Document:

artl_ex104.htm

EXHIBIT 10.4

 

EXCLUSIVE PATENT LICENSE AGREEMENT

 

BETWEEN

 

ANALOG BIOSCIENCES, INC.

 

AND

 

ARTELO BIOSCIENCES, INC.

 

	 
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EXCLUSIVE PATENT LICENSE AGREEMENT

 

This exclusive license agreement (“Agreement”) is effective July 3, 2017 (“Effective Date”), by and between (a) Analog Biosciences, Inc. (“Licensor”), a Nevada corporation, having an office at 1340 Specialty Dr., Ste i, Vista, CA 92081, and (b) Artelo Biosciences, Inc. (“Licensee”), a Nevada corporation having a principal place of business at 564 Wedge Lane, Fernley, NV 89408. Licensor and Licensee may be referred to herein, on occasion, individually as “Party” or collectively as “Parties”. 

 

RECITALS

 

Whereas, Licensor has an assignment of title to the invention(s) entitled “COMPOSITIONS CONTAINING CANNABINOIDS AND METHODS FOR MANUFACTURE THEREOF” (the “Invention”), invented by Joshua S. Schoonover, and to the patents and patent applications under Patent Rights as defined below, which are directed to the Invention; 

 

Whereas, Licensor and Licensee desire to have the Invention(s) developed and commercialized so that products, methods and services resulting therefrom may be available for public use and benefit; and 

 

Whereas, Licensee desires to acquire, and Licensor desires to grant, a license under Patent Rights to make, use, sell, offer for sale, and import products, methods, and services in accordance with the terms herein. 

 

Now, therefore, the Parties agree as follows: 

 

1. DEFINITIONS

 

1.1 “Affiliate” of Licensee (or of a Sublicensee, respectively) means any entity that, as of the applicable point in time during the term of this Agreement, directly or indirectly Controls Licensee (or a Sublicensee, respectively), is Controlled by Licensee (or a Sublicensee, respectively), or is under common Control with Licensee (or a Sublicensee, respectively). “Control” means (a) having the actual, present capacity to elect a majority of the directors of such entity, (b) having the power to direct at least fifty percent (50%) of the voting rights entitled to elect directors of such entity, or (c) in any country where the local law will not permit foreign equity participation of a majority of the outstanding stock or voting rights of such entity, the ownership or control, directly or indirectly, of the maximum percentage of such outstanding stock or voting rights permitted by local law. 

 

	 
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1.2 “Licensed Field of Use” means all fields of use covered by the Patent Rights.     

 

1.3 “Licensed Method” means any process or method the use or practice of which, (a) but for the license granted pursuant to this Agreement, would infringe, or contribute to or induce the infringement of, a Valid Claim of any issued, unexpired patent under Patent Rights, or (b) is covered by a claim in a pending patent application under Patent Rights. As used in Subparagraph (b) of this Paragraph 1.3, “covered by a claim in a pending patent application” means that such use or practice would, but for the license granted pursuant to this Agreement, constitute infringement, contributory infringement, or inducement of infringement, of such claim if such claim were issued.     

 

1.4 “Licensed Product” means any product, material, kit, or other article of manufacture or composition of matter, the making, use, Sale, offer for Sale, or import of which (a) but for the license granted pursuant to this Agreement, would infringe, or contribute to or induce the infringement of, a Valid Claim of any issued, unexpired patent under Patent Rights, or (b) is covered by a claim in a pending patent application under Patent Rights. As used in Subparagraph (b) of this Paragraph 1.4, “covered by a claim in a pending patent application” means that such making, use, Sale, offer for Sale, or import would, but for the license granted pursuant to this Agreement, constitute infringement, contributory infringement, or inducement of infringement, of such claim if such claim were issued. 

  

1.5  “Licensed Service” means a service provided using Licensed Products or Licensed Methods, including, without limitation, any such service provided in the form of contract research or other research performed by Licensee on behalf of a third party.  

  
	 
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1.6 “Licensed Territory” means the United States and its territories and possessions, and any foreign countries where Patent Rights exist.     

 

1.7 “Net Sales” means the gross invoice price charged by, and the value of non-cash consideration owed to, Licensee or a Sublicensee for Sales of Licensed Products and Licensed Services, less the sum of the following actual and customary deductions to the extent applicable: (a) cash, trade or quantity discounts; (b) sales, use, tariff, import or export duties, or other excise taxes, when included in Sales, but not value-added taxes assessed on (or income taxes derived from) such Sales; and (c) allowances or credits to customers because of rejections or returns. For purposes of calculating Net Sales, a Sale by Licensee to a Sublicensee for end use by the Sublicensee will be treated as a Sale at Licensee’s list price.     

 

1.8  “Patent Rights” means Licensor' rights in the claims of the following: U.S. Provisional Application Serial No. 62/509,095, entitled “COMPOSITIONS CONTAINING CANNABINOIDS AND METHODS FOR MANUFACTURE THEREOF,” filed on May 20, 2017, by Joshua S. Schoonover and assigned to Licensor; continuing applications thereof, including divisions, substitutions, extensions and continuation-in-part applications; patents issuing on said applications or continuing applications; reissues of such patents; and corresponding foreign patents or applications of any of the foregoing.     

 

1.9  “Sale” means the act of selling, leasing, or otherwise transferring or providing Licensed Products and Licensed Services for any consideration. Correspondingly, “Sell” means to make or cause to be made a Sale, and “Sold” means to have made or caused to be made a Sale.     

 

1.10  “Sublicense” means a sublicense under this Agreement.     

 

1.11 “Sublicensee” means a sublicensee under this Agreement.  

 

	 
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1.12 “Sublicense Agreement” means a sublicense agreement under this Agreement.     

 

1.13 “Valid Claim” means a claim of a patent in any country, which claim (a) has not expired and (b) has not been held to be invalid by a final judgment of a court of competent jurisdiction from which no appeal can be or is taken. 

  

2. GRANT

 

2.1  Subject to the limitations set forth in this Agreement, including, without limitation, the rights reserved in Paragraph 2.2, Licensor hereby grants to Licensee an exclusive license under Patent Rights, in the Licensed Field of Use in the Licensed Territory, (a) to make, use, offer for Sale, import, and Sell Licensed Products and Licensed Services, and (b) to practice Licensed Methods.     

 

2.2 Licensor reserves the right to do any one or more of the following:  

 

	
 
	(a)	publish any technical data resulting from research performed by Licensor relating to the Invention;
	
 
	
 
	
 

	
 
	(b)	make, use, and import the Invention and associated technology for educational and research purposes;
	
 
	
 
	
 

	
 
	(c)	practice Patent Rights for educational and research purposes, including in order to make, use, and import products, and in order to use and practice methods; and
	
 
	
 
	
 

	
 
	(d)	allow other educational and non-profit institutions to do any one or more of the activities of Subparagraphs (a), (b), and (c) of this Paragraph 2.2, for educational and research purposes.

  

3. SUBLICENSES 

 

3.1 Licensor hereby further grants to Licensee the right to grant to Affiliates of Licensee, to Affiliates of Sublicensees, and to third parties a Sublicense under the rights granted to Licensee hereunder, provided that Licensee has exclusive rights under this Agreement at the time of the grant of the Sublicense. Every Sublicense will include:  

 

	 
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	(a)	a statement setting forth the date upon which Licensee's exclusive license rights hereunder will expire;
	
 
	
 
	
 

	
 
	(b)	a provision requiring the performance by the Sublicensee of all the obligations owed by Licensee to Licensor under this Agreement other than those rights and obligations specified in Paragraph 5.3 (Minimum Annual Royalty);
	
 
	
 
	
 

	
 
	(c)	a provision requiring payment of royalties to Licensee in an amount sufficient to permit Licensee to meet Licensee’s royalty obligations to Licensor at the rates and bases set forth in this Agreement;
	
 
	
 
	
 

	
 
	(d)	a prohibition on the grant of further Sublicenses; and
	
 
	
 
	
 

	
 
	(e)	a provision imposing on the Sublicensee the same obligation of indemnification which Licensee has under Article 18 (Indemnification).

  

3.2 Licensee will pay to Licensor twenty-five percent (25%) of any cash consideration, and of the cash equivalent of all other consideration, which is due to Licensee for the grant of rights under a Sublicense, excluding payments due to Licensee as a royalty based on Sales by the Sublicensee. Payment owed to Licensor under this Paragraph 3.2 is in addition to payments owed by Licensee to Licensor as Earned Royalties under Paragraph 4.1 below based on Sales by the Sublicensee.     

 

3.3 Within thirty (30) days of execution of each Sublicense Agreement, or amendment thereof, Licensee will inform Licensor of such executed Sublicense Agreement or amendment, and Licensee will furnish to Licensor a copy of such Sublicense Agreement or amendment.     

 

3.4  Affiliates of Licensee and Affiliates of Sublicensees will have no licenses under Patent Rights except as granted by Licensee in a Sublicense pursuant to this Agreement.     

 

3.5  For the purposes of this Agreement, the operations of Sublicensees under their respective Sublicense Agreements will be deemed to be the operations of Licensee, for which Licensee will be responsible.     

 

3.6  Licensee will collect and guarantee payment of all monies and other consideration due Licensor under this Agreement from Sublicensees.  

 

	 
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3.7  Upon termination of this Agreement for any reason, at Licensor' discretion, all Sublicenses that are granted by Licensee pursuant to this Agreement, where the Sublicensee is in compliance with its Sublicense Agreement as of the date of such termination, will remain in effect and will be assigned to Licensor, except that Licensor will not be bound to perform any obligations set forth in any Sublicenses that extend beyond the obligations of Licensor set forth in this Agreement. 

 

4. ROYALTIES 

 

4.1 Licensee will pay to Licensor earned royalties (“Earned Royalties”) at the rate of one percent (1%) of the Net Sales of all Licensed Products and Licensed Services.     

 

4.2 Earned Royalties accruing to Licensor will be paid to Licensor, to be accompanied by the corresponding royalty report as required in Paragraph 6.4, quarterly within sixty (60) days after the end of each calendar quarter as follows: May 31 (for first quarter), August 31 (for second quarter), November 30 (for third quarter), and February 28 (for fourth quarter).     

 

4.3  Beginning July 3, 2021, and in each calendar year thereafter, Licensee will pay to Licensor a minimum annual royalty (“Minimum Annual Royalty”) of fifty thousand dollars ($50,000.00) for the life of this Agreement. The Minimum Annual Royalty will be paid to Licensor by July 3 of each year and will be credited against the Earned Royalties due and owing for the calendar year for which the Minimum Annual Royalty is made.     

 

4.4  All payments due Licensor will be payable in United States dollars. When Licensed Products and Licensed Services are Sold for monies other than United States dollars, Earned Royalties will first be determined in the foreign currency of the country in which the Sale was made and then converted into equivalent United States dollars. The exchange rate will be that rate quoted in the Wall Street Journal on the last business day of the reporting period.     

 

4.5 Earned Royalty payments due to Licensor for Sales occurring in any country outside the United States will not be reduced by any taxes, fees, or other charges imposed by the government of such country on the remittance of royalty income. Licensee will also be responsible for all bank transfer charges for payments to Licensor. 

 

	 
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4.6  Licensee will make all payments under this Agreement either by check or electronic transfer, payable to “Analog Biosciences, Inc.” and Licensee will forward such payments to Licensor at the address shown in Paragraph 20.1.     

 

4.7 If any patent or patent application, or any claim thereof, included within Patent Rights expires, or is held invalid or unpatentable in a final decision by a court of competent jurisdiction and last resort and from which no appeal has been or can be taken, all obligations to pay Earned Royalties based on such patent, patent application, or claim will cease as of the date of such expiration or final decision. Licensee will not, however, be relieved from paying any Earned Royalties that accrued before such expiration or final decision or that are based on another patent, patent application, or claim within Patent Rights which is not expired, or which is not held invalid or unpatentable in such final decision. 

  

5. DILIGENCE 

 

5.1  Licensee will diligently proceed with the development, manufacture, marketing, and Sale of Licensed Products and Licensed Services in quantities sufficient to meet the market demand.     

 

5.2 In addition to Licensee’s obligations under Paragraph 5.1, Licensee will accomplish the following milestones in Licensee’s activities under this Agreement:  

 

	
 
	(a)	Dose the first patient in a Phase III Clinical Trial or foreign equivalent using the Licensed Product within three (3) years of the Effective Date of this Agreement; and
	
 
	
 
	
 

	
 
	(b)	Obtain marketing authorization from the FDA or foreign equivalent for a Licensed Product within five (5) years of the Effective Date of this Agreement.

  

5.3 As part of the consideration under this Agreement, Licensee shall pay to Licensor, for each Licensed Product, the following milestone payments:  

 

	
 
	(a)	$100,000.00 upon enrolling the first patient in a Phase III Clinical Trial or foreign equivalent using the Licensed Product; and

 

	 
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	(b)	$200,000.00 upon obtaining marketing authorization from the FDA or foreign equivalent for each Licensed Product.

  

5.4 If Licensee is unable to meet any of its diligence obligations set forth in Paragraphs 5.1, 5.2 and 5.3, then Licensor will so notify Licensee of failure to perform. Licensee will have the right and option to extend the target date of any such diligence obligation for a period of six (6) months upon the payment of Five Thousand dollars ($5,000) within the thirty (30)-day period prior to the date to be extended, for each such extension option exercised by Licensee. Licensee may further extend the target date of any diligence obligation for an additional six (6) months upon payment of an additional Five Thousand dollars ($5,000). Additional extensions may be granted only by written agreement of the Parties. These payments are in addition to any other payments owed under this Agreement. Should Licensee opt not to extend the obligation or fail to meet the obligation by the extended target date, then Licensor will have the right and option either to terminate this Agreement or to reduce Licensee's exclusive license to a non-exclusive license. This right, if exercised by Licensor, supersedes the rights granted in Article 2 (Grant).     

 

5.5 To exercise either the right to terminate this Agreement or to reduce the license to a non-exclusive license for lack of diligence under Paragraph 5.1, 5.2 or 5.3, Licensor will give Licensee written notice of the deficiency. Licensee thereafter will have sixty (60) days to cure the deficiency. If Licensor has not received satisfactory written evidence that the deficiency has been cured by the end of the sixty (60)-day period, then Licensor may, at its option, either terminate the Agreement or reduce Licensee's exclusive license to a non-exclusive license by giving written notice to Licensee. These notices will be subject to Article 20 (Notices). 

  

6. PROGRESS AND ROYALTY REPORTS 

 

6.1 For the six (6)-month period beginning July 3, 2021, within sixty (60) days of each June 30 and December 31 following the end of such six (6)-month period, Licensee will submit to Licensor a semi-annual progress report covering Licensee's activities related to the development and testing of Licensed Products, Licensed Services, and Licensed Methods, including the obtaining of necessary governmental approvals, if any, for marketing in the United States. These progress reports will be made until the first Sale occurs in the United States. 

 

	 
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6.2 Each progress report will be a sufficiently detailed summary of activities of Licensee and any Sublicensees so that Licensor may evaluate and determine Licensee’s progress in the development of Licensed Products, Licensed Services, and Licensed Methods, and in meeting Licensee’s diligence obligations under Article 5, and will include (but not be limited to) the following: 

  

	
 
	(a)	summary of work completed and in progress;
	
 
	
 
	
 

	
 
	(b)	current schedule of anticipated events and milestones, including diligence milestones under Paragraph 5.2;
	
 
	
 
	
 

	
 
	(c)	anticipated market introduction dates for the Licensed Territory; and
	
 
	
 
	
 

	
 
	(d)	Sublicensees’ activities during the reporting period.

 

6.3 In Licensee’s progress report immediately subsequent to the first Sale of a Licensed Product or a Licensed Service by Licensee or by a Sublicensee, Licensee will report the date of such first Sale.     

 

6.4  After the first Sale of a Licensed Product or a Licensed Service, Licensee will make quarterly royalty reports to Licensor, to be accompanied by the corresponding Earned Royalty payment as required in Paragraph 4.2, within sixty (60) days after the quarters ending March 31, June 30, September 30, and December 31, of each year. Each such royalty report will include at least the following:  

 

	
 
	(a)	the volume of Licensed Products and Licensed Services Sold;
	
 
	
 
	
 

	
 
	(b)	gross revenue from Sale of Licensed Products and Licensed Services;
	
 
	
 
	
 

	
 
	(c)	Net Sales pursuant to Paragraph 1.7, and the calculation of Net Sales, including all deductions taken, so that Licensor can confirm the calculation;
	
 
	
 
	
 

	
 
	(d)	total Earned Royalties due Licensor; and
	
 
	
 
	
 

	
 
	(e)	names and addresses of Sublicensees for any new Sublicenses entered into during the reporting quarter.

  

6.5 If no Sales of Licensed Products or Licensed Services have occurred during the report period, the royalty report will contain a statement to this effect. 

 

	 
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7. BOOKS AND RECORDS 

 

7.1 Licensee will keep full, true, and accurate books of accounts containing all particulars that may be necessary for the purpose of showing (a) the amount of Earned Royalties payable to Licensor, and (b) Licensee’s compliance with obligations under this Agreement. For five (5) years following the end of the calendar year to which they pertain, said books and the supporting data will be open, during normal business hours upon reasonable notice, to the inspection and audit by representatives of Licensor for the purpose of verifying Licensee's royalty reports or compliance in other respects with this Agreement. Such representatives will be required to hold all information in confidence except as necessary to communicate Licensee's non-compliance with this Agreement to Licensor. 

 

7.2 The fees and expenses of Licensor' representatives performing such an examination will be borne by Licensor, provided that if an error in underpaid royalties to Licensor of more than five percent (5%) of the total Earned Royalties due for any year is discovered, then the fees and expenses of these representatives in conducting such examination will be borne by Licensee. 

 

8. LIFE OF THE AGREEMENT 

 

8.1 Unless otherwise terminated by operation of law or by acts of the Parties in accordance with the terms of this Agreement, this Agreement will be in effect from the Effective Date and will remain in effect for the life of the last-to-expire patent or last-to-be-abandoned patent application licensed under this Agreement, whichever is later. 

 

8.2 Any termination of this Agreement will not affect the rights and obligations set forth in the following: 

 

Article 1 Definitions 

Article 3 Sublicenses 

Article 7 Books and Records

 

	 
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Article 8 Life of the Agreement 

Article 11 Disposition of Licensed Products Upon Termination 

Article 14 Limited Warranties 

Article 16 Indemnification 

Article 20 Notices 

Article 21 Payments 

Article 23 Confidentiality 

Article 25 Applicable Law; Venue; Attorneys’ Fees 

Article 26 Scope of Agreement 

 

8.3 Any termination of this Agreement will not relieve Licensee of Licensee’s obligation to pay any payment due or owing at the time of such termination and will not relieve any obligations, owed by either Party to the other Party, established prior to termination. 

 

9. TERMINATION BY LICENSOR 

 

9.1 If Licensee should violate or fail to perform any term of this Agreement, then Licensor may give written notice of such default (“Notice of Default”) to Licensee. If Licensee should fail to repair such default within sixty (60) days of the effective date of such notice, Licensor will have the right to terminate this Agreement and the licenses herein by a second written notice (“Notice of Termination”) to Licensee. If a Notice of Termination is sent to Licensee, this Agreement will automatically terminate on the effective date of such notice. Such termination will not relieve Licensee of Licensee’s obligation to pay any royalty or license fees owing at the time of such termination and will not impair any accrued rights of Licensor. These notices will be subject to Article 20 (Notices). 

 

9.2 Notwithstanding Paragraph 9.1, this Agreement will terminate immediately, if Licensee files a claim including in any way the assertion that any portion of Patent Rights is invalid or unenforceable, where the filing of such claim is by Licensee, by a third party on behalf of Licensee, or by a third party at the urging of Licensee. 

 

	 
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9.3 Notwithstanding Paragraph 9.1, this Agreement will terminate immediately in the event of the filing of a petition for relief under the United States Bankruptcy Code by or against Licensee as a debtor or alleged debtor. 

 

10. TERMINATION BY LICENSEE 

 

10.1 Licensee will have the right at any time to terminate this Agreement in whole or as to any portion of Patent Rights by giving notice in writing to Licensor. Such notice of termination will be subject to Article 20 (Notices) and such termination of this Agreement in whole or in part will be effective ninety (90) days after the effective date of such notice of termination. 

 

10.2 Any termination pursuant to Paragraph 10.1 will not relieve Licensee of any obligation or liability accrued hereunder prior to such termination or rescind anything done by Licensee or any payments made to Licensor hereunder prior to the time such termination becomes effective, and such termination will not affect in any manner any rights of Licensor arising under this Agreement prior to such termination. 

 

11. DISPOSITION OF LICENSED PRODUCTS UPON TERMINATION 

 

11.1 Upon termination of this Agreement, for a period of one hundred and twenty (120) days after the date of termination, Licensee may complete the making of, and may Sell, any partially made Licensed Products, and Licensee may continue the practice of Licensed Methods only to the extent necessary to do the foregoing; provided that all such Sales will be subject to the terms of this Agreement including, but not limited to, the payment of royalties at the rate and at the time provided herein and the rendering of reports thereon. 

 

12. PATENT PROSECUTION AND MAINTENANCE

 

12.1 Licensor has or shall apply for, seek prompt issuance of and maintain during the term of this Agreement the Patent Rights in the United States and in such foreign countries as may be designated by Licensee in a written notice to Licensor within a reasonable time in advance of the required foreign filing dates. Licensee shall have the opportunity to advise and cooperate with Licensor in the prosecution, filing and maintenance of such patents. Licensee shall notify Licensor immediately if, at any time during the term of this Agreement, Licensee or any of its sublicensees does not qualify as a “small entity” as provided by the United States Patent and Trademark Office.

 

	 
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12.2 All fees and costs, including attorneys’ fees, relating to the filing, prosecution, maintenance, and post grant proceedings relating to the Patent Rights shall be the responsibility of Licensee, whether incurred prior to or after the Effective Date. Such fees and costs incurred by Licensor prior to the Effective Date in the amount of $3,330.00 (“Pre-agreement Expenses”) are due on the Effective Date and shall be paid by Licensee to Licensor within ten (10) business days of the Effective Date. Fees and costs incurred after the Effective Date, or fees and costs incurred before the Effective Date which are not included in the Pre-agreement Expenses stated above, shall be paid by Licensee within thirty (30) days after receipt of Licensor’s invoice therefor. Additionally, Licensee shall be liable to Licensor for all of Licensor’s out-of-pocket filing, prosecution, and maintenance costs (including all attorneys’ fees and costs), for any and all patent prosecution and maintenance actions that will be taken by patent counsel after the term of this Agreement but in response to any instructions that were sent during the term of this Agreement from Licensor to patent counsel relating to the Patent Rights. Payments pursuant to this Section 6.2 are not creditable against royalties or any other payment due to Licensor under this Agreement. 

 

13. MARKING

 

13.1 Licensee will mark all Licensed Products made, used, offered for Sale, imported, or Sold under this Agreement, or their containers, in accordance with applicable patent marking laws. 

 

14. LIMITED WARRANTIES

 

14.1 Licensor warrants to Licensee that Licensor has the lawful right to grant this license. 

 

	 
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14.2 This license and the associated rights to the Invention are provided to Licensee WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. LICENSOR MAKES NO REPRESENTATION OR WARRANTY THAT PRACTICE OF THE INVENTION OR PATENT RIGHTS (INCLUDING MAKING, USING, SELLING, OFFERING TO SELL, OR IMPORTING LICENSED PRODUCTS, LICENSED SERVICES, OR LICENSED METHODS) WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT. 

 

14.3 IN NO EVENT WILL LICENSOR BE LIABLE FOR ANY INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS LICENSE OR A SUBLICENSE, OR THE USE OF THE INVENTION, PATENT RIGHTS, LICENSED METHODS, LICENSED SERVICES, OR LICENSED PRODUCTS. 

 

14.4 Nothing in this Agreement is or will be construed as: 

 

	
 
	(a)	a warranty or representation by Licensor as to the patentability, validity, enforceability, or scope of Patent Rights;
	
 
	
 
	
 

	
 
	(b)	a warranty or representation that anything made, used, Sold, offered for Sale, or imported under any license granted in this Agreement is or will be free from infringement of patents of third parties;
	
 
	
 
	
 

	
 
	(c)	an obligation to bring or prosecute actions or suits against third parties for patent infringement;
	
 
	
 
	
 

	
 
	(d)	conferring by implication, estoppel, or otherwise any license or rights under any patent applications or patents of Licensor other than Patent Rights, regardless of whether such patent applications or patents are dominant or subordinate to Patent Rights; or
	
 
	
 
	
 

	
 
	(e)	an obligation to furnish any know-how not provided in the patents and patent applications under Patent Rights.

 

	 
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15. PATENT INFRINGEMENT

 

15.1 Licensee shall inform Licensor promptly in writing of any alleged infringement of the Patent Rights by a third party and of any available evidence thereof.

 

15.2 During the term of this Agreement, Licensee shall have the right, but shall not be obligated, to prosecute at its own expense all infringements of the Patent Rights in the Field and in the Territory if Licensee has notified Licensor in writing of its intent to prosecute; provided, however, that such right to bring such an infringement action shall remain in effect only for so long as the license granted herein remains exclusive. In furtherance of such right, Licensor hereby agrees that Licensee may include Licensor as a party plaintiff in any such suit, without expense to Licensor. The total cost of any such infringement action commenced or defended solely by Licensee shall be borne by Licensee and Licensor shall receive a percentage of any recovery or damages for past infringement derived therefrom which is equal to the percentage royalty due Licensor under Article 4. Licensee shall indemnify Licensor against any order for costs that may be made against Licensor in such proceedings.

 

15.3 If within six (6) months after having been notified of any alleged infringement, Licensee shall have been unsuccessful in persuading the alleged infringer to desist and shall not have brought and shall not be diligently prosecuting an infringement action, or if Licensee shall notify Licensor at any time prior thereto of its intention not to bring suit against any alleged infringer, then, and in those events only, Licensor shall have the right, but shall not be obligated, to prosecute at its own expense any infringement of the Patent Rights, and Licensor may, for such purposes, use the name of Licensee as party plaintiff. Licensor shall bear all costs and expenses of any such suit. In any settlement or other conclusion, by litigation or otherwise, Licensor shall keep any recovery or damages for past infringement derived therefrom.

 

15.4 In the event that a declaratory judgment action alleging invalidity or infringement of any of the Patent Rights shall be brought against Licensor, Licensee, at its option, shall have the right, within thirty (30) days after commencement of such action, to intervene and take over the sole defense of the action at its own expense.

 

15.5 In any infringement suit either party may institute to enforce the Patent Rights pursuant to this Agreement, the other party shall, at the request and expense of the party initiating such suit, cooperate in all respects and, to the extent possible, have its employees testify when requested and make available relevant records, information, samples, specimens, and other evidence upon request.

 

	 
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16. INDEMNIFICATION 

 

16.1 Licensee will, and will require Sublicensees to, indemnify, hold harmless, and defend Licensor and its officers, employees, and agents; sponsors of the research that led to the Invention; and the inventors of any patents and patent applications under Patent Rights and their employers; against any and all claims, suits, losses, damages, costs, fees, and expenses resulting from or arising out of exercise of this license or any Sublicense. This indemnification will include, but not be limited to, any product liability. 

 

17. COMPLIANCE WITH LAWS/EXPORT CONTROLS 

 

17.1 Licensee will comply with all applicable international, national, state, regional, and local laws and regulations in performing its obligations hereunder and in Licensee’s use, manufacture, Sale, offer for Sale, or import of the Licensed Products or Licensed Services, or in Licensee’s practice of Licensed Methods. Without limitation, Licensee will observe all applicable United States and foreign laws and regulations governing the transfer to other countries of technical data related to Licensed Products, Licensed Services, or Licensed Methods. 

 

18. GOVERNMENT APPROVAL OR REGISTRATION 

 

18.1 If this Agreement or any associated transaction is required by the law of any nation to be either approved or registered with any governmental agency, Licensee will assume all legal obligations to do so. Licensee will notify Licensor if Licensee becomes aware that this Agreement is subject to a United States or foreign government reporting or approval requirement. Licensee will make all necessary filings and pay all costs, including fees, penalties, and all other out-of-pocket costs, associated with such reporting or approval process. 

 

19. ASSIGNMENT 

 

19.1 This Agreement is binding upon and will inure to the benefit of Licensor and to Licensor’ successors and assigns. This Agreement is personal to Licensee and assignable by Licensee only with the written consent of Licensor, provided that Licensee may, on written notice to Licensor, assign this Agreement, including, without limitation, all obligations owed to Licensor hereunder, to an acquiror of all or substantially all of Licensee's stock or assets. 

 

	 
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20. NOTICES 

 

20.1 All notices under this Agreement will be deemed to have been fully given and effective when done in writing and (a) delivered in person, (b) mailed by registered or certified United States mail, or (c) deposited with a carrier service requiring signature by recipient, and addressed as follows: 

 

To Licensor: 

Analog Biosciences, Inc. 

3656 Ocean Ranch Blvd

Oceanside, CA 92056

Attn.: Joshua S. Schoonover, CEO 

 

To Licensee: 

Artelo Biosciences, Inc. 

888 Prospect Street, Suite 210

La Jolla, CA. 92037 

Attn.: Greg Gorgas, CEO

 

Either Party may change its address upon written notice to the other Party. 

 

21. PAYMENTS 

 

21.1 Payments to Licensor will be made by check or bank wire transfer, to the following address: 

 

Checks: 

The address associated with Licensor in accordance with Section 20.1.

 

Bank wire (Licensee is responsible for all wire transfer fees): 

TBD upon payment becoming due

 

	 
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21.2 If monies owed to Licensor under this Agreement are not received by Licensor when due, Licensee will pay to Licensor interest charges at a rate of ten percent (10%) per annum. Such interest will be calculated from the date payment was due until actually received by Licensor. Such accrual of interest will be in addition to, and not in lieu of, enforcement of any other rights of Licensor related to such late payment. Acceptance of any late payment will not constitute a waiver under Article 22 (Waiver). 

 

22. WAIVER 

 

22.1 The failure of either Party to assert a right hereunder or to insist upon compliance with any term or condition of this Agreement will not constitute a waiver of that right or excuse a similar subsequent failure to perform any such term or condition by the other Party. None of the terms and conditions of this Agreement can be waived except by the written consent of the Party waiving compliance. 

 

23. CONFIDENTIALITY 

 

23.1 With respect to disclosures by one Party (“Disclosing Party”) to the other Party (“Receiving Party”) under this Agreement, the Receiving Party will, subject to Paragraphs 23.2 and 23.3, hold the Disclosing Party's proprietary business and technical information, patent prosecution material, and other proprietary information, including the negotiated terms of this Agreement (all such proprietary information referred to collectively herein as “Proprietary Information”), in confidence and against disclosure to third parties, with at least the same degree of care as the Disclosing Party exercises to protect the Disclosing Party’s own data and information of a similar nature. This obligation will expire five (5) years after the termination or expiration of this Agreement. 

 

	 
	- 19 -
	

 
	 

 

23.2 With respect to Proprietary Information disclosed by the Disclosing Party to the Receiving Party, nothing contained herein will in any way restrict or impair the right of the Receiving Party to use, disclose, or otherwise deal with any information or data which: 

 

	
 
	(a)	at the time of disclosure to the Receiving Party by the Disclosing Party is available to the public by publication or otherwise, or thereafter becomes available to the public by publication or otherwise through no act of the Receiving Party;
	
 
	
 
	
 

	
 
	(b)	the Receiving Party can show by written record was in the Receiving Party’s possession prior to the time of disclosure to the Receiving Party hereunder and was not acquired by the Receiving Party from the Disclosing Party;
	
 
	
 
	
 

	
 
	(c)	is independently made available to the Receiving Party without restrictions as a matter of right by a third party, as demonstrated by written record;
	
 
	
 
	
 

	
 
	(d)	is independently developed by employees or agents of the Receiving Party who did not have access to the information disclosed by the Disclosing Party, as demonstrated by written record; or
	
 
	
 
	
 

	
 
	(e)	is subject to disclosure under the California Public Records Act or other requirements of law.

  

23.3 Within fifteen (15) days following the effective date of termination or expiration of this Agreement, each Receiving Party agrees to destroy or return to the Disclosing Party Proprietary Information received from the Disclosing Party which is in the possession of the Receiving Party. However, each Receiving Party may retain one copy of Proprietary Information received from the Disclosing Party for archival purposes in non-working files for the sole purpose of verifying the ownership of the Proprietary Information, provided such Proprietary Information will be subject to the confidentiality provisions set forth in this Article 23 (Confidentiality). Subject to such right to retain for archival purposes, each Receiving Party agrees to provide to the Disclosing Party, within thirty (30) days following termination of this Agreement, a written notice that Proprietary Information received from the Disclosing Party has been returned or destroyed. 

 

	 
	- 20 -
	

 
	 

 

24. SEVERABILITY 

 

24.1 The provisions of this Agreement are severable, and in the event that any provision of this Agreement is determined to be invalid or unenforceable under any controlling law, such invalidity or enforceability will not in any way affect the validity or enforceability of the remaining provisions hereof. 

 

25. APPLICABLE LAW; VENUE; ATTORNEYS’ FEES 

 

25.1 This Agreement will be construed, interpreted, and applied in accordance with the laws of the State of California, excluding any choice-of-law rules that would direct the application of the laws of another jurisdiction, except that the scope and validity of any patent or patent application under Patent Rights will be determined by the applicable law of the country of such patent or patent application. Any legal action brought by one Party against the other Party relating to this Agreement will be conducted in San Diego, California. The prevailing Party in any such legal action under this Agreement will be entitled to recover its reasonable attorneys’ fees in addition to its costs and necessary disbursements. 

 

26. SCOPE OF AGREEMENT 

 

26.1 Neither Party will use this Agreement as a basis to invoke the CREATE Act, 35 U.S.C. 103(c), without the written consent of the other Party. 

 

26.2 This Agreement incorporates the entire agreement between the Parties with respect to the subject matter hereof and supersedes all previous communications, representations, or understandings, whether oral or written, between the Parties relating to the subject matter hereof unless incorporated by reference herein. 

 

26.3 This Agreement may be modified only by written amendment duly executed by the Parties. 

 

26.4 Intentionally left blank.

 

	 
	- 21 -
	

 
	 

 

In witness whereof, the Parties have executed this Agreement in duplicate originals by their respective authorized officers or representatives on the respective dates below. 

 

 

	
Licensor: Analog Biosciences, Inc.
	
 
	
Licensee: Artelo Biosciences, Inc.
	
 

		
 
	
 
	
 

	/s/ Joshua S. Schoonover	
 
	/s/ Greg Gorgas	
 

	
Authorized Signatory: Joshua S. Schoonover
	
 
	
Authorized Signatory: Greg Gorgas
	
 

		
 
	
 
	
 

	
Date: July 3, 2017
	
 
	
Date: August 1, 2017
	
 

 

 

	
- 22 -artl_ex105.htm

EXHIBIT 10.5

 

ARTELO BIOSCIENCES, INC.

888 Prospect Street, Suite 210

La Jolla, CA 92037

 

July 31, 2017

 

Dr. Douglas Blayney

927 Mears Court

Stanford, CA 94305

 

	
 
	RE: 	Offer to Join the Board of Directors

  

Dear Dr. Blayney,

 

On behalf of Artelo Biosciences, Inc. (the “Company”), in recognition of our belief that your skills, expertise and knowledge will prove helpful to the Company’s progress, I am pleased to extend to you an offer to join the Company’s Board of Directors (the “Board”) as a director, and to serve in such capacity for a period of four (4) years (the “Term”).

 

As initial compensation for your service on the Board, you will receive 100,000 founders’ shares of the company to vest over a four (4) year period of time, at 25,000 per year served (25%). During the 2nd year of the Term, the Compensation Committee will set an annual cash retainer payable in quarterly installments in addition to vesting stock options. We expect the compensation to be $15,000 to $20,000 per year for year two (2) and $20,000 to $30,000 per year for year three (3) and thereafter. 

 

The Company will reimburse you for any reasonable expenses incurred by you in connection with your travel requested by and on behalf of the Company, provided that you furnish the Company with invoices, with receipts and other appropriate supporting documentation evidencing such expenses within 30 days of incurrence, and otherwise comply with the Company’s travel and expense reimbursement policies as may be in effect from time to time. 

 

The Company will provide you with a written Indemnification Agreement (in the form attached hereto as Exhibit A) that the Company will execute in your favor upon your acceptance of this offer. In addition, The Company shall use reasonable efforts to obtain (no later than August 31, 2017) and maintain during the director’s service on the Board, Directors and Officers liability insurance, in amounts and with deductibles customary for a comparably situated Company and shall extend such coverage to include you during your service on the Board and for not less than five (5) years thereafter, for any matters relating to director’s service with the Company.

 

In accepting this offer, you are representing to the Company (i) that you will devote adequate time and effort to perform your duties in a manner consistent with prevailing professional standards and during the Term serve on at least one Committee of the Board (ii) that you do not know of any conflict which would restrict your ability to consult with the Company or serve on the Board, and (iii) that you will not provide the Company with any documents, records, or other confidential information belonging to other parties. You further represent that during the term of your service on the Board, you will not engage in any activity that competes with or creates an actual conflict of interest with the Company, and that you will notify the Board before engaging in any activity that creates a potential conflict of interest with the Company.

 

	 
	
	

 
	 

 

ARTELO BIOSCIENCES INC.

 

Dr. Douglas Blayney

Re: Offer to Join the Board of Directors

July 31, 2017

 

As a condition of your service on the Board and in accordance with your duty to the Company, you agree to hold in strict confidence and trust, and not to use or disclose, any confidential information you receive or learn in connection with your service on the Board. In the event your service on the Board is terminated for any reason, you agree to return to the Company any materials received by you in the course of your service relating to the Company or the Board. 

 

Your service on the Board is entirely “at will” for both you and the Company. As a result, you are free to terminate your role as a Board member at any time, for any reason. Similarly, you may be removed by the Company as a Board member at any time, with or without cause, subject only to compliance with applicable law and the Company’s governing documents. Nothing in this letter creates any offer of employment or employment relationship between you and the Company.

 

If the foregoing terms are agreeable, please indicate your acceptance by signing this letter in the space provided below and returning this letter to the Company. We look forward to your serving as a member of the Board. 

 

	 	Sincerely,
 

Artelo Biosciences, Inc.
	
	 	 	 	 
		By:	/s/ Greg Gorgas	
	
 
	
Name:
	Greg Gorgas	 
	 	Title:	President and CEO	 

 

Agreed and Accepted:

 

/s/ Douglas Blayney, MD

Name: Douglas Blayney, MD

 

Date: August 1, 2017

 

	 
	
	

 
	 

  

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement, dated as of July 31, 2017, is made by and between Artelo Biosciences., a Nevada corporation (the “Corporation”) and Douglas Blayney, MD, (the “Indemnitee”).

 

RECITALS

 

A. The Corporation recognizes that competent and experienced persons are increasingly reluctant to serve or to continue to serve as directors or officers of corporations unless they are protected by comprehensive liability insurance or indemnification, or both, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such directors and officers;

 

B. The statutes and judicial decisions regarding the duties of directors and officers are often difficult to apply, ambiguous, or conflicting, and therefore fail to provide such directors and officers with adequate, reliable knowledge of legal risks to which they are exposed or information regarding the proper course of action to take;

 

C. The Corporation and Indemnitee recognize that plaintiffs often seek damages in such large amounts and the costs of litigation may be so enormous (whether or not the case is meritorious), that the defense and/or settlement of such litigation is often beyond the personal resources of directors and officers;

 

D. The Corporation believes that it is unfair for its directors and officers to assume the risk of huge judgments and other expenses which may occur in cases in which the director or officer received no personal profit and in cases where the director or officer was not culpable;

 

E. The Corporation, after reasonable investigation, has determined that the liability insurance coverage presently available to the Corporation may be inadequate in certain circumstances to cover all possible exposure for which Indemnitee should be protected. The Corporation believes that the interests of the Corporation and its shareholders would best be served by a combination of such insurance and the indemnification by the Corporation of the directors and officers of the Corporation;

 

F. The Corporation’s Amended and Revised Bylaws (the “Bylaws”) require the Corporation to indemnify its directors and officers to the fullest extent permitted by law;

 

G. Section 78.7502 of the Nevada Revised Statutes, under which the Corporation is organized, empowers the Corporation to indemnify its officers, directors, employees and agents by agreement and to indemnify persons who serve, at the request of the Corporation, as the directors, officers, employees or agents of other corporations or enterprises, and expressly provides that the indemnification provided by Section 78.7502 is not exclusive;

 

H. Section 78.138 of the Nevada Revised Statutes states that a director a director or officer is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer unless it is proven that:

 

	 
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(a) The director’s or officer’s act or failure to act constituted a breach of his or her fiduciary duties as a director or officer; and

 

(b) The breach of those duties involved intentional misconduct, fraud or a knowing violation of law.

 

I. The Board of Directors has determined that contractual indemnification as set forth herein is not only reasonable and prudent but also promotes the best interests of the Corporation and its shareholders;

 

J. The Corporation desires and has requested Indemnitee to serve or continue to serve as a director or officer of the Corporation free from undue concern for unwarranted claims for damages arising out of or related to such services to the Corporation; and

 

K. Indemnitee is willing to serve, continue to serve or to provide additional service for or on behalf of the Corporation on the condition that he is furnished the indemnity provided for herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

Section 1. Generally. 

 

To the fullest extent permitted by the laws of the State of Nevada:

 

(a) The Corporation shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that Indemnitee is or was or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of the Corporation, or while serving as a director or officer of the Corporation, is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent (which, for purposes hereof, shall include a trustee, partner or manager or similar capacity) of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity. For the avoidance of doubt, the foregoing indemnification obligation includes, without limitation, claims for monetary damages against Indemnitee to the fullest extent permitted under Section 78.7502 of the Nevada Revised Statutes as in existence on the date hereof.

 

(b) The indemnification provided by this Section 1 shall be from and against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such action, suit or proceeding and any appeal therefrom, but shall only be provided if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action, suit or proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful. 

 

	 
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(c) Notwithstanding the foregoing provisions of this Section 1, in the case of any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Corporation, or while serving as a director or officer of the Corporation, is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Corporation unless, and only to the extent that, the Nevada courts or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses which the Nevada courts or such other court shall deem proper. 

 

(d) The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that Indemnitee’s conduct was unlawful. 

 

Section 2. Successful Defense; Partial Indemnification. To the extent that Indemnitee has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 hereof or in defense of any claim, issue or matter therein, Indemnitee shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred in connection therewith. For purposes of this Agreement and without limiting the foregoing, if any action, suit or proceeding is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to Indemnitee, (ii) an adjudication that Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo contendere by Indemnitee, (iv) an adjudication that Indemnitee did not act in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and (v) with respect to any criminal proceeding, an adjudication that Indemnitee had reasonable cause to believe Indemnitee’s conduct was unlawful, Indemnitee shall be considered for the purposes hereof to have been wholly successful with respect thereto.

 

If Indemnitee is entitled under any provision of this Agreement to indemnification by the Corporation for some or a portion of the expenses (including attorneys’ fees), judgments, fines or amounts paid in settlement actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with any action, suit, proceeding or investigation, or in defense of any claim, issue or matter therein, and any appeal therefrom but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify Indemnitee for the portion of such expenses (including attorneys’ fees), judgments, fines or amounts paid in settlement to which Indemnitee is entitled.

 

	 
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Section 3. Determination That Indemnification Is Proper. Any indemnification hereunder shall (unless otherwise ordered by a court) be made by the Corporation unless a determination is made that indemnification of such person is not proper in the circumstances because he or she has not met the applicable standard of conduct set forth in Section 1(b) hereof. Any such determination shall be made (i) by a majority vote of the directors who are not parties to the action, suit or proceeding in question (“disinterested directors”), even if less than a quorum, (ii) by a majority vote of a committee of disinterested directors designated by majority vote of disinterested directors, even if less than a quorum, (iii) by a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote on the matter, voting as a single class, which quorum shall consist of shareholders who are not at that time parties to the action, suit or proceeding in question, (iv) by independent legal counsel, or (v) by a court of competent jurisdiction.

 

Section 4. Advance Payment of Expenses; Notification and Defense of Claim. 

 

(a) Expenses (including attorneys’ fees) incurred by Indemnitee in defending a threatened or pending civil, criminal, administrative or investigative action, suit or proceeding, or in connection with an enforcement action pursuant to Section 5(b), shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding within thirty (30) days after receipt by the Corporation of (i) a statement or statements from Indemnitee requesting such advance or advances from time to time, and (ii) an undertaking by or on behalf of Indemnitee to repay such amount or amounts, only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Corporation as authorized by this Agreement or otherwise. Such undertaking shall be accepted without reference to the financial ability of Indemnitee to make such repayment. Advances shall be unsecured and interest-free.

 

(b) Promptly after receipt by Indemnitee of notice of the commencement of any action, suit or proceeding, Indemnitee shall, if a claim thereof is to be made against the Corporation hereunder, notify the Corporation of the commencement thereof. The failure to promptly notify the Corporation of the commencement of the action, suit or proceeding, or Indemnitee’s request for indemnification, will not relieve the Corporation from any liability that it may have to Indemnitee hereunder, except to the extent the Corporation is prejudiced in its defense of such action, suit or proceeding as a result of such failure.

 

(c) In the event the Corporation shall be obligated to pay the expenses of Indemnitee with respect to an action, suit or proceeding, as provided in this Agreement, the Corporation, if appropriate, shall be entitled to assume the defense of such action, suit or proceeding, with counsel reasonably acceptable to Indemnitee, upon the delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Corporation, the Corporation will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same action, suit or proceeding, provided that (1) Indemnitee shall have the right to employ Indemnitee’s own counsel in such action, suit or proceeding at Indemnitee’s expense and (2) if (i) the employment of counsel by Indemnitee has been previously authorized in writing by the Corporation, (ii) counsel to the Corporation or Indemnitee shall have reasonably concluded that there may be a conflict of interest or position, or reasonably believes that a conflict is likely to arise, on any significant issue between the Corporation and Indemnitee in the conduct of any such defense or (iii) the Corporation shall not, in fact, have employed counsel to assume the defense of such action, suit or proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Corporation, except as otherwise expressly provided by this Agreement. The Corporation shall not be entitled, without the consent of Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for the Corporation or Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above.

 

	 
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(d) Notwithstanding any other provision of this Agreement to the contrary, to the extent that Indemnitee is, by reason of Indemnitee’s corporate status with respect to the Corporation or any corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which Indemnitee is or was serving or has agreed to serve at the request of the Corporation, a witness or otherwise participates in any action, suit or proceeding at a time when Indemnitee is not a party in the action, suit or proceeding, the Corporation shall indemnify Indemnitee against all expenses (including attorneys’ fees) actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

 

Section 5. Procedure for Indemnification.

 

(a) To obtain indemnification, Indemnitee shall promptly submit to the Corporation a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Corporation shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification.

 

(b) The Corporation’s determination whether to grant Indemnitee’s indemnification request shall be made promptly, and in any event within 60 days following receipt of a request for indemnification pursuant to Section 5(a). The right to indemnification as granted by Section 1 of this Agreement shall be enforceable by Indemnitee in any court of competent jurisdiction if the Corporation denies such request, in whole or in part, or fails to respond within such 60-day period. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 4 hereof where the required undertaking, if any, has been received by the Corporation) that Indemnitee has not met the standard of conduct set forth in Section 1 hereof, but the burden of proving such defense by clear and convincing evidence shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors or one of its committees, its independent legal counsel, and its shareholders) to have made a determination prior to the commencement of such action that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct set forth in Section 1 hereof, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors or one of its committees, its independent legal counsel, and its shareholders) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has or has not met the applicable standard of conduct. The Indemnitee’s expenses (including attorneys’ fees) incurred in connection with successfully establishing Indemnitee’s right to indemnification, in whole or in part, in any such proceeding or otherwise shall also be indemnified by the Corporation.

 

(c) The Indemnitee shall be presumed to be entitled to indemnification under this Agreement upon submission of a request for indemnification pursuant to this Section 5, and the Corporation shall have the burden of proof in overcoming that presumption in reaching a determination contrary to that presumption. Such presumption shall be used as a basis for a determination of entitlement to indemnification unless the Corporation overcomes such presumption by clear and convincing evidence.

 

	 
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Section 6. Insurance and Subrogation. 

 

(a) The Corporation may purchase and maintain insurance on behalf of Indemnitee who is or was or has agreed to serve at the request of the Corporation as a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against, and incurred by, Indemnitee or on Indemnitee’s behalf in any such capacity, or arising out of Indemnitee’s status as such, whether or not the Corporation would have the power to indemnify Indemnitee against such liability under the provisions of this Agreement. If the Corporation has such insurance in effect at the time the Corporation receives from Indemnitee any notice of the commencement of a proceeding, the Corporation shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the policy. The Corporation shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policy.

 

(b) In the event of any payment by the Corporation under this Agreement, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee with respect to any insurance policy, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Corporation to bring suit to enforce such rights in accordance with the terms of such insurance policy. The Corporation shall pay or reimburse all expenses actually and reasonably incurred by Indemnitee in connection with such subrogation.

 

(c) The Corporation shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) if and to the extent that Indemnitee has otherwise actually received such payment under this Agreement or any insurance policy, contract, agreement or otherwise. 

 

Section 7. Certain Definitions. For purposes of this Agreement, the following definitions shall apply:

 

(a) The term “action, suit or proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed claim, action, suit or proceeding, whether civil, criminal, administrative or investigative.

 

(b) The term “by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Corporation, or while serving as a director or officer of the Corporation, is or was serving or has agreed to serve at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise” shall be broadly construed and shall include, without limitation, any actual or alleged act or omission to act.

 

	 
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(c) The term “expenses” shall be broadly and reasonably construed and shall include, without limitation, all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements, appeal bonds, other out-of-pocket costs and reasonable compensation for time spent by Indemnitee for which Indemnitee is not otherwise compensated by the Corporation or any third party, provided that the rate of compensation and estimated time involved is approved by the Board, which approval shall not be unreasonably withheld), actually and reasonably incurred by Indemnitee in connection with either the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement, Section 607.0850 of the Nevada Statutes or otherwise.

 

(d) The term “judgments, fines and amounts paid in settlement” shall be broadly construed and shall include, without limitation, all direct and indirect payments of any type or nature whatsoever (including, without limitation, all penalties and amounts required to be forfeited or reimbursed to the Corporation), as well as any penalties or excise taxes assessed on a person with respect to an employee benefit plan). 

 

(e) The term “Corporation” shall include, without limitation and 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, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued.

 

(f) The term “other enterprises” shall include, without limitation, employee benefit plans.

 

(g) The term “serving at the request of the Corporation” shall include, without limitation, any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries.

 

(h) A person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Agreement. 

 

Section 8. Limitation on Indemnification. Notwithstanding any other provision herein to the contrary, the Corporation shall not be obligated pursuant to this Agreement:

 

(a) Claims Initiated by Indemnitee. To indemnify or advance expenses to Indemnitee with respect to an action, suit or proceeding (or part thereof) initiated by Indemnitee, except with respect to an action, suit or proceeding brought to establish or enforce a right to indemnification (which shall be governed by the provisions of Section 8(b) of this Agreement), unless such action, suit or proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation.

 

	 
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(b) Action for Indemnification. To indemnify Indemnitee for any expenses incurred by Indemnitee with respect to any action, suit or proceeding instituted by Indemnitee to enforce or interpret this Agreement, unless Indemnitee is successful in establishing Indemnitee’s right to indemnification in such action, suit or proceeding, in whole or in part, or unless and to the extent that the court in such action, suit or proceeding shall determine that, despite Indemnitee’s failure to establish their right to indemnification, Indemnitee is entitled to indemnity for such expenses; provided, however, that nothing in this Section 8(b) is intended to limit the Corporation’s obligation with respect to the advancement of expenses to Indemnitee in connection with any such action, suit or proceeding instituted by Indemnitee to enforce or interpret this Agreement, as provided in Section 4 hereof.

 

(c) Section 16 Violations. To indemnify Indemnitee on account of any proceeding with respect to which final judgment is rendered against Indemnitee for payment or an accounting of profits arising from the purchase or sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

 

(d) Non-compete and Non-disclosure. To indemnify Indemnitee in connection with proceedings or claims involving the enforcement of non-compete and/or non-disclosure agreements or the non-compete and/or non-disclosure provisions of employment, consulting or similar agreements the Indemnitee may be a party to with the Corporation, or any subsidiary of the Corporation or any other applicable foreign or domestic corporation, partnership, joint venture, trust or other enterprise, if any.

 

Section 9. Certain Settlement Provisions. The Corporation shall have no obligation to indemnify Indemnitee under this Agreement for amounts paid in settlement of any action, suit or proceeding without the Corporation’s prior written consent, which shall not be unreasonably withheld. The Corporation shall not settle any action, suit or proceeding in any manner that would impose any fine or other obligation on Indemnitee without Indemnitee’s prior written consent, which shall not be unreasonably withheld.

 

Section 10. Savings Clause. If any provision or provisions of this Agreement shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify Indemnitee as to costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated and to the full extent permitted by applicable law. 

 

Section 11. Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnification provided for herein is held by a court of competent jurisdiction to be unavailable to Indemnitee in whole or in part, it is agreed that, in such event, the Corporation shall, to the fullest extent permitted by law, contribute to the payment of Indemnitee’s costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, in an amount that is just and equitable in the circumstances, taking into account, among other things, contributions by other directors and officers of the Corporation or others pursuant to indemnification agreements or otherwise; provided, that, without limiting the generality of the foregoing, such contribution shall not be required where such holding by the court is due to (i) the failure of Indemnitee to meet the standard of conduct set forth in Section 1 hereof, or (ii) any limitation on indemnification set forth in Section 6(c), 8 or 9 hereof. 

 

	 
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Section 12. Form and Delivery of Communications. Any notice, request or other communication required or permitted to be given to the parties under this Agreement shall be in writing and either delivered in person or sent by telecopy, telex, telegram, overnight mail or courier service, or certified or registered mail, return receipt requested, postage prepaid, to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice):

 

If to the Corporation:

 

Artelo Biosciences, Inc.

888 Prospect Street, Suite 210

La Jolla, CA 92037

Attn: President

 

If to Indemnitee:

 

Dr. Douglas Blayney

927 Mears Court

Stanford, CA 94305

 

Section 13. Subsequent Legislation. If the Nevada Statutes are amended after adoption of this Agreement to expand further the indemnification permitted to directors or officers, then the Corporation shall indemnify Indemnitee to the fullest extent permitted by the Nevada Statutes, as so amended.

 

Section 14. Nonexclusivity. The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may have under any provision of law, the Corporation’s Certificate of Incorporation or Bylaws, in any court in which a proceeding is brought, the vote of the Corporation’s shareholders or disinterested directors, other agreements or otherwise, and Indemnitee’s rights hereunder shall continue after Indemnitee has ceased acting as an agent of the Corporation and shall inure to the benefit of the heirs, executors and administrators of Indemnitee. However, no amendment or alteration of the Corporation’s Certificate of Incorporation or Bylaws or any other agreement shall adversely affect the rights provided to Indemnitee under this Agreement

 

Section 15. Enforcement. The Corporation shall be precluded from asserting in any judicial proceeding that the procedures and presumptions of this Agreement are not valid, binding and enforceable. The Corporation agrees that its execution of this Agreement shall constitute a stipulation by which it shall be irrevocably bound in any court of competent jurisdiction in which a proceeding by Indemnitee for enforcement of his rights hereunder shall have been commenced, continued or appealed, that its obligations set forth in this Agreement are unique and special, and that failure of the Corporation to comply with the provisions of this Agreement will cause irreparable and irremediable injury to Indemnitee, for which a remedy at law will be inadequate. As a result, in addition to any other right or remedy Indemnitee may have at law or in equity with respect to breach of this Agreement, Indemnitee shall be entitled to injunctive or mandatory relief directing specific performance by the Corporation of its obligations under this Agreement.

 

	 
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Section 16. Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to Indemnitee to the fullest extent now or hereafter permitted by law.

 

Section 17. Entire Agreement. This Agreement and the documents expressly referred to herein constitute the entire agreement between the parties hereto with respect to the matters covered hereby, and any other prior or contemporaneous oral or written understandings or agreements with respect to the matters covered hereby are expressly superseded by this Agreement.

 

Section 18. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

Section 19. Successor and Assigns. All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators and legal representatives. The Corporation shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporation, by written agreement in form and substance reasonably satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform if no such succession had taken place.

 

Section 20. Service of Process and Venue. For purposes of any claims or proceedings to enforce this agreement, the Corporation consents to the jurisdiction and venue of any federal or state court of competent jurisdiction in the state of California, and waives and agrees not to raise any defense that any such court is an inconvenient forum or any similar claim.

 

Section 21. Supersedes Prior Agreement. This Agreement supersedes any prior indemnification agreement between Indemnitee and the Corporation or its predecessors.

 

Section 22. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Nevada, as applied to contracts between Nevada residents entered into and to be performed entirely within Nevada. If a court of competent jurisdiction shall make a final determination that the provisions of the law of any state other than Nevada govern indemnification by the Corporation of its officers and directors, then the indemnification provided under this Agreement shall in all instances be enforceable to the fullest extent permitted under such law, notwithstanding any provision of this Agreement to the contrary.

 

	 
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Section 23. Employment Rights. Nothing in this Agreement is intended to create in Indemnitee any right to employment or continued employment.

 

Section 24. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument, notwithstanding that both parties are not signatories to the original or same counterpart.

 

Section 25. Headings. The section and subsection headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of the date first above written.

 

 

	 	Artelo Biosciences, Inc.	
	 	 	 	 
		By:	/s/ Greg Gorgas	
	
 
	
Name:
	
Greg Gorgas
	 
	 	Title: 	President & CEO	 

  
	 	INDEMNITEE:	
	 	 	 	 
		By:	/s/ Douglas Blayney, MD	
	
 
	
Name:
	Douglas Blayney, MD	 

 

 

	
11

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