Exhibit 10.15


 


TRANSOMA MEDICAL, INC.


DIRECTOR NON-QUALIFIED STOCK OPTION AGREEMENT


 


THIS NON-QUALIFIED STOCK OPTION AGREEMENT (the
“Agreement”) is made this 4th day of September, 2003 by and between
Transoma Medical, Inc., a Minnesota corporation (the “Company”), and James
Ehlen, M.D., an individual resident of Minnesota (“Director”), who is a
non-employee member of the Board of Directors of the Company.


 


WHEREAS, the Company, pursuant to its 2000
Stock Incentive Plan (the “Plan”), wishes to grant this stock option to
Director.


 


NOW, THEREFORE, in accordance with the terms
and conditions of the Plan and the mutual covenants contained herein, the
parties hereto hereby agree as follows:


 


1.                                       Grant
of Option. The Company hereby grants to Director, on the date set forth
above, the right and option (hereinafter called the “Option”) to purchase all
or any part of an aggregate of 100,000 shares of common stock of the
Company at the price of $.23 per share on the terms and conditions set forth
herein. It is understood and agreed that the option price is the per share fair
market value of such shares on the date of this Agreement. This Option is not
intended to be an incentive stock option within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the “Code’).


 


2.                                       Duration
and Exercisability.


 


(a)                                  This
Option shall in all events terminate ten years after the date of grant.


 


(b)                                 Except
as otherwise provided in Section 3 of this Agreement and subject to the
other terms and conditions set forth herein, this Option may be exercised
by Director in accordance with the following schedule:


 


	
  On or after each of

  the following dates

  	
   

  	
  Cumulative percentage of shares

  as to which Option is exercisable

  
	
   

  	
   

  	
   

  
	
  September 1, 2004

  	
   

  	
  33 1/3%

  
	
  December 1, 2004

  	
   

  	
  8.3 1/3%

  
	
  March 1, 2005

  	
   

  	
  8.3 1/3%

  
	
  June 1, 2005

  	
   

  	
  8.3 1/3%

  
	
  September 1, 2005

  	
   

  	
  8.3 1/3%

  
	
  December 1, 2005

  	
   

  	
  8.3 1/3%

  
	
  March 1, 2006

  	
   

  	
  8.3 1/3%

  
	
  June 1, 2006

  	
   

  	
  8.3 1/3%

  
	
  September 1, 2006

  	
   

  	
  8.3 1/3%

  



 


(c)                                  During
the lifetime of Director, the Option shall be exercisable only by Director and
shall not be assignable or transferable by Director, other than by will or the
laws of descent and distribution.


 

















 


3.                                       Effect
of Termination of Service as Director.


 


(a)                                  In
the event that Director ceases to serve as a member of the Board of Directors
of the Company for any reason other than “Cause” (as defined in Section 3(b) hereof)
or Director’s death or disability (as such term is defined in Section 3(c) hereof),
Director shall have the right to exercise the Option at any time within one (1) year
after termination of Director’s service as a member of the Board of Directors
of the Company to the extent of the full number of shares Director was entitled
to purchase under the Option on the date of termination of Director’s service,
as provided in Section 2(b), subject to the condition that no Option shall
be exercisable after the expiration of the term of the Option.


 


(b)                                 If
Director’s service as a member of the Board of Directors of the Company is
terminated for “Cause,” the Option shall be terminated as of the date of the
act giving rise to such termination. For purposes of this Agreement, “Cause”
shall mean any of the following: (i) Director’s failure, refusal or
neglect to perform his or her duties and responsibilities as a member of the
Board of Directors after there has been delivered to Director notice from the
Board of Directors and a thirty (30) day opportunity to cure which Director has
not done; (ii) any act of personal dishonesty taken by Director in
connection with Director’s responsibilities to the Company; (iii) Director’s
conviction of any crime involving fraud or moral turpitude or any felony; or (iv) any
other action by Director that is inconsistent with the terms of this Agreement
and harmful to the business interests of the Company and which director has not
cured after receipt of notice and a reasonable period to cure, not to exceed
thirty (30) days.


 


(c)                                  If
Director shall die during the term of Director’s service as a member of the
Board of Directors of the Company, or within three (3) months after
termination of Director’s engagement with the Company for any reason other than
Cause, or if Director’s service as a director is terminated because Director
has become disabled (within the meaning of Code Section 2(e)(3)) while
serving as a director, and Director shall not have fully exercised the Option,
such Option may be exercised, at any time within twelve (12) months after
Director’s death or date of termination of service as a director for
disability, by Director, Director’s personal representatives or administrators
or guardians of Director, as applicable, or by any person or persons 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 Director was entitled
to purchase under the Option on the date of death, termination of service as a
director, if earlier, or date of termination of service as a director by reason
of disability and subject to the condition that no Option shall be exercisable
after the expiration of the term of the Option.


 


(d)                                 Notwithstanding
the foregoing, in no case may the Option be exercised to any extent by
anyone after the expiration of the term of the Option.


 


4.                                       Manner
of Exercise.


 


(a)                                  The
Option can be exercised only by Director or other proper party by delivering
within the Option period written notice of intent to exercise to the Company at



 


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its principal 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 shares designated in the notice.


 


(b)                                 Director
may pay the Option price in cash, by check (bank check, certified check or
personal check), by money order or, in the sole discretion of and with the
approval of the Company, (i) by delivering to the Company for cancellation
shares of common stock of the Company which have been held by the Director for
at least six months and one day as of the date of delivery to the Company with
a fair market value as of the date of exercise equal to the option price or the
portion thereof being paid by tendering such shares or (ii) by delivering
to the Company the full Option price in a combination of cash and Director’s
full recourse liability promissory Note, secured by the common stock issued
pursuant to the exercise of the Option, with a principal amount not to exceed
eighty percent (80%) of the Option price and a term not to exceed five (5) years,
which promissory note shall provide for interest on the unpaid balance thereof
which at all times shall be not less than the incremental borrowing rate of the
Director on a note of similar characteristics, and in no case less than the
minimum rate required to avoid the imputation of income, original issue
discount or a below-market rate loan pursuant to Sections 483, 1274 or 7872 of
the code or any successor provisions thereto.


 


5.                                       Forfeiture
of Option and Option Gain Resulting from Certain Activities.


 


(a)                                  If,
at any time within the longer of two (2) years after the date that
Director has exercised this Option or two (2) years after the date of the
termination of Director’s service as a director of the Company for any reason
whatsoever while this Agreement is in effect, Director engages in any
Forfeiture Activity (as defined below) then (i) this Option shall
immediately terminate effective as of the date any such activity first
occurred, and (ii) any gain received by Director pursuant to the exercise
of the Option granted hereunder must be paid to the Company within 30 days of
demand by the Company. For purposes hereof, the gain on any exercise of this
Option shall be determined by multiplying the number of shares purchased
pursuant to this Option times the excess of the fair market value of a share of
common stock on the date of exercise (without regard to any subsequent increase
or decrease in the fair market value) over the Exercise Price. The fair market
value of the Company’s common stock as of any date shall be determined by the
Company in accordance with the provisions of the Plan.


 


(b)                                 As
used herein, Director shall be deemed to have engaged in a Forfeiture Activity
if Director:


 


(i)                                     directly
or indirectly engages in any business activity on his or her own behalf or as a
partner, shareholder, employee, trustee, principal, agent, consultant, director
or otherwise of any person or entity which is in any respect in competition
with or competitive with the Company, or solicits, entices or induces any
employee, consultant or representative of the Company to engage in any such
activity;


 


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(ii)                                  directly
or indirectly solicits, entices or induces (or assists any other person or
entity in soliciting, enticing or inducing) any customer or potential customer
(or agent, employee or consultant of any customer or potential customer) with
whom Director had contact in the course of his or her service as a director of
the Company to deal with a competitor of the Company; or


 


(iii)                               fails
to hold in a fiduciary capacity for the benefit of the Company all confidential
information, knowledge and data, including customer lists and information,
business plans and business strategy (“Confidential Data”) relating in any way
to the business of the Company for so long as such Confidential Data remains
confidential.


 


(c)                                  If
any court of competent jurisdiction shall determine that the foregoing
forfeiture provision is invalid in any respect, the court so holding may limit
such covenant either or both in time, in area or in any other manner which the
court determines such that the covenant shall be enforceable against Director.
Director shall acknowledge that the remedy of law for any breach of the
foregoing covenant not to compete will be inadequate, and that the Company
shall be entitled, in addition to any remedy of law, to preliminary and
permanent injunctive relief


 


6.                                       Company’s
Option to Repurchase Shares.


 


(a)                                  Subject
to the provisions of Section 6(h) hereof, upon and after the
occurrence of anyone or more of the Option Events, as hereinafter defined, the
Company shall have the irrevocable right and option (the “Call Option”) to
purchase from Director or Director’s heirs, successors, personal
representatives or assigns, and Director on behalf of his or her heirs,
successors, personal representatives or assigns, agrees to sell to the Company
upon the exercise of the Call Option all or any part of the shares
acquired by Director pursuant to this Option. (The Company’s Call Option, and
any reference to shares acquired by Director pursuant to this Option, shall be
deemed to include all other shares of any class or series of the
Company’s capital stock acquired by Director on account of or with respect to
shares acquired pursuant to this Option, whether the acquisition of such shares
is by stock dividend, stock split, recapitalization or any other similar
means.) The Company may exercise the Call Option in whole or in part and
from time to time in its sole discretion; provided, however, the Company may exercise
the Call Option no earlier than six months and one day after the exercise of
the Option pursuant to which the shares subject to the Call Option were issued.
No delay in the exercise of the Call Option by the Company will diminish or
terminate the Company’s rights pursuant to the Call Option. The Option Events,
as they relate to any Director, shall be:


 


(i)                                     The
express desire of Director to sell, assign, pledge, transfer, give or otherwise
dispose of or encumber any shares acquired by Director pursuant to this Option
or any attempt by Director to transfer any such shares except in strict
compliance with the terms and conditions of this Agreement, whether or not for
value. Notwithstanding any other provision of this Agreement, a transfer by
Director during the lifetime of Director for bona fide estate or tax planning
purposes, including but not limited to any transfer by gift to a spouse, child,



 


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sibling or parent of Director or a transfer
to a trust, and a transfer following the death of the Director pursuant to the
terms of the Director’s will or the laws of descent and distribution or
intestate succession shall not be an Option Event within the meaning of this Section 6(a),
provided such transfer complies with the terms and conditions set forth in Section 6(f) hereof.
A transfer described in the preceding sentence shall be referred to as a “Permitted
Transfer” and a person who acquires shares in a Permitted Transfer as a “Permitted
Transferee.”


 


(ii)                                  Any
attempt by or desire of the Director to sell, transfer or dispose of shares
acquired pursuant to this Option in any manner whatsoever pursuant to a bona
fide offer by a third party to purchase such shares. (Such event shall
constitute an Option Event solely with respect to those shares of common stock
that the Director attempts to or desires to sell, transfer or dispose of to
such bona fide third party.)


 


(iii)                               The
appointment by a court of competent jurisdiction or otherwise of a receiver,
trustee or assignee of Director or Director’s property.


 


(iv)                              The
expiration of thirty (30) days immediately following the date upon which a
money judgment entered in a court of record against Director becomes final,
provided such judgment remains unsatisfied.


 


(v)                                 Voluntary
application of Director for relief under any act of Congress or any of the laws
of the several states now or hereafter enacted providing for the relief of
debtors.


 


(vi)                              Institution
of a levy, garnishment or attachment involving any of the shares acquired by
Director pursuant to this Option, unless released or discharged within a period
of thirty (30) days.


 


(vii)                           Any
purported transfer of all or any part of the shares acquired by Director
pursuant to this Option upon termination of Director’s marital relationship.
(Such event shall constitute an Option Event solely with respect to those
shares purported to be transferred.)


 


(viii)                        Termination
of Director’s service as a member of the Board of Directors of the Company for “Cause”
as defined in Section 3 (b) of this Agreement. Notwithstanding any
other provision of this Agreement, the termination of Director’s service as a
member of the Board of Directors of the Company for any reason other than “Cause,”
whether voluntary or involuntary and including but not limited to termination
as a result of death or disability, shall not be an Option Event within the
meaning of this Section 6.


 


(ix)                                Director’s
engaging in a Forfeiture Activity as defined in Section 5(b) of this
Agreement.


 


(b)                                 Within
thirty (30) days of the occurrence of any one or more of the Option Events
described in Section 6(a), the Director or his or her legal
representative, as the 


 


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case may be, shall notify
the Company of the occurrence of the Option Event or Events, the number of
shares subject to such Option Event and the address to which the Company shall
send any notice in connection with its Call Option.


 


(c)                                  Upon
the occurrence of the Option Event described in Section 6(a)(ii), Director
(or Director’s legal representative) shall deliver a written notice thereof to
the Company, which notice shall specify the Option Event, the bona fide third
party purchaser to whom the shares are to be sold, transferred or disposed of,
the purchase price or other consideration to be received by Director for such
shares, and the terms upon which such purchase price or other consideration is
to be paid, if applicable. The Company may then exercise its Call Option
with respect to all or any part of such shares by delivering a written
election to exercise to Director (or Director’s legal representative) within
thirty (30) days after receipt of the written notice from Director; provided,
however, that such written election to exercise shall provide for a date of
exercise and repurchase of the shares subject to the Company’s Call Option that
is no earlier than the day that is six months and one day after the exercise of
the Option pursuant to which the shares subject to the Call Option were issued.
The purchase price for the shares that the Company elects to purchase pursuant
to this Section 6(c) shall be the purchase price (or the fair market
value of other consideration) to be paid for such shares by the bona fide third
party purchaser. If the Company elects not to exercise its Call Option with
respect to all or any portion of the shares, Director (or his or her legal
representative) shall have the right to sell, transfer or dispose of such
shares on the terms specified in the written notice to the Company, but only if
such transaction is consummated within ninety (90) days after the date on which
Company received the written notice of the Option Event from the Director.


 


(d)                                 Upon
the occurrence of any one or more Option Events, other than the Option Event
described in Section 6(a)(ii), the purchase price for the shares that are
repurchased by the Company pursuant to the exercise of its Call Option shall be
the fair market value thereof. The fair market value of the shares shall be
determined by the Company in accordance with the provisions of the Plan.
Notwithstanding any other provisions of this Agreement, with respect to any
exercise by the Company of its Call Option in connection with an Option Event
described in Section 6(a)(viii) hereof, the Company shall be entitled
to offset and reduce the total purchase price of the repurchased shares by any
amount that Director is required to pay to the Company pursuant to Section 5(a)(ii) of
this Agreement.


 


(e)                                  As
determined by the Company in its sole and absolute discretion, the Company
shall make payment of the purchase price (determined under Section 6(c) or
6(d) hereof) for any shares that it reacquires pursuant to its exercise of
the Call Option by delivering to Director or Director’s heirs, successors,
assigns or personal representatives, as the case may be: (i) the
Company’s check in the amount of the purchase price; (ii) the Company’s
promissory note in the amount of the purchase price, which promissory note
shall provide for a term not to exceed five (5) years and interest on the
unpaid balance thereof at a rate which is not less than the incremental
borrowing rate of the Company on a note of similar characteristics, and in no
case less than the minimum rate required to avoid the imputation of income,
original issue discount or a below market rate loan 


 


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pursuant to Sections 483, 1274 and 7872 of
the Code or any successor provisions thereto, as determined by the Company; or (iii) a
combination of cash and the Company’s promissory note, as described in (ii),
the total of which is equal to such purchase price. Upon receipt of such
payment from the Company, Director or Director’s heirs, successors, assigns or
personal representatives, as the case may be, shall deliver to the Company
for cancellation the stock certificate or certificates evidencing the Common
Shares being repurchased by the Company pursuant to the exercise of its Call
Option, which certificate or certificates shall be duly endorsed for
cancellation by the Company. Director or Director’s heirs, successors, assigns
or personal representatives shall have no rights as a shareholder after receipt
of payment (whether in cash, a promissory note or a combination thereof) from
the Company.


 


(f)                                    A
Permitted Transferee who acquires shares in a Permitted Transfer, as set forth
in Section 6(a)(i) of this Agreement, shall be bound by the terms,
conditions, restrictions and obligations of this Section 6 and Section 7
of this Agreement as if such Permitted Transferee were Director. As a condition
precedent of a Permitted Transfer, the Permitted Transferee shall execute a
counterpart of this Agreement or such other and further documents or
agreements that the Company in consultation with its counsel deems necessary.
Any purported Permitted Transfer that is not in compliance with this Section 6(f) shall
be null and void.


 


(g)                                 Director
shall not voluntarily or involuntarily sell, exchange, transfer, pledge, or
otherwise dispose of any of the shares acquired pursuant to the exercise of
this Option unless Director shall first offer to sell such shares to the
Company pursuant to the Company’s Call Option as described above.


 


(h)                                 The
provisions of this Section 6 shall terminate and be of no further force
and effect as of the earliest date on which the Company registers a class or
series of its common stock under the Securities Exchange Act of 1934, as
amended (a “Public Offering”).


 


7.                                       Restrictions
on Transferability of Common Stock. All shares of common stock of the
Company issued upon the exercise of this Option shall bear the following
legend:


 


The shares evidenced by this certificate are
subject to restrictions on transferability and the repurchase options contained
in a Non-Qualified Stock Option Agreement dated September 4, 2003
between James Ehlen, M.D. and Transoma Medical, Inc., a Minnesota
corporation, a copy of which is available for review at the principal offices
of Transoma Medical, Inc.


 


8.                                       Miscellaneous.


 


(a)                                  This
Option is issued pursuant to the Company’s 2000 Stock Incentive Plan and is
subject to the terms of the Plan. In the event that any terms of this Agreement
are contrary to or inconsistent in any respect with the terms of the Plan, the
terms of the 


 


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Plan and any amendments to the Plan shall
control. A copy of the Plan and all amendments thereto will be furnished upon
request of Director.


 


(b)                                 This
Agreement shall not confer on Director any right with respect to continuance of
Director’s service as a director of the Company. Director shall have none of
the rights of a shareholder with respect to shares subject to this Option until
such shares shall have been issued to Director upon proper exercise of this
Option.


 


(c)                                  The
exercise of all or any parts of this Option shall only be effective at such
time that the sale of shares of common stock pursuant to such exercise will not
violate any state or federal securities or other laws.


 


(d)                                 In
the event that the Committee (as defined in Section 2(f) of the Plan)
determines pursuant to Section 4(c) of the Plan that it is
appropriate to make an adjustment of the number or type of shares (or other
securities or other property) subject to the Plan or of the exercise price of
awards granted pursuant to the Plan, the number and type of shares (or other
securities or other property) subject to this Option and the exercise price or
other terms of this Agreement shall be adjusted as provided in Section 4(c) of
the Plan in accordance with the Committee’s determination.


 


(e)                                  The
Company shall at all times during the term of the Option reserve and keep
available such number of shares of Company common stock as will be sufficient
to satisfy the requirements of this Agreement.


 


(f)                                    Director
agrees to disclose neither the contents nor any of the terms and conditions of
this Option to anyone, with the exception of Director’s immediate family
members, attorneys, financial advisors, accountants and the Internal Revenue
Service.


 


(g)                                 All
notices, requests, demands and other communications called for hereunder shall
be in writing and shall be deemed given if delivered personally, one (1) day
after mailing via Federal Express overnight or a similar overnight delivery
service, or three (3) days after being mailed by registered or certified
mail, return receipt requested, prepaid and addressed to the parties or their
successors in interest at the following addresses, or at such other addresses
as the parties may designate by written notice in the manner aforesaid:


 


	
  If to Company:

  	
   

  	
  Transoma Medical, Inc.

  
	
   

  	
   

  	
  4211 Lexington Avenue North, Suite 2244

  
	
   

  	
   

  	
  Arden Hills, MN 55126

  
	
   

  	
   

  	
  Tel.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to the Director:

  	
   

  	
  James Ehlen

  
	
   

  	
   

  	
  4221 Woodland Trail

  
	
   

  	
   

  	
  Golden Valley, MN

  



 


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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.


 


	
   

  	
   

  	
  TRANSOMA MEDICAL, INC.

  
	
   

  	
   

  	
   

  
	
  By 

  	
  /s/ Brian Brockway

  	
   

  
	
   

  	
   Its President and CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ K. James Ehlen

  	
   

  
						



 


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FIRST
AMENDMENT TO 

DIRECTOR NON-QUALIFIED STOCK OPTION AGREEMENT


 


This FIRST AMENDMENT TO DIRECTOR
NON-QUALIFIED STOCK OPTION AGREEMENT (this ”Amendment”) is made and
entered into as of August 2, 2007, by and between Transoma Medical, Inc.,
a Delaware corporation (the “Company”), and James Ehlen (the “Director”).


 


RECITALS


 


WHEREAS,
the Company and the Director have entered into that certain Director
Non-Qualified Stock Option Agreement, dated as of September 4, 2003 (the “Option
Agreement”), pursuant to the terms of which the Company has granted the
Director an option to purchase 100,000 shares of the Company’s common stock,
$.001 par value, at an exercise price of $0.23 per share; and


 


WHEREAS, the Company and the Director wish to amend
certain terms of the Option Agreement to comply with the requirements
necessary to avoid becoming subject to the requirement of Section 409A of
the Internal Revenue Code as permitted by IRS Notice 2006-79.


 


AGREEMENT


 


NOW, THEREFORE, in
consideration of the mutual promises of the parties contained herein, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:


 


1.                                       Grant
of Option. Section 1 of the Option Agreement is hereby amended in its
entirety and is restated as follows:


 


The Company hereby
grants to Director, on September 4, 2003, the right and option (hereafter
called the “Grandfathered Option”) to purchase all or any part of an
aggregate of 41,375 shares of common stock of the Company, all of which vested
before January 1, 2005, at the price of $0.23 per share on the terms and
conditions set forth herein. The Company hereby grants to Director, the right
and option (hereafter called the “Adjusted Option” and collectively with the
Grandfathered Option, the “Option”) to purchase all or any part of an
aggregate of 58,625 shares of common stock of the Company, all of which vested
on or after January 1, 2005, at the price of $0.40 per share on the terms
and conditions set forth herein. It is understood and agreed that the option
price for the Adjusted Option is the per share fair market value of such shares
on September 4, 2003. This Option is not intended to be an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”).


 


2.                                       Manner
of Exercise. Section 4(a) of the Option Agreement is hereby amended
by adding the following sentence to the end of that section:


 


The notice shall also provide
the number of shares exercised under the Grandfathered Option, the Adjusted
Option, or both.


 


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3.                                       No
Other Amendment. Except as set forth herein, the Option Agreement shall
remain in full force and effect in accordance with its terms.


 


4.                                       Counterparts.
This Amendment may be executed in one or more counterparts, each of which
will be deemed to be an original and all of which together will be deemed to be
one and the same instrument.


 


[Remainder of page intentionally
left blank; signature page follows]


 


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IN WITNESS WHEREOF,
the parties hereto have caused this Amendment to be duly executed as of the day
and year first above written.


 


 


	
  COMPANY

  	
   

  	
  DIRECTOR

  
	
   

  	
   

  	
   

  
	
  TRANSOMA
  MEDICAL, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Charles
  T. Coggin

  	
   

  	
  /s/ K. James Ehlen

  	
   

  
	
  Name:

  	
  Charles T. Coggin

  	
   

  	
  James Ehlen

  
	
  Title:

  	
  VP & CFO

  	
   

  	
   

  
						



 


 


[Signature Page to
First Amendment to Director Non-Qualified Stock Option Agreement]


 


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