Exhibit
10.1




BSD
MEDICAL CORPORATION




THIRD
AMENDED AND RESTATED


1998
DIRECTOR STOCK PLAN




PART
A.   PLAN ADMINISTRATION AND ELIGIBILITY




1.       
     Purpose.




The
purpose of this Third Amended and Restated 1998 Director Stock Plan (the “Plan”)
of BSD Medical Corporation (the “Company”) is to encourage ownership in the
Company by outside directors of the Company (each, a “Non-Employee Director,” or
collectively, the “Non-Employee Directors”) whose continued services are
considered essential to the Company’s continued progress and thus to provide
them with a further incentive to remain as directors of the
Company.




2.     
       Administration.




The Board
of Directors (the “Board”) of the Company or any committee (the “Committee”) of
the Board that will satisfy Rule 16b-3 of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), and any regulations promulgated thereunder, as
from time to time in effect, including any successor rule (“Rule 16b-3”), shall
supervise and administer the Plan. The Committee shall consist solely of two or
more non-employee directors of the Company, who shall be appointed by the Board.
A member of the Board shall be deemed to be a “non-employee director” only if
such member satisfies such requirements as the Securities and Exchange
Commission may establish for non-employee directors under Rule 16b-3. No member
of the Board or the Committee shall receive additional compensation for services
in connection with the administration of the Plan.




The Board
or the Committee may adopt such rules or guidelines as it deems appropriate to
implement the Plan. All questions of interpretation of the Plan or of any shares
issued under it shall be determined by the Board or the Committee and such
determination shall be final and binding upon all persons having an interest in
the Plan.




3.     
       Participation in the
Plan.




Each
member of the Board who is not an employee of the Company or any of its
subsidiaries or affiliates shall receive payment for his or her Annual Retainer
(as defined in Section 6 below) under the Plan, and may receive an Option (as
defined in Section 6 below), for so long as he or she serves as a director of
the Company.




4.       
     Stock Subject to the
Plan.




The
maximum number of shares of the Company’s common stock, par value $0.001 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 five hundred thousand (1,500,000). The limitation on the
number of shares which may be issued under the Plan shall be subject to
adjustment as provided in Section 9 of the Plan.










PART
B.   TERMS OF THE PLAN




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, 2011, 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 Sixty Thousand Dollars ($60,000)
(the “Annual Retainer”); provided, however, that any Non-Employee Director
qualifying as a “financial expert” pursuant to Item 407(d)(5) of Regulation S-K
promulgated under the Securities Exchange Act of 1934, as amended (“Financial
Expert”), shall receive an Annual Retainer of Sixty-Five Thousand Dollars
($65,000). If a Non-Employee Director no longer serves as a director of the
Company, for any reason including death or disability, such Non-Employee
Director shall be entitled to all unpaid portions of his or her Annual Retainer
which shall have accrued (on a daily basis) through the date of such
termination.




b.      Cash Payments. Each
Non-Employee Director shall receive annually from the Company, as part of the
Annual Retainer, Thirty Thousand Dollars ($30,000) in cash (the “Cash Payment”);
provided, however, that the Financial Expert shall receive an annual Cash
Payment of Thirty-Five Thousand Dollars ($35,000). The Cash Payment shall be
made in arrears in equal semi-annual installments on May 1 and November 1 of
each year (or if such day is not a business day, on the next succeeding business
day).




c.      Common Stock Payments; 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 on May 1 of each year (or if such day is not a business day, on
the next succeeding business day). The number of shares of Common Stock included
in the Common Stock Payment shall be determined by dividing Thirty Thousand
Dollars ($30,000) by (i) the preceding twenty (20) day average of the closing
prices for the Common Stock as reported by The NASDAQ Stock Market, or other
applicable exchange, 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 the grant shall be equal to the largest number of whole
shares determined as follows:




$30,000
            =
      Number of SharesFair
      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.


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d.      Options.




(i)           Annual Grant. In addition to
the Annual Retainer, during the term of the Plan, the Company may grant to each
Non-Employee Director for any year in which the Non-Employee Director serves as
a Non-Employee Director of the Company, an option to purchase shares of Common
Stock (the “Option”).  The Option shall not qualify as an “incentive
stock option” as defined in Section 422 of the Internal Revenue Code of 1986. If
a Non-Employee Director no longer serves as a director of the Company, for any
reason including death or disability, such Non-Employee Director shall be
entitled to the portion of his or her Option which shall have accrued (on a
daily basis) through the date of such termination.




(ii)           Purchase Price. The purchase
price of the Common Stock issued pursuant to an exercise of the Option shall be
the Fair Market Value of the Common Stock at the date the Option is granted (the
“Purchase Price”), with such fair market value to be determined as provided in
Section 6.c.(i) above.  The Purchase Price shall be payable upon the
exercise of the Option and may be paid by (i) cash or check payable to the
Company, (ii) the delivery to the Company of the number of outstanding shares of
Common Stock equal in Fair Market Value to the Purchase Price, or (iii)
receiving from the Company in exchange for the Option the number of shares of
Common Stock equal in value to the excess of the Fair Market Value of one share
of Common Stock of the Company over the Purchase Price per share of Common
Stock, multiplied by the number of shares of Common Stock underlying the
Option.




(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 Director 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.


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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 Non-Employee
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.




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.






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