Exhibit 10.11


 


TRANSOMA
MEDICAL, INC.

DIRECTOR NON-QUALIFIED STOCK OPTION AGREEMENT


 


THIS NON-QUALIFIED STOCK
OPTION AGREEMENT (the “Agreement”)
is made this          day of                 ,
           by and
between Transoma Medical, Inc., a Minnesota corporation (the “Company”),
and                   ,
an individual resident of                 
(“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                           
shares of 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 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 the Option is exercisable

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


(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 22(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 [date of agreement] between [employee
name] 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 


 


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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 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:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Tel.

  	
   

  	
   

  



 


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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

  	
   

  	
   

  
	
   

  	
  Its

  	
  President and CEO

  	
   

  
	
   

  	
   

  	
  Director

  



 


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