SCHEDULE 14A INFORMATION
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-11(c) or ss. 240.14a-12
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BSD MEDICAL CORPORATION
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Name of Registrant as Specified in Its Charter
BSD MEDICAL CORPORATION
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Name of Person(s) Filing Proxy Statement if other than the Registrant
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and )-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule O-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 by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-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:________________________________________________________
<PAGE>
BSD MEDICAL CORPORATION
NOTICE OF MEETING OF STOCKHOLDERS
AUGUST 21, 1998
To the Stockholders of BSD Medical Corporation:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of
BSD Medical Corporation, a Delaware corporation (the "Company"), will be held on
August 21, 1998, at 11:00 a.m., local time, at the offices of the Company
located at 2188 West 2200 South, Salt Lake City, Utah, 84119 (the "Meeting") for
the following purposes:
1. To elect five directors to serve for one year terms, or until their
respective successors shall be duly elected or appointed.
2. To consider and approve Tanner + Co. as independent auditor for the
Company for the fiscal year ending August 31, 1998.
3. To consider, approve and adopt the Company's 1998 Director Stock
Plan;
4. To consider, approve and adopt the Company's 1998 Stock Incentive
Plan; and
5. To transact such other business as may properly come before the
Meeting, or any adjournment or postponement thereof.
The Board of Directors of the Company has set July 1, 1998 as the
record date for the determination of stockholders entitled to notice of and to
vote at the Meeting. Accordingly, only stockholders of record at the close of
business on that date are entitled to vote at the Meeting, or any adjournment or
postponement thereof.
Stockholders are cordially invited to attend the Meeting. Regardless of
whether you expect to attend the Meeting in person, we urge you to read the
attached Proxy Statement and sign and date the accompanying proxy card and
return it in the enclosed postage-prepaid envelope. It is important that your
shares be represented at the Meeting. If you receive more than one proxy card
because your shares are registered in different names or notices go to different
addresses, each card should be completed and returned to assure that all of your
shares are voted.
A copy of the Company's 1997 Annual Report on Form 10-KSB and the
Company's Quarterly Report for its third fiscal quarter on Form 10-QSB, each as
filed with the Securities and Exchange Commission, are enclosed herewith. Please
take time to read this report.
By Order of the Board
/s/Dixie Toolson Sells
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Salt Lake City, Utah Dixie Toolson Sells
July 27, 1998 Secretary
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YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN
Please indicate your voting instructions on the enclosed proxy card,
and then sign and return it in the envelope provided, which is addressed for
your convenience. No postage is required if the envelope is mailed in the United
States.
PLEASE MAIL YOUR PROXY PROMPTLY
PROXIES MUST BE DELIVERED TO THE COMPANY NO LATER THAN
AUGUST 15, 1998, TO BE VOTED AT THE MEETING
<PAGE>
BSD MEDICAL CORPORATION
2188 West 2200 South
Salt Lake City, Utah 84119
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 21, 1998
SOLICITATION OF PROXY, REVOCABILITY AND VOTING
General
The accompanying proxy is solicited on behalf of the Board of Directors
(the "Board") of BSD Medical Corporation, a Delaware corporation (the
"Company"), for use at the annual meeting of stockholders of the Company (the
"Meeting"). The Meeting will be held on August 21, 1998, at 11:00 a.m., Salt
Lake City time, at the Company's offices located at 2188 West 2200 South, Salt
Lake City, Utah. All holders of record of common stock, par value $.01 per share
(the "Common Stock"), on July 1, 1998, the record date, will be entitled to vote
at the Meeting. At the close of business on the record date, the Company had
16,176,980 shares of Common Stock outstanding and entitled to vote. A majority,
8,088,490, of these shares of Common Stock will constitute a quorum for the
transaction of business at the Meeting. Each share of the Company's Common Stock
is entitled to one vote upon each matter presented to stockholders at the
Meeting. This Proxy Statement, the accompanying proxy, the Company's Annual
Report on Form 10-KSB, and the Company's Quarterly Report for its third fiscal
quarter on Form 10-QSB were first mailed to stockholders on or about July 30,
1998. The Company's Annual Report on Form 10-KSB and Quarterly Report on Form
10-QSB contain the information required by Rule 14a-3 of the Rules of the
Securities and Exchange Commission (the "SEC"), including audited financial
statements for the Company's fiscal year which ended August 31, 1997, and
unaudited financial statements for the third fiscal quarter which ended on May
31, 1998. The Annual Report is not and should not be regarded as material for
the solicitation of proxies or as a communication by means of which solicitation
is made with respect to the Meeting. At the Meeting, the Company's stockholders
will be asked to (i) elect five directors, (ii) approve independent public
accountants to audit the Company's financial statements for the fiscal year
ending August 31, 1998, (iii) approve the Company's 1998 Director Stock Plan and
the issuance of shares of Common Stock to its non-employee directors, (iv)
approve the Company's 1998 Stock Incentive Plan, and (v) vote on such other
matters as may properly come before the Meeting or any adjournment or
postponement of the Meeting.
<PAGE>
Proxies in the enclosed form will be effective if they are properly
executed, returned to the Company prior to the Meeting, and not revoked. The
Common Stock represented by each effective proxy will be voted at the Meeting in
accordance with the instructions on the proxy. If no instructions are indicated
on a proxy, all shares of Common Stock represented by that proxy will be voted
in favor of the election of the nominees for directors described in this Proxy
Statement and, as to any other matters of business which properly come before
the Meeting, will be voted by the named proxies as directed by the present
Board.
A stockholder giving a proxy pursuant to this solicitation may revoke
it at any time prior to its exercise by delivering to the Secretary of the
Company a written notice of revocation, or a duly executed proxy bearing a later
date, or by attending the Meeting and voting in person. Attendance at the
Meeting will not, however, constitute revocation of a proxy without further
action by the stockholder. Any written notice revoking a proxy should be sent to
the principal executive offices of the Company, addressed as follows: BSD
Medical Corporation, 2188 West 2200 South, Salt Lake City, Utah, 84119,
Attention: Dixie Toolson Sells, Secretary.
The five nominees for director receiving the highest number of
affirmative votes will be elected as directors. Votes withheld from any director
will be counted for purposes of determining the presence of a quorum for the
transaction of business, but will have no other effect. The approval of the
Company's independent auditors, the 1998 Director Stock Plan, and the 1998 Stock
Option Plan, each require the affirmative vote of the majority of the shares
present at the meeting either in person or by proxy. If a stockholder abstains
from voting certain shares, those shares will be treated as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum. Abstentions, however, will not be considered as votes cast either for or
against a particular matter. The Company intends to treat shares referred to as
"broker non-votes" (i.e., shares held by brokers or nominees as to which the
broker or nominee indicates on a proxy that it does not have discretionary
authority to vote) as shares that are present and entitled to vote for purposes
of determining the presence of a quorum. Broker non-votes will not be considered
as votes cast either for or against a particular matter.
The entire cost of soliciting proxies for use at the Meeting (estimated
by the Company to be approximately $15,000) will be borne by the Company.
Proxies will be solicited by use of the mails. Directors, officers and regular
employees of the Company may solicit proxies by telephone, telecopier or
personal contact. The Company will not pay any special compensation, to any
person, in connection with the solicitation of proxies. The cost of the
solicitation of proxies will include the cost of supplying necessary copies of
the solicitation materials to the beneficial owners of those shares of Common
Stock which are held of record by brokers, dealers, banks, voting trustees and
their nominees, including, upon request, the reasonable expenses which are
incurred by such record holders in mailing the solicitation materials to
beneficial owners.
1. ELECTION OF DIRECTORS
Nominees and Information
At the Meeting, five directors are to be elected to serve one year
terms expiring at the Meeting of the Company's stockholders to be held in 1999.
All directors will serve until their successors are duly elected and qualified,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
<PAGE>
<TABLE>
<CAPTION>
The persons named as proxy holders in the enclosed proxy cards (Mr.
Paul F. Turner and Ms. Dixie Toolson Sells) have advised the Company that,
unless a contrary direction is indicated on the proxy card, they intend to vote
for the five nominees named below. They have also advised the Company that in
the event any of the five nominees are not available for election for any
reason, they will vote for the election of such substitute nominee or nominees,
if any, as the Board may propose. The Board has no reason to believe that any
nominee will be unavailable to serve on the Board.
The Company's nominees for the Board are as follows:
Director
Name Age Principal Occupation Since
---- --- -------------------- -----
<S> <C> <C> <C>
Paul F. Turner 51 Chairman of the Board of Directors of the Company; 1994
Acting President, and Senior Vice President of Research
Gerhard W. Sennewald, 62 President and Chief Executive Officer of Medizin-Technik 1994
Ph.D. GmbH
S. Lewis Meyer, Ph.D. 54 President and Chief Executive Officer of Imatron, Inc.; 1994
Chief Executive Officer of Heartscan Imaging, Inc.
J. Gordon Short, M.D. 66 President and Chief Executive Officer of Brevis 1994
Corporation
Michael Nobel, Ph.D. 58 Chief Executive Officer of the MRAB Group 1998
</TABLE>
PAUL F. TURNER has served as a director of the Company since 1994. Mr. Turner
served as Staff and Senior Scientist to the Company from 1979 to 1986, and as
Vice President of Research from September 1986 through January 1989. In January,
1989, Mr. Turner was promoted to Senior Vice President of Research, and served
the Company in that position through October, 1993. Mr. Turner resigned as Vice
President of Research in October, 1993, but remained the Company's Senior
Scientist until December 1994, when Mr. Turner was re-appointed as Senior Vice
President of Research and was elected to the Board. On October 3, 1995, the
Board appointed Mr. Turner, Acting President.
GERHARD W. SENNEWALD, Ph.D. has served as a director of the Company since 1994.
Dr. Sennewald has been the Company's key European representative and distributor
for 13 years and has been instrumental in obtaining the majority of the
Company's foreign sales. Dr. Sennewald is 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.
S. LEWIS MEYER, Ph.D. has served as a director of the Company since 1994. Dr.
Meyer previously served as a Director of the Company in the 1980's. Dr. Meyer is
President and Chief Executive Officer of Imatron, Inc., a publicly traded
manufacturer of Ultrafast CT(TM) Scanner. Dr. Meyer is also Chief Executive
Officer of Heartscan Imaging, Inc., a subsidiary of Imatron, Inc., which is
engaged in the development of a nationwide network of coronary artery disease
risk assessment centers. Dr. Meyer is a Director of Finet Holdings Corp., a
publicly traded company that provides E-commerce services to the real estate
industries. Dr. Meyer is also a member of the board of directors of the American
Electronics Association.
<PAGE>
J. GORDON SHORT, M.D. has served as a director of the Company since 1994. From
1978 until 1982, Dr. Short participated in the initial development and
establishment of the Company's products as Medical Director for the Company. He
also previously served on the Company's Medical Advisory Board. Dr. Short is
President and Chief Executive Officer of Brevis Corporation, a medical products
company which specializes in consumable specialty supplies.
MICHAEL NOBEL, Ph.D. was appointed to the Board of Directors on January 13,
1998. Dr. Nobel is Chairman of the board of the Nobel Family Society. He is
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. Dr. Nobel is the CEO of the MRAB
Group which provides diagnostic imaging services.
Board of Director Meetings
In 1997, there were four meetings of the Board. Each director attended
at least 75% of all of the meetings. The Board, as a whole, acts as the audit
committee, nominating committee, compensation committee and executive committee.
The Board does not have any current plans to establish separate committees for
any of those functions.
Compensation of Directors
Mr. Turner is the sole member of the Board who is employed by the
Company. Mr. Turner does not receive any separate compensation for services
performed as a director, except as described below. In 1995, the Company gave
each director 2,000 shares of Common Stock and options to purchase an additional
35,000 share under the "BSD Corporation 1987 Stock Option Plan." The exercise
price for those options is $.10 per share. The options vest over a 5-year period
and expire in 2005. In addition, Drs. Sennewald, Meyer and Short shall receive
50,000 shares of Common Stock, and Dr. Nobel shall receive 20,000 shares of
Common Stock, each as part of his respective compensation for services rendered
to the Company from the date such respective director was elected to the Board
through August 31, 1998. As of July 1, 1998, the award made to each of Drs.
Sennewald, Meyer and Short were valued at $14,695, and the award made to Dr.
Nobel was valued at $5,878.
Certain Relationships
The following information summarizes certain transactions either
engaged in or proposed to be engaged in by the Company involving its directors:
<PAGE>
During the fiscal years ended August 31, 1997 and 1996, the Company
made sales of $692,542 and $277,509 to Medizin-Technik GmbH, a distribution
company controlled by Dr. Sennewald. Further, as of August 31, 1997, $35,702 of
the Company's inventory was on consignment to Medizin-Technik GmbH.
The Company had a non-interest bearing, unsecured note for $150,000
payable to Dr. Sennewald. The Company paid the note in full in the first quarter
of fiscal year ending August 31, 1998.
Dr. Sennewald serves as a distributor of the Company products. In
connection therewith, Dr. Sennewald has executed a copy of the Company's
Distributor Agreement, which terms, provisions, and costs are substantially
equivalent to those contained in the Distributorship Agreements the Company has
executed with others. In addition, the Company issued to Dr. Sennewald a
fully-paid and exclusive license to utilize certain of the Company's patented
technology within Europe in exchange for $15,000 and the payment of all European
maintenance fees, translation and filings fees, and defense costs incurred in
connection with the underlying patents. The license is effective for such period
as Dr. Sennewald remains actively involved with the distributor of the Company's
products in Europe, and the distributor is actively marketing the Company's
products in Europe.
During fiscal year 1998, the Board of the Company approved the payment
of $20,000 to S. Lewis Meyer, and the board of directors of TherMatrx, Inc., a
Delaware corporation which is beneficially owned equally by each of the Company
and Oracle Partners Limited, approved the payment of $25,000 to Dr. Meyer, each
for special and significant consulting services Dr. Meyer provided to the
Company and TherMatrx. Such services included the negotiation of the partnership
arrangement with Oracle Partners Limited and the settlement between the Company
and Urologix, Inc.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR ALL OF THE FIVE
NOMINEES SET FORTH ABOVE UNDER THE HEADING "NOMINEES AND INFORMATION."
2. APPOINTMENT OF INDEPENDENT AUDITORS
At the meeting, stockholders will be asked to ratify the Company's
appointment of Tanner + Co. ("Tanner") as its independent public accountants for
the fiscal year ending August 31, 1998. Tanner currently acts as the Company's
independent auditors, and has acted in that capacity since August 14, 1997, when
it was engaged to replace KPMG Peat Marwick, L.L.P. ("KPMG"), as the Company's
independent certified public accountants for the year ending August 31, 1997.
KPMG's engagement was terminated on August 14, 1997. KPMG's report on the
Company's 1996 financial statements was modified to include an uncertainty as to
the Company's ability to continue as a going concern. Except for that
modification, KPMG's report on the Company's financial statements for each of
the two most recent years did not contain an adverse opinion or disclaimer of
opinion, nor was its report modified as to uncertainty, audit scope, or
accounting principles. KPMG's termination did not occur because of resolved or
unresolved disagreements on any matter of accounting principles or practices,
financial statement disclosures or auditing scope or procedures. The decision to
change the Company's accountants from KPMG to Tanner was recommended by the
Company's officers and approved by the Board.
<PAGE>
A representative of Tanner will be present at the Meeting, will have
the opportunity to make a statement, and will be expected to be available to
respond to appropriate questions from stockholders.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE TO RATIFY THE SELECTION
OF TANNER + CO. TO SERVE AS AUDITORS FOR THE COMPANY FOR THE FISCAL YEAR ENDING
AUGUST 31, 1998.
3. APPROVAL OF 1998 DIRECTOR STOCK PLAN
The Board has adopted the 1998 Director Stock Plan (the "Director Stock
Plan"), subject to approval by the Company's stockholders at the Meeting. 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 approve the Director Stock Plan. If the Director Plan is not so approved, it
will not become effective.
The purpose of the Director Stock Plan is to provide for a method of
compensation for the members of the Board who are not employees of the Company
(the "Non-Employee Directors") that will strengthen the alignment of their
financial interests with those of the Company's stockholders. The following is a
summary of the principal provisions of the Director Stock Plan, a copy of which
is attached to this Proxy Statement as Exhibit A. This summary is qualified in
its entirety by express reference to the complete text of the Director Stock
Plan.
The Director Stock Plan would provide each Non-Employee Director with
an annual compensation retainer of $12,000 (the "Annual Retainer"), and an
option to acquire 25,000 shares of the Company's Common Stock at an exercise
price equal to eighty-five percent (85%) of the fair market value of the Common
Stock as of the date of the grant (the "Option"). Of the Annual Retainer, a cash
payment of $4,000 will be made in arrears to each Non-Employee Director, payable
in equal installments of $2,000 each 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 balance of the Annual Retainer will be 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
twenty (20) day average closing prices for the Common Stock prior to the payment
dates, as reported by the NASDAQ or the market makers in the Company's Common
Stock, or by the Board. The Common Stock Payments will be made on March 1 and
September 1 of each year.
The Director Stock Plan would also provide each Non-Employee Director
with an annual Option to acquire shares of Common Stock, effective September 1,
1998, and for each fiscal year thereafter. The total number of shares of Common
Stock included in the annual Option granted to each Non-Employee Director will
be 25,000. Each Option will vest in five equal and annual installments, and will
expire ten years from the date of grant. Portions of the Option which have
vested in the Non-Employee Director may be exercised at eighty-five percent
(85%) of 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.
<PAGE>
If approved by the Company's stockholders, the first Annual Retainer
payments and the Option will be made for the period which commenced on September
1, 1998. 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.
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. There will be no vesting or
similar conditions applicable to shares following the applicable Common Stock
Payment. The aggregate number of shares of Common Stock which may be granted
during the term of the Director Stock Plan is 1,000,000. 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 Director Stock Plan will continue until August 31, 2003, unless and
until it is terminated prior to that time by action of the Board. 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(c)(2)(ii) (or any successor provision)
under the Securities Exchange Act of 1934, as then in effect.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE TO APPROVE THE ADOPTION
OF THE COMPANY'S 1998 DIRECTOR STOCK PLAN.
4. APPROVAL OF THE 1998 STOCK INCENTIVE PLAN
General
In December, 1997, the Board adopted, subject to approval by the
Company's stockholders, the 1998 Stock Incentive Plan (the "Incentive Plan") and
reserved 2,000,000 shares of Common Stock for issuance under the Incentive Plan.
The Board believes that the availability of stock options and other incentives
will be 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 approve the Incentive Plan. If
the Incentive Plan is not so approved it will not be effective.
<PAGE>
Certain provisions of the Incentive Plan are summarized below. The
complete text of the Incentive Plan is attached to this Proxy Statement as
Exhibit B and the following summary is qualified in its entirety by express
reference to the complete text 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 20 employees,
officers and directors eligible to participate in the Incentive Plan.
The Incentive Plan shall be administered by the Board, which shall
designate 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 2,000,000. 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 Incentive Plan shall continue in effect for ten years from the date
it was adopted by the Board, subject to earlier termination by the Board. The
Board may suspend or terminate the Incentive Plan at any time.
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"). No employee may be granted options or stock appreciation rights under
the Incentive Plan for more than an aggregate of 400,000 shares in any
consecutive three-year period. No monetary consideration is paid to the Company
upon the granting of options.
<PAGE>
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. On
July 1, 1998 the market value of the shares of Common Stock was approximately
$.29 per share. 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. No options have been granted
under the Incentive Plan.
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 may not exceed 100,000 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 an 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 existence of SARs, as well as certain bonus rights described below,
would require charges to income over the life of the right based upon the amount
of appreciation, if any, in the market value of the shares of Common Stock over
the exercise price of shares subject to exercisable SARs or bonus rights.
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.
<PAGE>
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,
operating income, cash flows or any of the foregoing. 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. 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.
Tax Consequences
Certain options authorized to be granted under the Incentive Plan are
intended to qualify as ISOs for federal income tax purposes. Under federal
income tax law currently in effect, the optionee will recognize no income upon
grant or upon a proper exercise of the ISO. The amount by which the fair market
value of the stock at the time of exercise exceeds the exercise price, however,
is includible in the optionee's alternative minimum taxable income and may,
under certain conditions, result in alternative minimum tax liability. If an
employee exercises an ISO and does not dispose of any of the option shares
within two years following the date of grant and within one year following the
date of exercise, any gain realized on subsequent disposition of the shares will
be treated as income from the sale or exchange of a capital asset. If an
employee disposes of shares acquired upon exercise of an ISO before the
expiration of either the one-year holding period or the two-year waiting period,
any amount realized will be taxable as ordinary compensation income in the year
of such disqualifying disposition to the extent that the lesser of the fair
market value of the shares on the exercise date or the fair market value of the
shares on the date of disposition exceeds the exercise price. The Company will
not be allowed any deduction for federal income tax purposes at either the time
of the grant or the exercise of an ISO. Upon any disqualifying disposition by an
employee, the Company will generally be entitled to a deduction to the extent
the employee realized ordinary income.
<PAGE>
Certain options authorized to be granted under the Incentive Plan will
be treated as NSOs for federal income tax purposes. Under federal income tax law
currently in effect, no income is realized by the grantee of an NSO until the
option is exercised. At the time of exercise of an NSO, the optionee will
realize ordinary compensation income, and the Company will generally be entitled
to a deduction, in the amount by which the market value of the shares subject to
the option at the time of exercise exceeds the exercise price. The Company is
required to withhold on the income amount. Upon the sale of shares acquired upon
exercise of an NSO, the difference between the amount realized from the sale as
compared with the market value of the shares on the date of exercise will
generally be treated by the optionee as income or loss from the sale of a
capital asset.
Under federal income tax law currently in effect, no income is realized
by the grantee of a SAR until the SAR is exercised. At the time the SAR is
exercised, the grantee will realize ordinary compensation income, and the
Company generally will be entitled to a deduction, in an amount equal to the
fair market value of the shares or cash received. The Company is required to
withhold on the income amount.
An employee who receives stock in connection with the performance of
services will generally realize taxable income at the time of receipt unless the
shares are substantially nonvested for purposes of Section 83 of the Code and no
Section 83(b) election is made. If the shares are not vested at the time of
receipt, the employee will realize taxable income in each year in which a
portion of the shares substantially vest, unless the employee elects to
accelerate the recognition of income under Section 83(b) within 30 days after
the original transfer. The Company will generally be entitled to a tax deduction
in the amount includible as income by the employee at the same time or times as
the employee recognizes income equal to the amount of the cash bonus paid at the
time of receipt.
Section 162(m) of the Code limits to $1,000,000 per person the amount
that the Company may deduct for compensation paid to any of its most highly
compensated officers in any single year. Under IRS regulations, compensation
received through the exercise of an option or a SAR is not subject to the
$1,000,000 limit if the option or SAR and the Incentive Plan meet certain
requirements of the exception for performance-based compensation. One
requirement is that stockholders approve per-employee limits on the number of
shares as to which options and SARs may be granted. For other performance-based
awards, stockholders must approve the performance criteria upon which award
payouts will be based and the maximum amount payable under awards, both of which
are set forth in Section 11 of the Incentive Plan regarding performance-based
awards. Other requirements of the exception for performance-based compensation
are that the option or stock appreciation right be granted by a committee
composed solely of at least two outside directors and that the exercise price of
the option or the stock appreciation right be not less than fair market value of
the Common Stock on the date of grant. The Company believes that if Proposal 4
is approved by stockholders, and if the options or rights are granted by a
committee composed solely of at least two outside directors, then compensation
paid or deemed paid in connection with options, SARs and other performance-based
awards granted or made under the Incentive Plan in compliance with the above
requirements will not be subject to the $1,000,000 deduction limit.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE TO APPROVE THE ADOPTION
OF THE COMPANY'S 1998 STOCK INCENTIVE PLAN.
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the names, ages and positions held by all
directors and executive officers of the Company as of the date hereof. Directors
serve until the next Meeting of stockholders and until their successors have
been duly elected or appointed. Executive officers serve at the discretion of
the Board.
Year First
Elected or
Name and Address Age Position Appointed
---------------- --- -------- ---------
<S> <C> <C> <C>
Paul F. Turner 51 Chairman of the Board; Acting President; 1994
2188 West 2200 South Senior Vice President of Research
Salt Lake City, Utah 84119
Dixie Toolson Sells 48 Vice President of Regulatory Affairs; 1994
2188 West 2200 South Corporate Secretary
Salt Lake City, Utah 84119
Ray Lauritzen 48 Vice President of Field Services 1988
2188 West 2200 South
Salt Lake City, Utah 84119
Gerhard W. Sennewald, Ph.D. 62 Director 1994
2188 West 2200 South
Salt Lake City, Utah 84119
S. Lewis Meyer, Ph.D. 54 Director 1994
2188 West 2200 South
Salt Lake City, Utah 84119
J. Gordon Short, M.D. 66 Director 1994
2188 West 2200 South
Salt Lake City, Utah 84119
Michael Nobel, Ph.D. 58 Director 1998
2188 West 2200 South
Salt Lake City, Utah 84119
</TABLE>
Business Biographies
For a description of the business biographies of the Company's
directors, see the section of this Proxy Statement entitled "Election of
Directors."
DIXIE TOOLSON SELLS has been with the Company for 20 years. She served as
Administrative Director from 1978 to 1984, and Director of Regulatory Affairs
from 1984 to September 1987. In September, 1987, Ms. Sells was appointed to
serve as Vice President of Regulatory Affairs, and served in that position until
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. Ms. Sells also serves on the board of directors of the Utah
Intermountain Biomedical Association.
<PAGE>
RAY LAURITZEN has been with the Company for 15 years. He served as Field Service
Manager from 1982 to January 1988 and as Vice President of Field Service
Operations since January 1988.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of the Company's
Common Stock beneficially owned as of July 1, 1998, (i) by each person who is
known by the Company to own beneficially more than 5% of the Company's Common
Stock, (ii) by each director and director nominee, (iii) by each of the
Company's named executive officers, (iv) by all directors, director nominees and
executive officers, as a group, as reported by each such person. Unless
otherwise indicated, each stockholder's address is c/o the Company, 2188 West
2200 South, Salt Lake City, Utah 84119.
Name of Amount and Nature of Percent
Director or Executive Officer Beneficial Ownership of Class(1)
----------------------------- -------------------- ---------
Dr. Gerhard W. Sennewald 7,176,946(2) 44.14%
Paul F. Turner 1,990,339(3) 12.17%
Dr. S. Lewis Meyer 26,000(4) *
Dr. J. Gordon Short 23,000(5) *
Dixie Toolson Sells 567,519(6) 3.49%
Ray Lauritzen 58,216(7) *
Dr. Michael Nobel -0- *
Holders of More than 5%
-----------------------
John E. Langdon 1,350,010(8) 8.36%
Directors and officers as a group 9,842,020(9) 59.22%
(7 persons)
* Less than 1%
1 Based on 16,176,980 outstanding shares of Common Stock.
2 Includes 83,065 shares of Common Stock for which Dr. Sennewald has
options and 500,000 for which he has shared voting rights with his
spouse.
3 Includes 175,421 shares of Common Stock for which Mr. Turner has
options. Excludes an option to acquire 1% of the issued and outstanding
common stock of TherMatrx, Inc., a partially owned subsidiary of the
Company.
<PAGE>
<TABLE>
<CAPTION>
4 Includes 21,000 shares of Common Stock for which Dr. Meyer has options.
5 Includes 21,000 shares of Common Stock for which Dr. Short has options.
6 Includes 85,027 shares of Common Stock for which Ms. Sells has options
and 21,000 for which she has shared voting rights with her spouse.
Excludes an option to acquire 2.25% of the issued and outstanding
common stock of TherMatrx, Inc., a partially owned subsidiary of the
Company.
7 Includes 56,216 shares of Common Stock for which Mr. Lauritzen has
options.
8 Includes 946,485 shares of Common Stock held by various trusts for
which Mr. Langdon (or his wife) serves as Trustee.
9 Includes 441,729 shares of Common Stock for which Dr. Sennewald, Mr.
Turner, Dr. Meyer, Dr. Short, Ms. Sells and Mr. Lauritzen have options.
Except as set forth above, the Company knows of no beneficial owner of
five percent or more of the Company's Common Stock nor does it know of any
arrangement which may at a subsequent date result in a change of control of the
Company.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows compensation paid by the Company to its
Acting President and chief executive officer Mr. Paul Turner for each of the
fiscal years ended August 31, 1995, 1996 and 1997. None of the Company's other
executive officers' total annual salary and bonus exceeded $100,000.
Name and Principal Fiscal Restricted All Other
Position Year Salary Bonus Stock Awards Compensation
-------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Paul F. Turner 1997 $115,000(1) $-0- $ -0- $-0-
1996 $115,000 $-0- $2,120(2) $-0-
1995 $115,000 $-0- $1,240(2) $-0-
</TABLE>
1 On February 9, 1998, the Board of Directors approved a raise in the
base compensation of Mr. Turner, granting him an annual salary of $140,000.
2 During each of the fiscal years ended August 31, 1995 and 1996, the
Company awarded Mr. Turner 1,000 shares of restricted Common Stock. At each of
these times no consistently reliable stock quotations were available because
there was no established market for the Company's Common Stock. However, the
Company received a valuation of $1.24 per share on a controlling interest basis
as of December 4, 1994 and $2.11 per share on a minority interest basis as of
December 31, 1996, which values were used for the shares listed in this table.
The Company believes these estimates may not be reliable indicators of actual
realizable value of these shares because the market quotations that were
available at the specified times were for less than $1.00 per share.
<PAGE>
Employment Contracts
The Company has an employment agreement with Mr. Turner dated November
2, 1988. The agreement provided for specified salary increases through 1992. The
agreement provides that after October 1, 1993, Mr. Turner's salary will be based
on reasonable mutual agreements. The agreement provides that if Mr. Turner's
employment is terminated (other than voluntarily by Mr. Turner), then he 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 regular
salary for the 12 month period immediately prior to the termination. The
agreement also requires the Company to pay Mr. Turner for any accrued unused
vacation at the time of termination. The Company is also obligated to pay Mr.
Turner $1,000 (or the equivalent value in stock options) for each newly issued
patent obtained by the Company as a result of Mr. Turner's efforts (Mr. Turner
receives only $500 if multiple inventors are involved).
Mr. Turner's agreement contains a non-competition covenant prohibiting
him from competing with the Company for one year following termination. The
Company 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.
<PAGE>
COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require the Company's executive officers and directors, and persons
who beneficially own more than ten percent of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the National
Association of Securities Dealers Automated Quotations System ("NASDAQ") and to
furnish the Company with copies.
Based on its review of the copies of such forms received by the
Company, or written representations from certain reporting persons, the Company
believes that during fiscal year 1997 all filing requirements under Section
16(a) were complied with.
STOCKHOLDER PROPOSALS
In accordance with recently adopted rules of the Securities and
Exchange Commission, a stockholder proposal to be considered for inclusion in
the proxy material for the Company's 1999 Annual Meeting must be received by the
Company no later than forty-five days before the 1999 Annual Meeting.
Accordingly, the Company requests the stockholders submit any appropriate
proposal to be received by the Company no later than November 30, 1998. Any such
proposals, as well as any questions related thereto, should be directed to the
Secretary of the Company.
OTHER MATTERS
The Board is not aware of any other business which may come before the
Meeting. If any other matters should properly come before the Meeting, the
persons named on the enclosed proxy card will vote all proxies in accordance
with their best judgment on such matters.
BY ORDER OF THE BOARD
/s/Dixie Toolson Sells
----------------------
Dixie Toolson Sells
Secretary
July 27, 1998
BSD MEDICAL CORPORATION
1998 DIRECTOR STOCK PLAN
PART A. PLAN ADMINISTRATION AND ELIGIBILITY
1. Purpose
The purpose of this 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 "NonEmployee 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.
<PAGE>
4. Stock Subject to the Plan
The maximum number of shares of the Company's common stock, par value
$.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, shall be one million (1,000,000). 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
5. 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, 2003, unless earlier terminated by the Board
of Directors or the Committee.
6. 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 Twelve Thousand Dollars ($12,000) (the "Annual Retainer"). 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, Four Thousand Dollars ($4,000)
in cash (the "Cash Payment"). 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 Four Thousand Dollars ($4,000) by the preceding twenty (20) day average
of the closing prices for the Common Stock as reported by (i) the NASDAQ Stock
Market, if available, on the date in question (or, if such day is not a business
day, on the next succeeding business day), (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:
<PAGE>
$4,000
__________________________________________ = 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 25,000 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 eighty-five percent (85%)
of 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.
<PAGE>
(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
7. 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.
8. 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.
9. 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.
10. 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.
<PAGE>
11. 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.
12. Governing Law
This Plan and all determinations made and actions taken pursuant hereto
shall be governed by the law of the State of Delaware.
Approved by the Board Of Directors: February 9, 1998
Approved by the Shareholders:
/s/Dixie Toolson Sells
Dixie Toolson Sells
Secretary
STOCK INCENTIVE PLAN
BSD MEDICAL CORPORATION, a Delaware corporation, (the "Company") adopts
this Stock Incentive Plan (the "Plan"), effective February 9, 1998.
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 two
million (2,000,000) 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 become
effective on the date adopted by the Board of Directors. 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 continue in effect for a period of 10
years from the date adopted by the Board of Directors, 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
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.
<PAGE>
(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
400,000 Shares in any consecutive three-year period.
<PAGE>
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
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 100,000 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. Stock 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.
<PAGE>
(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 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:
<PAGE>
(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 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
150,000 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
$300,000.
(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.
<PAGE>
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 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
<PAGE>
(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 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.
<PAGE>
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.
Approved by the Board of Directors: February 9, 1998.
By:/s/Dixie Toolson Sells
-------------------------
Secretary of BSD Medical Corporation
BSD MEDICAL CORPORATION PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 21, 1998
- --------------------------------------------------------------------------------
The undersigned hereby appoints Paul F. Turner and Dixie Toolson Sells,
as Proxies, each with the power to appoint his/her substitute, and hereby
authorizes them to represent and to vote, as designated below, all the shares of
common stock of BSD Medical Corporation (the "Corporation") held of record by
the undersigned on July 1, 1998, at the annual meeting of the stockholders to be
held on August 21, 1998, or any adjournment thereof.
1. Election of Directors. To elect the following nominees as Directors of the
Corporation, until such time as each such nominee's successor shall have
been elected and duly qualified: Paul F. Turner; Gerhard W. Sennewald,
Ph.D.; S. Lewis Meyer, Ph.D.; J. Gordon Short, M.D.; and Michael Nobel,
Ph.D. To withhold your vote from any of the nominees, please clearly
cross-out such nominee's name from the preceding list.
|_| FOR |_| ABSTAIN
2. Independent Accountant. To approve and appoint the accounting firm of
Tanner + Co. as the Corporation's independent accountant for the fiscal
year ending August 31, 1998.
|_| FOR |_| AGAINST |_| ABSTAIN
3. Director Stock Plan. To approve and adopt the 1998 Director Stock Plan, as
recommended by the Board of Directors.
|_| FOR |_| AGAINST |_| ABSTAIN
4. Stock Incentive Plan. To approve and adopt the 1998 Stock Incentive Plan,
as recommended by the Board of Directors.
|_| FOR |_| AGAINST |_| ABSTAIN
5. General. To approve such other business as may properly come before the
Annual Meeting or any adjournments thereof.
|_| FOR |_| AGAINST |_| ABSTAIN
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS and, when
properly executed, will be voted in the manner directed herein by the
undersigned shareholder. If no direction is made, this proxy will be voted for
all proposals and election set forth in this Proxy.
By signing this proxy, you represent and warrant to the Corporation
that you are entitled to vote the number of shares in the manner prescribed. The
Corporation may rely upon this representation and you agree to provide the
Corporation, upon request, with evidence that you are authorized to vote the
shares as represented.
Please sign your name exactly as it appears on the Corporation's
records, and indicate the number and class of shares of capital stock you held
of the Corporation as of July 1, 1998. When shares are held by joint tenants,
both should sign. When signing as attorney, as executor, administrator, trustee
or guardian, please give full title as such. If a corporation or other entity,
please sign in full corporate name by President or other authorized officer. If
a partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
Dated:________________________ , 1998 _________________________
(Signature of Shareholder)
______________________________
(Signature of Shareholder if held jointly)
Exact Name(s) of Shareholder(s),
as set forth in the Corporation's records
