Exhibit 10.40

 

FORM OF INCENTIVE STOCK OPTION AGREEMENT

 

NANOVIBRONIX, INC.

2014 LONG-TERM INCENTIVE PLAN

 

1.          Grant of Option. Pursuant to the NanoVibronix, Inc. 2014 Long-Term
Incentive Plan (the “Plan”), as adopted by NanoVibronix, Inc., a Delaware
corporation (the “Company”), the Company grants to

 

_________________________

(the “Participant”)

 

who is an Employee of the Company, an option (the “Stock Option”) to purchase a
total of _________________ (____________) full shares of Common Stock of the
Company (the “Optioned Shares”) at an “Option Price” equal to $_________ per
share (being equal to the Fair Market Value per share of the Common Stock on the
Date of Grant or 110% of such Fair Market Value, in the case of a ten percent
(10%) or more stockholder as provided in Section 422 of the Code), in the
amounts, during the periods, and upon the terms and conditions set forth in this
Incentive Stock Option Agreement (this “Agreement”).

 

The “Date of Grant” of this Stock Option is ______________ 20____. The “Option
Period” shall commence on the Date of Grant and shall expire on the date
immediately preceding the tenth (10th) anniversary of the Date of Grant (or the
date immediately preceding the fifth (5th) anniversary of the Date of Grant, in
the case of a ten percent (10%) or more stockholder as provided in Section 422
of the Code) unless terminated earlier in accordance with Section 4 below. The
Stock Option is intended to be an Incentive Stock Option.

 

2.          Subject to Plan. The Stock Option and its exercise are subject to
the terms and conditions of the Plan, and the terms of the Plan shall control to
the extent not otherwise inconsistent with the provisions of this Agreement. The
capitalized terms used herein that are defined in the Plan shall have the same
meanings assigned to them in the Plan. The Stock Option is subject to any rules
promulgated pursuant to the Plan by the Board or the Committee and communicated
to the Participant in writing.

 

3.          Vesting; Time of Exercise. Except as specifically provided in this
Agreement and subject to certain restrictions and conditions set forth in the
Plan, the Optioned Shares shall be vested and the Stock Option shall be
exercisable as follows:

 

a.           One-third (1/3) of the total Optioned Shares shall vest and that
portion of the Stock Option shall become exercisable on the first anniversary of
the Date of Grant, provided the Participant is employed by the Company or a
Subsidiary on that date.

 

b.           An additional one-third (1/3) of the total Optioned Shares shall
vest and that portion of the Stock Option shall become exercisable on the second
anniversary of the Date of Grant, provided the Participant is employed by the
Company or a Subsidiary on that date.

 

c.           The remaining one-third (1/3) of the total Optioned Shares shall
vest and that portion of the Stock Option shall become exercisable on the third
anniversary of the Date of Grant, provided the Participant is employed by the
Company or a Subsidiary on that date.

 

 

 

 

[Notwithstanding the foregoing, upon the occurrence of a Change in Control, then
immediately prior to the effective date of such Change in Control, the total
Optioned Shares not previously vested shall thereupon immediately become vested
and this Stock Option shall become fully exercisable, if not previously so
exercisable.]

 

4.          Term; Forfeiture.

 

a.           Except as otherwise provided in this Agreement, to the extent the
unexercised portion of the Stock Option relates to Optioned Shares which are not
vested on the date of the Participant’s Termination of Service, the Stock Option
will be terminated on that date. The unexercised portion of the Stock Option
that relates to Optioned Shares which are vested will terminate at the first of
the following to occur:

 

i.            5 p.m. on the date the Option Period terminates;

 

ii.           5 p.m. on the date which is twelve (12) months following the date
of the Participant’s Termination of Service due to death or Total and Permanent
Disability;

 

iii.          immediately upon the Participant’s Termination of Service by the
Company for Cause (as defined below);

 

iv.          immediately upon the Participant’s violation of any non-compete or
non-solicitation agreement entered into between the Company and the Participant;

 

v.           5 p.m. on the date which is three (3) months following the date of
the Participant’s Termination of Service for any reason not otherwise specified
in this Section 4.a.; and

 

vi.          5 p.m. on the date the Company causes any portion of the Stock
Option to be forfeited pursuant to Section 7 hereof.

 

b.           For purposes of this Agreement, the term “Cause” shall have the
meaning ascribed to such term in any employment agreement in effect by and
between the Company and the Participant; provided, however, at any time there is
no such agreement in effect, or if such agreement does not define such term, the
term “Cause” shall mean (i) the Participant’s commission of a dishonest or
fraudulent act in connection with the Participant’s employment, or the
misappropriation of Company property; (ii) the Participant’s conviction of, or
plea of nolo contendere to, a felony or crime involving dishonesty; (iii) the
Participant’s inattention to duties, unsatisfactory performance, or failure to
perform the Participant’s duties hereunder, provided in each case the Company
gives the Participant written notice and thirty (30) days to correct the
Participant’s performance to the Company’s satisfaction; (iv) a substantial
failure to comply with the Company’s policies; (v) a material and willful breach
of the Participant’s fiduciary duties in any material respect, provided in each
case the Company gives the Participant written notice and thirty (30) days to
correct the breach to the Company’s satisfaction; (vi) the Participant’s failure
to comply in any material respect with any legal written directive of the Board;
or (vii) any act or omission of the Participant which is of substantial
detriment to the Company because of the Participant’s intentional failure to
comply with any statute, rule, or regulation, except any act or omission
believed by the Participant in good faith to have been in or not opposed to the
best interests of the Company (without intent of the Participant to gain,
directly or indirectly, a profit to which the Participant was not legally
entitled). Any determination of whether the Participant should be terminated for
Cause pursuant to this Agreement shall be made in the sole, good faith
discretion of the Board, and shall be binding upon all parties affected thereby.

 

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5.          Who May Exercise. Subject to the terms and conditions set forth in
Sections 3 and 4 above, during the lifetime of the Participant, the Stock Option
may be exercised only by the Participant, or by the Participant’s guardian or
personal or legal representative. If the Participant’s Termination of Service is
due to his death prior to the dates specified in Section 4.a. hereof, and the
Participant has not exercised the Stock Option as to the maximum number of
vested Optioned Shares as set forth in Section 3 hereof as of the date of death,
the following persons may exercise the exercisable portion of the Stock Option
on behalf of the Participant at any time prior to the earliest of the dates
specified in Section 4.a. hereof: the personal representative of his estate or
the person who acquired the right to exercise the Stock Option by bequest or
inheritance or by reason of the death of the Participant; provided that the
Stock Option shall remain subject to the other terms of this Agreement, the
Plan, and Applicable Laws.

 

6.          No Fractional Shares. The Stock Option may be exercised only with
respect to full shares, and no fractional share of Common Stock shall be issued.

 

7.          Manner of Exercise. Subject to such administrative regulations as
the Committee may from time to time adopt, the Stock Option may be exercised by
the delivery of written notice to the Committee setting forth the number of
shares of Common Stock with respect to which the Stock Option is to be
exercised, the date of exercise thereof (the “Exercise Date”) which shall be at
least three (3) days after giving such notice unless an earlier time shall have
been mutually agreed upon, and whether the Optioned Shares to be exercised will
be considered as deemed granted under an Incentive Stock Option as provided in
Section 11. On the Exercise Date, the Participant shall deliver to the Company
consideration with a value equal to the total Option Price of the shares to be
purchased, payable as follows: (a) cash, check, bank draft, or money order
payable to the order of the Company; (b) if the Company, in its sole discretion,
so consents in writing, Common Stock (including Restricted Stock) owned by the
Participant on the Exercise Date, valued at its Fair Market Value on the
Exercise Date, and which the Participant has not acquired from the Company
within six (6) months prior to the Exercise Date; (c) if the Company, in its
sole discretion, so consents in writing, by delivery (including by FAX) to the
Company or its designated agent of an executed irrevocable option exercise form
together with irrevocable instructions from the Participant to a broker or
dealer, reasonably acceptable to the Company, to sell certain of the shares of
Common Stock purchased upon exercise of the Stock Option or to pledge such
shares as collateral for a loan and promptly deliver to the Company the amount
of sale or loan proceeds necessary to pay such purchase price; and/or (d) in any
other form of valid consideration that is acceptable to the Committee in its
sole discretion. In the event that shares of Restricted Stock are tendered as
consideration for the exercise of a Stock Option, a number of shares of Common
Stock issued upon the exercise of the Stock Option equal to the number of shares
of Restricted Stock used as consideration therefor shall be subject to the same
restrictions and provisions as the Restricted Stock so tendered.

 

Upon payment of all amounts due from the Participant, the Company shall cause
the Common Stock then being purchased to be electronically registered in the
Participant’s name (or the name of the person exercising the Participant’s Stock
Option in the event of his death), promptly after the Exercise Date. The Company
shall not issue certificates for Common Stock unless the Participant (or the
person exercising the Participant’s Stock Option in the event of his death)
requests delivery of the certificates for the Common Stock in writing and in
accordance with the procedures established by the Committee. The Company shall
deliver the certificates as soon as administratively practicable following the
Company’s receipt of the written request from the Participant (or the person
exercising the Participant’s Stock Option in the event of his death) for
delivery of the certificates. The obligation of the Company to register or
deliver such shares of Common Stock shall, however, be subject to the condition
that, if at any time the Company shall determine in its discretion that the
listing, registration, or qualification of the Stock Option or the Common Stock
upon any securities exchange or inter-dealer quotation system or under any state
or federal law, or the consent or approval of any governmental regulatory body,
is necessary as a condition of, or in connection with, the Stock Option or the
issuance or purchase of shares of Common Stock thereunder, then the Stock Option
may not be exercised in whole or in part unless such listing, registration,
qualification, consent, or approval shall have been effected or obtained free of
any conditions not reasonably acceptable to the Committee.

 

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If the Participant fails to pay for any of the Optioned Shares specified in such
notice or fails to accept delivery thereof, then that portion of the
Participant’s Stock Option and the right to purchase such Optioned Shares may be
forfeited by the Participant.

 

8.          Nonassignability. The Stock Option is not assignable or transferable
by the Participant except by will or by the laws of descent and distribution.

 

9.          Rights as Stockholder. The Participant will have no rights as a
stockholder with respect to any of the Optioned Shares until the issuance of a
certificate or certificates to the Participant or the registration of such
shares in the Participant’s name for the shares of Common Stock. The Optioned
Shares shall be subject to the terms and conditions of this Agreement. Except as
otherwise provided in Section 10 hereof, no adjustment shall be made for
dividends or other rights for which the record date is prior to the issuance of
such certificate or certificates, or the registration of such shares in the
Participant’s name. The Participant, by his execution of this Agreement, agrees
to execute any documents requested by the Company in connection with the
issuance of the shares of Common Stock.

 

10.        Adjustment of Number of Optioned Shares and Related Matters. The
number of shares of Common Stock covered by the Stock Option, and the Option
Prices thereof, shall be subject to adjustment in accordance with Articles 11 –
13 of the Plan.

 

11.        Incentive Stock Option. Subject to the provisions of the Plan, the
Stock Option is intended to be an Incentive Stock Option. To the extent the
number of Optioned Shares exceeds the limit set forth in Section 6.3 of the
Plan, such Optioned Shares shall be deemed granted pursuant to a Nonqualified
Stock Option. Unless otherwise indicated by the Participant in the notice of
exercise pursuant to Section 7, upon any exercise of this Stock Option, the
number of exercised Optioned Shares that shall be deemed to be exercised
pursuant to an Incentive Stock Option shall equal the total number of Optioned
Shares so exercised multiplied by a fraction, (i) the numerator of which is the
number of unexercised Optioned Shares that could then be exercised pursuant to
an Incentive Stock Option, and (ii) the denominator of which is the then total
number of unexercised Optioned Shares.

 

12.        Disqualifying Disposition. In the event that Common Stock acquired
upon exercise of this Stock Option is disposed of by the Participant in a
“Disqualifying Disposition,” such Participant shall notify the Company in
writing within thirty (30) days after such disposition of the date and terms of
such disposition. For purposes hereof, “Disqualifying Disposition” shall mean a
disposition of Common Stock that is acquired upon the exercise of this Stock
Option (and that is not deemed granted pursuant to a Nonqualified Stock Option
under Section 11) prior to the expiration of either two (2) years from the Date
of Grant of this Stock Option or one (1) year from the transfer of shares to the
Participant pursuant to the exercise of the Stock Option.

 

13.        Voting. The Participant, as record holder of some or all of the
Optioned Shares following exercise of this Stock Option, has the exclusive right
to vote, or consent with respect to, such Optioned Shares until such time as the
Optioned Shares are transferred in accordance with this Agreement; provided,
however, that this Section shall not create any voting right where the holders
of such Optioned Shares otherwise have no such right.

 

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14.        Specific Performance. The parties acknowledge that remedies at law
will be inadequate remedies for breach of this Agreement and consequently agree
that this Agreement shall be enforceable by specific performance. The remedy of
specific performance shall be cumulative of all of the rights and remedies at
law or in equity of the parties under this Agreement.

 

15.        Participant’s Representations. Notwithstanding any of the provisions
hereof, the Participant hereby agrees that he will not exercise the Stock Option
granted hereby, and that the Company will not be obligated to issue any shares
to the Participant hereunder, if the exercise thereof or the registration or
issuance of such shares shall constitute a violation by the Participant or the
Company of any provision of any law or regulation of any governmental authority.
Any determination in this connection by the Company shall be final, binding, and
conclusive. The obligations of the Company and the rights of the Participant are
subject to all Applicable Laws.

 

16.        Investment Representation. Unless the shares of Common Stock are
issued to the Participant in a transaction registered under applicable federal
and state securities laws, by his execution hereof, the Participant represents
and warrants to the Company that all Common Stock which may be purchased
hereunder will be acquired by the Participant for investment purposes for his
own account and not with any intent for resale or distribution in violation of
federal or state securities laws. Unless the Common Stock is issued to him in a
transaction registered under the applicable federal and state securities laws,
any certificates issued with respect to the Common Stock shall bear an
appropriate restrictive investment legend and shall be held indefinitely, unless
they are subsequently registered under the applicable federal and state
securities laws or the Participant obtains an opinion of counsel, in form and
substance satisfactory to the Company and its counsel, that such registration is
not required.

 

17.        Participant’s Acknowledgments. The Participant acknowledges that a
copy of the Plan has been made available for his or her review by the Company,
and represents that he or she is familiar with the terms and provisions thereof,
and hereby accepts this Stock Option subject to all the terms and provisions
thereof. The Participant hereby agrees to accept as binding, conclusive, and
final all decisions or interpretations of the Committee or the Board, as
appropriate, upon any questions arising under the Plan or this Agreement.

 

18.        Law Governing. This Agreement shall be governed by, construed, and
enforced in accordance with the laws of the State of Delaware (excluding any
conflict of laws rule or principle of Delaware law that might refer the
governance, construction, or interpretation of this Agreement to the laws of
another state).

 

19.        No Right to Continue Employment. Nothing herein shall be construed to
confer upon the Participant the right to continue in the employment of the
Company or to interfere with or restrict in any way the right of the Company to
discharge the Participant at any time (subject to any contract rights of the
Participant).

 

20.        Legal Construction. In the event that any one or more of the terms,
provisions, or agreements that are contained in this Agreement shall be held by
a court of competent jurisdiction to be invalid, illegal, or unenforceable in
any respect for any reason, the invalid, illegal, or unenforceable term,
provision, or agreement shall not affect any other term, provision, or agreement
that is contained in this Agreement, and this Agreement shall be construed in
all respects as if the invalid, illegal, or unenforceable term, provision, or
agreement had never been contained herein.

 

21.        Covenants and Agreements as Independent Agreements. Each of the
covenants and agreements that is set forth in this Agreement shall be construed
as a covenant and agreement independent of any other provision of this
Agreement. The existence of any claim or cause of action of the Participant
against the Company, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company of the covenants and
agreements that are set forth in this Agreement.

 

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22.        Entire Agreement. This Agreement together with the Plan supersede any
and all other prior understandings and agreements, either oral or in writing,
between the parties with respect to the subject matter hereof and constitute the
sole and only agreements between the parties with respect to the said subject
matter. All prior negotiations and agreements between the parties with respect
to the subject matter hereof are merged into this Agreement. Each party to this
Agreement acknowledges that no representations, inducements, promises, or
agreements, orally or otherwise, have been made by any party or by anyone acting
on behalf of any party, which are not embodied in this Agreement or the Plan and
that any agreement, statement, or promise that is not contained in this
Agreement or the Plan shall not be valid or binding or of any force or effect.

 

23.        Parties Bound. The terms, provisions, and agreements that are
contained in this Agreement shall apply to, be binding upon, and inure to the
benefit of the parties and their respective heirs, executors, administrators,
legal representatives, and permitted successors and assigns, subject to the
limitation on assignment expressly set forth herein.

 

24.        Modification. No change or modification of this Agreement shall be
valid or binding upon the parties unless the change or modification is in
writing and signed by the parties. Notwithstanding the preceding sentence, the
Company may amend the Plan to the extent permitted by the Plan.

 

25.        Headings. The headings that are used in this Agreement are used for
reference and convenience purposes only and do not constitute substantive
matters to be considered in construing the terms and provisions of this
Agreement.

 

26.        Gender and Number. Words of any gender used in this Agreement shall
be held and construed to include any other gender, and words in the singular
number shall be held to include the plural, and vice versa, unless the context
requires otherwise.

 

27.        Notice. Any notice required or permitted to be delivered hereunder
shall be deemed to be delivered only when actually received by the Company or by
the Participant, as the case may be, at the addresses set forth below, or at
such other addresses as they have theretofore specified by written notice
delivered in accordance herewith:

 

a.           Notice to the Company shall be addressed and delivered as follows:

 

NanoVibronix, Inc.

525 Executive Boulevard

Elmsford, New York 10523

Attn:

Facsimile:

 

b.           Notice to the Participant shall be addressed and delivered as set
forth on the signature page.

 

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28.        Tax Requirements. The Participant is hereby advised to consult
immediately with his own tax advisor regarding the tax consequences of this
Agreement. The Company or, if applicable, any Subsidiary (for purposes of this
Section 28, the term “Company” shall be deemed to include any applicable
Subsidiary), shall have the right to deduct from all amounts paid in cash or
other form in connection with the Plan, any federal, state, local, or other
taxes required by law to be withheld in connection with this Award. The Company
may, in its sole discretion, also require the Participant receiving shares of
Common Stock issued under the Plan to pay the Company the amount of any taxes
that the Company is required to withhold in connection with the Participant’s
income arising with respect to this Award. Such payments shall be required to be
made when requested by the Company and may be required to be made prior to the
registration of such shares in the Participant’s name or the delivery of any
certificate representing shares of Common Stock, if such certificate is
requested by the Participant in accordance with Section 8.3(c) of the Plan. Such
payment may be made by (i) the delivery of cash to the Company in an amount that
equals or exceeds (to avoid the issuance of fractional shares under (iii) below)
the required tax withholding obligations of the Company; (ii) if the Company, in
its sole discretion, so consents in writing, the actual delivery by the
exercising Participant to the Company of shares of Common Stock that the
Participant has not acquired from the Company within six (6) months prior to the
date of exercise, which shares so delivered have an aggregate Fair Market Value
that equals or exceeds (to avoid the issuance of fractional shares under (iii)
below) the required tax withholding payment; (iii) if the Company, in its sole
discretion, so consents in writing, the Company’s withholding of a number of
shares to be delivered upon the exercise of the Stock Option, which shares so
withheld have an aggregate Fair Market Value that equals (but does not exceed)
the required tax withholding payment; or (iv) any combination of (i), (ii), or
(iii). The Company may, in its sole discretion, withhold any such taxes from any
other cash remuneration otherwise paid by the Company to the Participant.

 

* * * * * * * *

 

[Remainder of Page Intentionally Left Blank

Signature Page Follows.]

 

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
duly authorized officer, and the Participant, to evidence his consent and
approval of all the terms hereof, has duly executed this Agreement, as of the
date specified in Section 1 hereof.

 

  COMPANY:       NANOVIBRONIX, INC.       By:              Name:     Title:    
      PARTICIPANT:           Signature         Name:          Address: 
                          

 

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