================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
BSD MEDICAL CORPORATION
-----------------------
(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------------------------
(Name of Person(s) Filling 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(1)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5) Total Fee Paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------------
2) Form, Schedule, or Registration Statement No.:
-----------------------------------------------------------------------
3) Filing Party:
-----------------------------------------------------------------------
4) Date Filed:
-----------------------------------------------------------------------
1
BSD MEDICAL CORPORATION
2188 West 2200 South, Salt Lake City, Utah 84119
--------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF
BSD MEDICAL CORPORATION
February 1, 2008
--------------------------------------------------------------------------------
TO THE STOCKHOLDERS OF BSD MEDICAL CORPORATION:
The annual meeting of the stockholders (the "Annual Meeting") of BSD
Medical Corporation (the "Company") will be held on February 1, 2008, at The
Grand America Hotel located at 555 South Main Street, Salt Lake City, Utah
84111. The Annual Meeting will convene at 9:00 a.m. Mountain Time, to consider
and take action on the following proposals, which are more fully described in
the Proxy Statement:
1. to elect six members to the Board of Directors to serve until the
next annual meeting or until their successors are duly elected and
qualified;
2. to approve an amendment and restatement of the Company's Amended
and Restated 1998 Directors Stock Plan to increase the number of
shares of common stock reserved for issuance under the plan from
1,000,000 to 1,500,000;
(3-5) to approve an amendment and restatement of the Company's Amended
and Restated 1998 Stock Incentive Plan to:
3. increase the number of shares of common stock reserved for
issuance under the plan from 2,677,300 to 3,427,300;
4. increase the number of shares that may be awarded to each
participant; and
5. extend the termination date of the plan from February 9, 2008 to
ten years from the date the plan is adopted by the Board of
Directors, or the date the plan is approved by the shareholders,
whichever is earlier, subject to earlier termination by the Board
of Directors;
6. to ratify the selection of Tanner LC as the Company's independent
registered public accountants for the fiscal year ending August
31, 2008; and
7. to transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
Only owners of record of the Company's issued and outstanding common
stock as of the close of business on December 5, 2007 (the "Record Date") will
be entitled to notice of and to vote at the Annual Meeting. Each share of common
stock is entitled to one vote.
The Company's Proxy Statement is attached hereto. Financial and other
information concerning the Company is contained in the Company's Annual Report
on Form 10-K for the fiscal year ended August 31, 2007, which accompanies this
Proxy Statement.
THE ATTENDANCE AT AND/OR VOTE OF EACH STOCKHOLDER AT THE ANNUAL MEETING
IS IMPORTANT, AND EACH STOCKHOLDER IS ENCOURAGED TO ATTEND. TO ASSURE THAT YOUR
VOTE IS COUNTED, PLEASE COMPLETE, SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED
PROXY WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
BSD MEDICAL CORPORATION
BY ORDER OF THE BOARD OF DIRECTORS
Salt Lake City, Utah, December 31, 2007 Dennis E. Bradley, Secretary
2
BSD MEDICAL CORPORATION
2188 West 2200 South, Salt Lake City, Utah 84119
--------------------------------------------------------------------------------
PROXY STATEMENT
BSD MEDICAL CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 1, 2008
--------------------------------------------------------------------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by and on behalf of the Board of Directors (the "Board of Directors"
or the "Board") of BSD Medical Corporation, a Delaware corporation (the
"Company" or "BSD"), for use at the annual meeting of the stockholders (the
"Annual Meeting") to be held February 1, 2008 at the Grand America Hotel located
at 555 South Main Street, Salt Lake City, Utah 84111, at 9:00 a.m., Mountain
Time.
THIS PROXY STATEMENT, THE NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND
FORM OF PROXY ARE FIRST BEING MAILED TO THE COMPANY'S STOCKHOLDERS ON OR ABOUT
DECEMBER 31, 2007.
At the Annual Meeting, the stockholders of the Company will be asked to
vote on six proposals. Proposal 1 is the annual election of six directors to
serve on the Company's Board of Directors. Proposal 2 is an amendment and
restatement of the Company's Amended and Restated 1998 Directors Stock Plan to
increase the number of shares of common stock reserved for issuance under the
plan from 1,000,000 to 1,500,000. Proposals 3, 4 and 5 relate to an amendment
and restatement of the Company's Amended and Restated 1998 Stock Incentive Plan
to increase the number of shares of common stock reserved for issuance under the
plan from 2,677,300 to 3,427,300, to increase the number of shares that may be
awarded to each participant and to extend the termination date of the plan from
February 9, 2008 to ten years from the date the plan is adopted by the Board of
Directors, or the date the plan is approved by the shareholders, whichever is
earlier, subject to earlier termination by the Board of Directors. Proposal 6 is
the ratification of the selection of Tanner LC as the Company's independent
registered public accountants for the fiscal year ending August 31, 2008.
A proxy for use at the Annual Meeting is enclosed. Any stockholder who
executes and delivers such proxy by mailing a proxy card, or by voting via the
internet or telephone has the right to revoke it any time before it is exercised
by delivering to the Secretary of the Company an instrument revoking it or a
duly executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person. Subject to revocation, the proxy holders will vote all shares
represented by a properly executed proxy received in time for the Annual Meeting
in accordance with the instructions on the proxy. If no instruction is specified
with respect to a matter to be acted upon, the shares represented by the proxy
will be voted FOR the proposal in accordance with the recommendation of the
Board of Directors.
The expenses of preparing, assembling, printing and mailing this Proxy
Statement and the materials used in the solicitation of proxies will be borne by
the Company. Proxies will be solicited through the mail and may be solicited by
the Company's officers, directors and employees in person or by telephone. They
will not receive additional compensation for this effort. The Company does not
anticipate paying any compensation to any other party for the solicitation of
proxies, but may reimburse brokerage firms and others for their reasonable
expenses in forwarding solicitation material to beneficial owners.
RECORD DATE AND QUORUM REQUIREMENTS
December 5, 2007 has been fixed as the record date (the "Record Date")
for the determination of stockholders entitled to notice of and to vote at the
3
Annual Meeting. As of the Record Date, 21,288,333 shares of the Company's common
stock were issued and outstanding. Each outstanding share of common stock will
be entitled to one vote on each matter submitted to a vote of the stockholders
at the Annual Meeting.
The holders of one-third of the shares of the common stock outstanding
on the Record Date, present in person or by proxy, will constitute a quorum for
the transaction of business at the Annual Meeting and at any adjournment or
postponement thereof. Any abstentions and broker non-votes will be deemed as
present for purposes of determining a quorum at the Annual Meeting. The six
individuals receiving the most votes will be elected to serve as directors of
the Company. Abstentions and broker non-votes will not have the effect of being
counted as voted in favor of or against the election of directors. All
proposals, except for the election of directors, must be approved by a majority
of the votes present in person or represented by proxy at the Annual Meeting, at
which a quorum is present. Abstentions will have the effect of being counted as
voted against any of these proposals. Broker non-votes will not have the effect
of being counted as voted in favor of or against any of these proposals.
MAIL VOTING PROCEDURES
To vote by mail, a stockholder should complete, sign and date their
proxy card and mail it in the pre-addressed postage-paid envelope that
accompanies the delivery of the proxy card. A proxy card submitted by mail must
be received by the time of the Annual Meeting in order for the shares to be
voted.
TELEPHONE VOTING PROCEDURES
The telephone authorization procedure is designed to authenticate a
stockholder's identity to allow stockholders to vote their shares and confirm
that their instructions have been properly recorded. Specific instructions to be
followed are set forth on the enclosed proxy card. Telephone voting facilities
for stockholders of record are available 24 hours a day and will close at 11:59
p.m. Eastern Time on January 31, 2008.
INTERNET VOTING PROCEDURES
The internet authorization procedure is designed to authenticate a
stockholder's identity to allow stockholders to vote their shares and confirm
that their instructions have been properly recorded. Specific instructions to be
followed are set forth on the enclosed proxy card. Internet voting facilities
for stockholders of record are available 24 hours a day and will close at 11:59
p.m. Eastern Time on January 31, 2008.
--------------------------------------------------------------------------------
PROPOSAL 1: ELECTION OF DIRECTORS
--------------------------------------------------------------------------------
At the Annual Meeting, six directors are to be elected to serve until
the next annual meeting of stockholders or until a successor for such director
is elected and qualified, or until the death, resignation, or removal of such
director. It is intended that the proxies will be voted for the six nominees
named below for election to the Company's Board of Directors unless authority to
vote for any such nominee is withheld. Each of the nominees is currently a
director of the Company. Each person nominated for election has agreed to serve
if elected, and the Board of Directors has no reason to believe that any nominee
will be unavailable or will decline to serve. In the event, however, that any
nominee is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who is designated by the
current Board of Directors to fill the vacancy. Unless otherwise instructed, the
proxy holders will vote the proxies received by them FOR the nominees named
below. The six candidates receiving the highest number of affirmative votes of
the shares entitled to vote at the Annual Meeting will be elected as directors
of the Company.
DIRECTORS
The names of the nominees, their ages and their respective business
backgrounds are set forth below as of August 31, 2007.
Position(s) Director
Name With the Company Age Since
---- --------------------------- --- ----------
Paul F. Turner, MSEE Chairman of the Board, 60 1994
Senior Vice President and
Chief Technology Officer
Hyrum A. Mead, MBA President and Director 60 1999
Gerhard W. Sennewald, Ph.D. Director 71 1994
Michael Nobel, Ph.D. Independent Director 67 1998
Douglas P. Boyd, Ph.D. Independent Director 65 2005
Steven G. Stewart, CPA Independent Director and 59 2006
Financial Expert
Nominees for Election to the Board of Directors
Paul F. Turner, MSEE, has served as a director of BSD since 1994 and
currently serves as Chairman of the Board of Directors. Mr. Turner also has
served as the Senior Vice President and Chief Technology Officer of BSD since
August 1999. From October 1995 to August 1999, Mr. Turner served as the Acting
President of BSD. From 1986 to October 1995, Mr. Turner served in various
capacities with BSD, including Staff Scientist, Senior Scientist, Vice President
4
of Research, and Senior Vice President of Research. Mr. Turner has led the
design of microwave treatment systems for tumors, including the development of
external phased array antenna technology to focus radiated microwave energy deep
into the central area of the body to treat deep tumors. He has also integrated
this technology with magnetic resonance imaging to non-invasively monitor
treatments within the patient's body.
Hyrum A. Mead, MBA, has served as President and a director of BSD since
August 1999. Previously, he served five years as Vice President of Business
Development at ZERO Enclosures, a manufacturer in the telecommunications,
computer and aerospace enclosures industry and seven years as President of
Electro Controls, a manufacturer of computer controlled power systems. Mr. Mead
began his career in marketing with IBM where he was involved with the
introduction of many new products.
Gerhard W. Sennewald, Ph.D., has served as a director of BSD since
1994. From April 1985 to the present, Dr. Sennewald has served as the President
and Chief Executive Officer of Medizin-Technik GmbH, of Munich, Germany, a firm
which is engaged in the business of distributing hyperthermia equipment and
diagnostic imaging equipment and services. In connection with his service to
Medizin-Technik GmbH, Dr. Sennewald has been BSD's key European representative
and distributor for 17 years and has been instrumental in obtaining the majority
of BSD's foreign sales. He also serves on the Board of Directors of TherMatrx,
Inc.
Michael Nobel, Ph.D., has served as a director of BSD since January
1998. From 1991 to the present, Dr. Nobel has served as the Executive Chairman
of the MRAB Group, a privately-held company that provides diagnostic imaging
services. From 1995 to the present, Dr. Nobel has served as the Chairman of the
Board of the Nobel Family Society. From 1995 to the present, he also has served
as Chairman of the American Non-Violence Project Inc., and has served as a
consultant to Unesco in Paris and the United Nations Social Affairs Division in
Geneva. Dr. Nobel participated in the introduction of magnetic resonance imaging
as European Vice President for Fonar Corp.
Douglas P. Boyd, Ph.D., has served as a director of BSD since 2005. He
currently serves as CEO of TeleSecurity Sciences, Inc., and on the Board of
Directors of Techniscan Medical Systems, Inc. He is internationally known as an
expert in radiology and computed tomography ("CT") imaging systems, and has
pioneered the development of fan-beam CT scanners, Xenon detector arrays and EBT
scanners. Dr. Boyd has been awarded 13 U.S. patents. As a former professor of
radiology at the University of California, San Francisco, he has published more
than 100 scientific papers and is a frequent speaker at universities and
symposia.
Steven G. Stewart, CPA, has served as a director of BSD since 2006. He
is currently the Chief Financial Officer for Headwaters, Inc. (a New York Stock
Exchange company). Mr. Stewart served as Headwaters' Chief Financial Officer
from July 1998 until October 2005 when he became the Treasurer and subsequently
the Director of Financial Affairs. He was re-appointed as the Chief Financial
Officer of Headwaters on September 4, 2007. Prior to joining Headwaters, Mr.
Stewart served as a business assurance partner for PricewaterhouseCoopers LLP
(formerly Coopers & Lybrand LLP), and as an audit partner with Ernst & Young
(formerly Arthur Young), including service as the Salt Lake City office Director
of High Technology and Entrepreneurial Services.
COMPOSITION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company currently consists of six
directors. Directors are elected at each annual meeting of stockholders to serve
until the next annual meeting of stockholders or until their successors are duly
elected and qualified. There are no family relationships among any of the
Company's directors, officers or key employees.
CODE OF ETHICS
We have adopted a Code of Ethics that applies to all directors,
officers and employees of BSD. Our Code of Ethics is available on our website
(www.bsdmc.com) on our investor information webpage. We intend to post
amendments to or waivers from our Code of Ethics (to the extent applicable to
our chief executive officer, principal financial officer or principal accounting
officer) on our website.
5
AFFIRMATIVE DETERMINATIONS REGARDING DIRECTOR INDEPENDENCE
The Board of Directors has determined each of the following directors
to be an "independent director" as such term is defined in Section 121A of the
Rules of the American Stock Exchange: Michael Nobel, Douglas P. Boyd and Steven
G. Stewart.
In this Proxy Statement, these three directors are referred to
individually as an "Independent Director" and collectively as the "Independent
Directors."
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During fiscal year 2007, the Company's Board of Directors met three
times and no director attended fewer than 75% of meetings of the Board or any of
the Board committees of which a director was a member. Although the Company does
not have a formal policy regarding attendance by directors at the Company's
annual meeting, it encourages directors to attend and all directors attended the
Company's last annual meeting. The Board will give consideration during the
upcoming year to establishing a formal policy so as to maximize attendance by
directors, taking into account the directors' schedules and the timing
requirements of applicable law.
The Board of Directors has formed an audit committee and a compensation
committee. A copy of the charter of our audit committee is available on our
website (www.bsdmc.com) on our investor information webpage.
The Audit Committee. The Audit Committee, which held four meetings
during fiscal year 2007, is responsible for reviewing and monitoring the
Company's financial statements and internal accounting procedures, recommending
the selection of independent auditors by the Board, evaluating the scope of the
annual audit, reviewing audit results, consulting with management and the
Company's independent auditor prior to presentation of financial statements to
stockholders and, as appropriate, initiating inquiries into aspects of the
Company's internal accounting controls and financial affairs. The Board of
Directors has adopted a written audit committee charter.
The members of the Audit Committee are Messrs., Boyd, Stewart and
Nobel. Mr. Stewart is currently serving as the audit committee chairman and
financial expert. All members of the Audit Committee are independent directors.
The Nominating Committee. The Company does not have a standing
nominating committee or nominating committee charter. Each director participates
in decisions relating to making the Company's nominations for directors. The
Board of Directors believes that, considering the size of the Company and the
Board of Directors, nominating decisions can be easily made on a case-by-case
basis and there is no need for the added formality of a nominating committee.
Based on criteria established by the American Stock Exchange relating to
director independence, Messrs. Stewart, Boyd and Nobel are the Company's only
independent directors.
The Board of Directors does not have an express policy with regard to
the consideration of any director candidates since the Board believes that it
can adequately evaluate nominees on a case-by-case basis. The Board has not
previously received any recommendations for director candidates from
stockholders, and has not adopted a formal process for considering director
candidates who may be recommended by stockholders. However, the Company's policy
is to give due consideration to any and all such candidates, and in evaluating
director nominees, the Board considers the appropriate size of the Board, the
needs of the Company, the skills and experience of its directors, and a
candidate's familiarity with the Company's industry. A stockholder may submit a
recommendation for director candidates to the Company at its corporate offices,
to the attention of Hyrum A. Mead. The Company does not pay fees to any third
parties to assist it in identifying potential nominees.
The Compensation Committee. The members of the Compensation Committee
are Messrs. Boyd, Stewart and Nobel. Mr. Boyd is currently serving as the
Compensation Committee chairman. All members of the Compensation Committee are
independent directors. The Company's Compensation Committee does not currently
have a charter. The Compensation Committee has responsibility for establishing
6
and monitoring the executive compensation programs of the Company and for making
decisions regarding the compensation of the Company's Named Executive Officers.
The agenda for meetings of the Compensation Committee is determined by the
Chairman of the Compensation Committee. The Compensation Committee sets the
compensation package of the Named Executive Officers and their annual bonus.
DIRECTOR COMPENSATION
During fiscal 2006 we revised our 1998 Director Stock Plan to provide
an annual retainer in the amount of $30,000 to each non-employee director other
than the Chair of the Audit Committee, who is to receive $35,000. Of the Annual
Retainer, $15,000 is to be paid in cash to each such director, other than the
Chairman of the Audit Committee, who is to receive $20,000 in cash. The balance
of the Annual Retainer is to be paid in the form of restricted shares of our
common stock to each non-employee director. The restricted stock has a vesting
period of six months. The retainer is payable in equal installments on March 1
and September 1 of each year in which each non-employee director continues to
serve as a member of the Board. The portion of the annual retainer that is paid
in restricted stock will be determined by reference to the fair market value of
the Company's common stock, par value $0.01 per share (the "Common Stock"). The
fair market value of the Common Stock will be determined by reference to the
average closing prices, as reported by the American Stock Exchange, of the
Common Stock for the twenty days preceding the payment dates, or the average of
the prices quoted by the market makers in the Company's Common Stock on the
payment dates, or by the Board. In addition, each non-employee director will
receive an annual stock option to purchase 30,000 shares of our Common Stock.
The options vest ratably over five years and expire in 10 years.
On September 1, 2006, our non-employee directors were issued a stock
option grant for 30,000 shares with an exercise price of $4.77 per share for
their services for fiscal 2007. In addition, for fiscal 2007, each of these
directors was paid $15,000 cash and 2,572 shares of restricted stock, other than
the Audit Committee Chairman, who received $20,000 cash and 2,572 shares of
restricted stock.
DIRECTOR COMPENSATION TABLE
The table below summarizes the compensation paid by the Company to, or
earned by, our non-employee directors for the year ended August 31, 2007.
Stock Option
Fees Earned or Awards Awards
Name (1) Paid in Cash ($) ($)(2) ($) (3) Total ($)
--------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Douglas P. Boyd 15,000 15,000 17,173 47,173
Michael Nobel 15,000 15,000 17,173 47,173
Gerhard W. Sennewald 15,000 15,000 17,173 47,173
Steven G. Stewart 20,000 15,000 17,172 52,172
(1) Paul F. Turner and Hyrum A. Mead served as directors of the Company in
fiscal year 2007, but are omitted from the Director Compensation Table
because of their status as a Named Executive Officer. No additional
remuneration was paid to Messrs. Turner and Mead for their services as
directors.
(2) The amounts shown in column (c) reflect the value of the shares of
Common Stock issued to the non-employee directors. Each of these
directors was issued 2,572 shares of Common Stock for services as a
director during fiscal year 2007.
(3) The amounts shown in column (d) reflect the dollar amount recognized
for financial statement reporting purposes with respect to non-employee
director stock options for the year ended August 31, 2007 in accordance
7
with SFAS 123(R). The grant date value under SFAS 123(R) of stock
options awarded to each of the non-employee directors in 2007 was
$86,100 (based on the grant of an option for 30,000 shares with a per
share Black-Sholes value of $2.87 per share). Assumptions used in the
calculation of these amounts are included in footnotes to the Company's
audited financial statements for the year ended August 31, 2007,
included in our Annual Report on Form 10-K. As of the end of fiscal
year 2007, each non-employee director had outstanding options for the
following number of Company shares: Douglas P. Boyd, 55,000 shares;
Michael Nobel, 105,000 shares; Gerhard W. Sennewald, 80,000 shares; and
Steven G. Stewart, 46,368 shares.
COMMUNICATIONS WITH DIRECTORS
The Company has not adopted a formal process for stockholder
communications with the Board. Nevertheless, the Company has tried to ensure
that the views of stockholders are heard by the Board or individual directors,
as applicable, and that appropriate responses are provided to stockholders in a
timely manner. The Company believes its responsiveness to stockholder
communications to the Board has been good. A stockholder may submit any
communication with directors to the Company at its corporate offices, to the
attention of Hyrum A. Mead.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE FOR THE ELECTION OF ALL THE
DIRECTOR NOMINEES LISTED ABOVE.
8
--------------------------------------------------------------------------------
PROPOSAL 2: AMENDMENT AND RESTATEMENT OF THE AMENDED AND RESTATED 1998 DIRECTOR
STOCK PLAN TO INCREASE THE NUMBER OF SHARES FROM 1,000,000 TO 1,500,000
--------------------------------------------------------------------------------
At the Annual Meeting, our stockholders will be asked to approve an
amendment and restatement to the Amended and Restated 1998 Director Stock Plan
(the "Director Stock Plan") in order to increase the number of shares of Common
Stock reserved for issuance under the Director Stock Plan from 1,000,000 to
1,500,000 shares.
The affirmative vote of the holders of a majority of the shares of
Common Stock present, in person or by proxy, and entitled to vote at the Annual
Meeting is required to amend and restate the Director Stock Plan. If the
amendment and restatement of the Director Stock Plan is not so approved, it will
not become effective.
The four directors who are not employees of the Company (the
"Non-Employee Directors") have an interest in the amendment and restatement of
the Director Stock Plan because they are eligible for awards under the Director
Stock Plan.
Introduction to Director Stock Plan
In September 1997, the Board adopted, subject to approval by the
Company's stockholders, the Director Stock Plan, reserving 1,000,000 shares of
Common Stock for issuance under the Director Stock Plan. On January 11, 2006,
the Board amended and restated, with the approval of the Company's stockholders
on February 13, 2006, the Director Stock Plan to extend the termination date for
the Director Stock Plan to August 31, 2011. The Board believes that the
availability of stock options and other incentives is an important factor in the
Company's ability to attract and retain qualified directors and to provide
incentives for them to exert their best efforts on behalf of the Company. The
affirmative vote of the holders of a majority of the shares of Common Stock
present, in person or by proxy, and entitled to vote at the meeting is required
to amend and restate the Director Stock Plan. If the amendment and restatement
of the Director Stock Plan is not so approved it will not become effective.
As of November 30, 2007, options to purchase 406,368 shares of Common
Stock were outstanding under the Director Stock Plan and no shares were
available for issuance under the Director Stock Plan. The outstanding options
had a weighted average exercise price of $4.15.
Certain provisions of the Director Stock Plan are summarized below. The
complete text of the proposed amendment and restatement of the Director Stock
Plan is attached to this Proxy Statement as Appendix A and the following summary
is qualified in its entirety by express reference to the complete text of the
proposed amendment and restatement of the Director Stock Plan.
Summary of Amendment and Restatement of the Director Stock Plan
The Board believes that the remaining number of shares of Common Stock
is not sufficient for future granting needs under the Director Stock Plan.
Accordingly, the proposed amendment and restatement of the Director Stock Plan
increases the number of shares of Common Stock authorized for issuance under the
Director Stock Plan from 1,000,000 shares to 1,500,000 shares. The Board
believes that these additional shares would result in an adequate number of
shares of Common Stock being available for grant under the Director Stock Plan.
Summary of Other Principal Provisions of the Director Stock Plan
The purpose of the Director Stock Plan is to provide for a method of
compensation for the Non-Employee Directors that will strengthen the alignment
of their financial interests with those of the Company's stockholders. The
9
following is a summary of the principal provisions of the proposed amendment and
restatement of the Director Stock Plan, a copy of which is attached to this
Proxy Statement as Appendix A, and the effect of the proposed amendment and
restatement. This summary is qualified in its entirety by express reference to
the complete text of the proposed amendment and restatement of the Director
Stock Plan.
The Director Stock Plan provides each Non-Employee Director with an
annual retainer (the "Annual Retainer") of $30,000 for Non-Employee Directors,
other than the Chair of the Audit Committee, who receives $35,000. Of the Annual
Retainer, a cash payment of $15,000 is made in arrears to each Non-Employee
Director, other than the Chair of the Audit Committee, who receives a cash
payment of $20,000, payable in equal installments on March 1 and September 1 of
each year in which each Non-Employee Director continues to serve as a member of
the Board.
The portion of the Annual Retainer not paid in cash is paid in the form
of Common Stock (the "Common Stock Payments"). The total number of shares of
Common Stock included in each Common Stock Payment will be determined by
dividing the amount of the Annual Retainer that is to be paid in Common Stock by
the fair market value of a share of Common Stock (with any resulting fractional
shares to be paid in cash). The fair market value of the Common Stock will be
determined by reference to the average closing prices, as reported by the
American Stock Exchange, of the Common Stock for the twenty days preceding the
payment dates, or the average of the prices quoted by the market makers in the
Company's Common Stock on the payment dates, or by the Board. The Common Stock
Payments will be made on March 1 and September 1 of each year.
The Director Stock Plan currently provides and, if the amendment and
restatement of the Director Stock Plan is approved, will continue to provide,
each Non-Employee Director with an annual Option to acquire shares of Common
Stock on September 1st of each year. The total number of shares of Common Stock
included in the annual Option granted to each Non-Employee Director is 30,000.
Each Option will vest in five equal and annual installments, and will expire ten
years from the date of grant. The portion of each Non-Employee Director's Option
which has vested may be exercised at the fair market value of the Common Stock
at the date the Option is granted, as calculated with respect to the Annual
Retainer. The exercise price may be paid in cash, or by exchange of the vested
and exercised portion of the Option for the number of shares of Common Stock
equal in value to the difference in the fair market value of one share of Common
Stock as of the date the Option is exercised and the fair market value of one
share of Common Stock on the date the Option is granted, multiplied by the
number of shares of Common Stock for which the Option is being exercised.
Annual grants under the Director Stock Plan may be made out of the
authorized but unissued shares of Common Stock or by transfer of shares of
Common Stock previously reacquired by the Company. The number of shares issuable
in connection with any annual grant and the aggregate number of shares remaining
available for issuance under the Director Stock Plan will be proportionately
adjusted to reflect any subdivision or combination of outstanding shares of
Common Stock. The aggregate number of shares of Common Stock which may be
granted during the term of the Director Stock Plan is currently 1,000,000.
Approval of the amendment to the Director Stock Plan would increase the
aggregate number of shares of Common Stock which may be granted during the term
of the Director Stock Plan to 1,500,000. Going forward, each Non-Employee
Director will continue to receive such annual grants and payments as long as the
director has the status of Non-Employee Director. If a Non-Employee Director no
longer serves as a director of the Company for any reason, that director will be
entitled to all unpaid portions of his or her Annual Retainer which will have
accrued on a daily basis through the date of such termination.
The Board may from time to time amend, modify, or suspend the Director
Stock Plan for the purpose of meeting or addressing any changes in legal
requirements or for any other purpose permitted by law except that (i) no
amendment or alteration shall be effective prior to approval by the Company's
stockholders to the extent such approval is then required by applicable legal
requirements and (ii) the Director Stock Plan shall not be amended more than
once every six months to the extent such limitation is required by Rule 16b-3
(or any successor provision) under the Securities Exchange Act of 1934, as then
in effect.
10
Certain Federal Income Tax Consequences
The following is a summary of the principal U.S. federal income tax
consequences generally applicable to awards under the Director Stock Plan.
Annual Retainer. A director must recognize ordinary income upon receipt
of cash pursuant to the Annual Retainer, and the Company will be entitled to a
deduction for the same amount if and to the extent that the amount satisfies
applicable rules concerning deductibility of compensation. A director must also
recognize ordinary income equal to the fair market value of the shares of Common
Stock received (determined as of the date the shares are released from escrow)
pursuant to the Annual Retainer, and the Company will be entitled to a deduction
for the same amount at the same time, subject to applicable rules regarding the
deductibility of compensation.
Options. The grant of an option should not result in any taxable income
for a director. If a special election is made pursuant to Section 83(b) of the
Internal Revenue Code upon exercise of an option, a director will recognize
ordinary income equal to the excess of the fair market value of the shares of
Common Stock acquired on the date of exercise over the exercise price, and the
Company will be entitled at that time to a tax deduction for the same amount.
For individuals subject to Section 16(b) of the Securities Exchange Act of 1934,
if the special election under Section 83(b) of the Internal Revenue Code is not
made, shares of Common Stock received pursuant to the exercise of an option may
be treated as restricted as to transferability and subject to a substantial risk
of forfeiture for a period of up to six months after the date of exercise.
Accordingly, the amount of any ordinary income recognized, and the amount of the
Company's tax deduction, may be determined as of the end of such period. The tax
consequence to a director upon a disposition of shares of Common Stock acquired
through the exercise of an option will depend on how long the shares have been
held. Except in the case of incentive stock options ("ISOs"),generally there
will be no tax consequences to the Company in connection with the disposition of
shares acquired pursuant to an option.
NEW PLAN BENEFITS
No benefits under the Director Stock Plan have been or will be
available to any Named Executive Officers, executive officers, or employees.
Under the Director Stock Plan, each Non-Employee Director who continues to serve
on the Board will automatically receive an annual grant of an option to acquire
30,000 shares of the Company's Common Stock. Each such option will vest in five
equal and annual installments, and will expire ten years from the date of grant.
In addition, Non-Employee Directors will receive $15,000, except for the Audit
Committee Chairman who will receive $20,000, and an amount of Common Stock
determined by dividing $15,000 by the fair market value of a share of Common
Stock, as described in the Director Stock Plan. Assuming a fair market value of
$5.50 per share, the closing price of our Common Stock on November 30, 2007 as
reported by the American Stock Exchange, this annual grant would amount to 2,727
shares per director. These grants are contingent upon the election of
Non-Employee Directors at the Annual Meeting and will occur at a future date.
BSD Medical Corporation Amended and Restated 1998 Director Stock Plan
Dollar Value ($)(1) Number of Units
Hyrum A. Mead - -
Dennis P. Gauger - -
Paul F. Turner - -
Executive Group - -
Non-Executive Director Group (1) 120,000 (Option)
60,000 10,909.09 (2)
(Restricted Stock)
65,000 -0- (Cash)
Non-Executive Officer Employee Group - -
11
(1) We are unable to determine the dollar value of the options to
purchase 30,000 shares that are granted annually to each
non-employee director under the Amended and Restated 1998 Director
Stock Plan.
(2) Any payment for a fractional share automatically shall be paid in
cash based upon the Fair Market Value on the date of the
respective award of such fractional share.
VALUATION OF OUR COMMON STOCK
On November 30, 2007, the closing price of the Company's Common Stock,
as reported on the American Stock Exchange, was $5.50 per share.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS
OF THE COMPANY VOTE FOR THE AMENDMENT AND RESTATEMENT
OF THE DIRECTOR STOCK PLAN.
12
--------------------------------------------------------------------------------
(PROPOSALS 3-5) AMENDMENT AND RESTATEMENT OF THE COMPANY'S AMENDED AND RESTATED
1998 STOCK INCENTIVE PLAN TO:
PROPOSAL 3: INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE
UNDER THE PLAN FROM 2,677,300 SHARES TO 3,427,300 SHARES;
PROPOSAL 4: TO INCREASE THE NUMBER OF SHARES THAT MAY BE AWARDED TO EACH
PARTICIPANT; AND
PROPOSAL 5:TO EXTEND THE TERMINATION DATE OF THE PLAN FROM FEBRUARY 9, 2008 TO
ten years from the date the plan is adopted by the Board of Directors, or the
date the plan is approved by the shareholders, whichever is earlier, subject to
earlier termination by the Board of Directors.
--------------------------------------------------------------------------------
At the Annual Meeting, our stockholders will be asked to approve an
amendment and restatement of the Company's Amended and Restated 1998 Stock
Incentive Plan (the "Incentive Plan") to increase the number of shares of Common
Stock reserved for issuance under the Incentive Plan from 2,677,300 shares to
3,427,300 shares, to increase the number of shares that may be awarded to each
participant and to extend the termination date of the Incentive Plan from
February 9, 2008 to ten years from the date the plan is adopted by the Board of
Directors, or the date the plan is approved by the shareholders, whichever is
earlier, subject to earlier termination by the Board of Directors.
The affirmative vote of the holders of a majority of the shares of
Common Stock present, in person or by proxy, and entitled to vote at the Annual
Meeting is required to amend and restate the Incentive Plan. If the amendment
and restatement of the Incentive Plan is not so approved, it will not become
effective.
The Company's directors and executive officers have an interest in the
amendment and restatement of the Incentive Plan because they are eligible for
awards under the Incentive Plan.
Introduction to Incentive Plan
In December 1997, the Board adopted, subject to approval by the
Company's stockholders, the Incentive Plan, reserving 2,000,000 shares of Common
Stock for issuance under the Incentive Plan and providing that the Incentive
Plan would terminate on February 9, 2008. On July 29, 2004, the Board amended
and restated, subject to approval by the Company's stockholders, the Incentive
Plan to reserve 2,677,300 shares of Common Stock for issuance under the
Incentive Plan. The Board believes that the availability of stock options and
other incentives is an important factor in the Company's ability to attract and
retain qualified employees and to provide incentives for them to exert their
best efforts on behalf of the Company. The affirmative vote of the holders of a
majority of the shares of Common Stock present, in person or by proxy, and
entitled to vote at the meeting is required to amend the Incentive Plan. If the
amendment to the Incentive Plan is not so approved it will not become effective.
As of November 30, 2007, options to purchase 1,509,485 shares of Common
Stock were outstanding under the Incentive Plan and 549,732 were available for
issuance under the Incentive Plan. The outstanding options had a weighted
average exercise price of $2.15.
Certain provisions of the Incentive Plan are summarized below. The
complete text of the Incentive Plan is attached to this Proxy Statement as
Appendix B and the following summary is qualified in its entirety by express
reference to the complete text of the Incentive Plan.
Summary of Amendment and Restatement of the Incentive Plan
13
The Board believes that the remaining number of shares of Common Stock
is not sufficient for future granting needs under the Incentive Plan.
Accordingly, the proposed amendment and restatement of the Incentive Plan
increases the number of shares of Common Stock authorized for issuance under the
Incentive Plan from 2,677,300 to 3,427,300 shares. The Board believes that these
additional shares would result in an adequate number of shares of Common Stock
being available for grant under the Incentive Plan.
The Board believes that certain limitations on the size of awards that
may be granted to an individual under the Incentive Plan currently allow for
awards that may be inadequate to attract and retain qualified employees and to
provide incentives for them to exert their best efforts on behalf of the
Company. Accordingly, the proposed amendment and restatement of the Incentive
Plan raises these limits to a level the Board believes is appropriate. Pursuant
to the proposed amendment and restatement of the Incentive Plan, no one
participant in the Amended and Restated Incentive Plan may be granted (i)
options or stock appreciation rights during any consecutive three-year period
with respect to more than 1,000,000 shares, (ii) more than 1,000,000 Shares (as
defined in the Second Amended and Restated Incentive Plan), or (iii)
Performance-based Awards (as defined in the Second Amended and Restated
Incentive Plan) in any period that are intended to comply with the
performance-based exception under Section 162(m) of the Internal Revenue Code
and are denominated in shares with respect to more than 1,000,000 shares or are
denominated in dollars in excess of $5,000,000.
The Incentive Plan is set to terminate as of February 9, 2008. The
amendment and restatement extends the termination date to ten years from the
date the plan is adopted by the Board of Directors, or the date the plan is
approved by the shareholders, whichever is earlier, subject to earlier
termination by the Board of Directors. The Board believes that the availability
of stock options and other incentives is an important factor in the Company's
ability to attract and retain qualified employees and to provide incentives for
them to exert their best efforts on behalf of the Company. The Board believes
this extension would allow the Company to continue this incentive program.
Summary of Other Principal Provisions of the Incentive Plan
All employees, officers and directors of the Company and its
subsidiaries are eligible to participate in the Incentive Plan. Also eligible
are non-employee agents, consultants, advisors and independent contractors of
the Company or any subsidiary. The Company has approximately 46 employees,
officers and directors eligible to participate in the Incentive Plan.
The Incentive Plan is administered by the Board, which designates from
time to time the individuals to whom awards are made under the Incentive Plan,
the amount of any such award and the price and other terms and conditions of any
such award. The Board may delegate any or all authority for administration of
the Incentive Plan to a committee of the Board. Subject to the provisions of the
Incentive Plan, the Board, or a committee, if any, may adopt and amend rules and
regulations relating to the administration of the Incentive Plan. Only the Board
may amend, modify or terminate the Incentive Plan.
Types of Awards
The Incentive Plan permits the grants of incentive stock options,
nonstatutory stock options, stock awards, stock appreciation rights, cash bonus
rights, dividend equivalent rights, performance-based awards and foreign
qualified grants. The total number of shares of Common Stock reserved for
issuance under the Incentive Plan is currently 2,677,300. Shares awarded under
the Incentive Plan may be authorized and unissued shares or shares acquired in
the market. If any award granted under the Incentive Plan expires, terminates or
is cancelled, or if shares sold or awarded under the Incentive Plan are
forfeited to the Company or repurchased by the Company, the shares again become
available for issuance under the Incentive Plan.
The Board determines the persons to whom options are granted, the
option price, the number of shares to be covered by each option, the period of
each option, the times at which options may be exercised and whether the option
is an incentive stock option ("ISO"), as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or a non-statutory stock option
("NSO"). Currently, no employee may be granted options or stock appreciation
14
rights under the Incentive Plan for more than an aggregate of 400,000 shares in
any consecutive three-year period and under the proposed amendment and
restatement of the Incentive Plan may not exceed 1,000,000 shares in such
period. No monetary consideration is paid to the Company upon the granting of
options.
Options are exercisable in accordance with the terms of an option
agreement entered into at the time of grant. If the option is an ISO, all terms
must be consistent with the requirements of the Code and applicable regulations,
including that the option price cannot be less than the fair market value of the
shares of Common Stock on the date of the grant. If the option is an NSO, the
option price may be any price determined by the Board, which may be less than
the fair market value of the shares of Common Stock on the date of grant. Upon
the exercise of an option, the number of shares subject to the option is reduced
by the number of shares with respect to which the option is exercised, and the
number of shares available under the Incentive Plan for future option grants are
reduced by the number of shares with respect to which the option is exercised,
less the number of shares surrendered or withheld in connection with the
exercise of the option and the number of shares surrendered or withheld to
satisfy withholding obligations.
The Board may award shares of Common Stock under the Incentive Plan as
stock bonuses, restricted stock awards or otherwise. The Board determines the
persons to receive awards, the number of shares to be awarded and the time of
the award. Shares received as a stock bonus are subject to the terms, conditions
and restrictions determined by the Board at the time the bonus is awarded. The
aggregate number of shares that may be awarded to any one person pursuant to
stock awards under the Incentive Plan currently may not exceed 100,000 shares
and under the proposed amendment and restatement of the Incentive Plan may not
exceed 1,000,000 shares. No stock awards have been granted under the Incentive
Plan.
The Incentive Plan provides that the Company may issue shares under the
Incentive Plan subject to a purchase agreement between the Company and the
prospective recipient in such amounts, for such consideration, subject to such
restrictions and on such terms as the Board may determine.
Stock appreciation rights ("SARs") may be granted under the Incentive
Plan. SARs may, but need not, be granted in connection with an option grant or
an outstanding option previously granted under the Incentive Plan. A SAR gives
the holder the right to payment from the Company of an amount equal in value to
the excess of the fair market value on the date of exercise of a share of Common
Stock over its fair market value on the date of grant or, if granted in
connection with an option, the option price per share under the option to which
the SAR relates.
A SAR is exercisable only at the time or times established by the
Board. If a SAR is granted in connection with an option, it is exercisable only
to the extent and on the same conditions that the related option is exercisable.
Payment by the Company upon exercise of a SAR may be made in shares of
Common Stock valued at its fair market value, in cash, or partly in stock and
partly in cash, as determined by the Board. The Board may withdraw any SAR
granted under the Incentive Plan at any time and may impose any condition upon
the exercise of a SAR or adopt rules and regulations from time to time affecting
the rights of holders of SARs. No SARs have been granted under the Incentive
Plan.
The Board may grant cash bonus rights under the Incentive Plan in
connection with (i) options granted or previously granted, (ii) SARs granted or
previously granted, (iii) stock awarded or previously awarded, and (iv) shares
sold or previously sold under the Incentive Plan. Bonus rights may be used to
provide cash to employees for the payment of taxes in connection with awards
under the Incentive Plan. No cash bonus rights have been granted under the
Incentive Plan.
The Board may grant awards intended to qualify as performance-based
compensation under Section 162(m) of the Code and the regulations thereunder
("Performance-based Awards"). Performance-based Awards may be denominated either
in shares of Common Stock or in dollar amounts. All or part of the awards will
be earned if performance goals established by the Board for the period covered
by the awards are met and the employee satisfies any other restrictions
established by the Board. The performance goals will be expressed as one or more
targeted levels of performance with respect to the Company or any subsidiary,
division or other unit of the Company: earnings, earnings per share, stock price
increase, total stockholder return (stock price increase plus dividends), return
on equity, return on assets, return on capital, economic value added, revenues,
15
operating income, cash flows or any of the foregoing. Currently, no participant
may receive Performance-based Awards denominated in Common Stock in any fiscal
year with respect to which the maximum number of shares issuable under the
award, when aggregated with the shares issuable under any awards made in the
preceding two fiscal years, exceeds 150,000 shares of Common Stock or
Performance-based Awards denominated in dollars under which the maximum amount
of cash payable under awards made in the immediately preceding two fiscal years,
exceeds an aggregate of $300,000. Under the proposed amendment and restatement
of the Incentive Plan, these limits are increased to 1,000,000 shares and
$5,000,000, respectively. No Performance-based Awards have been granted under
the Incentive Plan.
Awards under the Incentive Plan may be granted to eligible persons
residing in foreign jurisdictions. The Board may adopt supplements to the
Incentive Plan necessary to comply with the applicable laws of foreign
jurisdictions and to afford participants favorable treatment under those laws,
but no award may be granted under any supplement with terms that are more
beneficial to the participants than the terms permitted by the Incentive Plan.
No foreign qualified grants have been awarded under the Incentive Plan.
Changes in Capital Structure
The Incentive Plan provides that if the number of outstanding shares of
Common Stock is increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company or of
another corporation by reason of any recapitalization, stock split or similar
transaction, appropriate adjustment will be made by the Board in the number and
kind of shares available for awards under the Incentive Plan. In the event of a
merger, consolidation or plan of exchange to which the Company is a party or a
sale of all or substantially all of the Company's assets (each a "Transaction"),
the Board will, in its sole discretion and to the extent possible under the
structure of the Transaction, select one of the following alternatives for
treating outstanding options under the Incentive Plan: (i) outstanding options
will remain in effect in accordance with their terms, (ii) outstanding options
shall be converted into options to purchase stock in the corporation that is the
surviving or acquiring corporation in the Transaction, or (iii) the Board will
provide a 30-day period prior to the consummation of the Transaction during
which outstanding options shall be exercisable to the extent exercisable and
upon the expiration of such 30-day period, all unexercised options shall
immediately terminate. The Board may, in its sole discretion, accelerate the
exercisability of options so that they are exercisable in full during such
30-day period. In the event of the dissolution of the Company, options shall be
treated in accordance with clause (iii) above.
Certain Federal Income Tax Consequences
The following is a brief summary of the certain U.S. federal income tax
consequences generally applicable to awards under the Incentive Plan.
This summary is for general information purposes only and does not
purport to be a complete analysis or listing of all potential U.S. federal
income tax consequences that may apply with respect to participation in the
Incentive Plan. In addition, this summary does not take into account the
individual facts and circumstances of any particular recipant that may affect
the U.S. federal income tax consequences of participation in the Incentive Plan.
Accordingly, this summary is not intended to be, and should not be construed as,
legal or U.S. federal income tax advice with respect to any recipient. Each
recipient should consult his or her own financial advisor, legal counsel, or
accountant regarding the U.S. federal, U.S. state and local, and foreign tax
consequences of participation in the Incentive Plan.
Scope of This Disclosure
Authorities. This summary is based on the Internal Revenue Code of
1986, as amended (the "Code"), Treasury Regulations, published Internal Revenue
Service ("IRS") rulings, published administrative positions of the IRS and U.S.
court decisions that are applicable as of the date of this document. Any of the
authorities on which this summary is based could be changed in a material and
adverse manner at any time, and any such change could be applied on a
retroactive basis. This summary does not discuss the potential effects, whether
adverse or beneficial, of any proposed legislation that, if enacted, could be
applied on a retroactive basis.
Grant and Exercise of Options
16
Incentive Stock Options
-----------------------
If the options granted under the Plan qualify as "incentive stock
options" within the meaning of Section 422 of the Code, the following tax
consequences will apply to recipients:
o Grant. A recipient will not recognize any taxable income at the
time an incentive stock option is granted.
o Exercise. Upon the exercise of an incentive stock option, a
recipient will not recognize any income for purposes of the
regular income tax. However, a recipient may be required to
recognize income for purposes of the alternative minimum tax (or
"AMT").
For purposes of the AMT, an incentive stock option will be treated
as a non-qualified option. Accordingly, for purposes of the AMT, a
recipient must recognize ordinary income in the amount by which
the fair market value of the common stock at the time of exercise
exceeds the option exercise price. As a result, if a recipient
recognizes a substantial amount of AMT income upon exercise of the
incentive stock option in relation to a recipient's taxable income
from wages and other sources in the year a recipient exercises the
option, a recipient may be subject to the AMT. Furthermore, the
fact that a recipient recognizes AMT income at the time a
recipient exercise an incentive stock option may not alter the
amount of regular income a recipient must recognize at the time a
recipient sells or otherwise disposes of the shares acquired upon
exercise of the incentive stock option.
A recipient is urged to consult his or her own tax advisor
regarding the effect of the AMT and the desirability of selling or
otherwise disposing of shares acquired upon exercise of an
incentive stock option in the same calendar year in which such
recipient acquired the shares to avoid having the AMT apply in the
year a recipient exercises the option and the regular tax apply in
the year the shares are sold. A recipient is also urged to consult
his or her own tax advisor regarding the benefit that may be
available from a tax credit for a prior year's minimum tax
liability provided for in Section 53 of the Internal Revenue Code.
o Tax Deduction for Company. If a recipient sells or otherwise
dispose of shares acquired upon the exercise of an incentive stock
option more than two years from the date the option was granted to
such recipient and more than one year after he or she exercised
the option, then the Company will not be allowed a deduction for
federal income tax purposes in connection with the grant or
exercise of the option. However, if a recipient sells or otherwise
disposes of the shares before the holding period described above
is satisfied, then the Company will be allowed a tax deduction at
the time and in the amount the recipient recognizes ordinary
income, if and to the extent the amount satisfies the general
rules concerning deductibility of compensation. Under current law,
this income is not subject to income or payroll tax withholding.
o Tax Basis of the Acquired Shares. If a recipient pays the exercise
price for an incentive stock option in cash, his or her original
tax basis in the shares received upon exercise will equal the
option exercise price.
If a recipient pays the exercise price for an incentive stock
option by tendering other shares of the Company's common stock
already owned by a recipient, and the recipient acquired those
tendered shares through any means other than by exercising one or
more incentive stock options, he or she will not recognize gain or
loss on the tendered shares, but the recipient's original tax
basis for an equal number of shares acquired upon exercise of the
option will be the same as his or her adjusted tax basis for the
tendered shares. The remaining acquired shares will have an
original tax basis equal to the amount of the exercise price paid
in cash, if any. If a recipient pays the exercise price solely by
tendering other shares of the Company's stock, then the original
tax basis of the remaining acquired shares will be zero.
17
If a recipient pays the exercise price for an incentive stock
option by tendering shares of the Company's common stock already
owned by a recipient, and the recipient acquired those tendered
shares by exercising another incentive stock option, Section 1036
of the Internal Revenue Code generally provides that such
recipient will recognize no gain or loss with respect to the
tendered shares (except possibly for purposes of the AMT as
described above), as long as he or she has held the tendered
shares for a period of time ending at least two years after the
date the option for the tendered shares was granted and at least
one year after a acquiring the tendered shares upon exercise of
the option.
o Sale of Shares and Characterization of Capital Gain or Loss. If a
recipient sells or otherwise disposes of shares acquired upon
exercise of an incentive stock option at a time more than two
years from the date the option was granted to such recipient and
more than one year after the recipient exercised the option, and
if, as usually is the case, the common stock is a capital asset in
such recipient's hands, then the recipient will recognize
long-term capital gain or loss in an amount equal to the
difference between the sale price of the shares and the exercise
price he or she paid for the shares.
o If a recipients sells or otherwise disposes of shares acquired
upon exercise of an incentive stock option before the holding
period described above is satisfied, then such recipient will
recognize ordinary income at the time of the disposition in an
amount equal to the lesser of (1) the difference between the
exercise price and the fair market value of the shares at the time
the option was exercised or (2) the difference between the
exercise price and the amount realized upon disposition of the
shares, and such recipient will recognize long-term or short-term
capital gain or loss (depending on whether he or she has held the
shares for more than 12 months or for 12 months or less) in an
amount equal to the difference between the sale price of the
shares and the fair market value of the shares on the date such
recipient exercised the option.
Non-Qualified Stock Options
---------------------------
If the options granted under the Incentive Plan do not qualify as
"incentive stock options" within the meaning of Section 422 of the Code, they
will be treated as "non-qualified" stock options (an "NQO") with the following
tax consequences to recipients:
o Grant. A recipient will not recognize any taxable income upon the
grant of an NQO.
o Exercise. Upon the exercise of an NQO, a recipient will recognize
ordinary income in the amount, if any, by which (a) the fair
market value of the Common Shares at the time of exercise exceeds
(b) the exercise price for the NQO. The Compoany generally will be
required to report this income to the IRS and to withhold income
and payroll taxes.
o Tax Basis in the Common Shares. If a recipient pays the exercise
price for an NQO in cash, the tax basis in the Common Shares
received generally will be equal to the sum of (a) such exercise
price plus (b) the amount that such U.S. Participant is required
to recognize as ordinary income as a result of the exercise of
such NQO. A recipient who pays the exercise price for an NQO in
property other than cash (including Common Shares) should consult
his or her own financial advisor, legal counsel, or accountant
regarding his or her tax basis in the Common Shares.
o Tax Deduction for our Company. The Company generally will be
allowed a deduction at the time and in the amount that such
recipient recognizes ordinary income upon exercise of an NQO,
subject to the general rules concerning deductibility of
compensation and the special rules applicable to foreign
corporations.
Stock Appreciation Rights
Grant. At the time a SAR is granted, a recipient will not recognize any
taxable income.
18
Exercise. At the time a recipient exercises a SAR, he/she will
recognize ordinary income equal to the cash or fair market value
of any shares of common stock received at that time (in the amount
that is equal to the excess of the fair market value of a share of
the Company's common stock on the date the SAR is exercised over
the grant price of the SAR).
Tax Deduction for Ensign. Subject to the general rules concerning
deductibility of compensation, the Company will be allowed an
income tax deduction in the amount that, and for the Company's
taxable year in which a recipient recognizes ordinary income upon
the exercise of a SAR.
Tax Basis of the Acquired Shares. A recipient's tax basis in any
shares received will equal the fair market value of those shares
at the time he or she recognizes ordinary income as a result of
exercising the SAR.
Sale of Shares. If, as usually is the case, the shares are a capital
asset in a recipient's hands, any additional gain or loss
recognized on a subsequent sale or exchange of the shares will not
be ordinary income but will qualify as a capital gain or loss.
Characterization of Capital Gain or Loss. Any capital gain or loss a
recipient recognizes upon a sale of the shares will be
characterized as long-term capital gain or loss if he or she has
held the shares for more than 12 months and as short-term capital
gain or loss if he or she has held the stock for 12 months or
less. For purposes of determining whether a recipient will
recognize long-term or short-term capital gain or loss on a
subsequent sale of the shares, the holding period will begin at
the time a recipient exercises the SAR.
Restricted Stock Awards
Grant and Lapse of Restrictions. Section 83(b) of the Internal Revenue
Code allows a recipient to elect, within 30 days after the date a
restricted stock award is received, to recognize and be taxed on
ordinary income equal to the fair market value of the common stock
at that time. If a recipient does not make a Section 83(b)
election within 30 days from the date you the restricted stock
award is received, he or she will recognize ordinary income equal
to the fair market value of the common stock upon expiration of
the restriction period.
Forfeiture. If a recipient does not make the Section 83(b) election
described above and, before the restriction period expires, he or
she forfeits the restricted stock under the terms of the award,
such recipient will not recognize any ordinary income in
connection with the restricted stock award. If a recipient does
make a Section 83(b) election and subsequently forfeits the
restricted stock under the terms of the award, he or she will not
be allowed an ordinary income tax deduction with respect to the
forfeiture. However, such recipeint may be entitled to a capital
loss.
The Company urges each recipient to consult a tax advisor to
determine, in light of current tax rates and possible future tax
legislation, whether it is more advantageous to make a Section
83(b) election upon receipt of a restricted stock award (resulting
in a current tax liability plus the potential for future capital
gains, currently taxed at lower rates than the rate applicable to
ordinary income, and a risk of forfeiture without an ordinary
income tax deduction) than not making the Section 83(b) election
(resulting in the deferral of tax and the eventual recognition as
ordinary income of any appreciation in the fair market value of a
recipient's shares).
Dividends Received on Restricted Stock. Dividends, if any, received by
a recipient before the end of the restriction period will be taxed
as ordinary income to you.
Tax Deduction for the Company. Subject to the general rules concerning
deductibility of compensation, the Company will be allowed an
income tax deduction in the amount that, and for its taxable year
in which, a recipient recognizes ordinary income in connection
with a restricted stock award. Dividends, if any, on the
19
restricted stock that are received by a recipient before the end
of the restriction period will also be deductible by the Company
subject to the general rules concerning compensation.
Tax Basis of Shares. A recipient's basis in the shares will equal
their fair market value at the time you recognize ordinary income.
Sale of Shares. A recipient cannot sell or otherwise dispose of the
restricted stock until after the restriction period expires. When
a recipient sells the shares after the restriction period expires,
he or she will recognize gain or loss in an amount by which the
sale price of the shares differs from his or her tax basis in the
shares. If, as usually is the case, the shares are a capital asset
in a recipient's hands, any gain or loss recognized on a sale or
other disposition of the shares will qualify as capital gain or
loss.
Characterization of Capital Gain or Loss. Any capital gain or loss a
recipient recognizes upon sale of the shares will be treated as
long-term capital gain or loss if he or she has held the shares
for more than 12 months from the date he or she recognized
ordinary income with respect to the shares and as short-term
capital gain or loss if he or she has held the stock for 12 months
or less from the date such recipient recognized ordinary income.
Performance Awards and Other Stock-Based Awards
The Incentive Plan also authorizes performance awards and other
stock-based awards, the terms of which are not specified in the Plan. The
federal income tax consequences to recipients and to the Company upon the grant
and exercise of the performance awards and other stock-based awards will depend
on the terms of such awards.
Special Rules for Executive Officers and Directors Subject to Section 16(b)
If a recipient is an executive officer or director of the Company
subject to Section 16(b) of the Securities Exchange Act of 1934, any shares
acquired upon exercise or payout of a non-qualified option, an incentive stock
option (for purposes of the AMT only), a SAR or a restricted stock unit, and any
shares of restricted stock that vest, may be treated as restricted property for
purposes of Section 83 of the Internal Revenue Code if a recipient has had a
non-exempt acquisition of shares of Company stock within the six months prior to
the exercise, payout or vesting. In that case, the recipient may be deemed to
have acquired the shares at a date up to six months after the date the award was
exercised or paid out or vested, and such recipient will recognize (and be taxed
on) ordinary income as of the later date, rather than as of the date of
exercise, payout or vesting.
However, Section 83(b) of the Internal Revenue Code allows a recipient
to elect to recognize ordinary income as of the date of exercise, payout or
vesting, without regard to Section 16(b) restrictions. The recipient must make
the election in the manner specified in Section 83(b) within 30 days after the
date the recipient exercises the option or SAR or the date of payout or vesting,
as applicable. If (1) the shares a recipient acquired upon the exercise, payout
or vesting of the award are treated as restricted property for purposes of
Section 83 of the Internal Revenue Code because of the application of Section
16(b) of the Securities Exchange Act of 1934 and (2) a recieint does not make a
Section 83(b) election within the required time period, the amount of taxable
ordinary income will be determined as follows:
For non-qualified options (and incentive stock options treated as
non-qualified options for purposes of the AMT), a recipient will
recognize and be taxed on ordinary income in the amount by which
the fair market value of the shares at the later date exceeds the
exercise price, rather than recognizing, and being taxed on,
ordinary income in the amount by which the fair market value of
the shares on the exercise date exceeds the exercise price.
For a SAR, a recipient will recognize and be taxed on ordinary income
in the amount of the fair market value of the shares of common
stock at the later date, rather than recognizing, and being taxed
on, ordinary income in the amount of the fair market value of the
shares as of the date the recipient exercised the SAR.
20
For restricted stock, a recipient will recognize and be taxed on
ordinary income in the amount of the fair market value of the
shares of common stock at the later date, rather than recognizing,
and being taxed on, ordinary income in the amount of the fair
market value of the shares on the date the restricted stock
vested.
The Company urges each recipient to consult his or her own tax advisor
for more details about these special rules and to help determine if he or she
should make a Section 83(b) election.
Deductibility of Executive Compensation Under Code Section 162(m).
Section 162(m) of the Code generally limits to $1,000,000 the amount that a
publicly-held corporation is allowed each year to deduct for the compensation
paid to each of the corporation's principal executive officer and three most
highly compensated officers (other than our principal financial officer).
However, "qualified performance-based compensation" is not subject to the
$1,000,000 deduction limit. In general, to qualify as performance-based
compensation, the following requirements need to be satisfied: (1) payments must
be computed on the basis of an objective, performance-based compensation
standard determined by a committee consisting solely of two or more "outside
directors," (2) the material terms under which the compensation is to be paid,
including the business criteria upon which the performance goals are based, and
a limit on the maximum bonus amount which may be paid to any participant with
respect to any performance period, must be approved by a majority of the
corporation's stockholders and (3) the committee must certify that the
applicable performance goals were satisfied before payment of any
performance-based compensation.
The Incentive Plan has been designed to permit grants of options, SARs
and other performance-based awards issued under the Incentive Plan to qualify
under the performance-based compensation rules so that income attributable to
the exercise of a NSO or a SAR or the receipt of other performance-based awards
may be exempt from the $1,000,000 deduction limit. Other awards under the
Incentive Plan may not so qualify for this exemption. The Incentive Plan's
provisions are consistent in form with the performance-based compensation rules,
so that if the committee that grants options, SARs and other performance-based
awards consists exclusively of members of the Board who qualify as "outside
directors," and the exercise price of the options (or deemed exercise price,
with respect to SARs) is not less than the fair market value of the shares of
Common Stock to which such grants relate, the compensation income arising on
exercise of those options or SARs or on receipt of other performance-based
awards should qualify as performance-based compensation which is deductible even
if that income would be in excess of the otherwise applicable limits on
deductible compensation income under Code Section 162(m).
NEW PLAN BENEFITS
It is not possible to currently determine the exact number of options
to be granted in the future under the Incentive Plan to our Named Executive
Officers, to all executive officers as a group, to all non-executive directors
as a group or to all employees as a group. During fiscal year 2007, no options
were granted to the Named Executive Officers. On December 19, 2007, we granted
36,000 stock options to each of Mr. Mead and Mr. Turner, which vest ratably over
three years. We do not, however, have any specific current plans or commitments
for awards under the Incentive Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF
THE COMPANY VOTE FOR THE AMENDMENT AND RESTATEMENT OF THE INCENTIVE PLAN.
--------------------------------------------------------------------------------
PROPOSAL 6: RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
--------------------------------------------------------------------------------
The Company is asking the stockholders to ratify the selection of
Tanner LC as the Company's independent registered public accountants for the
fiscal year ending August 31, 2008. The affirmative vote of the holders of a
21
majority of the shares of Common Stock present, in person or by proxy, and
entitled to vote at the meeting will be required to ratify the selection of
Tanner LC.
In the event the stockholders fail to ratify the appointment, the Audit
Committee of the Board of Directors will consider it as a direction to select
other auditors for the subsequent year. Even if the selection is ratified, the
Board or Audit Committee in their discretion may direct the appointment of a
different independent registered public accounting firm at any time during the
year if the Board determines that such change would be in the best interest of
the Company and its stockholders.
Tanner LC audited the Company's financial statements for fiscal years
ending August 31, 2007 and 2006. Its representatives will be present at the
annual meeting, and will have the opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
Principal Accountant Fees and Services
The following table presents fees for professional services rendered by
Tanner LC for the audit of our annual financial statements for the fiscal years
ended August 31, 2007 and August 31, 2006 and fees billed for other services
rendered by Tanner LC during those periods.
2007 2006
Audit Fees(1) $ 126,000 $ 75,500
Audit-Related Fees(2) 5,900 6,265
---------------- ---------------
Total $ 131,900 $ 81,765
================ ===============
-------------------------
(1) Audit Fees consist of fees billed for the annual audits and quarterly
reviews.
(2) Audit-Related Fees consist of fees billed for various SEC filings and
accounting research.
PRE-APPROVAL POLICIES
The Audit Committee pre-approved all audit, audit-related and non-audit
services performed by our independent auditors and subsequently reviewed the
actual fees and expenses paid to Tanner LC. The Audit Committee has determined
that the fees paid to Tanner LC for services are compatible with maintaining
Tanner LC's independence as our auditors.
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the Company's audited
financial statements with its management and has discussed with the Company's
independent registered public accountant the matters to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
The Audit Committee has received the written disclosures and the letter
from the Company's independent registered public accountant required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committee) and has discussed with the Company's independent registered public
accountant the independent registered public accountant's independence.
Based on its review, the Audit Committee recommended to the Board of
Directors that the audited financial statements for the Company's fiscal year
ended August 31, 2007 be included in the Company's Annual Report on Form 10-K
for its fiscal year ended August 31, 2007, which was filed on November 14, 2007.
Submitted by:
Douglas P. Boyd
Steven G. Stewart
Michael Nobel
Members of the Audit Committee
22
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY
THE SELECTION OF TANNER LC TO SERVE AS THE COMPANY'S INDEPENDENT
REGISTERED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING AUGUST 31, 2008.
EXECUTIVE OFFICERS
The names of the Company's executive officers, their ages and their
respective business backgrounds are set forth below as of August 31, 2007. For
information regarding the backgrounds of Hyrum A. Mead and Paul F. Turner,
please see their biographical descriptions above under Proposal 1 regarding the
election of directors. There are no family relationships among any of the
Company's directors, officers or key employees.
Name Age Position
---- --- --------
Hyrum A. Mead, MBA 60 President and Director
Dennis P. Gauger, CPA 55 Chief Financial Officer
Paul F. Turner, MSEE 60 Senior Vice President, Chief Technology
Officer and Chairman of the Board
Dennis P. Gauger, CPA, has served as Chief Financial Officer since May
2007. Mr. Gauger is a licensed Certified Public Accountant in Utah and Nevada,
and serves on a part-time, contract basis. Mr. Gauger has served or currently
serves other publicly held companies as a part-time, contract chief financial
officer, including the following: since January 2004, Mr. Gauger has served as a
director, Chief Financial Officer, and Secretary for Groen Brothers Aviation,
Inc., a publicly held aviation company (GNBA - OTCBB); since April 2004, Mr.
Gauger has served as a Chief Financial Officer for Cimetrix Incorporated, a
publicly held software company (CMXX.OB - NASD OTC); since December 2006, Mr.
Gauger has served as a Chief Financial Officer for Golden Phoenix Minerals, Inc.
a publicly held mining company (GPXM.OB - NASD OTC); and from November 2001
until March 2007, Mr. Gauger served as a Chief Financial Officer for Nevada
Chemicals, Inc., a chemical supply company to the gold mining industry
(NCEM-NNM). Additionally, over the past eight years, he has served several
public and private companies in a variety of industries as a part-time, contract
financial executive and consultant. Previously, Mr. Gauger worked for Deloitte
& Touche LLP, an international accounting and consulting firm, for 22 years,
including 9 years as an accounting and auditing partner. He is a member of the
American Institute of Certified Public Accountants and the Utah Association of
Certified Public Accountants.
SIGNIFICANT EMPLOYEES
In addition to the officers and directors identified above, the Company
expects the following individuals to make significant contributions to the
Company's business during fiscal 2008:
Name Age Position
---- --- --------
Brian L. Ferrand 52 Vice President of Sales
Dixie Toolson Sells 57 Vice President of Regulatory Affairs
Richard A. White 52 Vice President of International Sales
Brian L. Ferrand, joined BSD Medical as Vice President of Sales in
October 2005. From October 2004 to October 2005, Mr. Ferrand worked as an
independent consultant. Previously, Mr. Ferrand served as Vice President of
Sales and as a corporate officer of Merit Medical Systems, Inc. from 1993 until
October 2004. At Merit Medical Systems, Mr. Ferrand also served as Director of
Sales from 1992 to 1993 and as a National Sales Manager from 1991 to 1992. Merit
Medical Systems (a NASDAQ company), is a leading manufacturer and marketer of
products used in diagnostic and interventional cardiology and radiology
procedures worldwide.
Dixie Toolson Sells has served as Vice President of Regulatory Affairs
of BSD since December 1994. Ms. Sells served as Administrative Director of BSD
from 1978 to 1984; as Director of Regulatory Affairs from 1984 to September
1987; and as Vice President of Regulatory Affairs from September 1987 to October
1993. In October 1993, Ms. Sells resigned as Vice President of Regulatory
Affairs, and she served as Director of Regulatory Affairs from October 1993 to
December 1994. In December 1994, Ms. Sells was re-appointed as Vice President of
Regulatory Affairs and was appointed as Corporate Secretary by the Board of
Directors. Ms. Sells also serves on the Board of Directors of the Intermountain
Biomedical Association. Ms. Sells resigned as Corporate Secretary of BSD in
March 2002.
Richard A. White, joined BSD Medical in 2004, and serves as Vice
President of International Sales for the company. Mr. White has been deeply
involved in international sales since obtaining his degree in international
business at The Garvin School of International Management "Thunderbird" in 1980.
He has played a key role in the founding of new companies, has led a national
sales organization selling large capital equipment in power control systems and
served as International Sales Manager for Merit Medical Systems (a NASDAQ
23
company), which is a leading manufacturer and marketer of products used in
diagnostic and interventional cardiology and radiology procedures worldwide.
Prior to joining BSD Medical, Mr. White served for two years as manager of the
Home Touch sales division of Life Touch.
EXECUTIVE COMPENSATION
Compensation Discussion And Analysis
The following discussion and analysis provides information regarding
the Company's executive compensation objectives and principles, procedures,
practices and decisions, and is provided to help give perspective to the numbers
and narratives that follow in the tables in this section. This discussion will
focus on the Company's objectives, principles, practices and decisions with
regards to the compensation of Paul F. Turner, Chairman of the Board, Senior
Vice President and Chief Technology Officer, Hyrum A. Mead, President and Dennis
P. Gauger, Chief Financial Officer, our named executive officers ("Named
Executive Officers").
Executive Compensation Objectives and Principles
The overall objective of our executive compensation program is to help
create long-term value for our shareholders by attracting and retaining talented
executives, rewarding superior operating and financial performance, and aligning
the long-term interests of our executives with those of our shareholders.
Accordingly our executive compensation program incorporates the following
principles:
Compensation should be based upon individual job responsibility,
demonstrated leadership ability, management experience, individual
performance and Company performance.
Compensation should reflect the fair market value of the services
received. The Company believes that a fair and competitive pay
package is essential to attract and retain talented executives in
key positions.
Compensation should reward executives for long-term strategic
management and enhancement of shareholder value.
Compensation should reward performance and promote a performance
oriented environment.
Executive Compensation Procedures
We believe that compensation paid to our executive officers should be
closely aligned with our performance and the performance of each individual
executive officer on both a short-term and a long-term basis, should be based
upon the value each executive officer provides to our company, and should be
designed to assist us in attracting and retaining the best possible executive
talent, which we believe is critical to our long-term success. To attain our
executive compensation objectives and implement the underlying compensation
principles, we follow the procedures described below.
Role of the Compensation Committee. The Compensation Committee has
responsibility for establishing and monitoring our executive compensation
programs and for making decisions regarding the compensation of our Named
Executive Officers. The agenda for meetings of the Compensation Committee is
determined by the Chairman of the Compensation Committee. The Compensation
Committee sets the compensation package and annual bonus of the Named Executive
Officers. Our President, Mr. Mead, suggests items to be considered by the
Compensation Committee from time to time, including the compensation package for
the other Named Executive Officers, and participates in the meetings of the
Compensation Committee.
The Compensation Committee relies on its judgment in making
compensation decisions after reviewing our performance and evaluating our
executives' leadership abilities and responsibilities with our company and their
current compensation arrangements. The Compensation Committee assessment process
is designed to be flexible so as to better respond to the evolving business
environment and individual circumstances.
24
Role of Compensation Consultant. Mercer Human Resource Consulting has
assisted the Compensation Committee with its administration of compensation
programs for the Company's executive officers. In 2006, the Compensation
Committee engaged Mercer, an outside human resources consulting firm, to conduct
a review of its total compensation program for executive officers and to provide
peer compensation data. Based upon the market analyses performed by Mercer, it
made recommendations to the Compensation Committee as to the form and amount of
executive compensation to be awarded to the executive officers. The Compensation
Committee considered the recommendations of Mercer in setting executive
compensation for fiscal 2007.
Elements of Compensation
Our executive compensation objectives and principles are implemented
through the use of the following elements of compensation, each discussed more
fully below:
o Base Salary
o Annual Incentive Bonuses
o Stock-Based Compensation
o Other Benefits
Base Salary. The Compensation Committee approved the salaries of all
our executive officers for fiscal year 2007. Salary decisions concerning these
officers were based upon a variety of considerations consistent with the
compensation philosophy stated above. First, salaries were competitively set
relative to both other companies in the medical products industry and other
comparable companies. In determining the salaries for our executives in fiscal
2007, the Compensation Committee compared the compensation of some of the public
companies in the biotechnology industry to the compensation of our executives.
In August 2006, our Compensation Committee reviewed the published compensation
of the named executive officers of Introgen Therapeutics, Inc., RITA Medical
Systems, Inc., Cell Therapeutics, Inc., Immunicon Corporation, Poniard
Pharmaceuticals, Inc., Entremed, Inc., OXiGENE, Inc., Theragenics Corporation,
Antigenics Inc./DE, Inovio Biomedical Corporation, Praecis Pharmaceuticals
Incorporated and Celsion Corporation. We believe that the base salaries and the
total compensation of our executives are approximately equal to or less than the
median base salaries and median total compensation of executives with similar
positions at these companies. Second, the Compensation Committee considered each
officer's level of responsibility and individual performance, including an
assessment of the person's overall value to the Company. Third, internal equity
among employees was factored into the decision. Finally, the Compensation
Committee considered our financial performance and our ability to absorb any
increases in salaries. In the case of Mr. Gauger, base pay was paid in the form
of a monthly fee for his services under his consulting agreement.
Annual Incentive Bonuses. Each Named Executive Officer, other than Mr.
Gauger, is eligible to receive an annual performance-based bonus. The annual
bonus is intended to motivate participating executives to achieve both
short-term and long-term strategic and financial objectives. Mr. Mead and Mr.
Turner received bonuses determined by the Compensation Committee. For fiscal
2007, the Compensation Committee did not precisely define the parameters of the
bonuses for Mr. Mead and Mr. Turner at the beginning of the year. However, the
general goals of the company were discussed with these officers throughout the
year. Based upon an assessment of the progress of the company, the Compensation
Committee decided to award each of Mr. Mead and Mr. Turner a bonus equal to 25%
of his base salary.
Stock-Based Compensation. Each Named Executive Officer is eligible to
participate in the BSD Medical Corporation 1998 Stock Incentive Plan, which
provides for the granting of stock options, stock appreciation rights,
performance awards, and other stock-based awards and cash-based awards to
selected employees, non-employees and directors. Historically, we have issued
options pursuant to this incentive plan, and typically these options vest
ratably over a term of up to 5 years as determined by the Compensation
Committee. We do not have any policies for allocating compensation between
long-term and currently paid out compensation or between cash and non-cash
compensation or among different forms of non-cash compensation. Although we do
not have any formal policy for determining the amount of stock options or the
timing of our stock option grants, we have historically granted stock options to
high-performing employees (i) in recognition of their individual achievements
and contributions to our company, and (ii) in anticipation of their future
25
service and achievements. During fiscal year 2007, no options were granted to
the Named Executive Officers. On December 19, 2007, we granted 36,000 stock
options to each of Mr. Mead and Mr. Turner, which vest ratably over three years.
Other Benefits. Our Named Executive Officers receive the same benefits
that are available to all other full time employees, including the payment of
health, dental, life and disability insurance premiums.
Deductibility of Executive Compensation
Internal Revenue Code Section 162(m) limits the amount that we may
deduct for compensation paid to our principal executive officer and to each of
our three most highly compensated officers (other than our principal financial
officer) to $1.0 million per person, unless certain exemption requirements are
met. Exemptions to this deductibility limit may be made for various forms of
performance-based compensation. In the past, annual cash compensation to our
executive officers has not exceeded $1.0 million per person, so the compensation
has been deductible. In addition to salary and bonus compensation, upon the
exercise of stock options that are not treated as incentive stock options, the
excess of the current market price over the option price, or option spread, is
treated as compensation and accordingly, in any year, such exercise may cause an
officer's total compensation to exceed $1.0 million. Under certain regulations,
option spread compensation from options that meet certain requirements will not
be subject to the $1.0 million cap on deductibility. While the compensation
committee cannot predict how the deductibility limit may impact our compensation
program in future years, the compensation committee intends to maintain an
approach to executive compensation that strongly links pay to performance.
The Compensation Committee reviews and considers the deductibility of
executive compensation under Section 162(m) of the Code. In certain situations,
the Compensation Committee may approve compensation that will not meet the
requirements of Code Section 162(m) in order to ensure competitive levels of
total compensation for its executive officers. No Named Executive Officer's
compensation in 2007 exceeded the $1 million deduction limit.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed the foregoing Compensation
Discussion and Analysis required by Item 402(b) of Regulation S-K and discussed
the Compensation Discussion and Analysis with the Company's management. Based on
such review and discussions with management, the Compensation Committee
recommended to the Board that the foregoing Compensation Discussion and Analysis
be included in this Annual Report.
COMPENSATION COMMITTEE
Douglas P. Boyd
Steven G. Stewart
Michael Nobel
26
Summary Compensation Table
The table below summarizes the total compensation paid to or earned by
each of the Named Executive Officers for services in all capacities to the
Company and its affiliates for the year ended August 31, 2007:
Non-Equity All
Name and Incentive Plan Other
Principal Position Year Salary Bonus(1) Compensation Compensation Total
-------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (g) (h) (i)
Paul F. Turner 2007 $215,000 $53,000 $ - $7,049 (2) $275,049
Chairman of the Board,
Senior VP and Chief
Technology Officer
Hyrum A. Mead 2007 250,000 63,000 - 7,049 (3) 320,049
President
Dennis P. Gauger 2007 - - - 24,000 (4) 24,000
Chief Financial Officer
(1) The amounts shown in this column constitute the cash bonuses made to
certain named executive officers. These awards are discussed in further
detail in the Compensation Discussion and Analysis section of this
proxy statement.
(2) This amount consists of life insurance premiums of $145, medical
insurance premiums of $6,263 and disability insurance premiums of $641
paid by the Company.
27
(3) This amount consists of life insurance premiums of $145, medical
insurance premiums of $6,263 and disability insurance premiums of $641
paid by the Company.
(4) This amount consists entirely of fees paid to Mr. Gauger as Chief
Financial Officer on a part-time, contract basis in fiscal 2007.
Employment and Independent Contractor Agreements.
We entered into an employment agreement with Mr. Mead dated August 10,
1999. This agreement provides that Mr. Mead shall receive an annual base salary,
which shall be reviewed annually by the Board of Directors. Mr. Mead's annual
base salary was raised to $250,000 effective September 1, 2006. In the event of
termination of Mr. Mead's employment with the Company without cause (as defined
in the agreement) or Mr. Mead's resignation for good reason (as defined in the
agreement), the agreement provides that Mr. Mead will receive severance
compensation for a period of six months, including an extension of all benefits
and perquisites. The severance amount shall include six months of salary at the
highest rate paid to Mr. Mead prior to termination and an additional amount
equal to all bonuses received by Mr. Mead during the 12-month period preceding
termination (excluding any signing bonus received during such period). The
agreement also requires us to vest any options granted to Mr. Mead for the
purchase of our Common Stock, allowing a 90-day period for Mr. Mead to exercise
those options. Mr. Mead's agreement includes a non-competition covenant
prohibiting him from competing with us for one year following his termination.
We entered into an employment agreement with Mr. Turner dated November
2, 1988. The agreement sets Mr. Turner's annual base salary for each year until
October 1, 1993 and provides that after October 1, 1993 Mr. Turner's annual base
salary will be based upon a reasonable mutual agreement between Mr. Turner and
the Company. Mr. Turner's annual base salary was raised to $210,000 effective
September 1, 2006. In the event of termination of Mr. Turner's employment with
the Company without cause (as defined in the agreement) or Mr. Turner's
resignation for good reason (as defined in the agreement), the agreement
provides that Mr. Turner will receive severance pay for a one-year period, which
pay includes an extension of all of his rights, privileges and benefits as an
employee (including medical insurance). The one-year severance pay shall be
equal to Mr. Turner's average annual salary for the 12-month period immediately
prior to the termination. The agreement also requires us to pay Mr. Turner for
any accrued, unused vacation at the time of termination. We are also obligated
to pay Mr. Turner $1,000 (or the equivalent value in stock options) for each
newly issued patent obtained by us as a result of Mr. Turner's efforts (Mr.
Turner receives only $500 if multiple inventors are involved). Mr. Turner's
agreement includes a non-competition covenant prohibiting him from competing
with us for one year following his termination. We may continue the
non-competition period for up to four additional years by notifying Mr. Turner
in writing and by continuing the severance payments for the additional years
during which the non-competition period is extended.
Dennis P. Gauger, Chief Financial Officer, serves the Company on a
part-time, contract basis. The Company has an agreement with Mr. Gauger for a
term ending May 1, 2008, which provides monthly compensation of $6,000.
Outstanding Equity Awards at Fiscal Year-End
This table provides information on the year-end 2007 holdings of
Company stock options by the Named Executive Officers.
28
Number of Number of
Securities Securities
Underlying Underlying
Unexercised Unexercised Option Option
Options Options Exercise Expiration
Name Exercisable Unexercisable Price ($) Date
(#) (#)
--------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
Paul F. Turner 277,212 (1) - 1.20 04/09/2014
Hyrum A. Mead 74,464 (1) - 0.37 08/09/2010
Hyrum A. Mead 200,000 (2) - 0.81 01/18/2010
Hyrum A. Mead 400,000 (1) - 1.20 04/09/2014
(1) Options vest in equal annual installments (33.3% each year) on the
anniversary of the date of grant.
(2) Options vest in equal annual installments (20% each year) on the
anniversary of the date of grant .
Option Exercises and Stock Vested
The named executive officers exercised stock options during the year
ended August 31, 2007 as outlined below.
Number of Shares Acquired Value Realized on Exercise
Name on Exercise (#) ($) (1)
--------------------------------------------------------------------------------
(a) (b) (c)
Paul F. Turner 22,788 88,501
Hyrum A. Mead 5,284 30,013
(1) The amounts in this column reflect the difference between the exercise
price of the options and the market price of the Company's Common Stock
on the date of exercise.
Potential Payments Upon Termination
The information below describes and quantifies certain payments or
benefits that would be payable to Named Executive Officers under their existing
employment agreements and our existing plans and programs had they been
terminated on August 31, 2007. These benefits are in addition to benefits
generally available to all salaried employees of the Company in connection with
a termination of employment such as disability and life insurance benefits, the
value of employee-paid group health plan continuation coverage under COBRA and
accrued vacation pay.
As discussed above, Messrs. Turner and Mead have written employment
agreements that provide for certain severance payments and benefits in the event
of termination of their employment with the Company without cause or their
resignation for good reason. Additionally, their employment agreements provide
for acceleration of vesting of a portion of their otherwise unvested stock
options in the event they are terminated without cause or resign for good
reason. In order for Mr. Mead to receive his severance payment for the vesting
of his options to accelerate, his termination must occur prior to a change of
control of our company.
29
Severance Pay Stock Option Vesting
Name ($) Acceleration (3) ($)
------------------------------- ----------------- --------------------------
(a) (b) (c)
Paul F. Turner (1) 210,000 -
Hyrum A. Mead (2) 125,500 -
(1) Mr. Turner's employment agreement provides for severance pay equal to
Mr. Turner's average annual salary for the 12-month period immediately
prior to the termination. Mr. Turner will also be granted an extension
of all rights, privileges and benefits as an employee (including
medical insurance).
(2) Mr. Mead's employment agreement provides for six months severance pay
at the highest rate of salary paid to Mr. Mead prior to termination and
an additional amount equal to all bonuses received during such period
(excluding any signing bonus received during such period). Mr. Mead is
also entitled to accelerated vesting of his options under the Company's
equity compensation plans, allowing a 90-day period for Mr. Mead to
exercise those options. Mr. Mead will also be granted an extension of
all rights, privileges and benefits as an employee (including medical
insurance).
(3) All stock options held by Messrs. Turner and Mead as of August 31, 2007
were fully vested at August 31, 2007.
The Company does not have any agreement with Mr. Gauger to pay him
severance or other benefits following termination of his engagement, other than
monthly fees for services rendered prior to the effective date of such
termination. Therefore, if Mr. Gauger's engagement by the Company had terminated
for any reason on August 31, 2007, he would not have been entitled to any
severance or other benefits following such termination other than monthly fees
earned for services rendered prior to such termination.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to us with respect to
beneficial ownership of our Common Stock as of November 30, 2007 for (i) each
director and nominee, (ii) each holder of 5.0% or greater of our Common Stock,
(iii) our Named Executive Officers, and (iv) all executive officers and
directors as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the Commission) and generally includes
voting or investment power with respect to securities. Shares subject to options
that are exercisable within 60 days following November 30, 2007 are deemed to be
outstanding and beneficially owned by the optionee or group of optionees for the
purpose of computing share and percentage ownership of that optionee or group of
optionees, but are not deemed to be outstanding for the purpose of computing
the percentage ownership of any other person. Except as indicated by footnote,
the persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown beneficially owned by them. The
inclusion of any shares as beneficially owned does not constitute an admission
of beneficial ownership of those shares. The percentage calculation of
beneficial ownership is based on 21,288,333 shares of Common Stock outstanding
as of November 30, 2007. Except as otherwise noted, the address of each person
listed on the following table is 2188 West 2200 South, Salt Lake City, Utah
84119.
Common Stock Beneficially Owned
Name of Beneficial Owner Shares Percent
Officers and Directors
Dr. Gerhard W. Sennewald (1) 6,536,173 30.7%
Paul F. Turner (2) 2,162,994 10.0%
Hyrum A. Mead (3) 778,164 3.5%
Dr. Michael Nobel (4) 273,324 1.3%
Douglas P. Boyd (5) 247,507 1.2%
Steven G. Stewart (6) 13,543 *
Dennis P. Gauger - -
Holders of More Than 5%
John E. Langdon (7) 1,295,010 6.2%
All Executive Officers and Directors as a 10,011,705 44.8%
Group (7 persons) (8)
30
* Less than 1%
(1) Includes 26,000 shares subject to stock options that are currently
exercisable or exercisable within 60 days after November 30, 2007.
(2) Includes 277,212 shares subject to stock options that are currently
exercisable or exercisable within 60 days after November 30, 2007.
(3) Includes 674,464 shares subject to stock options that are currently
exercisable or exercisable within 60 days after November 30, 2007.
(4) Includes 51,000 shares subject to stock options that are currently
exercisable or exercisable within 60 days after November 30, 2007.
(5) Includes 16,000 shares subject to stock options that are currently
exercisable or exercisable within 60 days after November 30, 2007.
(6) Includes 9,274 shares subject to stock options that are currently
exercisable or exercisable within 60 days after November 30, 2007.
(7) Includes 351,862 shares owned directly by Mr. Langdon. The remaining
shares are held in the Dora Lee Langdon 1994 Children's trust for the
Benefit of Clay Allison Langdon and Lee Kendall Langdon, for which Mr.
Langdon is Trustee. Mr. Langdon's address is: 2501 Parkview Drive,
Suite 500, Fort Worth, TX 76102.
(8) Includes 1,053,950 shares subject to stock options that are currently
exercisable or exercisable within 60 days after November 30, 2007.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes the Company's equity compensation plans
as of August 31, 2007.
Number of securities
remaining available for
Number of securities to be Weighted-average exercise future issuance under
issued upon exercise of price of outstanding equity compensation plans
outstanding options, options, warrants and (excluding securities
Plan category warrants and rights rights reflected in column (a))
------------------------------- ---------------------------- ---------------------------- ----------------------------
(a) (b) (c)
Equity compensation plans 1,795,853 $2.31 631,185 (2)
approved by security holders
(1)
Equity compensation plans not - - -
approved by security holders
Total 1,795,853 $2.31 631,185
(1) A total of 3,677,300 shares of Common Stock have been reserved for issuance
under the plans. To date, a total of 1,092,231 options have been exercised under
the plans.
(2) A total of 883,326 shares were available for future issuances under our
equity compensation plans as of September 1, 2006.
--------------------------------------------------------------------------------
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
--------------------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers, and persons who own more than 10%
of a registered class of the Company's equity securities to file with the
Commission initial reports of ownership and reports of changes in ownership of
equity securities of the Company. Officers, directors, and greater than 10%
stockholders are required to furnish the Company with copies of all Section
16(a) forms they file. Based solely on review of the copies of such forms
received by the Company, or written representations from certain reporting
persons, the Company believes that during the year ended August 31, 2007, all
reporting persons complied with all applicable filing requirements.
--------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
--------------------------------------------------------------------------------
Since September 1, 2006, there has not been, nor is there any proposed
transaction in which the Company was or will be a party or in which it was or
will be a participant, involving an amount that exceeded or will exceed $120,000
and in which any director, executive officer, beneficial owner of more than 5%
31
of any class of the Company's voting securities, or any member of the immediate
family of any of the foregoing persons had or will have a direct or indirect
material interest, other than the transactions which are described below.
Medizin-Technik GmbH. BSD supplies equipment components to
Medizin-Technik GmbH located in Munich, Germany, which is a significant
distributor of BSD's products in Europe. Medizin-Technik purchases equipment,
which it installs, and components to service the BSD hyperthermia therapy
systems that Medizin-Technik sells to its customers in Europe. For the fiscal
years 2006 and 2007 and for the first quarter of fiscal year 2008, BSD had
revenue of $689,086, $1,385,332 and $908,025, respectively, from the sale of
systems and various component parts sold to Medizin-Technik. As of August 31,
2006 and 2007, and as of the end of the first quarter of fiscal year 2008,
accounts receivable from Medizin-Technik were $261,543, $488,200 and $1,036,247,
respectively. Dr. Gerhard W. Sennewald, one of BSD's directors and significant
stockholders, is the President and Chief Executive Officer of Medizin-Technik
and its sole stockholder. Management believes the terms of the transactions with
Medizin-Technik were arms length and fair to the Company.
The Company does not have a formal written process for reviewing
related person transactions. The Company expects that its management will review
for potential conflict of interest situations, on an ongoing basis, any future
proposed transaction, or series of transactions, with related persons, and
either approve or disapprove each reviewed transaction or series of related
transactions with related persons.
--------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
--------------------------------------------------------------------------------
No proposals have been submitted by stockholders of the Company for
consideration at the Annual Meeting. It is anticipated that the next annual
meeting of stockholders will be held on or about February 1, 2009. Stockholders
may present proposals for inclusion in the proxy statement to be mailed in
connection with the 2009 annual meeting of stockholders of the Company, provided
such proposals are received by the Company in writing no later than September 2,
2008 and are otherwise in compliance with Commission regulations regarding the
inclusion of stockholder proposals in company-sponsored proxy materials.
Pursuant to rules adopted by the Commission, if a shareholder intends to propose
any matter for a vote at the Company's 2009 annual meeting of stockholders, but
fails to notify the Company of that intention by November 16, 2008, then a proxy
solicited by the Board of Directors may be voted on that matter in the
discretion of the proxy holder, without discussion of the matter in the proxy
statement soliciting the proxy and without the matter appearing as a separate
item on the proxy card.
--------------------------------------------------------------------------------
OTHER MATTERS
--------------------------------------------------------------------------------
The Company is unaware of any business, other than described in this
Proxy Statement, that may be considered at the Annual Meeting. If any other
matters should properly come before the Annual Meeting, it is the intention of
the persons named in the accompanying form of proxy to vote the proxies held by
them in accordance with their best judgment.
To assure the presence of the necessary quorum and to vote on the
matters to come before the Annual Meeting, please promptly indicate your choices
via the internet, by phone or by mail according to the procedures described on
the proxy card. The submission of a proxy via the internet, by phone or by mail
does not prevent you from attending and voting at the Annual Meeting.
--------------------------------------------------------------------------------
AVAILABLE INFORMATION
--------------------------------------------------------------------------------
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Commission.
32
Any interested party may inspect information filed by the Company, without
charge, at the public reference facilities of the Commission at its principal
office at 100 F. Street, N.E., Washington, D.C. 20549. Any interested party may
obtain copies of all or any portion of the information filed by the Company at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 100 F. Street, N.E., Washington, D.C. 20549. In addition,
the Commission maintains an Internet site that contains reports, proxy and
information statements and other information regarding the Company and other
registrants that file electronically with the Commission at http://www.sec.gov.
The Company's Common Stock is quoted on the AMEX and trades under the
symbol "BSM".
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
The Company will provide without charge to any person from whom a proxy
is solicited by the Board of Directors, upon the written request of that person,
a copy of the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 2007, including the financial statements and schedules thereto (as
well as exhibits thereto, if specifically requested), required to be filed with
the Commission. Written requests for that information should be directed to the
Secretary of the Company at the address on the first page of this proxy
statement.
33
APPENDIX A
--------------------------------------------------------------------------------
BSD MEDICAL CORPORATION
SECOND AMENDED AND RESTATED
1998 DIRECTOR STOCK PLAN
Part A. PLAN ADMINISTRATION AND ELIGIBILITY
1. Purpose.
-------
The purpose of this Second Amended and Restated 1998 Director Stock Plan (the
"Plan") of BSD Medical Corporation (the "Company") is to encourage ownership in
the Company by outside directors of the Company (each, a "Non-Employee
Director," or collectively, the "Non-Employee Directors") whose continued
services are considered essential to the Company's continued progress and thus
to provide them with a further incentive to remain as directors of the Company.
2. Administration.
--------------
The Board of Directors (the "Board") of the Company or any committee (the
"Committee") of the Board that will satisfy Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and any regulations
promulgated thereunder, as from time to time in effect, including any successor
rule ("Rule 16b-3"), shall supervise and administer the Plan. The Committee
shall consist solely of two or more non-employee directors of the Company, who
shall be appointed by the Board. A member of the Board shall be deemed to be a
"non-employee director" only if such member satisfies such requirements as the
Securities and Exchange Commission may establish for non-employee directors
under Rule 16b-3. No member of the Board or the Committee shall receive
additional compensation for services in connection with the administration of
the Plan.
The Board or the Committee may adopt such rules or guidelines as it deems
appropriate to implement the Plan. All questions of interpretation of the Plan
or of any shares issued under it shall be determined by the Board or the
Committee and such determination shall be final and binding upon all persons
having an interest in the Plan.
3. Participation in the Plan.
-------------------------
Each member of the Board who is not an employee of the Company or any of its
subsidiaries or affiliates shall receive payment for his or her Annual Retainer
(as defined in Section 6 below) under the Plan, and shall receive an Option
annually, for so long as he or she serves as a director of the Company.
4. Stock Subject to the Plan.
-------------------------
The maximum number of shares of the Company's common stock, par value $0.01 per
share ("Common Stock"), which may be issued under the Plan, either as a Common
Stock Payment, as defined below, or upon exercise of Options, as defined below,
34
shall be one million five hundred thousand (1,500,000). The limitation on the
number of shares which may be issued under the Plan shall be subject to
adjustment as provided in Section 9 of the Plan.
Part B. TERMS OF THE PLAN
1. Effective Date of the Plan.
--------------------------
The Plan shall be effective as of September 1, 1998, subject to the approval and
ratification of the Plan by the shareholders of the Company. The Plan shall
terminate on August 31, 2011, unless earlier terminated by the Board of
Directors or the Committee.
2. Terms and Conditions.
--------------------
a. Compensation. During the term of the Plan, the Company shall pay to
each Non-Employee Director for each year in which the Non-Employee Director
serves as a Non-Employee Director of the Company, annual compensation in the
amount of Thirty Thousand Dollars ($30,000) (the "Annual Retainer"); provided,
however, that any Non-Employee Director qualifying as a "financial expert"
pursuant to Item 407(d)(5) of Regulation S-K promulgated under the Securities
Exchange Act of 1934, as amended ("Financial Expert"), shall receive an Annual
Retainer of Thirty-five Thousand Dollars ($35,000). If a Non-Employee Director
no longer serves as a director of the Company, for any reason including death or
disability, such Non-Employee Director shall be entitled to all unpaid portions
of his or her Annual Retainer which shall have accrued (on a daily basis)
through the date of such termination.
b. Cash Payments. Each Non-Employee Director shall receive annually
from the Company, as part of the Annual Retainer, Fifteen Thousand Dollars
($15,000) in cash (the "Cash Payment"); provided, however, that the Financial
Expert shall receive an annual Cash Payment of Twenty Thousand Dollars
($20,000). The Cash Payment shall be made in arrears in equal semi-annual
installments on March 1 and September 1 of each year (or if such day is not a
business day, on the next succeeding business day), with the first Cash Payment
to be made on or about March 1, 1999.
c. Common Stock Payments.
(i) Number of Shares Subject to Common Stock Payment. Each
Non-Employee Director shall receive annually and automatically from the
Company the balance of the Annual Retainer in the form of shares of
Common Stock (the "Common Stock Payment"). The Common Stock Payment
shall be made in arrears in semi-annual installments on March 1 and
September 1 of each year (or if such day is not a business day, on the
next succeeding business day), with the first Common Stock Payment to
be made on or about March 1, 1999. The number of shares of Common Stock
included in each Common Stock Payment shall be determined by dividing
Fifteen Thousand Dollars ($15,000) by (i) the preceding twenty (20) day
average of the closing prices for the Common Stock as reported by the
American Stock Exchange, if available, on the date in question (or, if
such day is not a business day, on the next succeeding business day),
35
(ii) the average of the prices quoted by the then market makers in the
Company's Common Stock on such dates or (iii) by such amount as the
Board or Committee determines in good faith to be the fair value of a
share of Common Stock (each, the "Fair Market Value"). The amount of
each installment shall be equal to the largest number of whole shares
determined as follows:
$15,000 = Number of Shares
-----------------------------------
Fair Market Value on Date of Award
Any payment for a fractional share automatically shall be paid in cash based
upon the Fair Market Value on the date of the respective award of such
fractional share.
(ii) Holding Period for Common Stock Payment Shares. The shares of
Common Stock included in each Common Stock Payment shall be deposited
in certificate or book entry form in escrow with the Company's
Secretary until the six-month anniversary of the date of issuance. The
Non-Employee Director shall retain all rights in the shares while they
are held in escrow, such as voting rights and the right to receive
dividends, but the Non-Employee Director shall not have the right to
pledge, sell or otherwise transfer such shares until after the
six-month anniversary of the issuance date, at which time the Company's
Secretary shall release the shares from escrow and deliver any
applicable stock certificates to the Non-Employee Director or release
any applicable restrictions on the Non-employee Director's book entry
account.
d. Options.
(i) Annual Grant. In addition to the Annual Compensation, during
the term of the Plan, the Company shall grant to each Non-Employee
Director for each year in which the Non-Employee Director serves as a
Non-Employee Director of the Company, an option to purchase 30,000
shares of Common Stock (the "Option"). The Option shall be granted
effective September 1 in each year, beginning in 1998. The Option shall
not qualify as an "incentive stock option" as defined in Section 422 of
the Internal Revenue Code of 1986. If a Non-Employee Director no longer
serves as a director of the Company, for any reason including death or
disability, such Non-Employee Director shall be entitled to the portion
of his or her Option which shall have accrued (on a daily basis)
through the date of such termination.
(ii) Purchase Price. The purchase price of the Common Stock issued
pursuant to an exercise of the Option shall be the Fair Market Value of
the Common Stock at the date the Option is granted (the "Purchase
Price"), with such fair market value to be determined as provided in
Section 6.c.(i) above. The Purchase Price shall be payable upon the
exercise of the Option and may be paid by (i) cash or check payable to
the Company, (ii) the delivery to the Company of the number of
outstanding shares of Common Stock equal in Fair Market Value to the
Purchase Price, or (iii) receiving from the Company in exchange for the
Option the number of shares of Common Stock equal in value to the
excess of the Fair Market Value of one share of Common Stock of the
Company over the Purchase Price per share of Common Stock, multiplied
by the number of shares of Common Stock underlying the Option.
36
(iii) Term and Vesting. Except as otherwise set forth herein,
unless earlier exercised, each Option shall terminate and expire upon
the tenth anniversary of the date such Option is awarded. Twenty
percent (20%) of each Option granted to a Non-Employee Director shall
vest on each anniversary of the effective date of the award, provided
that the Non-Employee shall have remained a director of the Company
since the date of the award. In the event a Non-Employee Director
ceases to serve as a director of the Company for any reason, any Option
granted to a Non-Employee Director which has (i) not vested in
accordance with this section shall be forfeited without compensation by
the Company, and all rights of the Non-Employee Director in respect of
such non-vested portion of the Option shall terminate and be of no
further force or effect, and (ii) vested in accordance with this
section shall remain exercisable for a period of one hundred eighty
days following the last day such Non-Employee Director is a director of
the Company, after which period the Option shall terminate and be of no
further force or effect.
Part C. GENERAL PROVISIONS
1. Assignments.
-----------
The rights and benefits under this Plan may not be assigned, pledged or
hypothecated. Upon the death of a Non-Employee Director, such person's rights to
receive any payments hereunder will transfer to such person's named beneficiary,
if any, or to his or her estate, and any Option to which such beneficiary or
estate is entitled and has vested shall remain exercisable by such beneficiary
or estate for a period of one hundred eighty days after the death of the
Non-Employee Director.
2. Limitation of Rights.
--------------------
Neither the Plan, nor the issuance of shares of Common Stock nor any other
action taken pursuant to the Plan, shall constitute or be evidence of any
agreement or understanding, express or implied, that the Company will retain a
Director for any period of time, or at any particular rate of compensation.
3. Changes in Present Stock.
------------------------
In the event of any merger, consolidation, reorganization, recapitalization,
stock dividend, stock split, or other change in the corporate structure or
capitalization affecting the Company's present Common Stock, at the time of such
event the Board or the Committee shall make appropriate adjustments to the
number (including the aggregate number specified in Section 4) and kind of
shares to be issued under the Plan and the price of any Common Stock Payment and
Purchase Price.
4. Amendment of the Plan.
---------------------
The Board shall have the right to amend, modify, suspend or terminate the Plan
at any time for any purpose; provided, that following the approval of the Plan
by the Company's shareholders, the Company will seek shareholder approval for
any change to the extent required by applicable law, regulation or rule.
37
5. Compliance with Section 16 of the Exchange Act.
----------------------------------------------
It is the Company's intent that the Plan comply in all respects with Rule 16b-3.
If any provision of this Plan is found not to be in compliance with such rule
and regulations, the provision shall be deemed null and void, and the remaining
provisions of the Plan shall continue in full force and effect. All transactions
under this Plan shall be executed in accordance with the requirements of Section
16 of the Exchange Act and regulations promulgated thereunder. The Board or the
Committee may, in its sole discretion, modify the terms and conditions of this
Plan in response to and consistent with any changes in applicable law, rule or
regulation.
6. Governing Law.
-------------
This Plan and all determinations made and actions taken pursuant hereto shall be
governed by the law of the State of Delaware.
38
APPENDIX B
--------------------------------------------------------------------------------
BSD MEDICAL CORPORATION
SECOND AMENDED AND RESTATED
1998 STOCK INCENTIVE PLAN
BSD MEDICAL CORPORATION, a Delaware corporation, (the "Company") adopts this
Second Amended and Restated Stock Incentive Plan (the "Plan"), effective
December 31, 2008, subject to stockholder approval.
1. Purpose. The purpose of this Plan is to enable the Company to attract and
retain the services of and provide performance incentives to (1) selected
employees, officers and directors of the Company or of any subsidiary of the
Company ("Employees") and (2) selected nonemployee agents, consultants, advisors
and independent contractors of the Company or any subsidiary.
2. Shares Subject to the Plan. Subject to adjustment as provided below and in
paragraph 13, the shares to be offered under the Plan shall consist of shares of
the common stock of the Company, par value $.01 per share ("Shares"), and the
total number of Shares that may be issued under the Plan shall not exceed three
million four hundred twenty seven thousand three hundred (3,427,300) Shares, all
of which may be issued pursuant to the exercise of options granted pursuant to
the Plan. The Shares issued under the Plan may be authorized and unissued Shares
or reacquired Shares or Shares acquired in the market. If any award granted
under the Plan expires, terminates or is canceled, the unissued Shares subject
to such award shall again be available under the Plan and if Shares which are
awarded under the Plan are forfeited to the Company or repurchased by the
Company, that number of Shares shall again be available under the Plan.
3. Effective Date and Duration of Plan.
(a) Effective Date. The Plan (as amended and restated) shall be
effective on the date adopted by the Board of Directors subject to stockholder
approval. Awards may be granted and Shares may be awarded or sold under the Plan
at any time after the effective date and before termination of the Plan.
(b) Duration. The Plan shall terminate ten years from the date the plan
is adopted by the Board of Directors, or the date the plan is approved by the
shareholders, whichever is earlier, subject to earlier termination by the Board
of Directors. The Board of Directors may suspend or terminate the Plan at any
time, except with respect to awards then outstanding under the Plan. Termination
shall not affect the terms of any outstanding awards.
4. Administration.
(a) Board of Directors. The Plan shall be administered by the Board of
Directors of the Company, which shall determine and designate from time to time
the individuals to whom awards shall be made, the amount of the awards and the
other terms and conditions of the awards. Subject to the provisions of the Plan,
the Board of Directors may from time to time adopt and amend rules and
regulations relating to the administration of the Plan, advance the lapse of any
waiting period, accelerate any exercise date, waive or modify any restriction
applicable to Shares (except those restrictions imposed by law) and make all
other determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the Plan. The interpretation and
39
construction of the provisions of the Plan and related agreements by the Board
of Directors shall be final and conclusive. The Board of Directors may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any related agreement in the manner and to the extent it shall deem expedient
to carry the Plan into effect, and it shall be the sole and final judge of such
expediency.
(b) Committee. The Board of Directors may delegate to a committee of
the Board of Directors (the "Committee") any or all authority for administration
of the Plan. If authority is delegated to a Committee, all references to the
Board of Directors in the Plan shall mean and relate to the Committee except (i)
as otherwise provided by the Board of Directors and (ii) that only the Board of
Directors may amend or terminate the Plan as provided in paragraphs 3 and 14.
(c) Officer. The Board of Directors or the Committee, as applicable,
may delegate to an executive officer of the Company authority to administer
those aspects of the Plan that do not involve the designation of individuals to
receive awards or decisions concerning the timing, amounts or other terms of
awards. No officer to whom administrative authority has been delegated pursuant
to this provision may waive or modify any restriction applicable to an award to
such officer under the Plan.
5. Types of Awards; Eligibility. The Board of Directors may, from time to time,
take the following actions, separately or in combination, under the Plan: (i)
grant "Incentive Stock Options", as defined in section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), as provided in paragraph 6; (ii)
grant options other than Incentive Stock Options ("Non-Statutory Stock Options")
as provided in paragraph 6; (iii) award Shares as provided in paragraph 7; (iv)
sell Shares subject to restrictions as provided in paragraph 8; (v) grant stock
appreciation rights as provided in paragraph 9; (vi) grant cash bonus rights as
provided in paragraph 10; (vii) grant Performance-based Rights as provided in
paragraph 11 and (viii) grant foreign qualified awards as provided in paragraph
12. Any such awards may be made to Employees, including Employees who are
officers or directors, and to other individuals described in paragraph 1 whom
the Board of Directors believes have made or will make an important contribution
to the Company or any subsidiary of the Company; provided, however, that only
Employees shall be eligible to receive Incentive Stock Options under the Plan.
The Board of Directors shall select the individuals to whom awards shall be made
and shall specify the action taken with respect to each individual to whom an
award is made. Unless otherwise determined by the Board of Directors with
respect to an award, each option, stock appreciation right, cash bonus right or
performance-based right granted pursuant to the Plan by its terms shall be
nonassignable and nontransferable by the recipient, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution of
the state or country of the recipient's domicile at the time of death. No
fractional Shares shall be issued in connection with any award. In lieu of any
fractional Shares, cash may be paid in an amount equal to the value of the
fraction or, if the Board of Directors shall determine, the number of Shares may
be rounded downward to the next whole share. No Employee may be granted options
or stock appreciation rights under the Plan for more than an aggregate of
1,000,000 Shares in any consecutive three-year period.
6. Option Grants. With respect to each option grant, the Board of Directors
shall determine the number of Shares subject to the option, the option price,
the period of the option, the time or times at which the option may be exercised
and whether the option is an Incentive Stock Option or a Non-Statutory Stock
Option and any other terms of the grant, all of which shall be set forth in an
option agreement between the Company and the optionee. In the case of Incentive
40
Stock Options, all terms shall be consistent with the requirements of the Code
and applicable regulations. Upon the exercise of an option, the number of Shares
reserved for issuance under the Plan shall be reduced by the number of Shares
issued upon exercise of the option less the number of Shares surrendered or
withheld in connection with the exercise of the option and the number of Shares
surrendered or withheld to satisfy withholding obligations in accordance with
paragraph 17.
7. Award of Shares. The Board of Directors may award Shares under the Plan as
bonuses or otherwise. The aggregate number of Shares that may be awarded to any
single participant pursuant to this provision shall not exceed 1,000,000 Shares.
Shares awarded pursuant to this paragraph shall be subject to the terms,
conditions, and restrictions determined by the Board of Directors. The Board of
Directors may require the recipient to sign an agreement as a condition of the
award, but may not require the recipient to pay any monetary consideration other
than amounts necessary to satisfy tax withholding requirements. The agreement
may contain any other terms, conditions, restrictions, representations and
warranties required by the Board of Directors. The certificates representing the
Shares awarded shall bear any legends required by the Board of Directors. Upon
the issuance of a an award of Shares, the number of Shares available for
issuance under the Plan shall be reduced by the number of Shares issued less the
number of any Shares surrendered to satisfy withholding obligations in
accordance with paragraph 17.
8. Purchased Shares. The Board of Directors may issue Shares under the Plan for
such consideration (including promissory notes and services) as determined by
the Board of Directors. Shares issued under the Plan shall be subject to the
terms, conditions and restrictions determined by the Board of Directors. All
Shares issued pursuant to this paragraph 8 shall be subject to a purchase
agreement, which shall be executed by the Company and the prospective recipient
of the Shares prior to the delivery of certificates representing such Shares to
the recipient. The purchase agreement may contain any terms, conditions,
restrictions, representations and warranties required by the Board of Directors.
The certificates representing the Shares shall bear any legends required by the
Board of Directors. Upon the issuance of purchased Shares, the number of Shares
available for issuance under the Plan shall be reduced by the number of Shares
issued less the number of any Shares surrendered to satisfy withholding
obligations in accordance with paragraph 17.
9. Appreciation Rights.
(a) Grant. Stock appreciation rights may be granted under the Plan by
the Board of Directors, subject to such rules, terms, and conditions as the
Board of Directors prescribes.
(b) Exercise. Each stock appreciation right shall entitle the holder,
upon exercise, to receive from the Company in exchange therefor an amount equal
in value to the excess of the fair market value on the date of grant (or, in the
case of a stock appreciation right granted in connection with an option, the
excess of the fair market value of one Share over the option price per Share
under the option to which the stock appreciation right relates), multiplied by
the number of Shares covered by the stock appreciation right or the option, or
portion thereof, that is surrendered. Payment by the Company upon exercise of a
stock appreciation right may be in Shares valued at fair market value, in cash,
or partly in Shares and partly in cash, all as determined by the Board of
Directors. The Board of Directors may withdraw any stock appreciation right
granted under the Plan at any time and may impose any conditions upon the
exercise of a stock appreciation right or adopt rules and regulations from time
to time affecting the rights of holders of stock appreciation rights. Such rules
41
and regulations may govern the right to exercise stock appreciation rights
granted thereafter. Upon the exercise of a stock appreciation right for Shares,
the number of Shares available for issuance under the Plan shall be reduced by
the number of Shares issued less the number of any Shares surrendered or
withheld to satisfy withholding obligations in accordance with paragraph 17.
Cash payments for stock appreciation rights shall not reduce the number of
Shares available for issuance under the Plan.
10. Cash Bonus Rights. The Board of Directors may grant cash bonus rights under
the Plan in connection with (i) options granted or previously granted, (ii)
stock appreciation rights granted or previously granted, (iii) Shares awarded or
previously awarded and (iv) Shares sold or previously sold under the Plan. Cash
bonus rights will be subject to rules, terms and conditions as the Board of
Directors may prescribe. The payment of a cash bonus shall not reduce the number
of Shares available for issuance under the Plan. A cash bonus right granted in
connection with an option will entitle an optionee to a cash bonus when the
related option is exercised (or terminates in connection with the exercise of a
stock appreciation right related to the option) in whole or in part if, in the
sole discretion of the Board of Directors, the bonus right will result in a tax
deduction that the Company has sufficient taxable income to use. A cash bonus
right granted in connection with an award of Shares pursuant to paragraph 7 or
purchase of Shares pursuant to paragraph 8 will entitle the recipient to a cash
bonus payable when the award of Shares is made or the Shares are purchased or
restrictions, if any, to which the Shares are subject lapse. If the Shares
awarded or purchased are subject to restrictions and are repurchased by the
Company or forfeited by the holder, the cash bonus right granted in connection
with the Shares awarded or purchased shall terminate and may not be exercised.
11. Performance-based Awards. The Board of Directors may grant awards intended
to qualify as performance-based compensation under section 162(m) of the Code
and the regulations thereunder ("Performance-based Awards"). Performance-based
Awards shall be denominated at the time of grant either in Shares ("Stock
Performance Awards") or in dollar amounts ("Dollar Performance Awards"). Payment
under a Stock Performance Award or a Dollar Performance Award shall be made, at
the discretion of the Board of Directors, subject to the limitations set forth
in paragraph 2, in Shares ("Performance Shares"), or in cash or any combination
thereof. Performance-based Awards shall be subject to the following terms and
conditions:
(a) Award Period. The Board of Directors shall determine the period of
time for which a Performance-based Award is made (the "Award Period").
(b) Performance Goals and Payment. The Board of Directors shall
establish in writing objectives ("Performance Goals") that must be met by the
Company or any subsidiary, division or other unit of the Company ("Business
Unit") during the Award Period as a condition to payment being made under the
Performance-based Award. The Performance Goals for each award shall be one or
more targeted levels of performance with respect to one or more of the following
objective measures with respect to the Company or any Business Unit: earnings,
earnings per Share, stock price increases, total shareholder return (stock price
increase plus dividends), return on equity, return on assets, return on capital,
economic value added, revenues, operating income, cash flows or any of the
foregoing (determined according to criteria established by the Board of
42
Directors). The Board of Directors shall also establish the number of
Performance Shares or the amount of cash payment to be made under a
Performance-based Award if the Performance Goals are met or exceeded, including
the fixing of a maximum payment (subject to paragraph 11(d)). The Board of
Directors may establish other restrictions to payment under a Performance-based
Award, such as a continued employment requirement, in addition to satisfaction
of the Performance Goals. Some or all of the Performance Shares may be issued at
the time of the award as restricted Shares subject to forfeiture in whole or in
part if Performance Goals, or if applicable, other restrictions are not
satisfied.
(c) Computation of Payment. During or after an Award Period, the
performance of the Company or Business Unit, as applicable, during the period
shall be measured against the Performance Goals. If the Performance Goals are
not met, no payment shall be made under a Performance-based Award. If the
Performance Goals are met or exceeded, the Board of Directors shall certify that
fact in writing and certify the number of Performance Shares earned or the
amount of cash payment to be made under the terms of the Performance-based
Award.
(d) Maximum Awards. No participant may receive Stock Performance Awards
in any fiscal year under which the maximum number of Shares issuable under the
award, when aggregated with the Shares issuable under any awards made in the
immediately preceding two fiscal years, exceeds 1,000,000 Shares or Dollar
Performance Awards in any fiscal year under which the maximum amount of cash
payable under the award, when aggregated with the amount of cash payable under
awards made in the immediately preceding two fiscal years, exceeds an aggregate
of $5,000,000.
(e) Effect on Shares Available. The payment of a Performance-based
Award in cash shall not reduce the number of Shares available for issuance under
the Plan. The number of Shares available for issuance under the Plan shall be
reduced by the number of Shares issued upon payment of an award, less the number
of Shares surrendered or withheld to satisfy withholding obligations.
12. Foreign Qualified Grants. Awards under the Plan may be granted to such
Employees and such other persons described in paragraph 1 residing in foreign
jurisdictions as the Board of Directors may determine from time to time. The
Board of Directors may adopt such supplements to the Plan as may be necessary to
comply with the applicable laws of such foreign jurisdictions and to afford
participants favorable treatment under such laws; provided, however, that no
award shall be granted under any such supplement with terms that are more
beneficial to the participants than the terms permitted by the Plan.
13. Changes in Capital Structure.
(a) Share Splits and Dividends. If the number of outstanding Shares of
the Company is hereafter increased or decreased or changed into or exchanged for
a different number or kind of securities of the Company by reason of any Share
split, combination or dividend payable in Shares, recapitalization or
reclassification, appropriate adjustment shall be made by the Board of Directors
43
in the number and kind of Shares available for grants under the Plan. In
addition, the Board of Directors shall make appropriate adjustment in the number
and kind of Shares as to which outstanding options, or portions thereof then
unexercised, shall be exercisable, so that the optionee's proportionate interest
before and after the occurrence of the event is maintained. Notwithstanding the
foregoing, the Board of Directors shall have no obligation to effect any
adjustment that would or might result in the issuance of fractional Shares, and
any fractional Shares resulting from any adjustment may be disregarded or
provided for in any manner determined by the Board of Directors. Any such
adjustments made by Board of Directors shall be conclusive.
(b) Mergers, Reorganizations, Etc. The Board of Directors may include
such terms and conditions, including without limitation, provisions relating to
acceleration in the event of a change in control, as it deems appropriate in
connection with any award under the Plan with respect to a merger,
consolidation, plan of exchange, acquisition of property or stock, separation,
reorganization or liquidation to which the Company or a subsidiary is a party or
a sale or all or substantially all of the Company's assets (each, a
"Transaction").Notwithstanding the foregoing, in the event of a Transaction, the
Board of Directors shall, in its sole discretion and to the extent possible
under the structure of the Transaction, select one or the following alternatives
for treating outstanding Incentive Stock Options or Non-Statutory Stock Options
under the Plan:
(i) Outstanding options shall remain in effect in accordance with
their terms; or
(ii) Outstanding options shall be converted into options to
purchase securities issued by the company that is surviving or
acquiring company in the Transaction. The amount, type of securities
subject thereto and exercise price of the converted options shall be
determined by the Board of Directors of the Company, taking into
account the relative values of the companies involved in the
Transaction and the exchange rate, if any, used in determining
securities of the surviving corporation to be issued to holders of
Shares of the Company. Unless otherwise determined by the Board of
Directors, the converted options shall be vested only to the extent
that the vesting requirements relating to options granted hereunder
have been satisfied; or
(iii) The Board of Directors shall provide a 30-day period prior
to the consummation of the Transaction during which outstanding options
may be exercised to the extent then exercisable, and upon the
expiration of such 30-day period, all unexercised options shall
immediately terminate. The Board of Directors may, in its sole
discretion, accelerate the exercisability of options so that they are
exercisable in full during such 30-day period.
(c) Dissolution of the Company. In the event of the dissolution of the
Company, options shall be treated in accordance with paragraph 13(b)(iii).
(d) Rights Issued by Another Corporation. The Board of Directors may
also grant options, stock appreciation rights, performance units, stock bonuses
and cash bonuses and issue restricted stock under the Plan having terms,
conditions and provisions that vary from those specified in this Plan provided
that any such awards are granted in substitution for, or in connection with the
44
assumption of, existing options, stock appreciation rights, stock bonuses, cash
bonuses, restricted stock and performance units granted, awarded or issued by
another corporation and assumed or otherwise agreed to be provided for by the
Company pursuant to or by reason of a Transaction.
14. Amendment of Plan. The Board of Directors may at any time, and from
time to time, modify or amend the Plan in such respects as it shall deem
advisable because of changes in the law while the Plan is in effect or for any
other reason. Except as provided in paragraphs 9, 10 and 13, however, no change
in an award already granted shall be made without the written consent of the
holder of such award.
15. Approvals. The obligations of the Company under the Plan are
subject to the approval of state and federal authorities or agencies with
jurisdiction in the matter. The Company will use its best efforts to take steps
required by state or federal law or applicable regulations, including rules and
regulations of the Securities and Exchange Commission and any stock exchange on
which the Company's Shares may then be listed, in connection with the grants
under the Plan. The foregoing notwithstanding, the Company shall not be
obligated to issue or deliver Shares under the Plan if such issuance or delivery
would violate applicable state or federal securities laws.
16. Employment and Service Rights. Nothing in the Plan or any award
pursuant to the Plan shall (i) confer upon any Employee any right to be
continued in the employment of the Company or any subsidiary or interfere in any
way with the right of the Company or any subsidiary by whom such Employee is
employed to terminate such Employee's employment at any time, for any reason,
with or without cause, or to decrease such Employee's compensation or benefits,
or (ii) confer upon any person engaged by the Company any right to be retained
or employed by the Company or to the continuation, extension, renewal, or
modification of any compensation, contract, or arrangement with or by the
Company.
17. Taxes. Each participant who has received an award under the Plan
shall, upon notification of the amount due, pay to the Company in cash amounts
necessary to satisfy any applicable federal, state and local withholding
requirements. If the participant fails to pay the amount demanded, the Company
may withhold that amount from other amounts payable by the Company to the
participant including salary, subject to applicable law. With the consent of the
Board of Directors, a participant may satisfy this withholding obligation, in
whole or in part, by having the Company withhold from any Shares to be issued
that number of Shares that would satisfy the amount due or by delivering Shares
to the Company to satisfy the withholding amount.
18. Rights as a Shareholder. The recipient of any award under the Plan
shall have no rights as a shareholder with respect to any Shares until the date
of issue to the recipient of a stock certificate for such Shares. Except as
otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date occurs prior to the date
such stock certificate is issued.
45
APPENDIX C
--------------------------------------------------------------------------------
FORM OF PROXY
BSD MEDICAL CORPORATION
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD February 1, 2008
The undersigned hereby constitutes, appoints and authorizes Paul F.
Turner and Hyrum A. Mead and each of them, the true and lawful attorneys and
Proxies of the undersigned with full power of substitution and appointment, for
and in the name, place and stead of the undersigned, to act for and vote as
designated below, all of the undersigned's shares of the common stock of BSD
Medical Corporation, a Delaware corporation, at the Annual Meeting of
Stockholders to be held at 9:00 A.M. Mountain Time, on February 1, 2008, at The
Grand America Hotel located at 555 South Main Street, Salt Lake City, Utah, and
at any and all adjournments thereof, for the following purposes:
1. To elect five (6) Directors:
[ ] For all nominees listed below (except as marked to the
contrary):
[ ] Withhold authority to vote for the nominees listed below:
Paul F. Turner Hyrum A. Mead
Gerhard W. Sennewald Michael Nobel
Douglas P. Boyd Steven G. Stewart
(INSTRUCTION: To withhold authority to vote for any individual nominee,
draw a line through or otherwise strike out his name. If authority to
vote for the election of any nominee is not withheld, the execution of
this Proxy shall be deemed to grant such authority.)
2. To approve the amendment and restatement of the Amended and Restated
1998 Director Stock Plan to increase the number of shares of common
stock reserved for issuance under from 1,000,000 to 1,500,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3-5) To approve the amendment and restatement of the Company's Amended and
Restated 1998 Employee Stock Option Plan to:
3. Increase the number of shares of common stock reserved for issuance
from 2,677,300 to 3,427,300;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Increase the number of shares that may be awarded to each participant;
and
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Extend the termination date of the plan from February 9, 2008 to ten
years from the date the plan is adopted by the Board of Directors, or
the date the plan is approved by the shareholders, whichever is
earlier, subject to earlier termination by the Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
36
6. To approve the selection of Tanner LC as the Company's independent
registered public accounting firm for the fiscal year ending August 31,
2008.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. To transact such other business as may properly come before the
meeting, or any adjournment thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby revokes any Proxies as to said shares heretofore
given by the undersigned, and ratifies and confirms all that said attorneys and
Proxies may lawfully do by virtue hereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR ALL PROPOSALS. THIS PROXY CONFERS DISCRETIONARY
AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF
THE MAILING OF THE NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS TO THE
UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement furnished herewith.
DATED:
-------------- --------------------------------------
Signature
Signature(s) should agree with the name(s) shown hereon. Executors,
administrators, trustees, guardians and attorneys should indicate their capacity
when signing. Attorneys should submit powers of attorney.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF BSD
MEDICAL CORPORATION. PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED
ENVELOPE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING.
46