Exhibit 10.4


 


STOCK OPTION AGREEMENT


 


THIS STOCK OPTION AGREEMENT is made as of the 20th
day of March, 2017 (the “Grant Date”) by and between PAVmed Inc., a Delaware corporation (the “Company”),
and Dennis M. McGrath (“Grantee”).


 


WHEREAS, in accordance with that certain Employment Agreement
(“Employment Agreement”), dated as of March 20, 2017, between the Company and the Grantee, the Board of Directors
of the Company (the “Board”) authorized the grant to the Grantee of an option (the “Option”)
to purchase an aggregate of 250,000 shares of the authorized but unissued common stock of the Company, $.001 par value (“Common
Stock”), conditioned upon the Grantee’s acceptance thereof upon the terms and conditions set forth in this Agreement
and, notwithstanding that the Option is not issued under the Plan, subject to the terms of the Company’s 2014 Long-Term Incentive
Equity Plan (the “Plan”) (capitalized terms used herein and not otherwise defined have the meanings set forth
in the Plan); and


 


WHEREAS, the Grantee desires to acquire the Option on the terms
and conditions set forth in this Agreement and, notwithstanding that the Option is not issued under the Plan, subject to the terms
of the Plan;


 


IT IS AGREED:


 


1.         Grant of Stock
Option. The Company hereby grants to the Grantee the right and option to purchase all or any part of an aggregate of 250,000
shares of the Common Stock (the “Option Shares”) on the terms and conditions set forth herein and, notwithstanding
that the Option is not issued under the Plan, subject to the provisions of the Plan, which shall be deemed incorporated herein
by reference.


 


2.         Non-Incentive
Stock Option. The Option represented hereby is not intended to be an Option that qualifies as an “Incentive Stock Option”
under Section 422 of the Internal Revenue Code of 1986, as amended.


 


3.         Exercise
Price. The exercise price (the “Exercise Price”) of the Option is $5.95 per share which is the fair value
at date of grant, subject to adjustment as hereinafter provided.


 




     


     


    

 


4.         Exercisability.
Subject to the terms and conditions of the Plan and this Agreement, this Option shall become exercisable as to one-twelfth (1/12)
of the Option Shares on the last day of the fiscal quarter in which the Grant Date occurs, unless the Grant Date occurs more than
forty-five (45) days after the commencement of such fiscal quarter, in which case the Option shall become exercisable as to one-twelfth
(1/12) of the Option Shares on the last day of the next succeeding fiscal quarter, and shall become exercisable as to one-twelfth
(1/12) of the Option Shares on the last day of each successive fiscal quarter for the following eleven (11) fiscal quarters. After
a portion of the Option becomes exercisable, it shall remain exercisable except as otherwise provided herein, until the close of
business on the day that is ten years from the Grant Date (the “Exercise Period”).


 


5.         Effect of Termination
of Employment.


 


5.1.      Termination
Due to Death. If Grantee’s employment by the Company terminates by reason of death, the portion of the Option, if any,
that was exercisable as of the date of death may thereafter be exercised by the legal representative of the estate or by the legatee
of the Grantee under the will of the Grantee, for a period of one year from the date of such death or until the expiration of the
Exercise Period, whichever period is shorter. The portion of the Option, if any, that was not exercisable as of the date of death
shall immediately terminate upon death.


 


5.2.      Termination
Due to Disability. If Grantee’s employment by the Company terminates by reason of Disability, the portion of the Option,
if any, that was exercisable as of the date of termination of employment may thereafter be exercised by the Grantee or legal representative
for a period of one year from the date of such termination or until the expiration of the Exercise Period, whichever period is
shorter. The portion of the Option, if any, that was not exercisable as of the date of Disability shall immediately terminate upon
disability.


 


5.3.      Termination
Due to Retirement. If Grantee’s employment by the Company terminates due to Normal Retirement, then the portion of the
Option that was exercisable as of the date of termination of employment may be exercised for a period of one year from the date
of such termination or until the expiration of the Exercise Period, whichever is shorter. The portion


 




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of the Option not yet exercisable on the date of termination
of employment shall immediately expire.


 


5.4.      Termination
by the Company without Cause or by the Grantee without Good Reason. If Grantee’s employment is terminated by the Company
without “Cause” (as defined in the Employment Agreement) or by the Grantee without “Good Reason” (as defined
in the Employment Agreement), then the portion of the Option that was exercisable as of the date of termination of employment may
be exercised for a period of three months from the date of such termination or until the expiration of the Exercise Period, whichever
is shorter. The portion of the Option not yet exercisable on the date of termination of employment shall immediately expire.


 


5.5.      Termination
by the Grantee with Good Reason. If Grantee’s employment is terminated by the Grantee with Good Reason, then the Option
immediately shall become exercisable as to all of the Option Shares and may be exercised for a period of three months from the
date of such termination or until the expiration of the Exercise Period, whichever is shorter.


 


5.6.      Change
of Control. If a Change of Control (as defined in the Indemnification Agreement between the Company and the Grantee dated as
of the date hereof) occurs at or prior to a termination of Grantee’s employment, then the Option immediately shall become
exercisable as to all the Option Shares and may be exercised until the expiration of the Exercise Period or such shorter period
set forth in Sections 5.1 to 5.5 or 5.7.


 


5.7.      Other
Termination. If Grantee’s employment is terminated for any reason other than (i) death, (ii) Disability, (iii) Normal
Retirement, (iv) without Cause by the Company or without Good Reason by the Grantee or (v) with Good Reason by the Grantee, the
Option shall expire on the date of termination of employment.


 


5.8.      Competing
With the Company. If Grantee’s employment with the Company or a Subsidiary is terminated for any reason whatsoever and
Grantee violates any of the provisions of Section 5 of the Employment Agreement as determined by judgment issued in a court of
law, then the Board, in its sole discretion, may require the Grantee to return to the Company the


 




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economic value of any award that was realized or obtained by
such Grantee at any time during the period beginning on the date that is 6 months prior to the date such Grantee’s employment
is terminated; provided, however, that if Grantee is a resident of the State of California, such right must be exercised by the
Company for cash within six months after the date of termination of Grantee’s service to the Company or within six months
after exercise of the Option, whichever is later. In such event, Grantee agrees to remit to the Company, in cash, an amount equal
to the difference between the Fair Market Value of the Option Shares on the date of termination (or the sales price of such Option
Shares if the Option Shares were sold during such 6 month period) and the Exercise Price of such Option Shares.


 


6.         Withholding Tax.
Not later than the date as of which an amount first becomes includible in the gross income of the Grantee for Federal income tax
purposes with respect to the Option, the Grantee shall pay to the Company, or make arrangements satisfactory to the Board regarding
the payment of, any Federal, state and local taxes of any kind required by law to be withheld or paid with respect to such amount
(“Withholding Tax”). The obligations of the Company under the Plan and pursuant to this Agreement shall be conditional
upon such payment or arrangements with the Company and the Company shall, to the extent permitted by law, have the right to deduct
any Withholding Taxes from any payment of any kind otherwise due to the Grantee from the Company.


 


7.         Adjustments.
In the event of any change in the shares of Common Stock of the Company as a whole occurring as the result of a common stock split,
or reverse split, common stock dividend payable on shares of Common Stock, combination or exchange of shares, or other extraordinary
or unusual event occurring after the grant of the Option, the terms of this Option shall be equitably adjusted. Any such adjustments
will be made by the Board, whose determination will be final, binding and conclusive, provided such determination is made in good
faith and the adjustment to the Exercise Price and the number of shares of Common Stock or other property issuable upon exercise
of this Option appropriately reflects the change in the shares of Common Stock, and provided further that the aggregate purchase
price payable for the Option Shares shall remain the same.


 




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8.         Method of Exercise.


 


8.1.      Notice
to the Company. The Option shall be exercised in whole or in part by written notice in substantially the form attached hereto
as Exhibit A directed to the Company at its principal place of business accompanied by full payment as hereinafter provided
of the exercise price for the number of Option Shares specified in the notice and of the Withholding Taxes, if any.


 


8.2.      Delivery
of Option Shares. The Company shall deliver a certificate for the Option Shares to the Grantee as soon as practicable after
payment therefor.


 


8.3.      Payment
of Purchase Price.


 


8.3.1.   Cash
Payment. The Grantee shall make cash payments by wire transfer, certified or bank check or personal check, in each case payable
to the order of the Company; the Company shall not be required to deliver certificates for Option Shares until the Company has
confirmed the receipt of good and available funds in payment of the purchase price thereof.


 


8.3.2.   Cashless
Payment. Provided that prior approval of the Company has been obtained, the Grantee may use Common Stock of the Company owned
by him to pay the purchase price for the Option Shares by delivery of stock certificates in negotiable form which are effective
to transfer good and valid title thereto to the Company, free of any liens or encumbrances. Shares of Common Stock used for this
purpose shall be valued at the Fair Market Value.


 


8.3.3.   Payment
of Withholding Tax. Any required Withholding Tax may be paid in cash or with Common Stock in accordance with Sections 8.3.1
and 8.3.2.


 


8.3.4.   Exchange
Act Compliance. Notwithstanding the foregoing, the Company shall have the right to reject payment in the form of Common Stock
if in the opinion of counsel for the Company, (i) it could result in an event of “recapture” under Section 16(b) of
the Securities Exchange Act of 1934; (ii) such shares of Common Stock may not be sold or transferred to the Company; or (iii) such
transfer could create legal difficulties for the Company.


 


9.         Transfer.
Except as may be set forth in the next sentence of this Section, the Option shall not be transferable by the Grantee other than
by will or by the laws of descent and distribution,


 




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and the Option shall be exercisable, during the Grantee’s
lifetime, only by the Grantee (or, to the extent of legal incapacity or incompetency, the Grantee’s guardian or legal representative).
Notwithstanding the foregoing, the Grantee, with the approval of the Board, may transfer all or a portion of the Option (i) (A)
by gift, for no consideration, or (B) pursuant to a domestic relations order, in either case, to or for the benefit of the Grantee’s
“Immediate Family” (as defined below), or (ii) to an entity in which the Grantee and/or members of Grantee’s
Immediate Family own more than fifty percent of the voting interest, in exchange for an interest in that entity, subject to such
limits as the Board may establish, and the transferee shall remain subject to all the terms and conditions applicable to the Option
prior to such transfer. The term “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law
or sister-in-law, including adoptive relationships, any person sharing the Grantee’s household (other than a tenant or employee),
a trust in which these persons have more than fifty percent beneficial interest, and a foundation in which these persons (or the
Grantee) control the management of the assets.


 


10.       Company Representations.
The Company hereby represents and warrants to the Grantee that:


 


10.1.    the
Company, by appropriate and all required action, is duly authorized to enter into this Agreement and consummate all of the transactions
contemplated hereunder; and


 


10.2.    the
Option Shares, when issued and delivered by the Company to the Grantee in accordance with the terms and conditions hereof, will
be duly and validly issued and fully paid and non-assessable.


 


11.       Grantee Representations.
The Grantee hereby represents and warrants to the Company that:


 


11.1.    he
is acquiring the Option and shall acquire the Option Shares for his own account and not with a view towards the distribution thereof;


 


11.2.    he
has received a copy of the Plan as in effect as of the date of this Agreement;


 




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11.3.    he
has received a copy of all reports and documents required to be filed by the Company with the Securities and Exchange Commission
pursuant to the Exchange Act, within the last 24 months and all reports issued by the Company to its stockholders;


 


11.4.    he
understands that he is subject to the Company’s Insider Trading Policy and has received a copy of such policy as of the date
of this Agreement;


 


11.5.    he
understands that he must bear the economic risk of the investment in the Option Shares, which cannot be sold by him unless they
are registered under the Securities Act of 1933 (“1933 Act”) or an exemption therefrom is available thereunder
and that the Company is under no obligation to register the Option Shares for sale under the 1933 Act;


 


11.6.    in
his position with the Company, he has had both the opportunity to ask questions and receive answers from the officers and directors
of the Company and all persons acting on its behalf concerning the terms and conditions of the offer made hereunder and to obtain
any additional information to the extent the Company possesses or may possess such information or can acquire it without unreasonable
effort or expense necessary to verify the accuracy of the information obtained pursuant to Section 11.3 above;


 


11.7.    he
is aware that the Company shall place stop transfer orders with its transfer agent against the transfer of the Option Shares in
the absence of registration under the 1933 Act or an exemption therefrom as provided herein; and


 


11.8.    if,
at the time of issuance of the Option Shares, the issuance of such shares have not been registered under the 1933 Act, the certificates
evidencing the Option Shares shall bear the following legends:


 


“The shares represented by this certificate have been
acquired for investment and have not been registered under the Securities Act of 1933. The shares may not be sold or transferred
in the absence of such registration or an exemption therefrom under said Act.”


 


“The shares represented by this certificate have been
acquired pursuant to a Stock Option Agreement dated as of March 20, 2017, a copy of which is on file with the Company, and may


 




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not be transferred, pledged or disposed of except in accordance
with the terms and conditions thereof.”


 


12.       Restriction
on Transfer of Option Shares. Anything in this Agreement to the contrary notwithstanding, the Grantee hereby agrees that he
shall not sell, transfer by any means or otherwise dispose of the Option Shares acquired by him unless (i) the Option Shares are
registered under the 1933 Act, or in the event that they are not so registered, an exemption from the 1933 Act registration requirements
is available thereunder and the Grantee has furnished the Company with notice of such proposed transfer and the Company’s
legal counsel, in its reasonable opinion, shall deem such proposed transfer to be so exempt, and (ii) such transfer is in compliance
with the Company’s Insider Trading Policy, as in effect at such time.


 


13.       Miscellaneous.


 


13.1.    Notices.
All notices, requests, deliveries, payments, demands and other communications which are required or permitted to be given under
this Agreement shall be in writing and shall be either delivered personally or sent by registered or certified mail, or by private
courier to the parties at their respective addresses set forth herein, or to such other address as either party shall have specified
by notice in writing to the other. Notice shall be deemed duly given hereunder when delivered or mailed as provided herein.


 


13.2.    Conflicts
with the Plan. In the event of a conflict between the provisions of the Plan and the provisions of this Agreement, the provisions
of the Plan shall in all respects be controlling.


 


13.3.    Grantee
and Stockholder Rights. The Grantee shall not have any of the rights of a stockholder with respect to the Option Shares until
such shares have been issued after the due exercise of the Option. Nothing contained in this Agreement shall be deemed to confer
upon Grantee any right to continued employment with the Company or any subsidiary thereof, nor shall it interfere in any way with
the right of the Company to terminate Grantee in accordance with the provisions regarding such termination set forth in the Employment
Agreement.


 


13.4.    Waiver.
The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of
any other or subsequent breach.


 




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13.5.    Entire
Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof. This
Agreement may not be amended except by writing executed by the Grantee and the Company.


 


13.6.    Binding
Effect; Successors. This Agreement shall inure to the benefit of and be binding upon the parties hereto and, to the extent
not prohibited herein, their respective heirs, successors, assigns and representatives. Nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto and as provided above, their respective heirs, successors,
assigns and representatives any rights, remedies, obligations or liabilities.


 


13.7.    Governing
Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (without regard
to choice of law provisions).


 


13.8.    Headings.
The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.


 


[Signature Page Follows]


 




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IN WITNESS WHEREOF, the parties hereto have signed this Agreement
as of the day and year first above:


 


	 	PAVMED INC.
	 	 	 
	 	By:	/s/ Lishan Aklog
	 	 	Name:	
	 	 	Title:	
	 	 	 
	 	GRANTEE:
	 	 
	 	/s/ Dennis M. McGrath


 




     


     


    

 


EXHIBIT A


 


FORM OF NOTICE OF EXERCISE OF OPTION


 


 


	 	 	 
	 	DATE	 


 


PAVMED INC.


525 Washington Blvd, Suite 2620


Jersey City, New Jersey 07310


Attention: General Counsel


 


		Re:	Purchase of Option Shares



 


Gentlemen:


 


In accordance with my Stock Option Agreement, dated as of March
20, 2017, with PAVmed Inc. (“Company”), under the Company’s 2014 Long-Term Incentive Equity Plan, I hereby
irrevocably elect to exercise the right to purchase _____________ shares of the Company’s common stock, par value $.0001
per share (“Common Stock”), which are being purchased for investment and not for resale.


 


As payment for my shares, enclosed is (check and complete applicable
boxes):


 


		☐	a ☐personal check or  ̈
certified check or ☐ bank check payable
to the order of “PAVmed Inc.” in the sum of $_____________;



 


		☐	confirmation of wire transfer in the amount of $_____________; and/or



 


		☐	with the consent of the Company, a certificate for _____________ shares of the Company’s Common Stock, free and clear
of any encumbrances, duly endorsed, having a Fair Market Value (as such term is defined in the 2014 Long-Term Incentive Equity
Plan) of $_____________.



 


I hereby represent and warrant to, and agree with, the Company
that:


 


		(i)	I am acquiring the Option Shares for my own account, for investment, and not with a view towards the distribution thereof;



 


		(ii)	I have received a copy of the Plan and all reports and documents required to be filed by the Company with the Commission pursuant
to the Exchange Act within the last 24 months and all reports issued by the Company to its stockholders;



 


		(iii)	I understand that I must bear the economic risk of the investment in the Option Shares, which cannot be sold by me unless they
are registered under the Securities Act of 1933 (“1933 Act”) or an exemption therefrom is available thereunder and



 




     


     


    

 


that the Company is under no obligation to register
the Option Shares for sale under the 1933 Act;


 


		(iv)	I agree that I will not sell, transfer by any means or otherwise dispose of the Option Shares acquired by me hereby except
in accordance with Company’s policy, if any, regarding the sale and disposition of securities owned by employees and/or directors
of the Company;



 


		(v)	in my position with the Company, I have had both the opportunity to ask questions and receive answers from the officers and
directors of the Company and all persons acting on its behalf concerning the terms and conditions of the offer made hereunder and
to obtain any additional information to the extent the Company possesses or may possess such information or can acquire it without
unreasonable effort or expense necessary to verify the accuracy of the information obtained pursuant to clause (ii) above;



 


		(vi)	my rights with respect to the Option Shares shall, in all respects, be subject to the terms and conditions of the Company’s
2014 Long-Term Incentive Equity Plan and the Agreement.



 


		(vii)	I am aware that the Company shall place stop transfer orders with its transfer agent against the transfer of the Option Shares
in the absence of registration under the 1933 Act or an exemption therefrom as provided herein; and



 


		(viii)	if, at the time of issuance of the Option Shares, the issuance of such shares have not been registered under the 1933 Act,
the certificates evidencing the Option Shares shall bear the following legends:



 


“The shares represented by this certificate have
been acquired for investment and have not been registered under the Securities Act of 1933. The shares may not be sold or transferred
in the absence of such registration or an exemption therefrom under said Act.”


 


“The shares represented by this certificate have
been acquired pursuant to a Stock Option Agreement dated as of March 20, 2017, a copy of which is on file with the Company, and
may not be transferred, pledged or disposed of except in accordance with the terms and conditions thereof.”


 


		(ix)	I am aware and understand that I may be subject to an Insider Trading Policy.



 


Kindly forward to me my certificate at your earliest convenience.


 




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Very truly yours,


 


	 	 	 
	(Signature)	 	(Address)
	 	 	 
	 	 	 
	(Print Name)	 	(Address)
	 	 	 
	 	 	 
	(Social Security Number)	 	 


 




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