Document:

Exhibit 10.3

 

FORM OF

INNOVATE BIOPHARMACEUTICALS, INC.

DIRECTOR INDEMNIFICATION AGREEMENT

 

This Director Indemnification
Agreement (this “Agreement”) is entered into effective as of _______________ __, 2018 by and between Innovate
Biopharmaceuticals, Inc., a Delaware corporation (the “Company”), and the director of the Company identified
on the signature page hereto (the “Director” and collectively with such Director’s Affiliated Persons,
as defined below, the “Indemnitees”).

 

RECITALS

 

A.           The
Company and Director recognize the continued difficulty in obtaining liability insurance for its directors, the significant increases
in the cost of such insurance and the general reductions in the coverage of such insurance.

 

B.           The
Company and Director further recognize the substantial increase in corporate litigation in general, subjecting directors to expensive
litigation risks at the same time as the availability and coverage of liability insurance has been severely limited.

 

C.           The
current protection available to directors may not be adequate under the present circumstances, and directors, including the Director,
may not be willing to continue to serve or be associated with the Company in such capacities without additional protection for
themselves and their Affiliated Persons.

 

D.           The
Company (i) desires to attract and retain the involvement of highly qualified persons, such as Indemnitees, to serve and be
associated with the Company, and (ii) accordingly, wishes to provide for the indemnification and advancement of expenses to
the Director and the Director’s Affiliated Persons as provided herein.

 

    	 	 	 

     

    

 

AGREEMENT

 

NOW, THEREFORE, the
Company and the Director hereby agree as follows:

 

1.           Indemnification.

 

(a)          Indemnification
of Expenses. The Company shall indemnify and hold harmless the Director and all of the Director’s Affiliated Persons
(as defined below) to the fullest extent permitted by law if any such Indemnitee was or is or becomes a party to or witness or
other participant in, or is threatened to be made a party to or witness or other participant in, any threatened, pending or completed
action, suit, proceeding or alternative dispute resolution mechanism, or any hearing, inquiry or investigation that such Indemnitee
in good faith believes might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism,
whether civil, criminal, administrative, investigative or other (hereinafter a “Claim”) by reason of (or arising
in part out of) any event or occurrence related to the fact that Director is or was (or is alleged to be or to have been) a director,
controlling person, fiduciary or other agent or affiliate of the Company, or any subsidiary of the Company, or is or was (or is
alleged to be or to have been) serving at the request of the Company as a director, officer, employee, fiduciary or other agent
or affiliate of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action or inaction
on the part of such Indemnitee while serving (or allegedly serving) in such capacity, including, without limitation, any such Claim
under the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), or any other federal or state statutory law or regulation, or any such Claim,
at common law or otherwise, that relates directly or indirectly (i) to the registration, purchase, sale or ownership of any
securities of the Company or (ii) to any fiduciary obligation owed with respect to the Company and its stockholders (hereinafter
an “Indemnification Event”), against any and all losses, claims, damages, expenses and liabilities, joint or
several, incurred in connection with such Claim (including any investigation, legal and other expenses incurred in connection with,
and any amount paid in settlement of (if such settlement is approved in advance by the Company, which approval shall not be unreasonably
withheld) any such Claim and against any and all expenses, including attorneys’ fees and all other costs, expenses and obligations
incurred in connection with investigating, defending a witness in or participating in (including on appeal), or preparing to defend,
be a witness in or participate in, any action, suit, proceeding, alternative dispute resolution mechanism, hearing, inquiry or
investigation related to such Claim), judgments, fines, penalties and amounts paid in settlement (if such settlement is approved
in advance by the Company, which approval shall not be unreasonably withheld) of such Claim and any federal, state, local or foreign
taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement (collectively, hereinafter
“Expenses”), including all interest, assessments and other charges paid or payable in connection with or in
respect of such Expenses. The Company shall make such payment of Expenses as soon as practicable but in any event no later than
ten (10) days after written demand by the Indemnitee therefor is presented to the Company.

 

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(b)          Reviewing
Party. Notwithstanding the foregoing, (i) the obligations of the Company under Section 1(a) shall be subject to the condition
that the Reviewing Party (as defined in Section 10(e) hereof) shall not have determined (in a written opinion, in any case in which
the Independent Legal Counsel referred to in Section 10(d) hereof is involved) that Indemnitee would not be permitted to be indemnified
under applicable law, and (ii) the obligation of the Company to make an advance payment of Expenses to Indemnitee pursuant to Section
2(a) (an “Expense Advance”) shall be subject to the condition that, if, when and to the extent that the Reviewing
Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled
to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided,
however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction
to secure a determination that Indemnitee should be indemnified under applicable law or hereunder, any determination made by the
Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law or hereunder shall not be binding
and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitees’ obligation
to reimburse the Company for any Expense Advance shall be unsecured and no interest shall be charged thereon. If there has not
been a Change in Control (as defined in Section 10(c) hereof), the Reviewing Party shall be selected by the Board of Directors
with the approval of the Indemnitee (which approval shall not be unreasonably withheld), and if there has been such a Change in
Control (other than a Change in Control (i) which has been approved by a majority of the Company’s Board of Directors prior
to such Change in Control or (ii) following which a majority of the Board of Directors of the Company (or the ultimate parent entity
thereof) is comprised of directors who were directors of the Company immediately prior to the Change in Control), the Reviewing
Party shall be the Independent Legal Counsel referred to in Section 10(d) hereof subject to the approval of the Indemnitee (which
approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company
and Indemnitees as to whether and to what extent Indemnitees would be permitted to be indemnified under applicable law. The Company
agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to fully indemnify such counsel against
any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement
or its engagement pursuant hereto. If there has been no determination by the Reviewing Party or if the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall
have the right to commence litigation seeking an initial determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to service
of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise (e.g., the court in the case
of litigation by Indemnitee) shall be conclusive and binding on the Company and Indemnitee.

 

(c)          Contribution.
If the indemnification provided for in Section 1(a) above for any reason is held by a court of competent jurisdiction to be
unavailable to an Indemnitee in respect of any Claims referred to therein, then the Company, in lieu of indemnifying such Indemnitee
thereunder, shall contribute to the amount paid or payable by such Indemnitee as a result of such losses, claims, damages, expenses
or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Indemnitees,
or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the
Indemnitee in connection with the action or inaction which resulted in such losses, claims, damages, expenses or liabilities, as
well as any other relevant equitable considerations. In connection with the registration of the Company’s securities, the
relative benefits received by the Company and any Indemnitee shall be deemed to be in the same respective proportions that the
net proceeds from the offering (before deducting expenses) received by the Company and the Indemnitee, in each case as set forth
in the table on the cover page of the applicable prospectus, bear to the aggregate public offering price of the securities so offered.
The relative fault of the Company and any Indemnitee shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information
supplied by the Company or the Indemnitee and the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.

 

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The Company and each
Indemnitee agree that it would not be just and equitable if contribution pursuant to this Section 1(c) were determined by
pro rata or per capita allocation or by any other method of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. In connection with the registration of the Company’s securities, in no
event shall an Indemnitee be required to contribute any amount under this Section 1(c) in excess of the lesser of (i) that
proportion of the total of such losses, claims, damages or liabilities indemnified against equal to the proportion of the total
securities sold under such registration statement which is being sold by such Indemnitee, or (ii) the net proceeds received
by such Indemnitee from its sale of securities under such registration statement. No person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not
found guilty of such fraudulent misrepresentation.

 

(d)          Survival
Regardless of Investigation. The indemnification and contribution provided for in this Section 1 will remain in full force
and effect regardless of any investigation made by or on behalf of the Indemnitees or any officer, director, employee, agent or
controlling person of the Indemnitees.

 

(e)          Mandatory
Payment of Expenses. Notwithstanding any other provision of this Agreement, to the extent that an Indemnitee has been successful
on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in the defense of any
action, suit, proceeding, inquiry or investigation referred to in Section (1)(a) hereof or in the defense of any claim, issue
or matter therein, such Indemnitee shall be indemnified against all Expenses incurred by such Indemnitee in connection therewith.

 

2.           Expenses;
Indemnification Procedure.

 

(a)          Advancement
of Expenses. The Company shall advance all Expenses incurred by any Indemnitee. The advances to be made hereunder shall be
paid by the Company to the Indemnitee as soon as practicable but in any event no later than ten (10) days after written demand
by such Indemnitee therefor to the Company.

 

(b)          Notice/Cooperation
by Indemnitees. Each Indemnitee shall, as a condition precedent to Indemnitee’s right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any Claim made against Indemnitee for which indemnification will or
could be sought under this Agreement. In addition, each Indemnitee shall give the Company such information and cooperation as it
may reasonably require and as shall be within Indemnitee’s power.

 

(c)          No
Presumptions; Burden of Proof. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement
(whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not
create a presumption that any Indemnitee did not meet any particular standard of conduct or have any particular belief or that
a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing
Party to have made a determination as to whether an Indemnitee has met any particular standard of conduct or had any particular
belief, nor an actual determination by the Reviewing Party that the Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that the Indemnitee
should be indemnified under applicable law, shall be a defense to the Indemnitee’s claim or create a presumption that the
Indemnitee has not met any particular standard of conduct or did not have any particular belief. In connection with any determination
by the Reviewing Party or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder, the burden of proof shall
be on the Company to establish that the Indemnitee is not so entitled.

 

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(d)          Notice
to Insurers. If, at the time of the receipt by the Company of a notice of a Claim pursuant to Section 2(b) hereof, the
Company has liability insurance in effect which may cover such Claim, the Company shall give prompt notice of the commencement
of such Claim to the insurers in accordance with the procedures set forth in the respective policies. If the Company has not paid
such amounts directly, the Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf
of each Indemnitee, all amounts payable as a result of such action, suit, proceeding, inquiry or investigation in accordance with
the terms of such policies.

 

(e)          Selection
of Counsel. In the event the Company shall be obligated hereunder to pay the Expenses of any Claim, the Company shall be entitled
to assume the defense of such Claim, with counsel approved by the applicable Indemnitee, which approval shall not be unreasonably
withheld, upon the delivery to such Indemnitee of written notice of its election to do so. After delivery of such notice, approval
of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to such Indemnitee
under this Agreement for any fees of counsel subsequently incurred by such Indemnitee with respect to the same Claim; provided
that, (i) the Indemnitee shall have the right to employ such Indemnitee’s counsel in any such Claim at the Indemnitee’s
expense and (ii) if (A) the employment of counsel by the Indemnitee has been previously authorized by the Company, (B) such
Indemnitee shall have reasonably concluded that there is an actual or potential conflict of interest between the Company and such
Indemnitee in the conduct of any such defense, or (C) the Company shall not continue to retain such counsel to defend such
Claim, then the fees and expenses of the Indemnitee’s counsel shall be at the expense of the Company. As long as the Company
has otherwise complied with the terms hereof, the Company shall have the right to conduct such defense as it sees fit in its sole
discretion, including the right to settle any claim, action or proceeding against any Indemnitee without the consent of such Indemnitee,
provided such settlement includes a full release of the Indemnitee by the claimant from all liabilities or potential liabilities
under such claim.

 

3.           Additional
Indemnification Rights; Nonexclusivity.

 

(a)          Scope.
The Company hereby agrees to indemnify each Indemnitee to the fullest extent permitted by law and in accordance with the terms
hereof, notwithstanding that such indemnification may not be specifically authorized by the Company’s Articles of Incorporation,
the Company’s Bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute
or rule which expands the right of a Delaware corporation to indemnify a member of its Board of Directors, it is the intent of
the parties hereto that each Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event
of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of
its Board of Directors or agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to
be applied to this Agreement, shall have no effect on this Agreement or the parties’ rights and obligations hereunder except
as set forth in Section 8(a) hereof.

 

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(b)          Nonexclusivity.
The indemnification provided by this Agreement shall be in addition to any rights to which any Indemnitee may be entitled under
the Company’s Certificate of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested directors,
the Delaware Corporations Code, or otherwise. The indemnification provided under this Agreement shall continue as to each Indemnitee
for any action such Indemnitee took or did not take while serving in an indemnified capacity even though the Indemnitee may have
ceased to serve in such capacity.

 

4.           No
Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any Claim
made against any Indemnitee to the extent such Indemnitee has otherwise actually received payment (under any insurance policy,
Articles of Incorporation, the Bylaws or otherwise) of the amounts otherwise indemnifiable hereunder.

 

5.           Partial
Indemnification. If any Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for
any portion of Expenses incurred in connection with any Claim, but not, however, for all of the total amount thereof, the Company
shall nevertheless indemnify Indemnitee for the portion of such Expenses to which such Indemnitee is entitled.

 

6.           Mutual
Acknowledgment. The Company and each Indemnitee acknowledge that in certain instances, Federal law or applicable public policy
may prohibit the Company from indemnifying its directors, controlling persons, fiduciaries or other agents or affiliates under
this Agreement or otherwise. Each Indemnitee understands, acknowledges and agrees that the Company has undertaken or may be required
in the future to undertake with the Securities and Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company’s rights under public policy to indemnify the Indemnitees, notwithstanding
any provision hereof to the contrary.

 

7.           Liability
Insurance. To the extent the Company maintains liability insurance applicable to directors, officers, employees, control persons,
fiduciaries or other agents and affiliates, the Indemnitee shall be covered by such policies in such a manner as to provide to
the Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors, if
such Indemnitee is a director, or of the Company’s officers, if such Indemnitee is not a director of the Company but is an
officer; or of the Company’s controlling persons, fiduciaries or other agents or affiliates, if such Indemnitee is not an
Officer or director but is a control person, fiduciary, agent or affiliate.

 

8.           Exceptions.
Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

 

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(a)          Excluded
Action or Omissions. To indemnify any Indemnitee for any intentional malfeasance by the Indemnitee or any act undertaken by
the Indemnitee where the Indemnitee did not in good faith believe the Indemnitee was acting in the best interests of the Company,
or for any other acts, omissions or transactions from which the Indemnitee may not be relieved of liability under applicable law;

 

(b)          Claims
Initiated by Indemnitee. To indemnify or advance expenses to any Indemnitee with respect to Claims initiated or brought voluntarily
by such Indemnitee and not by way of defense, except (i) with respect to actions or proceedings to establish or enforce a
right to indemnify under this Agreement or any other agreement or insurance policy or under the Company’s Certificate of
Incorporation or Bylaws now or hereafter in effect relating to Claims for Indemnification Events, (ii) in specific cases if
the Board of Directors has approved the initiation or bringing of such Claim, or (iii) as otherwise required under the Delaware
Corporations Code, regardless of whether such Indemnitee ultimately is determined to be entitled to such indemnification, advance
expense payment or insurance recovery, as the case may be;

 

(c)          Lack
of Good Faith. To indemnify any Indemnitee for any expenses incurred by such Indemnitee with respect to any proceeding instituted
by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material
assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous; or

 

(d)          Claims
Under Section 16(b). To indemnify any Indemnitee for expenses and the payment of profits arising from the purchase and
sale by such Indemnitee of securities in violation of Section 16(b) of the Exchange Act or any similar successor statute.

 

9.           [Intentionally
Omitted.]

 

10.         Construction
of Certain Phrases.

 

(a)          For
the purposes of this Agreement, an "Affiliated Person" of an Indemnitee shall include any director, officer, employee,
controlling person (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), agent or fiduciary
of the Indemnitee, any stockholder of the Company for whom Indemnitee serves as a director, officer, employee, controlling person,
agent or fiduciary, and any partnership, corporation, limited liability company, association, joint stock company, trust or joint
venture controlling, controlled by or under common control with such a stockholder. For these purposes, “control”
means the possession, directly or indirectly, of the power to direct management and policies of a person or entity, whether through
the ownership of voting securities, contract or otherwise.

 

(b)          For
purposes of this Agreement, references to the “Company” shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents, fiduciaries
and other Affiliated Persons, so that if Indemnitee is or was a director, officer, employee, agent, control person, fiduciary or
an Affiliated Person of such constituent corporation, or is or was serving at the request of such constituent corporation as a
director, officer, employee, control person, agent or fiduciary or another corporation, partnership, joint venture, employee benefit
plan, trust or other enterprise, such Indemnitee shall stand in the same position under the provisions of this Agreement with respect
to the resulting or surviving corporation as such Indemnitee would have with respect to such constituent corporation if its separate
existence had continued.

 

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(c)          For
purposes of this Agreement a “Change in Control” shall be deemed to have occurred if after the date of this
Agreement (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other
than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly
or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company,
(A) becomes the beneficial owner, directly or indirectly, of securities of the Company representing 50% or more of the combined
voting power of the Company’s then outstanding Voting Securities, or (B) becomes the “beneficial owner”
(as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50%
of the total voting power represented by the Company’s then outstanding Voting Securities, (ii) during any period of
two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any
new director whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved
by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof,
or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity)
at least 60% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially
all of the Company’s assets.

 

(d)          For
purposes of this Agreement, “Independent Legal Counsel” shall mean an attorney or firm of attorneys, selected
in accordance with the provisions of Section 1(b) hereof, who shall not have otherwise performed services for the Company
or any Indemnitee within the last three years (other than with respect to matters concerning the right of any Indemnitee under
this Agreement, or of other indemnitees under similar indemnity agreements).

 

(e)          For
purposes of this Agreement, a “Reviewing Party” shall mean any appropriate person or body consisting of a member
or members of the Company’s Board of Directors or any other person or body appointed by the Board of Directors who is not
a party to the particular Claim for which an Indemnitee is seeking indemnification, or Independent Legal Counsel.

 

(f)          For
purposes of this Agreement, “Voting Securities” shall mean any securities of the Company that vote generally
in the election of directors.

 

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11.         Company
as Primary Indemnitor. Notwithstanding anything to the contrary in this Agreement, the Company hereby acknowledges that an
Indemnitee may have certain rights to indemnification, advancement of expenses and/or insurance provided by other sources. The
Company hereby agrees with respect to any Indemnification Event (i) that it (or, to the extent applicable, its insurance provider)
is the indemnitor of first resort (i.e., its obligations to an Indemnitee are primary and any obligation of such other sources
to advance expenses or to provide indemnification for the same expenses or liabilities incurred by such Indemnitee are secondary)
and (ii) that it shall be required to advance the full amount of Expenses incurred by an Indemnitee and shall be liable for the
full amount of all Expenses to the extent legally permitted and as required by the terms of this Agreement without regard to any
rights an Indemnitee may have against such other sources. The Company further agrees that no advancement or payment by such other
sources on behalf of an Indemnitee with respect to any Claim for which such Indemnitee has sought indemnification from the Company
shall affect the foregoing, and such other sources shall have a right of contribution and/or be subrogated to the extent of such
advancement or payment to all of the rights of recovery of such Indemnitee against the Company with respect to the Indemnification
Event.

 

12.         Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall constitute an original.

 

13.         Binding
Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation
or otherwise to all or substantially all of the business and/or assets of the Company (and the Company may assign its rights and
obligations under this Agreement in connection with any such transaction without the consent of any Indemnitee), spouses, heirs,
and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase,
merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company,
by written agreement in form and substance satisfactory to each Indemnitee, expressly to assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
This Agreement shall continue in effect with respect to Claims relating to Indemnification Events regardless of whether any Indemnitee
continues to serve as a director, officer, employee, agent, controlling person, or fiduciary of the Company or of any other enterprise
at the Company’s request.

 

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14.         Attorneys’
Fees. Subject to the other provisions of this Agreement, in the event that any action is instituted by an Indemnitee under
this Agreement or under any liability insurance policies maintained by the Company to enforce or interpret any of the terms hereof
or thereof, any Indemnitee shall be entitled to be paid all expenses (including attorneys’ fees and all other costs, expenses
and obligations incurred in connection with investigating, defending a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in, any such action) incurred by such Indemnitee with respect to such action,
regardless of whether such Indemnitee is ultimately successful in such action, and unless, as part of such action, a court of competent
jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good
faith or were frivolous. In connection with such action, Indemnitee shall be entitled to the advancement of expenses (including
attorneys’ fees and all other costs, expenses and obligations incurred in connection investigating, defending a witness in
or participating in (including on appeal), or preparing to defend, be a witness in or participate in, any such action) with respect
to such action, unless, as a part of such action, a court of competent jurisdiction over such action determines that each of the
material assertions made by such Indemnitee as a basis for such action was not made in good faith or was frivolous. In the event
of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this
Agreement, the Indemnitee shall be entitled to be paid all expenses (including attorneys’ fees and all other costs, expenses
and obligations incurred in connection investigating, defending a witness in or participating in (including on appeal), or preparing
to defend, be a witness in or participate in, any such action) incurred by such Indemnitee in defense of such action (including
costs and expenses incurred with respect to Indemnitee counterclaims and cross-claims made in such action), and shall be entitled
to the advancement of expenses (including attorneys’ fees and all other costs, expenses and obligations incurred in connection
investigating, defending a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate
in, any such action) with respect to such action, unless, as a part of such action, a court having jurisdiction over such action
determines that each of such Indemnitee’s material defenses to such action was made in bad faith or was frivolous.

 

15.         Notice.
All notices and other communications required or permitted hereunder shall be in writing and shall be effective upon the earlier
of receipt or (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered
by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business
day of deposit with Federal Express or similar overnight courier, freight prepaid, or (d) one business day after the day of
delivery by facsimile transmission, if deliverable by facsimile transmission, with copy by first class mail, postage prepaid, and
shall be addressed if to an Indemnitee at the Indemnitee’s address as set forth beneath the Indemnitee’s signature
to this Agreement, and if to the Company at the address of its principal corporate offices (attention: Chief Executive Officer)
or at such other address as such party may designate by ten days’ advance written notice to the other party hereto.

 

16.         Consent
to Jurisdiction. The Company and each Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State
of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree
that any action instituted under this Agreement shall be commenced, prosecuted and continued only in courts located in Wilmington,
Delaware, which shall be the exclusive and only proper forum for adjudicating such a claim.

 

17.         Severability.
The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within
a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable,
and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent
possible, the provisions of this Agreement (including, without limitations, each portion of this Agreement containing any provision
held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as
to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

 

    	 	-10-	 

     

    

 

18.         Choice
of Law. This Agreement shall be governed by and its provisions construed and enforced in accordance with the laws of the State
of Delaware, without regard to the conflict of laws principles thereof.

 

19.         Subrogation.
In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights
of recovery of each Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure
such rights and to enable the Company effectively to bring suite to enforce such rights.

 

20.         Third
Party Beneficiaries. Each Indemnitee is an intended third party beneficiary of this Agreement.

 

21.         Amendment
and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is
in writing signed by the Company and the Director, whereupon all Indemnitees shall be bound. No waiver of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall
such waiver constitute a continuing waiver.

 

22.         Integration
and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges
all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between
the parties hereto, including, but not limited to, any Indemnification Agreement executed by the parties hereto prior to the date
hereof.

 

[Signature page follows.]

 

    	 	-11-	 

     

    

 

IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the date first above written.

 

	COMPANY	INNOVATE BIOPHARMACEUTICALS, INC.,
	 	a Delaware corporation

 

	 	By:	  

 

	DIRECTOR	 
	 	Signature

  

	 	Name:	 

 

	 	Address:	 

 

    	 	-12-ex_103884.htm

 

 

 

 

 

EXHIBIT 4.5 

 

 

 

 

 

 

 

 

 

 

AMERICANN, INC.

 

WARRANT TO PURCHASE COMMON STOCK

SERIES VI

 

This is to certify that, FOR VALUE RECEIVED, _________, or registered assigns (“Holder”), is entitled to purchase, subject to the provisions of this Warrant, from AmeriCann, Inc. (the “Company”), __________ shares of the common stock of the Company (“Common Stock”). This Warrant may be exercised at a purchase price of $1.50 per share at any time on or prior to October 17, 2022. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for a share of Common Stock may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, as may be adjusted from time to time, are hereinafter sometimes referred to as “Warrant Stock”; and the exercise price of a share of Common Stock in effect at any time, and as may be adjusted from time to time, is hereinafter sometimes referred to as the "Exercise Price."

 

(a) Exercise of Warrant. This Warrant may be exercised in whole or in part at any time or from time to time but not later than 5.00 P.M., Mountain time, on October 17, 2022. If the Expiration Date is a day on which banking institutions are authorized by law to close, then this Warrant may be exercised on the next succeeding day which shall not be such a day, by presentation and surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Shares of Warrant Stock specified in such form, together with all Federal and state taxes applicable upon such exercise. 

If this Warrant should be exercised in part only, the Company, upon surrender of this Warrant for cancellation, shall execute and shall deliver a new Warrant evidencing the right of the Holder to purchase the balance of the Shares of Warrant Stock purchasable hereunder. Upon receipt by the Company of this Warrant at the office or the agency of the Company, in proper form for exercise, the Holder shall be deemed to be the Holder of record of the Shares of Warrant Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such Shares of Warrant Stock shall not then be actually delivered to the Holder.

 

(b) Reservation of Shares of Warrant Stock. The Company hereby agrees that, at all times, there shall be reserved for issuance and/or delivery upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance or delivery upon exercise of this Warrant.

 

(c) Fractional Shares. No fractional Shares of Warrant Stock or scrip representing fractional Shares of Warrant Stock shall be issued upon the exercise of this Warrant. With respect to any fraction of a Share of Warrant Stock called for upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the current market value of such fractional share determined as follows:

 

(i)     If the Company's Common Stock is publicly traded, the average daily closing prices for 30 consecutive trading days immediately preceding the date of exercise of this Warrant. The closing price for each day shall be the last sale price regular-way or, in case no such sale takes place on such date, the average of the closing bid and asked prices regular-way, on the principal national securities exchange in which the Company's Common Stock is listed or admitted to trading, or if it is not listed or admitted to trading on any national securities exchange, the last sale price of such Common Stock on the consolidated transaction reporting system of the National Association of Securities Dealers ("NASD"), if such last sale information is reported on such system, or if not so reported, the average of the closing bid and asked prices of such Common Stock on the National Association of Securities Dealers Automatic Quotation system ("NASDAQ"), or any comparable system, or if the Common Stock is not listed on NASDAQ, or a comparable system, the average of the closing bid and asked prices as furnished by two members of the NASD selected from time to time by the Company for that purpose.

 

1

 

 

(ii)     If the Company's Common Stock is not publicly traded, the current value shall be an amount, not less than the book value, determined in such reasonable manner as may be prescribed by the Board of Directors of the Company, such determination to be final and binding on the Holder.

 

(d)     Exchange, Assignment or Loss of Warrant. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other Warrants of different denominations entitling the Holder thereof to purchase in the aggregate the same number of Shares of Warrant Stock purchasable hereunder. This Warrant may not be sold, hypothecated, assigned, or transferred prior to the date this Warrant is first exercisable. Any assignment shall be made subject to the provisions of Section (j) by surrender of this Warrant to the Company or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and with funds sufficient to pay any transfer tax; whereupon, the Company, without charge, shall execute and shall deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be cancelled. 

 

This Warrant may be divided or may be combined with other Warrants which carry the same rights upon presentation hereof at the office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and the denominations in which new Warrants are to be issued and signed by the Holder hereof. The term "Warrant" as used herein includes any Warrants issued in substitution for or replacement of this Warrant or into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction, or mutilation of this Warrant, and (in the case of loss, theft, or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and will deliver a new Warrant of like tenor and date. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed or mutilated shall be at any time enforceable by anyone.

 

(e)     Rights of the Holder. The Holder, by virtue hereof, shall not be entitled to any rights of a stockholder in the Company, either at law or in equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein.

 

2

 

 

 

(f)     Anti-Dilution Provisions.

 

(i)      Adjustment of Price. Anything in this Section (f) to the contrary notwithstanding, if the Company shall issue, at any time, Common Stock or convertible securities by way of dividend, forward stock split or other distribution on any stock of the Company or subdivide or combine the outstanding shares of Stock, the Exercise Price shall be proportionately decreased in the case of such issuance, forward stock split, or distribution (on the day following the date fixed for determining shareholders entitled to receive such additional shares) or proportionately increased in the case of such combination (on the date that such combination shall become effective), provided, however, should the Company cancel or fail to make such dividend or other distribution or other issuance, the Exercise Price shall be forthwith adjusted to the price which would have prevailed prior to the Company setting such record date.

 

(ii)     No Adjustment for Small Amounts. Anything in this Section to the contrary notwithstanding, the Company shall not be required to give effect to any adjustment in the Exercise Price unless and until the net effect of one or more adjustments, determined as above provided, shall have required a change of the Exercise Price by at least one cent, but when the cumulative net effect of more than one adjustment so determined shall be to change the actual Exercise Price by at least one cent, such change in the Exercise Price shall thereupon be given effect.

 

(iii)     Number of Shares Adjusted. Upon any adjustment of the Exercise Price, the Holder of this Warrant shall thereafter (until another such adjustment) be entitled to purchase, at the new Exercise Price, the number of Shares of Warrant Stock, calculated to the nearest full shares, obtained by multiplying the number of shares of Stock initially issuable upon exercise of this Warrant by the Exercise Price in effect on the date hereof and dividing the product so obtained by the new Exercise Price.

 

(g)     Officer's Certificate. Whenever the Exercise Price shall be adjusted as required by the provisions of Section (f) hereof, the Company shall forthwith file with its Secretary or an Assistant Secretary at its principal office, and with its stock transfer agent, if any, an Officer's Certificate showing the adjusted Exercise Price, determined as herein provided, and setting forth in reasonable detail the facts requiring such adjustment. Each such Officer's Certificate shall be made available at all reasonable times for inspection by the Holder; and the Company, after each such adjustment, shall forthwith deliver a copy of such certificate to the Holder. Such certificate shall be conclusive as to the correctness of such adjustment.

 

(h)     Notices to Warrant Holders. So long as this Warrant shall be outstanding and unexercised (i) if the Company shall pay any dividend or shall make any distribution upon the Common Stock or (ii) if the Company shall offer to the holders for subscription or purchase by them any shares of stock of any class or any other rights or (iii) if any capital reorganization of the Company; reclassification of the capital stock of the Company; consolidation or merger of the Company with or into another corporation; sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation; or voluntary or involuntary dissolution, liquidation, or winding up of the Company shall be effected, then, in any such case, the Company shall cause to be delivered to the Holder, at least ten (l0) days prior to the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution, or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation, or winding up is to take place and the date, if any, is to be fixed, as of which the holders of record shall be entitled to exchange their Shares for securities or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation, or winding up.

 

3

 

 

(i)     Reclassification, Reorganization or Merger. In case of any reclassification, or capital reorganization (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of an issuance of Common Stock by way of dividend or other distribution or of a subdivision or combination), or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary, in which merger the Company is the continuing corporation and which does not result in any reclassification, or capital reorganization) or in case of any sale or conveyance to another corporation of the property of the Company as an entirety or substantially as an entirety, the Company shall cause effective provision to be made so that the Holder shall have the right thereafter, by exercising this Warrant, to purchase the kind and amount of shares of Stock and other securities and property receivable upon such reclassification; capital reorganization; or other consolidation, merger, sale, or conveyance as may be issued or payable with respect to or in exchange for the number of Shares of the Company theretofore purchasable upon the exercise of this Warrant had such recapitalization; capital reorganization; or other consolidation, merger, sale or conveyance not taken place. Any such provisions shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section (i) shall similarly apply to successive reclassifications; capital reorganizations; and to successive consolidations, mergers, sales, or conveyances.

 

In the event that in any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Stock, any such issue shall be treated as an issue of Stock covered by the provisions of subsection (f) hereof with the amount of the consideration received upon the issue thereof being determined by the Board of Directors of the Company, such determination to be final and binding on the Holder.

 

(j)     Transfer to Comply with the Securities Act of l933.

 

(i)     This Warrant or the Warrant Stock or any other security issued or issuable upon exercise of this Warrant may not be sold, transferred, or otherwise disposed of except to a person who, in the opinion of counsel for the Company, is a person to whom this Warrant or such Warrant Stock may legally be transferred pursuant to Section (d) hereof without registration and without the delivery of a current Prospectus under the Act with respect thereto and then only against receipt of an agreement of such person to comply with the provisions of this Section (k) with respect to any resale or other disposition of such securities.

 

(ii)     The Company may cause the following legend or one similar thereto to be set forth on each certificate representing Warrant Stock or any other security issued or issuable upon exercise of this Warrant not theretofore distributed to the public or sold to underwriters for distribution to the public pursuant to Section (j) hereof, unless counsel for the Company is of the opinion as to any such certificate that such legend is unnecessary:

 

4

 

 

The shares represented by this Certificate have not been registered under the Securities Act of l933 (the "Act") and are "restricted securities" as that term is defined in Rule 144 under the Act. The shares may not be offered for sale, sold, or otherwise transferred except pursuant to an effective registration statement under the Act or pursuant to an exemption from registration under the Act, the availability of which is to be established to the satisfaction of the Company.

 

(l)     Applicable Law. This Warrant shall be governed by and construed in accordance with the laws of Delaware.

 

(m)     Registration Rights. The Company agrees that if, at any time during the five-year period commencing on December 29, 2017, it should file a Registration Statement with the Securities and Exchange Commission pursuant to the Securities Act of 1933 for a public offering of its shares of common stock, either for the account of the Company or for the account of any other person, the Company at its own expense, will offer to holders of the Warrants or shares of common stock previously issued upon the exercise thereof, the opportunity to register or qualify for public offering the shares of common stock underlying the Warrants or the shares so issued. This paragraph is not applicable to a Registration Statement filed with the Securities and Exchange Commission on Forms S-4 or S-8 or any other inappropriate forms. This provision does not apply to any shares of common stock underlying the Notes and Warrants which are eligible to be resold without restriction or volume limitation under Rule 144. In addition, this provision does not apply to any registration statement pertaining to the Company’s equity line of credit with Mountain States Capital, LLC.

 

 

	
			January __, 2018

				
			AMERICANN, INC.

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				 	
			 

			
	
			 

				
			 

				
			Timothy Keogh, Chief Executive Officer

				
			 

			
	
			 

				
			 

				
			 

				
			 

			

   

 

 

 

 

 

 

 

 

 

AmeriCann Warrant $1.50 12-26-17

 

5

 

 

PURCHASE FORM

 

                        Dated            .           

 

The undersigned hereby irrevocable elects to exercise the within Warrant to the extent of purchasing         Shares of Warrant Stock and hereby makes payment of $                   in payment of the actual exercise price thereof.

 

                   

 

INSTRUCTIONS FOR REGISTRATION OF STOCK

 

 

Name                                                                                

                  (Please typewrite or print in block letters)

 

Address                                                                   

                                                                         

 

Signature                                                                 

 

ASSIGNMENT FORM

 

 

FOR VALUE RECEIVED,                                                hereby sells, assigns, and transfers unto:

 

Name:                                                                                      

                     (Please typewrite or print in block letters)

 

Address                                                                   

                                                                        

 

the right to purchase the Common Stock represented by this Warrant to the extent of              shares as to which such right is exercisable and does hereby irrevocably constitute and appoint                    attorney, to transfer the same on the books of the Company with full power of substitution in the premises.

 

 

	Dated:                      .  	
			Signature                                                 

			

   

 

 

 

 

AmeriCann Warrant to Purch. $1.50 1-17-18

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