Document:

Exhibit 10.9

 

DATA SCIENCES INTERNATIONAL,
INC.

2000 STOCK INCENTIVE PLAN

 

Section 1. Purpose

 

The purpose of the Plan
is to promote the interests of the Company and its shareholders by aiding the
Company in attracting and retaining employees, officers, consultants,
independent contractors and non-employee directors capable of assuring the
future success of the Company, to offer such persons incentives to put forth
maximum efforts for the success of the Company’s business and to afford such
persons an opportunity to acquire a proprietary interest in the Company.

 

Section 2. Definitions

 

As used in the Plan, the
following terms shall have the meanings set forth below:

 

(a)           “Affiliate”
shall mean (i) any entity that, directly or indirectly through one or more intermediaries,
is controlled by the Company and (ii) any entity in which the Company has a
significant equity interest, in each case as determined by the Committee.

 

(b)           “Award”
shall mean any Option, Stock Appreciation Right, Restricted Stock, Performance
Award, Other Stock Grant or Other Stock-Based Award granted under the Plan.

 

(c)           “Award
Agreement” shall mean any written agreement, contract or other instrument or
document evidencing any Award granted under the Plan.

 

(d)           “Board”
shall mean the Board of Directors of the Company.

 

(e)           “Code”
shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated
thereunder.

 

(f)            “Committee”
shall mean a committee of Directors designated by the Board to administer the Plan.
The Committee shall be comprised of not less than such number of Directors as
shall be required to permit Awards granted under the Plan to qualify under Rule
16b-3, and each member of the Committee shall be a “Non-Employee Director”
within the meaning of Rule 16b-3 and an “outside director” within the meaning
of Section 162(m) of the Code. The Company expects to have the Plan
administered in accordance with the requirements for the award of “qualified
performance-based compensation” within the meaning of Section 162(m) of the
Code.

 

(g)           “Company”
shall mean Data Sciences International, Inc., a Minnesota corporation, and any successor corporation.

 

(h)           “Director”
shall mean a member of the Board.

 

 

(i)            “Eligible
Person” shall mean any employee, officer, consultant, independent contractor or
Director providing services to the Company or any Affiliate whom the Committee
determines to be an Eligible Person.

 

(j)            “Fair
Market Value” shall mean, with respect to any property (including, without
limitation, any Shares or other securities), the fair market value of such
property determined by such methods or procedures as shall be established from
time to time by the Committee. Notwithstanding the foregoing, unless otherwise
determined by the Committee, the Fair Market Value of Shares as of a given date
shall be, if the Shares are then quoted on the NASDAQ National Market System,
the average of the high and low sales price as reported on the NASDAQ National
Market System on such date or, if the NASDAQ National Market System is not open
for trading on such date, on the most recent preceding date when it is open for
trading.

 

(k)           “Incentive
Stock Option” shall mean an option granted under Section 6(a) of the Plan that
is intended to meet the requirements of Section 422 of the Code or any
successor provision.

 

(l)            “Non-Qualified
Stock Option” shall mean an option granted under Section 6(a) of the Plan that is not intended to be
an Incentive Stock Option.

 

(m)          “Option”
shall mean an Incentive Stock Option or a Non-Qualified Stock Option.

 

(n)           “Other
Stock Grant” shall mean any right granted under Section 6(e) of the Plan.

 

(o)           “Other
Stock-Based Award” shall mean any right granted under Section 6(f) of the Plan.

 

(p)           “Participant”
shall mean an Eligible Person designated to be granted an Award under the Plan.

 

(q)           “Performance
Award” shall mean any right granted under Section 6(d) of the Plan.

 

(r)            “Person”
shall mean any individual, corporation, partnership, association or trust.

 

(s)           “Plan”
shall mean the Data Sciences International, Inc. 2000 Stock Incentive Plan, as
amended from time to time, the provisions of which are set forth herein.

 

(t)            “Restricted
Stock” shall mean any Shares granted under Section 6(c) of the Plan.

 

(u)           “Rule
16b-3” shall mean Rule 16b-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, or any
successor rule or regulation.

 

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(v)           “Share”
or “Shares” shall mean shares of common stock, no par value per share, of the
Company or such other securities or property as may become subject to Awards
pursuant to an adjustment made under Section 4(c) of the Plan.

 

(w)          “Stock
Appreciation Right” shall mean any right granted under Section 6(b) of the Plan.

 

Section 3. Administration

 

(a)           Power
and Authority of the Committee. The Plan shall be administered by the Committee.
Subject to the express provisions of the Plan and to applicable law, the
Committee shall have full power and authority to: (i) designate Participants;
(ii) determine the type or types of Awards to be granted to each Participant
under the Plan; (iii) determine the number of Shares to be covered by (or with
respect to which payments, rights or other matters are to be calculated in connection
with) each Award; (iv) determine the terms and conditions of any Award or Award
Agreement; (v) amend the terms and conditions of any Award or Award Agreement
and accelerate the exercisability of Options or the lapse of restrictions
relating to Restricted Stock or other Awards; (vi) determine whether, to what
extent and under what circumstances Awards may be exercised in cash, Shares,
other securities, other Awards or other property, or canceled, forfeited or
suspended; (vii) determine whether, to what extent and under what circumstances
cash, Shares, promissory notes, other securities, other Awards, other property
and other amounts payable with respect to an Award under the Plan shall be
deferred either automatically or at the election of the holder thereof or the
Committee; (viii) interpret and administer the Plan and any instrument or
agreement, including an Award Agreement, relating to the Plan; (ix) establish,
amend, suspend or waive such rules and regulations and appoint such agents as
it shall deem appropriate for the proper administration of the Plan; and (x)
make any other determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan. Unless otherwise
expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or any
Award shall be within the sole discretion of the Committee, may be made at any
time and shall be final, conclusive and binding upon any Participant, any
holder or beneficiary of any Award and any employee of the Company or any
Affiliate.

 

(b)           Delegation.
The Committee may delegate its powers and duties under the Plan to one or more
Directors or to a committee of Directors, subject to such terms, conditions and
limitations as the Committee may establish in its sole discretion.

 

(c)           Power
and Authority of the Board of Directors. Notwithstanding anything to the
contrary contained herein, the Board may, at any time and from time to time,
without any further action of the Committee, exercise the powers and duties of
the Committee under the Plan.

 

Section 4. Shares
Available for Awards

 

(a)           Shares
Available. Subject to adjustment as provided in Section 4(c) of the Plan,
the aggregate number of Shares that may be issued under all Awards under the
Plan shall be 2,000,000. Shares to be issued under the Plan may be either
authorized but unissued Shares or Shares acquired in the open market or
otherwise. Any Shares that are used by a Participant as full

 

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or partial payment to the Company of the purchase
price relating to an Award, or in connection with the satisfaction of tax
obligations relating to an Award, shall again be available for granting Awards
(other than Incentive Stock Options) under the Plan. In addition, if any Shares
covered by an Award or to which an Award relates are not purchased or are
forfeited, or if an Award otherwise terminates without delivery of any Shares,
then the number of Shares counted against the aggregate number of Shares
available under the Plan with respect to such Award, to the extent of any such
forfeiture or termination, shall again be available for granting Awards under
the Plan. Notwithstanding the foregoing, the number of Shares available for
granting Incentive Stock Options under the Plan shall not exceed 2,000,000,
subject to adjustment as provided in the Plan and subject to the provisions of
Section 422 or 424 of the Code or any successor provision.

 

(b)           Accounting
for Awards. For purposes of this Section 4, if an Award entitles the holder
thereof to receive or purchase Shares, the number of Shares covered by such
Award or to which such Award relates shall be counted on the date of grant of
such Award against the aggregate number of Shares available for granting Awards
under the Plan.

 

(c)           Adjustments.
In the event that the Committee shall determine that any dividend or other
distribution (whether in the form of cash, Shares, other securities or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase or exchange
of Shares or other securities of the Company, issuance of warrants or other
rights to purchase Shares or other securities of the Company or other similar
corporate transaction or event affects the Shares such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of (i) the number and type of Shares (or other
securities or other property) that thereafter may be made the subject of
Awards, (ii) the number and type of Shares (or other securities or other
property) subject to outstanding Awards and (iii) the purchase or exercise
price with respect to any Award; provided, however, that the
number of Shares covered by any Award or to which such Award relates shall
always be a whole number.

 

(d)           Award
Limitations Under the Plan. No Eligible Person may be granted any Award or
Awards under the Plan, the value of which Award or Awards is based solely on an
increase in the value of the Shares after the date of grant of such Award or
Awards, for more than 500,000 Shares (subject to adjustment as provided for in Section 4(c) of the
Plan), in the aggregate in any calendar year. The foregoing annual limitation
specifically includes the grant of any Award or Awards representing “qualified
performance-based compensation” within the meaning of Section 162(m) of the
Code.

 

Section 5. Eligibility

 

Any
Eligible Person shall be eligible to be designated a Participant. In determining which Eligible Persons shall
receive an Award and the terms of any Award, the Committee may take into
account the nature of the services rendered by the respective Eligible Persons,
their present and potential contributions to the success of the Company or such
other factors as the Committee, in its discretion, shall deem relevant.
Notwithstanding the foregoing, an Incentive

 

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Stock Option may only be
granted to full or part-time employees (which term as used herein includes,
without limitation, officers and Directors who are also employees), and an
Incentive Stock Option shall not be granted to an employee of an Affiliate
unless such Affiliate is also a “subsidiary corporation” of the Company within
the meaning of Section 424(f) of the Code or any successor provision.

 

Section 6. Awards

 

(a)           Options.
The Committee is hereby authorized to grant Options to Participants with the
following terms and conditions and with such additional terms and conditions
not inconsistent with the provisions of the Plan as the Committee shall
determine:

 

(i)            Exercise
Price. The purchase price per Share purchasable under an Option shall be
determined by the Committee; provided, however, that in the case
of an Incentive Stock Option such purchase price shall not be less than 100% of
the Fair Market Value of a Share on the date of grant of such Option.

 

(ii)           Option
Term. The term of each Option shall be fixed by the Committee.

 

(iii)          Time
and Method of Exercise. The Committee shall determine the time or times at
which an Option may be exercised in whole or in part and the method or methods
by which, and the form or forms (including, without limitation, cash, Shares,
promissory notes, other securities, other Awards or other property, or any
combination thereof, having a Fair Market Value on the exercise date equal to
the relevant exercise price) in which, payment of the exercise price with
respect thereto may be made or deemed to have been made.

 

(iv)          Incentive
Stock Options. Notwithstanding anything in the Plan to the contrary, the
following additional provisions shall apply to the grant of stock options which
are intended to qualify as Incentive Stock Options:

 

(A)          The
aggregate Fair Market Value (determined as of the time the option is granted)
of the Shares with respect to which Incentive Stock Options are exercisable for
the first time by any participant during any calendar year (under this Plan and
all other plans of the Company and its Affiliates) shall not exceed $100,000.

 

(B)           All
Incentive Stock Options must be granted within ten years from the earlier of
the date on which this Plan was adopted by Board of Directors or the date this
Plan was approved by the shareholders of the Company.

 

(C)           Unless
sooner exercised, all Incentive Stock Options shall expire and no longer be
exercisable no later than 10 years after the date of grant; provided, however,
that in the case of a grant of an Incentive Stock Option to a participant who,
at the time such Option is granted, owns (within the meaning of Section 422 of
the Code) stock possessing more than 10% of the total combined voting power of
all classes of stock of the

 

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Company or of its
Affiliate, such Incentive Stock Option shall expire and no longer be
exercisable no later than 5 years from the date of grant.

 

(D)          The
purchase price per Share for an Incentive Stock Option shall be not less than
100% of the Fair Market Value of a Share on the date of grant of the Incentive
Stock Option; provided, however, that, in the case of the grant of an Incentive
Stock Option to a participant who, at the time such Option is granted, owns
(within the meaning of Section 422 of the Code) stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company or of
its Affiliate, the purchase price per Share purchasable under an Incentive
Stock Option shall be not less than 110% of the Fair Market Value of a Share on
the date of grant of the Incentive Stock Option.

 

(E)           Any
Incentive Stock Option authorized under the Plan shall contain such other
provisions as the Committee shall deem advisable, but shall in all events be
consistent with and contain all provisions required in order to qualify the
Option as an Incentive Stock Option.

 

(b)           Stock
Appreciation Rights. The Committee is hereby authorized to grant Stock
Appreciation Rights to Participants subject to the terms of the Plan and any
applicable Award Agreement. A Stock Appreciation Right granted under the Plan
shall confer on the holder thereof a right to receive upon exercise thereof the
excess of (i) the Fair Market Value of one Share on the date of exercise (or,
if the Committee shall so determine, at any time during a specified period
before or after the date of exercise) over (ii) the grant price of the Stock
Appreciation Right as specified by the Committee, which price shall not be less
than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation
Right. Subject to the terms of the Plan and any applicable Award Agreement, the
grant price, term, methods of exercise, dates of exercise, methods of
settlement and any other terms and conditions of any Stock Appreciation Right
shall be as determined by the Committee. The Committee may impose such
conditions or restrictions on the exercise of any Stock Appreciation Right as
it may deem appropriate.

 

(c)           Restricted
Stock. The Committee is hereby authorized to grant Restricted Stock to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:

 

(i)            Restrictions.
Shares of Restricted Stock shall be subject to such restrictions as the
Committee may impose (including, without limitation, a waiver by the
Participant of the right to vote or to receive any dividend or other right or
property with respect thereto), which restrictions may lapse separately or in
combination at such time or times, in such installments or otherwise as the
Committee may deem appropriate.

 

(ii)           Stock
Certificates. Any Restricted Stock granted under the Plan shall be
registered in the name of the Participant and shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such
Restricted Stock.

 

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(iii)          Forfeiture.
Except as otherwise determined by the Committee, upon termination of employment
(as determined under criteria established by the Committee) during the
applicable restriction period, all Shares of Restricted Stock subject to
restriction at such time shall be forfeited and reacquired by the Company; provided,
however, that the Committee may, when it finds that a waiver would be in
the best interest of the Company, waive in whole or in part any or all
remaining restrictions with respect to Shares of Restricted Stock.

 

(d)           Performance
Awards. The Committee is hereby authorized to grant Performance Awards to
Participants subject to the terms of the Plan and any applicable Award
Agreement. A Performance Award granted under the Plan (i) may be denominated or
payable in cash, Shares (including, without limitation, Restricted Stock),
other securities, other Awards or other property and (ii) shall confer on the
holder thereof the right to receive payments, in whole or in part, upon the
achievement of such performance goals during such performance periods as the
Committee shall establish. Subject to the terms of the Plan and any applicable
Award Agreement, the performance goals to be achieved during any performance
period, the length of any performance period, the amount of any Performance
Award granted, the amount of any payment or transfer to be made pursuant to any
Performance Award and any other terms and conditions of any Performance Award
shall be determined by the Committee.

 

(e)           Other
Stock Grants. The Committee is hereby authorized, subject to the terms of
the Plan and any applicable Award Agreement, to grant to Participants Shares
without restrictions thereon as are deemed by the Committee to be consistent
with the purpose of the Plan.

 

(f)            Other
Stock-Based Awards. The Committee is hereby authorized to grant to Participants,
subject to the terms of the Plan and any applicable Award Agreement, such other
Awards that are denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, Shares (including, without
limitation, securities convertible into Shares), as are deemed by the Committee
to be consistent with the purpose of the Plan. Shares or other securities
delivered pursuant to a purchase right granted under this Section 6(f) shall be
purchased for such consideration, which may be paid by such method or methods
and in such form or forms (including, without limitation, cash, Shares,
promissory notes, other securities, other Awards or other property or any
combination thereof), as the Committee shall determine, the value of which
consideration, as established by the Committee, shall not be less than 100% of
the Fair Market Value of such Shares or other securities as of the date such
purchase right is granted.

 

(g)           General

 

(i)            No
Cash Consideration for Awards. Awards shall be granted for no cash
consideration or for such minimal cash consideration as may be required by
applicable law.

 

(ii)           Awards
May Be Granted Separately or Together. Awards may, in the discretion of the
Committee, be granted either alone or in addition to, in tandem with or in
substitution for any other Award or any award granted under any plan of the
Company or any Affiliate other than the Plan. Awards granted in addition to or
in tandem with other Awards or in addition to or in tandem with awards granted
under any such other plan of the Company or any

 

7

 

Affiliate may be granted either at the same time as or
at a different time from the grant of such other Awards or awards.

 

(iii)          Forms
of Payment under Awards. Subject to the terms of the Plan and of any
applicable Award Agreement, payments or transfers to be made by the Company or
an Affiliate upon the grant, exercise or payment of an Award may be made in
such form or forms as the Committee shall determine (including, without
limitation, cash, Shares, promissory notes, other securities, other Awards or
other property or any combination thereof), and may be made in a single payment
or transfer, in installments or on a deferred basis, in each case in accordance
with rules and procedures established by the Committee. Such rules and
procedures may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred payments or the
grant or crediting of dividend equivalents with respect to installment or
deferred payments.

 

(iv)          Limits
on Transfer of Awards. No Award (other than Other Stock Grants) and no
right under any such Award shall be transferable by a Participant otherwise
than by will or by the laws of descent and distribution and the Company shall
not be required to recognize any attempted assignment of such rights by any
participant. Each Award or right under any Award shall be exercisable during
the Participant’s lifetime only by the Participant or, if permissible under
applicable law, by the Participant’s guardian or legal representative. No Award
or right under any such Award may be pledged, alienated, attached or otherwise
encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.

 

(v)           Term
of Awards. The term of each Award shall be for such period as may be
determined by the Committee; provided, however, that in the case of an
Incentive Stock Option such option shall expire and no longer be exercisable in
accordance with the provisions of Section 6(a)(iv)(C) of this Plan.

 

(vi)          Restrictions;
Securities Exchange Listing. The Committee shall have full and complete
authority to determine whether all or any part of the Shares or other
securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to restrictions on the transferability thereof or any
other restrictions affecting in any manner the optionee’s or grantee’s rights
with respect thereto or restrictions under applicable federal or state
securities laws and regulatory requirements. The Committee may in its full
discretion cause appropriate entries to be made or legends to be affixed to the
Shares or other securities to reflect such restrictions. If any securities of
the Company are traded on a securities exchange, the Company shall not be
required to deliver any Shares or other securities covered by an Award unless
and until such Shares or other securities have been admitted for trading on
such securities exchange.

 

Section 7. Amendment and
Termination: Adjustments

 

(a)           Amendments
to the Plan. The Board may amend, alter, suspend, discontinue or terminate
the Plan at any time; provided, however, that, notwithstanding any other
provision of the Plan or any Award Agreement, without the approval of the
shareholders of the

 

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Company, no such amendment, alteration, suspension,
discontinuation or termination shall be made that, absent such approval:

 

(i)            would
violate the rules or regulations of the NASDAQ National Market System or any
securities exchange that are applicable to the Company; or

 

(ii)           would
cause the Company to be unable, under the Code, to grant Incentive Stock
Options under the Plan.

 

(b)           Amendments
to Awards. The Committee may waive any conditions of or rights of the
Company under any outstanding Award, prospectively or retroactively. Except as
otherwise provided herein or in the Award Agreement, the Committee may not
amend, alter, suspend, discontinue or terminate any outstanding Award,
prospectively or retroactively, if such action would adversely affect the
rights of the holder of such Award, without the consent of the Participant or
holder or beneficiary thereof.

 

(c)           Correction
of Defects, Omissions and Inconsistencies. The Committee may correct any
defect, supply any omission or reconcile any inconsistency in the Plan or any
Award in the manner and to the extent it shall deem desirable to carry the Plan
into effect.

 

Section 8. Income Tax
Withholding

 

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 ensure that all applicable federal
or state payroll, withholding, income or other taxes, which are the sole and
absolute responsibility of a Participant, are withheld or collected from such
Participant. In order to assist a Participant in paying all or a portion of the
federal and state taxes to be withheld or collected upon exercise or receipt of
(or the lapse of restrictions relating to) an Award, the Committee, in its
discretion and subject to such additional terms and conditions as it may adopt,
may permit the Participant to satisfy such tax obligation by (i) electing to
have the Company withhold a portion of the Shares otherwise to be delivered
upon exercise or receipt of (or the lapse of restrictions relating to) such
Award with a Fair Market Value equal to the amount of such taxes or (ii)
delivering to the Company Shares other than Shares issuable upon exercise or
receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes. The election, if any, must be
made on or before the date that the amount of tax to be withheld is determined.

 

Section 9. General
Provisions

 

(a)           No
Rights to Awards. No Eligible Person, Participant or other Person shall have
any claim to be granted any Award under the Plan, and there is no obligation
for uniformity of treatment of Eligible Persons, Participants or holders or
beneficiaries of Awards under the Plan. The terms and conditions of Awards need
not be the same with respect to any Participant or with respect to different
Participants.

 

(b)           Award
Agreements. No Participant will have rights under an Award granted to such
Participant unless and until an Award Agreement shall have been duly executed
on behalf of the Company and, if requested by the Company, signed by the
Participant.

 

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(c)           Plan
Provisions Control. In the event that any provision of an Award Agreement
conflicts with or is inconsistent in any respect with the terms of the Plan as
set forth herein or subsequently amended, the terms of the Plan shall control.

 

(d)           No
Limit on Other Compensation Arrangements. Nothing contained in the Plan
shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases.

 

(e)           No
Right to Employment. The grant of an Award shall not be construed as giving
a Participant the right to be retained in the employ of the Company or any
Affiliate, nor will it affect in any way the right of the Company or an
Affiliate to terminate such employment at any time, with or without cause. In
addition, the Company or an Affiliate may at any time dismiss a Participant from employment free from any
liability or any claim under the Plan or any Award, unless otherwise expressly
provided in the Plan or in any Award Agreement.

 

(f)            Governing
Law. The validity, construction and effect of the Plan or any Award, and
any rules and regulations relating to the Plan or any Award, shall be
determined in accordance with the laws of the State of Minnesota.

 

(g)           Severability.
If any provision of the Plan or any Award is or becomes or is deemed to be
invalid, illegal or unenforceable in any jurisdiction or would disqualify the
Plan or any Award under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to applicable laws,
or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan or the
Award, such provision shall be stricken as to such jurisdiction or Award, and
the remainder of the Plan or any such Award shall remain in full force and
effect.

 

(h)           No
Trust or Fund Created. Neither the Plan nor any Award shall create or be construed
to create a trust or separate fund of any kind or a fiduciary relationship
between the Company or any Affiliate and a Participant or any other Person. To
the extent that any Person acquires a right to receive payments from the
Company or any Affiliate pursuant to an Award, such right shall be no greater
than the right of any unsecured general creditor of the Company or any
Affiliate.

 

(i)            No
Fractional Shares. No fractional Shares shall be issued or delivered pursuant
to the Plan or any Award, and the Committee shall determine whether cash shall
be paid in lieu of any fractional Shares or whether such fractional Shares or
any rights thereto shall be canceled, terminated or otherwise eliminated.

 

(j)            Headings.
Headings are given to the Sections and subsections of the Plan solely as a
convenience to facilitate reference. Such headings shall not be deemed in any
way material or relevant to the construction or interpretation of the Plan or
any provision thereof.

 

Section 10. Effective
Date of the Plan

 

The Plan shall be effective
as of November 2, 2000, subject to approval by the

 

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shareholders of the Company
within one year thereafter.

 

Section 11. Term of the
Plan

 

No Award shall be granted
under the Plan after November 2, 2010 or any earlier date of discontinuation or
termination established pursuant to Section 7(a) of the Plan. However, unless
otherwise expressly provided in the Plan or in an applicable Award Agreement,
any Award theretofore granted may extend beyond such date.

 

11Exhibit 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 

 

2

 

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.

 

3

 

(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 

 

4

 

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.)

 

5

 

(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 

 

6

 

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.

 

7

 

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, 

 

8

 

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

  

 

9

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