the employ of the Company, or any Participating Subsidiary, nor
shall it interfere in any way with the right of the Company, or any such
Participating Subsidiary, to discharge the Participant at any time for any
reason whatsoever, with or without cause. Nothing in this Article IX shall
affect any rights or obligations of the Company or any Participant under any
written contract of employment.
X. No Rights as a Stockholder
A Participant shall have no rights as a stockholder with respect to
any shares of Common Stock subject to a Stock Option. Except as provided in
Section 6.2, no adjustment shall be made in the number of shares of Common Stock
issued to a Participant, or in any other rights of the Participant upon exercise
of a Stock Option by reason of any dividend, distribution or other right granted
to stockholders for which the record date is prior to the date of exercise of
the Participant's Stock Option.
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<PAGE>
XI. Assignability
No Stock Option, Stock Appreciation Right or Supplemental Bonus right
granted under this Plan, nor any other rights acquired by a Participant under
this Plan, shall be assignable or transferable by a Participant, other than by
will or the laws of descent and distribution or, in the case of an NSO, pursuant
to a qualified domestic relations order as defined, by the Code, Title I of the
Employee Retirement Income Security Act, or the rules thereunder.
Notwithstanding the preceding sentence, the Committee may, in its sole
discretion, permit the assignment or transfer of an NSO by a Participant other
than an officer or director and the exercise thereof by a person other than such
Participant, on such terms and conditions as the Committee in its sole
discretion may determine. Any such terms shall be determined at the time the NSO
is granted, and shall be set forth in the Option Agreement. In the event of his
death, the Stock Option or any Stock Appreciation Right or Supplemental Bonus
right may be exercised by the Personal Representative of the Participant's
estate or, if no Personal Representative has been appointed, by the successor or
successors in interest determined under the Participant's will or under the
applicable laws of descent and distribution.
XII. Merger or Liquidation of the Company
If the Company or its stockholders enter into an agreement to dispose
of all, or substantially all, of the assets or outstanding capital stock of the
Company by means of a sale or liquidation, or a merger or reorganization in
which the Company is not the surviving corporation, the Board of Directors shall
have the power and discretion to prescribe the terms and conditions for the
exercise of, or modification of, the Options and other rights granted hereunder.
By way of illustration, and not by way of limitation, the Board of Directors may
provide for the complete or partial acceleration of the dates of exercise of the
Options or other rights, or may provide that such Options or other rights will
be exchanged for or converted into options or rights to acquire securities of
the surviving or acquiring corporation, or may provide for a payment or
distribution in respect of outstanding Options or rights (or the portion thereof
that is currently exercisable) in cancellation thereof. The Board or the
Committee may provide that Options or other rights granted hereunder must be
exercised in connection with the closing of such transaction, and that if not so
exercised such Options or rights will expire. Any such determinations by the
Board of Directors or Committee may be made generally with respect to all
Participants, or may be made on a case-by-case basis with respect to particular
Participants. The provisions of this Article XII shall not apply to any
transaction undertaken for the purpose of reincorporating the Company under the
laws of another jurisdiction, if such transaction does not materially affect the
beaeficial ownership of the Company's capital stock.
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<PAGE>
XIII. Amendment
The Board may from time to time alter, amend, suspend or discontinue
the Plan, including, where applicable, any modifications or amendments as it
shall deem advisable in order that ISOs will be classified as incentive stock
options under the Code, or in order to conform to any regulation or to any
change in any law or regulation applicable thereto; provided, however, that no
such action shall adversely affect the rights and obligations with respect to
Stock Options at any time outstanding under the Plan; and provided further that
no such action shall, without the approval of the stockholders of the Company,
increase the maximum number of shares of Common Stock that may be made subject
to Stock Options (unless necessary to effect the adjustments required by Section
6.2), (ii) materially increase the benefits accruing to Participants under the
Plan, or (iii) materially modify the requirements as to eligibility for
participation in the Plan.
XIV. Registration of Optioned Shares
The Stock Options shall not be exercisable unless the purchase of such
optioned shares is pursuant to an applicable effective registration statement
under the Securities Act of 1933, as amended (the "Act"), or unless, in the
opinion of counsel to the Company, the proposed purchase of such optioned shares
would be exempt from the registration requirements of the Act, and from the
registration or qualification requirements of applicable state securities laws.
XV. Withholding Taxes
The Company or Participating Subsidiary may take such steps as it may
deem necessary or appropriate for the withholding of any taxes which the Company
or the Participating Subsidiary is required by any law or regulation or any
governmental authority, whether federal, state or local, domestic or foreign, to
withhold in connection with any Stock Option, Stock Appreciation Right or
Supplemental Bonus, including, but not limited to, the withholding of all or any
portion of any payment or the withholding of issuance of shares of Common Stock
to be issued upon the exercise of any Stock Option or Stock Appreciation Right
or upon payment of any Supplemental Bonus, until the Participant reimburses the
Company or Participating Subsidiary for the amount the Company or Participating
Subsidiary is required to withhold with respect to such taxes, or cancelling any
portion of such payment or issuance in an amount sufficient to reimburse itself
for the amount it is required to so withhold.
XVI. Brokerage Arrangements
The Committee, in its discretion, may enter into arrangements with one
or more banks, brokers or other financial institutions to facilitate the
disposition of shares acquired
- 11 -
<PAGE>
upon exercise of Stock Options, Stock Appreciation Rights or Supplemental
Bonuses, including, without limitation, arrangements for the simultaneous
exercise of Stock Options, Stock Appreciation Rights or Supplemental Bonuses,
and sale of the shares acquired upon such exercise.
XVII. Nonexclusivity of the Plan
Neither the adoption of the Plan by the Board nor the submission of
the Plan to stockholders of the Company for approval shall be construed as
creating any limitations on the power or authority of the Board to adopt such
other or additional incentive or other compensation arrangements of whatever
nature as the Board may deem necessary or desirable or preclude or limit the
continuation of any other plan, practice or arrangement for the payment of
compensation or fringe benefits to employees generally, or to any class or group
of employees, which the Company or any Participating Subsidiary now has lawfully
put into effect, including, without limitation, any retirement, pension, savings
and stock purchase plan, insurance, death and disability benefits and executive
short-term incentive plans.
XVIII. Effective Date
This Plan was adopted by the Board of Directors and became effective
on June 26, 1991, and was approved by the Company's stockholders on June 28,
1991. No Stock Options shall be granted subsequent to ten years after the
effective date of the Plan. Stock Options outstanding subsequent to ten years
after the effective date of the Plan shall continue to be governed by the
provisions of the Plan.
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<PAGE>
PROXY This Proxy is Solicited on Behalf
of the Board of Directors
FISCHER IMAGING CORPORATION
Annual Meeting of Stockholders, June 27, 2000
The undersigned revokes all previous proxies, acknowledges receipt of the
Notice of the Annual Meeting of Stockholders to be held June 27, 2000 and the
Proxy Statement and appoints Morgan W. Nields and Louis E. Rivelli, each of
them, the Proxy of the undersigned, with full power of substitution, to vote
all shares of Common Stock of Fischer Imaging Corporation (the "Company")
which the undersigned is entitled to vote, either on his or her own behalf or
on behalf of any entity or entities, at the Annual Meeting of Stockholder of
the Company to be held at the Company's headquarters, 12300 North Grant
Street, Denver, Colorado 80241, on Tuesday, June 27, 2000, at 1:00 p.m. (the
"Annual Meeting"), and at any adjournment or postponement thereof, with the
same force and effect as the under signed might or could do if personally
present thereat. The shares represented by this Proxy shall be voted in the
manner set forth on the reverse side.
<TABLE>
<S> <C> <C> <C>
1. To elect two Class III directors to the Board of
Directors to serve for a three-year term ending in WITHHOLD
the year 2003 or until their successors are duly AUTHORITY
elected and qualified: FOR AGAINST TO VOTE
Morgan W. Nields [_] [_] [_]
Fred Burbank, M.D. [_] [_] [_]
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
2. To approve an amendment to the Company's 1991 Stock FOR AGAINST ABSTAIN
Option Plan (the "Plan") increasing the number of [_] [_] [_]
shares of Common Stock authorized for issuance over
the term of the Plan by an additional 500,000 shares.
3. To ratify the appointment of Arthur Andersen LLP as FOR AGAINST ABSTAIN
independent auditors of the Company for the fiscal [_] [_] [_]
year ending December 31, 2000.
4. In accordance with the discretion of the proxy holders, to act upon all
matters incident to the conduct of the meeting and upon other matters as
may properly come before the meeting.
</TABLE>
The Board of Directors recommends a vote IN FAVOR OF the directors listed
above and a vote IN FAVOR OF each of the listed proposals. This Proxy, when
properly executed, will be voted as specified above. If no specification is
made, this Proxy will be voted IN FAVOR OF the election of the directors
listed above and IN FAVOR OF the other proposals.
Please print the name(s) appearing on each share
certificate(s) over which you have voting authority:
----------------------------------------------------
(Print name(s) on certificate)
----------------------------------------------------
Please sign your name: (Authorized Signature(s))
Date:
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