Exhibit 10.10


 


TRANSOMA
MEDICAL, INC.

INCENTIVE STOCK OPTION AGREEMENT


 


THIS INCENTIVE STOCK
OPTION AGREEMENT (the “Agreement”)
is made this           
day of                             ,
20      , by and between Transoma Medical, Inc.,
a Minnesota corporation (the “Company”), and                                   ,
an individual resident of                             
(“Employee”).


 


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


 


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 Employee, 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. This Option is intended
to be an incentive stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”). It is understood and
agreed that the option price is 100% of the per share fair market value of such
shares on the date of this Agreement.


 


2.                                       Duration and Exercisability


 


(a)                                  This Option shall in all events terminate ten
(10) years after the date of grant, which is the date of this Agreement
set forth above.


 


(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 Employee in accordance with the
following schedule:


 


	
  On or after each of the

  following dates

  	
   

  	
  Cumulative percentage of shares with

  respect to which the Option is exercisable

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 

















 


(c)                                  Employee understands that to the extent that
the aggregate fair market value (determined at the time the option was granted)
of the shares of common stock of the
Company with respect to which all options that are incentive stock options
within the meaning of Section 422 of the Code are exercisable for the
first time by Employee during any calendar year exceeds $100,000, in accordance
with Section 422(d) of the Code, such options shall be treated as
options that do not qualify as incentive stock options.


 


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


 


3.                                       Effect of Termination of Employment


 


(a)                                  In the event that Employee shall cease to be
employed by the Company or its affiliate, if any, for any reason other than “Cause”
(as defined in Section 3(b) hereof) or Employee’s death or disability
(as such term is defined in Section 3(c) hereof), Employee shall have
the right to exercise the Option at any time within one (1) month
after such termination of employment to the extent of the full number of shares
Employee was entitled to purchase under the Option on the date of termination,
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 Employee’s employment 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) Employee’s failure, refusal or neglect to perform his
or her job duties and responsibilities after there has been delivered to
Employee notice from the Company and a thirty (30) day opportunity to cure
which Employee has not done; (ii) Employee’s failure to carry out any
reasonable directive of the Board of Directors; (iii) any act of personal
dishonesty taken by Employee in connection with Employee’s responsibilities to
the Company; (iv) Employee’s conviction of any crime involving fraud or
moral turpitude or any felony; or (v) other action by Employee that is
inconsistent with the terms of this Agreement, or any Employment or
Confidentiality and Noncompetition Agreements, between the Company and Employee
that is harmful to the business interests of the Company and which Employee has
not cured after receipt of notice and a reasonable period to cure, not to
exceed thirty (30) days.


 


(c)                                  If Employee shall die while in the employ of
the Company or a subsidiary, if any, or within one (1) month after
termination of employment for any reason other than Cause, or if employment is
terminated because Employee has become disabled (within the meaning of Code Section 22(e)(3))
while in the employ of the Company or a subsidiary, if any, and Employee shall
not have fully exercised the Option, such Option may be exercised at any
time within twelve (12) months after Employee’s death or date of termination of
employment for disability by Employee, personal representatives or
administrators, or guardians of Employee, 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 Employee
was entitled to purchase under the 


 


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Option on the date of death, termination of
employment, if earlier, or date of termination for such 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 Employee
or other proper party by delivering within the Option period written notice of
intent to exercise to the Company at 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)                                 Employee 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 Employee 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 Employee’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 Employee 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 Employee has exercised this Option or two (2) years
after the date of the termination of Employee’s employment with the Company for
any reason whatsoever while this Agreement is in effect, Employee 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 Employee 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.


 


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(b)                                 As used herein, Employee shall be deemed to
have engaged in a Forfeiture Activity if Employee: (i) directly or
indirectly engages in any business activity on his or her own behalf or as a
partner, shareholder, director, trustee, principal, agent, employee, consultant 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 or representative of the
Company to engage in any such activity; (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
Employee had contact in the course of his or her employment with 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 in time, in area or in
both, or in any other manner which the court determines, such that the covenant
shall be enforceable against Employee. Employee 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 Employee or Employee’s heirs, successors,
personal representatives or assigns, and Employee 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 Employee pursuant to this Option. (The Company’s Call Option, and
any reference to shares acquired by Employee 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 Employee 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 Employee, shall be:


 


(i)                                     The express desire of Employee to sell,
assign, pledge, transfer, give or otherwise dispose of or encumber any shares
acquired by Employee pursuant to this Option or any attempt by Employee to
transfer any such shares 


 


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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 Employee during the lifetime
of Employee for bona fide estate or tax planning purposes, including but not
limited to any transfer by gift to a spouse, child, sibling or parent of
Employee or a transfer to a trust, and a transfer following the death of the
Employee pursuant to the terms of the Employee’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 Employee 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 Employee 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 Employee or
Employee’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 Employee becomes final, provided such judgment remains
unsatisfied.


 


(v)                                 Voluntary application of Employee 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 Employee pursuant to this
Option, unless released or discharged within a period of thirty (30) days.


 


(vii)                           Employee’s termination of employment with the
Company for “Cause” as defined in Section 3(b) of this Agreement.
Notwithstanding any other provision of this Agreement, Employee’s termination of
employment with 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.


 


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


 


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


 


(b)                                 Within thirty (30) days of the occurrence of
anyone or more of the Option Events described in Section 6(a), the
Employee or his or her legal representative, as the 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), Employee (or his or her 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 Employee 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 Employee (or his or her legal
representative) within thirty (30) days after receipt of the written notice
from Employee; 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 a portion of the shares,
Employee (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 Employee.


 


(d)                                 Upon the occurrence of anyone 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)(ix) hereof, the Company shall be
entitled to offset and reduce the total purchase price of the repurchased
shares by any amount that Employee 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 Employee or Employee’s heirs, successors,
assigns or personal representatives, as the case may be: (i) the
Company’s check in the amount of the 


 


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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 pursuant to Sections 483, 1274 and 11872 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, Employee or his or her 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 shares of
common stock 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. Employee or his or her 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 Employee. 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)                                 Employee 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 Employee
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 an
Incentive Stock Option Agreement dated [date of this
Agreement to be inserted in the legend] between
[Employee’s
name to be inserted in the legend] and Transoma Medical, Inc., a Minnesota corporation, a copy of
which is available for review at the principal offices of Transoma Medical, Inc.


 


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8.                                       Miscellaneous


 


(a)                                  This Option is granted pursuant to the
Company’s 2000 Stock Incentive Plan and is subject to the terms of the Plan. In
the event that any of the 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 Employee.


 


(b)                                 This Agreement shall not confer on Employee
any right with respect to continuance of employment by the Company or any of
its affiliates, nor will it interfere in any way with the right of the Company
to terminate such employment at any time. Employee 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 Employee 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)                                    If Employee shall dispose of any of the
shares of common stock acquired upon exercise of the Option within two (2) years
from the date the Option was granted or within one (1) year after the date
of exercise of the Option, then, in order to provide the Company with the
opportunity to claim the benefit of any income tax deduction, Employee 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 or
state income tax laws or regulations, the Company may take such action as
it deems appropriate to assure (i) notice to the Company of any
disposition of the shares of the Company within the time periods described
above, and (ii) that, if necessary, all applicable federal or state
payroll, withholding, income or other taxes are withheld or collected from
Employee.


 


(g)                                 In order to provide the Company with the
opportunity to claim the benefit of any income tax deduction which may be
available to it upon the exercise of the Option when the Option does not
qualify as an incentive stock option within the meaning of Section 422 of
the Code, and in order to comply with all applicable federal or state income tax
laws or regulations, the Company may take such action as it deems
appropriate to insure that, if necessary, all applicable federal or state
payroll, withholding, 


 


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income or other taxes are withheld or collected from
Employee. Employee may elect to satisfy his or her federal and state
income tax withholding obligations upon exercise of this Option by (i) having
the Company withhold a portion of the shares of Company common stock otherwise
to be delivered upon exercise of such Option having a fair market value equal
to the amount of federal and state income tax required to be withheld upon such
exercise, in accordance with the rules of the Committee, or (ii) delivering
to the Company shares of its common stock other than the shares issuable upon
exercise of such Option with a fair market value equal to such taxes, in
accordance with the rules of the Committee.


 


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


 


(i)                                     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. (651) 481-7410

  
	
   

  	
   

  	
   

  
	
  If to the Employee:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Tel.

  	
   

  	
   

  
					



 


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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Employee

  



 


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