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                                                                   EXHIBIT 10.20

                        2003 INCENTIVE COMPENSATION PLAN

PURPOSE:          The purpose of the Incentive Compensation Plan is to attract,
motivate and retain qualified Officers and employees to maximize Company
performance against pre-defined operating objectives.

BACKGROUND:       Somanetics pursues a compensation program that includes
salary, incentive compensation, stock options and standard benefits (e.g. health
insurance)  to achieve a market competitive package to attract, motivate and
retain qualified Officers and employees. The Incentive Compensation Plan is a
core component of the overall compensation package for Somanetics Officers and
non-commissioned,   full-time, salaried employees. The program affords the
Officers and employees the opportunity to be financially rewarded based on
actual results and affords the Company cash   conservation when business
objectives are not achieved.

PLAN SUMMARY:     All Officers and non-commissioned, full-time, salaried
employees in good standing with the Company participate in the Incentive
Compensation Plan. Potential incentive compensation under the Plan is based on
each participant's position, salary level, individual performance against
pre-defined objectives and Company performance against pre-defined objectives.
One half of actual   incentive   compensation is paid quarterly based on
year-to-date sales results versus the Sales Plan and the remaining one half is
paid at the end of the fiscal year based on performance against a variety of
pre-defined individual and Company objectives.

PLAN DETAIL:

         PLAN A:  All Officers and non-commissioned, full-time, salaried
employees participate in Plan A of the program. This portion of the Plan
represents 50% of the incentive compensation potential for participants. The
basis for incentive compensation for this portion of the program is the
Company's year-to-date results versus the Sales Plan evaluated quarterly. In the
event that year-to-date performance versus the Sales Plan is <85%, no payment is
made under this portion of the Plan. Actual payment, if any, is made in the
month following the completion of each fiscal quarter, except for payment
relating to sales >100% to Plan. Over achievement, if any, is measured and paid
at year-end.

         PLAN B.  All Officers and non-commissioned, full-time, salaried
employees participate in Plan B of the program. This portion of the Plan
represents the other 50% of the incentive compensation potential for these
participants. The basis for incentive compensation for this portion of the
program is the Company's performance versus the Sales Plan and P&L Plan. An
individual must achieve at least 50% of their objectives to be considered for
any incentive compensation under this portion of the Plan. To the extent that
actual sales results are at least 85% to Plan and the company achieves its
year-end NOL objective, individuals receive incentive compensation in relation
to their achievement of pre-defined individual objectives. Measurement, and
actual payment, if any, is made at year-end.

NOTE:             New Officers and employees will be considered for
participation at the discretion of the President and/or the Compensation
Committee.
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                         INCENTIVE COMPENSATION PAYMENT
                                  CALCULATIONS

PLAN A:       QUARTERLY PAYMENT

               YTD% TO SALES PLAN X FACTOR X SALARY X RATE X .125

         FACTOR DETERMINATION:

<TABLE>
<CAPTION>
% TO SALES PLAN                    FACTOR
---------------                    ------
<S>                                <C>
  < 85%                               0
85% to 90%                           .5
90% to 95%                          .75
95% to 100%                          .9
   100%+                            1.0
</TABLE>

PLAN B:       YEAR-END PAYMENT

          % GOALS X SALARY X RATE X %SALES PLAN X .5 X EARNINGS POOL %

EARNINGS POOL:

The maximum earnings pool is 100% at, or above, break-even. For each $100,000 in
net operating losses, the earnings pool is reduced 10% calculated to the nearest
percentage point.

Note: The President and/or the Compensation Committee reserve the right to
adjust actual incentive compensation paid to individuals under Plan B by +/-
25%.
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                        PROGRAM ADMINISTRATION GUIDELINES

-    This Plan shall be administered by the Company's Compensation Committee,
     which is authorized to interpret this Plan, to make, amend and rescind
     rules and regulations relating to this Plan, to make awards under this
     Plan, and to make all other determinations under this Plan necessary or
     advisable for its administration.

-    All determinations, interpretations and constructions made by the
     Compensation Committee shall be final and conclusive.

-    The Compensation Committee reserves the right to pay bonuses to
     participants beyond those, if any, called for by the Plan, or to defer
     payment of bonuses based on the Company's cash position at the time of the
     planned payout.

-    Rights under this Plan may not be transferred, assigned or pledged.

-    Nothing in this Plan confers any participant any right to continued
     employment and does not interfere with the Company's right to terminate an
     employee's employment.

-    Revenue and net income will be as reported in the Company's Form 10-Q and
     10-K.

-    An Officer, or employee, must be a full-time employee in good standing at
     the time of actual payment in order to receive any payment under the Plan.
     No payment will be made to any person who leaves the full-time employ of
     the Company before the payment date. No payment will be made to any person
     who is subject to a formal, written performance action plan.

-    Any over achievement payment earned due to actual revenue exceeding Plan
     revenue will be paid after the end of the fiscal year based on final
     year-end sales results versus the Sales Plan.

-    Officer, or employee, participation in this Plan will be suspended during
     periods of paid time off days beyond the allowable amount, long-term
     disability periods, or any other extended leave of absence. Actual payment
     reductions and/or discontinuation of participation in the program for the
     remainder of the fiscal year will be at the discretion of the President
     and/or the Compensation Committee.

-    Earned payments under Plan A, except for payments relating to over
     achievement, are intended to be paid after the close of each fiscal quarter
     based on year-to-date performance versus the Sales Plan. Payments under
     Plan B, and any over achievement relating to Plan A, shall be paid at
     year-end. In either case, actual payment will be made as soon as
     practicable after sales and net income are determined and the payment
     confirmed by the Compensation Committee.

-    Payments under Plan A will be made for "catching up" on a year-to-date
     basis. For example, if the Company finishes the first quarter below Plan,
     participants can recoup their full first quarter bonus not earned at the
     conclusion of the first quarter by "catching up" by the end of the second
     quarter.