Standard form of Incentive Stock Option Agreement



 EXHIBIT 10.13 
 Grant ID XXXXX 
 ENTEROMEDICS INC. 
 INCENTIVE STOCK OPTION AGREEMENT 
 THIS AGREEMENT, made as of this
     day of             ,         , by and between EnteroMedics Inc., a Delaware corporation (the
“Company”), and                                  (“Optionee”).

 WHEREAS, the Company, pursuant to the Amended and Restated EnteroMedics Inc. 2003 Stock Incentive Plan (the “Plan”), wishes to
grant this stock option to Optionee; 
 NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the
parties hereto hereby agree as follows: 
 1. Grant of Option. The Company hereby grants to Optionee the right and option (“the
Option”) to purchase all or any part of an aggregate of                      shares (the “Shares”) of the common stock, par
value $.01 per share (the “Common Stock”), of the Company at the price of $                     per Share on the terms and
conditions set forth herein. It is understood and agreed that such price is not less than 100% of the fair market value of each such Share on the date of this Agreement. The Option is intended to qualify as an incentive stock option within the
meaning of Section 422A of the Internal Revenue Code of 1986, as amended (the “Code”). 
 2. Duration and
Exerciseability. The Option may not be exercised by Optionee except as set forth herein, and the Option shall in all events terminate ten years from the date hereof. Subject to the other terms and conditions set forth herein, the Option shall
vest and may be exercised by Optionee in cumulative installments as follows: 
  

			
	 On or after each of
 the following dates
	  	 Shares as to which the
 Option is exercisable

	XXXXX, XXXX	  	  

	Each subsequent month for 35 months	  	  

	36th subsequent month	  	  


 During the lifetime of Optionee, the Option shall be exercisable only by Optionee. The Option shall not be
assignable or transferable by Optionee, other than by will or the laws of descent and distribution. The vesting of the Option is subject to acceleration under the circumstances described in Section 4. 







 3. Effect of Termination of Relationship with the Company. 
 (a) In the event that Optionee shall cease to be employed by the Company or its subsidiaries, for any reason other than Optionee’s gross and willful
misconduct or Optionee’s death or disability, Optionee shall have the right to exercise the Option at any time within three months after such termination of employment to the extent of the full number of Shares Optionee was entitled to purchase
under the Option on the date of termination, subject to the condition that the Option shall not be exercisable after the expiration of its term. 
 (b) In the event that Optionee shall cease to be employed by the Company or its subsidiaries by reason of Optionee’s gross and willful misconduct during the course of his/her employment with the Company (as reasonably determined by the
Company), the Option shall terminate as of the date of the misconduct and shall not be exercisable thereafter. 
 (c) If Optionee shall die
while employed by the Company or its subsidiaries, or within three months after termination of his/her employment with the Company for any reason other than gross and willful misconduct, or if Optionee’s employment with the Company is
terminated because the Optionee has become disabled within the meaning of Section 22(e)(3) of the Code, and Optionee shall not have fully exercised the Option, the Option may be exercised at any time within twelve months after the date of
Optionee’s death or termination of employment because of disability by the legal representative or, if applicable, guardian of Optionee or by any person to whom the Option is transferred by will or the applicable laws of descent and
distribution to the extent of the full number of Shares Optionee was entitled to purchase under the Option on the date of death (or termination of his/her employment, if earlier) or termination of Optionee’s employment because of disability and
subject to the condition that the Option shall not be exercisable after the expiration of its term. 
 (d) With respect to the Option and any
other incentive stock option granted to Optionee, Optionee understands that to the extent that the aggregate fair market value (determined as of the date of the Option and each other such incentive stock option) of the shares of Common Stock
issuable upon exercise of the Option and all other incentive stock options which become exercisable for the first time by Optionee during any calendar year exceeds $100,000, then, in accordance with Section 422(d) of the Code, the portion of
the Option and any such other incentive stock options that exceed $100,000 shall be treated as options that do not qualify as incentive stock options. 
 4. Change in Control 
 (a) In the event that a “Change in Control” (as hereinafter defined)
occurs, (i) all outstanding Options shall be subject to the agreement pursuant to which such Change in Control is consummated and (ii) the vesting schedule of the Options held by Optionee shall accelerate such that on the date the Change
in Control is completed, 50% of any then-unvested shares subject to the Options held by Optionee shall immediately vest, irrespective of which of the provisions described in clauses (i) through (v) below are set forth in the agreement
pursuant to which such Change in Control is consummated (except in the case of clause (iv), in which case 100% of the Options would become vested). Such agreement shall provide for one or more of the following: 
 (i) The continuation of such outstanding Options by the Company (if the Company is the surviving corporation). 
  

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 (ii) The assumption of such outstanding Options by the surviving corporation or its
parent in a manner that complies with Section 424(a) of the Code (whether or not such Options are ISOs). 
 (iii) The
substitution by the surviving corporation or its parent of new options for such outstanding Options in a manner that complies with Section 424(a) of the Code (whether or not such Options are ISOs). 
 (iv) Full exercisability of such outstanding Options and full vesting of the Shares subject to such Options, followed by the cancellation
of such Options. The full exercisability of such Options and full vesting of the Shares subject to such Options may be contingent on the closing of such Change in Control. The Optionees shall be able to exercise such Options during a period of not
less than five full business days preceding the closing date of such Change in Control, unless (A) a shorter period is required to permit a timely closing of such Change in Control and (B) such shorter period still offers the Optionee a
reasonable opportunity to exercise such Options. Any exercise of such Options during such period may be contingent on the closing of such Change in Control. 
 (v) The cancellation of such outstanding Options and a payment to the Optionee equal to the excess of (A) the Fair Market Value (as
defined in the Plan) of the Shares subject to such Options (whether or not such Options are then exercisable or such Shares are then vested) as of the closing date of such Change in Control over (B) their aggregate exercise price. Such payment
shall be made in the form of cash, cash equivalents, or securities of the surviving corporation or its parent with a Fair Market Value equal to the required amount. Such payment may be made in installments and may be deferred until the date or dates
when such Options would have become exercisable or such Shares would have vested. Such payment may be subject to vesting based on the Optionee’s continuing service to the Company or its affiliates, provided that the vesting schedule shall not
be less favorable to the Optionee than the schedule under which such Options would have become exercisable or such Shares would have vested. If the aggregate exercise price of the Shares subject to such Options exceeds the Fair Market Value of such
Shares by greater than ten percent (10%) of the Fair Market Value of such Shares, then such Options may be cancelled without making a payment to the Optionee. For purposes of this Section 4(a)(v), the Fair Market Value of any security
shall be determined without regard to any vesting conditions that may apply to such security. 
 (b) A “Change in Control” of the
Company shall be deemed to have occurred if: 
 (i) Any “person” (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) who did not own shares of the capital stock of the Company on the date of grant of the Option shall, together with his, her or its “Affiliates” and
“Associates” (as such terms are defined in 

  

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Rule 12b-2 promulgated under the Exchange Act), become the “Beneficial Owner” (as such term is defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities (any such person being hereinafter referred to as an “Acquiring Person”);

 (ii) The “Continuing Directors” (as hereinafter defined) shall cease to constitute a majority of the
Company’s Board of Directors; 
 (iii) There should occur (A) any consolidation or merger involving the Company and
the Company shall not be the continuing or surviving corporation or the shares of the Company’s capital stock shall be converted into cash, securities or other property; provided, however, that this subclause (A) shall not
apply to a merger or consolidation in which (i) the Company is the surviving corporation and (ii) the stockholders of the Company immediately prior to the transaction have the same proportionate ownership of the capital stock of the
surviving corporation immediately after the transaction; (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company; or (C) any
liquidation or dissolution of the Company; or 
 (iv) The majority of the Continuing Directors determine, in their sole and
absolute discretion, that there has been a Change in Control. 
 (c) “Continuing Director” shall mean any person who is a member of
the Board of Directors of the Company, while such person is a member of the Board of Directors, who is not an Acquiring Person, an Affiliate or Associate of an Acquiring Person or a representative of an Acquiring Person or of any such Affiliate or
Associate and who (i) was a member of the Company’s Board of Directors on the date of grant of the Option or (ii) subsequently became a member of the Board of Directors, upon the nomination or recommendation, or with the approval of,
a majority of the Continuing Directors. 
 5. Manner of Exercise. 
 (a) The Option may only be exercised by Optionee or other proper party within the option period by delivering written notice of exercise to the Company at
its principal executive office. The notice shall state the number of Shares as to which the Option is being exercised and shall be accompanied by payment in full of the option price for all of the Shares designated in the notice. 
 (b) Optionee may, at the Company’s election, pay the option price in cash, by check (bank check, certified check or personal check) or by any other
means approved by the Committee (as such term is defined in the Plan) in its discretion, or in accordance with the terms set forth in the Plan. 
 (c) The exercise of the Option is contingent upon receipt from Optionee (or other proper person exercising the Option) of a representation that, at the time of such exercise, it is Optionee’s intention to acquire the Shares being
purchased for investment and not with a view to the distribution or sale thereof within the meaning of the Securities Act of 1933, as amended (the 

  

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“Securities Act”); provided, however, that the receipt of such representation shall not be required upon exercise of the Option if,
at the time of such exercise, the issuance of the Shares subject to the Option shall have been properly registered under the Securities Act and all applicable state securities laws. Such representation shall be in writing and in such form as the
Company may reasonably request. The certificate representing the Shares so issued for investment shall be imprinted with an appropriate legend setting forth all applicable restrictions on their transferability. 
 6. Right of First Refusal. 
 (a)
Right of First Refusal. In the event that the Optionee proposes to sell, pledge or otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in such Shares, the Company shall have the Right of First Refusal
with respect to all (and not less than all) of such Shares. If the Optionee desires to transfer Shares acquired under this Agreement, the Optionee shall give a written transfer notice (a “Transfer Notice”) to the Company describing fully
the proposed transfer, including the number of Shares proposed to be transferred, the proposed transfer price, the name and address of the proposed transferee (the “Transferee”) and proof satisfactory to the Company that the proposed sale
or transfer will not violate any applicable federal or state securities laws. The Transfer Notice shall be signed both by the Optionee and by the proposed Transferee and must constitute a binding commitment of both parties to the transfer of the
Shares. The Company shall have the right to purchase all, and not less than all, of the Shares on the terms of the proposal described in the Transfer Notice (subject, however, to any change in such terms permitted under Subsection (b) below) by
delivery of a notice of exercise of the Right of First Refusal within 30 days after the date when the Transfer Notice was received by the Company. 
 (b) Transfer of Shares. If the Company fails to exercise its Right of First Refusal within 30 days after the date when it received the Transfer Notice, the Optionee may, not later than 90 days following receipt of the
Transfer Notice by the Company, conclude a transfer of the Shares subject to the Transfer Notice on the terms and conditions described in the Transfer Notice, provided that any such sale is made in compliance with applicable federal and state
securities laws and not in violation of any other contractual restrictions to which the Optionee is bound. Any proposed transfer on terms and conditions different from those described in the Transfer Notice, as well as any subsequent proposed
transfer by the Optionee, shall again be subject to the Right of First Refusal and shall require compliance with the procedure described in Subsection (a) above. If the Company exercises its Right of First Refusal, the parties shall consummate
the sale of the Shares on the terms set forth in the Transfer Notice within 60 days after the date when the Company received the Transfer Notice (or within such longer period as may have been specified in the Transfer Notice); provided,
however, that in the event the Transfer Notice provided that payment for the Shares was to be made in a form other than cash or cash equivalents paid at the time of transfer, the Company shall have the option of paying for the Shares with cash or
cash equivalents equal to the present value of the consideration described in the Transfer Notice. 
 (c) Additional or Exchanged
Securities and Property. In the event of a merger or consolidation of the Company with or into another entity, any other corporate reorganization, a stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend


  

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payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s
outstanding securities, any securities or other property (including cash or cash equivalents) that are by reason of such transaction exchanged for, or distributed with respect to, any Shares subject to this Section 6 shall immediately be
subject to the Right of First Refusal. Appropriate adjustments to reflect the exchange or distribution of such securities or property shall be made to the number and/or class of the Shares subject to this Section 6. 
 (d) Termination of Right of First Refusal. Any other provision of this Section 6 notwithstanding, in the event that the Common Stock is
readily tradable on an established securities market when the Optionee desires to transfer Shares, the Company shall have no Right of First Refusal, and the Optionee shall have no obligation to comply with the procedures prescribed by
Subsections (a) and (b) above. 
 (e) Permitted Transfers. This Section 6 shall not apply to (i) a transfer by
beneficiary designation, will or intestate succession or (ii) a transfer to one or more members of the Optionee’s Immediate Family or to a trust established by the Optionee for the benefit of the Optionee and/or one or more members of the
Optionee’s Immediate Family, provided in either case that the Transferee agrees in writing on a form prescribed by the Company to be bound by all provisions of this Agreement. If the Optionee transfers any Shares acquired under this Agreement,
either under this Subsection (e) or after the Company has failed to exercise the Right of First Refusal, then this Agreement shall apply to the Transferee to the same extent as to the Optionee. For purposes of this Agreement, “Immediate
Family” shall include the ancestors, descendants, siblings and spouse of the Optionee. 
 (f) Termination of Rights as
Stockholder. If the Company makes available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be purchased in accordance with this Section 6, then after such time the person
from whom such Shares are to be purchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement). Such Shares shall be deemed to have been
purchased in accordance with the applicable provisions hereof, whether or not the certificate(s) therefor have been delivered as required by this Agreement. 
 (g) Assignment of Right of First Refusal. The Board of Directors may freely assign the Company’s Right of First Refusal, in whole or in part. Any person who accepts an assignment of the Right of First
Refusal from the Company shall assume all of the Company’s rights and obligations under this Section 6. 
 7. Market
Stand-Off. In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company’s initial public offering, the
Optionee or a Transferee shall not directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or sell any option or other contract for the purchase of, purchase any option or other contract for the sale of, or
otherwise dispose of or transfer, or agree to engage in any of the foregoing transactions with respect to, any Shares acquired under this Agreement without the prior written consent of the Company or its underwriters. Such restriction (the
“Market Stand-Off”) shall be 

  

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in effect for such period of time following the date of the final prospectus for the offering as may be requested by the Company or such underwriters. In no
event, however, shall such period exceed 180 days. The Market Stand-Off shall in any event terminate two years after the date of the Company’s initial public offering. In the event of the declaration of a stock dividend, a spin-off, a stock
split, an adjustment in conversion ratio, a recapitalization or a similar transaction affecting the Company’s outstanding securities without receipt of consideration, any new, substituted or additional securities which are by reason of such
transaction distributed with respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may
impose stop-transfer instructions with respect to the Shares acquired under this Agreement until the end of the applicable stand-off period. The Company’s underwriters shall be beneficiaries of the agreement set forth in this Section 7.
This Section 7 shall not apply to Shares registered in the public offering under the Securities Act, and the Optionee or a Transferee shall be subject to this Section 7 only if the directors and officers of the Company are subject to
similar arrangements. 
 8. Adjustments. In the event that there is any change in the Common Stock or corporate structure of the
Company as a result of any dividend or other distribution (whether in the form of cash, Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company or other similar corporate transaction or event, and all or any
portion of the Option shall then be unexercised and not yet expired, then appropriate adjustments in the outstanding Option shall be made as determined by the Committee in accordance with the provisions of Section 4(c) of the Plan in order to
prevent dilution or enlargement of Option rights. 
 9. Miscellaneous. 
 (a) The Option is issued pursuant to the Plan and is subject to its terms. In the event that any of the terms of this Option conflict or are inconsistent
in any respect with the terms of the Plan, the Plan terms shall control. Optionee hereby acknowledges receipt of a copy of the Plan. The Plan is also available for inspection during business hours at the principal office of the Company. 

(b) This Agreement shall not confer on Optionee any right with respect to continuance of employment by the Company or any of its subsidiaries, nor
will it interfere in any way with the right of the Company to terminate such employment at any time. Optionee shall have none of the rights of a stockholder with respect to the Shares until such Shares shall have been issued to him or her upon
exercise of the Option. 
 (c) The Company shall at all times during the term of the Option reserve and keep available such number of Shares
as will be sufficient to satisfy the requirements thereof. The exercise of all or any part of the Option shall only be effective at, and may be deferred until, such time as the sale of the Shares pursuant to such exercise will not violate any
federal or state securities laws, it being understood that the Company shall have no obligation to register the issuance or sale of the Shares for such purpose. 
  


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 (d) Subject to Section 6 of this Agreement, if Optionee shall dispose of any of the Shares acquired
upon exercise of the Option within two years from the date hereof or within one year after exercise of the Option, then, in order to provide the Company with the opportunity to claim the benefit of any income tax deduction that may be available to
it under the circumstances, Optionee shall promptly notify the Company of the dates of acquisition and disposition of such Shares, the number of Shares so disposed of, and the consideration, if any, received for such Shares. In order to comply with
all applicable federal and state income tax laws and regulations, the Company may take such action as it deems appropriate to ensure that, if necessary, all applicable federal or state payroll, withholding, income or other taxes are withheld or
collected from Optionee. 
 [The remainder of this page is intentionally left blank; signature page follows] 
  

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 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the day and year
first above written. 
  

			
	ENTEROMEDICS INC.
		
	By	 	  

	Name:	 	Mark B. Knudson, PhD
	Title:	 	President and CEO
	
	  

		 	Optionee


  

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