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                                                                   EXHIBIT 10.16


                        2000 INCENTIVE COMPENSATION PLAN

PURPOSE:         The purpose of the 2000 Incentive Compensation Plan is to
motivate and retain Officers and employees in order to maximize the performance
of the Company 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 key Officers and employees. The Incentive Compensation Plan is a core
component of the overall compensation package for Somanetics Officers and
employees and has been offered since 1996. The program affords the Officers and
employees the opportunity to be financially rewarded based on actual results and
affords the Company the benefit of conserving cash when business objectives are
not achieved.

PLAN SUMMARY:    All Officers and non-commissioned, non-manufacturing, full-time
employees participate in the 2000 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
2000 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. New Officers and employees will be considered for participation at
the discretion of the President and/or the Compensation Committee.

PLAN DETAIL:

         PLAN A: All Officers and non-commissioned, non-manufacturing, full-time
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 2000 Sales Plan evaluated quarterly.
In the event that year-to-date performance versus the 2000 Sales Plan is less
than 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 greater than 100% to Plan. Over
achievement, if any, is measured and paid at year-end.

         PLAN B. Officers and eligible employees who do not participate in Plan
C 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
individual's performance and the Company's performance versus the 2000 Sales
Plan and company objectives. 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 the 2000
Sales Plan and the company achieves its year-end company objectives, 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.

         PLAN C. Employees who participate in Plan A, but do not participate in
Plan B, participate in Plan C (Vice Presidents of R&D, Operations and Medical
Affairs, and Engineering department employees). 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 individual's performance against pre-defined objectives. An
individual must achieve at least 50% of individual objectives to be considered
for any incentive compensation under this portion of the Plan. Measurement, and
actual payment, if any, is made at year-end.


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                2000 INCENTIVE COMPENSATION PAYMENT CALCULATIONS

PLAN A:  QUARTERLY PAYMENT

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

     FACTOR DETERMINATION:

          % TO SALES PLAN                    FACTOR
          ---------------                    ------
           less than 85%                        0
             85% to 90%                        .5
             90% to 95%                        .75
             95% to 100%                       .9
                100%+                         1.0


PLAN B:  YEAR-END PAYMENT

     %GOALS  X  SALARY  X RATE  X  %SALES PLAN  X  %PROFITS PLAN  X  .5


PLAN C:  YEAR-END PAYMENT

     %GOALS  X  SALARY  X  RATE  X  .5


Note: The President and/or the Compensation Committee reserve the right to
adjust actual incentive compensation paid to individuals under Plan B or Plan C
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 Board reserves the right to pay bonuses to participants beyond those,
     if any, called for by the Plan.

-    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. And, 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 2000 Sales Plan.

-    Officer, or employee, participation in this Plan will be suspended during
     periods of sick 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 2000 Sales Plan. Payments
     under Plan B and Plan C, 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.

-    The year-end NOL Plan must be achieved in order for year-end payments to be
     made to participants.