10-Q

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarter Ended June 30, 2002

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                              to                             

Commission file number 0-19386

FISCHER IMAGING CORPORATION
(Exact name of Registrant as specified in its charter)

DELAWARE (State of incorporation)	36-2756787 (I.R.S. Employer Identification No.)
12300 North Grant Street Denver, Colorado (Address of principal executive offices)	80241 (Zip Code)

Registrant's telephone number, including area code: (303) 452-6800

        Indicate by check mark whether the Registrant (i) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (ii) has been subject to such filing requirements for the past 90 days. Yes o    No ý

        The number of shares of Registrant's Common Stock outstanding as of August 30, 2002 was 9,274,826.

Important Note: Ernst & Young LLP, our independent auditors, have not completed their review of this Report on Form 10-Q as required by Rule 10-01(d) of Regulation S-X. The circumstances leading to this result are described in Note 1 of the Notes to Consolidated Financial Statements appearing in this Report on Form 10-Q.

FISCHER IMAGING CORPORATION
TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION		Page
Item 1.	Consolidated Financial Statements
		Consolidated Balance Sheets (unaudited)—June 30, 2002 and December 31, 2001	3
		Consolidated Statements of Income (unaudited)—Three and six months ended June 30, 2002 and July 1, 2001	4
		Consolidated Statements of Cash Flows (unaudited)—Six months ended June 30, 2002 and July 1, 2001	5
		Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		20
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		21
Item 2.	Changes in Securities and Use of Proceeds		21
Item 3.	Defaults Upon Senior Securities		21
Item 4.	Submission of Matters to a Vote of Security Holders		21
Item 5.	Other Information		21
Item 6.	Exhibits and Reports on Form 8-K		21

FISCHER IMAGING CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share data)
(Unaudited)

					June 30, 2002			December 31, 2001
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents				$	18,195		$	1,233
	Trade accounts receivable, net of allowance for doubtful accounts of $675 and $1,278 at June 30, 2002 and December 31, 2001, respectively					16,694			16,790
	Inventories, net					13,182			19,683
	Patent settlement receivable					900			—
	Prepaid expenses and other current assets					564			312
		Total current assets				49,535			38,018
NON-CURRENT PATENT SETTLEMENT RECEIVABLE						6,300			—
PROPERTY AND EQUIPMENT:
	Manufacturing equipment					8,451			8,105
	Office equipment and leasehold improvements					6,771			6,356
						15,222			14,461
	Less:  Accumulated depreciation and amortization					12,940			12,615
		Property and equipment, net				2,282			1,846
INTANGIBLE ASSETS, net						1,171			1,589
DEFERRED COSTS AND OTHER ASSETS						1,193			1,352
				TOTAL ASSETS	$	60,481		$	42,805
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
	Trade accounts payable				$	1,786		$	3,589
	Accrued salaries and wages					1,859			1,816
	Customer deposits					23			115
	Accrued warranty and installation costs					1,357			1,201
	Deferred service revenue					369			322
	Deferred royalty revenue					1,894			—
	Other current liabilities					3,071			2,538
		Total current liabilities				10,359			9,581
LONG-TERM DEBT						915			925
NON-CURRENT DEFERRED ROYALTY REVENUE						10,457			—
			TOTAL LIABILITIES			21,731			10,506
STOCKHOLDERS' INVESTMENT:
	Common Stock, $.01 par value, 25,000,000 shares authorized, 9,255,553 and 9,176,929 shares issued and outstanding at June 30, 2002 and December 31, 2001, respectively					92			91
	Preferred Stock, 5,000,000 shares authorized: Series C Junior Participating Preferred Stock, $.01 par value, 500,000 shares authorized, no shares issued and outstanding					—			—
	Series D Convertible Preferred Stock, $.01 par value, 506,667 shares authorized, no shares issued and outstanding					—			—
	Additional paid-in capital					49,009			48,798
	Accumulated deficit					(10,147	)		(16,389	)
	Accumulated other comprehensive loss (foreign currency translation adjustments)					(204	)		(201	)
				TOTAL STOCKHOLDERS' INVESTMENT		38,750			32,299
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT					$	60,481		$	42,805

The accompanying notes are an integral part of these consolidated financial statements.

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FISCHER IMAGING CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share data)
(Unaudited)

			Three Months Ended						Six Months Ended
			June 30, 2002			July 1, 2001			June 30, 2002			July 1, 2001
REVENUES:
	Products and services		$	8,793		$	12,824		$	19,902		$	24,070
	Royalty			316			—			316			—
		Total Revenues		9,109			12,824			20,218			24,070
COST OF SALES:
	Products and services			6,505			6,386			11,921			12,070
	Inventory writedown and other charges			9,342			—			9,342			—
		Total Cost of Sales		15,847			6,386			21,263			12,070
GROSS PROFIT				(6,738	)		6,438			(1,045	)		12,000
OPERATING EXPENSES:
	Research and development			813			937			2,052			1,909
	Selling, marketing and service			3,307			3,125			5,800			6,019
	General and administrative			2,476			1,551			3,951			2,849
		Total Operating Expenses		6,596			5,613			11,803			10,777
INCOME (LOSS) FROM OPERATIONS				(13,334	)		825			(12,848	)		1,223
	Interest expense			(37	)		(50	)		(68	)		(104	)
	Interest income			17			25			18			47
	Patent settlement			19,233			—			19,233			—
	Other income (expense), net			(50	)		(49	)		(95	)		(208	)
INCOME BEFORE INCOME TAXES				5,829			751			6,240			958
	Provision for income taxes			—			—			—			—
NET INCOME			$	5,829		$	751		$	6,240		$	958
NET INCOME PER SHARE
	Basic		$	0.63		$	0.09		$	0.68		$	0.11
	Diluted		$	0.58		$	0.08		$	0.62		$	0.10
WEIGHTED AVERAGE SHARES USED TO CALCULATE INCOME PER SHARE
	Basic			9,239			8,635			9,213			8,633
	Diluted			10,013			9,403			10,024			9,235

The accompanying notes are an integral part of these consolidated financial statements.

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FISCHER IMAGING CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)

		Six Months Ended
		June 30, 2002			July 1, 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net cash provided by operating activities	$	17,526		$	2,534
CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures		(762	)		(538	)
	Net cash used in investing activities		(762	)		(538	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Proceeds from exercise of stock options		212			69
	Repayments of long-term debt		(10	)		—
	Net cash provided by financing activities		202			69
EFFECT OF EXCHANGE RATE CHANGES ON CASH			(4	)		(388	)
NET INCREASE IN CASH AND CASH EQUIVALENTS			16,962			1,677
CASH AND CASH EQUIVALENTS, beginning of period			1,233			843
CASH AND CASH EQUIVALENTS, end of period		$	18,195		$	2,520

The accompanying notes are an integral part of these consolidated financial statements.

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FISCHER IMAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)  GENERAL

        Fischer Imaging Corporation (the "Company") is filing its Form 10-Q for the second quarter although Ernst & Young LLP, Fischer's current auditor, has not been able to complete its SAS-71 review procedures due to an inability to review the work papers of the Company's previous auditor, Arthur Andersen LLP, and Ernst & Young will not be able to finalize its review of various inventory adjustments until it observes the Company's physical inventory count scheduled for September 30, 2002. The Form 10-Q is subject to revision when Ernst & Young LLP concludes its SAS-71 review procedures; however, in management's opinion, the accompanying unaudited consolidated balance sheets and statements of income and cash flows contain all adjustments necessary to present fairly the financial position of the Company on June 30, 2002, its results of operations for the three and six months ended June 30, 2002 and July 1, 2001, and its cash flows for the six months ended June 30, 2002 and July 1, 2001. Results of operations and cash flows for the interim periods may not be indicative of the results of operations and cash flows for the full fiscal year.

        These unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, as a result, do not include all the information and note disclosures required by generally accepted accounting principles. The financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company's latest annual report on Form 10-K for the year ended December 31, 2001.

        Typically, and for the year ending December 31, 2002, the Company closes its first three fiscal quarters as of the Sunday closest to the end of March, June and September.

        During the second quarter of 2002, the Board of Directors approved a plan to review the Company's business and its organizational structure. This resulted in the establishment of the new Radiology, Electrophysiology & Surgery ("RES") Division, with its own sales, marketing and engineering structure, and staffed with experienced Fischer employees. Management believes the divisionalization of the business relating to its non-core products into the newly formed RES Division will facilitate increased focus on the RES product lines. The Company's core business is the design, manufacture and marketing of specialty digital and other mammography systems for the diagnosis and treatment of disease.

(2)  INVENTORIES

        Inventories, which include costs of materials, direct labor, and manufacturing overhead, are priced at the lower of cost (using primarily the last-in, first-out, or LIFO, method of valuation) or market. There is not a material difference between inventory valuations on a first-in, first-out, or FIFO, basis and LIFO. Write-downs for excess and obsolete inventories are charged to expense in the period when conditions giving rise to the write-downs are first recognized.

        During the second quarter, the Company incurred a significant drop in revenue in its non-core products which formed the new RES Division. At the end of the second quarter, the Company also conducted a review of inventory levels needed to support a lower shipment rate and a significant writedown was made to bring inventory levels in line with the current estimate of future product revenue. Additionally, during the second quarter, the Company consolidated its warehousing operations, moved its inventory stores locations and reworked its production lines. The Company also reviewed its field inventory and its work order inventory counts. As a consequence of this review of inventory accounts, the Company marked down its inventory to more accurately reflect the net

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realizable value of the products held for eventual sale. The Company has estimated the total write-off of inventory to be in the range of $9 million to $11 million. During the second quarter, the Company recorded a total net inventory adjustment of $10.8 million to reflect this estimate. A total of $2.6 million relating to the review of field inventory and work order inventory has been recorded in Cost of Sales—Products and services and a total of $8.2 million relating to the non-core business products and has been recorded in Cost of Sales—Inventory writedown and other charges. The Company will take a physical inventory at the end of the third quarter 2002, and does not believe there will be an additional significant charge to expense as a result.

        Inventories consisted of the following components (in thousands):

		June 30, 2002		December 31, 2001
FIFO cost—
Raw materials and component parts		$	7,471	$	10,327
Work in process & finished goods			5,711		9,356
	Inventories, net	$	13,182	$	19,683

(3)  NOTES PAYABLE AND LONG-TERM DEBT

        Notes payable and long-term debt consisted of the following (in thousands):

	June 30, 2002			December 31, 2001
Capitalized lease obligations	$	18		$	76
Loan on CSV of life insurance		915			883
		933			959
Less—current maturities		(18	)		(34	)
Long-term debt	$	915		$	925

        The Company paid interest of $37,000 and $50,000 for the quarters ended June 30, 2002 and July 1, 2001, respectively.

        See "Management's Discussion and Analysis—Liquidity and Capital Resources" for further discussion of the Company's line of credit.

(4)  PATENT LITIGATION SETTLEMENT

        During the second quarter, the Company settled a patent infringement lawsuit that it had filed against ThermoElectron and Hologic, Inc. Under the $32.2 million settlement, the Company received $25 million in cash and $7.2 million in a long-term receivable from ThermoElectron to be received in equal annual installments over the remaining eight-year life of the patents for continued sales of the breast-biopsy imaging system now being sold by Hologic. The Company will recognize a total of $32.2 million over the original patent life of 17 years, resulting in a one-time other income item of $19.2 million and future annual license fees of approximately $1.9 million per year for the remaining patent lives.

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(5)  NET INCOME PER SHARE

        Basic income per share is computed by dividing the net income by the weighted average number of shares of Common Stock outstanding. Diluted income per share is determined by dividing the net income by the sum of: (1) the weighted average number of Common Shares outstanding; and (2) if dilutive, the effect of outstanding stock options determined utilizing the treasury stock method.

        A reconciliation between the number of securities used to calculate basic and diluted income per share is as follows (in thousands):

	Three Months Ended		Six Months Ended
	June 30, 2002	July 1 2001	June 30, 2002	July 1 2001
Weighted average of common shares outstanding:
Basic	9,239	8,635	9,213	8,633
Effect of stock options (treasury method)	774	768	811	602
Diluted	10,013	9,403	10,024	9,235

        As of June 30, 2002 and July 1, 2001, there were, respectively, 1,580,882 and 1,652,275 outstanding options to purchase shares of common stock under the Company's current stock option plans.

        The anti-dilutive options for the three months ended June 30, 2002 and July 1, 2001 were 806,203 and 884,132, respectively. The anti-dilutive options for the six months ended June 30, 2002 and July 1, 2001 were 769,821 and 1,050,832, respectively. The anti-dilutive options were excluded from the computation of diluted earnings per share for the quarters ended June 30, 2002 and July 1, 2001 because the exercise price exceeded the market price of the stock.

(6)  COMPREHENSIVE INCOME

        Comprehensive income is defined as the change in equity of an enterprise other than the change resulting from investments by or distributions to its owners. For the Company, comprehensive income includes only net earnings and foreign currency translation adjustments, as follows:

	Three Months Ended						Six Months Ended
	June 30, 2002			July 1 2001			June 30, 2002			July 1 2001
Net income	$	5,829		$	751		$	6,240		$	958
Foreign currency translation adjustments		(2	)		(144	)		(2	)		(388	)
Comprehensive income	$	5,827		$	607		$	6,238		$	570

(7)  NEW OPERATING DIVISION

        In establishing the new RES Division, the Company recognized a $1.2 million charge to provide system enhancements for non-core systems already sold in order to meet certain customer and safety requirements. This charge and the $8.2 million inventory writedown have been included in the financial statements in "Cost of Sales—Inventory Writedown and Other Charges." Additionally, the Company charged a $0.2 million writedown of impaired Goodwill related to a now-discontinued sales subsidiary of non-core products, which is included in General and Administrative expenses.

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(8)  OPERATING AND GEOGRAPHIC SEGMENT INFORMATION

        The Company operates in a single industry segment: the design, manufacture, and marketing of x-ray imaging systems. The Company's manufacturing and most distribution activities are in the United States, including export sales to Europe, primarily, and elsewhere. The Company also has marketing operations in Europe. The following is a summary of the Company's operations by segment (in thousands):

			United States
													Internal Sales
			Domestic		Export		Total			Europe						Total
Three Months Ended June 30, 2002
	Revenues:
		Products	$	4,095	$	930	$	5,025		$	51		$	(25	)	$	5,051
		Services		3,460		—		3,460			282			—			3,742
		Royalty		316		—		316						—			316
				7,871		930		8,801			333			(25	)		9,109
	Costs of sales:
		Products		5,686		583		6,269			45			(25	)		6,289
		Services		133		—		133			83			—			216
		Inventory writedown and other charges		9,342		—		9,342			—			—			9,342
		Allocated		15,161		583		15,744			128			(25	)		15,847
	Gross profit							(6,943	)		205			—			(6,738	)
	Operating expenses							6,218			378			—			6,596
	Loss from operations							(13,161	)		(173	)		—			(13,334	)
	Interest expense							(37	)		—			—			(37	)
	Interest income							17			—			—			17
	Other income (expense), net							19,191			(8	)		—			19,183
	Net income (loss)						$	6,010		$	(181	)	$	—		$	5,829

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			United States
												Internal Sales
			Domestic		Export		Total			Europe					Total
Three Months Ended July 1, 2001
	Revenues:
		Products	$	7,542	$	1,422	$	8,964		$	138	$	(30	)	$	9,072
		Services		3,541		—		3,541			211		—			3,752
				11,083		1,422		12,505			349		(30	)		12,824
	Costs of sales:
		Products		4,096		846		4,942			85		(30	)		4,997
		Services		536		—		536			44		—			580
		Allocated		4,632		846		5,478			129		(30	)		5,577
		Unallocated						809			—		—			809
								6,287			129		(30	)		6,386
		Gross profit						6,218			220		—			6,438
		Operating expenses						5,418			195		—			5,613
		Income from operations						800			25		—			825
		Interest expense						(50	)		—		—			(50	)
		Interest income						25			—		—			25
		Other income (expense), net						(56	)		7		—			(49	)
		Net income					$	719		$	32	$	—		$	751

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			United States
													Internal Sales
			Domestic		Export		Total			Europe						Total
Six Months Ended June 30, 2002
	Revenues:
		Products	$	10,079	$	2,031	$	12,110		$	425		$	(254	)	$	12,281
		Services		7,102		—		7,102			519			—			7,621
		Royalty		316		—		316			—			—			316
				17,497		2,031		19,528			944			(254	)		20,218
	Costs of sales:
		Products		9,839		1,279		11,118			239			(254	)		11,103
		Services		688		—		688			130			—			818
		Inventory writedown and other charges		9,342		—		9,342			—			—			9,342
		Allocated		19,869		1,279		21,148			369			(254	)		21,263
	Gross profit							(1,620	)		575			—			(1,045	)
	Operating expenses							11,192			611			—			11,803
	Loss from operations							(12,812	)		(36	)		—			(12,848	)
	Interest expense							(68	)		—			—			(68	)
	Interest income							18			—			—			18
	Other income (expense), net							19,156			(18	)		—			19,138
	Net income (loss)						$	6,294		$	(54	)	$	—		$	6,240
Other information:
	Identifiable assets						$	58,080		$	2,401		$	—		$	60,481
	Capital expenditures							762			—			—			762
	Depreciation							325			—			—			325
	Amortization							251			—			—			251

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			United States
													Internal Sales
			Domestic		Export		Total			Europe						Total
Six Months Ended July 1, 2001
	Revenues:
		Products	$	14,570	$	2,323	$	16,893		$	285		$	(33	)	$	17,145
		Services		6,401		—		6,401			524			—			6,925
				20,971		2,323		23,294			809			(33	)		24,070
	Costs of sales:
		Products		8,117		1,348		9,465			194			(33	)		9,626
		Services		871		—		871			125			—			996
		Allocated		8,988		1,348		10,336			319			(33	)		10,622
		Unallocated						1,448			—			—			1,448
								11,784			319			(33	)		12,070
	Gross profit							11,510			490			—			12,000
	Operating expenses							10,339			438			—			10,777
	Income from operations							1,171			52			—			1,223
	Interest expense							(104	)		—			—			(104	)
	Interest income							47			—			—			47
	Other income (expense), net							(203	)		(5	)		—			(208	)
	Net income						$	911		$	47		$	—		$	958
Other information:
	Identifiable assets						$	37,727		$	1,138		$	—		$	38,865
	Capital expenditures							538			—			—			538
	Depreciation							407			—			—			407
	Amortization							288			—			—			288

        Internal sales from the United States to Europe are recorded on the basis of transfer pricing established by the Company.

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(9)  COMMITMENTS & CONTINGENCIES

        The Company is a defendant in various lawsuits incident to the operation of its business. We believe there are no pending legal proceedings that would have a material adverse effect on the consolidated financial position or results of operations of the Company.

Vendor Financing Program

        The Company has agreed to provide a guarantee to one customer on the lease with a third party of one SenoScan system. If the customer should default on its lease obligation for a period of more than 60 days, the Company has agreed to assume the liability remaining on the lease. In such a case, the Company may be exposed to a maximum liability of the total amount of the lease payments of approximately $524,000 if it is not able to resell or relocate the SenoScan system.

(10) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards No. 142.

        In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," which replaced Accounting Principle Board Opinion No. 17, "Intangible Assets". SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only method. Amortization of goodwill, including goodwill recorded in past business combinations, will cease upon adoption of SFAS No. 142. After December 31, 2001, goodwill can only be written down upon impairment as a result of annual tests for fair value, or tests taken when certain triggering events occur. The Company adopted SFAS No. 142 on January 1, 2002 and accordingly did not record amortization expense from previous business combinations during the three months ended June 30, 2002. Goodwill amortization expense recorded in the three months ended July 1, 2001 was $50,303.

Statement of Financial Accounting Standards No. 143.

        In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." The statement requires companies to recognize the fair value of an asset retirement liability in the financial statements and capitalize that cost as part of the cost of the related long-lived asset. The asset retirement liability should then be allocated to expense by using a systematic and rational method. The statement is effective for fiscal years beginning after June 15, 2002. Adoption of this statement is not expected to have a significant impact on the Company's financial statements.

Statement of Financial Accounting Standards No. 144.

        In August 2001, the FASB issued SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets" which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The provisions of this statement are generally to be applied prospectively. The adoption of SFAS No. 144 did not have a material impact on the Company's financial statements.

Statement of Financial Accounting Standards No. 146.

        In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses financial accounting and reporting for costs associated with exit or

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disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). Generally, SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized as incurred, whereas EITF Issue No. 94-3 required such a liability to be recognized at the time that an entity committed to an exit play. The Company is currently evaluating the provisions of the new rule, which is effective for exit or disposal activities that are initiated after December 31, 2002.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

        You should read the following discussion of the results of operations and financial condition in conjunction with our consolidated financial statements and notes thereto appearing in the Company's Form 10-K for the year ended December 31, 2001.

        Fischer Imaging Corporation designs, manufactures and markets specialty digital and other mammography systems for the diagnosis and treatment of disease. During the second quarter of 2002, the Board of Directors approved the establishment of the new Radiology, Electrophysiology & Surgery ("RES") Division, with its own sales, marketing and engineering structure, and staffed with experienced Fischer employees. Management believes the divisionalization of the business relating to its non-core products into the newly formed RES Division will facilitate increased focus on the RES product lines.

Special Note Regarding Forward-looking Statements

        This Form 10-Q contains forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from any future results or performance expressed or implied by the forward-looking statements. Statements that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements because they contain the words "believes," "expects," "anticipates," "plans," "estimates," and similar words and expressions. These forward-looking statements include statements about:

•

potential future inventory adjustments;



•

the adequacy of financial resources;



•

future revenues, expenses and other operating results;



•

the success of our new RES Division;



•

marketing arrangements, and other agreements pertaining to Mammotest, SenoScan and other products;



•

our ability to obtain the necessary FDA approvals for SenoScan or our other products;



•

the success in marketing SenoScan;



•

the status of our products in development;



•

production and enhancement of SenoScan to meet market demands;



•

the market penetration of SenoScan;

14

•

the size and growth of our markets;



•

our manufacturing capacity and capabilities; and



•

the availability of raw materials and components.

        These forward-looking statements are only predictions and involve risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. In addition, these forward-looking statements represent our estimates and assumptions only as of the date of this report, and we expressly disclaim any duty to update these estimates and assumptions. Factors that could cause the actual results we achieve to differ materially from those discussed in the forward-looking statements are included in the risk factors of the Form 10-K as well as elsewhere in this report.

Critical Accounting Policies and Estimates

        The Company's discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to bad debts, inventories, long-lived assets, income taxes, and contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

        The Company recognizes revenue from the sales of systems and parts at the time the product is shipped. The Company recognizes revenue from services when they are performed, and from pre-paid service contracts and extended warranty contracts in the periods for which the contracts are in effect. The Company bills for service contracts and extended warranties in advance, and records a liability for the amount of the deferred revenue until such time as the contract expires. In the course of business, the Company ships replacement parts to customers, and records related revenue at the time of shipment. Certain replaced parts may be returned for partial credit, and the Company makes estimates to reduce current revenue to account for the future effect of those returns. Should such parts not be returned by customers, additional revenue may be recognized in future periods.

        The Company writes down its inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. There was a substantial writedown of inventory associated with the significant drop in revenue in our non-core product lines, the related creation of the new RES Division to focus on these product lines, and the evaluation of our ability to recover the net realizable value of existing inventories. The Company also changed the methodology by which it calculates excess and obsolete inventory, most notably on its product lines in the new RES Division.

15

        The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the Company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Alternatively, if customer remittances are better than expected, allowances may be reduced.

Contractual Obligations

        At June 30, 2002, the Company's commitments under contractual obligations were as follows:

Payments Due by Period
(in thousands)

	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
Capital Lease Obligations	$	18	$	18	$	—	$	—	$	—
Loan on CSV of Life Insurance		915		—		—		—		915
Guarantee—Customer Financing		524		524		—		—		—
Operating Leases		8,027		796		1,592		1,592		4,047
Total Contractual Cash Obligations	$	9,484	$	1,338	$	1,592	$	1,592	$	4,962

Results of Operations

Risk of Operating Losses

        We design, manufacture and market specialty and general purpose medical imaging systems for the diagnosis and treatment of disease. Our newer products are directed towards medical specialties, such as mammography screening, diagnosing and treating breast cancer, in which image-guided, minimally invasive therapies are replacing open surgical procedures.

        We have experienced losses from operations for this quarter and for three of the past five fiscal years. Significant factors giving rise to losses include: costs associated with excessive manufacturing capacity and intense competition for our markets. We have taken steps to reduce costs and improve sales, including:

•

establishing a new sales and marketing team for SenoScan in the second quarter of 2002;



•

closure of our Addison, Illinois manufacturing facility in 1999;



•

a workforce reduction of approximately 20% in the third and fourth quarters of 1999; and



•

other programs to increase efficiency.

        Regaining profitability will depend on many factors, including:

•

achieving market acceptance of SenoScan;



•

sufficient demand for our products;



•

our ability to maintain or increase gross margins;

16

•

the effectiveness of our efforts to control manufacturing and other costs;



•

our ability to receive necessary clearances from the FDA; and



•

effective implementation of marketing and sales strategies.

        We expect continued fluctuations in quarterly and annual revenues, operating results and net income, depending on such factors as:

•

the success of new product introductions like SenoScan or marketing initiatives by us or our competitors;



•

the success of our new RES Division;



•

the timing of large system product orders;



•

the effects of managed healthcare on hospital, clinic and other capital expenditures and reimbursement;



•

increases in marketing and other costs in relation to sales; and



•

seasonal patterns and other timing issues affecting customer purchasing decisions.

        These factors can occur unexpectedly and, because many of our costs are fixed, we may not be able to sufficiently reduce our costs in periods when revenues are less than anticipated and may, as a result, suffer unexpected losses. Please refer to the disclosure contained in our Form 10-K for the year ended December 31, 2001 for additional factors which may unexpectedly reduce our revenues.

Risks Associated with Market Acceptance of SenoScan

        The market for SenoScan is unproven. We have had only limited sales of our SenoScan system since its introduction, and our sales plan contemplates increasing the manufacture of SenoScan systems slowly and gradually.

        Thus, it will take some time before we can ascertain whether SenoScan has been accepted by clinicians. There is a significant installed base of conventional X-ray imaging products in hospitals and radiology practices. The use of SenoScan in many cases would require these potential customers to either modify or replace their existing X-ray imaging equipment. Moreover, we believe that a major factor in the market's acceptance of digital imaging technology is the trend toward transition by the healthcare industry from conventional film archiving systems to storage of X-ray images electronically. Because the benefits of our direct-to-digital technology may not by fully realized by customers until they install an electronic storage platform, a large potential market for these products may not develop until electronic storage is more widely used. Because of the early stage of the markets for these products, it is likely that our evaluation of the potential markets for these products will vary with time. A significant market for SenoScan and digital imaging products may not develop.

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Three and six months ended June 30, 2002 compared to the three and six months ended July 1, 2001

        The following table sets forth the percentage of revenues represented by certain data included in the Company's statements of operations for the periods indicated:

		Three Months Ended				Six Months Ended
		June 30, 2002		July 1 2001		June 30, 2002		July 1 2001
Revenues		100.0	%	100.0	%	100.0	%	100.0	%
Cost of Sales:
	Products and services	71.4		49.8		59.0		50.1
	Inventory writedown and other charges	102.6		—		46.2		—
Research and development		8.9		7.3		10.1		7.9
Selling, marketing and service		36.3		24.4		28.7		25.0
General and administrative		27.2		12.1		19.5		11.9
(Loss) income from operations		(146.4	)	6.4		(63.5	)	5.1
Other income (expense)		210.4		(0.5	)	94.4		(1.1	)
Net income		64.0		5.9		30.9		4.0

        Revenues.    Second quarter 2002 revenues were $9,109,000, a 29.0% decrease from second quarter 2001 revenues of $12,824,000. The decrease reflects primarily a decrease in non-mammography product line sales of 68%. This is consistent with the Company's stated direction of concentrating on women's health product lines and de-emphasizing our general radiography, electrophysiology and general surgery products. Mammography sales also declined 30% during the second quarter. During the quarter, significant management energy was directed at restructuring the field sales organization, establishing a senior sales management structure, as well as other activities designed to increase future sales. Second quarter 2002 revenues included $316,000 of royalty revenue associated with a mammography patent license related to the settlement of the patent litigation.

        For the six months ended June 30, 2002, revenues were $20,218,000, or about 16% lower than revenues of $24,070,000 for the six months ended July 1, 2001. The decrease was primarily in non-mammography product line sales with mammography product lines remaining relatively flat.

        Cost of Sales — Products and services.    For the second quarter of 2002, cost of sales — products and services expressed as a percentage of revenue was 71.4%, as compared to 49.8% for the second quarter of 2001. For the six months ended June 30, 2002, cost of sales — products and services as a percentage of revenue was 59.0%. The significant increase for the quarter and the six months period ending June 30, 2002 was due primarily to the impact of a $2.6 million inventory charge associated with the write-off of field service inventories and engineering material, labor and overhead associated with build-to-order systems.

        Cost of Sales — Inventory write down and other charges.    For the three and six months ended June 30, 2002, cost of sales — inventory writedown and other charges were 102.6% and 46.2% of revenues, respectively. During the second quarter, the Company had a significant drop in revenue in its non-core products which formed the new RES Division. At the end of the second quarter, the Company also conducted a review of inventory levels needed to support a lower shipment rate and a significant writedown was made to bring inventory levels in line with the current estimate of future product revenue.

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        Research and Development Expenses.    Research and development expenses for the second quarter of 2002 and 2001 were $813,000 and $937,000, respectively. For the six months ended June 30, 2002 and July 1, 2001, research and development expenses were $2,052,000 and $1,909,000 respectively. Overall, research and development expenses are up year over year due to the hiring of additional research and development personnel. Second quarter research and development expenses were lower due to transfers of build-to-order systems to inventory during the second quarter.

        Selling, Marketing and Service Expenses.    Selling, marketing and service expenses for the second quarter of 2002 and 2001 were $3,307,000 and $3,125,000, respectively, or 36.3% and 24.4%, respectively, of revenues. For the six months ended June 30, 2002 and July 1, 2001, selling, marketing and service expenses were $5,800,000 and $6,019,000, respectively, or 28.7% and 25.0% of revenues, respectively. The Company has increased its sales and marketing headcount, as well as increased its marketing costs associated with its core mammography product lines.

        General and Administrative Expenses.    General and administrative expenses for the second quarter of 2002 and 2001 were $2,476,000 and $1,551,000, respectively. For the six months ended June 30, 2002 and July 1, 2001, general and administrative expenses were $3,951,000 and $2,849,000, respectively. The increase in general and administrative expenses was due primarily to additional legal expenses and a writedown of impaired Goodwill of $222,000.

        Interest Expense / Interest Income.    Interest expense for the three months ended June 30, 2002 and July 1, 2001 was $37,000 and $50,000, respectively. Interest income for the second quarter of 2002 and 2001 was $17,000 and $25,000, respectively. Interest expense for the six months ended June 30, 2002 and July 1, 2001 was $68,000 and $104,000, respectively. Interest income for the six months ended June 30, 2002 and July 1, 2001 was $18,000 and $47,000, respectively. The decreases in interest expense in the three and six months ended June 30, 2002, as compared to the three and six months ended July 1, 2001, respectively were due primarily to lower levels of borrowings under the Company's working capital line of credit due to having excess cash balances from the settlement of the patent litigation.

        Patent Settlement.    Patent Settlement of $19,233,000 is the settlement of a patent infringement lawsuit that the Company had filed against ThermoElectron. Under the settlement, the Company received $25,000,000 in cash from ThermoElectron and will also receive a total of $7,200,000 in equal annual installments over the remaining eight-year life of the patents for the continued sale of the breast imaging system. The Company will recognize a total of $32,200,000 over the original patent life of 17 years, resulting in a one-time net gain of $19,233,000 and future annual license fees of approximately $1,894,000 per year for the remaining life of the underlying patents.

        Net Income/Loss.    The Company's net income for the second quarter of 2002 was $5,829,000 as compared to net income for the second quarter of 2001 of $751,000. The changes in net income are due to the factors mentioned above.

        The Company's net income for the six months ended June 30, 2002 and July 1, 2001 was $6,240,000 and $958,000, respectively. The changes in net income are due to the factors mentioned above.

        Earnings Per Share.    Diluted earning per share for the second quarter increased to $0.58 in 2002 from $0.08 in 2001 as a result of higher net income in the second quarter of 2002 compared to second quarter 2001. On a year to date basis, earnings per share increased to $0.62 in 2002 from $0.10 in 2001.

19

Income Taxes

        The Company estimates that it will owe no taxes for the year ended December 31, 2002. Accordingly, no income tax benefit or provision has been recorded for the six month period ended June 30, 2002. This was determined based upon the anticipated 2002 results of operations includable in the domestic tax return, net operating loss carry-forward of approximately $12.7 million at December 31, 2001, and upon projected net temporary differences between operating results reflected in the financial statements and those required to be reflected in the 2002 domestic tax return. As of December 31, 2001, the Company had valuation allowances of approximately $8.5 million, reducing net deferred tax assets to $0. The realizability of net deferred tax assets is dependent on the Company's ability to generate future taxable income.

        No income tax provisions have been recognized for foreign tax jurisdictions and no income tax benefits have been recognized for subsidiary losses outside the domestic return.

Liquidity and Capital Resources

        Net cash provided by operating activities for the six months ended June 30, 2002 was $17.5 million compared with $2.5 million provided by operations in the comparable six month period of 2001. The increase in cash was due primarily to a $25 million favorable patent infringement lawsuit settlement in June, 2002.

        Net cash used in investing activities was $762,000 for the six months ended June 30, 2002, versus cash used of $538,000 for the comparable six month period in 2001. The Company will commit approximately $500,000 in the third quarter for a new manufacturing software package, with $250,000 being incurred during that quarter and the remainder being incurred over the following three quarters. The increase in capital expenditures from $538,000 in 2001 to $762,000 in 2002 is due to leasehold improvements.

        Net cash provided by financing activities for the six months ended June 30, 2002 was $202,000 which resulted principally from the exercise of stock options. For the comparable period in 2001, cash of $69,000 was provided from the exercise of stock options.

        As of June 30, 2002, the Company had $18.2 million in cash and cash equivalents, working capital of $39.2 million, and an $8.0 million bank revolving line of credit facility, which is subject to restrictions as to availability based on eligible receivables and inventory, as defined. In June, 2002, the Company received $25 million in cash from the settlement of the patent infringement lawsuit that the Company had filed against ThermoElectron. As of June 30, 2002, the Company had no outstanding borrowing against the line of credit. On August 20, 2002, the Company cancelled the line of credit in order to avoid additional bank charges associated with the line of credit.

        The Company believes its current cash and cash equivalent balances and cash generated from operations will be sufficient to satisfy its liquidity needs through 2003. The Company may need to obtain additional debt or equity financing in the future to fund its long-term growth needs.

Item 3. Quantitative and Qualitative Disclosures About Market Risk:

        Market risk represents the risk of loss that may impact the financial position, results of operations or cash flow due to adverse changes in financial and commodity market prices and rates. The Company is exposed to market risk in the areas of changes in United States interest rates and changes in foreign currency rates as measured against the United States dollar. These exposures directly relate to the Company's normal operating and funding activities. Historically and as of June 30, 2002, the Company has not used derivative instruments or engaged in hedging activities. There have been no significant changes in the Company's market risk from December 31, 2001.

Item 4. Disclosures Relating to Internal Controls

        Not applicable.

20

PART II. OTHER INFORMATION

Item 1. Legal Proceedings:

        On June 10, 2002, the Company settled a patent infringement lawsuit that the Company filed against ThermoElectron and Hologic, Inc. involving patents relating to the Company's Mammotest stereotactic breast biopsy system.

        Under the $32.2 million settlement, the Company received $25 million in cash and $7.2 million in a long-term receivable from ThermoElectron to be received in equal annual installments over the remaining eight-year life of the patents. The Company agreed to dismiss the lawsuit, as well as dismissing litigation filed against Hologic, Inc. in the U.S. District Court of Boston, as well as in courts in France and Germany.

Item 2. Changes in Securities and Use of Proceeds:

        Not applicable.

Item 3. Defaults Upon Senior Securities:

        Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders:

        The annual shareholder meeting was held June 5, 2002 at 3:00 PM. There was one proposal presented to the stockholders for consideration: The election of directors. David G. Bragg, M.D. and Gerald D. Knudson were re-elected for a three-year term ending in 2005. No other business came before the stockholders for vote.

        The vote results were as follows:

David G. Bragg, M.D.	For:	4,060,275	Withheld:	77,946
Gerald D. Knudson	For:	3,589,387	Withheld:	548,834

        Directors whose terms expire in 2003 are Morgan W. Nields and Teresa W. Ayers. The term of Kathryn A. Paul expires in 2004.

Item 5. Other Information:

        Not applicable.

Item 6. Exhibits and Reports on Form 8-K:

        (a) Exhibits:

        The following is a list of exhibits filed as part of this Report on Form 10-Q. Where so indicated by footnote, exhibits which were previously filed are incorporated by reference. For exhibits incorporated

21

by reference, the location of the exhibit in the previous filing is indicated parenthetically except in those situations where the exhibit number was the same as set forth below.

Exhibit Number	Description of Exhibit
3.1	Certificate of Incorporation of the Company(1)
3.2	Bylaws of the Company(1)
4.1	Amended and Restated Rights Agreement, dated as of November 3, 1994, between the Company and American Securities Transfer, Inc. which includes the Certificate of Designation for the Series C Junior Participating Preferred Stock as Exhibit A and the form of Right Certificate as Exhibit B(4)
4.2	Certificate of Designation for the Series D Convertible Preferred Stock(4)
10.1	Agreement, dated October 5, 1990, between the Company and Dornier Medizintechnik GmbH(1)
10.2	Nonemployee Director Stock Option Plan, as amended(5)
10.3	Retention Bonus Plan(3)
10.4	Lease Agreement, dated July 31, 1992, between the Company and JN Properties(2)
10.5	Agreement dated October 10, 1997, between the Company and Ethicon Endo-Surgery, Inc. with Addendum dated January 28, 1998(5)
10.6	Form of Indemnification Agreement, dated as of September 6, 2002, between the Company and each of Kathryn A. Paul, Teresa W. Ayers, Gerald D. Knudson, Morgan W. Nields and David G. Bragg, M.D.(6)

(1)

Incorporated by reference to the Company's Registration Statement on Form S-1, File No. 33-41537, as filed with the Securities and Exchange Commission (the "Commission") on July 3, 1991.

(2)

Incorporated by reference to the Company's Form 10-K for the year ended December 31, 1992, as filed with the Commission.

(3)

Incorporated by reference to the Company's Form 10-K for the year ended December 31, 1994, as filed with the Commission on April 14, 1995.

(4)

Incorporated by reference to the Company's Form 8-K, as filed with the Commission on July 3, 1995.

(5)

Incorporated by reference to the Company's Form 10-K for the year ended December 31, 1997, as filed with the Commission on March 31, 1998.

(6)

Filed herewith.

        (b) Reports on Form 8-K

        The Company filed a report on Form 8-K on June 25, 2002 announcing the settlement of patent infringement litigation that the Company filed against ThermoElectron and Hologic, Inc.

22

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 to be signed on its behalf by the undersigned thereunto duly authorized.

	FISCHER IMAGING CORPORATION
Date: September 17th, 2002	/s/  GERALD D. KNUDSON Gerald D. Knudson Chief Executive Officer

Date: September 17^th, 2002
/s/  RODNEY B. JOHNSON Rodney B. Johnson
Chief Financial Officer, Secretary

CERTIFICATION
of the Chief Executive Officer

        I, Gerald D. Knudson, Chief Executive Officer of Fischer Imaging Corporation (the "Company"), hereby certify that:

(1)

I have reviewed the report of the Company on Form 10-Q for the quarterly period ended June 30, 2002, as filed with the Securities and Exchange Commission (the "Report");

(2)

Based on my knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the Report; and

(3)

Based on my knowledge, the financial statements and other financial information included in the Report fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the period presented in the Report.

Date: September 17, 2002

/s/  GERALD D. KNUDSON

Gerald D. Knudson
Chief Executive Officer

23

CERTIFICATION
of the Chief Financial Officer

        I, Rodney B. Johnson, Chief Financial Officer of Fischer Imaging Corporation (the "Company"), hereby certify that:

(1)

I have reviewed the report of the Company on Form 10-Q for the quarterly period ended June 30, 2002, as filed with the Securities and Exchange Commission (the "Report");

(2)

Based on my knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the Report; and

(3)

Based on my knowledge, the financial statements and other financial information included in the Report fairly present in all material respects the financial condition, results of operations and cash flows of the issuer as of, and for, the period presented in the Report.

Date: September 17, 2002

/s/  RODNEY B. JOHNSON

Rodney B. Johnson
Chief Financial Officer

24

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FISCHER IMAGING CORPORATION TABLE OF CONTENTS
FISCHER IMAGING CORPORATION CONSOLIDATED BALANCE SHEETS (Amounts in thousands except share data) (Unaudited)
FISCHER IMAGING CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands except per share data) (Unaudited)
FISCHER IMAGING CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (Unaudited)
FISCHER IMAGING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Disclosures Relating to Internal Controls

PART II. OTHER INFORMATION

Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K

SIGNATURES
CERTIFICATION of the Chief Executive Officer
CERTIFICATION of the Chief Financial Officer

EX-10.6

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Exhibit 10.6

FORM OF
INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (the "Agreement") is made and entered into this 6^th day of September, 2002, between Fischer Imaging Corporation, a Delaware corporation (the "Company"), and                                                   ("Indemnitee").

        A.    Indemnitee, as a member of the Company's Board of Directors and/or an officer of the Company, performs valuable services for the Company;

        B.    The Company and Indemnitee recognize the continued difficulty in obtaining liability insurance for corporate directors, officers, employees, controlling persons, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance.

        C.    The Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees, controlling persons, agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited.

        D.    The stockholders of the Company have adopted Bylaws (the "Bylaws") providing for the indemnification of the officers, directors, agents and employees of the Company to the maximum extent authorized by Section 145 of the Delaware Corporations Code, as amended ("Code").

        E.    Indemnitee does not regard the current protection available for the Company's directors, officers, employees, controlling persons, agents and fiduciaries as adequate under the present circumstances, and Indemnitee and other directors, officers, employees, controlling persons, agents and fiduciaries of the Company may not be willing to serve or continue to serve in such capacities without additional protection.

        F.    The Bylaws and the Code, by their non-exclusive nature, permit contracts between the Company and its directors, officers, employees, controlling persons, agents or fiduciaries with respect to indemnification of such directors.

        G.    The Company (i) desires to attract and retain the involvement of highly qualified individuals, such as Indemnitee, to serve the Company and, in part, in order to induce Indemnitee to be involved with the Company, and (ii) wishes to provide for the indemnification and advancing of expenses to Indemnitee to the maximum extent permitted by law.

        H.    In view of the considerations set forth above, the Company desires that Indemnitee be indemnified by the Company as set forth herein.

NOW, THEREFORE, in consideration of Indemnitee's service to the Company, the parties hereto agree as follows:

1.    Indemnity of Indemnitee.    The Company hereby agrees to indemnify Indemnitee to the fullest extent permitted by law, even if such indemnification is not specifically authorized by the other provisions of this Agreement, the Company's Certificate of Incorporation (the "Certificate"), the Company's Bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its Board of Directors or an officer, employee, controlling person, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its Board of Directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder except as set forth in Section 9(a) hereof.

2.    Additional Indemnity.    The Company hereby agrees to hold harmless and indemnify the Indemnitee:

        (a)  against any and all expenses incurred by Indemnitee, as set forth in Section 3(a) below; and

        (b)  otherwise to the fullest extent not prohibited by the Certificate, the Bylaws or the Code.

3.    Indemnification Rights.

        (a)    Indemnification of Expenses.    The Company shall indemnify and hold harmless Indemnitee, together with Indemnitee's partners, affiliates, employees, agents and spouse and each person who controls any of them or who may be liable within the meaning of Section 15 of the Securities Act of 1933, as amended (the "Securities Act"), or Section 20 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), to the fullest extent permitted by law if Indemnitee was or is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, or any hearing, inquiry or investigation that Indemnitee and the Company believe might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, investigative or other (hereinafter a "Claim") against any and all expenses (including attorneys' fees and all other costs, expenses and obligations incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in, any such action, suit, proceeding, alternative dispute resolution mechanism, hearing, inquiry or investigation, judgments, fines, penalties and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) of such Claim and any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement (collectively, hereinafter "Expenses")), including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, incurred by Indemnitee by reason of (or arising in part out of) any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, controlling person, agent or fiduciary of the Company or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, controlling person, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action or inaction on the part of Indemnitee while serving in such capacity including, without limitation, any and all losses, claims, damages, expenses and liabilities, joint or several (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit, proceeding or any claim asserted) under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, which relate directly or indirectly to the registration, purchase, sale or ownership of any securities of the Company or to any fiduciary obligation owed with respect thereto (hereinafter an "Indemnification Event"). Such payment of Expenses shall be made by the Company as soon as practicable but in any event no later than 5 days after written demand by Indemnitee therefor is presented to the Company.

        (b)    Reviewing Party.    Notwithstanding the foregoing, (i) the obligations of the Company under Section 2 shall be subject to the condition that the Reviewing Party (as described in Section 11(e) hereof) shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel as defined in Section 11(d) hereof is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) and Indemnitee acknowledges and agrees that the obligation of the Company to make an advance payment of Expenses to Indemnitee pursuant to Section 4(a) (an "Expense Advance") shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be

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permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any Expense Advance shall be unsecured and no interest shall be charged thereon. If there has not been a Change in Control (as defined in Section 11(c) hereof), the Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), the Reviewing Party shall be the Independent Legal Counsel referred to in Section 3(e) hereof. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee.

        (c)    Contribution.    If the indemnification provided for in Section 3(a) above for any reason is held by a court of competent jurisdiction to be unavailable to an Indemnitee in respect of any losses, claims, damages, expenses or liabilities referred to therein, then the Company, in lieu of indemnifying Indemnitee thereunder, shall contribute to the amount paid or payable by Indemnitee as a result of such losses, claims, damages, expenses or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and Indemnitee, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and Indemnitee in connection with the action or inaction which resulted in such losses, claims, damages, expenses or liabilities, as well as any other relevant equitable considerations. In connection with the registration of the Company's securities, the relative benefits received by the Company and Indemnitee shall be deemed to be in the same respective proportions that the net proceeds from the offering (before deducting expenses) received by the Company and the Indemnitee, in each case as set forth in the table on the cover page of the applicable prospectus, bear to the aggregate public offering price of the securities so offered. The relative fault of the Company and Indemnitee shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or Indemnitee and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

        The Company and Indemnitee agree that it would not be just and equitable if contribution pursuant to this Section 3(c) were determined by pro rata or per capita allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. In connection with the registration of the Company's securities, in no event shall an Indemnitee be required to contribute any amount under this Section 3(c) in excess of the lesser of (i) that proportion of the total of such losses, claims, damages or liabilities indemnified against equal to the proportion of the total securities sold under such registration statement which is being sold by Indemnitee or (ii) the proceeds received by

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Indemnitee from its sale of securities under such registration statement. No person found guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the Securities Act) shall be entitled to contribution from any person who was not found guilty of such fraudulent misrepresentation.

        (d)    Survival Regardless of Investigation.    The indemnification and contribution provided for herein will remain in full force and effect regardless of any investigation made by or on behalf of Indemnitee or any officer, director, employee, agent or controlling person of Indemnitee.

        (e)    Change in Control.    After the date hereof, the Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control) then, with respect to all matters thereafter arising concerning the rights of Indemnitee to payments of Expenses under this Agreement or any other agreement or under the Company's Certificate or Bylaws as now or hereafter in effect, Independent Legal Counsel (as defined in Section 11(d) hereof) shall be selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to abide by such opinion and to pay the reasonable fees of the Independent Legal Counsel referred to above and to fully indemnify such counsel against any and all reasonable expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

        (f)    Mandatory Payment of Expenses.    Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in the defense of any action, suit, proceeding, inquiry or investigation referred to in Section 3(a) hereof or in the defense of any claim, issue or matter therein, Indemnitee shall be indemnified against all Expenses incurred by Indemnitee in connection herewith.

4.    Expenses; Indemnification Procedure.

        (a)    Advancement of Expenses.    The Company shall advance all Expenses incurred by Indemnitee. The advances to be made hereunder shall be paid by the Company to Indemnitee as soon as practicable but in any event no later than five business days after written demand by Indemnitee therefor to the Company.

        (b)    Notice/Cooperation by Indemnitee.    Indemnitee shall give the Company notice in writing in accordance with Section 15 of this Agreement as soon as practicable of any Claim made against Indemnitee for which indemnification will or could be sought under this Agreement. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power.

        (c)    No Presumptions; Burden of Proof.    For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law, shall be a defense to

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Indemnitee's claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled.

        (d)    Notice to Insurers.    If, at the time of the receipt by the Company of a notice of a Claim pursuant to Section 4(b) hereof, the Company has liability insurance in effect which may cover such Claim, the Company shall give prompt notice of the commencement of such Claim to the insurers in accordance with the procedures set forth in each of the Company's policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such action, suit, proceeding, inquiry or investigation in accordance with the terms of such policies.

        (e)    Selection of Counsel.    In the event the Company shall be obligated hereunder to pay the Expenses of any Claim, the Company shall be entitled to assume the defense of such Claim, with counsel approved by the Indemnitee (which approval shall not be unreasonably withheld) upon the delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Claim; provided that (i) Indemnitee shall have the right to employ Indemnitee's counsel in any such Claim at Indemnitee's expense and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there is a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not continue to retain such counsel to defend such Claim, then the fees and expenses of Indemnitee's counsel shall be at the expense of the Company.

5.    Nonexclusivity.    The indemnification provided by this Agreement shall be in addition to any rights to which Indemnitee may be entitled under the Company's Certificate of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested directors, the General Corporation Law of the State of Delaware, or otherwise. The indemnification provided under this Agreement shall continue as to Indemnitee for any action Indemnitee took or did not take while serving in an indemnified capacity even though Indemnitee may have ceased to serve in such capacity.

6.    No Duplication of Payments.    The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against any Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Certificate of Incorporation, Bylaw or otherwise) of the amounts otherwise indemnifiable hereunder.

7.    Partial Indemnification.    If any Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for any portion of Expenses incurred in connection with any Claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled.

8.    Mutual Acknowledgement.    The Company and Indemnitee acknowledge that in certain instances, Federal law or applicable public policy may prohibit the Company from indemnifying its directors, officers, employees, controlling persons, agents or fiduciaries under this Agreement or otherwise. Each Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in certain circumstances for a determination of the Company's rights under public policy to indemnify Indemnitee.

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9.    Exceptions.    Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

        (a)    Claims Initiated by Indemnitee.    To indemnify or advance expenses to any Indemnitee with respect to Claims initiated or brought voluntarily by Indemnitee and not by way of defense, except (i) with respect to actions or proceedings to establish or enforce a right to indemnify under this Agreement or any other agreement or insurance policy or under the Company's Certificate of Incorporation or Bylaws now or hereafter in effect relating to Claims for Indemnifiable Events, (ii) in specific cases if the Board of Directors has approved the initiation or bringing of such Claim, or (iii) as otherwise required under Section 145 of the Delaware General Corporation Law, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be; or

        (b)    Claims Under Section 16(b).    To indemnify Indemnitee for expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Exchange Act or any similar successor statute; or

        (c)    Claims Excluded Under Section 145 of the Delaware General Corporation Law.    To indemnify Indemnitee if (i) Indemnitee did not act in good faith or in a manner reasonably believed by such Indemnitee to be in or not opposed to the best interests of the Company, or (ii) with respect to any criminal action or proceeding, Indemnitee had reasonable cause to believe Indemnitee's conduct was unlawful, or (iii) Indemnitee shall have been adjudged to be liable to the Company unless and only to the extent the court in which such action was brought shall permit indemnification as provided in Section 145(b) of the Delaware General Corporation Law.

10.    Period of Limitations.    No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against any Indemnitee, any Indemnitee's estate, spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of occurrence of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action, such shorter period shall govern.

11.    Construction of Certain Phrases.

        (a)  For purposes of this Agreement, references to the "Company" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents or fiduciaries, so that if Indemnitee is or was a director, officer, employee, agent, control person, or fiduciary of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, control person, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

        (b)  For purposes of this Agreement, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on any Indemnitee with respect to an employee benefit plan; and references to "serving at the request of the Company" shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or its beneficiaries; and if any Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interests of the

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participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Agreement.

        (c)  For purposes of this Agreement a "Change in Control" shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, (A) who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company's then outstanding Voting Securities, increases his or her beneficial ownership of such securities by 5% or more over the percentage so owned by such person, or (B) becomes the "beneficial owner" (as defined in Rule 13d-3 under said Exchange Act), directly or indirectly, of securities of the Company representing more than 20% of the total voting power represented by the Company's then outstanding Voting Securities, (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially all of the Company's assets.

        (d)  For purposes of this Agreement, "Independent Legal Counsel" shall mean an attorney or firm of attorneys, selected in accordance with the provisions of Section 3(d) hereof, who shall not have otherwise performed services for the Company or any Indemnitee within the last three years (other than with respect to matters concerning the right of any Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements).

        (e)  For purposes of this Agreement, a "Reviewing Party" shall mean any appropriate person or body consisting of a member or members of the Company's Board of Directors or any other person or body appointed by the Board of Directors who is not a party to the particular Claim for which Indemnitee is seeking indemnification, or Independent Legal Counsel.

        (f)    For purposes of this Agreement, "Voting Securities" shall mean any securities of the Company that vote generally in the election of directors.

12.    Counterparts.    This Agreement may be executed in one or more counterparts, each of which shall constitute an original.

13.    Binding Effect; Successors and Assigns.    This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the

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business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect with respect to Claims relating to Indemnifiable Events regardless of whether any Indemnitee continues to serve as a director, officer, employee, agent, controlling person, or fiduciary of the Company or of any other enterprise, including subsidiaries of the Company, at the Company's request.

14.    Attorneys' Fees.    In the event that any action is instituted by an Indemnitee under this Agreement or under any liability insurance policies maintained by the Company to enforce or interpret any of the terms hereof or thereof, any Indemnitee shall be entitled to be paid all Expenses incurred by Indemnitee with respect to such action if Indemnitee is ultimately successful in such action, and shall be entitled to the advancement of Expenses with respect to such action, unless, as a part of such action, a court of competent jurisdiction over such action determines that the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all Expenses incurred by Indemnitee in defense of such action (including costs and expenses incurred with respect to Indemnitee counterclaims and cross-claims made in such action), and shall be entitled to the advancement of Expenses with respect to such action, unless, as a part of such action, a court having jurisdiction over such action determines that the Indemnitee's material defenses to such action were made in bad faith or were frivolous.

15.    Notice.    All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given (a) five calendar days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid, or (d) one day after the business day of delivery by facsimile transmission, if deliverable by facsimile transmission, with copy by first class mail, postage prepaid, and shall be addressed if to Indemnitee, at Indemnitee's address as set forth beneath Indemnitee's signature to this Agreement and if to the Company at the address of its principal corporate offices (attention: Chief Executive Officer) or at such other address as such party may designate by ten calendar days' advance written notice to the other party hereto.

16.    Consent to Jurisdiction.    The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be commenced, prosecuted and continued only in the Court of Chancery of the State of Delaware in and for New Castle County, which shall be the exclusive and only proper forum for adjudicating such a claim.

17.    Severability.    The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including, without limitations, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

18.    Choice of Law.    This Agreement shall be governed by and its provisions construed and enforced in accordance with the laws of the State of Delaware, as applied to contracts between

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Delaware residents, entered into and to be performed entirely within the State of Delaware, without regard to the conflict of laws principles thereof.

19.    Subrogation.    In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.

20.    Amendment and Termination.    No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by all parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

21.    Integration and Entire Agreement.    This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto.

22.    No Construction as Employment Agreement.    Nothing contained in this Agreement shall be construed as giving the Indemnitee any right to be retained in the employ of the Company or any of its subsidiaries.

23.    Corporate Authority.    The Board of Directors of the Company has approved the terms of this Agreement.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written.

COMPANY:

FISCHER IMAGING CORPORATION
a Delaware corporation

By:

INDEMNITEE:

Signature:

Name:

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Exhibit 10.6

FORM OF INDEMNIFICATION AGREEMENT