Document:

Exhibit 10.1

 

TITAN PHARMACEUTICALS,
INC.

 

$25,000,000

 

COMMON STOCK

 

SALES
AGREEMENT

 

April 25, 2019

 

A.G.P./Alliance Global Partners

590 Madison Avenue

New York, NY 10022

 

Ladies and Gentlemen:

 

Titan Pharmaceuticals,
Inc., a Delaware corporation (the “Company”), confirms its agreement (this “Agreement”)
with A.G.P./Alliance Global Partners, as follows:

 

1.          Issuance
and Sale of Shares. The Company agrees that, from time to time during the term of this Agreement, on the terms and subject
to the conditions set forth herein, it may issue and sell to or through A.G.P./Alliance Global Partners, acting as agent and/or
principal (the “Sales Agent”), shares of the Company’s common stock, par value $0.001 per share
(the “Common Stock”), having an aggregate offering price of up to $25,000,000 (the “Maximum
Amount”), subject to the limitations set forth in Section 3(b) hereof. The issuance and sale of shares
of Common Stock to or through the Sales Agent will be effected pursuant to the Registration Statement (as defined below) filed
by the Company and which was declared effective under the Securities Act (as defined below) by the U.S. Securities and Exchange
Commission (the “Commission”).

 

     

     

    

 

The Company has filed,
in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations thereunder (collectively,
the “Securities Act”), with the Commission, not earlier than three years prior to the date hereof, a
shelf registration statement on Form S-3 (File No. 333-230742), including a base prospectus, relating to certain securities, including
the Common Stock, to be issued from time to time by the Company, and which incorporates by reference documents that the Company
has filed or will file in accordance with the provisions of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (collectively, the “Exchange Act”). The Company has prepared a prospectus supplement
to the base prospectus included as part of such registration statement at the time it became effective specifically relating to
the offering of Common Stock pursuant to this Agreement (the “Prospectus Supplement”). The Company will
furnish to the Sales Agent, for use by the Sales Agent, copies of the prospectus included as part of such registration statement
at the time it became effective, as supplemented by the Prospectus Supplement, relating to the offering of Common Stock pursuant
to this Agreement. Except where the context otherwise requires, “Registration Statement,” as used herein,
means such registration statement, as amended at the time of such registration statement’s effectiveness for purposes of
Section 11 of the Securities Act, including (1) all documents filed as a part thereof or incorporated or deemed to be incorporated
by reference therein, (2) any information contained or incorporated by reference in a Prospectus (as defined below) subsequently
filed with the Commission pursuant to Rule 424(b) under the Securities Act, to the extent such information is deemed, pursuant
to Rule 430B under the Securities Act, to be part of the registration statement at the effective time, and (3) any abbreviated
registration statement filed pursuant to Rule 462(b) under the Securities Act to register the offer and sale of additional
shares of Common Stock pursuant to this Agreement. Except where the context otherwise requires, “Prospectus,”
as used herein, means the base prospectus included in the registration statement at the time it became effective, including all
documents incorporated therein by reference to the extent such information has not been superseded or modified in accordance with
Rule 412 under the Securities Act (as qualified by Rule 430B(g) under the Securities Act), as it may be supplemented
by the Prospectus Supplement, in the form in which such prospectus and/or Prospectus Supplement have most recently been filed by
the Company with the Commission pursuant to Rule 424(b) under the Securities Act, together with any “issuer free writing
prospectus,” as defined in Rule 433 of the Securities Act (“Rule 433”), relating to the
Common Stock that (i) is required to be filed with the Commission by the Company or (ii) is exempt from filing pursuant
to Rule 433(d)(5)(i), in each case in the form filed or required to be filed with the Commission or, if not required to be
filed, in the form retained in the Company’s records pursuant to Rule 433(g) (each, an “Issuer Free Writing
Prospectus”). Any reference herein to the Registration Statement, the Prospectus or any amendment or supplement thereto
shall be deemed to refer to and include the documents incorporated by reference therein, and any reference herein to the terms
“amend,” “amendment” or “supplement” with respect to the Registration Statement or the Prospectus
shall be deemed to refer to and include the filing after the execution hereof of any document with the Commission deemed to be
incorporated by reference therein. For purposes of this Agreement, all references to the Registration Statement, the Prospectus
or to any amendment or supplement thereto shall be deemed to include any copy filed with the Commission pursuant to either the
Electronic Data Gathering Analysis and Retrieval System, or if applicable, the Interactive Data Electronic Applications (collectively
“EDGAR”).

 

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2.          Placements.
Each time that the Company wishes to issue and sell the Common Stock through the Sales Agent, as agent, hereunder (each, a “Placement”),
it will notify the Sales Agent by email notice (or other method mutually agreed to in writing by the parties) (a “Placement
Notice”) containing the parameters in accordance with which it desires the Common Stock to be sold, which shall
at a minimum include the number of shares of Common Stock to be issued (the “Placement Shares”), the
time period during which sales are requested to be made, any limitation on the number of shares of Common Stock that may be sold
in any one Trading Day (as defined in Section 3) and any minimum price below which sales may not be made, a form of
which containing such minimum sales parameters necessary is attached hereto as Schedule 1. The Placement Notice
shall originate from any of the individuals from the Company set forth on Schedule 2 (with a copy to each of
the other individuals from the Company listed on such schedule), and shall be addressed to each of the individuals from the Sales
Agent set forth on Schedule 2, as such Schedule 2 may be amended from time to time. The
Placement Notice shall be effective upon receipt by the Sales Agent unless and until (i) in accordance with the notice requirements
set forth in Section 4, the Sales Agent declines to accept the terms contained therein for any reason, in its sole
discretion, (ii) the entire amount of the Placement Shares have been sold, (iii) in accordance with the notice requirements
set forth in Section 4, the Company suspends or terminates the Placement Notice, (iv) the Company issues a subsequent
Placement Notice with parameters superseding those on the earlier dated Placement Notice, or (v) the Agreement has been terminated
under the provisions of Section 11. The amount of any discount, commission or other compensation to be paid by the
Company to the Sales Agent in connection with the sale of the Placement Shares through the Sales Agent, as agent, shall be as
set forth in Schedule 3. It is expressly acknowledged and agreed that neither the Company nor the Sales Agent
will have any obligation whatsoever with respect to a Placement or any Placement Shares unless and until the Company delivers
a Placement Notice to the Sales Agent and the Sales Agent does not decline such Placement Notice pursuant to the terms set forth
above, and then only upon the terms specified therein and herein. In the event of a conflict between the terms of this Agreement
and the terms of a Placement Notice, the terms of the Placement Notice will control.

 

3.          Sale
of Placement Shares by the Sales Agent. (a)          Subject to the terms
and conditions herein set forth, upon the Company’s issuance of a Placement Notice, and unless the sale of the Placement
Shares described therein has been declined, suspended, or otherwise terminated in accordance with the terms of this Agreement,
the Sales Agent, as agent for the Company, will use its commercially reasonable efforts consistent with its normal trading and
sales practices and applicable state and federal laws, rules and regulations and the rules of The Nasdaq Capital Market (the “Exchange”),
for the period specified in the Placement Notice, to sell such Placement Shares up to the amount specified by the Company in,
and otherwise in accordance with the terms of such Placement Notice. If acting as agent hereunder, the Sales Agent will provide
written confirmation to the Company (including by email correspondence to each of the individuals of the Company set forth on
Schedule 2, if receipt of such correspondence is actually acknowledged by any of the individuals to whom the
notice is sent, other than via auto-reply) no later than the opening of the Trading Day (as defined below) immediately following
the Trading Day on which it has made sales of Placement Shares hereunder setting forth the number of Placement Shares sold on
such day, the compensation payable by the Company to the Sales Agent pursuant to Section 2 with respect to such sales,
and the Net Proceeds (as defined below) payable to the Company, with an itemization of the deductions made by the Sales Agent
(as set forth in Section 5(a)) from the gross proceeds that it receives from such sales. Subject to the terms of the
Placement Notice, the Sales Agent may sell Placement Shares by any method permitted by law deemed to be an “at the market”
offering as defined in Rule 415 under the Securities Act, including without limitation sales made directly on the Exchange,
on any other existing trading market for the Common Stock or to or through a market maker. Subject to the terms of a Placement
Notice, the Sales Agent may also sell Placement Shares by any other method permitted by law, including but not limited to in negotiated
transactions with the Company’s prior written consent. The Company acknowledges and agrees that (i) there can be no assurance
that the Sales Agent will be successful in selling Placement Shares, (ii) the Sales Agent will incur no liability or obligation
to the Company or any other person or entity if it does not sell Placement Shares for any reason other than a failure by the Sales
Agent to use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable law and
regulations to sell such Placement Shares as required under this Agreement and (iii) the Sales Agent shall be under no obligation
to purchase Placement Shares on a principal basis pursuant to this Agreement, except as otherwise agreed by the Sales Agent and
the Company in writing and expressly set forth in a Placement Notice. For the purposes hereof, “Trading Day”
means any day on which the Company’s Common Stock is purchased and sold on the principal market on which the Common Stock
is listed or quoted.

 

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(b)          Under
no circumstances shall the Company cause or request the offer or sale of any Placement Shares if, after giving effect to the sale
of such Placement Shares, the aggregate number or gross sales proceeds of Placement Shares sold pursuant to this Agreement would
exceed the lesser of: (i) the number or dollar amount of shares of Common Stock registered pursuant to the Registration Statement
pursuant to which the offering hereunder is being made, (ii) the number of authorized but unissued and unreserved shares of
Common Stock, (iii) the number or dollar amount of shares of Common Stock permitted to be offered and sold by the Company
under Form S-3 (including General Instruction I.B.6. of Form S-3, if and for so long as applicable), (iv) the number or dollar
amount of shares of Common Stock authorized from time to time to be issued and sold under this Agreement by the Company’s
board of directors, a duly authorized committee thereof or a duly authorized executive committee, and notified to the Sales Agent
in writing, or (v) the number or dollar amount of shares of Common Stock for which the Company has filed the Prospectus Supplement
or other prospectus supplement specifically relating to the offering of the Placement Shares pursuant to this Agreement. Under
no circumstances shall the Company cause or request the offer or sale of any Placement Shares pursuant to this Agreement at a price
lower than the minimum price authorized from time to time by the Company’s board of directors, a duly authorized committee
thereof or a duly authorized executive committee, and notified to the Sales Agent in writing. Notwithstanding anything to the contrary
contained herein, the parties hereto acknowledge and agree that compliance with the limitations set forth in this Section 3(b)
on the number or dollar amount of Placement Shares that may be issued and sold under this Agreement from time to time shall be
the sole responsibility of the Company, and that the Sales Agent shall have no obligation in connection with such compliance.

 

(c)          During
the term of this Agreement, neither the Sales Agent nor any of its affiliates or subsidiaries shall engage in (i) any short
sale of any security of the Company or (ii) any sale of any security of the Company that the Sales Agent does not own or any
sale which is consummated by the delivery of a security of the Company borrowed by, or for the account of, the Sales Agent. During
the term of this Agreement and notwithstanding anything to the contrary herein, the Sales Agent agrees that in no event will the
Sales Agent or its affiliates engage in any market making, bidding, stabilization or other trading activity with regard to the
Common Stock or related derivative securities if such activity would be prohibited under Regulation M or other anti-manipulation
rules under the Exchange Act.

 

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4.          Suspension
of Sales. (a)          The Company or the Sales Agent may, upon notice to
the other party in writing (including by email correspondence to each of the individuals of the other party set forth on Schedule 2,
if receipt of such correspondence is actually acknowledged by any of the individuals to whom the notice is sent, other than via
auto-reply) or by telephone (confirmed immediately by verifiable facsimile transmission or email correspondence to each of the
individuals of the other party set forth on Schedule 2), suspend any sale of Placement Shares for a period
of time (a “Suspension Period”); provided, however, that such suspension shall not affect
or impair either party’s obligations with respect to any Placement Shares sold hereunder prior to the receipt of such notice.
Each of the parties agrees that no such notice under this Section 4 shall be effective against the other unless it
is made to one of the individuals named on Schedule 2 hereto, as such schedule may be amended from time to
time. During a Suspension Period, the Company shall not issue any Placement Notices and the Sales Agent shall not sell any Placement
Shares hereunder. The party that issued a suspension notice shall notify the other party in writing of the Trading Day on which
the Suspension Period shall expire not later than twenty-four (24) hours prior to such Trading Day.

 

(b)          Notwithstanding
any other provision of this Agreement, during any period in which the Company is in possession of material non-public information,
the Company and the Sales Agent agree that (i) no sale of Placement Shares will take place, (ii) the Company shall not
request the sale of any Placement Shares, and (iii) the Sales Agent shall not be obligated to sell or offer to sell any Placement
Shares.

 

5.          Settlement.
(a)          Settlement of Placement Shares. Unless otherwise specified
in the applicable Placement Notice, settlement for sales of Placement Shares will occur on the second (2nd) Trading
Day (or such earlier day as is industry practice for regular-way trading) following the respective Point of Sale (as defined below)
(each, a “Settlement Date”). The amount of proceeds to be delivered to the Company on a Settlement Date
against receipt of the Placement Shares sold (the “Net Proceeds”) will be equal to the aggregate sales
price received by the Sales Agent at which such Placement Shares were sold, after deduction for (i) the Sales Agent’s
discount, commission or other compensation for such sales payable by the Company pursuant to Section 2 hereof, and
(ii) any transaction fees imposed by any clearing organization or any governmental or self-regulatory organization in respect
of such sales.

 

(b)          Delivery
of Placement Shares. On or before each Settlement Date, the Company will, or will cause its transfer agent to, electronically
transfer the Placement Shares being sold by crediting the Sales Agent’s or its designee’s account (provided the Sales
Agent shall have given the Company written notice of such designee prior to the Settlement Date) at The Depository Trust Company
through its Deposit and Withdrawal at Custodian System or by such other means of delivery as may be mutually agreed upon by the
parties hereto which in all cases shall be freely tradable, transferable, registered shares in good deliverable form. On each Settlement
Date, the Sales Agent will deliver the related Net Proceeds in same day funds to an account designated by the Company on, or prior
to, the Settlement Date. The Company agrees that if the Company, or its transfer agent (if applicable), defaults in its obligation
to deliver duly authorized Placement Shares on a Settlement Date, the Company agrees that in addition to and in no way limiting
the rights and obligations set forth in Section 9(a) (Indemnification and Contribution) hereto, the Company will (i) hold
the Sales Agent, its directors, officers, members, partners, employees and agents of the Sales Agent, each broker dealer affiliate
of the Sales Agent, and each person, if any, who (A) controls the Sales Agent within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act or (B) is controlled by or is under common control with the Sales Agent
(each, a “Sales Agent Affiliate”), and the Sales Agent’s clearing organization, harmless against
any loss, claim, damage, or expense (including reasonable legal fees and expenses), as incurred, arising out of or in connection
with such default by the Company or its transfer agent (if applicable) and (ii) pay to the Sales Agent any commission, discount,
or other compensation to which it would otherwise have been entitled absent such default.

 

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6.          Representations
and Warranties of the Company. The Company represents and warrants to, and agrees with, the Sales Agent that as of each Applicable
Time (as defined in Section 22(a)), unless such representation, warranty or agreement specifies a different time or
times:

 

(a)          Compliance
with Registration Requirements. The Registration Statement was declared effective under the Securities Act by the Commission
on April 24, 2019, and any post-effective amendment thereto and any Rule 462(b) Registration Statement have also been declared
effective by the Commission or became effective upon filing under the Securities Act. The Company has not received from the Commission
any notice pursuant to Rule 401(g)(1) under the Securities Act objecting to the use of the shelf registration statement form.
At the time of the initial filing of the Registration Statement, the Company paid the required Commission filing fees relating
to the Placement Shares in accordance with Rules 456(a) and 457(o) under the Securities Act. The Company has complied to the
Commission’s satisfaction with all requests of the Commission for additional or supplemental information. No stop order suspending
the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement is in effect and no proceedings
for such purpose have been instituted or are pending or, to the best knowledge of the Company, are contemplated or threatened by
the Commission. At the time of (i) the initial filing of the Registration Statement with the Commission and (ii) the
most recent amendment thereto for the purposes of complying with Section 10(a)(3) of the Securities Act (whether such amendment
was by post-effective amendment, incorporated report filed pursuant to Section 13 or 15(d) of the Exchange Act or form of
prospectus), the Company met the then applicable requirements for use of Form S-3 under the Securities Act, including compliance
with General Instructions I.A and I.B.6. of Form S-3, if and for so long as applicable. The Registration Statement and the offer
and sale of the Placement Shares as contemplated hereby meet the requirements of Rule 415 under the Securities Act and comply
in all material respects with said Rule. In the section entitled “Plan of Distribution” in the Prospectus Supplement,
the Company has named A.G.P./Alliance Global Partners as an agent that the Company has engaged in connection with the transactions
contemplated by this Agreement. At the time of the initial filing of the Registration Statement and any post-effective amendment
thereto with the Commission, at the time the Registration Statement and any post-effective amendment thereto was declared effective
by the Commission, at the earliest time thereafter that the Company or another offering participant made a bona fide offer
(within the meaning of Rule 164(h)(2) of the Securities Act) of the Placement Shares and at each Applicable Time, the Company was
not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission
pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer. At the time of the initial filing
of the Registration Statement with the Commission, at the time the Registration Statement was declared effective by the Commission
and as of the date hereof, the Company was a “non-accelerated filer” and a “smaller reporting company”
(as such terms are defined in Rule 12b-2 under the Exchange Act).

 

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(b)          No
Misstatement or Omission. The Registration Statement and any post-effective amendment thereto, at the time it became or becomes
effective, complied or will comply in all material respects with the Securities Act. The Prospectus, and any amendment or supplement
thereto, on the date of such Prospectus or amendment or supplement, complied or will comply in all material respects with the Securities
Act. The Registration Statement and any post-effective amendment thereto, at the time it became or becomes effective, did not and
will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading. The Prospectus, as amended or supplemented, as of its date, did not and, as of each
Point of Sale and each Settlement Date, will not contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
The representations and warranties set forth in the two immediately preceding sentences do not apply to statements in or omissions
from the Registration Statement or any post-effective amendment thereto, or the Prospectus, or any amendments or supplements thereto,
made in reliance upon and in conformity with information relating to the Sales Agent furnished to the Company in writing by the
Sales Agent expressly for use therein. “Point of Sale” means, for a Placement, the time at which an acquiror
of Placement Shares entered into a contract, binding upon such acquiror, to acquire such Placement Shares.

 

(c)          Offering
Materials Furnished to the Sales Agent. Copies of the Registration Statement, the Prospectus, and all amendments or supplements
thereto and all documents incorporated by reference therein that were filed with the Commission on or prior to the date of this
Agreement, have been delivered, or are publicly available through EDGAR, to the Sales Agent. Each Prospectus delivered to the Sales
Agent for use in connection with the sale of the Placement Shares pursuant to this Agreement will be identical to the version of
such Prospectus filed with the Commission via EDGAR, except to the extent permitted by Regulation S-T.

 

(d)          Distribution
of Offering Material By the Company. The Company has not distributed and will not distribute, prior to the completion of the
Sales Agent’s distribution of the Placement Shares, any offering material in connection with the offering and sale of the
Placement Shares other than the Prospectus or the Registration Statement.

 

(e)          The
Sales Agreement. This Agreement has been duly authorized, executed and delivered by the Company, and constitutes a valid, legal,
and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as rights to indemnity
hereunder may be limited by federal or state securities laws and except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of creditors generally, and subject to general principles of equity.
The Company has full corporate power and authority to enter into this Agreement and to authorize, issue and sell the Placement
Shares as contemplated by this Agreement. This Agreement conforms in all material respects to the descriptions thereof in the Registration
Statement and the Prospectus.

 

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(f)          Authorization
of the Placement Shares. The Placement Shares, when issued and paid for as contemplated herein, will be validly issued, fully
paid and nonassessable, will be issued in compliance with all applicable securities laws, and will be free of preemptive, registration
or similar rights, and will conform to the description of the Common Stock contained in the Registration Statement and the Prospectus.

 

(g)          No
Applicable Registration or Other Similar Rights. There are no persons with registration or other similar rights to have any
equity or debt securities registered for sale under the Registration Statement or included in the offering contemplated by this
Agreement, except for such rights as have been duly waived. No person has the right to act as an underwriter or as a financial
advisor to the Company in connection with the offer and sale of the Placement Shares hereunder, whether as a result of the filing
or effectiveness of the Registration Statement or the sale of the Placement Shares as contemplated hereby or otherwise.

 

(h)          No
Material Adverse Change. Except as otherwise disclosed in the Prospectus, subsequent to the respective dates as of which information
is given in the Prospectus: (i) there has been no material adverse change in the business, properties, prospects, operations, condition
(financial or otherwise) or results of operations of the Company (any such change is called a “Material Adverse Change”),
or any development involving a prospective material adverse change, which, individually or in the aggregate, has had or would reasonably
be expected to result in a Material Adverse Change; (ii) the Company has not incurred any material liability or obligation,
indirect, direct or contingent, not in the ordinary course of business nor entered into any material transaction or agreement not
in the ordinary course of business; (iii) there has been no dividend or distribution of any kind declared, paid or made by
the Company; (iv) no officer or director of the Company has resigned from any position with the Company; and (v) there has not
been any Material Adverse Change in the Company’s long-term or short-term debt.

 

(i)          Independent
Accountants. To the knowledge of the Company, OUM & Co., LLP, whose report is filed with the Commission and included or
incorporated by reference in the Registration Statement and the Prospectus, is an independent registered public accounting firm
as required by the Securities Act and the Public Company Accounting Oversight Board. OUM & Co., LLP has not, during the periods
covered by the financial statements included or incorporated by reference in the Registration Statement and the Prospectus, provided
to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act.

 

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(j)          Financial
Statements. The financial statements, including the notes thereto and supporting schedules included or incorporated by reference
in the Registration Statement and the Prospectus, fairly present in all material respects the financial position and the results
of operations of the Company at the dates and for the periods to which they apply; and such financial statements have been prepared
in conformity with U.S. generally accepted accounting principles (“GAAP”), consistently applied throughout
the periods involved (provided that unaudited interim financial statements are subject to year-end audit adjustments that are not
expected to be material in the aggregate and do not contain all footnotes required by GAAP); and the supporting schedules included
in the Registration Statement and the Prospectus present fairly the information required to be stated therein. Except as included
or incorporated by reference therein, no historical or pro forma financial statements are required to be included or incorporated
by reference in the Registration Statement or the Prospectus under the Securities Act. The pro forma and pro forma as adjusted
financial information and the related notes, if any, included or incorporated by reference in the Registration Statement and the
Prospectus have been properly compiled and prepared in accordance with the applicable requirements of the Securities Act and present
fairly the information shown therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used
therein are appropriate to give effect to the transactions and circumstances referred to therein. All disclosures contained in
the Registration Statement or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the
rules and regulations of the Commission), if any, comply in all material respects with Regulation G of the Exchange Act and Item
10 of Regulation S-K of the Securities Act, to the extent applicable. Each of the Registration Statement and the Prospectus discloses
all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships
of the Company with unconsolidated entities or other persons that may have a material current or future effect on the Company’s
financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources,
or significant components of revenues or expenses.

 

(k)          Forward-Looking
Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) contained in the Registration Statement or the Prospectus has been made or reaffirmed by the Company without a reasonable
basis or has been disclosed by the Company other than in good faith.

 

(l)          Statistical
and Marketing-Related Data. The statistical and market-related data included in each of the Registration Statement and the
Prospectus are based on or derived from sources that the Company reasonably and in good faith believes are reliable and accurate
or represent the Company’s good faith estimates that are made on the basis of data derived from such sources.

 

(m)          XBRL.
The interactive data in eXtensible Business Reporting Language included or incorporated by reference in the Registration Statement
fairly presents the information called for in all material respects and has been prepared in accordance with the Commission’s
rules and guidelines applicable thereto.

 

(n)          Incorporation
and Good Standing of the Company. The Company is a corporation duly incorporated and validly existing under the laws of the
State of Delaware and is in good standing under such laws. The Company has requisite corporate power to carry on its business as
described in the Prospectus. The Company is duly qualified to transact business and is in good standing in all jurisdictions in
which the conduct of its business requires such qualification; except where the failure to be so qualified or to be in good standing
would not result in a Material Adverse Change. The Company has no subsidiaries and does not own or control, directly or indirectly,
any corporation, association or other entity.

 

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(o)          Capital
Stock Matters. All issued and outstanding securities of the Company issued prior to the transactions contemplated by this
Agreement have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no rights
of rescission with respect thereto, and are not subject to personal liability by reason of being such holders; and none of such
securities were issued in violation of the preemptive rights of any holders of any security of the Company or similar contractual
rights granted by the Company. The authorized shares of Common Stock conform in all material respects to all statements relating
thereto contained in the Registration Statement and the Prospectus. The offers and sales of the outstanding shares of Common Stock
were at all relevant times either registered under the Securities Act and the applicable state securities or “blue sky”
laws or, based in part on the representations and warranties of the purchasers of such shares, exempt from such registration requirements.
The description of the Company’s stock option, stock bonus and other stock plans or arrangements, and the options or other
rights granted thereunder, as described in the Registration Statement and the Prospectus, accurately and fairly present, in all
material respects, the information required to be shown with respect to such plans, arrangements, options and rights.

 

(p)          Non-Contravention
of Existing Instruments; No Further Authorizations or Approvals Required. The Company’s execution, delivery and performance
of this Agreement and consummation of the transactions contemplated hereby or by the Registration Statement and the Prospectus
(including the issuance and sale of the Placement Shares and the use of the proceeds from the sale of the Placement Shares as described
in the Prospectus under the caption “Use of Proceeds”) will not (A) result in a material violation of any existing
applicable law, rule, regulation, judgment, order or decree of any Governmental Entity as of the date hereof (including, without
limitation, those promulgated by the Food and Drug Administration of the U.S. Department of Health and Human Services (the “FDA”)
or by any foreign, federal, state or local regulatory authority performing functions similar to those performed by the FDA), (B)
conflict with, result in any violation or breach of, or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) (a “Default Acceleration Event”) of, any agreement, lease, credit
facility, debt, note, bond, mortgage, indenture or other instrument (“Contract”) or obligation or other
understanding to which the Company is a party or by which any property or asset of the Company is bound or affected, except to
the extent that such conflict, default, or Default Acceleration Event is not reasonably likely to result in a Material Adverse
Change, or (C) result in a breach or violation of any of the terms and provisions of, or constitute a default under, the Company’s
Amended and Restated Certificate of Incorporation (as the same may be amended or restated from time to time) or bylaws (as the
same may be amended or restated from time to time). The Company is not in violation, breach or default under its Amended
and Restated Certificate of Incorporation (as the same may be amended or restated from time to time) or bylaws (as the same may
be amended or restated from time to time). Neither the Company nor, to its knowledge, any other party is in violation, breach or
default of any Contract that has resulted in or could reasonably be expected to result in a Material Adverse Change. Each approval,
consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental
body necessary in connection with the execution and delivery by the Company of this Agreement and the performance of the Company
of the transactions herein contemplated has been obtained or made and is in full force and effect, except (i) with respect
to any Applicable Time at which the Sales Agent would not be able to rely on Rule 5110(b)(7)(C)(i) of the Financial Industry
Regulatory Authority, Inc. (“FINRA”), such additional steps as may be required by FINRA, (ii) filings
with the Commission required under the Securities Act or the Exchange Act, or filings with the Exchange pursuant to the rules and
regulations of the Exchange, in each case that are contemplated by this Agreement to be made after the date of this Agreement,
and (iii) such additional steps as may be necessary to qualify the Common Stock for sale by the Sales Agent under state securities
or Blue Sky laws.

 

    	 	10	 

     

    

 

(q)          No
Material Actions or Proceedings. There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental
proceeding pending or, to the Company’s knowledge, threatened against, or involving the Company or, to the Company’s
knowledge, any executive officer or director, including any proceeding before the FDA or comparable federal, state, local or foreign
governmental bodies (it being understood that the interaction between the Company and the FDA and such comparable governmental
bodies relating to the clinical development and product approval process shall not be deemed proceedings for purposes of this representation),
which has not been disclosed in the Registration Statement and the Prospectus which is required to be disclosed.

 

(r)          Labor
Disputes. No labor dispute with the employees of the Company exists or, to the knowledge of the Company, is imminent. The Company
is not aware that any key employee or significant group of employees of the Company plans to terminate employment with the Company.

 

(s)          All
Necessary Permits, etc. The Company possesses all licenses, certificates, registrations, authorizations and permits required
by the FDA and other governmental or regulatory authorities performing functions similar to those performed by the FDA and have
made all declarations and filings with, the appropriate local, state, federal or foreign governmental or regulatory agencies or
bodies (including, without limitation, those administered by the FDA or by any foreign, federal, state or local governmental or
regulatory authority performing functions similar to those performed by the FDA) that are necessary for the ownership or lease
of their respective properties or the conduct of their respective businesses as described in the Registration Statement and the
Prospectus (collectively, the “Permits”) except where any failures to possess or make the same would
not, singularly or in the aggregate, have a Material Adverse Change. The Company is in compliance with all such Permits, including
with all conditions and limitations on the commercial rights granted by such Permits; all such Permits are valid and in full force
and effect, except where the validity or failure to be in full force and effect would not, singularly or in the aggregate, have
a Material Adverse Change. The Company has not received notification of any revocation, modification, suspension, termination or
invalidation (or proceedings related thereto) of any such Permit and the Company has no reason to believe that any such Permit
will not be renewed.

 

(t)          Tax
Law Compliance. The Company has filed all returns (as hereinafter defined) required to be filed with taxing authorities prior
to the date hereof or has duly obtained extensions of time for the filing thereof. The Company has paid all taxes (as hereinafter
defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company. The provisions
for taxes payable, if any, shown on the financial statements filed with or as part of or incorporated by reference in the Registration
Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates
of such consolidated financial statements. Other than as disclosed in the Registration Statement and the Prospectus, (i) no issues
have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as
due from the Company, and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been
given by or requested from the Company. There are no tax liens against the assets, properties or business of the Company. The term
“taxes” means all federal, state, local, foreign and other net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges
of any kind whatever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto.
The term “returns” means all returns, declarations, reports, statements and other documents required
to be filed in respect to taxes.

 

    	 	11	 

     

    

 

(u)          Company
Not an “Investment Company”. The Company is not, and will not be, either after receipt of payment for the Placement
Shares or after the application of the proceeds therefrom as described under “Use of Proceeds” in the Registration
Statement or the Prospectus, required to register as an “investment company” under the Investment Company Act of 1940,
as amended (the “Investment Company Act”).

 

(v)         Insurance.
The Company carries or is entitled to the benefits of insurance, with reputable insurers, in such amounts and covering such risks
which the Company believes are adequate, and all such insurance is in full force and effect. The Company has no reason to believe
that it will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable
coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that
would not result in a Material Adverse Change.

 

(w)          No
Price Stabilization or Manipulation. The Company has not taken, directly or indirectly (without giving any effect to the activities
of the Agent), any action designed to or that might cause or result in stabilization or manipulation of the price of the Common
Stock or of any “reference security” (as defined in Rule 100 of Regulation M under the Exchange Act (“Regulation
M”)) with respect to the Common Stock, whether to facilitate the sale or resale of the Placement Shares or otherwise,
and has taken no action which would directly or indirectly violate Regulation M.

 

(x)          Related
Party Transactions. There are no business relationships or related party transactions involving the Company or any other person
required to be described in the Registration Statement and the Prospectus that have not been described as required pursuant to
the Securities Act.

 

(y)          Exchange
Act Compliance. The documents incorporated or deemed to be incorporated by reference in the Registration Statement, the Prospectus
or any amendment or supplement thereto, at the time they were or hereafter are filed with the Commission under the Exchange Act,
complied and will comply in all material respects with the requirements of the Exchange Act, and, when read together with the other
information in the Prospectus, at each Point of Sale and each Settlement Date, will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

    	 	12	 

     

    

 

(z)          Conformity
of Issuer Free Writing Prospectus. Each Issuer Free Writing Prospectus conformed or will conform in all material respects to
the requirements of the Securities Act on the date of first use, and the Company has complied or will comply with any filing requirements
applicable to such Issuer Free Writing Prospectus pursuant to the Securities Act. Each Issuer Free Writing Prospectus, as of its
issue date and at all subsequent times through the completion of the public offer and sale of the Placement Shares, did not, does
not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration
Statement or the Prospectus, including any document incorporated by reference therein that has not been superseded or modified.
The Company has not made any offer relating to the Placement Shares that would constitute an Issuer Free Writing Prospectus without
the prior written consent of the Sales Agent. The Company has retained in accordance with the Securities Act all Issuer Free Writing
Prospectuses that were not required to be filed pursuant to the Securities Act.

 

(aa)         Compliance
with Environmental Laws. The Company is in compliance with all foreign, federal, state and local rules, laws and regulations
relating to the use, treatment, storage and disposal of hazardous or toxic substances or waste and protection of health and safety
or the environment which are applicable to its business (“Environmental Laws”), except where the failure
to comply would not, singularly or in the aggregate, result in a Material Adverse Change. There has been no storage, generation,
transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of toxic or other wastes or other
hazardous substances by, due to, or caused by the Company (or, to the Company’s knowledge, any other entity for whose acts
or omissions the Company is or may otherwise be liable) upon any of the property now or previously owned or leased by the Company,
or upon any other property, in violation of any law, statute, ordinance, rule, regulation, order, judgment, decree or permit or
which would, under any law, statute, ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit,
give rise to any liability, except for any violation or liability which would not have, singularly or in the aggregate with all
such violations and liabilities, a Material Adverse Change; and there has been no disposal, discharge, emission or other release
of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous
substances with respect to which the Company has knowledge, except for any such disposal, discharge, emission, or other release
of any kind which would not have, singularly or in the aggregate with all such discharges and other releases, a Material Adverse
Change. In the ordinary course of business, the Company conducts periodic reviews of the effect of Environmental Laws on its business
and assets, in the course of which it identifies and evaluates associated costs and liabilities (including, without limitation,
any capital or operating expenditures required for clean-up, closure of properties or compliance with Environmental Laws or governmental
permits issued thereunder, any related constraints on operating activities and any potential liabilities to third parties). On
the basis of such reviews, the Company has reasonably concluded that such associated costs and liabilities would not have, singularly
or in the aggregate, a Material Adverse Change.

 

    	 	13	 

     

    

 

(bb)         Intellectual
Property. The Company owns or possesses or has valid rights to use all patents, patent applications, trademarks, service marks,
trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets and similar rights
(“Intellectual Property Rights”) necessary for the conduct of the business of the Company as currently
carried on and as described in the Registration Statement and the Prospectus. To the knowledge of the Company, no action or use
by the Company necessary for the conduct of its business as currently carried on and as described in the Registration Statement
and the Prospectus will involve or give rise to any infringement of, or license or similar fees for, any Intellectual Property
Rights of others. The Company has not received any notice alleging any such infringement, fee or conflict with asserted Intellectual
Property Rights of others. Except as would not reasonably be expected to result, individually or in the aggregate, in a Material
Adverse Change (A) to the knowledge of the Company, there is no infringement, misappropriation or violation by third parties of
any of the Intellectual Property Rights owned by the Company; (B) there is no pending or, to the knowledge of the Company, threatened
action, suit, proceeding or claim by others challenging the rights of the Company in or to any such Intellectual Property Rights,
and the Company is unaware of any facts which would form a reasonable basis for any such claim, that would, individually or in
the aggregate, together with any other claims in this Section 6(bb), reasonably be expected to result in a Material Adverse
Change; (C) the Intellectual Property Rights owned by the Company and, to the knowledge of the Company, the Intellectual Property
Rights licensed to the Company have not been adjudged by a court of competent jurisdiction invalid or unenforceable, in whole or
in part, and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging
the validity or scope of any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable
basis for any such claim that would, individually or in the aggregate, together with any other claims in this Section 6(bb),
reasonably be expected to result in a Material Adverse Change; (D) there is no pending or, to the Company’s knowledge, threatened
action, suit, proceeding or claim by others that the Company infringes, misappropriates or otherwise violates any Intellectual
Property Rights or other proprietary rights of others, the Company has not received any written notice of such claim and the Company
is unaware of any other facts which would form a reasonable basis for any such claim that would, individually or in the aggregate,
together with any other claims in this Section 6(bb), reasonably be expected to result in a Material Adverse Change; and
(E) to the Company’s knowledge, no employee of the Company is in or has ever been in violation in any material respect of
any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation
agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates
to such employee’s employment with the Company, or actions undertaken by the employee while employed with the Company and
could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change. To the Company’s
knowledge, all material technical information developed by and belonging to the Company which has not been patented has been kept
confidential. The Company is not a party to or bound by any options, licenses or agreements with respect to the Intellectual Property
Rights of any other person or entity that are required to be set forth in the Registration Statement and the Prospectus and are
not described therein. The Registration Statement and the Prospectus contain in all material respects the same description of the
matters set forth in the preceding sentence. None of the technology employed by the Company has been obtained or is being used
by the Company in violation of any contractual obligation binding on the Company or, to the Company’s knowledge, any of its
officers, directors or employees, or otherwise in violation of the rights of any persons.

 

    	 	14	 

     

    

 

(cc)         Brokers.
The Company is not a party to any contract, agreement or understanding with any person (other than as contemplated by this Agreement)
that would give rise to a valid claim against the Company or the Sales Agent for a brokerage commission, finder’s fee or
like payment in connection with the offering and sale of the Placement Shares by the Sales Agent under this Agreement.

 

(dd)         No
Outstanding Loans or Other Indebtedness. There are no outstanding loans, advances (except normal advances for business expenses
in the ordinary course of business) or guarantees or indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company, or any of their respective family members, except as disclosed in the Registration Statement and the
Prospectus.

 

(ee)         No
Reliance. The Company has not relied upon the Sales Agent or legal counsel for the Sales Agent for any legal, tax or accounting
advice in connection with the offering and sale of the Placement Shares.

 

(ff)         Broker-Dealer
Status. Neither the Company nor any of its related entities (i) is required to register as a “broker” or “dealer”
in accordance with the provisions of the Exchange Act or (ii) directly or indirectly through one or more intermediaries, controls
or is a “person associated with a member” or “associated person of a member” (within the meaning of Article
I of the NASD Manual administered by FINRA). To the Company’s knowledge, there are no affiliations or associations between
any member of FINRA and any of the Company’s officers, directors or 5% or greater security holders, except as set forth in
the Registration Statement.

 

(gg)         Public
Float Calculation. As of the close of trading on the Exchange on April 24, 2019, the aggregate market value of the outstanding
voting and non-voting common equity (as defined in Rule 405) of the Company held by persons other than affiliates of the Company
(pursuant to Rule 144 of the Securities Act, those that directly, or indirectly through one or more intermediaries, control,
or are controlled by, or are under common control with, the Company) (the “Non-Affiliate Shares”), was
approximately $26 million (calculated by multiplying (x) the price at which the common equity of the Company was last sold
on the Exchange on March 20, 2019 by (y) the number of Non-Affiliate Shares outstanding on April 24, 2019). The Company is
not a shell company (as defined in Rule 405) and has not been a shell company for at least 12 calendar months previously and
if it has been a shell company at any time previously, has filed current Form 10 information (as defined in Instruction I.B.6.
of Form S-3) with the Commission at least 12 calendar months previously reflecting its status as an entity that is not a shell
company.

 

(hh)         FINRA
Matters. All of the information provided to the Sales Agent or to counsel for the Sales Agent by the Company, its counsel,
its officers and directors and, to the Company’s knowledge, the holders of any securities (debt or equity) or options to
acquire any securities of the Company in connection with the offering of the Placement Shares is true, complete, correct and compliant
with FINRA’s rules in all material respects and any letters, filings or other supplemental information provided to FINRA
pursuant to FINRA Rules or NASD Conduct Rules is true, complete and correct in all material respects. Except as disclosed in the
Registration Statement and the Prospectus, there is no (i) officer or director of the Company, or, to the Company’s knowledge,
(ii) beneficial owner of 5% or more of any class of the Company’s securities or (iii) beneficial owner of the Company’s
unregistered equity securities that were acquired during the 180-day period immediately preceding the date of this Agreement that
is an affiliate or associated person of a FINRA member participating in the offer, issuance and sale of the Placement Shares as
contemplated by this Agreement and the Registration Statement and the Prospectus (as determined in accordance with the rules and
regulations of FINRA).

 

    	 	15	 

     

    

 

(ii)         Compliance
with Laws. The Company: (A) is and at all times has been in compliance in all material respects with all statutes, rules, or
regulations applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing,
labeling, promotion, sale, offer for sale, storage, import, export or disposal of any product manufactured or distributed by the
Company (“Applicable Laws”), except as could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Change; (B) has not received any warning letter, untitled letter or other correspondence
or notice from any governmental authority alleging or asserting noncompliance with any Applicable Laws or any licenses, certificates,
approvals, clearances, authorizations, permits and supplements or amendments thereto required by any such Applicable Laws (“Authorizations”);(C)
possesses all material Authorizations and such Authorizations are valid and in full force and effect and are not in material violation
of any term of any such Authorizations; (D) has not received notice of any claim, action, suit, proceeding, hearing, enforcement,
investigation, arbitration or other action from any governmental authority or third party alleging that any product operation or
activity is in violation of any Applicable Laws or Authorizations and has no knowledge that any such governmental authority or
third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; (E) has not received
notice that any governmental authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations
and has no knowledge that any such governmental authority is considering such action; and (F) has filed, obtained, maintained or
submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments
as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, records,
claims, submissions and supplements or amendments were complete and correct in all material respects on the date filed (or were
corrected or supplemented by a subsequent submission).

 

(jj)         Sarbanes–Oxley
Act. There is and has been no failure on the part of the Company or any of the Company’s directors or officers, in their
capacities as such, to comply in all material respects with any applicable provision of the Sarbanes-Oxley Act of 2002 and the
rules and regulations promulgated in connection therewith (the “Sarbanes-Oxley Act”), including Section 402
related to loans and Sections 302 and 906 related to certifications.

 

    	 	16	 

     

    

 

(kk)         Disclosure
Controls And Procedures. Except as set forth in the Registration Statement and the Prospectus, the Company maintains systems
of “internal control over financial reporting” (as defined under Rules 13a-15 and 15d-15 under the Exchange Act) that
comply with the requirements of the Exchange Act and have been designed by, or under the supervision of, their respective principal
executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP,
including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets
is permitted only in accordance with management’s general or specific authorization; (iv) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences;
and (v) the interactive data in eXtensible Business Reporting Language included or incorporated by references in the Registration
Statement and the Prospectus fairly present the information called for in all material respects and are prepared in accordance
with the Commission’s rules and guidelines applicable thereto. Since the date of the latest audited financial statements
included in the Registration Statement and the Prospectus, there has been no change in the Company’s internal control over
financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control
over financial reporting.

 

(ll)         ERISA.
The Company and any “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974,
as amended, and the regulations and published interpretations thereunder (collectively, “ERISA”)) established
or maintained by the Company or its “ERISA Affiliates” (as defined below) are in compliance in all material respects
with ERISA. “ERISA Affiliate” means, with respect to the Company, any member of any group of organizations
described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the “Code”) of which the Company is a member. No “reportable event”
(as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan”
established or maintained by the Company or any of its ERISA Affiliates. No “employee benefit plan” established or
maintained by the Company or any of its ERISA Affiliates, if such “employee benefit plan” were terminated, would have
any “amount of unfunded benefit liabilities” (as defined under ERISA). Neither the Company nor any of its ERISA Affiliates
has incurred or reasonably expects to incur any material liability under (i) Title IV of ERISA with respect to termination of,
or withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee
benefit plan” established or maintained by the Company or any of its ERISA Affiliates that is intended to be qualified under
Section 401(a) of the Code is so qualified and, to the knowledge of the Company, nothing has occurred, whether by action or failure
to act, which would cause the loss of such qualification.

 

(mm)         Contracts
and Agreements. The agreements and documents described in the Registration Statement and the Prospectus conform in all material
respects to the descriptions thereof contained therein and there are no agreements or other documents required by the Securities
Act to be described in the Registration Statement and the Prospectus or to be filed with the Commission as exhibits to the Registration
Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to
which the Company is a party or by which it is or may be bound or affected and (i) that is referred to in the Registration
Statement and the Prospectus, or (ii) is material to the Company’s business, has been duly authorized and validly executed
by the Company, is in full force and effect in all material respects and is enforceable against the Company and, to the Company’s
knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification
or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. None of such agreements or instruments has been assigned by the
Company, and neither the Company nor, to the Company’s knowledge, any other party is in default thereunder and, to the Company’s
knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder.
To the best of the Company’s knowledge, performance by the Company of the material provisions of such agreements or instruments
will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental
agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses (each, a “Governmental
Entity”), including, without limitation, those relating to environmental laws and regulations.

 

    	 	17	 

     

    

 

(nn)         Title
to Properties. Except as set forth in the Registration Statement and the Prospectus, the Company has good and marketable title
in fee simple to, or has valid rights to lease or otherwise use, all items of real or personal property which are material to the
business of the Company, in each case free and clear of all liens, encumbrances, security interests, claims and defects that do
not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed
to be made of such property by the Company; and all of the leases and subleases material to the business of the Company, and under
which the Company holds properties described in the Registration Statement and the Prospectus, are in full force and effect, and
the Company has not received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights
of the Company under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company to the
continued possession of the leased or subleased premises under any such lease or sublease, which would result in a Material Adverse
Change.

 

(oo)         No
Unlawful Contributions or Other Payments. No payments or inducements have been made or given, directly or indirectly, to any
federal or local official or candidate for, any federal or state office in the United States or foreign offices by the Company
or any of its officers or directors, or, to the knowledge of the Company, by any of its employees or agents or any other person
in connection with any opportunity, contract, permit, certificate, consent, order, approval, waiver or other authorization relating
to the business of the Company, except for such payments or inducements as were lawful under applicable laws, rules and regulations.
Neither the Company, nor, to the knowledge of the Company, any director, officer, agent, employee or other person associated with
or acting on behalf of the Company, (i) has used any corporate funds for any unlawful contribution, gift, entertainment or
other unlawful expense relating to political activity; (ii) made any direct or indirect unlawful payment to any government
official or employee from corporate funds; or (iii) made any bribe, unlawful rebate, payoff, influence payment, kickback or
other unlawful payment in connection with the business of the Company.

 

(pp)         Foreign
Corrupt Practices Act. None of the Company or, to the knowledge of the Company, any director, officer, agent, employee, affiliate
or other person acting on behalf of the Company, is aware of or has taken any action, directly or indirectly, that would result
in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder
(collectively, the “FCPA”), including, without limitation, making use of the mails or any means or instrumentality
of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money,
or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official”
(as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political
office, in contravention of the FCPA. The Company has conducted its business in compliance with the FCPA and has instituted and
maintains policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance
therewith.

 

    	 	18	 

     

    

 

(qq)         Money
Laundering Laws. The operations of the Company are and have been conducted at all times in compliance with applicable financial
recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money
laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”)
and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving
the Company with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

 

(rr)         OFAC.
None of the Company or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or person acting on
behalf of the Company is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”); and the Company will not directly or indirectly use the proceeds of the
offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person
or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.

 

(ss)         Exchange
Listing. The Common Stock is registered pursuant to Section 12(b) of the Exchange Act and is currently listed on the Exchange
under the trading symbol “TTNP”. There is no action pending by the Company or, to the Company’s knowledge and
except as disclosed in the Registration Statement and the Prospectus, the Exchange to delist the Common Stock from the Exchange,
nor has the Company received any notification that the Exchange is contemplating terminating such listing. The Company has no intention
to delist the Common Stock from the Exchange or to deregister the Common Stock under the Exchange Act, in either case, at any time
during the period commencing on the date of this Agreement through and including the 90th calendar day after the termination of
this Agreement. The Placement Shares have been approved for listing on the Exchange. The issuance and sale of the Placement Shares
under this Agreement does not contravene the rules and regulations of the Exchange.

 

(tt)         Margin
Rules. The Company owns no “margin securities” as that term is defined in Regulation U of the Board of Governors
of the Federal Reserve System (the “Federal Reserve Board”), and none of the proceeds from the issuance,
sale and delivery of the Placement Shares as contemplated by this Agreement and as described in the Registration Statement and
the Prospectus will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose
of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the shares of Common Stock to be considered a “purpose credit” within the meanings
of Regulation T, U or X of the Federal Reserve Board.

 

    	 	19	 

     

    

 

(uu)         Underwriter
Agreements. The Company is not a party to any agreement with an agent or underwriter for any other “at-the-market”
or continuous equity transaction.

 

(vv)         Board
of Directors. The qualifications of the persons serving as board members of the Company and the overall composition of the
Company’s Board of Directors comply with the applicable requirements of the Exchange Act and the Sarbanes-Oxley Act and the
listing rules of the Exchange applicable to the Company. At least one member of the Audit Committee of the Board of Directors of
the Company qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the
listing rules of the Exchange. In addition, at least a majority of the persons serving on the Board of Directors of the Company
qualify as “independent,” as defined under the listing rules of the Exchange.

 

(ww)         No
Integration. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would
cause the offer and sale of the Placement Shares hereunder to be integrated with prior offerings by the Company for purposes of
the Securities Act that would require the registration of any such securities under the Securities Act.

 

(xx)        No
Material Defaults. The Company has not defaulted on any installment on indebtedness for borrowed money or on any rental on
one or more long-term leases, which defaults, individually or in the aggregate, could reasonably be expected to result in a Material
Adverse Change. The Company has not filed a report pursuant to Section 13(a) or 15(d) of the Exchange Act since the filing
of its last Annual Report on Form 10-K, indicating that it (i) has failed to pay any dividend or sinking fund installment
on preferred stock or (ii) has defaulted on any installment on indebtedness for borrowed money or on any rental on one or
more long-term leases, which defaults, individually or in the aggregate, could reasonably be expected to result in a Material Adverse
Change.

 

(yy)         Books
and Records. The minute books of the Company have been made available to the Sales Agent and counsel for the Sales Agent, and
such books (i) contain a substantially complete summary of all meetings and material actions of the board of directors (including
each board committee) and stockholders of the Company (or analogous governing bodies and interest holders, as applicable) since
the time of its respective incorporation or organization through the date of the latest meeting and action, and (ii) accurately
in all material respects reflect all transactions referred to in such minutes.

 

(zz)         Continued
Business. No supplier, customer, distributor or sales agent of the Company has notified the Company that it intends to discontinue
or decrease the rate of business done with the Company, except where such discontinuation or decrease has not resulted
in and could not reasonably be expected to result in a Material Adverse Change.

 

(aaa)        Contracts
Affecting Capital. There are no transactions, arrangements or other relationships between and/or among the Company, any of
its affiliates (as such term is defined in Rule 405 under the Securities Act) and any unconsolidated entity, including, but not
limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect
the Company’s liquidity or the availability of or requirements for its capital resources required to be described or incorporated
by reference in the Registration Statement and the Prospectus which have not been described or incorporated by reference as required.

 

    	 	20	 

     

    

 

(bbb)        Regulations.
The disclosures in the Registration Statement and the Prospectus concerning the effects of federal, state, local and all foreign
regulation on the Company’s business as currently contemplated are correct in all material respects and no other such regulations
are required to be disclosed in the Registration Statement and the Prospectus which are not so disclosed.

 

(ccc)        Regulatory
Matters; Compliance. To the Company’s knowledge, the Company and each of its directors, officers, employees and agents,
is and has been in material compliance with applicable health care laws, including, to the extent applicable, without limitation,
the Federal Food, Drug and Cosmetic Act (21 U.S.C. § 301 et seq.), the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)),
the civil False Claims Act (31 U.S.C. § 3729 et seq.), the criminal False Claims Law (42 U.S.C. § 1320a-7b(a)), the Civil
Monetary Penalties Law (42 U.S.C. § 1320a-7a), the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C.
§ 1320d et seq.), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (42 U.S.C.
§ 17921 et seq.), the exclusion laws (42 U.S.C. § 1320a-7), Medicare (Title XVIII of the Social Security Act), Medicaid
(Title XIX of the Social Security Act), and the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care
and Education Affordability Reconciliation Act of 2010, including without limitation the Physician Payments Sunshine Act (42 U.S.C.
§ 1320a-7h), and the regulations promulgated pursuant to such laws, and comparable state laws (collectively, the “Health
Care Laws”).  The Company has not received notice of any ongoing claim, action, suit, proceeding, hearing, enforcement,
investigation, arbitration or other action from any governmental authority or third party alleging that any product operation or
activity is in material violation of any Health Care Laws.  The Company has filed, obtained, maintained or submitted all reports,
documents, forms, notices, applications, records, claims, submissions and supplements or amendments thereto as required by any
Health Care Laws or Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions
and supplements or amendments were complete, correct and not misleading on the date filed (or were corrected or supplemented by
a subsequent submission). To the Company’s knowledge, the manufacturing facilities and operations of its suppliers are in
compliance in all material respects with all applicable statutes, rules, and regulations of the FDA and comparable regulatory agencies
outside of the United States to which the Company or its contractors and supplies are subject. The Company is not distributing
or promoting any product in a way that would violate the advertising and promotional requirements of the FDA or any other federal,
state or foreign regulatory authority, including the FDA’s current regulations and policies related to “off-label”
marketing and promotion of prescription drugs and medical devices, consistent with the current scope of the Company’s marketing
authorization and product labeling.

 

    	 	21	 

     

    

 

(ddd)        Information
Technology. The Company’s information technology assets and equipment, computers, systems, networks, hardware, software,
websites, applications, and databases (collectively, “IT Systems”) are adequate for, and operate and
perform in all material respects as required in connection with the operation of the business of the Company as currently conducted,
and to the knowledge of the Company are free and clear of all material bugs, errors, defects, Trojan horses, time bombs, malware
and other corruptants. The Company has implemented and maintained commercially reasonable controls, policies, procedures, and safeguards
to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security
of all IT Systems and data (including all personal, personally identifiable, sensitive, confidential or regulated data (“Personal
Data”)) used in connection with their businesses, and there have been no breaches, violations, outages or unauthorized
uses of or accesses to same, except for those that have been remedied without material cost or liability or the duty to notify
any other person, nor any incidents under internal review or investigations relating to the same. The Company is presently in material
compliance with all applicable laws or statutes and all judgments, orders, rules and regulations of any court or arbitrator or
governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT
Systems and Personal Data and to the protection of such IT Systems and Personal Data from unauthorized use, access, misappropriation
or modification. The Company has taken all necessary actions to comply with the European Union General Data Protection Regulation
and all other applicable laws and regulations with respect to Personal Data that have been announced as of the date hereof as becoming
effective within 12 months after the date hereof, and for which any non-compliance with same would be reasonably likely to create
a material liability.

 

(eee)        Confidentiality
and Non-Competitions. To the Company’s knowledge, no director, officer, key employee or consultant of the Company is
subject to any confidentiality, non-disclosure, non-competition agreement or non-solicitation agreement with any employer or prior
employer that could reasonably be expected to materially affect his ability to be and act in his respective capacity of the Company
or be expected to result in a Material Adverse Change.

 

Any certificate signed by an officer of
the Company and delivered to the Sales Agent or to counsel for the Sales Agent pursuant to or in connection with this Agreement
shall be deemed to be a representation and warranty by the Company to the Sales Agent as to the matters set forth therein.

 

The Company acknowledges that the Sales
Agent and, for purposes of the opinions to be delivered pursuant to Section 7 hereof, counsel to the Company and counsel
to the Sales Agent, will rely upon the accuracy and truthfulness of the foregoing representations and hereby consents to such reliance.

 

    	 	22	 

     

    

 

7.          Covenants
of the Company. The Company covenants and agrees with the Sales Agent that:

 

(a)          Registration
Statement Amendments. After the date of this Agreement and during any period in which a Prospectus relating to any Placement
Shares is required to be delivered by the Sales Agent under the Securities Act (including in circumstances where such requirement
may be satisfied pursuant to Rule 153 or Rule 172 under the Securities Act), (i) the Company will notify the Sales
Agent promptly of the time when any subsequent amendment to the Registration Statement, other than documents incorporated by reference,
has been filed with the Commission and/or has become effective or any subsequent supplement to the Prospectus has been filed and
of any request by the Commission for any amendment or supplement to the Registration Statement or Prospectus or for additional
information, (ii) the Company will prepare and file with the Commission, promptly upon the Sales Agent’s reasonable
request, any amendments or supplements to the Registration Statement or Prospectus that, in the Sales Agent’s reasonable
opinion, may be necessary or advisable in connection with the distribution of the Placement Shares by the Sales Agent (provided,
however, that the failure of the Sales Agent to make such request shall not relieve the Company of any obligation or liability
hereunder, or affect the Sales Agent’s right to rely on the representations and warranties made by the Company in this Agreement,
and provided, further, that the only remedy the Sales Agent shall have with respect to the failure to make such filing
shall be to cease making sales under this Agreement until such amendment or supplement is filed); (iii) the Company will not
file any amendment or supplement to the Registration Statement or Prospectus, other than documents incorporated by reference, relating
to the Placement Shares or a security convertible into the Placement Shares unless a copy thereof has been submitted to the Sales
Agent within a reasonable period of time before the filing and the Sales Agent has not reasonably objected thereto (provided,
however, that the failure of the Sales Agent to make such objection shall not relieve the Company of any obligation or liability
hereunder, or affect the Sales Agent’s right to rely on the representations and warranties made by the Company in this Agreement,
and provided, further, that the only remedy the Sales Agent shall have with respect to the failure by the Company
to obtain such consent shall be to cease making sales under this Agreement); (iv) the Company will furnish to the Sales Agent
at the time of filing thereof a copy of any document that upon filing is deemed to be incorporated by reference into the Registration
Statement or Prospectus, except for those documents available via EDGAR; and (v) the Company will cause each amendment or
supplement to the Prospectus, other than documents incorporated by reference, to be filed with the Commission as required pursuant
to the applicable paragraph of Rule 424(b) of the Securities Act (without reliance on Rule 424(b)(8) of the Securities
Act) or, in the case of any documents incorporated by reference, to be filed with the Commission as required pursuant to the Exchange
Act, within the time period prescribed.

 

(b)          Notice
of Commission Stop Orders. The Company will advise the Sales Agent, promptly after it receives notice or obtains knowledge
thereof, of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any
notice objecting to, or other order preventing or suspending the use of, the Prospectus, of the suspension of the qualification
of the Placement Shares for offering or sale in any jurisdiction, or of the initiation of any proceeding for any such purpose or
any examination pursuant to Section 8(e) of the Securities Act, or if the Company becomes the subject of a proceeding under
Section 8A of the Securities Act in connection with the offering of the Placement Shares; and it will promptly use its commercially
reasonable efforts to prevent the issuance of any stop order or to obtain its withdrawal if such a stop order should be issued.
Until such time as any stop order is lifted, the Sales Agent shall cease making offers and sales under this Agreement.

 

    	 	23	 

     

    

 

(c)          Delivery
of Prospectus; Subsequent Changes. During any period in which a Prospectus relating to the Placement Shares is required to
be delivered by the Sales Agent under the Securities Act with respect to a pending sale of the Placement Shares (including in circumstances
where such requirement may be satisfied pursuant to Rule 153 or Rule 172 under the Securities Act), the Company will
comply with all requirements imposed upon it by the Securities Act, as from time to time in force, and to file on or before their
respective due dates all reports and any definitive proxy or information statements required to be filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14, 15(d) or any other provision of or under the Exchange Act. If during such
period any event occurs as a result of which the Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then
existing, not misleading, or if during such period it is necessary to amend or supplement the Registration Statement or Prospectus
to comply with the Securities Act, the Company will promptly notify the Sales Agent to suspend the offering of Placement Shares
during such period and the Company will promptly amend or supplement the Registration Statement or Prospectus (at the expense of
the Company) so as to correct such statement or omission or effect such compliance; provided, however, that the Company
may delay any such amendment or supplement if, in the reasonable judgment of the Company, it is in the best interests of the Company
to do so.

 

(d)          Listing
of Placement Shares. During any period in which the Prospectus relating to the Placement Shares is required to be delivered
by the Sales Agent under the Securities Act with respect to a pending sale of the Placement Shares (including in circumstances
where such requirement may be satisfied pursuant to Rule 153 or Rule 172 under the Securities Act), the Company will
use its commercially reasonable efforts to cause the Placement Shares to be listed on the Exchange and to qualify the Placement
Shares for sale under the securities laws of such jurisdictions as the Sales Agent reasonably designates and to continue such qualifications
in effect so long as required for the distribution of the Placement Shares; provided, however, that the Company shall
not be required in connection therewith to qualify as a foreign corporation or dealer in securities or file a general consent to
service of process in any jurisdiction.

 

(e)          Delivery
of Registration Statement and Prospectus. The Company will furnish to the Sales Agent and its counsel (at the expense of the
Company) copies of the Registration Statement, the Prospectus (including all documents incorporated by reference therein) and all
amendments and supplements to the Registration Statement or Prospectus that are filed with the Commission during any period in
which a Prospectus relating to the Placement Shares is required to be delivered under the Securities Act (including all documents
filed with the Commission during such period that are deemed to be incorporated by reference therein), in each case as soon as
reasonably practicable and in such quantities as the Sales Agent may from time to time reasonably request and, at the Sales Agent’s
request, will also furnish copies of the Prospectus to each exchange or market on which sales of the Placement Shares may be made;
provided, however, that the Company shall not be required to furnish any document (other than the Prospectus) to
the Sales Agent to the extent such document is available on EDGAR.

 

(f)          Earnings
Statement. The Company will make generally available to its security holders as soon as practicable, but in any event not later
than 15 months after the end of the Company’s current fiscal quarter, an earnings statement of the Company (which need not
be audited) covering a 12-month period that complies with Section 11(a) and Rule 158 of the Securities Act. The terms
“earnings statement” and “make generally available to its security holders” shall have the meanings set
forth in Rule 158 under the Securities Act.

 

    	 	24	 

     

    

 

(g)          Expenses.
The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated in accordance
with the provisions of Section 11 hereunder, will pay the following expenses all incident to the performance of its
obligations hereunder, including, but not limited to, expenses relating to (i) the preparation, printing and filing of the
Registration Statement and each amendment and supplement thereto, of each Prospectus and of each amendment and supplement thereto,
(ii) the preparation, issuance and delivery of the Placement Shares, including any stock or other transfer taxes and any stamp
or other duties payable upon the sale, issuance or delivery of the Placement Shares to the Sales Agent, (iii) the fees and
disbursements of the counsel, accountants and other advisors to the Company in connection with the transactions contemplated by
this Agreement; (iv) the qualification of the Placement Shares under securities laws in accordance with the provisions of
Section 7(d) of this Agreement, including filing fees (provided, however, that any fees or disbursements
of counsel for the Sales Agent in connection therewith shall be paid by the Sales Agent except as set forth in (ix) below), (v) the
printing and delivery to the Sales Agent of copies of the Prospectus and any amendments or supplements thereto, and of this Agreement,
(vi) the fees and expenses incurred in connection with the listing or qualification of the Placement Shares for trading on
the Exchange, (vii) the fees and expenses of the transfer agent or registrar for the Common Stock; (viii) filing fees
and expenses, if any, of the Commission and the FINRA Corporate Financing Department (provided, however, that any
fees or disbursements of counsel for the Sales Agent in connection therewith shall be paid by the Sales Agent except as set forth
in (ix) below) and (ix) the Company shall reimburse the Sales Agent for the out-of-pocket expenses of the Sales Agent (A)
in an amount not to exceed $45,000 prior to the execution of this Agreement (including but not limited to the reasonable fees and
expenses of counsel to the Sales Agent) and (B) in reasonable amounts to be mutually agreed upon by the Company and the Sales
Agent from time to time after the date of this Agreement for each Representation Date with respect to which the Company is obligated
to deliver a certificate pursuant to Section 7(m) for which no waiver is applicable pursuant to Section 7(m),
provided with respect to this clause (B) (1) the Sales Agent has reasonably incurred such fees and expenses in connection with
any “bring-down” due diligence investigation of the Company in connection with such Representation Date and (2) the
Company’s reimbursement obligation shall not exceed $7,500 per fiscal year.

 

(h)          Use
of Proceeds. The Company will use the Net Proceeds as described in the Prospectus in the section entitled “Use of Proceeds.”

 

(i)          Notice
of Other Sales. The Company (I) shall provide the Sales Agent notice as promptly as reasonably possible before it offers to
sell, contracts to sell, sells, grants any option to sell or otherwise disposes of any shares of Common Stock (other than Placement
Shares offered pursuant to the provisions of this Agreement) or securities convertible into or exchangeable for Common Stock,
or warrants or any rights to purchase or acquire Common Stock, during the period beginning on the fifth (5th) Trading
Day immediately prior to the date on which any Placement Notice is delivered to the Sales Agent hereunder and ending on the fifth
(5th) Trading Day immediately following the final Settlement Date with respect to Placement Shares sold pursuant to
such Placement Notice (or, if the Placement Notice has been terminated or suspended prior to the sale of all Placement Shares
covered by a Placement Notice, the fifth (5th) Trading Day immediately following the date of such suspension or termination),
and (II) will not directly or indirectly in any other “at-the-market” or continuous equity transaction offer to sell,
sell, contract to sell, grant any option to sell or otherwise dispose of any shares of Common Stock (other than the Placement
Shares offered pursuant to this Agreement) or securities convertible into or exchangeable for shares of Common Stock, warrants
or any rights to purchase or acquire, shares of Common Stock prior to the termination of this Agreement; provided, however,
that such notice requirements or restrictions, as the case may be, will not be required in connection with the Company’s
issuance or sale of (i) shares of Common Stock, options to purchase shares of Common Stock, other equity awards or shares
of Common Stock issuable upon the exercise of options or other equity awards, pursuant to any employee or director stock option
or benefits plan, stock ownership plan or dividend reinvestment plan of the Company whether now in effect or hereafter implemented,
(ii) shares of Common Stock issuable upon exchange, conversion or redemption of securities or the exercise of warrants, options
or other rights in effect or outstanding, and disclosed in filings by the Company available on EDGAR or otherwise in writing (including
by email correspondence) to the Sales Agent and (iii) shares of Common Stock or securities convertible into or exchangeable for
shares of Common Stock as consideration for mergers, acquisitions, sale or purchase of assets or other business combinations or
strategic alliances occurring after the date of this Agreement which are not issued for capital raising purposes.

 

    	 	25	 

     

    

 

(j)          Change
of Circumstances. The Company will, at any time during a fiscal quarter in which the Company intends to tender a Placement
Notice or sell Placement Shares, advise the Sales Agent promptly after it shall have received notice or obtained knowledge thereof,
of any information or fact that would alter or affect in any material respect any opinion, certificate, letter or other document
provided to the Sales Agent pursuant to this Agreement.

 

(k)          Due
Diligence Cooperation. The Company will cooperate with any reasonable due diligence review conducted by the Sales Agent or
its agents in connection with the transactions contemplated hereby, including, without limitation, providing information and making
available documents and senior corporate officers, during regular business hours and at the Company’s principal offices,
as the Sales Agent may reasonably request.

 

(l)          Required
Filings Relating to Placement of Placement Shares. The Company shall set forth in each Annual Report on Form 10-K and Quarterly
Report on Form 10-Q filed by the Company with the Commission in respect of any quarter in which sales of Placement Shares were
made by or through the Sales Agent under this Agreement, with regard to the relevant period, the amount of Placement Shares sold
to or through the Sales Agent, the Net Proceeds to the Company and the compensation payable by the Company to the Sales Agent with
respect to such sales of Placement Shares. To the extent that the filing of a prospectus supplement with the Commission with respect
to any sales of Placement Shares becomes required under Rule 424(b) under the Securities Act, the Company agrees that, on
or before such dates as the Securities Act shall require, the Company will (i) file a prospectus supplement with the Commission
under the applicable paragraph of Rule 424(b) under the Securities Act, which prospectus supplement will set forth, with regard
to the relevant period, the amount of Placement Shares sold to or through the Sales Agent, the Net Proceeds to the Company and
the compensation payable by the Company to the Sales Agent with respect to such Placement Shares, and (ii) deliver such number
of copies of each such prospectus supplement to each exchange or market on which such sales were effected as may be required by
the rules or regulations of such exchange or market. The Company shall afford the Sales Agent and its counsel with a reasonable
opportunity to review and comment upon, shall consult with the Sales Agent and its counsel on the form and substance of, and shall
give due consideration to all such comments from the Sales Agent or its counsel on, any such filing prior to the issuance, filing
or public disclosure thereof; provided, however, that the Company shall not be required to submit for review (A) any portion
of any periodic reports filed with the Commission under the Exchange Act other than the specific disclosure relating to any sales
of Placement Shares and (B) any disclosure contained in periodic reports filed with the Commission under the Exchange Act
if it shall have previously provided the same disclosure for review in connection with a previous filing.

 

    	 	26	 

     

    

 

(m)          Representation
Dates; Certificate. On or prior to the date the first Placement Notice is given hereunder and each time the Company (i) files
the Prospectus relating to the Placement Shares or amends or supplements the Registration Statement or the Prospectus relating
to the Placement Shares (other than (A) a prospectus supplement filed in accordance with Section 7(l) of this
Agreement or (B) a supplement or amendment that relates to an offering of securities other than the Placement Shares) by means
of a post-effective amendment, sticker, or supplement but not by means of incorporation of document(s) by reference to the Registration
Statement or the Prospectus relating to the Placement Shares; (ii) files an annual report on Form 10-K under the Exchange
Act (including any Form 10-K/A containing amended financial information or a material amendment to the previously filed Form 10-K);
(iii) files a quarterly report on Form 10-Q under the Exchange Act; or (iv) files a current report on Form 8-K containing
amended financial information (other than an earnings release, to “furnish” information pursuant to Items 2.02 or 7.01
of Form 8-K or to provide disclosure pursuant to Item 8.01 of Form 8-K relating to the reclassification of certain properties as
discontinued operations in accordance with Statement of Financial Accounting Standards No. 144) under the Exchange Act (each date
of filing of one or more of the documents referred to in clauses (i) through (iv) shall be a “Representation Date”),
the Company shall furnish the Sales Agent within three (3) Trading Days after each Representation Date with a certificate, in the
form attached hereto as Exhibit 7(m). The requirement to provide a certificate under this Section 7(m)
shall be waived for any Representation Date occurring at a time at which no Placement Notice is pending, which waiver shall continue
until the earlier to occur of the date the Company delivers a Placement Notice hereunder (which for such calendar quarter shall
be considered a Representation Date) and the next occurring Representation Date; provided, however, that such waiver
shall not apply for any Representation Date on which the Company files its annual report on Form 10-K. Notwithstanding the foregoing,
if the Company subsequently decides to sell Placement Shares following a Representation Date when the Company relied on such waiver
and did not provide the Sales Agent with a certificate under this Section 7(m), then before the Company delivers the
Placement Notice or the Sales Agent sells any Placement Shares, the Company shall provide the Sales Agent with a certificate, in
the form attached hereto as Exhibit 7(m), dated the date of the Placement Notice.

 

    	 	27	 

     

    

 

(n)          Legal
Opinion. On or prior to the date the first Placement Notice is given hereunder, the Company shall cause to be furnished to
the Sales Agent the written opinions and negative assurance of Loeb & Loeb LLP, as counsel to the Company, or other counsel
reasonably satisfactory to the Sales Agent (“Company Counsel”), and the written opinions and negative
assurance of Morrison & Foerster LLP, as intellectual property counsel to the Company, or other counsel reasonably satisfactory
to the Sales Agent (“Company IP Counsel”), in each case substantially in the forms previously agreed
between the Company and the Sales Agent. Thereafter, within three (3) Trading Days after each Representation Date with respect
to which the Company is obligated to deliver a certificate pursuant to Section 7(m) for which no waiver is applicable
pursuant to Section 7(m), and not more than once per calendar quarter, the Company shall cause to be furnished to the
Sales Agent the written opinions and negative assurance of Company Counsel and Company IP Counsel substantially in the forms previously
agreed between the Company and the Sales Agent, modified, as necessary, to relate to the Registration Statement and the Prospectus
as then amended or supplemented; provided, however, that if Company Counsel and Company IP Counsel have previously
furnished to the Sales Agent such written opinions and negative assurance of such counsel, in each case substantially in the forms
previously agreed between the Company and the Sales Agent, then Company Counsel and Company IP Counsel may, in respect of any future
Representation Date, furnish the Sales Agent with a letter signed by such counsel (each, a “Reliance Letter”)
in lieu of such opinions and negative assurance of such counsel to the effect that the Sales Agent may rely on the prior opinions
and negative assurance of such counsel delivered pursuant to this Section 7(n) to the same extent as if it were dated
the date of such Reliance Letter (except that statements in such prior opinion and negative assurance shall be deemed to relate
to the Registration Statement and the Prospectus as amended or supplemented to the date of such Reliance Letter).

 

(o)          Comfort
Letter. On or prior to the date the first Placement Notice is given hereunder and within three (3) Trading Days after each
subsequent Representation Date with respect to which the Company is obligated to deliver a certificate pursuant to Section 7(m) for
which no waiver is applicable pursuant to Section 7(m), other than a Representation Date under Section 7(m)(iii)  or Section 7(m)(iv) unless
with respect to a Representation Date under Section 7(m)(iv) the Sales Agent reasonably requests delivery
thereof, the Company shall cause its independent accountants to furnish the Sales Agent letters (the “Comfort
Letters”), dated the date that the Comfort Letter is delivered, in form and substance satisfactory to the Sales
Agent, (i) confirming that they are an independent registered public accounting firm within the meaning of the Securities
Act, the Exchange Act and the rules and regulations of the PCAOB and are in compliance with the applicable requirements relating
to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of such date,
the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants’
“comfort letters” to the Sales Agent in connection with registered public offerings (the first such letter,
the “Initial Comfort Letter”) and (iii) updating the Initial Comfort Letter with any information
that would have been included in the Initial Comfort Letter had it been given on such date and modified as necessary to relate
to the Registration Statement and the Prospectus, as amended and supplemented to the date of such letter.

 

(p)          Market
Activities. The Company will not, directly or indirectly, (i) take any action designed to cause or result in, or that
constitutes or might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Common Stock or (ii)  sell, bid for, or purchase shares of Common Stock
in violation of Regulation M, or pay anyone any compensation for soliciting purchases of the Placement Shares other than the Sales
Agent.

 

(q)          Insurance.
The Company shall maintain insurance in such amounts and covering such risks as is reasonable and customary for the business in
which it is engaged.

 

    	 	28	 

     

    

 

(r)          Investment
Company Act. The Company will conduct its affairs in such a manner so as to reasonably ensure that it is not and, after giving
effect to the offering and sale of the Placement Shares and the application of proceeds therefrom as described in the Prospectus,
will not be, an “investment company” within the meaning of such term under the Investment Company Act.

 

(s)          Securities
Act and Exchange Act. The Company will use its best efforts to comply with all requirements imposed upon it by the Securities
Act and the Exchange Act as from time to time in force, so far as necessary to permit the continuance of sales of, or dealings
in, the Placement Shares as contemplated by the provisions hereof and the Prospectus.

 

(t)          No
Offer to Sell. Other than the Prospectus and an Issuer Free Writing Prospectus approved in advance by the Company and the Sales
Agent in its capacity as principal or agent hereunder, neither the Sales Agent nor the Company (including its agents and representatives,
other than the Sales Agent in its capacity as such) will make, use, prepare, authorize, approve or refer to any written communication
(as defined in Rule 405 under the Securities Act), required to be filed with the Commission, that constitutes an offer to
sell or solicitation of an offer to buy Placement Shares hereunder.

 

(u)          Sarbanes-Oxley
Act. The Company will use its best efforts to comply with all effective applicable provisions of the Sarbanes-Oxley Act.

 

(v)         Transfer
Agent. The Company shall maintain, at its sole expense, a registrar and transfer agent for the Common Stock.

 

8.          Conditions
to the Sales Agent’s Obligations. The obligations of the Sales Agent hereunder with respect to a Placement will be subject
to the continuing accuracy and completeness of the representations and warranties made by the Company herein, to the due performance
by the Company of its obligations hereunder, to the completion by the Sales Agent of a due diligence review satisfactory to the
Sales Agent in its reasonable judgment, and to the continuing satisfaction (or waiver by the Sales Agent in its sole discretion)
of the following additional conditions:

 

(a)          Registration
Statement Effective. The Registration Statement shall be effective and shall be available for the sale of all Placement Shares
contemplated to be issued by any Placement Notice which have not yet been issued and sold pursuant to such Registration Statement.

 

(b)          Securities
Act Filings Made. The Company shall have filed with the Commission the Prospectus Supplement pursuant to Rule 424(b) under
the Securities Act not later than the Commission’s close of business on the second Business Day following the date of this
Agreement. All other filings with the Commission required by Rule 424(b) or Rule 433 under the Securities Act to have
been filed prior to the issuance of any Placement Notice hereunder shall have been made within the applicable time period prescribed
for such filing by Rule 424(b) (without reliance on Rule 424(b)(8) of the Securities Act) or Rule 433, as applicable.

 

    	 	29	 

     

    

 

(c)          No
Material Notices. None of the following events shall have occurred and be continuing: (i) receipt by the Company of any
request for additional information from the Commission or any other federal or state governmental authority during the period of
effectiveness of the Registration Statement, the response to which would require any post-effective amendments or supplements to
the Registration Statement or the Prospectus; (ii) the issuance by the Commission or any other federal or state governmental
authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for
that purpose; (iii) receipt by the Company of any notification with respect to the suspension of the qualification or exemption
from qualification of any of the Placement Shares for sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose; (iv) the occurrence of any event that makes any material statement made in the Registration Statement or
the Prospectus or any material document incorporated or deemed to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in the Registration Statement, related Prospectus or such documents so that, in the
case of the Registration Statement, it will not contain any materially untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements therein not misleading and, that in the case of
the Prospectus, it will not contain any materially untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made,
not misleading.

 

(d)          No
Misstatement or Material Omission. The Sales Agent shall not have advised the Company that the Registration Statement or Prospectus,
or any amendment or supplement thereto, contains an untrue statement of fact that in the Sales Agent’s reasonable opinion
is material, or omits to state a fact that in the Sales Agent’s reasonable opinion is material and is required to be stated
therein or is necessary to make the statements therein not misleading.

 

(e)          Material
Changes. Except as contemplated in the Prospectus, or disclosed in the Company’s reports filed with the Commission, there
shall not have been any material adverse change in the authorized capital stock of the Company or any Material Adverse Change or
any development that could reasonably be expected to result in a Material Adverse Change, or any downgrading in or withdrawal of
the rating assigned to any of the Company’s securities (other than asset backed securities) by any rating organization or
a public announcement by any rating organization that it has under surveillance or review its rating of any of the Company’s
securities (other than asset backed securities), the effect of which, in the case of any such action by a rating organization described
above, in the reasonable judgment of the Sales Agent (without relieving the Company of any obligation or liability it may otherwise
have), is so material as to make it impracticable or inadvisable to proceed with the offering of the Placement Shares on the terms
and in the manner contemplated by this Agreement and the Prospectus.

 

(f)          Representation
Certificate. The Sales Agent shall have received the certificate required to be delivered pursuant to Section 7(m)
on or before the date on which delivery of such certificate is required pursuant to Section 7(m).

 

(g)          Legal
Opinions. The Sales Agent shall have received the opinions and negative assurances of Company Counsel and Company IP Counsel
required to be delivered pursuant Section 7(n) on or before the date on which such delivery of such opinions and negative
assurances is required pursuant to Section 7(n).

 

    	 	30	 

     

    

 

(h)          Comfort
Letter. The Sales Agent shall have received the Comfort Letter required to be delivered pursuant Section 7(o) on
or before the date on which such delivery of such Comfort Letter is required pursuant to Section 7(o).

 

(i)          Officer’s
Certificate. On or prior to the date the first Placement Notice is given hereunder, the Sales Agent shall have received a certificate,
signed on behalf of the Company by its President and Chief Executive Officer, certifying as to (i) the Certificate of Incorporation
of the Company, (ii) the By-laws of the Company, (iii) the resolutions of the Board of Directors of the Company (or a
committee thereof) authorizing the execution, delivery and performance of this Agreement and the issuance of the Placement Shares
and (iv) the incumbency of the officers duly authorized to execute this Agreement and the other documents contemplated by
this Agreement.

 

(j)          No
Suspension. Trading in the Common Stock shall not have been suspended on the Exchange and the Common Stock shall not have been
delisted from the Exchange.

 

(k)          Other
Materials. On each date on which the Company is required to deliver a certificate pursuant to Section 7(m), the
Company shall have furnished to the Sales Agent such appropriate further opinions, certificates, letters and documents as the Sales
Agent may have reasonably requested. All such opinions, certificates, letters and other documents shall have been in compliance
with the provisions hereof. The Company will furnish the Sales Agent with such conformed copies of such opinions, certificates,
letters and other documents as the Sales Agent shall have reasonably requested.

 

(l)          Approval
for Listing. The Placement Shares shall either have been (i) approved for listing on the Exchange, subject only to notice
of issuance, or (ii) the Company shall have filed an application for listing of the Placement Shares on the Exchange at, or
prior to, the issuance of any Placement Notice.

 

(m)          No
Termination Event. There shall not have occurred any event that would permit the Sales Agent to terminate this Agreement pursuant
to Section 11(a).

 

(n)          FINRA.
The Sales Agent shall have received a letter from the Corporate Financing Department of FINRA confirming that such department has
determined to raise no objection with respect to the fairness or reasonableness of the terms and arrangements related to the sale
of the Placement Shares pursuant to this Agreement.

 

    	 	31	 

     

    

 

9.          Indemnification
and Contribution. (a)          Company Indemnification. The
Company agrees to indemnify and hold harmless the Sales Agent, the directors, officers, members, partners, employees and
agents of the Sales Agent each broker dealer affiliate of the Sales Agent, and each the Sales Agent Affiliate, if any, from
and against any and all losses, claims, liabilities, expenses and damages (including, but not limited to, any and all
reasonable investigative, legal and other expenses incurred in connection with, and any and all amounts paid in settlement
(in accordance with Section 9(c)) of, any action, suit or proceeding between any of the indemnified parties and
any indemnifying parties or between any indemnified party and any third party, or otherwise, or any claim asserted), as and
when incurred, to which the Sales Agent, or any such person, may become subject under the Securities Act, the Exchange Act or
other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, liabilities,
expenses or damages arise out of or are based, directly or indirectly, on (x) any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, the Base Prospectus, the Prospectus Supplement or the
Prospectus or any amendment or supplement thereto or in any Issuer Free Writing Prospectus or in any application or other
document executed by or on behalf of the Company or based on written information furnished by or on behalf of the Company
filed in any jurisdiction in order to qualify the Common Stock under the securities laws thereof or filed with the
Commission, (y) the omission or alleged omission to state in any such document a material fact required to be stated in
it or necessary to make the statements in it not misleading or (z) any breach by any of the indemnifying parties of
any of their respective representations, warranties and agreements contained in this Agreement; provided, however,
that this indemnity agreement shall not apply to the extent that such loss, claim, liability, expense or damage arises from
the sale of the Placement Shares pursuant to this Agreement and is caused directly by an untrue statement or omission made in
reliance upon and in strict conformity with written information relating to the Sales Agent and furnished to the Company by
the Sales Agent expressly for inclusion in any document as described in clause (x) of this Section 9(a).
This indemnity agreement will be in addition to any liability that the Company might otherwise have.

 

(b)          The
Sales Agent Indemnification. The Sales Agent agrees to indemnify and hold harmless the Company and its directors and each officer
of the Company that signed the Registration Statement, and each person, if any, who (i) controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act or (ii) is controlled by or is under common
control with the Company (each, a “Company Affiliate”) from and against any and all losses, claims, liabilities,
expenses and damages (including, but not limited to, any and all reasonable investigative, legal and other expenses incurred in
connection with, and any and all amounts paid in settlement (in accordance with Section 9(c)) of, any action, suit
or proceeding between any of the indemnified parties and any indemnifying parties or between any indemnified party and any third
party, or otherwise, or any claim asserted), as and when incurred, to which any such Company Affiliate, may become subject under
the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar
as such losses, claims, liabilities, expenses or damages arise out of or are based, directly or indirectly, on (x) any untrue
statement or alleged untrue statement of a material fact contained in the Registration Statement, the Base Prospectus, the Prospectus
Supplement or the Prospectus or any amendment or supplement thereto, or (y) the omission or alleged omission to state in any
such document a material fact required to be stated in it or necessary to make the statements in it not misleading; provided,
however, that this indemnity agreement shall apply only to the extent that such loss, claim, liability, expense or damage
is caused directly by an untrue statement or omission made in reliance upon and in strict conformity with written information relating
to the Sales Agent and furnished to the Company by the Sales Agent expressly for inclusion in any document as described in clause (x)
of this Section 9(b).

 

    	 	32	 

     

    

 

(c)          Procedure.
Any party that proposes to assert the right to be indemnified under this Section 9 will, promptly after receipt of
notice of commencement of any action against such party in respect of which a claim is to be made against an indemnifying party
or parties under this Section 9, notify each such indemnifying party of the commencement of such action, enclosing
a copy of all papers served, but the omission so to notify such indemnifying party will not relieve the indemnifying party from
(i) any liability that it might have to any indemnified party otherwise than under this Section 9 and (ii) any
liability that it may have to any indemnified party under the foregoing provision of this Section 9 unless, and only
to the extent that, such omission results in the forfeiture of substantive rights or defenses by the indemnifying party. If any
such action is brought against any indemnified party and it notifies the indemnifying party of its commencement, the indemnifying
party will be entitled to participate in and, to the extent that it elects by delivering written notice to the indemnified party
promptly after receiving notice of the commencement of the action from the indemnified party, jointly with any other indemnifying
party similarly notified, to assume the defense of the action, with counsel reasonably satisfactory to the indemnified party, and
after notice from the indemnifying party to the indemnified party of its election to assume the defense, the indemnifying party
will not be liable to the indemnified party for any legal or other expenses except as provided below and except for the reasonable
costs of investigation subsequently incurred by the indemnified party in connection with the defense. The indemnified party will
have the right to employ its own counsel in any such action, but the fees, expenses and other charges of such counsel will be at
the expense of such indemnified party unless (1) the employment of counsel by the indemnified party has been authorized in writing
by the indemnifying party, (2) the indemnified party has reasonably concluded (based on advice of counsel) that there may be legal
defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying
party, (3) a conflict or potential conflict exists (based on advice of counsel to the indemnified party) between the indemnified
party and the indemnifying party (in which case the indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (4) the indemnifying party has not in fact employed counsel to assume the defense of such
action within a reasonable time after receiving notice of the commencement of the action, in each of which cases the reasonable
fees, disbursements and other charges of counsel will be at the expense of the indemnifying party or parties. It is understood
that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees, disbursements and other charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such indemnified party or parties. All such fees, disbursements and other charges will be
reimbursed by the indemnifying party promptly as they are incurred. An indemnifying party will not, in any event, be liable for
any settlement of any action or claim effected without its written consent. No indemnifying party shall, without the prior written
consent of each indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim,
action or proceeding relating to the matters contemplated by this Section 9 (whether or not any indemnified party is
a party thereto), unless such settlement, compromise or consent includes an unconditional release of each indemnified party from
all liability arising or that may arise out of such claim, action or proceeding.

 

    	 	33	 

     

    

 

(d)          Contribution.
In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 9 is applicable in accordance with its terms but for any reason is held to be unavailable
from the Company or the Sales Agent, the Company and the Sales Agent will contribute to the total losses, claims, liabilities,
expenses and damages (including any investigative, legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim asserted, but after deducting any contribution received by the
Company from persons other than the Sales Agent, such as persons who control the Company within the meaning of the Securities Act,
officers of the Company who signed the Registration Statement and directors of the Company, who also may be liable for contribution)
to which the Company and the Sales Agent may be subject in such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Sales Agent on the other. The relative benefits received by the Company on the
one hand and the Sales Agent on the other hand shall be deemed to be in the same proportion as the total Net Proceeds from the
sale of the Placement Shares (before deducting expenses) received by the Company bear to the total compensation received by the
Sales Agent from the sale of Placement Shares on behalf of the Company. If, but only if, the allocation provided by the foregoing
sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate
to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault of the Company, on
the one hand, and the Sales Agent, on the other, with respect to the statements or omission that resulted in such loss, claim,
liability, expense or damage, or action in respect thereof, as well as any other relevant equitable considerations with respect
to such offering. Such relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company
or the Sales Agent, the intent of the parties and their relative knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Sales Agent agree that it would not be just and equitable if contributions
pursuant to this Section 9(d) were to be determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party
as a result of the loss, claim, liability, expense, or damage, or action in respect thereof, referred to above in this Section 9(d)
shall be deemed to include, for the purpose of this Section 9(d), any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such action or claim to the extent consistent with Section 9(c)
hereof. Notwithstanding the foregoing provisions of this Section 9(d), the Sales Agent shall not be required to contribute
any amount in excess of the commissions received by it under this Agreement and no person found guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section 9(d), any person who controls a party to this Agreement
within the meaning of the Securities Act will have the same rights to contribution as that party (and any officers, directors,
members, partners, employees or agents of the Sales Agent and each broker dealer affiliate of the Sales Agent will have the same
rights to contribution as the Sales Agent), and each officer of the Company who signed the Registration Statement and each director
of the Company will have the same rights to contribution as the Company, subject in each case to the provisions hereof. Any party
entitled to contribution, promptly after receipt of notice of commencement of any action against such party in respect of which
a claim for contribution may be made under this Section 9(d), will notify any such party or parties from whom contribution
may be sought, but the omission to so notify will not relieve that party or parties from whom contribution may be sought from any
other obligation it or they may have under this Section 9(d) except to the extent that the failure to so notify such
other party materially prejudiced the substantive rights or defenses of the party from whom contribution is sought. Except for
a settlement entered into pursuant to the last sentence of Section 9(c) hereof, no party will be liable for contribution
with respect to any action or claim settled without its written consent if such consent is required pursuant to Section 9(c)
hereof.

 

    	 	34	 

     

    

 

10.         Representations
and Agreements to Survive Delivery. The indemnity and contribution agreements contained in Section 9 of this Agreement
and all representations and warranties of the Company herein or in certificates delivered pursuant hereto shall survive, as of
their respective dates, regardless of (i) any investigation made by or on behalf of the Sales Agent, any controlling person
of the Sales Agent, or the Company (or any of their respective officers, directors, members or controlling persons), (ii) delivery
and acceptance of the Placement Shares and payment therefor or (iii) any termination of this Agreement.

 

11.         Termination.
(a)          The Sales Agent shall have the right by giving notice as
hereinafter specified at any time to terminate this Agreement if (i) any Material Adverse Change, or any development
that could reasonably be expected to result in a Material Adverse Change has occurred that, in the reasonable judgment of the
Sales Agent, may materially impair the ability of the Sales Agent to sell the Placement Shares hereunder, (ii) the
Company shall have failed, refused or been unable to perform any agreement on its part to be performed hereunder; provided, however,
in the case of any failure of the Company to deliver (or cause another person to deliver) any certification, opinion, or
letter required under Sections 7(m), 7(n), 7(o) or 7(p), the Sales Agent’s right to
terminate shall not arise unless such failure to deliver (or cause to be delivered) continues for more than thirty (30) days
from the date such delivery was required, (iii) any other condition of the Sales Agent’s obligations hereunder is
not fulfilled, or (iv) any suspension or limitation of trading in the Placement Shares or in securities generally on the
Exchange shall have occurred (including automatic halt in trading pursuant to market-decline triggers, other than those in
which solely program trading is temporarily halted), or a major disruption of securities settlements or clearing services
in the United States shall have occurred, or minimum prices for trading have been fixed on the Exchange. Any such termination
shall be without liability of any party to any other party except that the provisions of Section 7(g) (Expenses), Section 9 (Indemnification
and Contribution), Section 10 (Representations and Agreements to Survive Delivery), Section 11(f), Section 16
(Applicable Law; Consent to Jurisdiction) and Section 17 (Waiver of Jury Trial) hereof shall remain in full force
and effect notwithstanding such termination. If the Sales Agent elects to terminate this Agreement as provided in this Section 11(a),
the Sales Agent shall provide the required notice as specified in Section 12 (Notices).

 

(b)          The
Company shall have the right, by giving ten (10) days’ notice as hereinafter specified in Section 12, to terminate
this Agreement in its sole discretion at any time after the date of this Agreement. Any such termination shall be without liability
of any party to any other party except that the provisions of Section 7(g), Section 9, Section 10,
Section 11(f), Section 16 and Section 17 hereof shall remain in full force and effect notwithstanding
such termination.

 

    	 	35	 

     

    

 

(c)          The
Sales Agent shall have the right, by giving ten (10) days’ notice as hereinafter specified in Section 12, to
terminate this Agreement in its sole discretion at any time after the date of this Agreement. Any such termination shall be without
liability of any party to any other party except that the provisions of Section 7(g), Section 9, Section 10,
Section 11(f), Section 16 and Section 17 hereof shall remain in full force and effect notwithstanding
such termination.

 

(d)          Unless
earlier terminated pursuant to this Section 11, this Agreement shall automatically terminate upon the earlier to occur
of (i) issuance and sale of all of the Placement Shares to or through the Sales Agent on the terms and subject to the conditions
set forth herein and (ii) the expiration of the Registration Statement on the third (3rd) anniversary of the initial
effective date of the Registration Statement pursuant to Rule 415(a)(5) under the Securities Act; provided that the provisions
of Section 7(g), Section 9, Section 10, Section 11(f), Section 16 and
Section 17 hereof shall remain in full force and effect notwithstanding such termination.

 

(e)          This
Agreement shall remain in full force and effect unless terminated pursuant to Sections 11(a), (b), (c)
or (d) above or otherwise by mutual agreement of the parties; provided, however, that any such termination
by mutual agreement shall in all cases be deemed to provide that Section 7(g), Section 9, Section 10,
Section 11(f), Section 16 and Section 17 shall remain in full force and effect.

 

(f)          Any
termination of this Agreement shall be effective on the date specified in such notice of termination; provided, however,
that such termination shall not be effective until the close of business on the date of receipt of such notice by the Sales Agent
or the Company, as the case may be. If such termination shall occur prior to the Settlement Date for any sale of Placement Shares,
such termination shall not become effective until the close of business on such Settlement Date and such Placement Shares shall
settle in accordance with the provisions of this Agreement.

 

12.         Notices.
All notices or other communications required or permitted to be given by any party to any other party pursuant to the terms
of this Agreement shall be in writing, unless otherwise specified, and if sent to the Sales Agent, shall be delivered to:

 

A.G.P./Alliance Global Partners

590 Madison Avenue

New York, NY 10022

Attention: Tom Higgins

Email: atm@allianceg.com

 

with a copy (which shall not constitute
notice) to:

 

Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

666 Third Avenue

New York, New York 10017

Attention: Anthony J. Marsico, Esq.

Facsimile: (212) 983-3115

 

    	 	36	 

     

    

 

and if to the Company, shall be delivered
to:

 

Titan Pharmaceuticals,
Inc.

400 Oyster Point Blvd., Suite 505

South San Francisco, CA 94080

Attention: Chief Executive Officer

Facsimile: (650) 244-4990

 

with a copy (which shall not constitute
notice) to:

 

Loeb & Loeb

345 Park Avenue

New York, New York 10154

Attention: Fran Stoller, Esq.

Facsimile: (212) 214-0706

 

Each party may change
such address for notices by sending to the other party to this Agreement written notice of a new address for such purpose. Each
such notice or other communication shall be deemed given (i) when delivered personally or by verifiable facsimile transmission
(with an original to follow) on or before 4:30 p.m., New York City time, on a Business Day or, if such day is not a Business Day,
on the next succeeding Business Day, (ii) on the next Business Day after timely delivery to a nationally-recognized overnight
courier and (iii) on the Business Day actually received if deposited in the U.S. mail (certified or registered mail, return
receipt requested, postage prepaid). For purposes of this Agreement, “Business Day” shall mean any day
on which the Exchange and commercial banks in the City of New York are open for business.

 

An electronic communication
(“Electronic Notice”) shall be deemed written notice for purposes of this Section 12 if sent
to the electronic mail address specified by the receiving party under separate cover. Electronic Notice shall be deemed received
at the time the party sending Electronic Notice receives confirmation of receipt by the receiving party (other than pursuant to
auto-reply). Any party receiving Electronic Notice may request and shall be entitled to receive the notice on paper, in a nonelectronic
form (“Nonelectronic Notice”) which shall be sent to the requesting party within ten (10) days of receipt
of the written request for Nonelectronic Notice.

 

13.         Successors
and Assigns. This Agreement shall inure to the benefit of and be binding upon the Company and the Sales Agent and their respective
successors and permitted assigns and, as to Sections 5(b) and 9, the other indemnified parties specified therein.
References to any of the parties contained in this Agreement shall be deemed to include the successors and permitted assigns of
such party. Nothing in this Agreement, express or implied, is intended to confer upon any other person any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. Neither party may assign its
rights or obligations under this Agreement without the prior written consent of the other party; provided, however,
that the Sales Agent may assign its rights and obligations hereunder to an affiliate of the Sales Agent without obtaining the Company’s
consent.

 

    	 	37	 

     

    

 

14.         Adjustments
for Share Splits. The parties acknowledge and agree that all share-related numbers contained in this Agreement shall be adjusted
to take into account any share split, share dividend or similar event effected with respect to the Common Stock.

 

15.         Entire
Agreement; Amendment; Severability. This Agreement (including all schedules and exhibits attached hereto and Placement Notices
issued pursuant hereto) and any other writing entered into by the parties relating to this Agreement constitutes the entire agreement
and supersedes all other prior and contemporaneous agreements and undertakings, both written and oral, among the parties hereto
with regard to the subject matter hereof. Neither this Agreement nor any term hereof may be amended except pursuant to a written
instrument executed by the Company and the Sales Agent. In the event that any one or more of the provisions contained herein, or
the application thereof in any circumstance, is held invalid, illegal or unenforceable as written by a court of competent jurisdiction,
then such provision shall be given full force and effect to the fullest possible extent that it is valid, legal and enforceable,
and the remainder of the terms and provisions herein shall be construed as if such invalid, illegal or unenforceable term or provision
was not contained herein, but only to the extent that giving effect to such provision and the remainder of the terms and provisions
hereof shall be in accordance with the intent of the parties as reflected in this Agreement.

 

16.         Applicable
Law; Consent to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the internal laws of the
State of New York, without regard to the principles of conflicts of laws. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in the City of New York, Borough of Manhattan, for the adjudication of any
dispute hereunder or in connection with any transaction contemplated hereby, and hereby irrevocably waives, and agrees not to assert
in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such
suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.
Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof (certified or registered mail, return receipt requested) to such party at the address in
effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted
by law.

 

17.         Waiver
of Jury Trial. The Company and the Sales Agent each hereby irrevocably waives any right it may have to a trial by jury in respect
of any claim based upon or arising out of this Agreement or any transaction contemplated hereby.

 

    	 	38	 

     

    

 

18.         Absence
of Fiduciary Relationship. The Company acknowledges and agrees that:

 

(a)          the
Sales Agent is acting solely as agent in connection with the sale of the Placement Shares contemplated by this Agreement and the
process leading to such transactions, and no fiduciary or advisory relationship between the Company or any of its respective affiliates,
stockholders (or other equity holders), creditors or employees or any other party, on the one hand, and the Sales Agent, on the
other hand, has been or will be created in respect of any of the transactions contemplated by this Agreement, irrespective of whether
the Sales Agent has advised or is advising the Company on other matters, and the Sales Agent has no obligation to the Company with
respect to the transactions contemplated by this Agreement, except the obligations expressly set forth in this Agreement;

 

(b)          the
Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions
contemplated by this Agreement;

 

(c)          the
Sales Agent has not provided any legal, accounting, regulatory or tax advice with respect to the transactions contemplated by this
Agreement, and the Company has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate;

 

(d)          the
Company has been advised and is aware that the Sales Agent and its affiliates are engaged in a broad range of transactions which
may involve interests that differ from those of the Company and that the Sales Agent has no obligation to disclose such interests
and transactions to the Company by virtue of any fiduciary, advisory or agency relationship; and

 

(e)          the
Company waives, to the fullest extent permitted by law, any claims it may have against the Sales Agent, for breach of fiduciary
duty or alleged breach of fiduciary duty and agrees that the Sales Agent shall have no liability (whether direct or indirect, in
contract, tort or otherwise) to the Company in respect of such a fiduciary claim or to any person asserting a fiduciary duty claim
on behalf of or in right of the Company, including stockholders, partners, employees or creditors of the Company.

 

19.         Use
of Information. The Sales Agent may not provide any information gained in connection with this Agreement and the transactions
contemplated by this Agreement, including due diligence, to any third party other than its legal counsel advising it on this Agreement
unless expressly approved by the Company in writing.

 

20.         Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument. Delivery of an executed Agreement by one party to the other may be made by facsimile
transmission.

 

    	 	39	 

     

    

 

21.         Effect
of Headings; Knowledge of the Company. The section and Exhibit headings herein are for convenience only and shall not affect
the construction hereof. All references in this Agreement to the “knowledge of the Company” or the “Company’s
knowledge” or similar qualifiers shall mean the actual knowledge of the directors and officers of the Company, after due
inquiry.

 

22.         Definitions.
As used in this Agreement, the following term has the meaning set forth below:

 

(a)          “Applicable
Time” means the date of this Agreement, each Representation Date, each date on which a Placement Notice is given, each
Point of Sale, and each Settlement Date.

 

[Remainder of Page Intentionally Blank]

 

    	 	40	 

     

    

 

If the foregoing correctly
sets forth the understanding between the Company and the Sales Agent, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company and the Sales Agent.

 

	 	Very truly yours,
	 	 
	 	TITAN PHARMACEUTICALS, INC.
	 	 
	 	By:	/s/ Sunil Bhonsle
	 	 	Name: Sunil Bhonsle
	 	 	Title: Chief Executive Officer

 

	 	ACCEPTED as of the date first-above written:
	 	 
	 	A.G.P./ALLIANCE GLOBAL PARTNERS
	 	 
	 	By:	/s/ Tom Higgins
	 	 	Name:  Tom Higgins
	 	 	Title:     Managing Director

 

    	 		 

     

    

 

SCHEDULE 1

 

 

 

Form of Placement Notice

 

 

 

	From:	Titan Pharmaceuticals, Inc.
	 	 
	To:	A.G.P./Alliance Global Partners
	 	Attention: [•]
	 	 
	Subject:	Placement Notice
	 	 
	Date:	[•], 201[•]

 

Ladies and Gentlemen:

 

Pursuant to the terms
and subject to the conditions contained in the Sales Agreement (the “Sales Agreement”) between Titan
Pharmaceuticals, Inc., a Delaware corporation (the “Company”), and A.G.P./Alliance Global Partners (the
“Sales Agent”), dated [April 25], 2019, the Company hereby requests that the Sales Agent sell up to [•]
shares of the Company’s common stock, par value $0.001 per share (the “Placement Shares”), at a
minimum market price of $[•] per share, during the time period beginning [month, day, time] and ending [month, day, time]
[and with no more than [•] Placement Shares sold in any one Trading Day].

 

[The Company may include
such other sale parameters as it deems appropriate.]

 

Capitalized terms used
and not defined herein shall have the respective meanings assigned to them in the Sales Agreement.

 

     

     

    

 

SCHEDULE 2

Notice Parties

 

Titan Pharmaceuticals, Inc.

 

Sunil Bhonsle (sbhonsle@titanpharm.com)

 

With copies to:

 

Brian Crowley (bcrowley@titanpharm.com)

 

The Sales Agent

 

Tom Higgins (thiggins@allianceg.com)

 

With copies to:

 

atm@allianceg.com

 

 

     

     

    

 

SCHEDULE 3

Compensation

 

The Company shall pay to the Sales Agent
in cash, upon each sale of Placement Shares through the Sales Agent pursuant to this Agreement, an amount equal to 3.00% of the
aggregate gross proceeds from each sale of Placement Shares.*

 

 

 

*       The
foregoing rate of compensation shall not apply when the Sales Agent purchases Placement Shares on a principal basis, in which case
the Company may sell the Placement Shares to the Sales Agent as principal at a price to be mutually agreed upon by the Company
and the Sales Agent at the relevant Point of Sale pursuant to the applicable Placement Notice (it being hereby acknowledged and
agreed that the Sales Agent shall be under no obligation to purchase Placement Shares on a principal basis pursuant to the Sales
Agreement, except as otherwise agreed by the Sales Agent and the Company in writing and expressly set forth in a Placement Notice).

 

     

     

    

 

Exhibit 7(m)

 

OFFICER CERTIFICATE

 

The undersigned,
the duly qualified and appointed _____________________ of Titan Pharmaceuticals, Inc., a Delaware corporation (the “Company”),
does hereby certify in such capacity and on behalf of the Company, pursuant to Section 7(m) of the Sales Agreement,
dated [25], 2019 (the “Sales Agreement”), between the Company and A.G.P./Alliance Global Partners, that:

 

		(i)	the representations and warranties of the Company in
Section 6 of the Sales Agreement (A) to the extent such representations and warranties are subject to qualifications
and exceptions contained therein relating to materiality or Material Adverse Change, are true and correct on and as of the date
hereof with the same force and effect as if expressly made on and as of the date hereof, except for those representations and
warranties that speak solely as of a specific date and which were true and correct as of such date, and (B) to the extent
such representations and warranties are not subject to any qualifications or exceptions, are true and correct in all material
respects as of the date hereof as if made on and as of the date hereof with the same force and effect as if expressly made on
and as of the date hereof except for those representations and warranties that speak solely as of a specific date and which were
true and correct as of such date; and;

 

		(ii)	the Company has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied pursuant to the Sales Agreement at or prior to the date hereof;

 

		(iii)	as of the date hereof, (i) the Registration Statement
does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading, (ii) the Prospectus does not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (iii) no event has occurred as a result of which it is
necessary to amend or supplement the Registration Statement or the Prospectus in order to make the statements therein not untrue
or misleading for clauses (i) and (ii) above, respectively, to be true and correct;

 

		(iv)	there has been no Material Adverse Change since the date
as of which information is given in the Prospectus, as amended or supplemented;

 

		(v)	the Company does not possess any material non-public
information; and

 

		(vi)	the aggregate offering price of the Placement Shares
that may be issued and sold pursuant to the Sales Agreement and the maximum number or amount of Placement Shares that may be sold
pursuant to the Sales Agreement have been duly authorized by the Company’s board of directors or a duly authorized committee
thereof.

 

     

     

    

 

Terms used herein and not defined herein
have the meanings ascribed to them in the Sales Agreement.

 

	Dated:	 	 	By:	 
	 	 	 
	 	 	Name:
	 	 	 
	 	 	Title:Exhibit 10.1

 

 

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

 

	
UNITED STATES OF AMERICA

	
)

	 	
)

	 	
Plaintiff,

	
)

	
v.

	
)

	
CAUSE NO. 1:19-cr-0141

	 	
)

	
CELADON GROUP, INC.,

	
)

	 	
)

	 	
Defendant.

	
)

 

DEFERRED PROSECUTION AGREEMENT

Defendant Celadon Group, Inc. (the “Company”), pursuant to authority granted by the Company’s Board of Directors reflected in Attachment B, and the United States Department of Justice, Criminal Division, Fraud Section (the “Fraud Section”) and the United States Attorney’s Office for the Southern District of Indiana (the “Office”) enter into this deferred prosecution agreement (the “Agreement”).

Criminal Information and Acceptance of Responsibility

1.         The Company acknowledges and agrees that the Fraud Section and the Office will file the attached one-count criminal Information in the United States District Court for the Southern District of Indiana charging the Company with one count of conspiracy to commit certain offenses against the United States, in violation of Title 18, United States Code, Section 371, that is: (a) to commit securities fraud, in violation of Title 18, United States Code, Section 1348; and (b) to knowingly and willfully falsify the books, records, and accounts of the Company, a U.S. issuer, in violation of Title 15, United States Code, Sections 78m(b)(2)(A), (b)(5) and 78ff(a).  In so doing, the Company: (a) knowingly waives its right to indictment on 

1

this charge, as well as all rights to a speedy trial pursuant to the Sixth Amendment to the United States Constitution, Title 18, United States Code, Section 3161, and Federal Rule of Criminal Procedure 48(b); and (b) knowingly waives any objection with respect to venue to any charges by the United States arising out of the conduct described in the Statement of Facts attached hereto as Attachment A and consents to the filing of the Information, as provided under the terms of this Agreement, in the United States District Court for the Southern District of Indiana.  The Fraud Section and the Office agree to defer prosecution of the Company pursuant to the terms and conditions described below.

2.          The Company admits, accepts, and acknowledges that it is responsible under United States law for the acts of its former officers, directors, employees, and agents as charged in the Information, and as set forth in the attached Statement of Facts, and that the allegations described in the Information and the facts described in the attached Statement of Facts are true and accurate.  Should the Fraud Section or the Office pursue the prosecution that is deferred by this Agreement, the Company stipulates to the admissibility of the attached Statement of Facts in any proceeding, including any trial, guilty plea, or sentencing proceeding, and will not contradict anything in the attached Statement of Facts at any such proceeding.

Term of the Agreement

3.      This Agreement is effective for a period beginning on the date on which the Information is filed and ending on June 30, 2024 (the “Term”).  The Company agrees, however, that, in the event the Fraud Section or the Office determine, in their sole discretion, that the Company has knowingly violated any provision of this Agreement or has failed to completely perform or fulfill each of the Company’s obligations under this Agreement, an extension or 

2

extensions of the Term may be imposed by the Fraud Section or the Office, in their sole discretion, for up to a total additional time period of one year, without prejudice to the Fraud Section’s or the Office’s right to proceed as provided in Paragraphs 14-18 below.  Any extension of the Agreement extends all terms of this Agreement, including the terms of the reporting requirement in Attachment D, for an equivalent period.  Conversely, in the event the Fraud Section or the Office find, in their sole discretion, that there exists a change in circumstances sufficient to eliminate the need for the reporting requirement in Attachment D, and that the other provisions of this Agreement have been satisfied, the Agreement may be terminated early.  If the Court rejects the Agreement, all the provisions of the Agreement shall be deemed null and void, and the Term shall be deemed to have not begun.

Relevant Considerations

4.          The Fraud Section and the Office enter into this Agreement based on the individual facts and circumstances presented by this case and the Company, including:

a.          the Company did not receive voluntary disclosure credit because it did not voluntarily and timely disclose to the Fraud Section or the Office the conduct described in the Statement of Facts attached hereto as Attachment A (“Statement of Facts”).  However, after learning of the allegations of misconduct by Company officials, the Company retained an external law firm to conduct an independent investigation, and ultimately notified the Fraud Section and the Office of its investigation and intent to fully cooperate;

b.           the Company received full credit for its cooperation with the Fraud Section’s and the Office’s investigation, including conducting a thorough internal investigation, 

3

making factual presentations to the Fraud Section and the Office, and collecting, analyzing, and organizing voluminous evidence and information for the Fraud Section and the Office;

c.          the Company provided to the Fraud Section and the Office all relevant facts known to it, including information about the individuals involved in the conduct described in the attached Statement of Facts and conduct disclosed to the Fraud Section and the Office prior to the Agreement;

d.          the Company engaged in significant remedial measures, including that: (i) the Company no longer employs or is affiliated with any of the individuals known to the Company to be implicated in the conduct at issue in the case as of the date of this Agreement; (ii) the Company created the new position of Chief Accounting Officer reporting directly to the Chief Financial Officer; (iii) the Company hired an experienced Internal Audit staff member reporting directly to the Company’s Internal Audit Manager; and (iv) the Company enhanced its compliance program, including updating the Company’s code of conduct, whistleblower, ethics policies, and has adopted, and is in the process of adopting, enhanced controls over financial reporting;

e.          the Company has enhanced and has committed to continuing to enhance its compliance program and internal controls, including ensuring that its compliance program satisfies the minimum elements set forth in Attachment C to this Agreement (Corporate Compliance Program);

f.          based on the Company’s remediation and the state of its compliance program, and the Company’s agreement to report to the Fraud Section as set forth in Attachment 

4

D to this Agreement (Corporate Compliance Reporting), the Fraud Section determined that an independent compliance monitor was unnecessary.

g.          the nature and seriousness of the offense conduct, including the knowing and willful falsification of the books and records of a publicly-traded company by former high-level executives of the Company;

h.          the Company has no prior criminal history; and

j.          the Company has agreed to continue to cooperate with the Fraud Section and the Office in any ongoing investigation of the conduct of the Company, its subsidiaries and affiliates, or any of its present or former officers, directors, employees, agents, business partners, distributors, and consultants relating to violation of federal criminal laws.

Future Cooperation and Disclosure Requirements

5.    The Company shall cooperate fully with the Fraud Section and the Office in any and all matters relating to the conduct described in this Agreement and the attached Statement of Facts and other conduct under investigation by the Fraud Section or the Office until the later of the date upon which all investigations and prosecutions arising out of such conduct are concluded, or the end of the term specified in Paragraph 3.  At the request of the Fraud Section or the Office, the Company shall also cooperate fully with other domestic or foreign law enforcement and regulatory authorities and agencies in any investigation of the Company, its subsidiaries or its affiliates, or any of its present or former officers, directors, employees, agents, business partners, distributors, consultants, or any other party, in any and all matters relating to the conduct described in this Agreement and the attached Statement of Facts and other conduct under investigation by the Fraud Section or the Office.  The Company’s cooperation pursuant to 

5

this Paragraph is subject to applicable law and regulations, as well as valid claims of attorney-client privilege or attorney work product doctrine; however, the Company must provide to the Fraud Section and the Office a log of any information or cooperation that is not provided based on an assertion of law, regulation, or privilege, and the Company bears the burden of establishing the validity of any such an assertion.  The Company agrees that its cooperation pursuant to this paragraph shall include, but not be limited to, the following:

a.          The Company shall truthfully disclose all factual information with respect to its activities, those of its subsidiaries and affiliates, and those of its present and former directors, officers, employees, agents, and consultants, including any evidence or allegations and internal or external investigations, about which the Company has any knowledge or about which the Fraud Section or the Office may inquire.  This obligation of truthful disclosure includes, but is not limited to, the obligation of the Company to provide to the Fraud Section and the Office, upon request, any document, record or other tangible evidence about which the Fraud Section or the Office may inquire of the Company.

b.          Upon request of the Fraud Section or the Office, the Company shall designate knowledgeable employees, agents or attorneys to provide to the Fraud Section and the Office the information and materials described in Paragraph 5(a) above on behalf of the Company.  It is further understood that the Company must at all times provide complete, truthful, and accurate information.

c.          The Company shall use its best efforts to make available for interviews or testimony, as requested by the Fraud Section or the Office, present or former officers, directors, employees, agents and consultants of the Company.  This obligation includes, but is not limited 

6

to, sworn testimony before a federal grand jury or in federal trials, as well as interviews with domestic or foreign law enforcement and regulatory authorities.  Cooperation under this Paragraph shall include identification of witnesses who, to the knowledge of the Company, may have material information regarding the matters under investigation.

d.          With respect to any information, testimony, documents, records or other tangible evidence provided to the Fraud Section or the Office pursuant to this Agreement, the Company consents to any and all disclosures to other governmental authorities, including United States authorities and those of a foreign government of such materials as the Fraud Section or the Office, in their sole discretion, shall deem appropriate.

6.          In addition to the obligations in Paragraph 5, during the Term, should the Company learn of any evidence or allegation of a violation of anti-fraud, reporting, or books and records provisions of the federal securities laws, the Company shall promptly report such evidence or allegation to the Fraud Section and the Office.

Payment of Monetary Penalty

7.          The Fraud Section, the Office, and the Company agree that application of the United States Sentencing Guidelines (“USSG” or “Sentencing Guidelines”) to determine the applicable fine range yields the following analysis:

	
a.

	
The 2018 USSG are applicable to this matter.

	 
	 	 	 
	
b.

	
Offense Level.  Based upon USSG § 2B1.1, the total offense level is 36, calculated as follows:

	 
	 	 	 
	 	
(a)(2)          Base Offense Level

	
6

	 	 	 
	 	
(b)(1)(L)          Loss more than $25,000,000

	
+22

	 	 	 
	 	
(b)(2)(A)(1)     10 or more victims

	+2

 

7

	 	
(b)(10)(C)           Offense involved sophisticated means

	
+2

	 	 
	 	
(b)(20)(A)(i) Involved officer of publicly traded company

	
+4

	 	 
	 	TOTAL	
36

	 	 
	
c.

	
Base Fine.  Based upon USSG § 8C2.4(a)(1), the base fine is $80,000,000 (the fine indicated in the Offense Level Fine Table)

	 
	 	 
	
d.

	
Culpability Score.  Based upon USSG § 8C2.5, the culpability score is 8, calculated as follows:

	 
	 	 
	 	
(a)          Base Culpability Score

	
5

	 	 
	 	
(b)(1)     the organization had 5,000 or more employees and an individual within high-level personnel of the 

organization participated in, condoned, or was willfully ignorant of the offense

	
+5

	 	 
	 	
(g)(1)     The organization fully cooperated in the investigation and clearly demonstrated recognition and affirmative acceptance of responsibility for its criminal conduct

	
-2

	 	 
	 	
8

	 	 

	 	
Calculation of Fine Range:

	 
	 	 	 
	 	
Base Fine

	
$80,000,000

	 	 	 
	 	
Multipliers

	
1.6 (min) / 3.2 (max)

	 	 	 
	 	
Fine Range

	
$128,000,000 / $256,000,000

 

The Company agrees, pursuant to Title 18, United States Code, Section 3663A, to pay restitution to victims of the offense in the amount of $42,245,302 (the “Restitution Amount”).  The Company agrees to bear the cost of the administration of all restitution claims by a third party claims administrator (“Claim Administrator”) who will report directly to the Fraud Section

8

and the Office.  The Company may select the claim administrator subject to the approval of the Fraud Section and the Office, and the Company must submit its selection no later than forty-five days after the signing of this Agreement.  The Company further agrees to provide the Claim Administrator with full access to the books and records of the Company and all subsidiaries and affiliates as necessary in order for the Claim Administrator to pay restitution to victims.  Subject to confirmation by the Fraud Section and the Office that any such payments occurred, the Company may offset the Restitution Amount otherwise required by this agreement based on payments made directly to shareholders in connection with the settlement of the shareholder class action captioned In re Celadon Group, Inc. Securities Litigation, No. 17-cv-02828-JFK (S.D.N.Y.) (the “Securities Class Action Settlement”).  The Restitution Amount is payable as follows by the Company:

	
·

	
$5,000,000 is payable to the claim administrator no later than ninety days after the signing of this Agreement;

	
·

	
Beginning with the Company’s fiscal year 2020 (which concludes on June 30, 2020) and continuing to the Company’s fiscal year 2023 (which concludes on June 30, 2023), the company shall, no later than 120 days after the completion of each fiscal year, after first making all required payments to the Company’s term loan and revolving lenders (“Lenders”) required under the Company’s then effective term loan and revolving credit agreements (as amended, replaced or extended from time to time, the “Credit Agreements”), pay to the Claim Administrator 50 percent of any Excess Cash Flow (as defined in the Credit Agreements, “ECF”) remaining after the payment of the Lenders' required ECF percentage for the applicable fiscal year.  To the extent

 

9

	
 

	
that the Company fails to generate ECF for any fiscal year occurring during the Term of this Agreement, or the annual ECF payment would create or continue any default under the Credit Agreements, the Company shall not be required to pay to the claim administrator any annual payment for such fiscal year, and the non-occurrence of such payment shall not constitute a breach of this Agreement.  Except as may otherwise be agreed to by the parties, the Company agrees that at no time will it enter into any Credit Agreements that impose an ECF sweep above 75 percent, or impose conditions on the payment of ECF to the Claim Administrator that are more restrictive in any material respect than the conditions on the payment of ECF to the Lenders; and

	
·

	
If the Restitution Amount has not been paid in full to the Claim Administrator prior to the conclusion of the Term, the remainder is payable to the Claim Administrator at the conclusion of the Term.  Subject to compliance with all applicable laws and regulations, the Company is not prohibited from issuing equity or debt in order to fund the payment.

	
·

	
If the Company does not pay the remainder of the restitution by the conclusion of the Term, the Fraud Section and the Office may deem it a breach of this Agreement pursuant to Paragraphs 14-18 of this Agreement.

The Fraud Section and the Office are not requiring the Company to pay a criminal fine under this Agreement, which is conditioned on the Company paying the Restitution Amount by the conclusion of the Term.  The Fraud Section and the Office agree that this disposition is appropriate given the facts and circumstances of this case, including the relevant considerations

10

outlined above, and given the Company’s inability to pay a fine in addition to the Restitution Amount.  Nothing in this Agreement, however, shall be deemed an agreement by the Fraud Section and the Office that $42,245,302 in restitution is the maximum penalty that may be imposed in any future prosecution, and the Fraud Section and the Office are not precluded from arguing in any future prosecution that the Court should impose any type of monetary penalty, including a fine or forfeiture, and the amount of such fine or forfeiture.  The Company acknowledges that no tax deduction may be sought in connection with the payment of restitution in connection with this Agreement.  With respect to restitution payments not yet made, the Company shall not seek or accept directly or indirectly reimbursement or indemnification from any source with regard to the restitution that the Company pays pursuant to this Agreement or any other agreement entered into with an enforcement authority or regulator concerning the facts set forth in the attached Statement of Facts.

11

Conditional Release from Liability

8.     Subject to Paragraphs 14-18, the Fraud Section and the Office agree, except as provided in this Agreement, that they will not bring any criminal or civil case against the Company relating to any of the conduct described in the attached Statement of Facts or the criminal Information filed pursuant to this Agreement.  The Fraud Section and the Office, however, may use any information related to the conduct described in the attached Statement of Facts against the Company:  (a) in a prosecution for perjury or obstruction of justice; (b) in a prosecution for making a false statement; (c) in a prosecution or other proceeding relating to any crime of violence; or (d) in a prosecution or other proceeding relating to a violation of any provision of Title 26 of the United States Code.

a.         This Agreement does not provide any protection against prosecution for any future conduct by the Company.

b.         In addition, this Agreement does not provide any protection against prosecution of any individuals, regardless of their affiliation with the Company.

Corporate Compliance Program

9.          The Company represents that it has implemented and will continue to implement a compliance and ethics program designed to prevent and detect violations of anti-fraud, reporting, or books and records provisions of federal securities laws throughout its operations, including those of its subsidiaries, affiliates, employees, agents, and joint ventures, including, but not limited to, the minimum elements set forth in Attachment C.

10.     In order to address any deficiencies in its internal accounting controls, policies, and procedures, the Company represents that it has undertaken, and will continue to undertake in 

12

the future, in a manner consistent with all of its obligations under this Agreement, a review of its existing internal accounting controls, policies, and procedures regarding compliance with anti-fraud, reporting, or books and records provisions of the federal securities laws.  Where necessary and appropriate, the Company agrees to adopt a new compliance program, or to modify its existing one, including internal controls, compliance policies, and procedures in order to ensure that it maintains: (a) an effective system of internal accounting controls designed to ensure the making and keeping of fair and accurate books, records, and accounts; and (b) a rigorous compliance program that is designed to effectively detect and deter violations of anti-fraud, reporting, or books and records provisions of the federal securities laws throughout its operations.  The compliance program, including the internal accounting controls system will include, but not be limited to, the minimum elements set forth in Attachment C.

Corporate Compliance Reporting

11.    The Company agrees that it will report to the Fraud Section and the Office annually during the Term regarding remediation and implementation of the compliance measures described in Attachment C.  These reports will be prepared in accordance with Attachment D.

Deferred Prosecution

12.          In consideration of the undertakings agreed to by the Company herein, the Fraud Section and the Office agree that any prosecution of the Company for the conduct set forth in the attached Statement of Facts be and hereby is deferred for the Term.  To the extent there is conduct disclosed by the Company that is not set forth in the attached Statement of Facts, such 

13

conduct will not be exempt from further prosecution and is not within the scope of or relevant to this Agreement.

13.     The Fraud Section and the Office further agree that if the Company fully complies with all of its obligations under this Agreement, the Fraud Section and the Office will not continue the criminal prosecution against the Company described in Paragraph 1 and, at the conclusion of the Term, this Agreement shall expire.  Within six months after the Agreement’s expiration, the Fraud Section and the Office shall seek dismissal with prejudice of the criminal Information filed against the Company described in Paragraph 1, and agrees not to file charges in the future against the Company based on the conduct described in this Agreement and the attached Statement of Facts.

Breach of the Agreement

14.     If, during the Term, the Company: (a) commits any felony under U.S. federal law; (b) provides in connection with this Agreement deliberately false, incomplete, or misleading information, including in connection with its disclosure of information about individual culpability; (c) fails to cooperate as set forth in Paragraphs 5 and 6 of this Agreement; (d) fails to implement a compliance program as set forth in Paragraphs 9 and 10 of this Agreement and Attachment C; or (e) otherwise fails to completely perform or fulfill each of the Company’s obligations under the Agreement, regardless of whether the Fraud Section or the Office become aware of such a breach after the Term is complete, the Company shall thereafter be subject to prosecution for any federal criminal violation of which the Fraud Section or the Office have knowledge, including, but not limited to, the charges in the Information described in Paragraph 1, which may be pursued by the Fraud Section or the Office in the U.S. District Court for the

14

Southern District of Indiana or any other appropriate venue.  Determination of whether the Company has breached the Agreement and whether to pursue prosecution of the Company shall be in the Fraud Section’s and the Office’s sole discretion.  Any such prosecution may be premised on information provided by the Company or its personnel.  Any such prosecution relating to the conduct described in the attached Statement of Facts or relating to conduct known to the Fraud Section or the Office prior to the date on which this Agreement was signed that is not time-barred by the applicable statute of limitations on the date of the signing of this Agreement may be commenced against the Company, notwithstanding the expiration of the statute of limitations, between the signing of this Agreement and the expiration of the Term plus one year.  Thus, by signing this Agreement, the Company agrees that the statute of limitations with respect to any such prosecution that is not time-barred on the date of the signing of this Agreement shall be tolled for the Term plus one year.  In addition, the Company agrees that the statute of limitations as to any violation of federal law that occurs during the Term will be tolled from the date upon which the violation occurs until the earlier of the date upon which the Fraud Section or the Office is made aware of the violation or the duration of the Term plus five years, and that this period shall be excluded from any calculation of time for purposes of the application of the statute of limitations.

15.          In the event the Fraud Section or the Office determines that the Company has breached this Agreement, the Fraud Section and the Office agree to provide the Company with written notice of such breach prior to instituting any prosecution resulting from such breach.  Within thirty days of receipt of such notice, the Company shall have the opportunity to respond to the Fraud Section and the Office in writing to explain the nature and circumstances of such 

15

breach, as well as the actions the Company has taken to address and remediate the situation, which explanation the Fraud Section and the Office shall consider in determining whether to pursue prosecution of the Company.

16.          In the event that the Fraud Section or the Office determines that the Company has breached this Agreement:  (a) all statements made by or on behalf of the Company to the Fraud Section, the Office, or to the Court, including the attached Statement of Facts, and any testimony given by the Company before a grand jury, a court, or any tribunal, or at any legislative hearings, whether prior or subsequent to this Agreement, and any leads derived from such statements or testimony, shall be admissible in evidence in any and all criminal proceedings brought by the Fraud Section against the Company; and (b) the Company shall not assert any claim under the United States Constitution, Rule 11(f) of the Federal Rules of Criminal Procedure, Rule 410 of the Federal Rules of Evidence, or any other federal rule that any such statements or testimony made by or on behalf of the Company prior or subsequent to this Agreement, or any leads derived therefrom, should be suppressed or are otherwise inadmissible.  The decision whether conduct or statements of any current director, officer or employee, or any person acting on behalf of, or at the direction of, the Company, will be imputed to the Company for the purpose of determining whether the Company has violated any provision of this Agreement shall be in the sole discretion of the Fraud Section and the Office.

17.          The Company acknowledges that the Fraud Section and the Office have made no representations, assurances, or promises concerning what sentence may be imposed by the Court if the Company breaches this Agreement and this matter proceeds to judgment.  The Company 

16

further acknowledges that any such sentence is solely within the discretion of the Court and that nothing in this Agreement binds or restricts the Court in the exercise of such discretion.

18.          On the date that the period of deferred prosecution specified in this Agreement expires, the Company, by the Chief Executive Officer of the Company and the Chief Financial Officer of the Company, will certify to the Fraud Section and the Office that the Company has met its disclosure obligations pursuant to Paragraph 6 of this Agreement.  Each certification will be deemed a material statement and representation by the Company to the executive branch of the United States for purposes of 18 U.S.C. §§ 1001 and 1519, and it will be deemed to have been made in the judicial district in which this Agreement is filed.

Sale, Merger, or Other Change in Corporate Form of Company

19.          Except as may otherwise be agreed by the parties in connection with a particular transaction, the Company agrees that in the event that, during the Term, it undertakes any change in corporate form, including if it sells, merges, or transfers business operations that are material to the Company’s consolidated operations, or to the operations of any subsidiaries or affiliates involved in the conduct described in the attached Statement of Facts, as they exist as of the date of this Agreement, whether such sale is structured as a sale, asset sale, merger, transfer, or other change in corporate form, it shall include in any contract for sale, merger, transfer, or other change in corporate form a provision binding the purchaser, or any successor in interest thereto, to the obligations described in this Agreement.  The purchaser or successor in interest must also agree in writing that the Fraud Section’s and the Office’s ability to breach under this Agreement is applicable in full force to that entity.  The Company agrees that the failure to include these provisions in the transaction will make any such transaction null and void.  The Company shall 

17

provide notice to the Fraud Section and the Office at least thirty (30) days prior to undertaking any such sale, merger, transfer, or other change in corporate form.  The Fraud Section and the Office shall notify the Company prior to such transaction (or series of transactions) if they determine that the transaction(s) will have the effect of circumventing or frustrating the enforcement purposes of this Agreement.  If, at any time during the Term, the Company engages in a transaction that has the effect of circumventing or frustrating the enforcement purposes of this Agreement, the Fraud Section and the Office may deem it a breach of this Agreement pursuant to Paragraphs 14-18 of this Agreement.  Nothing herein shall restrict the Company from indemnifying (or otherwise holding harmless) the purchaser or successor in interest for penalties or other costs arising from any conduct that may have occurred prior to the date of the transaction, so long as such indemnification does not have the effect of circumventing or frustrating the enforcement purposes of this Agreement, as determined by the Fraud Section and the Office.

Public Statements by Company

20.          The Company expressly agrees that it shall not, through present or future attorneys, officers, directors, employees, agents or any other person authorized to speak for the Company make any public statement, in litigation or otherwise, contradicting the acceptance of responsibility by the Company set forth above or the facts described in the attached Statement of Facts.  Any such contradictory statement shall, subject to cure rights of the Company described below, constitute a breach of this Agreement, and the Company thereafter shall be subject to prosecution as set forth in Paragraphs 14-18 of this Agreement.  The decision whether any public statement by any such person contradicting a fact contained in the attached Statement of Facts 

18

will be imputed to the Company for the purpose of determining whether it has breached this Agreement shall be at the sole discretion of the Fraud Section and the Office.  If the Fraud Section or the Office determines that a public statement by any such person contradicts in whole or in part a statement contained in the attached Statement of Facts, the Fraud Section and the Office shall so notify the Company, and the Company may avoid a breach of this Agreement by publicly repudiating such statement(s) within five business days after notification.  The Company shall be permitted to raise defenses and to assert affirmative claims in other proceedings relating to the matters set forth in the attached Statement of Facts provided that such defenses and claims do not contradict, in whole or in part, a statement contained in the attached Statement of Facts.  This Paragraph does not apply to any statement made by any present or former officer, director, employee, or agent of the Company in the course of any criminal, regulatory, or civil case initiated against such individual, unless such individual is speaking on behalf of the Company.

21.          The Company agrees that if it or any of its direct or indirect subsidiaries or affiliates issues a press release or holds any press conference in connection with this Agreement, the Company shall first consult with the Fraud Section and the Office to determine: (a) whether the text of the release or proposed statements at the press conference are true and accurate with respect to matters between the Fraud Section, the Office, and the Company; and (b) whether the Fraud Section or the Office have any objection to the release.

22.          The Fraud Section and the Office agree, if requested to do so, to bring to the attention of law enforcement and regulatory authorities the facts and circumstances relating to the nature of the conduct underlying this Agreement, including the nature and quality of the 

19

Company’s cooperation and remediation.  By agreeing to provide this information to such authorities, the Fraud Section and the Office are not agreeing to advocate on behalf of the Company, but rather are agreeing to provide facts to be evaluated independently by such authorities.

Limitations on Binding Effect of Agreement

23.          This Agreement is binding on the Company, the Fraud Section, and the Office, but specifically does not bind any other component of the Department of Justice, other federal agencies, or any state, local or foreign law enforcement or regulatory agencies, or any other authorities, although the Fraud Section and the Office will bring the cooperation of the Company and its compliance with its other obligations under this Agreement to the attention of such agencies and authorities if requested to do so by the Company.

Notice

24.        Any notice to the Fraud Section or the Office under this Agreement shall be given by personal delivery, overnight delivery by a recognized delivery service, or registered or certified mail, addressed to: Chief of the Securities and Financial Fraud Unit, Fraud Section, Criminal Division, U.S. Department of Justice, 1400 New York Avenue, N.W., Washington, DC, 20005.  Any notice to the Company under this Agreement shall be given by personal delivery, overnight delivery by a recognized delivery service, or registered or certified mail, addressed to Paul Svindland, Chief Executive Officer, Celadon Group Inc., 9503 E. 33rd Street, Indianapolis, IN 46235.  Notice shall be effective upon actual receipt by the Fraud Section and the Office or the Company.

20

Complete Agreement

25.      This Agreement, including its attachments, sets forth all the terms of the agreement between the Company and the Fraud Section and the Office.  No amendments, modifications or additions to this Agreement shall be valid unless they are in writing and signed by the Fraud Section, the Office, the attorneys for the Company, and a duly authorized representative of the Company.

 

	
AGREED:

	 
	 	 
	
FOR CELADON GROUP, INC.:

	 
	 	 
	
Date:

	4/24/19	 	
By:

	/s/ Paul C. Svindland
	 	 	
Paul Svindland

	 	 	
Chief Executive Officer

	 	 	
Celadon Group, Inc.

	 	 	 
	 	 	 
	 	 	 
	
Date:

	4/24/19	 	
By:

	/s/ Derek A. Cohen
	 	 	
Derek A. Cohen, Esq.

	 	 	
Lloyd Winawer, Esq.

	 	 	
Goodwin Procter LLP

	 	 	
Counsel for Celadon Group, Inc.

 

21

	
FOR THE DEPARTMENT OF JUSTICE:

	 	 
	 	 	 
	 	 	
ROBERT A. ZINK

	 	 	
Acting, Chief, Fraud Section

	 	 	
Criminal Division

	 	 	
United Stated Department of Justice

	 	 	 
	 	 	 
	
Date:

	4/25/19	 	
By:

	/s/ Kyle Maurer
	 	 	
Kyle W. Maurer

	 	 	
L. Rush Atkinson

	 	 	
Trial Attorneys

	 	 	 
	 	 	 
	 	 	
JOSH J. MINKLER

	 	 	
United States Attorney

	 	 	
Southern District of Indiana

	 	 	 
	 	 	 
	
Date:

	4/25/19	 	
By:

	/s/ Steven DeBrota
	 	 	
Steven D. DeBrota

	 	 	
Deputy Chief, General Crimes Unit

	 	 	
Nicholas J. Linder

	 	 	
Assistant United States Attorney

 

 

22

COMPANY OFFICER’S CERTIFICATE

I have read this Agreement and carefully reviewed every part of it with outside counsel for Celadon Group, Inc. (the “Company”).  I understand the terms of this Agreement and voluntarily agree, on behalf of the Company, to each of its terms.  Before signing this Agreement, I consulted outside counsel for the Company.  Counsel fully advised me of the rights of the Company, of possible defenses, of the Sentencing Guidelines’ provisions, and of the consequences of entering into this Agreement.

I have carefully reviewed the terms of this Agreement with the Board of Directors of the Company.  I have advised and caused outside counsel for the Company to advise the Board of Directors fully of the rights of the Company, of possible defenses, of the Sentencing Guidelines’ provisions, and of the consequences of entering into the Agreement.

No promises or inducements have been made other than those contained in this Agreement.  Furthermore, no one has threatened or forced me, or to my knowledge any person authorizing this Agreement on behalf of the Company, in any way to enter into this Agreement.  I am also satisfied with outside counsel’s representation in this matter.  I certify that I am the Chief Executive Officer for the Company and that I have been duly authorized by the Company to execute this Agreement on behalf of the Company.

 

	
Date:

	4/24/19 	 	 
	 	Celadon Group, Inc.
	 	 
	 	
By:

	/s/ Paul C. Svindland
	 	 	
Paul Svindland

	 	 	
Chief Executive Officer

 

 

CERTIFICATE OF COUNSEL

I am counsel for Celadon Group, Inc. (the “Company”) in the matter covered by this Agreement.  In connection with such representation, I have examined relevant Company documents and have discussed the terms of this Agreement with the Company Board of Directors.  Based on our review of the foregoing materials and discussions, I am of the opinion that the representative of the Company has been duly authorized to enter into this Agreement on behalf of the Company and that this Agreement has been duly and validly authorized, executed, and delivered on behalf of the Company and is a valid and binding obligation of the Company.  Further, I have carefully reviewed the terms of this Agreement with the Board of Directors and the Chief Executive Officer of the Company.  I have fully advised them of the rights of the Company, of possible defenses, of the Sentencing Guidelines’ provisions and of the consequences of entering into this Agreement.  To my knowledge, the decision of the Company to enter into this Agreement, based on the authorization of the Board of Directors, is an informed and voluntary one.

 

	
Date:

	4/24/19	 	 
	 	
 

	 	 
	 	 
	 	
By:

	/s/ Derek A. Cohen
	 	 	
Derek A. Cohen, Esq.

	 	 	
Lloyd Winawer, Esq.

	 	 	Goodwin Procter LLP
	 	 	
Counsel for Celadon Group, Inc.

 

 

ATTACHMENT A

STATEMENT OF FACTS

1.          The following Statement of Facts is incorporated by reference as part of the Deferred Prosecution Agreement (the “Agreement”) between the United States Department of Justice, Criminal Division, Fraud Section (the “Fraud Section”), the United States Attorney’s Office for the Southern District of Indiana (the “Office”), and Celadon Group, Inc. (“Celadon”).  Celadon hereby agrees and stipulates that the following information is true and accurate.  Celadon admits, accepts, and acknowledges that it is responsible for the acts of its officers, directors, employees, and agents as set forth below.  Should the Fraud Section and the Office pursue the prosecution that is deferred by this Agreement, Celadon agrees that it will neither contest the admissibility of, nor contradict, this Statement of Facts in any such proceeding.  The following facts establish beyond a reasonable doubt the charges set forth in the criminal Information attached to this Agreement.

Relevant Individuals and Entities

2.          Celadon was a corporation based in Indianapolis, Indiana that was one of North America’s largest truckload freight transportation providers.  Celadon provided, among other services, point-to-point shipping for major customers in the United States, Mexico, and Canada.  Celadon’s shares were traded publicly on the New York Stock Exchange, a national securities exchange, and its stock was registered with the United States Securities and Exchange Commission (“SEC”) pursuant to Section 12(b) of the Securities Exchange Act of 1934.

3.          Quality Companies, LLC (“Quality”) was a wholly owned subsidiary of Celadon, and was based in Indianapolis, Indiana.  Among other things, Quality leased tractors and trailers to owner-operator truck drivers who contracted with Celadon or with other trucking companies.

1

4.          Individual A was Celadon’s former Chairman and Chief Executive Officer (“CEO”).

5.          Individual B was Celadon’s former President and Chief Operating Officer (“COO”).

6.          Individual C was Celadon’s former Chief Financial Officer (“CFO”).

7.          Individual D was Quality’s former President.

8.         Truck Dealer 1 was an Iowa-based closely held corporation that operated a series of dealerships across the midwestern United States specializing in buying and selling new and used commercial trucks.  Truck Dealer 1 operated a location in Indianapolis, Indiana that did business with Celadon and Quality.   

9.         Public Accounting Firm 1 was a national certified public accounting and advisory firm that served as Celadon’s auditor.

The Federal Securities Laws and SEC Rules and Regulations

10.      The SEC was an independent agency of the United States government that was charged by law with preserving honest and efficient securities markets. The federal securities laws, regulations, and rules were designed to ensure that the financial information of publicly traded companies was accurately recorded and disclosed to the investing public. As a publicly traded company, Celadon and its directors, officers, and employees were required to comply with the federal securities laws, regulations, and rules. Under the federal securities laws and regulations, Celadon was required, among other things, to file with the SEC annual reports (known as SEC Forms 10-K), quarterly reports (known as SEC Forms 10-Q), and other periodic reports that included accurate and reliable financial statements.

2

11.     The Public Company Accounting Oversight Board (“PCAOB”) was a nonprofit corporation established by Congress, pursuant to the Sarbanes-Oxley Act of 2002, to oversee the audits of public companies in order to protect investors and the public interest by promoting informative, accurate, and independent audit reports.

Overview of the Scheme

12.          Between approximately June 2013 and June 2016, Quality grew significantly as a company.  For example, in or around June 2013, Quality owned and managed approximately 750 tractors/trucks, but by June 2016, Quality owned and managed more than 11,000 tractors/trucks.

13.          Initially, Quality’s primary business model was to lease these trucks to individual truck drivers, who operated the trucks for various trucking companies across the country as independent truck drivers.  Most of these drivers leased trucks from Quality because they did not have a high enough credit rating to purchase their own trucks via traditional methods.

14.          Quality’s financial performance began to struggle in 2016 for a number of reasons, including a declining demand for freight services and a downturn in the used truck market, which caused the value of used trucks in Quality’s fleet to decrease.  In addition, Quality owned a significant quantity of a specific model of truck that was known in the industry to have major mechanical issues, which many drivers did not want to lease.  Given these issues, Quality struggled to lease all of the trucks it had in its fleet.

15.           By 2016, the vast majority of the idle and unleased trucks in Quality’s portfolio were overvalued on Quality’s accounting records (or books), as the actual fair market value of these trucks was significantly lower than what Quality was carrying them for on its books.  These idle trucks were overvalued on Quality’s books by tens of millions of dollars.

3

16.          In June 2016, Individual D (Quality’s President) sent an email to Individual B (Celadon’s President and COO) noting that Quality had over $70 million worth of trucks that it was not able to lease and that Quality wasn’t “in the money on hardly any of the $70M.”

17.          Multiple members of Celadon’s former senior management team recognized that disposing of these idle trucks at market value would require Quality to report a significant loss on the sale of the trucks on Celadon’s financial statements because the vast majority of them were carried on Quality’s books at values well in excess of what Quality could actually sell them for.

18.          Instead of continuing Quality’s attempts to lease the idle trucks to independent drivers or to sell the idle trucks on the open market at a loss and reporting such a loss to investors, members of Celadon’s senior management team, all acting within the scope of their employment at Celadon and Quality, participated in a scheme that resulted in Celadon falsely reporting inflated profits and inflated assets to the SEC and the investing public through Celadon’s financial statements.

19.         The scheme involved trading the vast majority of Quality’s overvalued idle trucks at inflated prices to Truck Dealer 1 in exchange for newer used trucks that Quality hoped it could lease to independent truck drivers.

The Trade Deals

20.          Specifically, Quality engaged in a series of transactions with Truck Dealer 1 to make it appear, on paper, that Quality and Truck Dealer 1 engaged in ten separate transactions – at fair market value – between approximately June 2016 and October 2016, including approximately five transactions involving the sale of trucks from Quality to Truck Dealer 1 and five transactions involving the sale of trucks from Truck Dealer 1 to Quality.  In order to make it 

4

appear that each of these ten purported transactions were separate, independent, and not linked to each another, Quality and Truck Dealer 1 generated separate invoices for each of the purported transactions.

21.          The invoices appear to show the following sales from Quality to Truck Dealer 1:

	
Approx. Date

	
Approx. Number of Trucks

	
Approx. Total Sale Amount

	
June 15, 2016

	
101

	
$3,535,000

	
June 29, 2016

	
48

	
$1,680,000

	
July 31, 2016

	
83

	
$3,239,000

	
August 30, 2016

	
240

	
$12,432,675

	
September 30, 2016

	
508

	
$30,467,504

	 	 	 
	
TOTAL

	
980

	
$51,354,179

 

22.          The invoices appear to show the following purchases by Quality from Truck Dealer 1:

 

	
Approx. Date

	
Approx. Number of Trucks

	
Approx. Total Purchase Amount

	
June 28, 2016

	
149

	
$9,685,000

	
August 22, 2016

	
83

	
$5,644,000

	
August 30, 2016

	
155

	
$18,094,850

	
September 29, 2016

	
50

	
$5,975,000

	
October 3, 2016

	
225

	
$27,913,500

	 	 	 
	
TOTAL

	
662

	
$67,312,350

 

5

23.         In reality, however, the ten transactions were not independent transactions, nor were they done at fair market value.  Instead, Quality and Truck Dealer 1 engaged in four separate “trade deals” that were structured as follows:

Trade Deal 1 (June 2016)

	
Approx. Number of Trucks Purchased by Quality & Price

	
149

	
$9,685,000

	
Approx. Number of Trucks Traded in by Quality & Price

	
149

	
($5,215,000)

	
Approx. Net Amount Paid By Quality

	
--

	
$4,470,000

Trade Deal 2 (July/August 2016)

	
Approx. Number of Trucks Purchased by Quality & Price

	
83

	
$5,644,000

	
Approx. Number of Trucks Traded in by Quality & Price

	
83

	
($3,239,000)

	
Approx. Net Amount Paid By Quality

	
--

	
$2,405,000

Trade Deal 3 (August 2016)

	
Approx. Number of Trucks Purchased by Quality & Price

	
155

	
$18,094,850

	
Approx. Number of Trucks Traded in by Quality & Price

	
240

	
($12,432,675)

	
Approx. Net Amount Paid By Quality

	
--

	
$5,662,175

6

Trade Deal 4 (September/October 2016)

	
Approx. Number of Trucks Purchased by Quality & Price

	
275

	
$33,888,500

	
Approx. Number of Trucks Traded in by Quality & Price

	
508

	
($30,467,504)

	
Approx. Net Amount Paid By Quality

	
--

	
$3,420,996

 

24.       The prices reflected on the invoices for the trucks in the four trade deals did not reflect fair market value, but instead were purposely inflated well above market value in an effort to avoid recognizing losses on the transactions.  Celadon ultimately used these inflated truck values to hide millions of dollars of losses from investors when reporting its financial condition.

25.       In reality, the four trade deals were negotiated as follows: Individual D provided Truck Dealer 1 with a list of trucks Quality wanted to dispose of.  The list of trucks included Quality’s book value for each truck – generally well in excess of market value – which represented the amount that Quality needed to receive for each truck to avoid taking losses.  For each trade deal, Truck Dealer 1 would then calculate the total amount that Quality’s book value exceeded fair market value.  This figure was called the “over allowance” or “O/A.”  Quality, in turn, agreed to pay the full amount of O/A on top of the fair market value of the trucks Quality purchased from Truck Dealer 1 on the other side of each trade deal.  As a result, both sides of the transaction were inflated by approximately the same amount so that Quality could record its disposal of its idle trucks while hiding its incurred losses.

26.     In connection with Trade Deal 4, Truck Dealer 1 sent a spreadsheet to Individual D showing that the O/A on that deal alone was approximately $20 million, evidencing that the 

7

prices agreed to between Quality and Truck Dealer 1 in that deal were inflated by approximately $20 million over fair market value.

27.        As Trade Deals 1-4 were being conducted, multiple members of Celadon’s senior management team were on notice that each of the transactions with Truck Dealer 1were trades, and/or that the transactions were done at inflated prices well in excess of fair market value.

Timing of Trade Deal 4

28.         Quality and Truck Dealer 1 negotiated Trade Deal 4 in or around September 2016.  Although Trade Deal 4 was, in reality, a single trade transaction, Celadon, through Individuals C and D, convinced Truck Dealer 1 to make it appear, on paper, to be three separate transactions spread out over two different days: (a) the payment of approximately $5,975,000 from Quality to Truck Dealer 1 on or about September 29, 2016 for the sale of approximately 50 trucks; (b) the payment of approximately $30,467,504 from Truck Dealer 1 to Quality on or about September 29, 2016 for approximately 508 trucks; and (c) the payment of approximately $27,913,500 from Quality to Truck Dealer 1 on or about October 3, 2016 for approximately 225 trucks.  Individuals C and D structured the payments this way to ensure that Quality did not have to pay approximately $27,913,500 to Truck Dealer 1 until after the close of its fiscal quarter (2017 Q1), which ended on September 30, 2016, even though the transaction was a trade that was actually agreed upon prior to September 30, 2016.

Celadon Fraudulently Accounts for the Trade Deals

29.      Celadon falsely recorded the four trade transactions with Truck Dealer 1 on its books at the inflated values listed on the invoices, and not fair market value – as required by the SEC.  This resulted in Celadon materially overstating earnings and assets in its 2016 Form 10-K, which it filed with the SEC on September 13, 2016, and its 2017 Q1 Form 10-Q, which it filed with the SEC on November 9, 2016.  If Celadon had recognized a $20 million loss in connection

8

with Trade Deal 4 in its 2017 Q1 Form 10-Q, the net loss Celadon reported to investors would have increased by approximately $20 million.

30.          With respect to Trade Deal 4, Celadon also failed to account for, or disclose to investors in its 2017 Q1 financial statements, the payment of approximately $27,913,500 that Celadon agreed to make to Truck Dealer 1 in October 2016.  This resulted in Celadon not disclosing a nearly $28 million liability associated with Trade Deal 4 to investors in its Form 10-Q for 2017 Q1, which it filed with the SEC on November 9, 2016.

False and Misleading Statements to Accounting Firm 1

31.          On or about December 8, 2016, an article was published on an investment website alleging, among other things, that Quality’s transactions with Truck Dealer 1 were “swaps” and that Celadon had overstated its Q1 2017 profits by at least $10 million as a result.  In response, Celadon’s management approved a memo, which the company provided to its independent auditors at Public Accounting Firm 1 that: (a) falsely denied that the Truck Dealer 1 transactions were trades; and (b) falsely stated that the trucks involved in the transactions were purchased and sold at fair market value, and thus were accounted for properly on Celadon’s books.

32.          Further, in approximately January and February 2017, in connection with its review of Celadon’s financial statements for the three-month and six-month periods ended December 31, 2016, Public Accounting Firm 1 asked members of Celadon’s management team several important questions about the nature of Quality’s transactions with Truck Dealer 1, including: (a) if the amounts paid for the trucks in Trade Deals 1-4 reflected fair market value; and (b) if the transactions were, in fact, trades as opposed to independent transactions as reflected on the invoices.  In response, multiple members of Celadon’s management again falsely represented to Public Accounting Firm 1 that the transactions were done at fair market value and that they were not trades.

9

33.        Specifically, on or about February 9, 2017, Individual A (Celadon’s CEO) and Individual C (Celadon’s CFO) signed a representation letter addressed to Public Accounting Firm 1 that contained the following false representation:

	
 

	
The [Truck Dealer 1] sales and purchases transactions were conducted at arm’s length and the prices at which the Company bought and sold vehicles reflect fair market values at the time of the transactions.  Each transaction was discreet in nature and none were interdependent.  There are no undisclosed side agreements related to these transactions.

34.    Around the same time Individual A and Individual C signed the false representation letter, Public Accounting Firm 1 was contacted by the PCAOB with a request for documents related to Celadon and Quality’s transactions with Truck Dealer 1.  In connection with this request, Public Accounting Firm 1 began a further investigation into the transactions.

35.     In connection with this investigation, Public Accounting Firm 1 held a series of meetings with Celadon’s senior management, including a meeting on or about April 5, 2017.  This meeting was attended by Individual A, Individual B, Individual C, and Individual D.

36.     At the April 5, 2017 meeting, members of Celadon’s management team falsely represented to Public Accounting Firm 1, among other things, that: (a) the transactions with Truck Dealer 1 were not trades; and (b) the transactions were done at fair market value.  The false statements were made in an effort to convince Public Accounting Firm 1 that Celadon had properly accounted for the transactions with Truck Dealer 1 its financial statements for fiscal year 2016 and the quarters ending September 30, 2016 (2017 Q1) and December 31, 2016 (2017 Q2).

10

Public Accounting Firm 1 Withdraws its Opinions

37.      Public Accounting Firm 1, however, ultimately withdrew its audit opinion for Celadon’s Fiscal Year 2016 financial statements and its review of Celadon’s financial statements for quarters ending September 30, 2016 (2017 Q1) and December 31, 2016 (2017 Q2).

38.     On May 1, 2017, Celadon publicly announced that its financial statements for fiscal year 2016, and the quarters ending September 30, 2016 (2017 Q1) and December 31, 2016 (2017 Q2) and related reports of Public Accounting Firm 1 should no longer be relied upon.  On the day prior to the announcement, Celadon’s shares were trading at approximately $4.00 a share, however the price of Celadon’s shares immediately after the announcement fell to approximately $1.80 a share.  This resulted in an approximate one-day loss of $62.3 million in Celadon’s market capitalization.

11

ATTACHMENT B

CERTIFICATE OF CORPORATE RESOLUTIONS

WHEREAS, Celadon Group, Inc. (the “Company”) has been engaged in discussions with the United States Department of Justice, Criminal Division, Fraud Section (the “Fraud Section”) and the United States Attorney’s Office for the Southern District of Indiana (the “Office”) regarding issues arising in relation to the conduct described in the Statement of Facts attached hereto as Attachment A; and

WHEREAS, in order to resolve such discussions, it is proposed that the Company enter into a certain agreement with the Fraud Section and the Office; and

WHEREAS, the Company’s Chief Executive Officer, Paul Svindland, together with outside counsel for the Company, have advised the Board of Directors of the Company of its rights, possible defenses, the Sentencing Guidelines’ provisions, and the consequences of entering into such agreement with the Fraud Section and the Office;

Therefore, the Board of Directors has RESOLVED that:

1.          The Company (a) acknowledges the filing of the one-count Information charging the Company with conspiracy to commit certain offenses against the United States, that is: (i) to commit securities fraud, in violation of Title 18, United States Code, Section 1348, and (ii) to knowingly and willfully falsify the books, records, and accounts of the Company, a U.S. issuer, in violation of Title 15, United States Code, Sections 78m(b)(2)(A), (b)(5) and 78ff(a); (b) waives indictment on such charges and enters into a deferred prosecution agreement with the Fraud Section; and (c) agrees to pay restitution to victims totaling $42,245,302 with respect to the conduct described in the Information;

B-1

2.          The Company accepts the terms and conditions of this Agreement, including, but not limited to, (a) a knowing waiver of its rights to a speedy trial pursuant to the Sixth Amendment to the United States Constitution, Title 18, United States Code, Section 3161, and Federal Rule of Criminal Procedure 48(b); and (b) a knowing waiver for purposes of this Agreement and any charges by the United States arising out of the conduct described in the attached Statement of Facts of any objection with respect to venue and consents to the filing of the Information, as provided under the terms of this Agreement, in the United States District Court for the Southern District of Indiana; and (c) a knowing waiver of any defenses based on the statute of limitations for any prosecution relating to the conduct described in the attached Statement of Facts or relating to conduct known to the Fraud Section or the Office prior to the date on which this Agreement was signed that is not time-barred by the applicable statute of limitations on the date of the signing of this Agreement;

3.          The Chief Executive Officer of the Company, Paul Svindland, is hereby authorized, empowered and directed, on behalf of the Company, to execute the Deferred Prosecution Agreement substantially in such form as reviewed by this Board of Directors at this meeting with such changes as the Chief Executive Officer of the Company, Paul Svindland, may approve;

4.          The Chief Executive Officer of the Company, Paul Svindland, is hereby authorized, empowered and directed to take any and all actions as may be necessary or appropriate and to approve the forms, terms or provisions of any agreement or other documents as may be necessary or appropriate, to carry out and effectuate the purpose and intent of the foregoing resolutions; and

B-2

5.          All of the actions of the Chief Executive Officer of the Company, Paul Svindland, which actions would have been authorized by the foregoing resolutions except that such actions were taken prior to the adoption of such resolutions, are hereby severally ratified, confirmed, approved, and adopted as actions on behalf of the Company.

 

	
Date:

	4/24/19	 	 
	 	 
	 	 
	 	
By:

	/s/ Chase Welsh
	 	 	
Chase Welsh, Esq.

	 	 	
Corporate Secretary

	 	 	Celadon Group, Inc.

 

 

B-3

ATTACHMENT C

CORPORATE COMPLIANCE PROGRAM

In order to address any deficiencies in its internal controls, compliance code, policies, and procedures regarding compliance with anti-fraud, reporting, or books and records provisions of the federal securities laws (“Relevant Laws”), CELADON GROUP, INC. (“CELADON” or the “Company”) agrees to continue to conduct, in a manner consistent with all of its obligations under this Agreement, appropriate reviews of its existing internal controls, policies, and procedures.

Where necessary and appropriate, the Company agrees to modify its currently established Corporate Compliance Program, including its system of internal controls, its Code of Conduct, and its compliance policies and procedures in order to ensure that it maintains: (a) an effective system of internal accounting controls designed to ensure the making and keeping of fair and accurate books, records, and accounts; and (b) a rigorous compliance program that incorporates relevant internal accounting controls, as well as policies and procedures designed to effectively detect and deter violations of the Relevant Laws.  At a minimum, this should include, but not be limited to, the following elements to the extent they are not already part of the Company’s existing internal controls and Corporate Compliance Program.

High-Level Commitment

1.          CELADON will ensure that its officers, directors, and senior management provide strong, explicit, and visible support and commitment to its corporate policy against violations of the Relevant Laws and its Corporate Compliance Program.

C-1

Policies and Procedures

2.          CELADON will develop and promulgate a clearly articulated and visible corporate policy against violations of the anti-fraud, reporting, or books and records provisions of the Relevant Laws, which policy shall be memorialized in written additions to its Corporate Compliance Program.

3.          The Company will develop and promulgate compliance policies and procedures designed to reduce the prospect of violations of the anti-fraud, reporting, or books and records provisions of the Relevant Laws and the Company’s Corporate Compliance Program, and the Company will take appropriate measures to encourage and support the observance of ethics and compliance policies and procedures against violation of anti-fraud, reporting, or books and records provisions of the Relevant Laws by personnel at all levels of the Company.  These policies and procedures shall apply to all officers, directors, and employees and, where necessary and appropriate, outside parties authorized to act on behalf of the Company in a foreign jurisdiction, including but not limited to, agents and intermediaries, consultants, representatives, distributors, contractors and suppliers, consortia, and joint venture partners (collectively, “authorized agents and business partners”).  The Company shall notify all employees that compliance with the policies and procedures is the duty of individuals at all levels of the Company.

4.          The Company will ensure that it has a system of financial and accounting procedures, including a system of internal controls, reasonably designed to ensure the maintenance of fair and accurate books, records, and accounts.

C-2

Periodic Risk-Based Review

5.          CELADON will develop these compliance policies and procedures on the basis of the risk assessment the Company undergoes as part of its enterprise risk framework, with particular focus on risks facing the Company related to violations of anti-fraud, reporting, or books and records provisions of the Relevant Laws.

6.          The Company shall review its policies and procedures related to anti-fraud, reporting, or books and records provisions of the Relevant Laws no less than annually and update them as appropriate to ensure their continued effectiveness, taking into account relevant developments in the field and evolving international and industry standards.

Proper Oversight and Independence

7.          The Company will assign responsibility to one or more senior corporate executives of the Company for the implementation and oversight of the Company’s policies, and procedures related to anti-fraud, reporting, or books and records provisions of the Relevant Laws.  Such corporate official(s) shall have the authority to report directly to independent monitoring bodies, including, the Company’s Board of Directors, or any appropriate committee of the Board of Directors, or the Internal Audit organization, and shall have an adequate level of autonomy from management as well as sufficient resources and authority to maintain such autonomy.

Training and Guidance

8.          The Company will implement mechanisms designed to ensure that its Corporate Compliance program, including policies related to anti-fraud, reporting, or books and records provisions of the Relevant Laws, are effectively communicated to all officers, directors, employees, and, where necessary and appropriate, agents and business partners.  These 

C-3

mechanisms shall include: (a) periodic training for all officers and directors, all employees in positions of leadership or trust, positions that require such training (e.g., internal audit, sales, legal, compliance, finance), or positions that otherwise pose a risk to the Company, and, where necessary and appropriate, agents and business partners; and (b) corresponding certifications by all such officers, directors, employees, agents, and business partners, certifying compliance with the training requirements.

9.          CELADON will maintain, or where necessary establish, an effective system for providing guidance and advice to officers, directors, employees, and, where necessary and appropriate, agents and business partners, on complying with the Company’s policies, and procedures related to anti-fraud, reporting, or books and records provisions of the Relevant Laws, including when they need advice on an urgent basis or in any foreign jurisdiction in which the Company operates.

Internal Reporting and Investigation

10.          The Company will maintain, or where necessary establish, an effective system for internal and, where possible, confidential reporting by, and protection of, officers, directors, employees, and, where appropriate, authorized agents and business partners concerning violations of the anti-fraud, reporting, or books and records provisions of the Relevant Laws and those aspects of the Corporate Compliance Program related thereto.

11.          The Company will maintain, or where necessary establish, an effective and reliable process with sufficient resources for responding to, investigating, and documenting allegations of violations of anti-fraud, reporting, or books and records provisions of the Relevant Laws or the Company’s Corporate Compliance Program.

Enforcement and Discipline

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12.          CELADON will implement mechanisms designed to effectively enforce its Corporate Compliance Program, policies, and procedures, including appropriately encouraging compliance and disciplining violations.

13.          The Company will institute appropriate disciplinary procedures to address, among other things, violations of anti-fraud, reporting, or books and records provisions of the Relevant Laws and the Company’s Corporate Compliance Program by the Company’s officers, directors, and employees.  Such procedures should be applied consistently and fairly, regardless of the position held by, or perceived importance of, the director, officer, or employee.  The Company shall implement procedures to ensure that where misconduct is discovered, reasonable steps are taken to remedy the harm resulting from such misconduct, and to ensure that appropriate steps are taken to prevent further similar misconduct, including assessing its internal controls and Corporate Compliance Program and making modifications necessary to ensure the overall compliance program is effective.

Third-Party Relationships

14.          The Company will use appropriate risk-based due diligence and compliance requirements pertaining to the retention and oversight of all its authorized agents and business partners, including:

a.          properly documented due diligence pertaining to the hiring and appropriate and regular oversight of agents and business partners;

b.          informing agents and business partners of the Company’s commitment to abiding by anti-fraud, reporting, or books and records provisions of the Relevant Laws, and of the Company’s Corporate Compliance Program; and

c.          seeking a reciprocal commitment from agents and business partners.

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15.          Where necessary and appropriate, the Company will include standard provisions in agreements, contracts, and renewals thereof with its authorized agents and business partners that are reasonably calculated to prevent violations of anti-fraud, reporting, or books and records provisions of the Relevant Laws, which may, depending upon the circumstances, include: (a) anti-fraud representations and undertakings relating to compliance with the Relevant Laws; (b) where appropriate and feasible, rights to conduct audits of the books and records of the agent or business partner to ensure compliance with the foregoing; and (c) rights to terminate an agent or business partner as a result of any breach of anti-fraud, reporting, or books and records provisions of the Relevant Laws, the Company’s Corporate Compliance Program or the representations and undertakings related to such matters.

Mergers and Acquisitions

16.          Prior to pursuing any merger or acquisition, the Company will conduct appropriate risk-based due diligence on potential new business entities, including appropriate federal securities fraud due diligence by legal, accounting, and compliance personnel.

17.          CELADON will ensure that the Company’s Corporate Compliance Program, policies, and procedures regarding anti-fraud, reporting, or books and records provisions of the Relevant Laws apply as quickly as is practicable to newly acquired businesses or entities merged with the Company and will promptly train the officers, directors, employees, authorized agents, and business partners consistent with Paragraph 8 above on the Relevant Laws and the Company’s Corporate Compliance Program.

Monitoring and Testing

18.          CELADON will conduct periodic reviews and testing of its Corporate Compliance Program to evaluate and improve its effectiveness in preventing and detecting 

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violations of anti-fraud, reporting, or books and records provisions of the Relevant Laws and the Company’s Corporate Compliance Program, taking into account relevant developments in the field and evolving international and industry standards.

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ATTACHMENT D

REPORTING REQUIREMENTS

CELADON GROUP, INC. (“CELADON” or the “Company”) agrees that it will report to the United States Attorney’s Office for the Southern District of Indiana and the United States Department of Justice, Criminal Division, Fraud Section (together the “United States”) periodically, at no less than twelve-month intervals during a five-year term, regarding remediation and implementation of the Company’s Corporate Compliance Program and internal controls, policies, and procedures described in Attachment C.  During this five-year period, the Company shall: (1) conduct an initial review and submit an initial report, and (2) conduct and prepare at least two follow-up reviews and reports, as described below:

a.          By no later than one year from the date this Agreement is executed, CELADON shall submit to the United States a written report setting forth a complete description of its remediation efforts to date, its proposals reasonably designed to improve the Company’s internal controls, policies, and procedures for ensuring compliance with anti-fraud, reporting, or books and records provisions of the federal securities laws, and the proposed scope of the subsequent reviews.  The report shall be transmitted to “Chief, Securities and Financial Fraud Unit, United States Department of Justice, Criminal Division, Fraud Section, 1400 New York Avenue, N.W., Washington, D.C. 20005.”  The Company may extend the time period for issuance of the report with prior written approval of the United States.

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b.          CELADON shall undertake at least two follow-up reviews and reports incorporating the United States’ views on the Company’s prior reviews and reports, to further monitor and assess whether the Company’s policies and procedures are reasonably designed to detect and prevent violations of anti-fraud, reporting, or books and records provisions of the federal securities laws.

c.          The first follow-up review and report shall be completed by no later than one year after the initial report is submitted to the United States.  The second follow-up review and report shall be completed and delivered to the United States no later than thirty days before the end of the Term.

d.         The reports will likely include proprietary, financial, confidential, and competitive business information.  Moreover, public disclosure of the reports could discourage cooperation, impede pending or potential government investigations and thus undermine the objectives of the reporting requirement.  For these reasons, among others, the reports and the contents thereof are intended to remain and shall remain non-public, except as otherwise agreed to by the parties in writing, or except to the extent that the United States determines in its sole discretion that disclosure would be in furtherance of the United States’ discharge of its duties and responsibilities or is otherwise required by law.

e.         The Company may extend the time period for submission of any of the follow-up reports with prior written approval of the United States.

 

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Back to Form 8-K

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