SEC Filing | Stereotaxis Inc.

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DEF 14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

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 §240.14a-12

Stereotaxis, Inc.

(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)(1) 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:

LOGO

STEREOTAXIS, INC.

4320 Forest Park Avenue

Suite 100

St. Louis, Missouri 63108

(314) 678-6100

April 26, 2013

Dear Shareholder:

You are cordially invited to attend our Annual Meeting of Shareholders on June 5, 2013. We will hold the meeting at 9:00 a.m. Central Daylight Time at our principal executive offices, which are located at 4320 Forest Park Avenue, Suite 100, St. Louis, Missouri 63108.

We have elected to provide access to our proxy materials over the Internet under the Securities and Exchange Commission’s “notice and access” rules. Details regarding the business to be conducted are described in the Notice of Internet Availability of Proxy Materials (the “Notice”) you received in the mail and in this proxy statement. We have also made a copy of our 2012 Annual Report on Form 10-K available on the Internet with this proxy statement. We encourage you to read our Annual Report on Form 10-K. It includes our audited financial statements and provides information about our business and products.

Your vote is important. Whether or not you plan to attend the Annual Meeting, we encourage you to vote your shares. If your shares are held in the name of a bank, broker or other holder of record, you must present proof of your ownership, such as a bank or brokerage account statement, to be admitted to the meeting. All shareholders must also present a form of personal identification in order to be admitted to the meeting. You may vote by mail, Internet, telephone, or in person at the meeting.

On behalf of the entire Board, we look forward to seeing you at the meeting.

Sincerely,

William C. Mills III

Chairman of the Board

LOGO

STEREOTAXIS, INC.

4320 Forest Park Avenue

Suite 100

St. Louis, Missouri 63108

(314) 678-6100

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

April 26, 2013

The Annual Meeting of Shareholders of Stereotaxis, Inc. will be held at our principal executive offices located at 4320 Forest Park Avenue, Suite 100, St. Louis, Missouri 63108, on Wednesday, June 5, 2013, at 9:00 a.m., Central Daylight Time, for the following purposes:

To elect two directors as Class III Directors to serve until our 2016 Annual Meeting;

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal year 2013;

To approve, by non-binding vote, executive compensation;

To approve the amendment to the Stereotaxis, Inc. 2012 Stock Incentive Plan to increase the number of shares authorized for issuance thereunder by one million shares;

To approve a decrease in the authorized number of shares of our common stock from 300,000,000 to 50,000,000; and

To transact such other business as may properly come before the meeting.

The Board of Directors fixed April 12, 2013, as the date of record for the meeting, and only shareholders of record at the close of business on that date will be entitled to vote at the meeting or any adjournment thereof.

We first began sending to all shareholders of record a Notice of Internet Availability of Proxy Materials on April 26, 2013. Please note that our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 is available for viewing on the Internet. Please refer to the instructions on the Notice of Internet Availability of Proxy Materials you received in the mail.

By Order of the Board of Directors,

STEREOTAXIS, INC.

Karen Witte Duros

Secretary

St. Louis, Missouri

April 26, 2013

IMPORTANT NOTICE

Please Vote Your Shares Promptly

TABLE OF CONTENTS


	PAGE

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING		3

INFORMATION ABOUT THE BOARD OF DIRECTORS		6

CORPORATE GOVERNANCE INFORMATION		8

BOARD MEETINGS AND COMMITTEES		11

DIRECTOR COMPENSATION		14

PROPOSAL 1: ELECTION OF DIRECTORS		16

EXECUTIVE COMPENSATION		16

Compensation Discussion and Analysis		16

Compensation Committee Report		30

Compensation Committee Interlocks and Insider Participation		31

Summary Compensation Table		31

Grants of Plan-Based Awards		32

Outstanding Equity Awards At Fiscal Year-End		33

Option Exercises and Stock Vested		34

Securities Authorized for Issuance under Equity Compensation Plans		34

Potential Payments upon Termination or Change of Control		34

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT		38

REPORT OF AUDIT COMMITTEE		42

PROPOSAL 2: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS		43

PROPOSAL 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION		44

PROPOSAL 4: APPROVAL OF AN AMENDMENT TO THE 2012 STOCK INCENTIVE PLAN		45

PROPOSAL 5: APPROVAL OF AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO DECREASE THE AUTHORIZED COMMON STOCK		51

PRINCIPAL ACCOUNTING FEES AND SERVICES		52

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS		53

Page 1


	PAGE

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE		54

GENERAL INFORMATION		54

APPENDIX A STEREOTAXIS, INC. 2012 STOCK INCENTIVE PLAN		A-1

APPENDIX B CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF STEREOTAXIS, INC.		B-1

Page 2

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

Q.	*Why am I receiving these materials?*

The Board of Directors (the “Board”) of Stereotaxis, Inc. (the “Company”) is soliciting proxies from the Company’s shareholders in connection with its 2013 Annual Meeting of Shareholders to be held on June 5, 2013, and any and all adjournments and postponements thereof. A Notice of Internet Availability of Proxy Materials (the “Notice”) was first sent to our shareholders on or about April 26, 2013. You are encouraged to vote on the proposals presented in these proxy materials. You are invited to attend the Annual Meeting, but you do not have to attend to vote.

Q.	*When and where is the Annual Meeting?*

We will hold the Annual Meeting of Shareholders on June 5, 2013, at 9:00 a.m., Central Daylight Time at our principal executive offices located at 4320 Forest Park Avenue, Suite 100, St. Louis, Missouri 63108.

Q.	*Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?*

In accordance with rules adopted by the Securities and Exchange Commission (the “SEC”), we may furnish proxy materials, including this proxy statement and our 2012 Annual Report on Form 10-K to our shareholders by providing access to such documents on the Internet instead of mailing printed copies. Most shareholders will not receive printed copies of the proxy materials unless they request them. Instead, the Notice, which was mailed to most of our shareholders, will instruct you as to how you may access and review all of the proxy materials on the Internet. The Notice also instructs you as to how you may submit your proxy on the Internet. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice.

Q.	*How do I get electronic access to the proxy materials?*

The Notice will provide you with instructions regarding how to view our proxy materials for the Annual Meeting on the Internet.

Q.	*Who is entitled to vote at the meeting?*

You are entitled to vote (in person or by proxy) if you were a shareholder of record of shares of our

common stock at the close of business on April 12, 2013 (the “Record Date”). On April 12, 2013, there were 8,148,432 shares of our common stock outstanding and entitled to vote and no shares of our preferred stock outstanding.

Q.	*What am I being asked to vote on at the meeting?*

We are asking our shareholders to (1) elect two Class III Directors to serve until our 2016 Annual Meeting of Shareholders, (2) ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the 2013 fiscal year, (3) approve, by non-binding vote, executive compensation, (4) approve an amendment to our 2012 Stock Incentive Plan to increase the number of shares authorized for issuance thereunder by one million; (5) amend Stereotaxis’ certificate of incorporation to decrease the number of shares of common stock, par value $0.001 per share, that Stereotaxis is authorized to issue to 50,000,000 shares; and (6) transact such other business as may properly come before the meeting.

Q.	*How do I vote?*

Whether or not you expect to be present in person at the Annual Meeting, you are requested to vote your shares. Most shareholders will be able to choose whether they wish to vote using the Internet, by telephone or mail. The availability of Internet voting or telephone voting for shareholders whose shares are held in street name by a bank or a broker may depend on the voting processes of that organization. If you vote using the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible. Internet and telephone voting facilities will be available 24 hours a day and will close at 11:59 p.m., Eastern Daylight Time, on June 4, 2013, the day before the date of the Annual Meeting. If you hold your shares directly as a shareholder of record and you attend the meeting, you may vote by ballot. If you hold your shares in street name through a bank or broker and you wish to vote at the meeting, you must obtain a proxy, executed in your favor, from your bank or broker.

Whether you hold shares directly as the shareholder of record or beneficially in street name, you may direct how your shares are voted without attending the Annual Meeting. If you are a shareholder of

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record, you may vote by proxy. You can vote by proxy over the Internet by following the instructions provided in the Notice, or, if you requested to receive printed proxy materials, you can also vote by mail or telephone as well as by the Internet pursuant to instructions provided on the proxy card. If you hold shares beneficially in street name, you may also vote by proxy over the Internet by following the instructions provided in the Notice, or, if you requested to receive printed proxy materials, you can also vote by following the voting instruction card provided to you by your broker, bank, trustee or nominee.

Q.	*What if I want to change my vote?*

If you are a shareholder of record, you can revoke your proxy at any time before it is voted at the Annual Meeting by:

•

timely delivering a properly executed, later-dated proxy;

•

submitting a later vote by Internet or telephone any time prior to 11:59 p.m., Eastern Daylight Time, on June 4, 2013;

•

delivering a written revocation of your proxy to our Secretary at our principal executive offices; or

•

voting by ballot at the meeting.

If your shares are held in the name of a bank or brokerage firm, you may change your vote by submitting new voting instructions to your bank or broker following the instructions that they provide.

Q.	*What vote of the shareholders is needed?*

No business can be conducted at the Annual Meeting unless a majority of the outstanding shares of common stock entitled to vote is present in person or represented by proxy at the meeting. Each share of our common stock is entitled to one vote with respect to each matter on which it is entitled to vote. A plurality of the shares entitled to vote and present in person or by proxy at the meeting must be voted “FOR” a director nominee. A majority of shares entitled to vote and present in person or by proxy at the meeting must be voted “FOR” the ratification of Ernst & Young LLP as our independent registered public accounting firm for the 2013 fiscal year, “FOR” the non-binding approval of executive compensation, and “FOR” the amendment to our 2012 Stock Incentive Plan. A majority of shares of

common stock outstanding as of the Record Date must be voted “FOR” the amendment of our certificate of incorporation.

Q.	*What do I do if my shares of common stock are held in “street name” at a bank or brokerage firm?*

If your shares are held in an account at a brokerage firm, bank, broker-dealer, trust or other similar organization, like the vast majority of our shareholders, you are considered the beneficial owner of shares held in street name, and the Notice was forwarded to you by that organization. As the beneficial owner, you have the right to direct your broker, bank, trustee or nominee how to vote your shares and you are also invited to attend the Annual Meeting.

Q.	*What happens if I request a paper copy of proxy material and return my signed proxy card but forget to indicate how I want my shares of common stock voted?*

If you sign, date and return your proxy and do not mark how you want to vote, your proxy will be counted as a vote “FOR” all of the nominees for directors, “FOR” the ratification of our independent registered public accounting firm, “FOR” the approval of executive compensation, “FOR” the amendment to our 2012 Stock Incentive Plan; and “FOR” the amendment to our certificate of incorporation, and in the discretion of the proxy holders for such other business as may properly come before the meeting.

Q.	*What happens if I do not instruct my broker how to vote or if I indicate I wish to “abstain” on the proxy?*

If you hold shares in street name through a broker or other nominee and do not vote your shares or provide voting instructions, your broker may vote for you on “routine” proposals but not on “non-routine” proposals. The ratification of the Company’s auditor is considered routine, but all of our other proposals are non-routine. Therefore, if you do not vote on the non-routine proposals or provide voting instructions, your broker will not be allowed to vote your shares. This will result in a broker non-vote. Broker non-votes are not counted as shares present and entitled to vote so they will not affect the outcome of the vote.

If you indicate that you wish to “abstain,” your vote will have the same effect as a vote against the proposal or the election of the applicable director.

Page 4

Q.	*What if other matters are voted on at the Annual Meeting?*

If any other matters are properly presented at the Annual Meeting for consideration and if you have voted your shares by Internet, telephone or mail, the persons named as proxies in your proxy will have the discretion to vote on those matters for you. As of the date we filed this proxy statement with the Securities and Exchange Commission, the Board of Directors did not know of any other matter to be presented at the Annual Meeting.

Q.	*What do I need to do if I plan to attend the meeting in person?*

All shareholders must present a form of personal identification in order to be admitted to the meeting. If your shares are held in the name of a bank, broker or other holder of record, you also must present proof of your ownership, such as a bank or brokerage account statement, to be admitted to the meeting.

Page 5

INFORMATION ABOUT THE BOARD OF DIRECTORS

Set forth below is the name, age, and business experience of each of the continuing directors and nominees of the Company, including the specific experience, qualifications, attributes or skills that led to the conclusion that such person should serve as a director. There are no family relationships between any of our directors and executive officers.

Class III Directors (terms expiring at the 2013 Annual Meeting; Nominees for reelection to the Board at the 2013 Annual Meeting)

Fred A. Middleton

Director since June 1990

Mr. Middleton, 63, served as our Chairman of the Board from June 1990 until May 2012. He has been a General Partner in Sanderling Ventures since 1987. Prior to that time, he was an independent investor in the biomedical field. From 1984 to 1986, Mr. Middleton was Managing General Partner of Morgan Stanley Ventures. He joined Genentech, Inc. in 1978 and was a part of the founding management team, assisting in developing its strategy and holding a variety of roles including Vice Presidencies of Finance, Administration, and Corporate Development, and Chief Financial Officer. Mr. Middleton also served as President of Genentech Development Corporation. Prior to that time, he served as a consultant with McKinsey & Company and as a Vice President of Chase Manhattan Bank. Mr. Middleton serves on the board of directors of biotechnology companies, Endocyte, Inc. (Nasdaq: ECYT) and Pacira Pharmaceuticals, Inc. (Nasdaq: PCRX). He also serves as a member of the board of directors of several privately held biomedical companies. Mr. Middleton holds an M.B.A. from Harvard University and a B.S. degree in Chemistry from the Massachusetts Institute of Technology. Mr. Middleton’s business experience provides a unique perspective on the Company’s strategic initiatives, investor markets and financial outlook. His service on the Board for over 20 years provides valuable insight into the evolution of our products and technology.

William C. Mills III

Chairman of the Board since May 2012

Director since June 2000

Mr. Mills, 57, is an independent venture capitalist with over 32 years of experience in venture capital. He currently serves as Chairman of the Board of Managers of Ascension Health Ventures III, L.P., a strategic healthcare venture fund focused on the medical device, healthcare information technology, and service sectors, and he is a member of the board of directors of Interleukin Genetics, Inc., a publicly traded company that develops and markets genetic tests. From 2004 until 2009, Mr. Mills was a managing member of a management company conceived by EGS Healthcare Capital Partners to manage EGS Private Healthcare Partnership III. Earlier, Mr. Mills was a Partner in the Boston office of Advent International, a private equity and venture capital firm, for five years. At Advent, he was co-responsible for healthcare venture capital investments and focused on investments in the medical technology and biopharmaceutical sectors. Before joining Advent, Mr. Mills spent more than 11 years with the Venture Capital Fund of New England where he was a General Partner. Prior to that, he spent seven years at PaineWebber Ventures/Ampersand Ventures as Managing General Partner. Mr. Mills received an S.M. in Chemistry from the Massachusetts Institute of Technology, an M.S. in Management from the Massachusetts Institute of Technology Sloan School of Management and an A.B. in Chemistry from Princeton University. Mr. Mills has significant experience serving on the boards of growing companies in the medical technology and biotechnology fields. This experience, coupled with his scientific and technical expertise, provides valuable knowledge regarding the Company’s strategy, intellectual property, regulatory, and compliance activities.

Page 6

Class I Directors (terms expiring at the 2014 Annual Meeting)

David W. Benfer

Director since February 2005

Mr. Benfer, 66, currently serves as the Chairman of The Benfer Group LLC, which provides advisory services to healthcare providers and suppliers. In addition, he serves as a partner in Advisors to Healthcare Suppliers, a healthcare and health services consulting firm. Since 2010, he has served on the advisory board of Investor Growth Capital U.S., a venture capital firm. From 1999 to 2009, Mr. Benfer served as President and Chief Executive Officer of Saint Raphael Healthcare System and the Hospital of Saint Raphael, New Haven, Connecticut. Prior to that, he was the President and Chief Executive Officer of the Provena-Saint Joseph/Morris Health Network in Joliet, Illinois from 1992 to 1999. Mr. Benfer served as Senior Vice President for Hospital and Urban Affairs for the Henry Ford Health System in Detroit and Chief Executive Officer of the Henry Ford Hospital from 1985 to 1992. He served as the Chairman of the American College of Healthcare Executives (ACHE) from 1998 to 1999 and on its Board of Governors from 1992 to 2000. Mr. Benfer was named a Fellow of ACHE in 1981 and served on the Board of the Catholic Health Association from 2003 until 2008. Mr. Benfer also serves as a director of a private financial institution. He earned his M.B.A. from Xavier University and his B.S.B.A. from Wittenburg University. Mr. Benfer’s extensive experience in the healthcare industry and in hospital management provides the Company with useful industry information related to technology acquisition, governance, and risk and liability issues.

Eric N. Prystowsky, M.D.

Director since February 2007

Dr. Prystowsky, 65, has been the Director of the Clinical Electrophysiology Laboratory at St. Vincent Hospital in Indianapolis, Indiana, since 1988. He also currently is a Consulting Professor of Medicine at Duke University Medical Center. He is the former chairman of the American Board of Internal Medicine’s test writing committee for the Electrophysiology Board Certification Examination and the past president of Heart Rhythm Society. He currently serves as Editor-in-Chief of the Journal of Cardiovascular Electrophysiology. Dr. Prystowsky also serves on the board of directors of CardioNet, Inc., a publicly held cardiac rhythm services company. From 1986 to 1988, Dr. Prystowsky was Professor of Medicine and Director of Clinical Electrophysiology at Duke University Medical Center. From 1979 to 1986, he served as a full time faculty member at the Indiana University School of Medicine, where he was director of the electrophysiology laboratory. He earned his M.D. from the Mt. Sinai School of Medicine and a bachelor’s degree from Pennsylvania State University. Dr. Prystowsky completed his internal medicine training at Mt. Sinai Hospital in New York City and his training in cardiology and clinical electrophysiology at Duke University Medical Center. Dr. Prystowsky has conducted extensive research with respect to cardiac arrhythmias, the treatment of which is one of the Company’s primary focuses. Dr. Prystowsky is also internationally recognized as an expert in atrial fibrillation and such expertise is important in the Company’s product development efforts.

Class II Directors (terms expiring at the 2015 Annual Meeting)

Robert J. Messey

Director since May 2005

Mr. Messey, 67, served as the Senior Vice President and Chief Financial Officer of Arch Coal, Inc. from December 2000 until his retirement in April 2008. Prior to joining Arch Coal, he served as the Vice President of Financial Services of Jacobs Engineering Group, Inc. from 1999 to 2000 following that company’s acquisition of Sverdrup Corporation, where he had served as Senior Vice President and Chief Financial Officer from 1992 to 1999. Mr. Messey was an audit partner at Ernst & Young LLP from 1981 to 1992. He serves as a director and member of the audit and compensation committees of Oxford Resources Partners, LP, a publicly traded coal mining company. He previously served as a director and chairman of the audit committee of Baldor Electric

Page 7

Company, a publicly traded manufacturer of industrial electrical motors. He also serves as an advisory director, chairman of the audit committee, and member of the compensation committee of a privately held mining company. Mr. Messey earned his B.S.B.A. from Washington University. Mr. Messey’s experience in finance provides the Board with a great deal of expertise on the financing, accounting and compliance matters.

Joseph D. Keegan, Ph.D.

Director since February 2011

Dr. Keegan, 59, served as the president, chief executive officer and a director of ForteBio, Inc., a venture capital funded life sciences Company, from 2007 until February, 2012. He currently serves as a director of Seahorse Bioscience, Inc., Response Biomedical Corp., as chairman of the board of Labcyte Corporation, and as a director and chairman of the board of the Analytical and Life Science Systems Association. From 1998 to 2007, Dr. Keegan was president, chief executive officer and a director of Molecular Devices Corporation. From 1992 to 1998, he held several senior management positions with Becton Dickinson and Company, including president of Worldwide Tissue Culture, and vice president and general manager of Worldwide Flow Cytometry. Prior to that, he held a number of positions with Leica, Inc., General Electric Company and Hewlett Packard Company. He previously served as a director of Alpha Innotech Corp., BioImagene Corporation, Essen Instruments and Upstate Biotechnology. He also serves on the board of directors of the San Francisco Opera. Dr. Keegan earned a Ph.D. in Physical Chemistry from Stanford University and a B.A. in Chemistry from Boston University. Dr. Keegan’s strong executive experience and knowledge of high growth life sciences businesses provides valuable support for general management matters and commercial adoption of our products.

Euan S. Thomson, Ph.D.

Director since October 2012

Dr. Thomson, 50, currently serves as the operating partner of Khosla Ventures, a venture capital company. He served as the President and Chief Executive Officer of Accuray, Incorporated, a publicly held radiation oncology company, from 2002 until 2012. He was the President and Chief Executive Officer of Photoelectron Corporation, a x-ray technology company, from 1999 to 2002. Prior to that, for approximately 15 years, he was engaged in research, teaching, clinical practice, and administration within the United Kingdom health care system. During that time, he also provided consulting advice for companies and hospitals on scientific development, product marketing and management. Dr. Thomson is a member of the Board of Directors of the Hospice of the Valley. He previously served as Chair of the California Division of the American Cancer Society’s CEOs Against Cancer. He has received numerous awards, including the Ernst and Young Entrepreneur of the Year Award. In July 2003, Photoelectron Corporation filed for bankruptcy. Dr. Thomson did not have any involvement in the business or affairs of Photoelectron Corporation from the time of his departure in February 2002 through the time it filed for bankruptcy. Dr. Thomson earned a B.S. in Physics, an M.S. in Radiation Physics and a Ph.D. in Physics from the University of London. He is the author of numerous scientific papers and he holds six U.S. patents. Dr. Thomson’s approximately 30 years in the medical device industry and his experience as a CEO of public companies in the medical device industry, provide valuable guidance for the Company’s product innovation, customer initiatives, and strategic and operational matters.

CORPORATE GOVERNANCE INFORMATION

Board Leadership Structure and Board Role in Risk Oversight

William C. Mills III, a non-employee director, has served as the Chairman of the Board since May, 2012. Our Company has no set policy regarding an independent Chairman of the Board. The Board regularly evaluates the responsibilities of the independent Board chairman and whether the separation of the offices of Chairman of the Board and Chief Executive Officer continues to best serve the Company. Our independent directors regularly have executive sessions as part of our regular meeting schedule during which only the independent directors are present. As of April 13, 2013, Mr. Mills assumed the role of interim Chief Executive Officer following the resignation of our Chief Executive Officer, Michael P. Kaminski. Thus, Mr. Mills currently is not an independent director.

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Our Board provides risk oversight to the Company through the Nominating and Corporate Governance Committee and the Audit Committee. The Nominating and Corporate Governance Committee monitors healthcare compliance and regulatory risk and the Audit Committee monitors financial risks faced by the Company. This oversight process takes place through discussions at committee meetings with the members of senior management who are responsible for the Company’s risk management policies and procedures. In addition, the Audit Committee regularly meets in a private session with the Company’s independent auditors.

Director Independence

Our Board determined that, during 2012, other than Mr. Kaminski, each of our directors, and each member of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee was independent under the rules of the NASDAQ Global Market. As described above, following Mr. Kaminski’s resignation from the Company, Mr. Mills was appointed interim Chief Executive Officer effective April 13, 2013. In addition, he resigned from the Audit Committee and Nominating and Corporate Governance Committee. Our Board currently has a majority of independent directors consistent with the rules of the NASDAQ Global Market. Each member of the Audit Committee is independent as defined in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934. During 2012, the Company had a consulting agreement with Dr. Prystowsky. The Board determined that this agreement did not impair his independent judgment. Dr. Prystowsky’s consulting agreement expired in February 2012.

Director Nomination Process

The Nominating and Corporate Governance Committee is responsible for identifying and recommending to the Board candidates to serve as members of the Board. In carrying out this responsibility, the Committee has adopted a written policy setting forth the minimum qualifications to serve as a director of the Company. These minimum qualifications emphasize integrity, independence, experience, strength of character, mature judgment and technical skills applicable to the Company. The Committee also will consider whether the candidate is able to represent fairly and equally all shareholders of the Company without favoring or advancing any particular shareholder or other constituency of the Company.

The Committee also seeks Board members from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. Directors should have experience in positions with a high degree of responsibility, be leaders in the companies or institutions with which they are affiliated, and/or be selected based upon contributions they can make to the Company and Board. We do not have a formal policy regarding diversity, but the Board is committed to a diverse membership. In selecting nominees, the Board does not discriminate on the basis of race, color, national origin, gender, religion, disability, or sexual orientation.

In the Committee’s discretion, the Committee may approve the candidacy of a nominee who does not satisfy all of these requirements if it believes the service of such nominee is in the best interests of the Company and its shareholders.

The Committee has written procedures for identifying and evaluating candidates for election to the Board. The material elements of that process are as follows:

•

The Committee in its discretion gives due consideration to the renomination of incumbent directors who desire to continue their service and who continue to satisfy the Committee’s criteria for membership on the Board.

•

If there is no qualified and available incumbent or if there is a vacancy on the Board, the Committee will identify and evaluate new candidates and will solicit or entertain recommendations for nominees from other Board members and the Company’s management. The Committee also may engage a professional search firm to assist it in identifying qualified candidates.

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Nomination of Directors by Shareholders

The Committee will evaluate candidates proposed by shareholders for nomination as directors under criteria similar to the evaluation of other candidates. Our bylaws provide that shareholders seeking to nominate candidates for election as directors at an annual meeting of shareholders must provide timely notice in writing. To be timely, a shareholder’s notice must be delivered to or mailed and received at our principal executive offices not more than 120 days or less than 90 days prior to the anniversary date of the immediately preceding annual meeting of shareholders. However, in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the shareholder in order to be timely must be received not later than the close of business on the 10th day following the date on which notice of the date of the annual meeting was mailed to shareholders or made public, whichever first occurs. Our bylaws specify requirements as to the form and content of a shareholder’s notice. These provisions may preclude shareholders from making nominations for directors at an annual meeting of shareholders.

The Nominating and Corporate Governance Committee has established a written policy that it will consider recommendations for the nomination of a candidate submitted by holders of the Company’s shares entitled to vote generally in the election of directors. The material elements of that policy include the following:

•

the Committee will give consideration to these recommendations for positions on the Board where the Committee has determined not to re-nominate a qualified incumbent director;

•

for each annual meeting of shareholders, it is anticipated that the Committee will accept for consideration only one recommendation from any shareholder or affiliated group of shareholders (within the meaning of SEC Regulation 13D); and

•

while the Committee has not established a minimum number of shares that a shareholder must own in order to present a nominating recommendation for consideration, or a minimum length of time during which the shareholder must own its shares, the Committee may in its discretion take into account the size and duration of a recommending shareholder’s ownership interest in the Company.

The Committee may in its discretion also consider the extent to which the shareholder making the nominating recommendation intends to maintain its ownership interest in the Company, to the extent such information is available to the Committee. The Committee may elect not to consider recommendations of nominees who do not satisfy the criteria described above, including that a director must represent the interests of all shareholders and not serve for the purpose of favoring or advancing the interests of any particular shareholder group or other constituency. Absent special or unusual circumstances, only those recommendations whose submission complies with the procedural requirements adopted by the Committee will be considered by the Committee.

Any shareholder wishing to submit a candidate for consideration should send the following information to the Corporate Secretary, Stereotaxis, Inc., 4320 Forest Park Avenue, Suite 100, St. Louis, Missouri 63108:

•

Shareholder’s name, number of shares owned, length of period held and proof of ownership;

•

Name, age, business and residential address of candidate;

•

A detailed résumé describing, among other things, the candidate’s educational background, occupation, employment history and material outside commitments (e.g., memberships on other boards and committees, charitable foundations);

•

A supporting statement which describes the candidate’s reasons for seeking election to the Board and documents his/her ability to satisfy the director qualifications described herein;

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•

Any information relating to the candidate that is required to be disclosed in the solicitation of proxies for election of director;

•

The class and number of shares of our capital stock that are beneficially owned by the candidate;

•

A description of any arrangements or understandings between the shareholder and the candidate; and

•

A signed statement from the candidate, confirming his/her willingness to serve on the Board.

Our Corporate Secretary will promptly forward such materials to the chair of our Nominating and Corporate Governance Committee and our Chairman of the Board. Our Corporate Secretary will also maintain copies of such materials for future reference by the Committee when filling Board positions. Shareholders may submit potential director candidates at any time pursuant to these procedures.

Shareholder Communications Policy

Any shareholder wishing to send communications to our Board should send the written communication and the following information to our Corporate Secretary, Stereotaxis, Inc., 4320 Forest Park Avenue, Suite 100, St. Louis, Missouri 63108:

•

Shareholder’s name, number of shares owned, length of period held and proof of ownership;

•

Name, age, business and residential address of shareholder; and

•

Any individual director or Committee to whom the shareholder would like to have the written statement and other information sent.

The Corporate Secretary will forward the information to the Chairman of the Board, if addressed to the full Board, or to the specific director to which the communication is addressed.

Code of Ethics and Business Conduct

Our Board adopted a Code of Ethics and Business Conduct for all of our directors, officers and employees effective August 1, 2004. Shareholders may download a free copy of our Code of Business Conduct and Ethics from our website (www.stereotaxis.com) or by request to our Chief Financial Officer as follows:

Stereotaxis, Inc.

Attention: Martin C. Stammer

4320 Forest Park Avenue, Suite 100

St. Louis, Missouri 63108

314-678-6100

To the extent required by law or the rules of the NASDAQ Global Market, any amendments to, or waivers from, any provision of the Code of Ethics and Business Conduct will be promptly disclosed publicly. To the extent permitted by such requirements, we intend to make such public disclosure by posting the relevant material on our website (www.stereotaxis.com) in accordance with SEC rules. Information on our website does not constitute part of this proxy statement.

BOARD MEETINGS AND COMMITTEES

Board Meetings

During fiscal year 2012, the Board of Directors held five regular meetings and nine special meetings. During fiscal year 2012, all incumbent directors, except Dr. Prystowsky and Mr. Kelley, attended 75% or more of the aggregate meetings of the Board and the Board committees on which they served during the period they

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held office. Dr. Prystowsky attended 75% or more of the Board’s regular meetings. He is a practicing physician and due to his patient schedule, he was unable to attend some of the special meetings. Mr. Kelley was unable to attend a number of Board and committee meetings due to health reasons. Directors are encouraged, but not required, to attend our Annual Meeting of Shareholders. All of the directors, except for Mr. Kelley, attended our 2012 Annual Meeting of Shareholders.

Board Committee Membership

The Board has established three standing committees. Presently, the standing committees are: Audit, Compensation, and Nominating and Corporate Governance. In addition, the Board established a Strategy and Technology Committee. Committee membership as of the end of fiscal year 2012 was as follows:


Audit		Compensation
Robert J. Messey, Chairman		Fred A. Middleton, Chairman
David W. Benfer		William M. Kelley
William C. Mills III		Robert J. Messey

Nominating & Corporate Governance		Strategy and Technology
William C. Mills III, Chairman		William C. Mills III, Chairman
David W. Benfer		David W. Benfer
William M. Kelley		Joseph D. Keegan
		Fred A. Middleton
		Euan S. Thomson

Until November 2012, Mr. Middleton served, without additional compensation, as an ex-officio member of the Strategy and Technology Committee. At that time, he began serving as an official member of the Committee.

The Board has adopted a written charter for each of the committees. The charters of our Audit, Compensation, and Nominating and Corporate Governance Committees, and our Code of Ethics and Business Conduct are published on our website at www.stereotaxis.com/investors/governance.html. These materials are available in print to any shareholder upon request. From time to time the Board and the Committees review and update these documents as they deem necessary and appropriate.

Audit Committee

The Board has determined that each member of the Audit Committee is independent and each is financially sophisticated under the NASDAQ Global Market rules. Mr. Messey, who currently serves as the chair of the Audit Committee, qualifies as an Audit Committee Financial Expert under SEC rules and regulations. The Audit Committee assists our Board in its oversight of:

•

the integrity of our financial statements;

•

our accounting and financial reporting process, including our internal controls;

•

our compliance with legal and regulatory requirements;

•

the independent registered public accountants’ qualifications and independence; and

•

the performance of our independent registered public accountants.

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The Audit Committee has direct responsibility for the appointment, compensation, retention and oversight of our independent registered public accountants. In addition, the Audit Committee must approve in advance:

•

any related-party transaction that creates a conflict of interest situation;

•

all audit services; and

•

all non-audit services, except for de minimis non-audit services, provided the Audit Committee has approved such de minimis services prior to the completion of the audit.

During fiscal year 2012, the Audit Committee met fourteen times.

Compensation Committee

Each member of the Compensation Committee qualifies as an “Independent Director” under the NASDAQ Global Market rules and as an “Outside Director” under Section 162(m) of the Internal Revenue Code of 1986. The functions of the Compensation Committee include:

•

assisting management and the Board in defining an executive compensation policy;

•

determining the total compensation package for our chief executive officer and other executive officers;

•

administering each of our equity-based compensation plans, including our 2002 Stock Incentive Plan, our 2002 Non-Employee Directors’ Stock Plan, our 2009 Employee Stock Purchase Plan and our 2012 Stock Incentive Plan;

•

approving new incentive plans and major benefit programs.

During fiscal year 2012, the Compensation Committee met ten times.

Nominating and Corporate Governance Committee

Each member of the Nominating and Corporate Governance Committee qualifies as an “Independent Director” under the NASDAQ Global Market rules. The Nominating and Corporate Governance Committee assists the Board in:

•

identifying and evaluating individuals qualified to become Board members;

•

reviewing director nominees received from shareholders;

•

selecting director nominees for submission to the shareholders at our Annual Meeting;

•

selecting director candidates to fill any vacancies on the Board;

•

overseeing the structure and operations of the Board, including recommending Board committee structure, appointments and responsibilities; and

•

overseeing our healthcare compliance policies.

The Nominating and Corporate Governance Committee is also responsible for developing and recommending to the Board a set of corporate governance guidelines and principles applicable to us.

During fiscal year 2012, the Nominating and Corporate Governance Committee met five times.

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Strategy and Technology Committee

The Strategy and Technology Committee was established in 2011 to assist the Board in its oversight of our strategic and technology initiatives by:

•

examining management’s strategic and technology direction and investment in research and development, and initiatives regarding technology, new products and new business models and structures; and

•

advising the Board to help assure the Company makes well-informed choices in committing its resources.

During fiscal year 2012, the Strategy and Technology Committee met nine times.

DIRECTOR COMPENSATION

Director Compensation Policy

Non-employee directors receive cash compensation and equity awards for their services as Board members. In August 2012, the Compensation Committee adopted a revised compensation program for non-employee directors. Under the revised program, as of the date of each annual shareholders’ meeting beginning with the 2012 annual shareholders’ meeting, which was held on August 22, 2012, each director receives an annual grant of 10,000 restricted share units, or 20,000 in the case of the chairman of the Board. The chairpersons of the Audit, Compensation, and Nominating and Corporate Governance Committees receive an additional 2,000 restricted share units. However, the number of restricted share units granted to each director on August 22, 2012, was reduced by 25% of the number of shares of restricted share units granted on January 3, 2012, in exchange for the reinstitution of each director’s full cash compensation that had been previously reduced by 50% for 2012. The annual grants of restricted share units vest one year from the date of grant or on the date of the next annual shareholders’ meeting, whichever is earlier.

In addition to the annual grants, newly elected directors are entitled to receive a grant of 20,000 restricted share units. Initial grants of restricted shares units to new directors vest over a two-year period, with 50% vesting after the first year, and 50% vesting after the second year.

Each non-employee director receives a $30,000 annual retainer ($36,000 for the chairman of the Board) for Board membership. Each member of the Strategy and Technology Committee receives an additional annual cash retainer of $10,000. The chairman of the Strategy and Technology Committee receives an additional cash retainer of $100,000 in connection with additional assistance to be furnished to the Board relating to a number of assignments on behalf of the Committee. In October 2012, the Committee changed the annual retainer for the chairman of the Board to $100,000 and eliminated the annual cash retainers for the chairman and members of the Strategy and Technology Committee. The directors’ annual retainer fees are paid quarterly.

The annual cash retainer payable to each non-employee director was reduced by 50% in January 2012, for the period from January 1, 2012 through December 31, 2012, and each director was granted restricted stock in lieu of the cash payments. In August 2012, the Board reinstated the full cash retainer effective September 1, 2012, in exchange for a reduction in the annual grant of restricted share units as described above.

We reimburse our directors for reasonable out-of-pocket expenses incurred in connection with attendance and participation in Board and committee meetings.

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Compensation of Directors

The following table discloses compensation information of members of our Board of Directors for serving as members of the Company’s Board in 2012:


Director	Fees Earned or Paid in Cash ($)	Stock Awards ($)(1)	Option Awards ($)	All Other Compensation	Total ($)
William C. Mills III (2)	128,500	51,435	-	-	179,935
Christopher Alafi, Ph.D. (3)	11,630	15,000	-	-	26,630
David W. Benfer (4)	26,875	31,155	-	-	58,030
Michael P. Kaminski (5)	-	-	-	-	-
Joseph D. Keegan, Ph.D. (6)	21,875	31,155	-	-	53,030
William M. Kelley (7)	23,750	31,155	-	-	54,905
Robert J. Messey (8)	28,750	34,535	-	-	63,285
Fred A. Middleton (9)	25,250	37,386	-	-	62,636
Eric N. Prystowsky, M.D. (10)	18,750	31,155	-	2,400	52,305
Euan S. Thomson, Ph.D. (11)	-	38,000	-	-	38,000

(1)	Amount represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.

(2)	23,324 time-based restricted share units were outstanding as of December 31, 2012, none of which were vested as of such date. 14,075 options were outstanding as of December 31, 2012, all of which were exercisable as of such date.

(3)

1,765 time-based restricted share units were outstanding as of December 31, 2012, none of which were vested as of such date. 9,225 options were outstanding as of December 31, 2012, all of which were exercisable as of such date. Dr. Alafi’s term as a director ended on August 22, 2012, the date of the 2012 Annual Meeting of Shareholders.

(4)	11,324 time-based restricted share units were outstanding as of December 31, 2012, none of which were vested as of such date. 11,150 options were outstanding as of December 31, 2012, all of which were exercisable as of such date.

(5)

As a member of the Company’s management, Michael P. Kaminski did not receive compensation for his services as a director in 2012. The compensation received by Mr. Kaminski as an employee of the Company is shown in the Summary Compensation Table below. Mr. Kaminski resigned as President and CEO and as a director effective April 12, 2013.

(6)	11,324 time-based restricted share units were outstanding as of December 31, 2012, none of which were vested as of such date. 4,050 options were outstanding as of December 31, 2011, 3,675 of which were exercisable as of such date.

(7)	11,324 time-based restricted share units were outstanding as of December 31, 2012, none of which were vested as of such date. 10,150 options were outstanding as of December 31, 2012, all of which were exercisable as of such date.

(8)	13,324 time-based restricted share units were outstanding as of December 31, 2012, none of which were vested as of such date. 13,925 options were outstanding as of December 31, 2012, all of which were exercisable as of such date.

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(9)	13,589 time-based restricted share units were outstanding as of December 31, 2012, none of which were vested as of such date. 22,550 options were outstanding as of December 31, 2012, all of which were exercisable as of such date.

(10)

11,324 time-based restricted share units were outstanding as of December 31, 2012, none of which were vested as of such date. 7,800 options were outstanding as of December 31, 2012, all of which were exercisable as of such date. All other compensation reflects amounts paid under a consulting agreement between Dr. Prystowsky and the Company, which expired in February 2012.

(11)	Dr. Thomson was appointed to the Board on October 22, 2012. He received an initial grant of 20,000 restricted share units. 20,000 time-based restricted share units were outstanding as of December 31, 2012, none of which were vested as of such date.

PROPOSAL 1: ELECTION OF DIRECTORS

The Board, pursuant to the bylaws, has set the number of directors of the Company at nine. The directors are divided into three classes, Class I, Class II and Class III, each class to be as nearly equal in number as possible. The term of office of each director shall be until the third annual meeting following his or her election and until the election and qualification of his or her successor.

The shareholders are being asked to elect two directors, Fred A. Middleton and William C. Mills III to serve as Class III directors to serve until the 2016 Annual Meeting of Shareholders. The Board nominated Mr. Middleton and Mr. Mills for election at the 2013 Annual Meeting of Shareholders upon the recommendation of the Nominating and Corporate Governance Committee. Each nominee currently is a director of our Company. Following the annual meeting, there will be a vacancy in one position of the Class III directors because one of the Class III directors is not standing for re-election. Certain information with respect to the nominees for election is set forth above under the headings “Information about the Board of Directors” and “Board Meetings and Committees.” Proxies cannot be voted for a greater number of persons than the number of nominees named in each Class.

The Board does not contemplate that any of the nominees will be unable to stand for election, but should any nominee become unable to serve or for good cause will not serve, all proxies (except proxies marked to the contrary) will be voted for the election of a substitute nominee as our Board may recommend.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF THE NAMED NOMINEES AS DIRECTORS.

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Executive Summary

2012 was a challenging year marked by significant operational achievement and notable financial improvement. During 2012, we made significant progress in converting the excitement around our unique Epoch™ platform into capital orders and customer upgrades, resulting in an 11% increase in total full year revenue over 2011. By year-end, we achieved our strategic milestone of upgrading half of our installed base in North America and Europe to the new technology. We also reached shipment targets for the Niobe^® ES system, receiving an additional $2.5 million of funding on January 31, 2013, under our existing agreement with Healthcare Royalty Partners (previously ‘Cowen’).

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Our significant financial outcomes for 2012 include:

•

Total revenues were up by 11% to $46.6 million, with the increase attributed to both system and recurring revenues. Utilization in the Niobe^® ES sites increased 19% from 2011 and overall utilization was up 7%.

•

Operating loss was $(10.6) million, a 67% reduction from $(31.9) million in the prior year, with the largest improvement occurring in the second half of the year. Operating loss for the last six months of 2012 was $(1.8) million.

•

Capital management efforts resulted in a reduction in operating expenses of 31% and a reduction in cash burn of 68% from 2011.

•

However, reflective of the challenging environment facing the Company, our stock price has declined from $8.50/share at the beginning of 2012 to approximately $2.55/share by year-end.

Within this business performance context, the compensation outcomes for the 2012 fiscal year, as well as pay program decisions made to-date for 2013, continue to reflect our commitment to aligning executive pay and business performance while providing incentives to retain key talent. Consequently, we note the following related compensation highlights for 2012:

•

Throughout 2012, executive base salaries remained at reduced levels

In October 2011, we converted a component of executive base salary into time-vested equity to control cash expenses, link a greater proportion of executive pay to stock price performance, and align management with the broader non-management employee base that received retention equity awards around the same time. On an annualized basis, base salary reductions approximated 16% for the President & CEO and 10% for other eligible Named Executive Officers. The Chief Financial Officer did not participate in this program.

•

The 2012 and 2013 Management Bonus Plans instill a sense of urgency and combine performance objectives and a timely delivery of earned incentives that are critical to the business recovery and retention challenges the company faces

The Management Bonus Plan focuses on achievement of business plan objectives with respect to revenues, capital orders and adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”). To put further emphasis on the importance of a rapid turnaround, performance was measured and bonuses paid on a semi-annual basis for 2012. For 2013, performance will be measured and bonuses will be paid on a quarterly basis.

•

Below target payouts were earned under the 2012 Management Bonus Plan

Reflecting our below target performance on key corporate-level metrics, our executives received payouts under this incentive program at approximately 33% of target levels for 2012. This reflects payouts at 36.8% of target under the first-half incentive criteria and 29.5% of target under the second-half incentive criteria.

•

2012 performance share awards vest only upon the achievement of bottom line milestones

These awards vest only upon the achievement of positive adjusted EBITDA and adjusted net income criteria over 2012 and 2013. We believe that these are significant milestones toward our business being able to operate on a cash flow positive basis and will create significant shareholder value. Over the next two fiscal years these shares vest as follows:

•

50% upon achievement of one quarter of positive adjusted EBITDA in 2012 (not achieved),

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•

50% vest upon achieving at least two out of three consecutive quarters with positive adjusted net income by December 31, 2013.

•

“Realizable” compensation is significantly below grant value for Named Executive Officers

All outstanding stock appreciation rights (“SARs”) are currently underwater, and the EBITDA and GAAP net income performance criteria for the performance shares granted in 2011 and 2012 have not yet been achieved as of year-end 2012. Additionally, the service-vested restricted stock awards granted in recognition of base salary reductions have lost approximately 75% of their grant date value.

•

Stock ownership guidelines were enhanced, converting at a less than 10:1 ratio following the reverse stock split for our executive officers

In addition to providing regular grants of equity, we believe that setting ownership standards for our executive team ensures that they are well aligned with shareholder interests by having a certain amount of their personal wealth invested in the Company.

•

Stock retention requirements were introduced in 2012

The Committee approved a requirement that executives hold 100% of all equity (net of taxes) for two years following the vesting date to further enhance the ownership environment among the leadership team.

These recent pay outcomes and actions reflect our success in deploying compensation programs that align pay realized by executives and the returns to our shareholders. The Compensation Committee further recognizes the importance of both providing market competitive pay opportunities and also motivating and retaining key talent in a challenging business environment. Specifically, we continue to be guided by our compensation philosophy, as described in the section following this Executive Summary, to ensure that compensation programs consistently support our business objectives. As circumstances remain dynamic, the Compensation Committee has taken timely actions, including the provision of special incentive opportunities, to adapt our compensation strategy to such circumstances as they arise. Ultimately, we believe that the decisions made in 2012 and early 2013 reflect the Committee’s efforts to appropriately incentivize executives, particularly with respect to rewarding management for efficient stewardship of capital and continued focus on growing revenues through maximizing our current engagements and expanding our market presence.

Say-on-Pay Results

The Compensation Committee considered the results of the 2012 advisory, non-binding “say-on-pay” proposal and incorporated the results as one of the many factors considered in connection with the discharge of its responsibilities. Because a substantial majority (97%) of our shareholders approved the compensation programs described in our proxy statement for the 2012 annual meeting of shareholders, the Compensation Committee did not implement changes to our compensation programs as a direct result of the shareholder advisory vote. However, as outlined in the forthcoming sections of this Compensation Discussion & Analysis, the Committee did continue to take actions with respect to our fiscal year 2012 and 2013 compensation programs based on the business conditions facing the Company.

Compensation Philosophy

The objective of our compensation program is to attract, retain and motivate highly qualified executive officers while aligning the interests of these executives with those of shareholders. When designing compensation packages to achieve this objective, the Committee is guided by the following principles:

•

Align pay and performance: Provide total compensation that is commensurate with stock price performance, the operational and financial success of our business, and the individual performance contributions of executives.

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•

Manage program cost and dilution: Balance other considerations for executive pay programs with their impact on earnings, cash flow and stock dilution.

•

Provide market competitive pay: Targeted compensation opportunities should generally reflect levels, both in terms of size of pay opportunity and mix of pay elements, observed in the competitive marketplace, as defined by the market median pay levels among companies with which we compete for talent.

We believe that adhering to these principles will create a total compensation program that supports our aim to deliver long-term shareholder value through business performance. In benchmarking the market competitiveness of total compensation, we utilize a peer group of select companies to represent our competitive labor market. Targeted total compensation opportunities are comprised of base salary, annual incentives and equity-based long-term incentives. In addition to the above principles, the Compensation Committee exercises its judgment in setting pay levels with respect to individual competencies and experience and the internal compensation equity among Named Executive Officers.

Role and Independence of the Consultant

From time-to-time, when deemed necessary, the Committee engages the services of an independent compensation consultant, Pay Governance, LLC (the “Consultant”). The Consultant provides the Committee with market data and analysis, commentary on incentive design practices, and an external perspective on pay trends and legal and regulatory developments.

Pay Governance LLC does not provide any services to the Company other than those related to executive compensation consulting. The Committee considers the Consultant to be fully independent and that the Consultant’s work has not raised any conflict of interest.

Compensation Determination Process

The typical pay review process occurs at the beginning of the fiscal year in January and February at which time the Committee reviews and approves adjustments in executive compensation, including, base salaries, target annual incentive opportunities, the approval of annual equity awards and the establishment of performance goals for the annual incentive plan and performance-vested long-term awards. During the review process, the Committee considers a number of factors, including competitive market data, input received from the Company’s management, and an assessment of individual performance and the operating performance of the Company.

Through active discussions with the CEO, human resources personnel and the Consultant, the Committee receives input regarding various considerations relevant to compensation programs, such as business goals, strategic objectives for the Company, appropriate participants for incentive programs, market best practices, and any other information, as may be requested by the Committee. The CEO makes recommendations to the Committee regarding cash compensation for Named Executive Officers and, with respect to equity grants, the appropriate grants for executives and other employee levels. The Committee reviews the appropriateness of the recommendations of the CEO and accepts or adjusts such recommendations in light of the considerations applicable to the relevant element of compensation. It is also the Committee’s practice to set total compensation for the CEO during executive session.

In addition to context and recommendations provided by management, and consistent with our compensation philosophy, the Committee has historically set targeted total compensation (base salaries, annual incentives, and long-term incentive awards) at the median of the competitive market (reviewing data as described below); this positioning includes additional adjustments for other considerations such as business performance, company size and stock dilution. In addition, incentive programs are designed such that total compensation realized by executives is consistent with performance achievement:

•

Exceeds targeted incentive levels for performance that exceeds our short and long-term performance expectations; and

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•

Falls below targeted incentive levels for performance that does not meet our short and long-term performance expectations.

This approach reflects the Compensation Committee’s philosophy to align executive pay outcomes directly with performance achievement. However, while incentive program designs are intended to be objective and formulaic, the Committee may also use its discretion to adjust compensation components for Named Executive Officers, as such discretion provides a means of acknowledging non-formulaic considerations such as the context in which certain performance achievement has occurred, the unique experience an individual brings to a role, and other factors the Committee deems relevant.

When reviewing the competitiveness of compensation, the Committee uses both proprietary survey data specific to the technology industry and publicly disclosed peer group compensation data. Specifically, the Committee uses the Radford Global Technology Database to obtain proprietary survey data and a sample of similar companies that make up the Industry Peer Group as listed below:


ABIOMED, Inc.	DexCom, Inc.	NuVasive, Inc.
Accuray, Inc.	Hansen Medical, Inc.	Rockwell Medical Technologies,
AtriCure, Inc.	LeMaitre Vascular, Inc.	The Spectranetics Corporation
Conceptus, Inc.	MAKO Surgical Corp	SonoSite, Inc.
CryoLife, Inc.	Masimo Corporation	Volcano Corporation

While

selected as a peer company in 2011, the following companies are no longer included due to corporate actions (e.g., acquisition or merger): Orthovita, Synovis Life Technologies, Vital Images.

The Committee did not conduct a detailed competitive review in 2012 since merit or market adjustments were not being planned for Named Executive Officers for 2012.

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Elements of the Compensation Program

The various elements of our executive compensation program, established through the process outlined above, are intended to provide competitive total compensation while aligning the behavior and action of Named Executive Officers with shareholder interests. For each component of Named Executive Officer compensation, the following table summarizes its purpose with respect to our compensation philosophy, applicable performance measures, and 2012 actions and outcomes pertaining to the component.


Component	Purpose	Performance Measures	2012 Outcomes
Base Salary	Fixed pay based on responsibilities of role; basic pay for recruiting and retaining top talent	Individual performance and contribution	Named Executive Officers other than CFO, maintained reduced salary levels through 2012
Annual Incentive	Motivates and rewards achievement of important short-term goals that are key to generating shareholder value	Transitioned to a program measuring performance twice annually based on revenue, orders, adjusted EBITDA and strategic management objectives (MBOs)	Business performance resulted in the following corporate-level payouts (as a % of target): First-Half: 38.6% of target Second-Half: 29.5% of target
Stock-Settled SARs	Leveraged pay opportunity motivating the creation of long-term shareholder value; stock settlement designed to promote share ownership	Stock price appreciation relative to strike price at grant	All outstanding awards are currently underwater; No awards were granted to Named Executive Officers in 2012
Performance-vested restricted stock	Equity award linked to key financial profitability milestones of our business	February, 2012 Grant: • 50% one quarter of positive EBITDA in FY 2012 • 50% two out of three quarters of positive GAAP adjusted net income from Jan 2012 to Dec 2013	Through 2012, the performance vesting criteria have not been met thus no awards have vested
Service-vested restricted share units	Equity award motivating continued employment and stock price performance	August, 2012 grant vests 25% per year beginning in 2013	N/A
Benefits	Standard compensation benefit; Named Executive Officers receive same benefits as other employees, and no special perquisites	N/A	N/A

Base Salary. In October 2011, as we sought to control cash expenses in response to our business performance, the Committee decided it was appropriate to convert a portion of each Named Executive Officer’s base salary into an equal value of restricted share units (“RSUs”). The value of the reduction represented a set percentage of each executive’s annual base salary, with the reduction spread over an 18-month period, offset by RSU awards with a grant date fair value equal to the 18-month reduction. The RSU awards were granted in October 2011 and vest fully at the conclusion of the 18-month period on March 31, 2013.

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In October 2012, the Committee determined it was appropriate to enhance the retention value associated with the overall compensation package by restoring base salaries to the pre-reduction levels on January 1, 2013 for the Named Executive Officers impacted by the salary reduction, three months prior to the originally scheduled reset date. Additionally, Mr. Duggan’s base salary was increased by 10%, effective November 1, 2012 in recognition of his below market competitive positioning.


	2012 Base Salary Information
Executive	2011 Annual Salary		2012 Annual Salary		Reduced Salary 11/1/11 to 12/31/12		Effective Salary at 1/1/13
Michael P. Kaminski (1) President & Chief Executive Officer	$	420,000	$	420,000	$	352,000	$	420,000
Samuel W. Duggan II (2) Chief Financial Officer	$	270,000	$	297,000(3) (10% increase)		N/A	$	297,000
Frank J. Cheng Senior Vice President, Marketing & Business Development	$	285,000	$	285,000	$	256,500	$	285,000
Karen W. Duros Senior Vice President, General Counsel & Secretary	$	270,000	$	270,000	$	243,000	$	270,000
David A. Giffin Vice President, Human Resources	$	200,000	$	200,000	$	180,000	$	200,000

(1)	Mr. Kaminski resigned from the Company effective April 12, 2013.

(2)	Mr. Duggan resigned from the Company effective February 22, 2013.

(3)	Mr. Duggan’s salary was increased effective November 1, 2012.

Annual Incentive Plan. The Company’s annual incentive plan, the Management Bonus Plan, is intended to motivate Named Executive Officers to drive the financial performance critical to generating shareholder value for the Company. Under this program, each Named Executive Officer receives a target award opportunity, established each year and denominated as a percentage of each officer’s base salary. For each performance component of the plan, if target performance is achieved, each Named Executive Officer’s incentive will be funded at the target level. For performance above or below target, payouts are respectively increased or decreased, with no payouts made for performance below a threshold performance level and additional payouts not earned beyond a maximum performance level.

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Awards may also be adjusted up or down based on individual performance considerations. However, all individual adjustments are made such that the cumulative incentives delivered under the program still equal the total funding determined based on actual performance achievement against established plan goals. Such individual adjustments for Named Executive Officers are subject to the review and approval of the Compensation Committee. For fiscal year 2012, award opportunities as a percentage of base salary for Named Executive Officers remained unchanged relative to 2011. In addition, target annual opportunities were unaffected by the changes to base salary that occurred in October 2011; specific annual opportunities by Named Executive Officers were as follows:


	2012 Annual Incentive Opportunity
Executive	Threshold	Target	Maximum
Michael P. Kaminski (1) President & Chief Executive Officer	$105,000 25% of Base	$210,000 50% of Base	$420,000 100% of Base
Samuel W. Duggan II (2) Chief Financial Officer	$69,667 25% of Base	$139,333 50% of Base	$278,667 100% of Base
Frank J. Cheng Senior Vice President, Marketing & Business Development	$71,250 25% of Base	$142,500 50% of Base	$285,000 100% of Base
Karen W. Duros Senior Vice President, General Counsel & Secretary	$54,000 20% of Base	$108,000 40% of Base	$162,000 60% of Base
David A. Giffin Vice President, Human Resources	$40,000 20% of Base	$80,000 40% of Base	$120,000 60% of Base

(1)	Mr. Kaminski resigned from the Company effective April 12, 2013.

(2)	Mr. Duggan resigned from the Company effective February 22, 2013.

Given our business performance in 2011, the Committee determined that the 2012 Management Bonus Plan should focus on restoring growth in revenues and capital orders and also making major progress towards being profitable. In addition, the bonus plan was divided into two semi-annual performance periods in order to reward participants for achieving distinct levels of performance in the first half of the year, as well as in the second half. The Committee believes that providing mid-year bonus opportunities creates a sense of urgency in driving performance consistent with the Company’s current circumstances.

For 2012, the Committee identified four corporate-wide performance measures for the 2012 incentive plan: Robotics/Recurring revenue, Odyssey^® revenues, Orders and Adjusted EBITDA. Additionally, individual awards can be adjusted based on strategic management objectives (MBOs) which vary by Named Executive Officers. The Committee views the ability to reward the achievement of qualitative, non-financial goals as an important piece of creating pay for performance alignment in our Management Bonus Plan.

In setting goals for the Management Bonus Plan’s metrics, the Committee seeks to set attainable targets that represent the year-over-year improvement in the financial performance that drives the value of the business. In particular, our practice is to generally link target performance to our business plan and set threshold goals such that their achievement would still represent a level of improvement over the prior year. This ensures that no incentive payouts are made until performance improvement has been achieved in a given year.

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For the first half of 2012 under the Management Bonus Plan, the Committee approved the following goals, weightings and threshold and target performance levels.


First Half Metrics ($000’s)	Weighting			Threshold 90% Plan			Target 100% Plan
Robotics/Recurring Revenue		22.2	%	$	18,714		$	20,794
Odyssey Revenue		11.1	%	$	5,595		$	6,217
Orders		33.3	%	$	14,129		$	15,699
Adjusted EBITDA		33.3	%	($	5,542	)	($	5,039	)

In order to appropriately emphasize the importance of becoming profitable, an annual overachievement qualifier was introduced which requires both a Q4 adjusted EBITDA of at least $448,000 and a full-year adjusted EBITDA of at least ($2.039M) for payouts above the established target levels to be earned, irrespective of performance on the four aforementioned measures.

Actual performance in the first half of 2012 resulted in an overall payout factor of 36.8% for our Named Executive Officers based on actual results of 94% of target on the Robotics revenue metric and the 93% of target on the adjusted EBITDA metric. The following table summarizes the actual performance achievement in the first half of 2012 and corresponding bonus funding per metric:


First Half Metrics ($000’s)	Weighting			Threshold 90% Plan			Actual Result			Bonus Funding as % of Target
Robotics/Recurring Revenue		22.2	%	$	18,714		$	19,616			15.9	%
Odyssey Revenue		11.1	%	$	5,595		$	3,181			0	%
Orders		33.3	%	$	14,129		$	6,134			0	%
Adjusted EBITDA		33.3	%	($	5,542	)	($	5,415	)		20.9	%
								1st Half Total			36.8	%

For the second half of 2012, the metrics were the same as the first half with the performance goals as follows:


Second Half Metrics ($000’s)	Weighting			Threshold 90% Plan			Target 100% Plan
Robotics/Recurring Revenue		22.2	%	$	21,764		$	24,182
Odyssey Revenue		11.1	%	$	8,062		$	8,958
Orders		33.3	%	$	18,716		$	20,795
Adjusted EBITDA		33.3	%	($	553	)	($	503	)

Actual performance in the second half of 2012 resulted in an overall payout factor of 29.5% for our Named Executive Officers based on performance against the adjusted EBITDA goal at 87.5% of target. The following table summarizes the actual performance achievement in the second half of 2012 and corresponding bonus funding per metric:


Second Half Metrics ($000’s)	Weighting			Threshold 90% Plan			Actual Result			Bonus Funding as % of Target
Robotics/Recurring Revenue		22.2	%	$	21,764		$	20,459			0	%
Odyssey Revenue		11.1	%	$	8,062		$	3,308			0	%
Orders		33.3	%	$	18,716		$	11,353			0	%
Adjusted EBITDA		33.3	%	($	553	)	($	509	)		29.5	%
								2nd Half Total			29.5	%

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The Committee also retains the ability to exercise its discretion in adjusting both total bonus funding as well as the individual awards received by our Named Executive Officers. The Committee did not exercise its discretion with respect to total funding for the first half or second half of 2012 under the Management Bonus Plan.

Target bonus awards for our Named Executive Officers, versus resulting actual bonuses received (reflecting adjustments at the individual level for results against their respective MBOs) are summarized in the following table:


	2012 – First Half Incentive				2012 – Second Half Incentive
Executive	Target		Actual Paid		Target		Actual Paid
Michael P. Kaminski (1) President & Chief Executive Officer	$	105,000	$	38,640	$	105,000	$	31,306
Samuel W. Duggan II (2) Chief Financial Officer	$	68,750	$	30,000		Ineligible due to resignation
Frank J. Cheng Senior Vice President, Marketing & Business Development	$	71,250	$	18,000	$	71,250	$	21,244
Karen W. Duros Senior Vice President, General Counsel & Secretary	$	54,000	$	23,000	$	54,000	$	16,100
David A. Giffin Vice President, Human Resources	$	40,000	$	16,000	$	40,000	$	11,926

(1)	Mr. Kaminski resigned from the Company effective April 12, 2013.

(2)	Mr. Duggan resigned from the Company effective February 22, 2013.

To put further emphasis on the importance of a rapid turnaround, the 2013 Management Bonus Plan will be measured and incentives will be paid on a quarterly basis, further strengthening the line-of-sight between short-term performance and rewards.

Long-Term Incentive Compensation. The objective of the Company’s long-term incentive program is to directly align compensation outcomes with returns received by shareholders, build equity ownership within the management team, and motivate the sustainable financial performance that supports stock price growth. Long-term incentive awards are made pursuant to the Company’s newly adopted 2012 Stock Incentive Plan, which permits grants of cash awards, stock options, stock appreciation rights or stock awards (e.g., restricted stock and RSUs). The Committee throughout the year may also approve awards in connection with employee promotions, employee retention, an individual newly hired to the Company, or for purposes otherwise deemed to be in the best interest of the Company. The timing of these equity award grants is not based on the timing of the release of material, non-public information, nor is such information released for the purpose of affecting the value of executive compensation.

For 2012, consistent with our efforts to provide competitive incentive opportunities and enhance the retention value in light of multiple years of limited realizable value associated with prior equity incentives the Committee made two separate long-term incentive award grants to Named Executive Officers. In February, a grant of performance-vested restricted stock awards (“RSAs”) was made to selected senior executives with vesting contingent on prospective performance objectives. In August, a grant of service-vested RSUs was made with the intention of emphasizing retention and the criticality of shareholder alignment during this key phase in the Company’s life-cycle.

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Specifically, the details of the awards are as follows:

•

February grant of performance vested RSUs, which had the following key terms and conditions:

•

50% upon achievement of one quarter of positive adjusted EBITDA in 2012,

•

50% vest upon achieving at least two out of three consecutive quarters with positive adjusted net income by December 31, 2013.

•

August grant of service vested RSUs vesting 25% per year beginning in August 2013

The Committee therefore approved the following grants to Named Executive Officers during fiscal year 2012:


	2012 Long-Term Incentives
Executive	# Performance-Vested RSAs(1) (February 2012)		# Service- Vested RSUs(2) (August 2012)
Michael P. Kaminski (3) President & Chief Executive Officer		17,500		80,000
Samuel W. Duggan II (4) Chief Financial Officer		7,500		40,000
Frank J. Cheng Senior Vice President, Marketing & Business Development		6,300		25,000
Karen W. Duros Senior Vice President, General Counsel & Secretary		4,200		22,500
David A. Giffin Vice President, Human Resources		4,200		22,500

(1)	Performance-Vested RSAs price on the date of grant was $8.00

(2)	Service-Vested RSUs price on the date of grant was $1.69.

(3)	Mr. Kaminski resigned from the Company effective April 12, 2013.

(4)	Mr. Duggan resigned from the Company effective February 22, 2013.

Stock Ownership Guidelines

At the beginning of fiscal year 2011, consistent with our philosophy to align executives with shareholders and pay for performance, we established stock ownership guidelines for our executive officers, including the Named Executive Officers. These guidelines are intended to create a management team of owners, tying Company stock price performance to executive wealth and motivating sustainable long-term business value generation. The initial ownership requirements, which were established prior to the reverse stock split in July 2012, were set at what the Committee considered to be reasonable and appropriate at the time. Following the 10:1 reverse split the Committee believed that it was appropriate to adjust the guidelines to reflect the impact of the split; however, they determined that an enhancement administered through an adjustment to guidelines at less than the 10:1 conversion rate was appropriate to continue to recognize the importance of developing an ownership culture.

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Additionally, in 2012, the Committee approved a requirement that executives hold 100% of all equity (net of taxes) for two years following the vesting date to further enhance the ownership environment among the leadership team.

The guidelines, denominated as a fixed number of shares, are displayed below:


Executive	Pre-Split Guideline		Post-Split Guideline
President & CEO		300,000 shares		100,000 shares
Other Executive Officers		100,000 shares		50,000 shares

At the beginning of the 2012 fiscal year, these guidelines represented value that was approximately 2.0x the CEO’s current annual base salary and approximately 1.5x the current base salary for other executive officers. Given our decline in stock price over the year, these ownership levels now represent a lower value, but we believe that requiring these levels of whole share ownership by management provides added incentive to grow our stock price. For purposes of calculating ownership levels against these guidelines, the following types of ownership are counted towards each officer’s guideline:

•

Restricted stock or RSUs that vest based on service (this includes awards that vest based on service and performance criteria, assuming the performance criteria have been met);

•

The in-the-money value of vested, stock-settled SARs, converted into a number of shares at the closing stock price at the time ownership is being measured; and

•

Common stock owned outright or in any Company deferred compensation plan or other program.

Since vested stock-settled SARs could be exercised and converted into shares of stock at any time, we believe it is appropriate that such SARs contribute to executive ownership without requiring executives to reduce the outstanding leverage they have from the Company’s long-term incentive program.

As of December 31, 2012, the ownership of all Named Executive Officers was at least 54% of each individual’s respective guideline. Our executive officers are expected to achieve the guidelines within three years of either their hire date or February 2011, the time at which the guidelines were established. The following table provides detail on our Named Executive Officers’ ownership as a percent of guideline at our last fiscal year end:


Executive		Ownership as % of Guideline
Michael P. Kaminski (1) President & Chief Executive Officer		95
Samuel W. Duggan II (2) Chief Financial Officer		Not applicable due to resignation
Frank J. Cheng Senior Vice President, Marketing & Business Development		61
Karen W. Duros Senior Vice President, General Counsel & Secretary		54
David A. Giffin Vice President, Human Resources		56

(1)	Mr. Kaminski resigned from the Company effective April 12, 2013.

(2)	Mr. Duggan resigned from the Company effective February 22, 2013.

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Other Benefits

•

Healthcare and Other Insurance Programs: All of our employees, including the Named Executive Officers, are eligible to participate in medical, dental, short and long-term disability and life insurance plans. The terms of such benefits for our Named Executive Officers are the same as those for all of our employees.

•

401(k): We offer all eligible employees the opportunity to participate in a 401(k) plan to which the Company generally matches employee contributions dollar for dollar up to 3% of the employee’s salary during the employee’s period of participation. However, we have temporarily suspended the Company match given ongoing efforts to control our cash operating expenses. For the fiscal year 2012, no matching contributions were made.

•

Employee Stock Purchase Plan: The Company offers an employee stock purchase plan, under which all of our employees, including our Named Executive Officers, who do not own 5% or more of our outstanding common stock, have the opportunity to buy an aggregate of up to 250,000 shares of Company common stock at 95% of market price with up to 15% of their salaries and incentives (subject to certain limits), with the objective of allowing employees to profit when the value of our stock increases over time. This plan was suspended in 2012.

Significant Q1 2013 Events

Share Plan Request

In addition to the awards described above, we are also submitting a request for additional shares under our 2012 Stock Incentive Plan for approval by shareholders. As described in more detail in the applicable proposal section of this proxy statement, we are requesting the approval of additional shares to be granted under the 2012 Stock Incentive Plan to make grants of equity for compensation purposes to our employees or non-employee directors. We view the ability to grant equity as a key element of our compensation program, both in regular rewards to motivate employees as well as grants in order to recruit key talent into our organization.

February Service Vested RSU Grant

The Company made the following grants of service vested RSUs to Named Executive Officers in March 2013. These awards vest annually at a rate of 40% in 2014 and 20% annually each year after.


Executive		# Service- Vested RSUs(1) (March 2013)
Michael P. Kaminski (2) President & Chief Executive Officer		0
Samuel W. Duggan II (3) Chief Financial Officer		0
Frank J. Cheng Senior Vice President, Marketing & Business Development		25,000
Karen W. Duros Senior Vice President, General Counsel & Secretary		25,000
David A. Giffin Vice President, Human Resources		25,000

(1)	Service-Vested RSUs price on the date of grant was $2.49.

(2)	Mr. Kaminski resigned from the Company effective April 12, 2013.

(3)	Mr. Duggan resigned from the Company effective February 22, 2013.

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CEO Separation Agreement

The Company’s President and Chief Executive Officer, Michael Kaminski, resigned effective April 12, 2013. Mr. Kaminski continued to be eligible for a payout under the 2013 Management Bonus Plan for first quarter results.

The Committee considered the need to arrange a consulting agreement with Mr. Kaminski after his departure from the Company. The Company and Mr. Kaminski entered into a consulting agreement for the period from April 13, 2013 through October 13, 2014 to ensure a smooth transition to new leadership occurs. In exchange, 40,000 of the 80,000 shares of Mr. Kaminski’s restricted stock granted as of August 21, 2012 will continue to vest during the time he continues to provide services. All other equity awards including unexercised stock options or stock appreciation rights, performance shares or units or other types of awards based on the equity of the Company granted to Mr. Kaminski during his employment with the Company were cancelled as of April 13, 2013. He will not receive any base salary nor will he be eligible for payouts under the Management Bonus Plan during the period covered by the consulting agreement.

Policy on Recoupment of Incentive Compensation

In December 2010, the Compensation Committee of the Board approved the following policy on recoupment of incentive compensation.

In the event of a material restatement of financial results of the Company (other than a restatement required by a change of GAAP or accounting standards) due to fraud, gross negligence or willful misconduct on the part of any Senior Executive (as defined below) or any key employee, the Independent Directors will review all incentive compensation awarded to or earned based on the Company’s financial results, during the three fiscal years prior to the filing of the restated financial results, by each of the Senior Executives and any key employees involved in the fraud, gross negligence or willful misconduct. For this purpose, a financial statement or financial performance metric will be treated as materially inaccurate with respect to any Senior Executive or key employee who knowingly engaged in providing inaccurate information or knowingly failed to timely correct information relating to those financial statements or financial performance metrics.

The incentive compensation to be reviewed will include all incentive compensation based on financial results, including annual cash incentive bonus awards and all forms of equity-based compensation. If, in the view of the Independent Directors, the incentive compensation would have been lower if it had been based on the restated results, the Independent Directors may, upon consideration of all factors deemed relevant by the Independent Directors, and to the extent permitted by applicable law, seek recoupment from the Senior Executives, and any key employee whose acts or omissions contributed to the fraud, gross negligence or intentional misconduct, of any portion of such incentive compensation as it deems appropriate.

Any recoupment under this Policy may be in addition to any other remedies that may be available to the Company under applicable law, including disciplinary actions up to and including termination of employment.

The Board intends to incorporate the provisions of this Policy in future incentive plan documents, award agreements and employee agreements.

For purposes of this Policy, “Senior Executives” mean the Company’s executive officers (as defined under the Securities and Exchange Act of 1934, as amended).

Page 29

Federal Income Tax Considerations

Section 162(m) of the Internal Revenue Code limits the tax deduction allowable for executive compensation to $1.0 million per year for certain executive officers unless such compensation is performance based. As the cash compensation paid to our executive officers is below $1.0 million, and the Compensation Committee believes that the performance vested restricted stock granted would meet the requirements for performance-based compensation, and the value of time vested restricted share units is not substantial, the Company believes that these limitations did not impact the Company in 2012.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussions, the Compensation Committee recommended to the Company’s Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

Submitted by the Compensation Committee of the Board of Directors.

Fred A. Middleton, Chairman

William M. Kelley

Robert J. Messey

The Compensation Committee report and the report of the Audit Committee below will not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement or portions thereof into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that we specifically incorporate by reference the Compensation Committee report or the Audit Committee report, and will not otherwise be deemed filed under such Acts.

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Compensation Committee Interlocks and Insider Participation

Mr. Middleton served as a member of our Compensation Committee during our last fiscal year and as our president from December 1996 through June 1997. Otherwise, none of our Compensation Committee members and none of our executive officers have a relationship that would constitute an interlocking relationship with executive officers or directors of another entity or insider participation in compensation decisions.

Summary Compensation Table

The following table summarizes the total compensation paid to the following executive officers (our “Named Executive Officers”) for fiscal years 2010, 2011 and 2012. For more information about the components of the total compensation, refer to the “Compensation Discussion and Analysis” section of this proxy statement.


Name and Principal Position	Year		Salary ($)		Stock Awards ($)(1)		Option Awards ($)(2)		Non-Equity Incentive Plan Compensation ($)(3)		All Other Compensation ($)(4)		Totals ($)
Michael P. Kaminski (5)		2012		352,000		275,200		-		69,946		1,980		699,126
President and Chief Executive Officer		2011		399,667		339,600		555,713		0		9,330		1,304,310
President and Chief Executive Officer		2010		400,000		-		281,250		52,000		9,330		742,580
Samuel W. Duggan II (6)		2012		274,500		127,600		-		30,000		1,768		433,868
Chief Financial Officer		2011		67,500		26,000		108,325		0		436		202,261
Frank J. Cheng (7)		2012		265,500		92,650		-		39,244		1,682		390,076
Senior Vice President, Marketing and Business Development		2011		276,208		128,286		200,057		0		228,418		832,969
Senior Vice President, Marketing and Business Development		2010		193,910		-		262,800		50,000		45,348		552,058
Karen W. Duros (8)		2012		243,000		71,805		-		39,100		1,617		355,522
Senior Vice President, General Counsel & Secretary		2011		263,250		97,524		133,371		0		5,764		499,909
Senior Vice President, General Counsel & Secretary		2010		66,635		-		191,800		7,616		254		266,305
David A. Giffin		2012		180,000		71,805		-		27,926		1,280		281,011
Vice President, Human Resources		2011		192,833		87,024		133,371		0		6,465		419,693
Vice President, Human Resources		2010		187,000		-		112,500		25,000		7,450		331,950

(1)

Amounts reported include the aggregate grant date fair value of awards granted during the year computed in accordance with ASC 718, Compensation-Stock Compensation. These awards consist of grants of common stock, restricted shares and RSUs. Restricted shares granted to employees are valued at the fair market value at the date of grant. See Note 11 of the notes to our consolidated financial statements contained in our 2012 Annual Report on Form 10-K for a discussion of all assumptions made by us in determining the ASC 718, Compensation-Stock Compensation values of our equity awards. These amounts reflect the aggregate grant date fair value for these awards and do not correspond to the actual value that will be recognized by the Named Executive Officers.

(2)

These amounts represent the aggregate grant date fair value of stock options and stock appreciation rights granted during the year computed in accordance with ASC 718, Compensation-Stock Compensation. See Note 11 of the notes to our consolidated financial statements contained in our 2012 Annual Report on Form 10-K for a discussion of all assumptions made by us in determining the grant date fair values of our equity awards. These amounts reflect the aggregate grant date fair value for these awards and do not

Page 31

correspond to the actual value that will be recognized by the Named Executive Officers. All outstanding stock options and stock appreciation rights are currently under water. Please see the “Grants of Plan-Based Awards Table” for information on restricted share units granted in fiscal year 2012.

(3)	These amounts represent cash awards earned during the respective fiscal year under the applicable annual incentive programs, which were paid in the following fiscal year. See the “Compensation Discussion and Analysis” section above for a more detailed discussion.

(4)

All Other Compensation includes non-routine compensatory payments as well as amounts contributed by us to the executive’s 401(k) plan and the payment of group term life insurance premiums. Included in All Other Compensation for Mr. Cheng includes $219,292 for relocation expenses relating to the sale of his home in 2011 and relocation allowance in the amount of $42,253 in 2010. No other single amounts exceeded $10,000 for any individual.

(5)	Mr. Kaminski resigned from the Company effective April 12, 2013.

(6)	Mr. Duggan joined the Company on October 1, 2011. He resigned from the Company effective February 22, 2013.

(7)	Mr. Cheng joined the Company on April 19, 2010.

(8)	Ms. Duros joined the Company on October 4, 2010.

Grants of Plan-Based Awards

The following table sets forth certain information with respect to plan-based awards granted to each of our Named Executive Officers during the fiscal year ended December 31, 2012.


Named Executive Officer	Grant Date		Estimated Future Payouts Under Non-Equity Incentive Plan Awards ($)(1)						Estimated Future Payouts Under Equity Incentive Plan Awards(#)(2)		All Other Stock Awards: Number of Shares of Stock or Units (#)(3)		Grant Date Fair Value of Stock and Option Awards ($)(4)
Named Executive Officer	Grant Date		Threshold ($)		Target ($)		Maximum ($)
Michael P. Kaminski (5)		2/14/12		105,000		210,000		420,000		17,500				35,000
Michael P. Kaminski (5)		8/22/12										80,000		135,200
Samuel W. Duggan II (6)		2/14/12		69,667		139,333		278,667		7,500				15,000
Samuel W. Duggan II (6)		8/22/12										40,000		67,600
Frank J. Cheng		2/14/12		71,250		142,500		285,000		6,300				12,600
Frank J. Cheng		8/22/12										25,000		42,250
Karen W. Duros		2/14/12		54,000		108,000		162,000		4,200				8,400
Karen W. Duros		8/22/12										22,500		38,205
David A. Giffin		2/14/12		40,000		80,000		120,000		4,200				8,400
David A. Giffin		8/22/12										22,500		38,205

(1)	Constitutes awards that could have been earned under the 2012 annual bonus program. Refer to “Compensation Discussion and Analysis” for additional information regarding cash payouts to Named Executive Officers.

(2)	Constitutes performance based restricted share units issued in 2012 under the 2002 Stock Incentive Plan. Performance based restricted share units will vest only if certain performance goals are achieved. Those goals have not yet been achieved.

(3)	All Other Stock constitutes time based restricted share units issued in 2012 under the 2012 Stock Incentive Plan.

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(4)

Includes the full grant date fair value of options, stock appreciation rights, restricted stock awards or restricted share units, computed in accordance with ASC 718, Compensation-Stock Compensation, applying the same valuation model and assumptions applied for financial reporting purposes. Generally, the full grant date fair value is the amount that the Company would expense in its financial statements over the award vesting schedule. These amounts reflect the Company’s accounting expense and do not correspond to the actual value that will be recognized by the Named Executive Officers.

(5)	Mr. Kaminski resigned from the Company effective April 12, 2013.

(6)	Mr. Duggan resigned from the Company effective February 22, 2013.

Outstanding Equity Awards At Fiscal Year-End

The following table discloses information regarding outstanding awards under the Company’s 2002 Stock Incentive Plan, as amended, and 2012 Stock Incentive Plan as of December 31, 2012.


	Option Awards								Stock Awards
Named Executive Officer	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable(1)		Option Exercise Price ($)		Option Expiration Date		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(2)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3)
Michael P. Kaminski (4)		1,388		-		59.40		5/27/2013
		6,944		-		59.40		1/17/2014
		5,000		-		68.60		2/5/2013
		10,000		-		49.70		5/28/2013
		12,500		-		46.00		12/11/2013
		8,854		3,646		46.70		2/17/2015
		12,031		14,219		35.20		2/15/2021
										6,750		17,213
										9,357		23,860
										17,500		44,625
										80,000		204,000
Samuel W. Duggan II (5)		5,468		12,032		10.04		10/1/2021
										2,500		6,375
										7,500		19,125
										40,000		102,000
Frank J. Cheng		3,000		1,500		48.60		4/20/2015
		5,625		3,375		35.50		6/16/2015
		4,331		5,119		35.20		2/15/2021
										2,430		6,197
										3,922		10,001
										25,000		63,750
										6,300		16,065
Karen W. Duros		5,416		4,584		40.02		10/3/2015
		2,887		3,413		35.20		2/15/2021
										1,620		4,131
										3,715		9,473
										22,500		57,375
										4,200		10,710
David A. Giffin		3,000		-		68.60		2/5/13
		2,500		-		70.30		8/5/13
		1,916		84		33.80		2/18/14
		3,541		1,459		46.70		2/17/15
		2,887		3,413		35.20		2/15/21
										1,620		4,131
										2,752		7,018
										22,500		57,375
										4,200		10,710

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(1)	The amounts appearing in this column represent the total number of options and stock appreciation rights that have not vested as of December 31, 2012. Option grants and SARs vest at the rate of 25% after one year of service from the date of grant, and monthly thereafter, over 36 additional months.

(2)

The amounts appearing in this column represent the total number of time based restricted share units and performance based restricted stock granted under our 2002 Stock Incentive Plan or the 2012 Stock Incentive Plan. The performance based restricted stock will vest only if certain performance goals are achieved. Those goals have not yet been achieved.

(3)	Based on the closing price of $2.55 for the shares of our common stock on December 30, 2012 (the last business day of fiscal year 2012).

(4)	Mr. Kaminski resigned from the Company effective April 12, 2013.

(5)	Mr. Duggan resigned from the Company effective February 22, 2013.

Option Exercises and Stock Vested

With respect to the Named Executive Officers, no options or stock appreciation rights were exercised, and no restricted stock or RSUs vested, during the fiscal year ended December 31, 2012.

Securities Authorized for Issuance under Equity Compensation Plans

The following table discloses information regarding securities to be issued upon the exercise of outstanding options, warrants and rights.


	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)(1)
Plan Category	(a)	(b)	(c)
Equity compensation plans approved by shareholders	373,899	$43.90	660,777
Equity compensation plans not approved by shareholders	-	-	-
Total	373,899		660,777

(1)	Includes 529,312 shares of RSUs which may only be transferred upon vesting.

Potential Payments upon Termination or Change of Control

The award agreements under our 2002 Stock Incentive Plan and 2012 Stock Incentive Plan provide for the acceleration of certain equity awards in the event of termination of the employee’s employment due to a change of control of the Company. The provisions under the award agreements are generally applicable to awards granted to all participants in the Plan, including the Named Executive Officers. We have described those provisions generally below. Additionally, under the stock incentive plans, in the event of a change of control of the Company, the Compensation Committee has discretion to provide for termination of awards in exchange for cash payments or the issuance of substitute awards. Benefits or payments under other plans and arrangements that are generally available to the Company’s employees on similar terms are not described.

In addition, we have entered into employment agreements with our Named Executive Officers that provide for a continuation of certain post-employment benefits, to the extent permitted under the applicable employment benefit plan(s). Each of the employment agreements provide for payments at, following, or in connection with a variety of circumstances following the Named Executive Officer’s termination of employment or in the event of a change of control of the Company.

Page 34

Following the description of each Named Executive Officer’s specific employment agreement, we have quantified, in tabular format, the potential payments and benefits upon termination without cause or due to a change of control of the Company for each of the Named Executive Officers, assuming the Named Executive Officer’s employment terminated on December 31, 2012, and, if applicable, based on our closing stock price of $2.55 on that date. In calculating the value of acceleration of equity awards, the value of unvested options and SARs equals $2.55 per share minus the exercise price for all such options or SARs and the value of the restricted shares and RSUs equals $2.55 per share multiplied by the number of unvested restricted shares or RSUs, as applicable.

Provisions of awards under the Stock Incentive Plans

If a Named Executive Officer’s employment is terminated on or within one year after a change of control (or in the case of incentive stock options, in contemplation of a change of control, or in the case of restricted stock or SARs, the employee leaves for good reason, as defined in the agreement), the award agreements for such stock options, restricted stock and SARs under the 2002 Stock Incentive Plan and 2012 Stock Incentive Plan provide as follows: (1) all unvested stock options and SARs will vest immediately and all unexercised options and SARs can be exercised for their remaining terms; and (2) all outstanding performance based RSUs vest immediately and become non-forfeitable.

The awards do not generally accelerate in connection with the retirement, resignation or other termination of employment (i.e., voluntary termination, termination for cause or involuntary termination) of any of the participants. In addition, none of the equity awards under the 2002 Stock Incentive Plan or 2012 Stock Incentive Plan accelerate in the event of termination by death or disability, although SARs and options could be exercised for specified periods following such termination events.

Employment Agreements and Quantification of Payments upon Termination or Change of Control

Mr. Kaminski. If Mr. Kaminski is terminated without cause, he will be paid his monthly base salary for a period of 24 months, provided that, if he is reemployed by the Company or obtains comparable employment during such 24 month period, his salary continuation payments will be offset by the amount of salary from the Company or a new employer. In addition, the number of his stock options, stock appreciation rights or other equity awards subject to vesting over the 12 month period following any such termination will automatically vest as of the termination date and will be exercisable for a period of one year thereafter or the remaining term of the award, whichever is earlier. In the event of a change of control of the Company, if Mr. Kaminski is not offered a comparable position and salary in the surviving entity after the change of control, he will be paid his monthly base salary for a period of 24 months after the termination of his employment. Additionally, 100% of his unvested options, stock appreciation rights and restricted shares will vest under the terms of the 2002 Stock Incentive Plan and 2012 Stock Incentive Plan. If Mr. Kaminski is terminated without cause or as a result of a change of control during a year in which he has served at least six months as president and chief executive officer, he is entitled to receive a bonus from any bonus plan in which he is a participant at the same level as the other management employees on a prorated basis based on the number of days worked. In the event of either a termination without cause or as a result of change of control, Mr. Kaminski will be entitled to his medical and dental benefits for a period of 24 months (subject to any requirements for employee contributions), except that such benefits will end if he obtains full time employment with another employer. Mr. Kaminski resigned from the Company effective April 12, 2013.

Other Named Executive Officers. If a Named Executive Officer, other than Mr. Kaminski, is terminated by the Company without cause, the Named Executive Officer will receive his or her monthly base salary as of the date of termination for 12 months following the date of termination. The officer also will receive continuation of medical and dental benefits and life and disability insurance benefits (subject to any requirement for employee premium contributions) for 12 months, except that such benefits will terminate upon receipt of comparable

Page 35

benefits from another employer. In the event of termination by the Company without cause, the salary continuation payments will be offset by the amount of any compensation the officer receives during the severance period from the Company, any other employer or as an independent contractor. In addition, the RSUs granted in October 2011 in connection with the officers’ salary reductions (other than Mr. Duggan) will vest pro rata based on the number of days from the date of grant to the date of termination.

In the event of a termination of a Named Executive Officer, other than Mr. Kaminski, during the period commencing six months prior to a change of control of the Company and ending two years after a change of control, or if the officer separates from service for good reason, as defined in the employment agreement, within two years after a change of control of the Company, then the officer will be entitled to a lump sum payment equal to the officer’s annual base salary at a rate equal to the greater of the rate in effect immediately before the officer’s separation or the rate in effect immediately before the change of control. In addition the officer will receive continued medical and dental coverage under the Company’s benefit plans pursuant to COBRA for up to one year following the officer’s separation from service at the Company’s cost, and continued life and disability insurance benefits, also at the Company’s cost. All awards under the 2002 Stock Incentive Plan and the 2012 Stock Incentive Plan will vest in full.

Based on a hypothetical termination date of December 31, 2012, the severance benefits for the Named Executive Officers would have been as follows:


Named Executive Officer	Termination without Cause ($)(1)		Involuntary termination due to change of control ($)(2)
Michael P. Kaminski (3)		1,008,489		1,161,489
Samuel W. Duggan II (4)		314,596		447,496
Frank J. Cheng (5)		310,749		403,861
Karen W. Duros (6)		295,286		374,513
David A. Giffin (7)		218,937		295,934

(1)

These amounts reflect cash severance payments; the value of extended medical and dental benefits and life and disability insurance (except that Mr. Kaminski will not receive life and disability insurance); and in the case of Mr. Kaminski only, the value of accelerated vesting of performance based restricted stock and time based restricted share units calculated based on the closing price of $2.55 for shares of our common stock on December 31, 2012. No value is included based on accelerated vesting of stock options or SARs for Mr. Kaminski because all of his stock options and SARs are underwater. The value of extended medical and dental benefits and life and disability insurance (“Benefits”) was determined based on the annual cost of the Company’s contribution for employees’ medical and dental benefits and the full annual cost of life and disability insurance.

(2)

These amounts reflect cash severance payments; the value of extended medical and dental benefits and life and disability insurance (except that Mr. Kaminski will not receive life and disability insurance); the value of accelerated vesting of performance based restricted stock and time based restricted share units calculated based on the closing price of $2.55 for shares of our common stock on December 31, 2012. No value is included based on accelerated vesting of stock options or SARs because all of the stock options and SARs held by the officers are underwater. The value of extended Benefits was determined based on the full annual cost of COBRA benefits and live and disability insurance.

(3)

These amounts include $840,000 of cash severance, $31,789 of extended Benefits, and $136,700 for accelerated vesting of restricted stock and RSUs in the event of a termination without cause; and $840,000 of cash severance, $31,789 of extended Benefits, and $289,700 for accelerated vesting of restricted stock

Page 36

and RSUs in the event of a termination due to a change of control. Excludes amount related to a potential bonus available to Mr. Kaminski upon termination without cause or due to a change of control as described above. Mr. Kaminski resigned from the Company effective April 12, 2013.

(4)

These amounts include $297,000 of cash severance and $17,596 of extended Benefits in the event of a termination without cause; and $297,000 of cash severance, $22,996 of extended Benefits, and $127,500 for accelerated vesting of restricted stock and RSUs in the event of a termination due to a change of control. Mr. Duggan resigned from the Company effective February 22, 2013.

(5)

These amounts include $285,000 of cash severance, $17,448 of extended Benefits, and $8,301 for accelerated vesting of restricted stock and RSUs in the event of a termination without cause; and $285,000 of cash severance, $22,848 of extended Benefits, and $96,013 for accelerated vesting of restricted stock and RSUs in the event of a termination due to a change of control.

(6)

These amounts include $270,000 of cash severance, $17,421 of extended Benefits, and $7,865 for accelerated vesting of restricted stock and RSUs in the event of a termination without cause; and $270,000 of cash severance, $22,821 of extended Benefits, and $81,692 for accelerated vesting of restricted stock and RSUs in the event of a termination due to a change of control.

(7)

These amounts include $200,000 of cash severance, $13,112 of extended Benefits, and $5,825 for accelerated vesting of restricted stock and RSUs in the event of a termination without cause; and $200,000 of cash severance, $16,700 of extended Benefits, and $79,234 for accelerated vesting of restricted stock and RSUs in the event of a termination due to a change of control.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information known to us with respect to the beneficial ownership of our common stock as of February 28, 2013 by:

•

each person known by us to own beneficially more than 5% of our outstanding common stock;

•

each of our directors;

•

each of our Named Executive Officers; and

•

all of our directors and executive officers as a group.

There were 8,059,224 shares of common stock outstanding as of February 28, 2013. Unless otherwise indicated, the table below includes the number of shares underlying options, debentures, warrants, and restricted share units (less shares withheld for tax withholdings) that are currently exercisable or exercisable within 60 days of February 28, 2013. Shares of common stock subject to options, debentures and warrants that are currently exercisable or exercisable within 60 days of February 28, 2013 are considered outstanding and beneficially owned by the person holding the options, debentures or warrants for the purposes of computing beneficial ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. To our knowledge, except as set forth in the footnotes to this table and subject to applicable community property laws where applicable, each person named in the table has sole voting and investment power with respect to the shares set forth opposite such person’s name. Except as otherwise indicated, the address of each of the persons in this table is as follows: c/o Stereotaxis, Inc., 4320 Forest Park Avenue, Suite 100, St. Louis, Missouri 63108.

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Name and Address of Beneficial Owner of Common Stock	Number of shares of Common Stock beneficially owned		Percentage of shares of Common Stock beneficially owned
Five percent shareholders
Alafi Capital Company LLC (1) 9 Commodore Drive, Suite 405 Emeryville, CA 94608		2,704,480		28.48	%
Entities affiliated with Sanderling Ventures (2) 400 S. El Camino Real, Suite 1200 San Mateo, CA 94402		2,324,131		24.83	%
Franklin Resources, Inc. (3) One Franklin Parkway San Mateo, CA 94403		1,636,640		18.79	%
Prescott Group Capital Management, L.L.C. (4) 1924 South Utica, Suite 1120 Tulsa, OK 74104		860,495		9.99	%
Tenor Capital Management Company, L.P. (5) 1180 Avenue of the Americas, Suite 1940 New York, NY 10036		454,299		5.34	%
Directors and Named Executive Officers
Christopher Alafi, Ph.D. (6)		2,752,357		28.95	%
Fred A. Middleton (7)		2,411,283		25.70	%
David W. Benfer (8)		18,085		*
Joseph D. Keegan, Ph.D. (9)		6,085		*
William M. Kelley (10)		16,175		*
Robert J. Messey (11)		17,595		*
William C. Mills III (12)		18,745		*
Eric N. Prystowsky, M.D. (13)		10,835		*
Euan S. Thomson, Ph.D.		0		*
Michael P. Kaminski (14)		74,022		*
Samuel W. Duggan II (15)		7,500		*
Frank J. Cheng (16)		27,466		*
Karen W. Duros (17)		18,725		*
David A. Giffin (18)		25,209		*
All directors and executive officers as a group (14 persons) (19)		5,404,082		49.28	%

* Indicates ownership of less than 1%

(1)

Includes 1,266,628 shares held by and 1,437,852 shares issuable under warrants held by Alafi Capital Company LLC (“Alafi Capital”). Christopher Alafi and Moshe Alafi are the managing partners of Alafi Capital and have full voting and investment power with respect to the shares owned by Alafi Capital. All information regarding ownership of Alafi Capital and its affiliates is based solely on a Schedule 13D filed by Alafi Capital on March 18, 2009, and Form 4s filed by Dr. Alafi on August 19, 2010, November 12, 2010, September 9, 2011, September 12, 2011, April 3, 2012, May 3, 2012, and May 14, 2012. Dr. Alafi was a director of the Company. His term as a director expired on August 22, 2012, the date of the 2012 Annual Meeting of Shareholders.

(2)	Includes: (a) 80 shares held by the Middleton McNeil Retirement Trust; (b) 83 shares held by Sanderling Ventures Management V; (c) 3,060 shares held by and 10,686 shares issuable under warrants held by

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Sanderling VI Beteiligungs GmbH & Co. KG; (d) 3,646 shares held by and 12,732 shares issuable under warrants held by Sanderling VI Limited Partnership; (e) 28,117 shares held by and 99,399 shares issuable under warrants held by Sanderling Ventures Management VI; (f) 53,276 shares held by Sanderling IV Biomedical Co-Investment Fund, L.P.; (g) 22,452 shares held by Sanderling Venture Partners IV Co-Investment Fund, L.P.; (h) 67,791 shares held by Sanderling Venture Partners V Co-Investment Fund, L.P.; (i) 11,097 shares held by Sanderling V Beteiligungs GmbH & Co. KG; (j) 11,957 shares held by Sanderling V Limited Partnership; (k) 39,716 shares held by Sanderling V Biomedical Co-Investment Fund, L.P.; (l) 1,500 shares held by Sanderling Management, LLC 401(k) Plan; and (m) 782,272 shares held by and 1,176,265 shares issuable under warrants held by Sanderling Venture Partners VI Co-Investment Fund, L.P.

The Middleton McNeil Retirement Trust has voting and dispositive authority over the shares owned by such trust. The trust’s trustees are Fred A. Middleton and Robert G. McNeil, who manage the trust for the benefit of Fred A. Middleton and Robert G. McNeil. Such individuals disclaim beneficial ownership of all such shares held by the foregoing trust, except to the extent of their proportionate pecuniary interests therein.

Middleton-McNeil Associates IV, LLC is the general partner of Sanderling IV Biomedical Co-Investment Fund, L.P. and has voting and dispositive authority over the shares owned by Sanderling IV Biomedical Co-Investment Fund, L.P. Middleton-McNeil Associates IV, LLC is managed by its members, Fred A. Middleton and Robert G. McNeil. Such individuals disclaim beneficial ownership of all such shares held by the foregoing funds, except to the extent of their proportionate pecuniary interests therein.

Middleton-McNeil Associates IV, L.P. is the general partner of Sanderling Venture Partners IV Co-Investment Fund, L.P. and has voting and dispositive power over the shares owned by Sanderling Venture Partners IV Co-Investment Fund, L.P. Middleton-McNeil Associates IV, L.P. is managed by its general partners, Fred A. Middleton and Robert G. McNeil. Such individuals disclaim beneficial ownership of all such shares held by the foregoing funds, except to the extent of their proportionate pecuniary interests therein.

Middleton, McNeil & Mills Associates V, LLC is the Investment General Partner of Sanderling V Limited Partnership and Sanderling V Beteiligungs GmbH & Co. KG and the General Partner of Sanderling V Biomedical Co-Investment Fund, L.P. and Sanderling Venture Partners V Co-Investment Fund, L.P. and has voting and dispositive authority over the shares owned by such entities. Middleton, McNeil & Mills Associates V, LLC is managed by its managing directors, Fred A. Middleton and Robert G. McNeil, Timothy C. Mills and Timothy J. Wollaeger. Such individuals disclaim beneficial ownership of all such shares held by the foregoing funds, except to the extent of their proportionate pecuniary interests therein.

Sanderling Ventures Management V is managed by Fred A. Middleton and Robert G. McNeil, Timothy C. Mills and Timothy J. Wollaeger, the individuals who have invested under the d/b/a Sanderling Ventures Management V, which individuals have voting and dispositive power over the shares owned by Sanderling Ventures Management V. Such individuals disclaim beneficial ownership of all such shares held by the foregoing funds, except to the extent of their proportionate pecuniary interests therein. Sanderling Ventures Management VI is managed by Fred A. Middleton, Robert G. McNeil, Timothy C. Mills and Timothy J. Wollaeger, the individuals who have invested under the d/b/a Sanderling Ventures Management VI, which individuals have voting and dispositive power over the shares owned by Sanderling Ventures Management VI. Such individuals disclaim beneficial ownership of all such shares held by the foregoing funds, except to the extent of their proportionate pecuniary interests therein.

Middleton, McNeil, Mills & Associates, VI, LLC is the Investment General Partner of Sanderling Venture Partners VI Co-Investment Fund, L.P., Sanderling VI Beteiligungs GmbH & Co. KG and Sanderling VI Limited Partnership and has voting and dispositive power over the shares owned by such entity. Sanderling

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Venture Partners VI Co-Investment Fund, L.P. is managed by its managing directors, Fred A. Middleton, Robert G. McNeil, Timothy C. Mills and Timothy J. Wollaeger. Such individuals disclaim beneficial ownership of all such shares held by the foregoing funds, except to the extent of their proportionate pecuniary interests therein.

All information regarding ownership of Sanderling Ventures and its affiliates is based solely on a Schedule 13D filed by Sanderling Ventures on March 18, 2009, and Form 4s filed by Mr. Middleton on August 19, 2010, November 12, 2010, April 3, 2012, May 3, 2012, May 14, 2012, August 24, 2012, and December 4, 2012.

(3)

All information regarding ownership of Franklin Resources, Inc. is based a Schedule 13G filed on February 12, 2013 by Franklin Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr., and Franklin Advisers, Inc. The shares are owned by one or more open- or closed-end investment companies or other managed accounts that are investment management clients of investment managers that are direct and indirect subsidiaries of Franklin Resources, Inc., including Franklin Advisers, Inc. Charles B. Johnson and Rupert H. Johnson, Jr. each own in excess of 10% of the outstanding common stock of Franklin Resources, Inc. and are the principal shareholders of Franklin Resources, Inc. Franklin Advisers, Inc. has sole voting and sole dispositive power over 986,022 shares of common stock and 650,618 shares of common stock issuable under warrants.

(4)

Prescott Group Aggressive Small Cap, L.P. (“Prescott Small Cap”) and Prescott Group Aggressive Small Cap II, L.P. (“Prescott Small Cap II” and, together with Prescott Small Cap, the “Small Cap Funds”) are the general partners of Prescott Group Aggressive Small Cap Master Fund, G.P. (“Prescott Master Fund”). Prescott Group Capital Management, L.L.C. (“Prescott Capital”) is the general partner of the Small Cap Funds and Mr. Phil Frohlich is the principal of Prescott Capital, and as a result Mr. Frohlich and Prescott Capital may direct the vote and disposition of these securities on behalf of the Small Cap Funds.

Prescott Capital and Mr. Phil Frohlich are the beneficial owners of 1,494,117 shares of common stock, which consists of (i) 303,995 shares of common stock, (ii) 595,061 shares of common stock issuable upon conversion of presently convertible notes and (iii) warrants exercisable to purchase 595,061 shares of common stock; provided, however, that the “blocker provision” applicable to such notes and warrants restricts the conversion of the convertible notes and the exercise of the warrants such that Prescott Capital and Mr. Phil Frohlich may only covert such notes and exercise such warrants up to a maximum percentage of beneficial ownership of 9.99% of the Company’s outstanding common stock. Therefore, Prescott Capital and Mr. Phil Frohlich are restricted in the amount of their beneficial ownership to 860,495 shares of common stock, which amount consists of (i) 303,995 shares of common stock and (ii) 556,500 shares of common stock (A) issuable upon conversion of presently convertible notes and/or (B) receivable upon exercise of presently held warrants.

All information regarding ownership of Prescott Capital is based on Prescott Master Fund’s participation in a convertible debenture transaction with Stereotaxis, Inc. on May 7, 2012 and a Schedule 13G/A filed on February 14, 2013 by Prescott Capital, the Small Cap Funds, and Mr. Frohlich.

(5)

Tenor Capital Management Company, L.P. (“Tenor Capital”) is the investment manager of Tenor Opportunity Master Fund Ltd. (“Tenor Opportunity”) and Aria Opportunity Fund, Ltd. (“Aria”), and has voting and investment power over securities held by Tenor Opportunity and Aria. The total beneficial ownership of 454,299 shares of common stock consists of (i) 7,933 shares of common stock; (ii) warrants exercisable to purchase 223,148 shares of common stock; and 223,148 shares of common stock issuable upon conversion of presently convertible notes. All information regarding ownership of Tenor Capital is determined by our calculations based on the participation of Tenor Opportunity and Aria in a convertible debenture transaction with Stereotaxis, Inc. on May 7, 2012, our review of a Schedule 13G filed on February 13, 2013 by Tenor Capital, and further information furnished by Tenor Capital.

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(6)

Includes 1,226,628 shares held by and 1,437,852 additional shares issuable under warrants held by Alafi Capital as described above. Dr. Alafi is a general partner of Alafi Capital and disclaims beneficial ownership of the shares and warrants held by Alafi Capital except to the extent of his proportionate partnership interest therein. Includes 223 shares held by the Alafi Family Foundation, 12,600 shares held by the Christopher Alafi Trust, and 3,000 shares held by Dr. Alafi’s mother. Also includes options to purchase 9,225 shares of common stock held by Dr. Alafi. Dr. Alafi’s term as director expired on August 22, 2012, the date of the 2012 Annual Meeting of Shareholders.

(7)

Includes 1,025,049 shares held by and 1,299,082 additional shares issuable under warrants held by Sanderling as described above. Mr. Middleton disclaims beneficial ownership of the shares and warrants held by Sanderling and Middleton-McNeil L.P. except to the extent of his proportionate ownership interest therein. Also includes options to purchase 22,550 shares of common stock.

(8)	Includes 11,150 options to purchase shares of common stock. Includes 2,025 shares of common stock held by Mr. Benfer’s spouse.

(9)	Includes options to purchase 4,050 shares of common stock.

(10)	Includes options to purchase 10,150 shares of common stock.

(11)	Includes options to purchase 13,925 shares of common stock. Includes 20 shares of common stock held by trust.

(12)	Includes options to purchase 14,075 shares of common stock.

(13)	Includes options to purchase 7,800 shares of common stock.

(14)	Includes options to purchase 37,948 shares of common stock. Includes 70 shares of common stock held by the Cynthia B. Kaminski Revocable Trust, and 300 shares of common stock held by immediate family members.

(15)	Includes 5,000 shares of common stock held by the Samuel W. Duggan II Trust.

(16)	Includes options to purchase 14,869 shares of common stock.

(17)	Includes options to purchase 9,663 shares of common stock.

(18)	Includes options to purchase 14,871 shares of common stock.

(19)	Includes shares beneficially owned by Christopher Alafi as described above. Dr. Alafi’s term as a director expired on August 22, 2012, the date of the 2012 Annual Meeting of Shareholders.

REPORT OF AUDIT COMMITTEE

Three non-employee directors comprise the Audit Committee. All are independent as defined in Nasdaq Rule 5605(a)(2) and Rule 10-A-3(b)(1) of the Securities Exchange Act of 1934. The Board has adopted a written charter for the Audit Committee, which is posted at http://www.stereotaxis.com/investors/governance.html.

The Audit Committee assists the Board in its oversight of our accounting and financial reporting process. Management has the primary responsibility for the financial statements and the reporting process, including our systems of internal control, while the independent registered public accountants are responsible for performing an independent audit of our financial statements in accordance with auditing standards generally accepted in the United States and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States.

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In fulfilling its oversight responsibilities, the Committee reviewed and discussed the audited financial statements to be included in the Annual Report on Form 10-K for the year ended December 31, 2012 with management, including a discussion of the quality and the acceptability of our financial reporting practices and the internal controls over financial reporting.

The Committee reviewed with the independent registered public accounting firm their judgments as to the quality and the acceptability of our financial reporting and such other matters as are required to be discussed with the Committee under auditing standards generally accepted in the United States, including the matters required to be discussed by Statement on Auditing Standards No. 61, as amended and as adopted by the Public Company Accounting Oversight Board in Rule 3200T. In addition, the Committee discussed with the independent registered public accountants, the firm’s independence from our management including the matters in the accountants’ written disclosures regarding the auditors’ independence required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence.

Our independent registered public accountants did not provide any non-audit services to us during 2012.

In reliance on the reviews and discussions referred to above, the Committee recommended to the Board of Directors that the audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 for filing with the SEC. The Committee has appointed Ernst & Young LLP as the Company’s independent registered public accountants for fiscal year 2013.

Submitted by the Audit Committee of the Board of Directors.

Robert J. Messey, Chair

William C. Mills III

David W. Benfer

PROPOSAL 2: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

Our Audit Committee, pursuant to its charter, has appointed Ernst & Young LLP as the Company’s independent registered public accountants to examine the financial statements of the Company for our 2013 fiscal year.

While the Audit Committee is responsible for the appointment, compensation, retention, termination and oversight of the independent registered public accounting firm, the Audit Committee and our Board are requesting, as a matter of policy, that the shareholders ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accountants for 2013. The Audit Committee is not required to take any action as a result of the outcome of the vote on this proposal. However, if the shareholders do not ratify the appointment, the Audit Committee may investigate the reasons for shareholder rejection and may consider whether to retain Ernst & Young LLP or to appoint another firm. Furthermore, even if the appointment is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company and its shareholders.

A formal statement by representatives of Ernst & Young LLP is not planned for the Annual Meeting. However, Ernst & Young LLP representatives are expected to be present at the meeting and available to respond to appropriate questions.

The affirmative vote of the holders of a majority of the shares present in person or by proxy and entitled to vote at the Annual Meeting will be required to ratify the selection of Ernst & Young LLP.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2013.

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PROPOSAL 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION

At the 2012 Annual Meeting of Shareholders, more than 95% of the shares were cast in support of the Company’s executive compensation program. Pursuant to Section 14A of the Exchange Act, our Board of Directors is again submitting a non-binding shareholder vote on our executive compensation as described in this proxy statement (commonly referred to as “say-on-pay”). We currently plan to hold this vote annually, and the next such vote will be held at our 2014 Annual Meeting of Shareholders.

While this vote is advisory, and not binding on our Company, it will provide information to our Compensation Committee regarding shareholders’ sentiment about our executive compensation philosophy, which the Committee will be able to consider when determining executive compensation in the future.

As you consider how to cast your vote, we encourage you to review the “Compensation Discussion & Analysis” section of this proxy statement. Stereotaxis’ compensation governance and planning processes are focused on creating a program that aligns executive pay outcomes with long-term value creation for shareholders. The Company’s 2012 executive compensation program and changes made in 2013 demonstrate our commitment to continual improvement of our pay programs and align executive pay and business performance. We believe the executive compensation program in place today supports the strategic goals of the Company and the need to drive positive performance gains. In particular, we believe the following points illustrate our commitment to pay for performance:

•

Throughout 2012, executive base salaries remained at reduced levels

•

Below target payouts were earned under the 2012 Management Bonus Plan

•

2012 performance share awards vest only upon the achievement of bottom line milestones

•

50% upon achievement of one quarter of positive adjusted EBITDA in 2012 (not achieved),

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•

50% vest upon achieving at least two out of three consecutive quarters with positive adjusted net income by December 31, 2013.

•

“Realizable” compensation is significantly below grant value for Named Executive Officers

•

Stock ownership guidelines were enhanced, converting at a less than 10:1 ratio following the reverse stock split for our executive officers

•

Stock retention requirements were introduced in 2012

The Board strongly endorses the Company’s executive compensation program and recommends that the shareholders vote in favor of the following resolution:

RESOLVED, that the shareholders approve, on an advisory basis, the compensation of the Company’s Named Executive Officers as described in this proxy statement under “Executive Compensation”, including the “Compensation Discussion and Analysis” and the tabular and narrative disclosure contained in this proxy statement.

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE COMPANY’S EXECUTIVE COMPENSATION.

PROPOSAL 4: APPROVAL OF AN AMENDMENT TO THE 2012 STOCK INCENTIVE PLAN

Our 2012 Stock Incentive Plan was adopted by the Compensation Committee of our Board of Directors in July 2012 and approved by our shareholders in August 2012. Our Board of Directors believes that long-term incentive compensation programs align the interests of management, employees and the shareholders to create long-term shareholder value. The Board believes that plans such as the 2012 Stock Incentive Plan increase our ability to achieve this objective by allowing for several different forms of long-term incentive awards, which the Board believes will help us recruit, reward, motivate and retain talented personnel.

As of March 31, 2013, a total of 1,541,100 shares of common stock have been reserved for issuance under the 2002 Stock Incentive Plan and the 2012 Stock Incentive Plan.

Under the terms of the 2012 Stock Incentive Plan, the exercise price of each stock option is the market value of our common stock on the date of grant. Stock options have a maximum term of 10 years but terminate earlier if the individual ceases to provide services to us. As of March 31, 2013, options and stock appreciation rights to purchase 6,125 shares were issued and outstanding under the 2012 Stock Incentive Plan and no options or stock appreciation rights had been exercised. In addition, as of such date, 651,152 shares of restricted stock were issued and outstanding under the 2012 Stock Incentive Plan and no shares are vested. No other awards had been made and 28,014 shares remained available for future grants as of such date. As of March 31, 2013, the closing price of our common stock was $2.00 per share.

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In April 2013, the Compensation Committee of our Board of Directors approved a proposal to amend the 2012 Stock Incentive Plan to increase the shares authorized for issuance thereunder by a further 1,000,000 shares. We are seeking shareholder approval of this amendment to the 2012 Stock Incentive Plan.

Set forth below is a summary of the material provisions of the 2012 Stock Incentive Plan. The summary of the provisions below is qualified in its entirety by the full text of the 2012 Stock Incentive Plan. A copy of the 2012 Stock Incentive Plan as amended and restated by the proposed amendment is attached to this proxy statement as Appendix A.

Vote Required

The affirmative vote of a majority of the shares present in person or by proxy will be required to approve the amendment of the 2012 Stock Incentive Plan. Abstentions and “broker non-votes” will not be counted as having been voted on the proposal, and therefore, will have the same effect as negative votes.

The Board of Directors and our executive officers have an interest in this proposal as they may receive awards under the 2012 Stock Incentive Plan.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDMENT TO INCREASE THE SHARES AUTHORIZED UNDER THE 2012 STOCK INCENTIVE PLAN BY 1,000,000 SHARES.

Description of Material Provisions of the 2012 Stock Incentive Plan

Term of the Plan

The Plan will terminate ten years after the date on which the Board approved the Plan and no awards will be granted after the expiration of such ten-year period.

Eligible Participant

Any director or employee of the Company, or its subsidiaries, as well as any individual providing services to the Company may be selected to receive an award.

Administration

This plan is administered by the Board of Directors through a committee appointed by the Board. The Compensation Committee administers this Plan. Every member of the Compensation Committee is (i) a “Non-Employee Director” within the meaning of Rule 16b-3 of the Exchange Act, and (ii) an “Independent Director” for purposes of the rules and regulations of the Nasdaq Global Market.

The committee has full power to determine persons eligible to participate in the plan, to interpret this plan, to adopt the rules, regulations and guidelines necessary or proper to carry out this plan and to determine the type and terms of any awards to be granted. The specific terms, conditions, performance requirements, limitations and restrictions of any award will be set forth in an award agreement, entered into between the Company and a participant.

Authorized Shares

Currently, the number of shares of stock authorized for issuance under the 2012 Plan is up to five hundred thousand (500,000) plus the number of shares of stock subject to stock options, SARs and restricted stock units granted under the 2002 Stock Incentive Plan, up to a maximum of two hundred ninety thousand (290,000), which

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would have become available for grant under the terms of that Plan, by reason of the forfeiture, cancellation, expiration or termination of those awards, but for the expiration of that Plan.

Types of Awards

An award under the Plan may be a stock option, either qualified or nonqualified, a stock appreciation right, a performance share, restricted stock or other cash-based or stock-based awards.

Stock Options. The committee is able to grant nonqualified stock options and incentive stock options under the 2012 Stock Incentive Plan. The exercise price of an incentive stock option may not be less than 100% of the fair market value of the common stock on the date the option is granted (110% in the case of a 10% stockholder), and the exercise price of a nonqualified option must be determined by the committee, but may not be less than 100% of the fair market value of the common stock on the date the option is granted. As our common stock is listed on the Nasdaq Global Market, the fair market value is the per share closing sale price for the common stock (or the average of the closing bid and asked prices if no sales were reported that day) on the date the option is granted.

Stock Appreciation Rights. The committee may grant stock appreciation rights under the Plan. Stock appreciation rights are the rights to receive the appreciation in fair market value of common stock between the exercise date and the date of grant. We can pay the appreciation in either cash, shares of our common stock, or a combination thereof. Stock appreciation rights will become exercisable at the times and on the terms established by the committee, subject to the terms of the 2012 Stock Incentive Plan.

Performance Shares. A performance share award is an award denominated in units of stock, which will provide for payment of stock if performance goals are achieved over specified performance periods. Once the performance share award vests, the participant shall be entitled to payout of the value of the award in shares of common stock.

Restricted Stock. Restricted stock is an award of common stock granted subject to restrictions on transfer and vesting as determined by the committee. The committee shall have complete discretion to determine (i) the number of shares subject to a restricted stock award granted to any participant and (ii) the conditions for grant or for vesting that must be satisfied, which typically will be based principally or solely on continued service to us but may include a performance-based component. Shares of common stock granted under any restricted stock award may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until all applicable restrictions are removed or have expired.

Other Stock-Based Award and Cash-Based Award. The Plan provides that awards of common stock, including fully vested stock grants, or other awards valued in whole or in part by reference to the fair market value of common stock may also be made under the Plan in the form of other stock-based awards.

Share Counting Rules

Any shares of stock tendered by a participant as full or partial payment to the Company to satisfy a purchase price of an award, any shares subject to an award under the Plan which are withheld to satisfy an applicable tax withholding, or any shares covered by a stock appreciation right which is settled for a lesser number of shares shall not become available for issuance under the Plan. However, any awards, which by their terms may only be settled in cash, do not reduce the number of shares available for issuance.

Term of Stock Options and Stock Appreciation Rights

A maximum term of 10 years from the date of grant is set for all stock options and stock appreciation rights.

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Vesting Limitations

Each stock option and stock appreciation right shall have a minimum vesting period of three years from the date of grant, provided that such vesting may occur incrementally over the three years.

Change of Control

Change of control means the purchase or acquisition by any person or group, of beneficial ownership of 35% or more of the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities entitled to vote in an election of directors.

The committee may provide, in its sole discretion, for the termination of an award upon consummation of a change of control in exchange for a cash amount and/or issuance of a substitute award to substantially preserve the terms of any awards previously granted under the Plan. Any change must be in a manner consistent with Internal Revenue Code Section 409A.

Restrictions on Transferability

Awards granted under this Plan are generally not transferable by the participant except by law, will or the laws of descent and distribution, or by permission of the committee.

Amendment of Award Agreements

The Compensation Committee is specifically prohibited from amending the terms of outstanding award agreements without the approval of Company shareholders if such amendments would either reduce the exercise price of outstanding stock options or stock appreciation rights, or cancel an outstanding stock option or stock appreciation right in exchange for cash, another award, or another stock option or stock appreciation right that has an exercise price less than that of the original stock option or stock appreciation right.

Dividends or Dividend Equivalents

No dividends or dividend equivalents shall be paid with respect to outstanding stock based awards that are intended to be performance-based awards, as that term is defined in the Plan, nor shall dividends or dividend equivalents be paid on any outstanding stock options or stock appreciation rights.

Anti-dilution

In the event of any change in outstanding stock of the Company by reason of stock split, stock dividend, combination or reclassification of shares, or similar events, the committee shall make adjustments to numbers of outstanding shares covered by awards and the price per share or such other equitable adjustments as it deems appropriate.

Non-Employee Director Grants

It is the intent of the Company to provide equity grants to our non-employee directors through the 2012 Plan as opposed to being provided through a separately administered plan.

Federal Income Tax Aspects

The following paragraphs are a summary of the general federal income tax consequences to U.S. taxpayers and the Company of awards granted under the 2012 Plan. Tax consequences for any particular individual may be different.

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Nonqualified Stock Options. No taxable income is realized when a nonqualified stock option with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount by which the fair market value of the shares purchased on the date of exercise, exceeds the exercise price paid for such share. Any taxable income recognized in connection with an option exercise by an employee of the Company is subject to tax withholding by the Company. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.

Incentive Stock Options. No taxable income is realized when an incentive stock option is granted or exercised (except for purposes of the alternative minimum tax, in which case the differential between the fair market value on the date of grant and the exercise price is an alternative minimum tax preference item). If a participant exercises the option and then later sells or otherwise disposes of the shares acquired pursuant to an incentive stock option more than two years after the grant date and more than one year after the exercise date, the difference between the sale price and the exercise price will be taxed as capital gain or loss. If the participant exercises the option and then later sells or otherwise disposes of the shares before the end of the two or one-year holding periods described above, he or she generally will realize ordinary income at the time of the disposition equal to the fair market value of the shares on the exercise date (or the sale price, if less) minus the exercise price of the option.

Stock Appreciation Rights. No taxable income is realized when a stock appreciation right with an exercise price equal to the fair market value of the underlying stock on the date of grant is granted to a participant. Upon exercise, the participant will recognize ordinary income in an amount equal to the amount of excess, if any, of the fair market value of the stock on the date of exercise over the fair market value of the stock on the date of grant. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.

Restricted Stock. Unless a timely 83(b) election is made, as described in the following paragraph, a participant generally will not realize taxable income at the time an award of restricted stock is granted. Instead, he or she will recognize ordinary income in the first taxable year in which his or her interest in the shares underlying the award becomes either (i) freely transferable, or (ii) no longer subject to substantial risk of forfeiture. The amount of ordinary income recognized will be equal to the difference between the fair market value of the shares at the time any restrictions on transferability lapse and the original purchase price paid for the shares, if any.

A participant may elect, pursuant to Section 83(b) of the Internal Revenue Code, to recognize ordinary income at the time he or she is granted the award in an amount equal to the fair market value of the shares underlying the award (less the purchase price paid for the shares, if any) on the date the award is granted, notwithstanding that the restricted stock would otherwise not be includible in gross income at that time. Any change in the value of the shares after the date of grant would be taxed as a capital gain or loss if and when the shares are disposed of by the participant. If the section 83(b) election is made, the participant’s holding period for capital gains begins on the date of grant.

Performance Shares. A participant generally will not recognize taxable income upon the granting of an award of performance shares. Instead, he or she will recognize ordinary income in the first taxable year in which his or her interest in the shares underlying the award becomes either (i) freely transferable, or (ii) no longer subject to substantial risk of forfeiture. The amount of ordinary income recognized will be equal to the difference between the fair market value of the shares at the time any restrictions on transferability lapse and the original purchase price paid for the shares, if any. Upon selling shares of stock received in payment under a performance share, the participant will recognize a capital gain or loss in an amount equal to the difference between the sale price of the share and the participant’s tax basis in the share.

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Other Stock-Based Awards. A participant will generally recognize ordinary taxable income upon granting of a stock-based award that is not subject to vesting or performance achievement criteria. Any change in the value of the shares after the date of grant would be taxed as a capital gain or loss if and when the shares are disposed of by the participant. A participant will generally recognize ordinary taxable income upon the later to occur of the granting or the vesting of a cash-based award.

Tax Effect for the Company. We generally will be entitled to a tax deduction in connection with an award under the 2012 Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonqualified stock option). Special rules limit the deductibility of compensation paid to our Chief Executive Officer and to each of our three most highly compensated executive officers (other than the Chief Executive Officer and, in most circumstances, our Chief Financial Officer). Under Section 162(m), the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, we can preserve the deductibility of certain compensation in excess of $1,000,000 if the conditions of Section 162(m) are met. These conditions include stockholder approval of the 2012 Plan, setting limits on the number of awards that any individual may receive and for awards other than certain stock options and establishing performance criteria that must be met before the award actually will vest or be paid. The 2012 Plan has been designed to permit the committee to grant awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m), thereby permitting us to continue to receive a federal income tax deduction in connection with such awards.

Section 409A. Section 409A of the Code, which was added by the American Jobs Creation Act of 2004, provides certain new requirements with respect to non-qualified deferred compensation arrangements. These include new requirements with respect to an individual’s election to defer compensation and the individual’s election of the timing and form of distribution of the deferred compensation. Section 409A also generally provides that distributions may only be made on or following the occurrence of certain events (e.g., the individual’s separation from service, a predetermined date, the individual’s death or a change in control). Section 409A imposes restrictions on an individual’s ability to change his or her distribution timing or form after the compensation has been deferred. For certain individuals who are “specified employees,” Section 409A requires that such individual’s distribution commence no earlier than six months after such individual’s separation from service. For purposes of Section 409A, the term “specified employee” includes officers with a certain level of compensation ($165,000 in 2012) and employees with a certain level of ownership in the company.

Awards granted under the 2012 Plan with a deferral feature will be subject to the requirements of Section 409A. If an award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with the provisions of Section 409A, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation. Generally, we intend to structure any awards under the 2012 Plan to either be exempt from or meet the applicable tax law requirements under Section 409A in order to avoid its adverse tax consequences.

THE FOREGOING IS ONLY A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE PARTICIPANTS AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF AWARDS UNDER THE 2012 PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX CONSEQUENCES OF A PARTICIPANT’S DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.

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Accounting Treatment

We adopted Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), in the first quarter of fiscal 2006. SFAS 123(R) requires the estimated fair market value of all share-based payments to employees, including grants of employee stock options, to be recognized as expense in the statement of operations. Share-based compensation expense to be recognized would include the estimated expense for all stock awards granted on and subsequent to January 29, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS 123(R) and the estimated expense for the portion vesting in the period for options granted prior to, but not vested as of January 29, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123.

PROPOSAL 5: APPROVAL OF AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO DECREASE THE AUTHORIZED COMMON STOCK

We are seeking approval to decrease the authorized number of shares of our common stock from 300,000,000 to 50,000,000.

The form of the amendment to our Certificate of Incorporation to accomplish the decrease in our authorized shares is attached to this proxy statement as Appendix B. The discussion herein is qualified in its entirety by the full text of such amendment, which in incorporated herein by reference.

Background and Reasons For the Decrease in Authorized Shares

Current Capitalization. We currently have 300 million shares of authorized common stock. As of the Record Date, there were approximately 8.1 million shares of common stock issued and outstanding. In addition, as of the Record Date, there were 3.6 million shares of common stock reserved for issuance upon exercise or conversion of outstanding warrants issued to certain institutional investors in May 2012 under a stock and warrant purchase agreement (PIPE) and warrants issued in connection with loan guarantees; 7.4 million shares of common stock reserved for conversion of subordinated convertible debentures, including warrants and interest shares to be issued to the holders of such subordinated convertible debentures; and 0.8 million shares of common stock reserved for issuance upon exercise of outstanding equity awards under our 2002 Stock Incentive Plan and 2012 Stock Incentive Plan. An additional 1.0 million shares will be reserved for issuance under our 2012 Stock Incentive Plan if the shareholders approve Proposal 4 included in this proxy statement.

Reasons for the Decrease. At a special meeting of the shareholders held on July 10, 2012, the shareholders approved an increase in the authorized shares from 100 million to 300 million in order to provide a sufficient number of authorized shares for: (1) the number of shares reserved for exercise of outstanding warrants and convertible securities issued to the holders of convertible debentures and warrants issued to certain institutional investors in May 2012, and interest shares that may be issued in lieu of cash interest payments under such debentures, as well as warrants issued to certain institutional investors in May 2012 under a stock and warrant purchase agreement (PIPE); (2) the number of shares issuable upon exercise of all stock options and other equity awards outstanding; (3) any shares that the Company may request to be included in equity incentive plans that may be implemented in the future, subject to required stockholder approval; and (4) the number of shares authorized for future issuance under the Company’s employee stock purchase plan.

Also, at the special meeting of shareholders, the shareholders approved an amendment to our Certificate of Incorporation to effect a reverse stock split of the Company’s common stock, and on July 10, 2012, we effected a reverse split of our common stock at a ratio of one for ten shares. As a result, the number of shares underlying stock options, stock appreciation rights, restricted stock units, warrants, and convertible debentures outstanding was significantly reduced. Therefore, the Board of Directors believes that a reduction of the authorized shares of common stock to 50 million is sufficient to support the Company’s ongoing efforts to raise capital to fund its operations for the foreseeable future. Additionally, we may be able to experience cost savings by reducing fees to the State of Delaware based on the number of currently authorized shares.

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For these reasons we are seeking shareholder approval to authorize our Board of Directors to amend Article IV of our Certificate of Incorporation in order to decrease the number of authorized shares of common stock of the Company from 300 million shares of common stock to 50 million shares of common stock.

General. If approved by our shareholders, the authorized shares of common stock would be available for issuance for any proper corporate purpose as determined by our Board of Directors without further approval by the shareholders, except as required by law, the Listing Rules of the Nasdaq Global Market or the rules of any other national securities exchange on which our shares of common stock are listed.

There will be no change in the rights attributable to our authorized shares of common stock. The proposed amendment will not affect the par value of the common stock, which will remain at $0.001 per share. Under our Certificate of Incorporation, our shareholders do not have preemptive rights to subscribe to additional securities that we may issue; in other words, current holders of common stock do not have a prior right to purchase any new issue of our capital stock to maintain their proportionate ownership of common stock. If we issue additional shares of common stock or other securities convertible into common stock in the future, it will dilute the voting rights of existing holders of common stock and will also dilute earnings per share and book value per share.

If this Proposal No. 5 is approved by the shareholders, the amendment to our Certificate of Incorporation will become effective upon the filing of the amendment with the Secretary of State of the State of Delaware. We would make such filing promptly after the 2013 Annual Meeting of Shareholders.

Vote Required

The affirmative vote of the holders of a majority of the shares of the Company’s common stock issued and outstanding and entitled to vote is required to approve the amendment of our Certificate of Incorporation to decrease the number of authorized shares of common stock from 300 million to 50 million.

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR”APPROVAL OF THE AMENDMENT TO THE STEREOTAXIS CERTIFICATE OF INCORPORATION.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The following fees were charged for professional services rendered by Ernst & Young LLP, our independent registered public accountants, in fiscal year 2011 and fiscal year 2012:


	Amount Billed for Fiscal Year
Description of Professional Service	2011 $	2012 $
Audit Fees – professional services rendered for the audit of our annual financial statements and review of financial statements included in our Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.	350,000	451,000
Audit-Related Fees – assurance and related services by Ernst & Young LLP that are reasonably related to the performance of the audit or review of financial statements and are not reported as “Audit Fees.”	1,995	1,800
Tax Fees – professional services rendered by Ernst & Young LLP for tax compliance, tax advice and tax planning.	-	-
All Other Fees	-	-
Total Ernst & Young LLP Fees	351,995	452,800

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Pre-Approval Policy

As described in the Audit Committee charter, which was amended and restated in August, 2011, it is the Audit Committee’s policy and procedure to review and consider and ultimately pre-approve, where appropriate, all audit and non-audit engagement services to be performed by our independent registered public accountants. All of the audit services, audit-related services and tax services provided by Ernst & Young LLP during fiscal year 2012 were pre-approved in accordance with the Audit Committee’s policy.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

We review all relationships and transactions in which the Company and our directors, executive officers or their immediate family members participate to determine whether such persons have a direct or indirect material interest in such transactions or relationships. In addition, our Code of Ethics and Business Conduct generally prohibits our officers, directors and employees from engaging in activities that involve, or even appear to involve, a conflict between their personal interest and the interests of the Company. Our Code of Ethics and Business Conduct encourages our employees to report to us an actual or apparent conflict of interest.

Our Board of Directors, with any directors involved in the relevant transaction recused, or the Audit Committee reviews all related party transactions involving the Company and any of the Company’s principal shareholders or members of our board of directors or senior management or any immediate family member of any of the foregoing. A general statement of this policy is set forth in our audit committee charter, which is published on our website at www.stereotaxis.com/investors/governance.html. However, the Board does not have detailed written policies and procedures for reviewing related party transactions. Rather, all facts and circumstances surrounding each related party transaction may be considered.

Note and Warrant Purchase Agreement. Effective November 10, 2010, we executed the Third Amendment to the Note and Warrant Purchase Agreement with Alafi Capital Company and certain affiliates of Sanderling Venture Partners (the “Lenders”) under which the Lenders committed to extend their October 2009 agreement to loan us an aggregate of $10 million on an unsecured basis through March 31, 2012. This facility may also be used by the Company to guarantee its loan commitments with Silicon Valley Bank, its primary bank lender, through the same extended term. In conjunction with this extension, we issued five-year warrants to purchase an aggregate of 80,000 shares of our common stock at an exercise price of $40.15 per share to the Lenders. Such number of warrants was equal to 32% of the $10 million extension with an exercise price equal to 10% above the price of common shares sold in the November 2010 public offering.

Effective March 30, 2012, we executed the Fourth Amendment to the Note and Warrant Purchase Agreement with the Lenders, in connection with the extension of our loan commitments with Silicon Valley Bank through April 30, 2012. We issued five-year warrants to purchase an aggregate of 75,734 shares of our common stock at an exercise price of $6.60 per share to the Lenders. The exercise price is equal to the closing bid price on March 29, 2012, the trading day immediately prior to the date of the amendment.

Effective May 1, 2012, we executed the Fifth Amendment to the Note and Warrant Purchase Agreement with the Lenders, in connection with the extension of our loan commitments with Silicon Valley Bank through May 15, 2012. We issued five-year warrants to purchase an aggregate of 60,975 shares of our common stock, at an exercise price of $4.10 per share to the Lenders. The exercise price is equal to the closing bid price on April 30, 2012, the trading day immediate prior to the date of the amendment.

Effective May 7, 2012, we executed the Sixth Amendment to the Note and Warrant Purchase Agreement (“Sixth Amendment”) with the Lenders, in connect with the extension of our loan commitments with Silicon Valley Bank through March 31, 2013. The Lenders’ obligation to provide either direct loans to us or guarantee our loan commitments with Silicon Valley Bank was decreased from $10 million in aggregate to $3 million. We issued five-year warrants to purchase an aggregate of 234,305 shares of our common stock, at an exercise price

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of $3.36 per share to the Lenders. The exercise price is equal to the closing bid price on May 4, 2012, the trading day immediately prior to the date of the amendment.

Prior to May 7, 2012, the obligations under the $10 million loan or guarantee commitment, and the number of warrants granted under each of the amendments were split evenly between Alafi Capital Company and certain affiliates of Sanderling Venture Partners. Under the Sixth Amendment, the loan obligation or guarantee commitment of Alafi Capital Company is $1.0 million, and that of certain affiliates of Sanderling Ventures Partners is $2.0 million, and the warrants were granted on a proportionate basis. The Lenders are affiliates of Christopher D. Alafi and Fred A. Middleton, respectively. Each of these transactions was reviewed and approved by non-interested directors at a meeting of the Board of Directors, at which Mr. Middleton and Mr. Alafi were recused from the discussions and vote, or by the Audit Committee. Neither Mr. Middleton nor Mr. Alafi was a member of the Audit Committee.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires all Company executive officers, directors and persons owning more than 10% of any registered class of our capital stock to file reports of ownership and changes in ownership with the SEC. Based solely on the reports received by us and on written representations from reporting persons, we believe that all such persons timely filed such reports during the last fiscal year.

GENERAL INFORMATION

SHAREHOLDER PROPOSALS

Proposals Included In Proxy Statement

Proposals of shareholders of the Company that are intended to be presented by such shareholders at the Company’s 2014 Annual Meeting and that shareholders desire to have included in the Company’s proxy materials relating to such meeting must be received by the Company at its principal executive offices no later than December 28, 2013, which is 120 calendar days prior to the anniversary of April 26, 2013, the release date of this proxy statement relating to the 2013 Annual Meeting. Upon timely receipt of any such proposal, the Company will determine whether or not to include such proposal in the proxy statement and proxy in accordance with applicable regulations governing the solicitation of proxies.

Proposals Not Included in the Proxy Statement

Our bylaws provide that shareholders seeking to bring business before an annual meeting of shareholders, or to nominate candidates for election as directors at an annual meeting of shareholders, must provide timely notice in writing. To be timely, a shareholder’s notice must be delivered to or mailed and received at our principal executive offices not more than 120 days or less than 90 days prior to the anniversary date of the immediately preceding the annual meeting of shareholders. However, in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the shareholder in order to be timely must be received not later than the close of business on the 10th day following the date on which notice of the date of the annual meeting was mailed to shareholders or made public, whichever first occurs. Our restated bylaws specify requirements as to the form and content of a shareholder’s notice. These provisions may preclude shareholders from bringing matters before an annual meeting of shareholders or from making nominations for directors at an annual meeting of shareholders.

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Any shareholder wishing to submit a candidate for election to our Board of Directors should follow the procedures outlined in “Director Nominations.” For all other proposals, as to each matter of business proposed, the shareholder should send the following information to the Corporate Secretary, Stereotaxis, Inc., 4320 Forest Park Avenue, Suite 100, St. Louis, Missouri 63108:

•

A brief description of the business desired to be brought before the meeting and the reasons for conducting such business;

•

The text of the business (including the text of any resolutions proposed and the language of any proposed amendment to our charter documents);

•

The name and address, as they appear in our shareholder records, of the shareholder(s) proposing such business;

•

The class and number of shares of the stock which are beneficially owned by the proposing shareholder(s);

•

Any material interest of the proposing shareholder(s) in such business; and

•

A statement as to whether either the proposing shareholder(s) intend(s) to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the Company’s voting shares required under applicable law to carry the proposal.

A more complete description of this process is set forth in our bylaws.

HOUSEHOLDING OF PROXIES

The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for annual reports, proxy statements and Notices of Internet Availability of Proxy Materials, with respect to two or more shareholders sharing the same address by delivering a single annual report and/or proxy statement and/or Notices of Internet Availability of Proxy Materials addressed to those shareholders. This process is commonly referred to as “householding.” The Company and some brokers household annual reports, proxy materials, and Notices of Internet Availability of Proxy Materials, delivering a single annual report and/or proxy statement and/or Notice of Internet Availability of Proxy Materials to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders.

Once you have received notice from your broker or the Company that your broker or we will be householding materials to your address, householding will continue until you are notified otherwise or until you request otherwise. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate annual report and/or proxy statement and/or Notice of Internet Availability of Proxy Materials, in the future, please notify your broker if your shares are held in a brokerage account or us if you hold registered shares. If, at any time, you and another shareholder sharing the same address wish to participate in householding and prefer to receive a single copy of our annual report and/or proxy statement and/or Notice of Internet Availability of Proxy Materials, please notify your broker if your shares are held in a brokerage account or us if you hold registered shares.

You may request to receive at any time a separate copy of our proxy materials, our Annual Report, or Notice of Internet Availability of Proxy Materials, or notify us that you do or do not wish to participate in householding by sending a written request to our Corporate Secretary at 4320 Forest Park Avenue, Suite 100, St. Louis, Missouri 63108, or by telephoning 314-678-6100. We will deliver such materials to you promptly upon such request.

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OTHER INFORMATION

The Board knows of no matter, other than those referred to in this proxy statement, which will be presented at the meeting. However, if any other matters, including a shareholder proposal excluded from this proxy statement pursuant to the rules of the SEC, properly come before the meeting or any of its adjournments, the person or persons voting the proxies will vote in accordance with their best judgment on such matters. Should any nominee for director be unable to serve or for good cause will not serve at the time of the meeting or any adjournments thereof, the persons named in the proxy will vote for the election of such other person for such directorship as the Board may recommend, unless, prior to the meeting, the Board has eliminated that directorship by reducing the size of the Board. The Board is not aware that any nominee herein will be unable to serve or for good cause will not serve as a director.

The Company will bear the expense of preparing, printing and mailing this proxy material, as well as the cost of any required solicitation. Directors, officers or employees of the Company may solicit proxies on behalf of the Company. In addition, the Company will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred in forwarding proxy materials to beneficial owners of the Company’s stock and obtaining their proxies.

You are urged to vote promptly. You may revoke your proxy at any time before it is voted; and if you attend the meeting, as we hope you will, you may vote your shares in person, if you held your shares directly as a registered holder. In addition, we will furnish, without charge, copies of exhibits to our Annual Report on Form 10-K for the year ended December31, 2012, as filed with the Commission, upon the written request of any person who is a shareholder as of the Record Date, upon payment of a reasonable fee which shall not exceed our reasonable expenses in connection therewith. Requests for such materials should be directed to Stereotaxis, Inc., 4320 Forest Park Avenue, Suite 100, St. Louis, Missouri 63108, Attention: Secretary. Such information may also be obtained free of charge by accessing the Commission’s web site at www.sec.gov.

April 26, 2013

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Appendix A

STEREOTAXIS, INC.

2012 STOCK INCENTIVE PLAN

As amended and restated effective April 17, 2013 (subject to shareholder approval)

1. Purpose of the Plan.

The purpose of the Plan is to provide the Company with a means to assist in recruiting, retaining, and rewarding certain employees, directors, consultants, and other individuals providing services to the Company and to motivate such individuals to exert their best efforts on behalf of the Company by providing incentives through the granting of Awards. By granting Awards to such individuals, the Company expects that the interests of the recipients will be better aligned with those of the Company by providing recipients with a proprietary interest in the growth and performance of the Company.

2. Definitions. Unless the context clearly indicates otherwise, the following capitalized terms shall have the meanings set forth below:

A. “Act” means the Securities Exchange Act of 1934, as amended, or any successor thereto.

B. “Award” means a grant under the Plan of an Option, Stock Appreciation Right, Cash-Based Award or Other Stock-Based Award.

C. “Award Agreement” means the document (in written or electronic form) communicating the terms, conditions and limitations applicable to an Award. The Committee may, in its discretion, require that the Participant execute such Award Agreement, or may provide for procedures through which Award Agreements are made available but not executed. Any Participant who is granted an Award and who does not affirmatively reject the applicable Award Agreement shall be deemed to have accepted the terms of Award as embodied in the Award Agreement.

D. “Board” means the Board of Directors of the Company.

E. “Cash-Based Award” means an Award described in Section 7 as a Cash-Based Award.

F. “Change of Control” means the occurrence of one or more of the following:

(1) The purchase or other acquisition (other than from the Company) by any person, entity or group of persons, within the meaning of Section 13(d) or 14(d) of the Act (excluding, for this purpose, the Company or its subsidiaries or any employee benefit plan of the Company or its subsidiaries), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 35% or more of either the then-outstanding shares of common stock of the Company or the combined voting power of the Company’s then-outstanding voting securities entitled to vote generally in the election of directors;

(2) Individuals who, as of the date hereof, constitute the Board (as of the date hereof, the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person who becomes a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Act) shall be, for purposes of this section, considered as though such person were a member of the Incumbent Board; or

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(3) The consummation of a reorganization, merger or consolidation, in each case with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 50% of, respectively, the common stock and the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated corporation’s then-outstanding voting securities, or of a liquidation or dissolution of the Company or of the sale of all or substantially all of the assets of the Company.

Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred with respect to any Award that (i) provides “non-qualified deferred compensation” within the meaning of Code Section 409A and (ii) settles upon a Change of Control, unless such foregoing event constitutes a “change in ownership” of the Company, a “change in effective control” of the Company, or a “change in the ownership of a substantial portion of the assets” of the Company in each case, as defined under Code Section 409A.

G. “Code” means the Internal Revenue Code of 1986, as amended, or any successor thereto, and the regulations and other guidance promulgated thereunder.

H. “Committee” means the Compensation Committee of the Board, and any successor committee thereto or such other committee of the Board as may be designated by the Board to administer this Plan in whole or in part including any subcommittee of the Board as designated by the Board.

I. “Company” means Stereotaxis, Inc., a Delaware corporation, and any successor thereto.

J. “Employer” means the Company and any other entity directly or indirectly controlling, controlled by, or under common control with, the Company or any other entity designated by the Board or the Committee in which the Company has an interest. The term “control” (including the terms “controlling”, “controlled by” and “under common control with”) has the meaning ascribed to it under Rule 405 of the Securities Act of 1933, as amended, or any successor thereto, and the regulations and other guidance promulgated thereunder.

K. “Fair Market Value” means the closing sale price, regular way, or, in case no such sale takes place on such date, the average of the closing bid and asked prices, regular way, on the date such Fair Market Value is measured of one share of Stock as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the Nasdaq Global Market or, if the shares of Stock are not listed or admitted to trading on the Nasdaq Global Market, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares of Stock are listed or admitted to trading or, if the shares of Stock are not listed or admitted to trading on any national securities exchange, the last quoted sale price on such date or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market on such date, as reported by the National Association of Securities Dealers, Inc. Automated Quotations System or such other system then in use. If shares of Stock are not publicly held or so listed or publicly traded, the Fair Market Value per share of Stock shall be 100% of the fair market value of a share of Stock on the date such Fair Market Value is measured, as determined in good faith by the Committee.

L. “Incentive Stock Option” means a stock option which is intended to be an incentive stock option within the meaning of Code Section 422.

M. “Non-Qualified Stock Option” means a stock option which is not an Incentive Stock Option.

N. “Option” means both an Incentive Stock Option and a Non-Qualified Stock Option.

O. “Other Stock-Based Award” means an Award granted pursuant to Section 7 and described as an Other Stock-Based Award.

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P. “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of the granting of the Option, each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain, or such other meaning as may be hereafter ascribed to it in Code Section 424.

Q. “Participant” means any director or any employee of the Company, or any of its subsidiaries (including subsidiaries of subsidiaries), or any other entity in which the Company has a significant equity or other interest, as determined by the Committee, as well as any individual providing services to the Company who is selected to receive an Award; provided, that Incentive Stock Options may only be granted to employees of the Company or any of its Subsidiaries.

R. “Plan” means the Stereotaxis, Inc. 2012 Stock Incentive Plan.

S. “Stock” means the common stock, par value of $0.001 per share, of the Company.

T. “Stock Appreciation Right” means a stock appreciation right described in Section 6.

U. “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of granting an Award, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain, or such other meaning as may be hereafter ascribed to it in Code Section 424.

3. Stock Subject to the Plan.

As of the date of adoption of this Plan by the Board or the Committee, as applicable, the number of shares of Stock available for Awards under the Plan shall be one million five hundred thousand (1,500,000). This maximum aggregate number of shares that may be issued under the Plan pursuant to Awards shall be increased, up to a maximum of two hundred ninety thousand (290,000) additional shares, by the number of shares of Stock subject to awards outstanding under the Stereotaxis, Inc. 2002 Stock Incentive Plan (“Prior Stock Plan”) as of the date hereof (“Prior Award Shares”) , but only to the extent such Prior Award Shares expire after the date of adoption of this Plan unexercised, or are forfeited after such date, with the expiration or forfeiture of an award under the Prior Stock Plan with respect to one share of Stock resulting in one share of Stock available for use or allocation to Awards granted pursuant to this Plan. The maximum number of shares of Stock subject to Awards which may be granted during a calendar year to a Participant shall be 1,000,000. The Company may, in its discretion, use shares of Stock held in the treasury in lieu of authorized but unissued shares of Stock. If any Award shall expire or terminate or be cancelled or forfeited for any reason, the shares subject to the Award shall again be available for the purposes of the Plan. Any shares of Stock which are tendered by a Participant as full or partial payment to the Company to satisfy a purchase price related to an Award shall not be available for the purposes of the Plan. To the extent any shares subject to an Award are not delivered to a Participant because such shares are used to satisfy an applicable tax-withholding obligation or used to satisfy a purchase price related to an Option, such withheld shares shall not be available for the purposes of the Plan. Shares of Stock subject to the grant of a Stock Appreciation Right shall not become available again for issuance under this Plan upon exercise or settlement of such Stock Appreciation Right for a lesser number of shares. Awards that by their terms may only be settled in cash shall not reduce the number of shares available for purposes of the Plan, and if cash is issued in lieu of Stock pursuant to an Award, such shares will not become available again for issuance under this Plan.

All the shares of Stock available under the Plan may be used for the grant of Incentive Stock Options.

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4. Administration.

The Plan shall be administered by the Committee. Subject to the express provisions of the Plan, the Committee shall have plenary authority, in its discretion, to determine the individuals to whom, and the time or times at which, Awards shall be granted and the number of shares, if applicable, to be subject to each Award. In making such determinations, the Committee may take into account the nature of services rendered by the respective individuals, their present and potential contributions to the Employer’s success and such other factors as the Committee, in its discretion, shall deem relevant. Subject to the express provisions of the Plan, the Committee shall also have plenary discretionary authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the respective Award Agreements (which need not be identical) and to make all other determinations necessary or advisable for the administration of the Plan. The Committee’s determinations on the matters referred to in this Section 4 shall be conclusive.

Notwithstanding the foregoing, the Committee may not amend the terms of outstanding Award Agreements without the approval of the Company’s shareholders in accordance with applicable law or regulation to either reduce the exercise price of any outstanding Option or Stock Appreciation Right, or cancel any outstanding Option or Stock Appreciation Right in exchange for cash, another Award, or another Option or Stock Appreciation Right with an exercise price that is less than the exercise price of the original Option or Stock Appreciation Right.

The Committee shall have the power and authority to determine which individuals, including individuals outside the United States, shall be eligible to receive Awards under the Plan. The Committee may adopt, amend or rescind rules, procedures or sub-plans relating to the operation and administration of the Plan to accommodate the specific requirements of local laws, procedures, and practices. Without limiting the generality of the foregoing, the Committee is specifically authorized to adopt rules, procedures and sub-plans with provisions that limit or modify rights on death, disability, retirement, separation from service or termination of employment, available methods of exercise or settlement of an Award, payment of income, social insurance contributions and payroll taxes, withholding procedures and handling of any stock certificates or other indicia of ownership which vary with local requirements. The Committee may also adopt rules, procedures or sub-plans applicable to Participants employed by particular Employers or at particular locations.

5. Options.

The Committee, in its discretion, may grant Options which are Incentive Stock Options or Non-Qualified Stock Options, as evidenced by the Award Agreement, and shall be subject to the foregoing and the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Committee shall determine:

A. Type of Option. Incentive Stock Options may be granted to any individual classified by the Committee as an employee of the Company, a Parent or a Subsidiary. A Non-Qualified Stock Option may be granted to any individual selected by the Committee, provided that in no event shall a Non-Qualified Stock Option be granted in exchange for services performed by an individual unless the Company is an “eligible issuer of service recipient stock” within the meaning of Code Section 409A with respect to such individual. No individual may be granted Options to purchase more than 1,000,000 shares of Stock during any single fiscal year of the Company.

B. Option Prices. The purchase price of the Stock under each Option shall not be less than 100% of the Fair Market Value of the Stock at the time of the granting of the Option, as determined under Section 16; provided that, in the case of a Participant who owns more than 10% of the total combined voting power of all classes of stock of the Company, a Parent or a Subsidiary (as determined in accordance with Code Section 422), the purchase price of the Stock under each Incentive Stock Option shall not be less than 110% of the Fair Market Value of the Stock on the date such Option is granted.

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C. Exercise — Elections and Restrictions. The purchase price for an Option is to be paid in full upon the exercise of the Option, either (i) in cash, (ii) in the discretion of the Committee, by the tender to the Company (either actual or by attestation) of shares of Stock already owned by the Participant and registered in his or her name, having a Fair Market Value equal to the cash exercise price of the Option being exercised, (iii) through a net or cashless (including broker-assisted cashless exercise, to the extent permissible) form of exercise as permitted by the Committee, or (iv) in the discretion of the Committee, by any combination of the payment methods specified in clauses (i), (ii), or (iii) hereof; provided that, no shares of Stock may be tendered in exercise of an Incentive Stock Option if such shares were acquired by the Participant through the exercise of an Incentive Stock Option unless (a) such shares have been held by the Participant for at least one year and (b) at least two years have elapsed since such prior Incentive Stock Option was granted.

D. Option Terms. The term of each Option shall not be more than ten (10) years from the date of granting thereof, as determined under Section 16, or such shorter period as is prescribed in the Award Agreement; provided that, in the case of a Participant who owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, a Parent or a Subsidiary, the term of any Incentive Stock Option shall not be more than five (5) years from the date of granting thereof or such shorter period as prescribed in the Award Agreement. Within such limit, Options will be exercisable at such time or times, and subject to such restrictions and conditions, as the Committee shall, in each instance, approve, which need not be uniform for all Participants. The holder of an Option shall have none of the rights of a shareholder with respect to the shares subject to Option until such shares shall be issued to him or her upon the exercise of his or her Option. In no event shall Option holders be entitled to dividends or dividend equivalents with respect to such Options.

E. Successive Option Grants. As determined by the Committee, successive option grants may be made to any Participant under the Plan.

F. Additional Incentive Stock Option Requirements. The maximum aggregate Fair Market Value (determined at the time an Option is granted) of the Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year (under all plans of the Company, a Parent and a Subsidiary) shall not exceed $100,000. A Participant who disposes of Stock acquired upon the exercise of an Incentive Stock Option either (i) within two years after the date of grant of such Incentive Stock Option or (ii) within one year after the transfer of such shares to the Participant, shall notify the Company of such disposition and of the amount realized upon such disposition.

6. Stock Appreciation Rights.

A. Grant Terms. The Committee may grant a Stock Appreciation Right independent of an Option or in connection with an Option or a portion thereof. A Stock Appreciation Right granted in connection with an Option or a portion thereof shall cover the same shares of Stock covered by the Option, or a lesser number as the Committee may determine. The maximum number of shares of Stock subject to Awards for Stock Appreciation Rights for grants intended to qualify as Performance-Based Awards during a calendar year shall be 1,000,000. The term of each Stock Appreciation Right shall not be more than ten (10) years from the date of granting thereof, as determined under Section 16, or such shorter period as is prescribed in the Award Agreement.

B. Exercise Terms. The exercise price per share of Stock of a Stock Appreciation Right shall not be less than 100% of the Fair Market Value of the Stock at the time of granting, as determined under Section 16, the Stock Appreciation Right. A Stock Appreciation Right granted independent of an Option shall entitle the Participant upon exercise to a payment from the Company in an amount equal to the excess of the Fair Market Value on the exercise date of a share of Stock over the exercise price per share, times the number of Stock Appreciation Rights exercised. A Stock Appreciation Right granted in connection with an Option shall entitle the Participant to surrender an unexercised Option (or portion thereof) and to receive in exchange an amount equal to

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the excess of the Fair Market Value on the exercise date of a share of Stock over the exercise price per share for the Option, times the number of shares covered by the Option (or portion thereof) which is surrendered. Payment may be made, in the discretion of the Committee, in (i) Stock, (ii) cash or (iii) any combination of Stock and cash. Cash shall be paid for fractional shares of Stock upon the exercise of a Stock Appreciation Right.

C. Limitations. The Committee may include in the Award Agreement such conditions upon the exercisability or transferability of Stock Appreciation Rights as it determines in its sole discretion. In no event shall Stock Appreciation Right holders be entitled to dividends or dividend equivalents with respect to such Stock Appreciation Rights.

7. Other Stock-Based Awards and Cash-Based Awards.

The Committee may, in its sole discretion, grant Awards of Stock, restricted Stock, restricted Stock units and other Awards that are valued in whole or in part by reference to the Fair Market Value of Stock. These Awards shall collectively be referred to herein as Other Stock-Based Awards. The Committee may also, in its sole discretion, grant Cash-Based Awards, which shall have a value as may be determined by the Committee. Other Stock-Based Awards shall be in such form, and dependent on such conditions, if any, as the Committee shall determine, including, but not limited to, the right to receive fully-vested shares or the right to receive one or more shares of Stock (or the cash-equivalent thereof) upon the completion of a specified period of service, the occurrence of an event or the attainment of performance objectives. Other Stock-Based Awards and Cash-Based Awards may be granted with or in addition to other Awards. Subject to the other terms of the Plan, Other Stock-Based Awards and Cash-Based Awards may be granted to such Participants in such amounts and upon such terms, and at any time and from time to time, as shall be determined by the Committee and set forth in an Award Agreement; provided that, the maximum Cash-Based Award that may be granted to a Participant in a calendar year is $1,000,000 to the extent it is also a Performance-Based Award. Notwithstanding the foregoing, no dividends or dividend equivalents shall be paid with respect to unvested Other Stock-Based Awards, including Other Stock-Based Awards that are intended to be Performance-Based Awards.

8. Performance-Based Awards.

The Committee may, in its sole and absolute discretion, determine that certain Awards should be subject to such requirements so that they are deductible by the Employer under Code Section 162(m). If the Committee so determines, such Awards shall be considered Performance-Based Awards subject to the terms of this Section 8, as provided in the Award Agreement. A Performance-Based Award shall be granted by the Committee in a manner to satisfy the requirements of Code Section 162(m) and the regulations thereunder. The performance measures to be used for purposes of a Performance-Based Award shall be determined by the Committee, in its sole and absolute discretion, from among the following: the Company’s earnings per share growth; earnings; earnings per share; cash flow; working capital; expense management; customer satisfaction; revenues; financial return ratios; market performance; shareholder return and/or value; operating income (loss) (including earnings (loss) before income taxes, depreciation and amortization); net income (loss); profit returns; margins; stock price; working capital; business trends; production cost; product cost; return on assets; project milestones; and plant and equipment performance. The performance measures may relate to the Company, a Parent, a Subsidiary, an Employer or one or more units of such an entity.

The Committee shall determine whether, with respect to a performance period, the applicable performance goals have been met with respect to an Award and, if they have, to so certify and ascertain the amount of the applicable Performance-Based Award. Each performance measure that constitutes a criteria measured by reference to the Company’s financial statements shall be determined in accordance with generally accepted accounting principles as consistently applied by the Company and, if so determined by the Committee prior to the date the performance measures are established in writing, adjusted, to the extent permitted under Code Section 162(m), to omit the effects of extraordinary items, gain or loss on the disposal of a business segment, unusual or infrequently occurring events and transactions and cumulative effects of changes in

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accounting principles. The Committee shall have the discretion to adjust the amount payable on a Company-wide or divisional basis or to reflect individual performance and/or unanticipated factors; provided, however, that Awards which are designed to qualify as Performance-Based Awards may not be adjusted upward (the Committee shall retain the discretion to adjust such Awards downward).

9. Vesting Limitations.

Except as otherwise provided in this Plan, each Stock Option and Stock Appreciation Right shall have a minimum vesting period of three years from the date of grant of such award, provided that such vesting may occur incrementally over such three-year period. Except as otherwise provided in this Plan, the vesting schedule of any such Award may not accelerate except in the case of death, disability, retirement, a Change of Control, involuntary termination of employment without cause or voluntary termination for good reason. Except as otherwise provided in this Plan, whether an Award will be subject to accelerated vesting upon the occurrence of one or more of these events shall be specified in Award Agreement relating to such Award or another agreement with the Participant, such as an employment agreement.

10. Withholding. Upon exercise of an Option, the Company shall withhold a sufficient number of shares to satisfy the Company’s minimum required statutory withholding obligations for any taxes incurred as a result of such exercise (based on the minimum statutory withholding rates for federal and state tax purposes, including payroll taxes); provided that, in lieu of all or part of such withholding, the Participant may pay an equivalent amount of cash to the Company. Prior to the payment, settlement, or vesting of any Award other than an Option, the Participant shall pay to the Company, or make arrangements acceptable to the Company for the payment of, amounts sufficient for the Company to satisfy its required statutory withholding obligations. The Company shall have the right to satisfy its required statutory withholding obligations by withholding an amount of cash otherwise due to a Participant (or shares of Stock for Awards settled in shares of Stock) upon the settlement of any Award.

11. Nontransferability of Awards.

Unless otherwise determined by the Committee and expressly set forth in an Award Agreement, an Award granted under the Plan shall, by its terms, be non-transferable otherwise than by will or the laws of descent and distribution and an Award may be exercised, if applicable, during the lifetime of the Participant thereof, only by the Participant or his or her guardian or legal representative. Notwithstanding the above, the Committee may not provide in an Award Agreement that an Incentive Stock Option is transferable.

12. Investment Purpose.

Each Award under the Plan shall be awarded only on the condition that all purchases of Stock thereunder shall be for investment purposes, and not with a view to resale or distribution, except that the Committee may make such provision with respect to Awards granted under this Plan as it deems necessary or advisable for the release of such condition upon the registration with the Securities and Exchange Commission of Stock subject to the Award, or upon the happening of any other contingency warranting the release of such condition.

13. Adjustments Upon Changes in Capitalization or Corporation Acquisitions.

In the event of any change in the outstanding Stock of the Company by reason of a stock split, stock dividend, combination or reclassification of shares, recapitalization, consolidation, split-up, merger, or similar event, the Committee shall adjust appropriately: (a) the number of shares or kind of Stock (i) available for issuance under the Plan, (ii) for which Awards may be granted to an individual Participant, and (iii) covered by outstanding Awards denominated in stock or units of stock; (b) the exercise and grant prices related to outstanding Awards; and (c) the appropriate Fair Market Value and other price determinations for such Awards. In the event of any other change affecting the Stock or any distribution (other than normal cash dividends) to

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holders of Stock, such adjustments in the number and kind of shares and the exercise, grant and conversion prices of the affected Awards as may be deemed equitable by the Committee, including adjustments to avoid fractional shares, shall be made to give proper effect to such event. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Committee shall be authorized to cause to issue or assume stock options, whether or not in a transaction to which section 424(a) of the Code applies, by means of substitution of new stock options for previously issued stock options or an assumption of previously issued stock options. In such event, the aggregate number of shares of Stock available for issuance under Awards under Section 3, including the individual Participant maximums, will be increased to reflect such substitution or assumption.

In the event of a Change of Control, notwithstanding any other provisions of the Plan or an Award Agreement to the contrary, the Committee may, in its sole discretion, provide for:

(1) Termination of an Award upon the consummation of the Change of Control in exchange for the payment of a cash amount (but only in a manner which does not result in a violation of Code Section 409A and only to the extent the terminated Award has, in the discretion of the Committee, a positive value as of the termination date); and/or

(2) Issuance of substitute Awards to substantially preserve the terms of any Awards previously granted under the Plan (but only in a manner which does not result in a violation of Code Section 409A) which are outstanding upon the consummation of the Change of Control.

Prior to the consummation of a Change of Control, the Committee may also provide for accelerated vesting of any outstanding Awards that are otherwise unexercisable or unvested as of a date selected by the Committee.

14. Amendment and Termination.

The Board or the Committee may at any time terminate the Plan, or make such modifications to the Plan as either shall deem advisable; provided, however, that the Board or the Committee may not, without further approval by the shareholders of the Company, increase the maximum number of shares as to which Awards may be granted under the Plan (except under the anti-dilution provisions of Section 13), or change the class of employees to whom Incentive Stock Options may be granted. No termination or amendment of the Plan may, without the consent of the Participant to whom any Award shall theretofore have been granted, adversely affect the rights of such Participant under such Award.

15. Effectiveness of the Plan.

The Plan shall become effective upon adoption by the Board or the Committee subject, however, to its further approval by the shareholders of the Company given within twelve (12) months of the date the Plan is adopted by the Board or the Committee at a regular meeting of the shareholders or at a special meeting duly called and held for such purpose. Grants of Awards may be made prior to such shareholder approval but all Award grants made prior to shareholder approval shall be subject to the obtaining of such approval and if such approval is not obtained, such Awards shall not be effective for any purpose.

16. Time of Granting of an Award.

An Award grant under the Plan shall be deemed to be made on the date on which the Committee, by formal action of its members duly recorded in the records thereof, makes an Award to a Participant (but in no event prior to the adoption of the Plan by the Board or the Committee).

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17. Term of Plan.

This Plan shall terminate ten (10) years after the date on which it is approved and adopted by the Board or the Committee and no Award shall be granted hereunder after the expiration of such ten-year period. Awards outstanding at the termination of the Plan shall continue in accordance with their terms and shall not be affected by such termination.

18. No Right To Continued Employment.

Nothing in the Plan or in any Award granted pursuant to the Plan shall confer on any individual any right to continue in the employ of the Employer or interfere in any way with the right of the Employer to terminate his or her employment at any time.

19. Choice of Law.

The Plan shall be governed by and construed in accordance with the laws of the State of Delaware without regard to conflicts of law. Unless otherwise provided in an Award Agreement, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Missouri, County of St. Louis, to resolve any and all issues that may arise out of or relate to the Plan or any Award Agreement.

20. Severability. If any provision of the Plan is, becomes, or is deemed invalid, illegal, or unenforceable in any jurisdiction, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended or limited in scope to conform to applicable laws or, in the discretion of the Committee, it shall be stricken and the remainder of the Plan shall remain in full force and effect.

* * *

The foregoing amended Plan was approved and adopted by the Committee on April 17, 2013, and approved by the Stockholders on , .

Secretary

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Appendix B

CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION

OF STEREOTAXIS, INC.

A Delaware Corporation

Stereotaxis, Inc., a corporation organized and existing under the laws of the State of Delaware (“Corporation”), hereby certifies that:

The name of this Corporation is Stereotaxis, Inc.

Pursuant to Section 242 of the Delaware General Corporation Law, this Certificate of Amendment hereby amends Article IV of the Certificate of Incorporation by deleting Section 1 thereof in its entirety and replacing it with the following:

“1. Authorized Stock. The total number of shares which the Corporation is authorized to issue is 60,000,000 shares as follows: 50,000,000 shares of common stock, each having a par value of one-tenth of one cent ($0.001) (the “Common Stock”) and 10,000,000 shares of preferred stock, each having a par value of one-tenth of one cent ($0.001) (the “Preferred Stock”).”

IN WITNESS WHEROF, Stereotaxis, Inc. has caused this Certificate of Amendment to the Certificate of Incorporation to be signed by Karen Witte Duros, its Senior Vice President, General Counsel & Secretary, this [ ] day of [ ], 20 .


Stereotaxis, Inc.

By:
Karen Witte Duros

Senior Vice President, General Counsel & Secretary

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STEREOTAXIS, INC.

KAREN W. DUROS, SECRETARY

4320 FOREST PARK AVENUE, SUITE 100

ST. LOUIS, MO 63108

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Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS

If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.

VOTE BY PHONE - 1-800-690-6903

Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.


TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:	KEEP THIS PORTION FOR YOUR RECORDS
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.		DETACH AND RETURN THIS PORTION ONLY

The Board of Directors recommends you vote FOR the following:

For

All

Withhold

All

For All

Except

To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.

1. Election of Directors

Nominees

01 Fred A. Middleton

02 William C. Mills III

The Board of Directors recommends you vote FOR proposals 2, 3, 4 and 5.

For

Against

Abstain

2 To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2013.

3 To approve, by non-binding vote, executive compensation.

4 To approve the amendment to the Stereotaxis, Inc. 2012 Stock Incentive Plan to increase the number of shares authorized for issuance thereunder.

5 To approve the amendment to the Stereotaxis, Inc. Certificate of Incorporation to decrease the authorized number of shares of the Company’s common stock, par value $0.001 per share.

NOTE: In their discretion, the proxies are authorized to vote upon any other business as may properly come before the meeting.

LOGO

Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.

Signature [PLEASE SIGN WITHIN BOX]

Date

Signature (Joint Owners)

Date

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Form 10-K is/are available at www.proxyvote.com.

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LOGO

PROXY

STEREOTAXIS, INC.

Annual Meeting of Stockholders - June 5, 2013

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY

The undersigned hereby appoints Karen Witte Duros and Martin C. Stammer, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Stereotaxis, Inc. Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Stockholders of the Company to be held at 9:00 a.m., Central Time on June 5, 2013 or at any adjournment or postponement thereof, with all powers which the undersigned would posses if present at the Meeting.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED AND FOR

PROPOSAL 2, 3, 4 AND 5. IF NO CHOICE IS SELECTED, THE PROXY WILL VOTE THE SHARES IN

ACCORDANCE WITH SUCH RECOMMENDATION.

Continued and to be signed on reverse side

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