Exhibit
10.1


 


LOAN AND
SECURITY AGREEMENT


 


THIS LOAN AND SECURITY
AGREEMENT is made and dated as of May 9, 2014 and is entered into by and among (a) (i) CELATOR PHARMACEUTICALS, INC., a Delaware
corporation (“Inc.”), (ii) CELATOR PHARMACEUTICALS CORP., a Nova Scotia unlimited liability company (“Corp.”),
and (iii) each of its subsidiaries (hereinafter collectively referred to as the “Borrower”), (b) the several banks
and other financial institutions or entities from time to time parties to this Agreement (collectively, referred to as “Lender”)
and (c) HERCULES TECHNOLOGY GROWTH CAPITAL, INC., a Maryland corporation, in its capacity as administrative agent for itself and
the Lender (in such capacity, the “Agent”).


 


RECITALS


 


A.           Borrower
has requested Lender to make available to Borrower two (2) term loans (each a “Term Loan Advance” and collectively,
the “Term Loan Advances”) in an aggregate principal amount of up to Fifteen Million Dollars ($15,000,000) (the “Maximum
Term Loan Amount”); and


 


B.           Lender
is willing to make the Term Loan Advances on the terms and conditions set forth in this Agreement.


 


AGREEMENT


 


NOW, THEREFORE, Borrower,
Agent and Lender agree as follows:


 


SECTION
1.          DEFINITIONS AND RULES OF CONSTRUCTION


 


1.1           Unless
otherwise defined herein, the following capitalized terms shall have the following meanings:


 


“1933 Act” is defined in Section
8.2(c).


 


“Account Control Agreement(s)”
means any agreement entered into by and among the Agent, Borrower and a third party Bank or other institution (including a Securities
Intermediary) in which Borrower maintains a Deposit Account or an account holding Investment Property and which grants Agent a
perfected first priority security interest in the subject account or accounts.


 


“ACH Authorization” means the
ACH Debit Authorization Agreement in substantially the form of Exhibit H.


 


“Advance(s)” means a Term Loan
Advance.


 


“Advance Date” means the funding
date of any Advance.


 


“Advance Request” means a request
for an Advance submitted by Borrower to Agent in substantially the form of Exhibit A.


 


“Agent” has the meaning given
to it in the preamble to this Agreement.


 


“Agreement” means this Loan and
Security Agreement, as amended from time to time.


 


“Amortization Date” means June
1, 2015; provided, however, that if the Milestone Event occurs prior to such date, at the request of Borrower, the Amortization
Date shall be December 1, 2015.


 


“Assignee” has the meaning given
to it in Section 11.13.


 


“BOA Account” is defined in Section
7.12.


 


“Board” means Borrower’s
board of directors.


 




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“Borrower Products” means all
products, software, service offerings, technical data or technology currently being designed, manufactured or sold by Borrower
or which Borrower intends to sell, license, or distribute in the future including any products or service offerings under development,
collectively, together with all products, software, service offerings, technical data or technology that have been sold, licensed
or distributed by Borrower since its incorporation.


 


“Borrower Repayment Election Notice”
is defined in Section 8.2(a).


 


“Business Day” means any day other
than Saturday, Sunday and any other day on which banking institutions in the State of California are closed for business.


 


“Cash” means all cash and liquid
funds.


 


“Change in Control” means any
reorganization, recapitalization, consolidation or merger (or similar transaction or series of related transactions) of Borrower
or any Subsidiary, sale or exchange of outstanding shares (or similar transaction or series of related transactions) of Borrower
or any Subsidiary in which the holders of Borrower or Subsidiary’s outstanding shares immediately before consummation of
such transaction or series of related transactions do not, immediately after consummation of such transaction or series of related
transactions, retain shares representing more than fifty percent (50%) of the voting power of the surviving entity of such transaction
or series of related transactions (or the parent of such surviving entity if such surviving entity is wholly owned by such parent),
in each case without regard to whether Borrower or Subsidiary is the surviving entity.


 


“Claims” has the meaning given
to it in Section 11.10.


 


“Closing Date” means the date
of this Agreement.


 


“Collateral” means the property
described in Section 3.


 


“Confidential Information” has
the meaning given to it in Section 11.12.


 


“Contingent Obligation” means,
as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any Indebtedness,
lease, dividend, letter of credit or other obligation of another, including any such obligation directly or indirectly guaranteed,
endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly
or indirectly liable; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services
issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement,
interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent
Obligation” shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect
of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support arrangement.


 


“Copyright License” means any
written agreement granting any right to use any Copyright or Copyright registration, now owned or hereafter acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest.


 


“Copyrights” means all copyrights,
whether registered or unregistered, held pursuant to the laws of the United States, any State thereof, or of any other country.


 


“Corp.” has the meaning given
to it in the preamble to this Agreement.


 




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“Deposit Accounts” means any “deposit
accounts,” as such term is defined in the UCC, and includes any checking account, savings account, or certificate of deposit.


 


“Delivery Date” is defined in
Section 8.2(a).


 


“Domestic Subsidiary” means any
Subsidiary that is not a Foreign Subsidiary.


 


“Draw Period” means the period
commencing upon the December 15, 2014 and continuing through the earlier to occur of (i) March 31, 2015, and (ii) an Event of Default.


 


“End of Term Charge” is defined
in Section 2.5.


 


“Equity Rights Letter Agreement”
means the Equity Rights Letter Agreement dated as of even date hereof by and between Agent and Borrower.


 


“ERISA” means the Employee Retirement
Income Security Act of 1974, as amended, and the regulations promulgated thereunder.


 


“Event of Default” has the meaning
given to it in Section 9.


 


“Facility Charge” means one percent
(1.0%) of the Maximum Term Loan Amount.


 


“Financial Statements” has the
meaning given to it in Section 7.1.


 


“Foreign Subsidiary” means any
Subsidiary other than a Subsidiary organized under the laws of any state within the United States.


 


“GAAP” means generally accepted
accounting principles in the United States of America, as in effect from time to time.


 


“Inc.” has the meaning given to
it in the preamble to this Agreement.


 


“Indebtedness” means indebtedness
of any kind, including (a) all indebtedness for borrowed money or the deferred purchase price of property or services (excluding
trade credit entered into in the ordinary course of business due within sixty (60) days), including reimbursement and other obligations
with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments,
(c) all capital lease obligations, and (d) all Contingent Obligations.


 


“Indemnified Person”
has the meaning given to it in Section 6.3.


 


“Insolvency Proceeding”
is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.


 


“Intellectual Property” means
all of Borrower’s Copyrights, Trademarks, Patents, Licenses, service marks and other marks, tradenames or other trade rights
of the Borrower, trade secrets and inventions, mask works, and all of Borrower’s applications therefor and reissues, extensions,
or renewals thereof, and all of Borrower’s goodwill associated with any of the foregoing, together with Borrower’s
rights to sue for past, present and future infringement of Intellectual Property and the goodwill associated therewith.


 


“Investment” means any beneficial
ownership (including stock, partnership or limited liability company interests) of or in any Person, or any loan, advance or capital
contribution to any Person or the acquisition of all, or substantially all, of the assets of another Person.


 




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“Joinder Agreements” means for
each Subsidiary, a completed and executed Joinder Agreement in substantially the form attached hereto as Exhibit G.


 


“Lender” has the meaning given
to it in the preamble to this Agreement.


 


“Liabilities” has the meaning
given to it in Section 6.3.


 


“License” means any Copyright
License, Patent License, Trademark License or other license of rights or interests.


 


“Lien” means any mortgage, deed
of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or charge of any kind, whether
voluntarily incurred or arising by operation of law or otherwise, against any property, any conditional sale or other title retention
agreement, and any lease in the nature of a security interest.


 


“Loan” means the Advances made
under this Agreement.


 


“Loan Documents” means this Agreement,
the Notes (if any), the ACH Authorization, the Account Control Agreements, the Joinder Agreements, all UCC Financing Statements,
the Warrant, the Equity Rights Letter Agreement, any subordination agreement, and any other documents executed in connection with
the Secured Obligations or the transactions contemplated hereby, as the same may from time to time be amended, modified, supplemented
or restated.


 


“Material Adverse Effect” means
a material adverse effect upon: (i) the business, operations, properties, assets, prospects or condition (financial or otherwise)
of Borrower; or (ii) the ability of Borrower to perform the Secured Obligations in accordance with the terms of the Loan Documents,
or the ability of Agent or Lender to enforce any of its rights or remedies with respect to the Secured Obligations; or (iii) the
Collateral or Agent’s Liens on the Collateral or the priority of such Liens.


 


“Maximum Term Loan Amount” shall
have the meaning assigned to such term in the preamble to this Agreement.


 


“Maximum Rate” shall have the
meaning assigned to such term in Section 2.2.


 


“Milestone Event” means confirmation
by Lender that Borrower has delivered evidence acceptable to Lender in Lender’s sole discretion, after the Closing Date,
but on or prior to June 1 2015, that Borrower has achieved full enrollment of its CPX-351 Phase 3 trial.


 


“Note(s)” means a promissory note
or promissory notes to evidence Lender’s Loans, as such Note(s) may be requested pursuant to Section 2.6.


 


“Patent License” means any written
agreement granting any right with respect to any invention on which a Patent is in existence or a Patent application is pending,
in which agreement Borrower now holds or hereafter acquires any interest.


 


“Patents” means all letters patent
of, or rights corresponding thereto, in the United States or in any other country, all registrations and recordings thereof, and
all applications for letters patent of, or rights corresponding thereto, in the United States or any other country.


 


“Permitted Accounts” is defined
in Section 7.12.


 




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“Permitted Indebtedness” means:
(i) Indebtedness of Borrower in favor of Lender or Agent arising under this Agreement or any other Loan Document; (ii) Indebtedness
existing on the Closing Date which is disclosed in Schedule 1A; (iii) Indebtedness of up to $100,000 outstanding at any time secured
by a Lien described in clause (vii) of the defined term “Permitted Liens,” provided such Indebtedness does not exceed
the lesser of the cost or fair market value of the Equipment financed with such Indebtedness; (iv) Indebtedness to trade creditors
incurred in the ordinary course of business, including Indebtedness incurred in the ordinary course of business with corporate
credit cards; (v) Indebtedness that also constitutes a Permitted Investment; (vi) Subordinated Indebtedness; (vii) reimbursement
obligations in connection with letters of credit that are secured by cash or cash equivalents and issued on behalf of the Borrower
or a Subsidiary thereof in an amount not to exceed $200,000 at any time outstanding, (viii) other Indebtedness in an amount not
to exceed $100,000 at any time outstanding, and (ix) extensions, refinancings and renewals of any items of Permitted Indebtedness,
provided that the principal amount is not increased or the terms modified to impose materially more burdensome terms upon Borrower
or its Subsidiary, as the case may be.


 


“Permitted Investment” means:
(i) Investments existing on the Closing Date which are disclosed in Schedule 1B; (ii) (a) marketable direct obligations issued
or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one year from
the date of acquisition thereof, (b) commercial paper maturing no more than one year from the date of creation thereof and currently
having a rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service,
(c) certificates of deposit issued by any bank with assets of at least $500,000,000 maturing no more than one year from the date
of investment therein, and (d) money market accounts; (iii) repurchases of stock from former employees, directors, or consultants
of Borrower under the terms of applicable repurchase agreements at the original issuance price of such securities in an aggregate
amount not to exceed $250,000 in any fiscal year, provided that no Event of Default has occurred, is continuing or would exist
after giving effect to the repurchases; (iv) Investments accepted in connection with Permitted Transfers; (v) Investments (including
debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of Borrower’s
business; (vi) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and
suppliers who are not affiliates, in the ordinary course of business, provided that this subparagraph (vi) shall not apply to
Investments of Borrower in any Subsidiary; (vii) Investments consisting of loans not involving the net transfer on a substantially
contemporaneous basis of cash proceeds to employees, officers or directors relating to the purchase of capital stock of Borrower
pursuant to employee stock purchase plans or other similar agreements approved by Borrower’s Board; (viii) Investments consisting
of travel advances in the ordinary course of business; (ix) Investments in newly-formed Domestic Subsidiaries, provided that each
such Domestic Subsidiary enters into a Joinder Agreement promptly after its formation by Borrower and execute such other documents
as shall be reasonably requested by Agent; (x) Investments in Foreign Subsidiaries approved in advance in writing by Agent; (xi)
joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the nonexclusive licensing
of technology, the development of technology or the providing of technical support, provided that any cash Investments by Borrower
do not exceed $100,000 in the aggregate in any fiscal year; and (xii) additional Investments that do not exceed $250,000 in the
aggregate.


 


“Permitted Liens” means any and
all of the following: (i) Liens in favor of Agent or Lender; (ii) Liens existing on the Closing Date which are disclosed in Schedule
1C; (iii) Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested
in good faith by appropriate proceedings; provided, that Borrower maintains adequate reserves therefor in accordance with GAAP;
(iv) Liens securing claims or demands of materialmen, artisans, mechanics, carriers, warehousemen, landlords and other like
Persons arising in the ordinary course of Borrower’s business and imposed without action of such parties; provided, that
the payment thereof is not yet required; (v) Liens arising from judgments, decrees or attachments in circumstances which do
not constitute an Event of Default hereunder; (vi) the following deposits, to the extent made in the ordinary course of business:
deposits under worker’s compensation, unemployment insurance, social security and other similar laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity, performance or other similar
bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure statutory
obligations (other than Liens arising under ERISA or environmental Liens) or surety or appeal bonds, or to secure indemnity, performance
or other similar bonds; (vii) Liens on Equipment or software or other intellectual property constituting purchase money Liens and
Liens in connection with capital leases securing Indebtedness permitted in clause (iii) of “Permitted Indebtedness”;
(viii) Liens incurred in connection with Subordinated Indebtedness; (ix) leasehold interests in leases or subleases and licenses
granted in the ordinary course of business and not interfering in any material respect with the business of the licensor; (x) Liens
in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties that are promptly paid
on or before the date they become due; (xi) Liens on insurance proceeds securing the payment of financed insurance premiums that
are promptly paid on or before the date they become due (provided that such Liens extend only to such insurance proceeds and not
to any other property or assets); (xii) statutory and common law rights of set-off and other similar rights as to deposits of cash
and securities in favor of banks, other depository institutions and brokerage firms; (xiii) easements, zoning restrictions, rights-of-way
and similar encumbrances on real property imposed by law or arising in the ordinary course of business so long as they do not materially
impair the value or marketability of the related property; (xiv) Liens on cash or cash equivalents securing obligations permitted
under clause (vii) of the definition of Permitted Indebtedness; and (xv) Liens incurred in connection with the extension, renewal
or refinancing of the Indebtedness secured by Liens of the type described in clauses (i) through (xi) above; provided, that
any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount
of the Indebtedness being extended, renewed or refinanced (as may have been reduced by any payment thereon) does not increase.


 




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“Permitted Transfers” means (i)
sales of Inventory in the ordinary course of business, (ii) licenses and similar arrangements for the use of Intellectual Property
that could not result in a legal transfer of title of the licensed property but that may be exclusive in respects other than territory
and that may be exclusive as to territory only as to discrete geographical areas outside of the United States, in each case in
the ordinary course of business, or (iii) dispositions of worn-out, obsolete or surplus Equipment at fair market value in the ordinary
course of business, and (iv) other Transfers of assets having a fair market value of not more than $250,000 in the aggregate in
any fiscal year.


 


“Person” means any individual,
sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability
company, institution, other entity or government.


 


“Prepayment Charge” shall have
the meaning assigned to such term in Section 2.4.


 


“Prime Rate” means the “prime
rate” as reported in The Wall Street Journal, and if not reported, then the prime rate most recently reported in The Wall
Street Journal.


 


“Principal Installment Due Date”
is defined in Section 8.2(a).


 


“Principal Installment Payment”
is defined in Section 8.2(a).


 


“RBC Accounts” is defined in Section
7.12.


 


“Receivables” means (i) all of
Borrower’s Accounts, Instruments, Documents, Chattel Paper, Supporting Obligations, letters of credit, proceeds of any letter
of credit, and Letter of Credit Rights, and (ii) all customer lists, software, and business records related thereto.


 


“Required Lenders” means at any
time, the holders of more than 50% of the sum of the aggregate unpaid principal amount of the Term Loan Advances then outstanding.


 


“SEC” is defined in Section 8.2(c).


 


“Secured Obligations” means Borrower’s
obligations under this Agreement and any Loan Document, including any obligation to pay any amount now owing or later arising.


 


“Rule 144” is defined
in Section 8.2(c).


 


“Stock Payment Conditions”
is defined in Section 8.2(b).


 


“Stock Payment Option”
is defined in Section 8.2(a).


 


“Subordinated Indebtedness” means
Indebtedness subordinated to the Secured Obligations in amounts and on terms and conditions satisfactory to Agent in its sole discretion.


 




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“Subsidiary” means an entity,
whether corporate, partnership, limited liability company, joint venture or otherwise, in which Borrower owns or controls 50% or
more of the outstanding voting securities, including each entity listed on Schedule 1 hereto.


 


“Term Commitment” means as to
any Lender, the obligation of such Lender, if any, to make a Term Loan Advance to the Borrower in a principal amount not to exceed
the amount set forth under the heading “Term Commitment” opposite such Lender’s name on Schedule 1.1.


 


“Term Loan Advance” and “Term
Loan Advances” are each defined in Recital A hereof.


 


“Term Loan Interest Rate” means
for any day, a floating per annum rate of interest equal to the greater of either (i) nine and three quarters of one percent (9.75%),
or (ii) the sum of (A) nine and three quarters of one percent (9.75%), plus (B) the Prime Rate minus three and one quarter of one
percent (3.25%). The Term Loan Interest Rate will change from time to time on each day that the Prime Rate changes.


 


“Term Loan Maturity Date” means
December 1, 2017, and extended, if applicable, upon the occurrence of the Milestone Event, at the request of Borrower, to June
1, 2018.


 


“Trademark License” means any
written agreement granting any right to use any Trademark or Trademark registration, now owned or hereafter acquired by Borrower
or in which Borrower now holds or hereafter acquires any interest.


 


“Trademarks” means all trademarks
(registered, common law or otherwise) and any applications in connection therewith, including registrations, recordings and applications
in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof.


 


“Tranche A Amount” has the meaning
given to it in Section 2.1(a).


 


“Tranche B Amount” means (a) Fifteen
Million Dollars ($15,000,000), minus (b) the original principal amount of the Tranche A Amount.


 


“ULC” means an issuer that is
an unlimited company, unlimited liability corporation or unlimited liability company.


 


“ULC Laws” means the Companies
Act (Nova Scotia) and any other present or future Nova Scotia laws governing ULCs.


 


“ULC Shares” means shares or other
equity interests in the capital stock of a ULC


 


“UCC” means (a) with respect to
any assets located in the United States, the Uniform Commercial Code as the same is, from time to time, in effect in the State
of California; provided, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection
or priority of, or remedies with respect to, Agent’s Lien on any Collateral is governed by the Uniform Commercial Code as
the same is, from time to time, in effect in a jurisdiction other than the State of California, then the term “UCC”
shall mean the Uniform Commercial Code as in effect, from time to time, in such other jurisdiction solely for purposes of the provisions
thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions,
and (b) with respect to any assets located in Canada, the Personal Property Security Act (British Columbia) as amended and as may
be further amended and in effect from time to time; provided further, that in the event that, by reason of mandatory provisions
of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Lender’s Lien on any Collateral
is governed by the Personal Property Security Act or equivalent legislation in effect in a provincial jurisdiction other than Nova
Scotia, the term “Code” shall mean the Personal Property Security Act or equivalent legislation as enacted and in effect
in such other province solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies
and for purposes of definitions relating to such provisions.


 




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“Warrant” means any warrant entered
into in connection with the Loan, as may be amended, restated or modified from time to time.


 


Unless otherwise specified,
all references in this Agreement or any Annex or Schedule hereto to a “Section,” “subsection,” “Exhibit,”
“Annex,” or “Schedule” shall refer to the corresponding Section, subsection, Exhibit, Annex, or Schedule
in or to this Agreement. Unless otherwise specifically provided herein, any accounting term used in this Agreement or the other
Loan Documents shall have the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder
shall be computed in accordance with GAAP, consistently applied. Unless otherwise defined herein or in the other Loan Documents,
terms that are used herein or in the other Loan Documents and defined in the UCC shall have the meanings given to them in the UCC.


 


SECTION
2.          THE LOAN


 


2.1           Term
Loan.


 


(a)          Term
Loan Advances. Subject to the terms and conditions of this Agreement, Lender will severally (and not jointly) make, in an amount
not to exceed its respective Term Commitment, and Borrower agrees to draw, an initial Term Loan Advance on the Closing Date in
an amount of at least Ten Million Dollars ($10,000,000), but not exceeding Fifteen Million Dollars ($15,000,000) (the amount of
principal advanced on the Closing Date is hereinafter referred to as the “Tranche A Amount”). During the Draw Period,
Borrower may request one (1) additional Term Loan Advance in an amount of up to the Tranche B Amount. The aggregate outstanding
Term Loan Advances shall not exceed the Maximum Term Loan Amount. Proceeds of any Advance shall be deposited into an account that
is subject to a first priority perfected security interest in favor of Agent perfected by an Account Control Agreement.


 


(b)          
Advance Request. To obtain a Term Loan Advance, Borrower shall complete, sign and deliver an Advance Request (at least two
(2) Business Days before the Advance Date) to Agent. Lender shall fund the Term Loan Advance in the manner requested by the Advance
Request provided that each of the conditions precedent to such Term Loan Advance is satisfied as of the requested Advance Date.


 


(c)          Interest.
The principal balance of each Term Loan Advance shall bear interest thereon from the Advance Date applicable to the Term Loan Advance
at the Term Loan Interest Rate based on a year consisting of 360 days, with interest computed daily based on the actual number
of days elapsed. The Term Loan Interest Rate will float and change on each day that the Prime Rate changes from time to time.


 


(d)          Payment.
Borrower will pay interest on each Term Loan Advance on the first (1st) Business Day of each month, beginning the month
after the Advance Date. Commencing on the Amortization Date, and continuing on the first (1st) Business Day of each
month thereafter, Borrower shall repay the aggregate principal balance of Term Loan Advances that are outstanding on the day immediately
preceding the Amortization Date in equal monthly installments of principal and interest (mortgage style) beginning on the Amortization
Date and continuing on the first (1st) Business Day of each month thereafter until the Secured Obligations are repaid.
After any change in the Term Loan Interest Rate hereunder, Agent shall recalculate future payments of principal and interest to
fully amortize the outstanding principal amount over the remaining scheduled monthly payments hereunder prior to the Term Loan
Maturity Date. The entire principal balance of the Term Loan Advances and all accrued but unpaid interest hereunder, and all other
Secured Obligations with respect to the Term Loan Advances, shall be due and payable on Term Loan Maturity Date. For the avoidance
of doubt, in the event of any conversion of a portion of any Term Loan Advance pursuant to Section 8.1 below, the remaining monthly
payments described in this Section 2.1(d) shall be recalculated by Agent following such conversion date to reflect (i) the lower
outstanding principal of the Term Loan Advance so converted, (ii) the lower interest payments resulting from such reduced principal,
and (iii) the remaining months until the Term Loan Maturity Date. Borrower shall make all payments under this Agreement without
setoff, recoupment or deduction and regardless of any counterclaim or defense. Lender will initiate debit entries to the Borrower’s
account as authorized on the ACH Authorization on each payment date of all periodic obligations payable to Lender under each Term
Loan Advance. Once repaid, a Term Loan Advance or any portion thereof may not be reborrowed.


 


2.2           Maximum
Interest. Notwithstanding any provision in this Agreement or any other Loan Document, it is the parties’ intent not to
contract for, charge or receive interest at a rate that is greater than the maximum rate permissible by law that a court of competent
jurisdiction shall deem applicable hereto (which under the laws of the State of California shall be deemed to be the laws relating
to permissible rates of interest on commercial loans) (the “Maximum Rate”). If a court of competent jurisdiction shall
finally determine that Borrower has actually paid to Lender an amount of interest in excess of the amount that would have been
payable if all of the Secured Obligations had at all times borne interest at the Maximum Rate, then such excess interest actually
paid by Borrower shall be applied as follows: first, to the payment of the Secured Obligations consisting of the outstanding principal
amount of the Term Loan Advances; second, after all principal is repaid, to the payment of Lender’s accrued interest, costs,
expenses, professional fees and any other Secured Obligations; and third, after all Secured Obligations are repaid, the excess
(if any) shall be refunded to Borrower.


 




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2.3           Default
Interest. In the event any payment is not paid on the scheduled payment date, an amount equal to five percent (5%) of the past
due amount shall be payable on demand. In addition, upon the occurrence and during the continuation of an Event of Default hereunder,
all Secured Obligations, including principal, interest, compounded interest, and professional fees, shall bear interest at a rate
per annum equal to the rate set forth in Section 2.1(c) plus five percent (5%) per annum. In the event any interest is not paid
when due hereunder, delinquent interest shall be added to principal and shall bear interest on interest, compounded at the rate
set forth in Section 2.1(c) or Section 2.3, as applicable.


 


2.4           Prepayment.
At its option upon at least seven (7) Business Days prior notice to Agent, Borrower may prepay all, or any portion, of the outstanding
Advances by paying the entire principal balance, or a portion thereof, all accrued and unpaid interest on the portion prepaid,
all unpaid Agent’s and Lender’s fees and expenses accrued to the date of the repayment (including the End of Term Charge),
together with a prepayment charge on the portion prepaid equal to the following percentage of the Advance amount being prepaid:
if such Advance amounts are prepaid in any of the first twelve (12) months following the Closing Date, three percent (3.00%); after
twelve (12) months but prior to twenty four (24) months following the Closing Date, two percent (2.00%); and thereafter, one percent
(1.00%) (each, a “Prepayment Charge”). Borrower agrees that the Prepayment Charge is a reasonable calculation of Lender’s
lost profits in view of the difficulties and impracticality of determining actual damages resulting from an early repayment of
the Advances. Upon the occurrence of a Change in Control, Borrower shall prepay the outstanding amount of all principal and accrued
interest through the prepayment date and all unpaid Agent’s and Lender’s fees and expenses accrued to the date of the
repayment (including the End of Term Charge) together with the applicable Prepayment Charge.


 


2.5           End
of Term Charge. On the earliest to occur of (i) the Term Loan Maturity Date, (ii) the date that Borrower prepays the outstanding
Secured Obligations, or (iii) the date that the Secured Obligations become due and payable, Borrower shall pay Lender a charge
equal to Five Hundred Ninety-Two Thousand Five Hundred Dollars ($592,500) (the “End of Term Charge”). Notwithstanding
the required payment date of such charge, it shall be deemed earned by Lender as of the Closing Date.


 


2.6           Notes.
If so requested by Lender by written notice to Borrower, then Borrower shall execute and deliver to Lender (and/or, if applicable
and if so specified in such notice, to any Person who is an assignee of Lender pursuant to Section 11.13) (promptly after the Borrower’s
receipt of such notice) a Note or Notes to evidence Lender’s Loans.


 


2.7           Pro
Rata Treatment. Each payment (including prepayment) on account of any fee and any reduction of the Term Loan Advances
shall be made pro rata according to the Term Commitments of the relevant Lender.


 


2.8           Withholding.
Payments received by Lender from Borrower under this Agreement will be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed
by any governmental authority (including any interest, additions to tax or penalties applicable thereto). Specifically, however,
if at any time any governmental authority, applicable law, regulation or international agreement requires Borrower to make any
withholding or deduction from any such payment or other sum payable hereunder to Lender, Borrower hereby covenants and agrees that
the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary
to ensure that, after the making of such required withholding or deduction, Lender receives a net sum equal to the sum which it
would have received had no withholding or deduction been required, and Borrower shall pay the full amount withheld or deducted
to the relevant governmental authority. Borrower will, upon request, furnish Lender with proof reasonably satisfactory to Lender
indicating that Borrower has made such withholding payment; provided, however, that Borrower need not make any withholding payment
if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to
which payment in full is bonded or reserved against by Borrower. The agreements and obligations of Borrower contained in this Section 2.8
shall survive the termination of this Agreement.


 




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SECTION
3.          SECURITY INTEREST


 


3.1           As
security for the prompt, complete and indefeasible payment when due (whether on the payment dates or otherwise) of all the Secured
Obligations, Borrower grants to Agent a security interest in all of Borrower’s right, title, and interest in and to the
following personal property whether now owned or hereafter acquired (collectively, the “Collateral”): (a) Receivables;
(b) Equipment; (c) Fixtures; (d) General Intangibles (other than Intellectual Property); (e) Inventory; (f) Investment Property
(but excluding thirty-five percent (35%) of the capital stock of any Foreign Subsidiary that constitutes a Permitted Investment);
(g) Deposit Accounts; (h) Cash; (i) Goods; and all other tangible and intangible personal property of Borrower whether now or
hereafter owned or existing, leased, consigned by or to, or acquired by, Borrower and wherever located, and any of Borrower’s
property in the possession or under the control of Agent; and, to the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of each of the foregoing;
provided, however, that the Collateral shall include all Accounts and General Intangibles that consist of rights to payment
and proceeds from the sale, licensing or disposition of all or any part, or rights in, the Intellectual Property (the “Rights
to Payment”). Notwithstanding the foregoing, if a judicial authority (including a U.S. Bankruptcy Court) holds that a security
interest in the underlying Intellectual Property is necessary to have a security interest in the Rights to Payment, then the Collateral
shall automatically, and effective as of the date of this Agreement, include the Intellectual Property to the extent necessary
to permit perfection of Agent’s security interest in the Rights to Payment.


 


3.2           Borrower
acknowledges that certain of the Collateral may now or in the future consist of ULC Shares, and that it is the intention of Lender
and Borrower that the Creditor should not under any circumstances prior to realization thereon be held to be a “member”
or a “shareholder”, as applicable, of a ULC for the purposes of any ULC Laws. Therefore, notwithstanding any provisions
to the contrary contained in this Agreement or the Loan Documents, where Inc. is the registered owner of ULC Shares which are
Collateral, Inc. shall remain the sole registered owner of such ULC Shares until such time as such ULC Shares are effectively
transferred into the name of the Lender or any other Person on the books and records of the applicable ULC. Accordingly, Inc.
shall be entitled to receive and retain for its own account any dividend on or other distribution, if any, with respect to such
ULC Shares and shall have the right to vote such ULC Shares and to control the direction, management and policies of the applicable
ULC to the same extent as Inc. would if such ULC Shares were not encumbered to the Lender pursuant hereto. Nothing in this Agreement,
or the Loan Documents is intended to, and nothing in this Agreement, or the Loan Documents shall, constitute the Lender or any
Person other than Inc., a member or shareholder of a ULC for the purposes of any ULC Laws (whether listed or unlisted, registered
or beneficial), until such time as notice is given to Inc. and further steps are taken pursuant hereto or thereto so as to register
Lender or such other Person, as specified in such notice, as the holder of the ULC Shares. To the extent any provision hereof
would have the effect of constituting Lender as a member or a shareholder, as applicable, of any ULC prior to such time, such
provision shall be severed herefrom and shall be ineffective with respect to ULC Shares which are Collateral without otherwise
invalidating or rendering unenforceable this Agreement or invalidating or rendering unenforceable such provision insofar as it
relates to Collateral which is not ULC Shares. Except upon the exercise of rights of Lender to sell, transfer or otherwise dispose
of ULC Shares in accordance with this Agreement, Inc. shall not cause or permit, Lender to: (a) be registered as a shareholder
or member of the applicable ULC; (b) have any notation entered in their favour in the share register of such ULC; (c) be held
out as shareholders or members of such ULC; (d) receive, directly or indirectly, any dividends, property or other distributions
from such ULC by reason of Lender holding a security interest over the ULC Shares; or (e) act as a shareholder of such ULC, or
exercise any rights of a shareholder including the right to attend a meeting of shareholders of such ULC or to vote its ULC Shares.


 


SECTION
4.          CONDITIONS PRECEDENT TO LOAN


 


The obligation of Lender
to make the Term Loan Advances hereunder are subject to the satisfaction by Borrower of the following conditions:


 


4.1           Initial
Advance. On or prior to the Closing Date, Borrower shall have delivered to Agent the following:


 


(a)          executed
originals of the Loan Documents, a legal opinion of Borrower’s counsel, and all other documents and instruments reasonably
required by Agent to effectuate the transactions contemplated hereby or to create and perfect the Liens of Agent with respect to
all Collateral, in all cases in form and substance reasonably acceptable to Agent;


 


(b)          certified
copy of resolutions of Borrower’s Board evidencing approval of (i) the Loan and other transactions evidenced by the
Loan Documents; and (ii) the Warrant and transactions evidenced thereby;


 


(c)          certified
copies of the Certificate of Incorporation and the Bylaws, as amended through the Closing Date, of Borrower;


 




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(d)          a
certificate of good standing for Borrower from its state of incorporation and similar certificates from all other jurisdictions
in which it does business and where the failure to be qualified would have a Material Adverse Effect;


 


(e)          payment
of the Facility Charge and reimbursement of Agent’s and Lender’s current expenses reimbursable pursuant to this Agreement,
which amounts may be deducted from the initial Advance; and


 


(f)          such
other documents as Agent may reasonably request.


 


4.2           All
Advances. On each Advance Date:


 


(a)          Agent
shall have received (i) an Advance Request for the relevant Advance as required by Section 2.1(b), each duly executed
by Borrower’s Chief Executive Officer or Chief Financial Officer, and (ii) any other documents Agent may reasonably
request.


 


(b)          The
representations and warranties set forth in this Agreement and in Section 5 and in the Warrant shall be true and correct in
all material respects on and as of the Advance Date with the same effect as though made on and as of such date, except to the extent
such representations and warranties expressly relate to an earlier date.


 


(c)          Borrower
shall be in compliance with all the terms and provisions set forth herein and in each other Loan Document on its part to be observed
or performed, and at the time of and immediately after such Advance no Event of Default shall have occurred and be continuing.


 


(d)          Each
Advance Request shall be deemed to constitute a representation and warranty by Borrower on the relevant Advance Date as to the
matters specified in paragraphs (b) and (c) of this Section 4.2 and as to the matters set forth in the Advance Request.


 


4.3           No
Default. As of the Closing Date and each Advance Date, (i) no fact or condition exists that would (or would, with the passage
of time, the giving of notice, or both) constitute an Event of Default and (ii) no event that has had or could reasonably be expected
to have a Material Adverse Effect has occurred and is continuing.


 


SECTION
5.          REPRESENTATIONS AND WARRANTIES OF BORROWER


 


Borrower represents
and warrants that:


 


5.1           Corporate
Status. Inc. is a corporation duly organized, legally existing and in good standing under the laws of the State of Delaware
and Corp. is a corporation duly organized, legally existing and in good standing under the laws of the Province of Nova Scotia.
Borrower is duly qualified as a foreign corporation in all jurisdictions in which the nature of its business or location of its
properties require such qualifications and where the failure to be qualified could reasonably be expected to have a Material Adverse
Effect. Borrower’s present name, former names (if any), locations, place of formation, tax identification number, organizational
identification number and other information are correctly set forth in Exhibit C, as may be updated by Borrower in a written notice
(including any Compliance Certificate) provided to Agent after the Closing Date.


 


5.2           Collateral.
Borrower owns the Collateral and the Intellectual Property, free of all Liens, except for Permitted Liens. Borrower has the power
and authority to grant to Agent a Lien in the Collateral as security for the Secured Obligations.


 


5.3           Consents.
Borrower’s execution, delivery and performance of the Notes (if any), this Agreement and all other Loan Documents, and Borrower’s
execution of the Warrant, (i) have been duly authorized by all necessary corporate action of Borrower, (ii) will not
result in the creation or imposition of any Lien upon the Collateral, other than Permitted Liens and the Liens created by this
Agreement and the other Loan Documents, (iii) do not violate any provisions of Borrower’s Certificate or Articles of Incorporation
(as applicable), bylaws, or any, law, regulation, order, injunction, judgment, decree or writ to which Borrower is subject and
(iv) except as described on Schedule 5.3, do not violate any contract or agreement or require the consent or approval of any
other Person which has not already been obtained. The individual or individuals executing the Loan Documents and the Warrant are
duly authorized to do so.


 


5.4           Material
Adverse Effect. No event that has had or could reasonably be expected to have a Material Adverse Effect has occurred and is
continuing. Borrower is not aware of any event likely to occur that is reasonably expected to result in a Material Adverse Effect.


 


5.5           Actions
Before Governmental Authorities. Except as described on Schedule 5.5, there are no actions, suits or proceedings at law or
in equity or by or before any governmental authority now pending or, to the knowledge of Borrower, threatened against or affecting
Borrower or its property.


 




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5.6           Laws.
Borrower is not in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree
of any governmental authority, where such violation or default is reasonably expected to result in a Material Adverse Effect. Borrower
is not in default in any manner under any provision of any agreement or instrument evidencing Indebtedness, or any other material
agreement to which it is a party or by which it is bound.


 


5.7           Information
Correct and Current. No information, report, Advance Request, financial statement, exhibit or schedule furnished, by or on
behalf of Borrower to Agent in connection with any Loan Document or included therein or delivered pursuant thereto contained, contains
or will contain any material misstatement of fact or omitted, omits or will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were, are or will be made, not misleading at the time such
statement was made or deemed made. Additionally, any and all financial or business projections provided by Borrower to Agent, whether
prior to or after the Closing Date, shall be (i) provided in good faith and based on the most current data and information available
to Borrower, and (ii) the most current of such projections provided to Borrower’s Board.


 


5.8           Tax
Matters. Except as described on Schedule 5.8, (a) Borrower has filed all federal, state and local tax returns that it is required
to file, or has timely filed any necessary extension to file such tax returns, (b) Borrower has duly paid or fully reserved for
all taxes or installments thereof (including any interest or penalties) as and when due, which have or may become due pursuant
to such returns, and (c) Borrower has paid or fully reserved for any tax assessment received by Borrower for the three (3) years
preceding the Closing Date, if any (including any taxes being contested in good faith and by appropriate proceedings).


 


5.9           Intellectual
Property Claims. Borrower is the sole owner of, or otherwise has the right to use, the Intellectual Property. Except as described
on Schedule 5.9, (i) each of the material Copyrights, Trademarks and Patents is valid and enforceable, (ii) no material part of
the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and (iii) no claim has been made to Borrower
that any material part of the Intellectual Property violates the rights of any third party. Exhibit D is a true, correct and
complete list of each of Borrower’s Patents, registered Trademarks, registered Copyrights, and material agreements under
which Borrower licenses Intellectual Property from third parties (other than shrink-wrap software licenses), together with application
or registration numbers, as applicable, owned by Borrower or any Subsidiary, in each case as of the Closing Date. Borrower is not
in material breach of, nor has Borrower failed to perform any material obligations under, any of the foregoing contracts, licenses
or agreements and, to Borrower’s knowledge, no third party to any such contract, license or agreement is in material breach
thereof or has failed to perform any material obligations thereunder.


 


5.10         Intellectual
Property. Except as described on Schedule 5.10, Borrower has, or in the case of any proposed business, will have, all material
rights with respect to Intellectual Property necessary in the operation or conduct of Borrower’s business as currently conducted
and proposed to be conducted by Borrower. Without limiting the generality of the foregoing, and in the case of Licenses, except
for restrictions that are unenforceable under Division 9 of the UCC, Borrower has the right, to the extent required to operate
Borrower’s business, to freely transfer, license or assign Intellectual Property without condition, restriction or payment
of any kind (other than license payments in the ordinary course of business) to any third party, and Borrower owns or has the right
to use, pursuant to valid licenses, all software development tools, library functions, compilers and all other third-party software
and other items that are used in the design, development, promotion, sale, license, manufacture, import, export, use or distribution
of Borrower Products.


 


5.11         Borrower
Products. Except as described on Schedule 5.11, no Intellectual Property owned by Borrower or Borrower Product has been or
is subject to any actual or, to the knowledge of Borrower, threatened litigation, proceeding (including any proceeding in the United
States Patent and Trademark Office or any corresponding foreign office or agency) or outstanding decree, order, judgment, settlement
agreement or stipulation that restricts in any manner Borrower’s use, transfer or licensing thereof or that may affect the
validity, use or enforceability thereof. There is no decree, order, judgment, agreement, stipulation, arbitral award or other provision
entered into in connection with any litigation or proceeding that obligates Borrower to grant licenses or ownership interest in
any future Intellectual Property related to the operation or conduct of the business of Borrower or Borrower Products. Borrower
has not received any written notice or claim, or, to the knowledge of Borrower, oral notice or claim, challenging or questioning
Borrower’s ownership in any Intellectual Property (or written notice of any claim challenging or questioning the ownership
in any licensed Intellectual Property of the owner thereof) or suggesting that any third party has any claim of legal or beneficial
ownership with respect thereto nor, to Borrower’s knowledge, is there a reasonable basis for any such claim. Neither Borrower’s
use of its Intellectual Property nor the production and sale of Borrower Products infringes the Intellectual Property or other
rights of others.


 




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5.12         Financial
Accounts. Exhibit E, as may be updated by the Borrower in a written notice provided to Agent after the Closing Date, is a
true, correct and complete list of (a) all banks and other financial institutions at which Borrower or any Subsidiary maintains
Deposit Accounts and (b) all institutions at which Borrower or any Subsidiary maintains an account holding Investment Property,
and such exhibit correctly identifies the name, address and telephone number of each bank or other institution, the name in which
the account is held, a description of the purpose of the account, and the complete account number therefor.


 


5.13         Employee
Loans. Borrower has no outstanding loans to any employee, officer or director of the Borrower nor has Borrower guaranteed the
payment of any loan made to an employee, officer or director of the Borrower by a third party.


 


5.14         Capitalization
and Subsidiaries. Borrower’s capitalization as of the Closing Date is set forth on Schedule 5.14 annexed hereto. Borrower
does not own any stock, partnership interest or other securities of any Person, except for Permitted Investments. Attached as Schedule
5.14, as may be updated by Borrower in a written notice provided after the Closing Date, is a true, correct and complete list of
each Subsidiary.


 


 


5.15         Use
of Proceeds. Borrower shall use the proceeds of the Term Loan Advances as working capital and to fund its general business
requirements and not for personal, family, household or agricultural purposes.


 


SECTION
6.          INSURANCE; INDEMNIFICATION


 


6.1           Coverage.
Borrower shall cause to be carried and maintained commercial general liability insurance, on an occurrence form, against risks
customarily insured against in Borrower’s line of business. Such risks shall include the risks of bodily injury, including
death, property damage, personal injury, advertising injury, and contractual liability per the terms of the indemnification agreement
found in Section 6.3. Borrower must maintain a minimum of $2,000,000 of commercial general liability insurance for each occurrence.
Borrower has and agrees to maintain a minimum of $2,000,000 of directors’ and officers’ insurance for each occurrence
and $5,000,000 in the aggregate. So long as there are any Secured Obligations outstanding, Borrower shall also cause to be carried
and maintained insurance upon the Collateral, insuring against all risks of physical loss or damage howsoever caused, in an amount
not less than the full replacement cost of the Collateral, provided that such insurance may be subject to standard exceptions and
deductibles.


 


6.2           Certificates.
Borrower shall deliver to Agent certificates of insurance that evidence Borrower’s compliance with its insurance obligations
in Section 6.1 and the obligations contained in this Section 6.2. Borrower’s insurance certificate shall state
Agent is an additional insured for commercial general liability, a loss payee for all risk property damage insurance, subject to
the insurer’s approval, and a loss payee for property insurance and additional insured for liability insurance for any future
insurance that Borrower may acquire from such insurer. Attached to the certificates of insurance will be additional insured endorsements
for liability and lender’s loss payable endorsements for all risk property damage insurance. All certificates of insurance
will provide for a minimum of thirty (30) days advance written notice to Agent of cancellation or any other change adverse to Agent’s
interests. Any failure of Agent to scrutinize such insurance certificates for compliance is not a waiver of any of Agent’s
rights, all of which are reserved.


 


6.3           Indemnity.
Borrower agrees to indemnify and hold Agent, Lender and their officers, directors, employees, agents, in-house attorneys, representatives
and shareholders (each, an “Indemnified Person”) harmless from and against any and all claims, costs, expenses, damages
and liabilities (including such claims, costs, expenses, damages and liabilities based on liability in tort, including strict liability
in tort), including reasonable attorneys’ fees and disbursements and other costs of investigation or defense (including those
incurred upon any appeal) (collectively, “Liabilities”), that may be instituted or asserted against or incurred by
such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement and the other
Loan Documents or the administration of such credit, or in connection with or arising out of the transactions contemplated hereunder
and thereunder, or any actions or failures to act in connection therewith, or arising out of the disposition or utilization of
the Collateral, excluding in all cases Liabilities to the extent resulting solely from any Indemnified Person’s gross negligence
or willful misconduct. Borrower agrees to pay, and to save Agent and Lender harmless from, any and all liabilities with respect
to, or resulting from any delay in paying, any and all excise, sales or other similar taxes (excluding taxes imposed on or measured
by the net income of Agent or Lender) that may be payable or determined to be payable with respect to any of the Collateral or
this Agreement. In no event shall any Indemnified Person be liable on any theory of liability for any special, indirect, consequential
or punitive damages (including any loss of profits, business or anticipated savings).


 


SECTION
7.          COVENANTS OF BORROWER


 


Borrower agrees as
follows:


 


7.1           Financial
Reports. Borrower shall furnish to Agent the financial statements and reports listed hereinafter (the “Financial Statements”):


 




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(a)          as
soon as practicable (and in any event within 30 days) after the end of each month, unaudited interim and year-to-date financial
statements as of the end of such month (prepared on a consolidated and consolidating basis, if applicable), including balance sheet
and related statements of income and cash flows accompanied by a report detailing any material contingencies (including the commencement
of any material litigation by or against Borrower) or any other occurrence that would reasonably be expected to have a Material
Adverse Effect, all certified by Borrower’s Chief Executive Officer or Chief Financial Officer to the effect that they have
been prepared in accordance with GAAP, except (i) for the absence of footnotes, (ii) that they are subject to normal year end adjustments,
and (iii) they do not contain certain non-cash items that are customarily included in quarterly and annual financial statements;


 


(b)          as
soon as practicable (and in any event within 45 days) after the end of each fiscal quarter, unaudited interim and year-to-date
financial statements as of the end of such fiscal quarter (prepared on a consolidated and consolidating basis, if applicable),
including balance sheet and related statements of income and cash flows accompanied by a report detailing any material contingencies
(including the commencement of any material litigation by or against Borrower) or any other occurrence that would reasonably be
expected to have a Material Adverse Effect, certified by Borrower’s Chief Executive Officer or Chief Financial Officer to
the effect that they have been prepared in accordance with GAAP, except (i) for the absence of footnotes, and (ii) that they are
subject to normal year end adjustments; as well as the most recent capitalization table for Borrower, including the weighted average
exercise price of employee stock options;


 


(c)          as
soon as practicable (and in any event within one hundred fifty (150) days) after the end of each fiscal year, unqualified audited
financial statements as of the end of such year (prepared on a consolidated and consolidating basis, if applicable), including
balance sheet and related statements of income and cash flows, and setting forth in comparative form the corresponding figures
for the preceding fiscal year, certified by a firm of independent certified public accountants selected by Borrower and reasonably
acceptable to Agent, accompanied by any management report from such accountants;


 


(d)          
as soon as practicable (and in any event within 30 days) after the end of each month, a Compliance Certificate in the form of Exhibit
F;


 


(e)          promptly
after the sending or filing thereof, as the case may be, copies of any proxy statements, financial statements or reports that Borrower
has made available to holders of its capital stock and copies of any regular, periodic and special reports or registration statements
that Borrower files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor,
or any national securities exchange; and


 


(f)          financial
and business projections promptly following their approval by Borrower’s Board, and in any event, within 30 days prior to
the end of Borrower’s fiscal year, as well as budgets, operating plans and other financial information reasonably requested
by Agent.


 


Borrower shall not
make any change in its (a) accounting policies or reporting practices, or (b) fiscal years or fiscal quarters. The fiscal year
of Borrower shall end on December 31.


 


The executed Compliance
Certificate may be sent via facsimile to Agent at (650) 473-9194 or via e-mail to BJadot@herculestech.com. All Financial Statements
required to be delivered pursuant to clauses (a), (b) and (c) shall be sent via e-mail to financialstatements@herculestech.com
with a copy to BBang@herculestech.com provided, that if e-mail is not available or sending such Financial Statements via e-mail
is not possible, they shall be sent via facsimile to Agent at: (866) 468-8916, attention Chief Credit Officer.


 


7.2           Management
Rights. Upon five (5) Business Days’ notice (provided no notice is required if an Event of Default has occurred and is
continuing) Borrower shall permit any representative that Agent or Lender authorizes, including its attorneys and accountants,
to inspect the Collateral and examine and make copies and abstracts of the books of account and records of Borrower at reasonable
times and upon reasonable notice during normal business hours. In addition, any such representative shall have the right to meet
with management and officers of Borrower to discuss such books of account and records. In addition, Agent or Lender shall be entitled
at reasonable times and intervals to consult with and advise the management and officers of Borrower concerning significant business
issues affecting Borrower. Such consultations shall not unreasonably interfere with Borrower’s business operations. The parties
intend that the rights granted Agent and Lender shall constitute “management rights” within the meaning of 29 C.F.R
Section 2510.3-101(d)(3)(ii), but that any advice, recommendations or participation by Agent or Lender with respect to any business
issues shall not be deemed to give Agent or Lender, nor be deemed an exercise by Agent or Lender of, control over Borrower’s
management or policies.


 




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7.3           Further
Assurances. Borrower shall from time to time execute, deliver and file, alone or with Agent, any financing statements, security
agreements, collateral assignments, notices, control agreements, or other documents to perfect or give the highest priority to
Agent’s Lien on the Collateral. Borrower shall from time to time procure any instruments or documents as may be requested
by Agent, and take all further action that may be necessary or desirable, or that Agent may reasonably request, to perfect and
protect the Liens granted hereby and thereby. In addition, and for such purposes only, Borrower hereby authorizes Agent to execute
and deliver on behalf of Borrower and to file such financing statements, collateral assignments, notices, control agreements, security
agreements and other documents without the signature of Borrower either in Agent’s name or in the name of Agent as agent
and attorney-in-fact for Borrower. Borrower shall protect and defend Borrower’s title to the Collateral and Agent’s
Lien thereon against all Persons claiming any interest adverse to Borrower or Agent other than Permitted Liens.


 


7.4           Indebtedness.
Borrower shall not create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness, or permit any Subsidiary
so to do, other than Permitted Indebtedness, or prepay any Indebtedness or take any actions which impose on Borrower an obligation
to prepay any Indebtedness, except for the conversion of Indebtedness into equity securities and the payment of cash in lieu of
fractional shares in connection with such conversion.


 


7.5           Collateral.
Borrower shall at all times keep the Collateral, the Intellectual Property and all other property and assets used in Borrower’s
business or in which Borrower now or hereafter holds any interest free and clear from any legal process known to Borrower or Liens
whatsoever (except for Permitted Liens), and shall give Agent prompt written notice of any legal process affecting the Collateral,
the Intellectual Property, such other property and assets, or any Liens thereon, provided however, that the Collateral and such
other property and assets may be subject to Permitted Liens except that there shall be no Liens whatsoever on Intellectual Property.
Borrower shall cause its Subsidiaries to protect and defend such Subsidiary’s title to its assets from and against all Persons
claiming any interest adverse to such Subsidiary, and Borrower shall cause its Subsidiaries at all times to keep such Subsidiary’s
property and assets free and clear from any legal process or Liens whatsoever (except for Permitted Liens, provided however, that
there shall be no Liens whatsoever on Intellectual Property), and shall give Agent prompt written notice of any legal process known
to Borrower affecting such Subsidiary’s assets. Borrower shall not agree with any Person other than Agent or Lender not to
encumber its property.


 


7.6           Investments.
Borrower shall not directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries
so to do, other than Permitted Investments.


 


7.7           Distributions.
Borrower shall not, and shall not allow any Subsidiary to, (a) repurchase or redeem any class of stock or other equity interest
other than pursuant to employee, director or consultant repurchase plans or other similar agreements, provided, however, in each
case the repurchase or redemption price does not exceed the original consideration paid for such stock or equity interest, or (b)
declare or pay any cash dividend or make a cash distribution on any class of stock or other equity interest, except that a Subsidiary
may pay dividends or make distributions to Borrower, or (c) lend money to any employees, officers or directors or guarantee the
payment of any such loans granted by a third party in excess of $100,000 in the aggregate or (d) waive, release or forgive any
Indebtedness owed by any employees, officers or directors in excess of $100,000 in the aggregate.


 


7.8           Transfers.
Except for Permitted Transfers, Borrower shall not voluntarily or involuntarily transfer, sell, lease, license, lend or in any
other manner convey any equitable, beneficial or legal interest in any material portion of its assets.


 


7.9           Mergers
or Acquisitions. Borrower shall not merge, amalgamate, or consolidate, or permit any of its Subsidiaries to merge, amalgamate,
or consolidate, with or into any other business organization (other than mergers, amalgamations, or consolidations of (a) a Subsidiary
which is not a Borrower into another Subsidiary or into Borrower or (b) a Borrower into another Borrower), or acquire, or permit
any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person.


 


7.10         Taxes.
Borrower and its Subsidiaries shall pay when due all taxes, fees or other charges of any nature whatsoever (together with any related
interest or penalties) now or hereafter imposed or assessed against Borrower, Agent, Lender or the Collateral or upon Borrower’s
ownership, possession, use, operation or disposition thereof or upon Borrower’s rents, receipts or earnings arising therefrom.
Borrower shall file on or before the due date therefor all personal property tax returns in respect of the Collateral. Notwithstanding
the foregoing, Borrower may contest, in good faith and by appropriate proceedings, taxes for which Borrower maintains adequate
reserves therefor in accordance with GAAP.


 




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7.11         Corporate
Changes. Neither Borrower nor any Subsidiary shall change its corporate name, legal form or jurisdiction of formation without
twenty (20) days’ prior written notice to Agent. Neither Borrower nor any Subsidiary shall suffer a Change in Control. Neither
Borrower nor any Subsidiary shall relocate its chief executive office or its principal place of business unless: (i) it has provided
prior written notice to Agent; and (ii) such relocation shall be within the continental United States. Neither Borrower nor any
Subsidiary shall relocate any item of Collateral (other than (x) sales of Inventory in the ordinary course of business, (y) relocations
of Equipment having an aggregate value of up to $150,000 in any fiscal year, and (z) relocations of Collateral from a location
described on Exhibit C to another location described on Exhibit C) unless (i) it has provided prompt written notice to Agent, (ii)
such relocation is within the continental United States and, (iii) if such relocation is to a third party bailee, it has delivered
a bailee agreement in form and substance reasonably acceptable to Agent.


 


7.12         Deposit
Accounts. Neither Borrower nor any Subsidiary shall maintain any Deposit Accounts (other than the Permitted Accounts (as defined
herein)), or accounts holding Investment Property, except with respect to which Agent has an Account Control Agreement. Notwithstanding
the foregoing, Borrower may maintain (i) a petty cash account with Bank of America, provided that the aggregate balance of such
account does not exceed Ten Thousand Dollars ($10,000.00) at any time (the “BOA Account”), and (ii) deposit accounts
with Royal Bank of Canada, provided that the aggregate balance of such accounts do not exceed One Hundred Thousand Dollars ($100,000.00)
(the “RBC Accounts”) (the BOA Account and the RBC Account, collectively the “Permitted Accounts”).


 


7.13         Subsidiaries.
Borrower shall notify Agent of each Subsidiary formed subsequent to the Closing Date and, within 15 days of formation, shall cause
any such Subsidiary to execute and deliver to Agent a Joinder Agreement.


 


7.14         Notification
of Event of Default. Borrower shall notify Agent immediately of the occurrence of any Event of Default, such notice to be sent
via facsimile to Agent.


 


SECTION
8.          RIGHT TO invest; PAYMENT IN CASH OR COMMON STOCK


 


8.1           Right
to Invest. Lender or its assignee or nominee shall have the right, in its discretion, to participate in a Subsequent Financing
(as defined in the Equity Rights Letter Agreement) pursuant to the terms set forth in the Equity Rights Letter Agreement.


 


8.2           Payment
in Cash or Common Stock.


 


(a)          Subject
to satisfaction of the Stock Payment Conditions set forth in paragraph (b) of this Section 8.2 and compliance with the other terms
and conditions of this Section 8.2, Borrower may elect to pay, in whole or in part, up to $3,000,000 in the aggregate of any regularly
scheduled installment of principal (a “Principal Installment Payment”) by converting the Notes into shares of Common
Stock in lieu of payment in cash (such option, the “Stock Payment Option”). In order to validly exercise a Stock Payment
Option, Borrower (A) must deliver written notice thereof, in the form attached hereto as Exhibit I, to Lender (a “Borrower
Repayment Election Notice”) five (5) days prior to the applicable due date of the Principal Installment Payment (the “Principal
Installment Due Date”) and (B) shall either (i) (provided that Borrower’s transfer agent is participating in the Fast
Automated Securities Transfer Program of the Depository Trust Company) credit to Lender by no later than the second trading day
following the applicable Principal Installment Due Date (such date, the “Delivery Date”) such aggregate number of shares
of Common Stock to be issued to Lender with respect to such Borrower Repayment Election Notice, as determined in accordance with
this Section 8.2, or (ii) deliver to Lender stock certificates evidencing the number of shares of Common Stock with respect to
such Borrower Repayment Election Notice, as determined in accordance with this Section 8.2, by no later than the second trading
day following the applicable Delivery Date. All payments in respect of a Principal Installment Payment shall be made in cash, unless
(i) Borrower timely delivers a Borrower Repayment Election Notice in accordance with the immediately preceding sentence; (ii) Borrower
timely delivers the requisite stock certificates or credits the shares of Common Stock to Lender in accordance with this Section
8.2; and (iii) the Stock Payment Conditions set forth in Section 8.2(b) are satisfied in respect of such payment. A Borrower Repayment
Election Notice, once delivered by Borrower, shall be irrevocable unless otherwise agreed, in writing, by Agent, on behalf of the
Lender. If Borrower elects to convert the Notes (if applicable) to repay a Principal Installment Payment, in whole or in part,
in shares of Common Stock, the number of such shares of Common Stock to be issued in respect of such Principal Installment Payment
shall be equal to the number determined by dividing (x) the principal amount to be paid in shares of Common Stock by (y) the Fixed
Conversion Price. For purposes hereof, the “Fixed Conversion Price” shall be the price that is 15% higher than the
Exercise Price (as defined in the Warrant); provided, however, that upon the occurrence of any stock split, stock dividend, combination
of shares or reverse stock split pertaining to the Common Stock, the Fixed Conversion Price shall be proportionately increased
or decreased as necessary to reflect the proportionate change in the shares of Common Stock issued and outstanding as a result
of such stock split, stock dividend, combination of shares or reverse stock split. Any shares of Common Stock issued pursuant to
a Borrower Repayment Election Notice shall be deemed to be issued upon conversion of the Notes.


 




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(b)          Notwithstanding
Section 8.2(a), Borrower’s right to deliver, and Lender’s obligation to accept, shares of Common Stock in lieu of payment
in cash of a Principal Installment Payment is conditioned on the satisfaction of each of the following conditions (the “Stock
Payment Conditions”) as of such Delivery Date: (A) the closing price of the shares of Common Stock as reported by NASDAQ
on the NASDAQ market for each of the seven (7) consecutive trading days immediately preceding the Delivery Date shall be greater
than or equal to 115% of the Fixed Conversion Price; (B) the Common Stock issued in connection with any such payment does not exceed
15% of the total trading volume of the Common Stock for the twenty-two (22) consecutive trading days immediately prior to and including
such Delivery Date; (C) only one Repayment Election Notice may be given in any calendar month; (D) the aggregate principal amount
to be paid in shares of Common Stock pursuant to Section 8.2 of this Agreement shall not exceed Three Million Dollars ($3,000,000);
(E) the Common Stock is (and was on each of the twenty-two (22) consecutive trading days immediately preceding such Delivery Date)
quoted or listed on the NASDAQ market; (F) a registration statement is effective and available for the resale of all of the shares
of Common Stock to be delivered on such Delivery Date, or such shares of Common Stock are eligible for resale to the public pursuant
to Rule 144 without any limitation; (G) after giving effect to the issuance of such shares of Common Stock to Lender, any individual
Lender would not (A) beneficially own, together with its affiliates, Common Stock in excess of the limitations specified in subsection
8.2(c) below and (B) have been issued shares of Common Stock pursuant to all Repayment Election Notices in an aggregate amount
in excess of the Cap; (H) as of such Delivery Date, there is no outstanding Event of Default and there is no breach or default
that, if left uncured, would result in an Event of Default; and (I) Inc. shall have sufficient authorized but unissued shares of
Common Stock to provide for the issuance of the shares of Common Stock pursuant to the Borrower Repayment Election Notice. If any
of the Stock Payment Conditions are not satisfied as of a Delivery Date, Borrower shall not be permitted to pay, and the Lender
shall not be obligated to accept, the Principal Installment Payment in shares of Common Stock, and Borrower shall instead pay such
principal amount in cash; provided, however, that the Stock Payment Conditions set forth in clauses (A), (B), (C), (E), (F) and
(H) above may be waived by a writing executed by both Borrower and Lender. In the event the Borrower is relying upon an effective
registration statement to satisfy clause (F) of the Stock Payment Conditions, each of Inc. and Lender shall provide customary indemnification
to one another with respect to such registration statement in a form acceptable to the Borrower and Lender. By no later than the
first trading day following the Delivery Date, Borrower shall either (i) (provided that Borrower's transfer agent is participating
in the Fast Automated Securities Transfer Program of the Depository Trust Company) credit to Lender the shares of Common Stock
to be delivered by Borrower with respect to the portion of the Principal Installment Payment being paid in shares of Common Stock
or (ii) deliver to Agent, on behalf of each Lender, certificates, free of restrictive legends, evidencing the shares of Common
Stock to be delivered by Borrower with respect to the portion of the Principal Installment Payment being paid in shares of Common
Stock, which shares of Common Stock, in the case of clauses (i) and (ii), shall be allocated among each Lender in the manner specified
to Borrower by the Agent.


 


(c)          Notwithstanding
any provision herein to the contrary, no individual Lender, together with its affiliates, shall be permitted to beneficially own
a number of shares of Common Stock (other than shares that may be deemed beneficially owned except for being subject to a limitation
analogous to the limitation contained in this Section 8.2(c)) in excess of 9.99% of the number of shares of Common Stock then issued
and outstanding, it being the intent of Borrower and each Lender that each Lender, together with its respective affiliates, not
be deemed at any time to have the power to vote or dispose of greater than 9.99% of the number of shares of Common Stock issued
and outstanding at any time; provided, however, that each Lender shall have the right, upon 61 days’ prior written notice
to Borrower, to waive the 9.99% limitation of this subsection 8.2(c); provided, further, that upon such Lender’s waiver of
such 9.99% limitation, such Lender shall comply with the provisions under Rule 144 (“Rule 144”) of the Securities Act
of 1933, as amended (the “1933 Act”). Notwithstanding anything contained herein to the contrary, Borrower shall not
be permitted to issue to any Lender, and no Lender shall not be required to accept, shares of Common Stock pursuant to a Borrower
Repayment Election Notice if and to the extent such issuance, when taking together with all other issuances pursuant to prior Borrower
Repayment Election Notices, would result in (A) the issuance of more than 19.99% of the Common Stock outstanding as of the date
of this Agreement or (B) such Lender, together with its affiliates, beneficially owning in excess of 19.99% of the outstanding
Common Stock (each of clauses (A) and (B) are referred to herein as the “Cap”). As used herein, beneficial ownership
shall be determined in accordance with Section 13(d) of the 1934 Act. Upon the reasonable written request of any Lender, Borrower
shall within three (3) Business Days confirm in writing to Lender the number of shares of Common Stock then issued and outstanding
as of any given date. For purposes of Borrower’s compliance with this Section 8(c), in determining the percentage of Borrower’s
issued and outstanding Common Stock owned beneficially and/or of record by Lender and its affiliates as at any date, Borrower shall
be entitled to rely on the most recent written notice of such ownership (if any) provided by Lender to Borrower or the information
as to such ownership contained in the reports and schedules then filed with the Securities and Exchange Commission (the “SEC”)
by Lender; provided, that the foregoing shall not operate to impair Lender’s ability to refuse or reject any shares
of Common Stock issued to Lender by Borrower pursuant to this Section 8.2 if Lender’s acceptance of such shares would violate
any of the thresholds set forth in this Section 8.2(c).


 




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(d)          With
a view to making available to Lender the benefits of Rule 144 (or its successor rule) and any other rule or regulation of the SEC
that may at any time permit Lender to sell shares of Common Stock issued pursuant to Section 8.2 of this Agreement to the public
without registration, Borrower covenants and agrees that, upon Lender’s written request to Borrower, Borrower shall furnish
to Lender, within ten (10) Business Days after receipt of such request, a written statement confirming the compliance of Inc. with
the filing requirements of the SEC as set forth in paragraph (c)(1) of Rule 144, as such Rule may be amended from time to time.


 


(e)          If
Borrower elects to deliver a Borrower Repayment Election Notice, Inc. covenants and agrees to reserve from its duly authorized
capital stock, as of that date and any Delivery Date, not less than the number of shares of Common Stock that may be issuable upon
payment of any Principal Installment Payment pursuant to Section 8.2 of this Agreement. Borrower further represents, warrants and
covenants that, upon issuance of any shares of Common Stock pursuant to Section 8.2 of this Agreement, such shares of Common Stock
shall be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens and charges
with respect to the issue thereof.


 


(f)          For
so long as Lender holds any shares of Common Stock issued pursuant to Section 8.2 of this Agreement, Inc. shall make reasonable
efforts to maintain the Common Stock’s authorization for listing on NASDAQ and Inc. shall not take any action which would
reasonably be expected to result in the delisting or suspension of the Common Stock on NASDAQ.


 


SECTION
9.          EVENTS OF DEFAULT


 


The occurrence of any
one or more of the following events shall be an Event of Default:


 


9.1           Payments.
Borrower fails to pay any amount due under this Agreement, the Notes, or any of the other Loan Documents on the due date; or


 


9.2           Covenants.
Borrower breaches or defaults in the performance of any covenant or Secured Obligation under this Agreement, or any of the other
Loan Documents or any other agreement among Borrower, Agent and Lender, and (a) with respect to a default under any covenant
under this Agreement (other than under Sections 6, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, and 7.14,), any other Loan Document or any other
agreement among Borrower, Agent and Lender, such default continues for more than ten (10) days after the earlier of the date on
which (i) Agent or Lender has given notice of such default to Borrower and (ii) Borrower has actual knowledge of such default or
(b) with respect to a default under any of Sections 6, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, and 7.14, the occurrence of such default;
or


 


9.3           Material
Adverse Effect. A circumstance has occurred that would reasonably be expected to have a Material Adverse Effect; or


 


9.4           Representations.
Any representation or warranty made by Borrower in any Loan Document or in the Warrant shall have been false or misleading in any
material respect; or


 


9.5           Insolvency.
Borrower (A) (i) shall make an assignment for the benefit of creditors; or (ii) shall be unable to pay its debts as they
become due, or be unable to pay or perform under the Loan Documents, or shall become insolvent; or (iii) shall file a voluntary
petition in bankruptcy; or (iv) shall file any petition, answer, or document seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation pertinent
to such circumstances; or (v) shall seek or consent to or acquiesce in the appointment of any trustee, receiver, or liquidator
of Borrower or of all or any substantial part (i.e., 33-1/3% or more) of the assets or property of Borrower; or (vi) shall
cease operations of its business as its business has normally been conducted, or terminate substantially all of its employees;
or (vii) Borrower or its directors or majority shareholders shall take any action initiating any of the foregoing actions
described in clauses (i) through (vi); or (B) either (i) thirty (30) days shall have expired after the commencement of
an involuntary action against Borrower seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future statute, law or regulation, without such action being dismissed or all orders or
proceedings thereunder affecting the operations or the business of Borrower being stayed; or (ii) a stay of any such order
or proceedings shall thereafter be set aside and the action setting it aside shall not be timely appealed; or (iii) Borrower
shall file any answer admitting or not contesting the material allegations of a petition filed against Borrower in any such proceedings;
or (iv) the court in which such proceedings are pending shall enter a decree or order granting the relief sought in any such
proceedings; or (v) thirty (30) days shall have expired after the appointment, without the consent or acquiescence of Borrower,
of any trustee, receiver or liquidator of Borrower or of all or any substantial part of the properties of Borrower without such
appointment being vacated; or


 




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9.6           Attachments;
Judgments. Any portion of Borrower’s assets is attached or seized, or a levy is filed against any such assets, or a judgment
or judgments is/are entered for the payment of money, individually or in the aggregate, of at least $100,000, or Borrower is enjoined
or in any way prevented by court order from conducting any part of its business; or


 


9.7           Other
Obligations. The occurrence of any default under any agreement or obligation of Borrower involving any Indebtedness in excess
of $50,000, or the occurrence of any default under any agreement or obligation of Borrower that could reasonably be expected to
have a Material Adverse Effect.


 


SECTION
10.         REMEDIES


 


10.1         General.
Upon and during the continuance of any one or more Events of Default, (i) Agent may, at its option, accelerate and demand payment
of all or any part of the Secured Obligations together with a Prepayment Charge and declare them to be immediately due and payable
(provided, that upon the occurrence of an Event of Default of the type described in Section 9.5, all of the Secured Obligations
shall automatically be accelerated and made due and payable, in each case without any further notice or act), (ii) Agent may, at
its option, sign and file in Borrower’s name any and all collateral assignments, notices, control agreements, security agreements
and other documents it deems necessary or appropriate to perfect or protect the repayment of the Secured Obligations, and in furtherance
thereof, Borrower hereby grants Agent an irrevocable power of attorney coupled with an interest, and (iii) Agent may notify any
of Borrower’s account debtors to make payment directly to Agent, compromise the amount of any such account on Borrower’s
behalf and endorse Agent’s name without recourse on any such payment for deposit directly to Agent’s account. Agent
may exercise all rights and remedies with respect to the Collateral under the Loan Documents or otherwise available to it under
the UCC and other applicable law, including the right to release, hold, sell, lease, liquidate, collect, realize upon, or otherwise
dispose of all or any part of the Collateral and the right to occupy, utilize, process and commingle the Collateral. All Agent’s
rights and remedies shall be cumulative and not exclusive.


 


10.2         Collection;
Foreclosure. Upon the occurrence and during the continuance of any Event of Default, Agent may, at any time or from time to
time, apply, collect, liquidate, sell in one or more sales, lease or otherwise dispose of, any or all of the Collateral, in its
then condition or following any commercially reasonable preparation or processing, in such order as Agent may elect. Any such sale
may be made either at public or private sale at its place of business or elsewhere. Borrower agrees that any such public or private
sale may occur upon ten (10) calendar days’ prior written notice to Borrower. Agent may require Borrower to assemble the
Collateral and make it available to Agent at a place designated by Agent that is reasonably convenient to Agent and Borrower. The
proceeds of any sale, disposition or other realization upon all or any part of the Collateral shall be applied by Agent in the
following order of priorities:


 


First, to Agent and Lender in an
amount sufficient to pay in full Agent’s and Lender’s costs and professionals’ and advisors’ fees and expenses
as described in Section 11.11;


 


Second, to Lender in an amount equal
to the then unpaid amount of the Secured Obligations (including principal, interest, and the Default Rate interest), in such order
and priority as Agent may choose in its sole discretion; and


 


Finally, after the full, final,
and indefeasible payment in Cash of all of the Secured Obligations, to any creditor holding a junior Lien on the Collateral, or
to Borrower or its representatives or as a court of competent jurisdiction may direct.


 


Agent shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it complies with the obligations of a secured party under the UCC.


 




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10.3         No
Waiver. Agent shall be under no obligation to marshal any of the Collateral for the benefit of Borrower or any other Person,
and Borrower expressly waives all rights, if any, to require Agent to marshal any Collateral.


 


10.4         Cumulative
Remedies. The rights, powers and remedies of Agent hereunder shall be in addition to all rights, powers and remedies given
by statute or rule of law and are cumulative. The exercise of any one or more of the rights, powers and remedies provided herein
shall not be construed as a waiver of or election of remedies with respect to any other rights, powers and remedies of Agent.


 


SECTION
11.         MISCELLANEOUS


 


11.1         Severability.
Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective
only to the extent and duration of such prohibition or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.


 


11.2         Notice.
Except as otherwise provided herein, any notice, demand, request, consent, approval, declaration, service of process or other communication
(including the delivery of Financial Statements) that is required, contemplated, or permitted under the Loan Documents or with
respect to the subject matter hereof shall be in writing, and shall be deemed to have been validly served, given, delivered, and
received upon the earlier of: (i) the day of transmission by facsimile or hand delivery or delivery by an overnight express
service or overnight mail delivery service; or (ii) the third calendar day after deposit in the United States mails, with
proper first class postage prepaid, in each case addressed to the party to be notified as follows:


 


	 	(a)	If to Agent:	HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
	 	 	 	Legal Department
	 	 	 	Attention:  General Counsel and Mr. Bryan Jadot
	 	 	 	400 Hamilton Avenue, Suite 310
	 	 	 	Palo Alto, California  94301
	 	 	 	Facsimile:  650-473-9194
	 	 	 	Telephone:  650-289-3060
	 	(b)	If to Lender:	HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
	 	 	 	Legal Department
	 	 	 	Attention:  General Counsel and Mr. Bryan Jadot
	 	 	 	400 Hamilton Avenue, Suite 310
	 	 	 	Palo Alto, CA  94301
	 	 	 	Facsimile:  650-473-9194
	 	 	 	Telephone:  650-289-3060
	 	(c)	If to Borrower:	Celator Pharmaceuticals, Inc
	 	 	 	Celator Pharmaceuticals Corp.
	 	 	 	Attention:  Chief Financial Officer
	 	 	 	200 Princeton South Corporate Center, Suite 180
	 	 	 	Ewing, New Jersey 08628
	 	 	 	Facsimile:  609-243-0202
	 	 	 	Telephone:  609-243-0123


 


or to such other address as each
party may designate for itself by like notice.


 


11.3         Entire
Agreement; Amendments.


 


(a)          This
Agreement and the other Loan Documents constitute the entire agreement and understanding of the parties hereto in respect of the
subject matter hereof and thereof, and supersede and replace in their entirety any prior proposals, term sheets, non-disclosure
or confidentiality agreements, letters, negotiations or other documents or agreements, whether written or oral, with respect to
the subject matter hereof or thereof (including Agent’s revised proposal letter dated March 24, 2014).


 




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(b)          Neither
this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance
with the provisions of this Section 11.3(b). The Required Lenders and Borrower party to the relevant Loan Document may, or, with
the written consent of the Required Lenders, the Agent and the Borrower party to the relevant Loan Document may, from time to time,
(i) enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding
any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Borrower
hereunder or thereunder or (ii) waive, on such terms and conditions as the Required Lenders or the Agent, as the case may be, may
specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any default or Event of Default
and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (A) forgive
the principal amount or extend the final scheduled date of maturity of any Loan, extend the scheduled date of any amortization
payment in respect of any Term Loan Advance, or reduce the stated rate of any interest or fee payable hereunder) or extend the
scheduled date of any payment thereof, in each case without the written consent of each Lender directly affected thereby; (B) eliminate
or reduce the voting rights of any Lender under this Section 11.3(b) without the written consent of such Lender; (C) reduce any
percentage specified in the definition of Required Lenders, consent to the assignment or transfer by the Borrower of any of its
rights and obligations under this Agreement and the other Loan Documents, release all or substantially all of the Collateral or
release a Borrower from its obligations under the Loan Documents, in each case without the written consent of all Lenders; or (D)
amend, modify or waive any provision of Section 11.17 without the written consent of the Agent. Any such waiver and any such amendment,
supplement or modification shall apply equally to each Lender and shall be binding upon Borrower, the Lender, the Agent and all
future holders of the Loans.


 


11.4         No
Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the
parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.


 


11.5         No
Waiver. The powers conferred upon Agent and Lender by this Agreement are solely to protect its rights hereunder and under the
other Loan Documents and its interest in the Collateral and shall not impose any duty upon Agent or Lender to exercise any such
powers. No omission or delay by Agent or Lender at any time to enforce any right or remedy reserved to it, or to require performance
of any of the terms, covenants or provisions hereof by Borrower at any time designated, shall be a waiver of any such right or
remedy to which Agent or Lender is entitled, nor shall it in any way affect the right of Agent or Lender to enforce such provisions
thereafter.


 


11.6         Survival.
All agreements, representations and warranties contained in this Agreement and the other Loan Documents or in any document delivered
pursuant hereto or thereto shall be for the benefit of Agent and Lender and shall survive the execution and delivery of this Agreement
and the expiration or other termination of this Agreement. For the avoidance of doubt, the termination of this Agreement and/or
any payment or prepayment of the Secured Obligations shall not affect the term of the Warrant unless otherwise agreed in writing
by Agent.


 


11.7         Successors
and Assigns. The provisions of this Agreement and the other Loan Documents shall inure to the benefit of and be binding on
Borrower and its permitted assigns (if any). Borrower shall not assign its obligations under this Agreement or any of the other
Loan Documents without Agent’s express prior written consent, and any such attempted assignment shall be void and of no effect.
Agent and Lender may assign, transfer, or endorse its rights hereunder and under the other Loan Documents without prior notice
to Borrower, and all of such rights shall inure to the benefit of Agent’s and Lender’s successors and assigns.


 


11.8         Governing
Law. This Agreement and the other Loan Documents have been negotiated and delivered to Agent and Lender in the State of California,
and shall have been accepted by Agent and Lender in the State of California. Payment to Agent and Lender by Borrower of the Secured
Obligations is due in the State of California. This Agreement and the other Loan Documents shall be governed by, and construed
and enforced in accordance with, the laws of the State of California, excluding conflict of laws principles that would cause the
application of laws of any other jurisdiction.


 


11.9         Consent
to Jurisdiction and Venue. All judicial proceedings (to the extent that the reference requirement of Section 11.10 is not applicable)
arising in or under or related to this Agreement or any of the other Loan Documents may be brought in any state or federal court
located in the State of California. By execution and delivery of this Agreement, each party hereto generally and unconditionally:
(a) consents to nonexclusive personal jurisdiction in Santa Clara County, State of California; (b) waives any objection
as to jurisdiction or venue in Santa Clara County, State of California; (c) agrees not to assert any defense based on lack
of jurisdiction or venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby
in connection with this Agreement or the other Loan Documents. Service of process on any party hereto in any action arising out
of or relating to this Agreement shall be effective if given in accordance with the requirements for notice set forth in Section 11.2,
and shall be deemed effective and received as set forth in Section 11.2. Nothing herein shall affect the right to serve process
in any other manner permitted by law or shall limit the right of either party to bring proceedings in the courts of any other jurisdiction.


 




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11.10         Mutual
Waiver of Jury Trial / Judicial Reference.


 


(a)          Because
disputes arising in connection with complex financial transactions are most quickly and economically resolved by an experienced
and expert Person and the parties wish applicable state and federal laws to apply (rather than arbitration rules), the parties
desire that their disputes be resolved by a judge applying such applicable laws. EACH OF BORROWER, AGENT AND LENDER SPECIFICALLY
WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY
OTHER CLAIM (COLLECTIVELY, “CLAIMS”) ASSERTED BY BORROWER AGAINST AGENT, LENDER OR THEIR RESPECTIVE ASSIGNEE OR BY
AGENT, LENDER OR THEIR RESPECTIVE ASSIGNEE AGAINST BORROWER. This waiver extends to all such Claims, including Claims that involve
Persons other than Agent, Borrower and Lender; Claims that arise out of or are in any way connected to the relationship among Borrower,
Agent and Lender; and any Claims for damages, breach of contract, tort, specific performance, or any equitable or legal relief
of any kind, arising out of this Agreement, any other Loan Document.


 


(b)          If
the waiver of jury trial set forth in Section 11.10(a) is ineffective or unenforceable, the parties agree that all Claims shall
be resolved by reference to a private judge sitting without a jury, pursuant to Code of Civil Procedure Section 638, before a mutually
acceptable referee or, if the parties cannot agree, a referee selected by the Presiding Judge of the Santa Clara County, California.
Such proceeding shall be conducted in Santa Clara County, California, with California rules of evidence and discovery applicable
to such proceeding.


 


(c)          In
the event Claims are to be resolved by judicial reference, either party may seek from a court identified in Section 11.9, any prejudgment
order, writ or other relief and have such prejudgment order, writ or other relief enforced to the fullest extent permitted by law
notwithstanding that all Claims are otherwise subject to resolution by judicial reference.


 


11.11         Professional
Fees. Borrower promises to pay Agent’s and Lender’s fees and expenses necessary to finalize the loan documentation,
including but not limited to reasonable attorney’s fees, UCC searches, filing costs, and other miscellaneous expenses. In
addition, Borrower promises to pay any and all reasonable attorneys’ and other professionals’ fees and expenses (including
fees and expenses of in-house counsel) incurred by Agent and Lender after the Closing Date in connection with or related to: (a) the
Loan; (b) the administration, collection, or enforcement of the Loan; (c) the amendment or modification of the Loan Documents;
(d) any waiver, consent, release, or termination under the Loan Documents; (e) the protection, preservation, audit, field
exam, sale, lease, liquidation, or disposition of Collateral or the exercise of remedies with respect to the Collateral; (f) any
legal, litigation, administrative, arbitration, or out of court proceeding in connection with or related to Borrower or the Collateral,
and any appeal or review thereof; and (g) any bankruptcy, restructuring, reorganization, assignment for the benefit of creditors,
workout, foreclosure, or other action related to Borrower, the Collateral, the Loan Documents, including representing Agent or
Lender in any adversary proceeding or contested matter commenced or continued by or on behalf of Borrower’s estate, and any
appeal or review thereof.


 


11.12         Confidentiality.
Agent and Lender acknowledge that certain items of Collateral and information provided to Agent and Lender by Borrower are confidential
and proprietary information of Borrower, if and to the extent such information either (x) is marked as confidential by Borrower
at the time of disclosure, or (y) should reasonably be understood to be confidential (the “Confidential Information”).
Accordingly, Agent and Lender agree that any Confidential Information it may obtain in the course of acquiring, administering,
or perfecting Agent’s security interest in the Collateral shall not be disclosed to any other Person or entity in any manner
whatsoever, in whole or in part, without the prior written consent of Borrower, except that Agent and Lender may disclose any such
information: (a) to its own directors, officers, employees, accountants, counsel and other professional advisors and to its
affiliates if Agent or Lender in their sole discretion determines that any such party should have access to such information in
connection with such party’s responsibilities in connection with the Loan or this Agreement and, provided that such recipient
of such Confidential Information either (i) agrees to be bound by the confidentiality provisions of this paragraph or (ii) is otherwise
subject to confidentiality restrictions that reasonably protect against the disclosure of Confidential Information; (b) if
such information is generally available to the public; (c) if required or appropriate in any report, statement or testimony
submitted to any governmental authority having or claiming to have jurisdiction over Agent or Lender; (d) if required or appropriate
in response to any summons or subpoena or in connection with any litigation, to the extent permitted or deemed advisable by Agent’s
or Lender’s counsel; (e) to comply with any legal requirement or law applicable to Agent or Lender; (f) to the
extent reasonably necessary in connection with the exercise of any right or remedy under any Loan Document, including Agent’s
sale, lease, or other disposition of Collateral after default; (g) to any participant or assignee of Agent or Lender or any
prospective participant or assignee; provided, that such participant or assignee or prospective participant or assignee agrees
in writing to be bound by this Section prior to disclosure; or (h) otherwise with the prior consent of Borrower; provided,
that any disclosure made in violation of this Agreement shall not affect the obligations of Borrower or any of its affiliates or
any guarantor under this Agreement or the other Loan Documents.


 




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11.13         
Assignment of Rights. Borrower acknowledges and understands that Agent or Lender may sell and assign all or part of its
interest hereunder and under the Loan Documents to any Person or entity (an “Assignee”). After such assignment the
term “Agent” or “Lender” as used in the Loan Documents shall mean and include such Assignee, and such Assignee
shall be vested with all rights, powers and remedies of Agent and Lender hereunder with respect to the interest so assigned; but
with respect to any such interest not so transferred, Agent and Lender shall retain all rights, powers and remedies hereby given.
No such assignment by Agent or Lender shall relieve Borrower of any of its obligations hereunder. Lender agrees that in the event
of any transfer by it of the Note(s)(if any), it will endorse thereon a notation as to the portion of the principal of the Note(s),
which shall have been paid at the time of such transfer and as to the date to which interest shall have been last paid thereon.


 


11.14         Revival
of Secured Obligations. This Agreement and the Loan Documents shall remain in full force and effect and continue to be effective
if any petition is filed by or against Borrower for liquidation or reorganization, if Borrower becomes insolvent or makes an assignment
for the benefit of creditors, if a receiver or trustee is appointed for all or any significant part of Borrower’s assets,
or if any payment or transfer of Collateral is recovered from Agent or Lender. The Loan Documents and the Secured Obligations and
Collateral security shall continue to be effective, or shall be revived or reinstated, as the case may be, if at any time payment
and performance of the Secured Obligations or any transfer of Collateral to Agent, or any part thereof is rescinded, avoided or
avoidable, reduced in amount, or must otherwise be restored or returned by, or is recovered from, Agent, Lender or by any obligee
of the Secured Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise,
all as though such payment, performance, or transfer of Collateral had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, avoided, avoidable, restored, returned, or recovered, the Loan Documents and the Secured Obligations
shall be deemed, without any further action or documentation, to have been revived and reinstated except to the extent of the full,
final, and indefeasible payment to Agent or Lender in Cash.


 


11.15         Counterparts.
This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts, and by
different parties hereto in separate counterparts, each of which when so delivered shall be deemed an original, but all of which
counterparts shall constitute but one and the same instrument.


 


11.16         No
Third Party Beneficiaries. No provisions of the Loan Documents are intended, nor will be interpreted, to provide or create
any third-party beneficiary rights or any other rights of any kind in any Person other than Agent, Lender and Borrower unless specifically
provided otherwise herein, and, except as otherwise so provided, all provisions of the Loan Documents will be personal and solely
among Agent, the Lender and the Borrower.


 


11.17         Agency.


 


(a)          Lender
hereby irrevocably appoints Hercules Technology Growth Capital, Inc. to act on its behalf as the Agent hereunder and under the
other Loan Documents and authorizes the Agent to take such actions on its behalf and to exercise such powers as are delegated to
the Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.


 


(b)          Lender
agrees to indemnify the Agent in its capacity as such (to the extent not reimbursed by Borrower and without limiting the obligation
of Borrower to do so), according to its respective Term Commitment percentages (based upon the total outstanding Term Loan Commitments)
in effect on the date on which indemnification is sought under this Section 11.17, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any
time be imposed on, incurred by or asserted against the Agent in any way relating to or arising out of, this Agreement, any of
the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby
or thereby or any action taken or omitted by the Agent under or in connection with any of the foregoing; The agreements in this
Section shall survive the payment of the Loans and all other amounts payable hereunder.


 


(c)          Agent
in Its Individual Capacity. The Person serving as the Agent hereunder shall have the same rights and powers in its capacity
as a Lender as any other Lender and may exercise the same as though it were not the Agent and the term “Lender” shall,
unless otherwise expressly indicated or unless the context otherwise requires, include each such Person serving as Agent hereunder
in its individual capacity.


 


(d)          Exculpatory
Provisions. The Agent shall have no duties or obligations except those expressly set forth herein and in the other Loan Documents.
Without limiting the generality of the foregoing, the Agent shall not:


 


1.          be
subject to any fiduciary or other implied duties, regardless of whether any default or any Event of Default has occurred and is
continuing;


 




    	23



    	 



    

 


2.          have
any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly
contemplated hereby or by the other Loan Documents that the Agent is required to exercise as directed in writing by the Lender,
provided that the Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose
the Agent to liability or that is contrary to any Loan Document or applicable law; and


 


3.          except
as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and the Agent shall not be liable for
the failure to disclose, any information relating to the Borrower or any of its affiliates that is communicated to or obtained
by any Person serving as the Agent or any of its affiliates in any capacity.


 


(e)          The
Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Lender or as the
Agent shall believe in good faith shall be necessary, under the circumstances or (ii) in the absence of its own gross negligence
or willful misconduct.


 


(f)          The
Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation
made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other
document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of
the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any default or Event of
Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other
agreement, instrument or document or (v) the satisfaction of any condition set forth in Section 4 or elsewhere herein, other than
to confirm receipt of items expressly required to be delivered to the Agent.


 


(g)          Reliance
by Agent. Agent may rely, and shall be fully protected in acting, or refraining to act, upon, any resolution, statement, certificate,
instrument, opinion, report, notice, request, consent, order, bond or other paper or document that it has no reason to believe
to be other than genuine and to have been signed or presented by the proper party or parties or, in the case of cables, telecopies
and telexes, to have been sent by the proper party or parties. In the absence of its gross negligence or willful misconduct, Agent
may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates
or opinions furnished to Agent and conforming to the requirements of the Loan Agreement or any of the other Loan Documents. Agent
may consult with counsel, and any opinion or legal advice of such counsel shall be full and complete authorization and protection
in respect of any action taken, not taken or suffered by Agent hereunder or under any Loan Documents in accordance therewith. Agent
shall have the right at any time to seek instructions concerning the administration of the Collateral from any court of competent
jurisdiction. Agent shall not be under any obligation to exercise any of the rights or powers granted to Agent by this Agreement,
the Loan Agreement and the other Loan Documents at the request or direction of Lenders unless Agent shall have been provided by
Lender with adequate security and indemnity against the costs, expenses and liabilities that may be incurred by it in compliance
with such request or direction.


 


11.18         Publicity.


 


(a)          Borrower
consents to the publication and use by Agent or Lender the following items and information, to the extent such items and information
are already contained in any regular, periodic or special reports or registration statements that Borrower files with the Securities
and Exchange Commission or otherwise contained in any press release or publicly available investor presentation made available
on the Borrower’s website, and provided that such items and information as depicted, described or otherwise used by Agent
or Lender are done so in a manner consistent with such reports or registration statements wherein the items or information are
found: (i) Borrower's name (including a brief description of the relationship among Borrower, Agent and Lender) and logo and a
hyperlink to Borrower’s web site, separately or together, in written and oral presentations, advertising, promotional and
marketing materials, client lists, public relations materials or on its web site (together, the “Lender Publicity Materials”);
(ii) the names of officers of Borrower in the Lender Publicity Materials; and (iii) Borrower’s name, trademarks or servicemarks
in any news release concerning Agent or Lender.


 


(b)          Borrower
shall, without Agent’s or Lender’s consent, have the right to publicize or use Agent’s or Lender's name (including
a brief description of the relationship among Borrower, Agent and Lender) in conjunction with (i) any regular, periodic and special
reports or registration statements that Borrower files with the Securities and Exchange Commission or any governmental authority
that may be substituted therefor, or any national securities exchange, or (ii) any public or private offering materials or other
investor relations information produced by the Borrower: Agent’s or Lender's name (including a brief description of the relationship
among Borrower, Agent and Lender).


 




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11.19         Borrower
Liability. Either Borrower may, acting singly, request Advances hereunder.  Each Borrower hereby appoints the other as
agent for the other for all purposes hereunder, including with respect to requesting Advances hereunder. Each Borrower hereunder
shall be jointly and severally obligated to repay all Advances made hereunder, regardless of which Borrower actually receives said
Advance, as if each Borrower hereunder directly received all Advances.  Each Borrower waives (a) any suretyship defenses
available to it under the Code or any other applicable law, including, without limitation, the benefit of California Civil Code
Section 2815 permitting revocation as to future transactions and the benefit of California Civil Code Sections 1432, 2809, 2810,
2819, 2839, 2845, 2847, 2848, 2849, 2850, and 2899 and 3433, and (b) any right to require Lender to: (i) proceed against
any Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy. Lender may
exercise or not exercise any right or remedy it has against any Borrower or any security it holds (including the right to foreclose
by judicial or non-judicial sale) without affecting any Borrower’s liability.  Notwithstanding any other provision of
this Agreement or other related document, each Borrower irrevocably waives all rights that it may have at law or in equity (including,
without limitation, any law subrogating Borrower to the rights of Lender under this Agreement) to seek contribution, indemnification
or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable
for any of the Secured Obligations, for any payment made by Borrower with respect to the Secured Obligations in connection with
this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Secured
Obligations as a result of any payment made by Borrower with respect to the Secured Obligations in connection with this Agreement
or otherwise.  Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section
shall be null and void.  If any payment is made to a Borrower in contravention of this Section, such Borrower shall hold such
payment in trust for Lender and such payment shall be promptly delivered to Lender for application to the Secured Obligations,
whether matured or unmatured.


 


(SIGNATURES TO FOLLOW)


 




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IN WITNESS WHEREOF,
Borrower, Agent and Lender have duly executed and delivered this Loan and Security Agreement as of the day and year first above
written.


 


	 	BORROWER:
	 	CELATOR PHARMACEUTICALS, INC.
	 	Signature:	/s/ Scott T. Jackson
	 	Print Name:	Scott T. Jackson
	 	Title:	Chief Executive Officer
	 	 	 
	 	CELATOR PHARMACEUTICALS CORP.
	 	Signature:	/s/ Scott T. Jackson
	 	Print Name:	Scott T. Jackson
	 	Title:	Chief Executive Officer
	 	 	 
	Accepted in Palo Alto, California:	 	 
	 	AGENT:
	 	HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
	 	Signature:	/s/ Michael Penney
	 	Print Name:	Michael Penney
	 	Title:	General Counsel
	 	 	 
	 	LENDER:
	 	HERCULES TECHNOLOGY GROWTH CAPITAL, INC.
	 	Signature:	/s/ Michael Penney
	 	Print Name:	Michael Penney
	 	Title:	General Counsel


 




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Table of Exhibits and Schedules


 


	Exhibit A:	Advance Request 
	 	Attachment to Advance Request
	Exhibit B:	Promissory Note
	Exhibit C:	Name, Locations, and Other Information for Borrower
	Exhibit D:	Borrower’s Patents, Trademarks, Copyrights and Licenses
	Exhibit E:	Borrower’s Deposit Accounts and Investment Accounts
	Exhibit F:	Compliance Certificate
	Exhibit G:	Joinder Agreement
	Exhibit H:	ACH Debit Authorization Agreement
	Exhibit I:	Borrower Repayment Election Notice
	Schedule 1	Subsidiaries
	Schedule 1.1	Commitments
	Schedule 1A	Existing Permitted Indebtedness
	Schedule 1B	Existing Permitted Investments
	Schedule 1C	Existing Permitted Liens
	Schedule 5.3	Consents, Etc.
	Schedule 5.5	Actions Before Governmental Authorities
	Schedule 5.8	Tax Matters
	Schedule 5.9	Intellectual Property Claims
	Schedule 5.10	Intellectual Property
	Schedule 5.11	Borrower Products
	Schedule 5.14	Capitalization


 




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EXHIBIT
A


 


ADVANCE
REQUEST


 


	To: 	Agent:	 	Date:	__________, 2014
	 	Hercules Technology Growth Capital, Inc. (the “Agent”)	 	 	 
	 	400 Hamilton Avenue, Suite 310	 	 	 
	 	Palo Alto, CA 94301	 	 	 
	 	Facsimile:  650-473-9194	 	 	 
	 	Attn:	 	 	 


 


Celator Pharmaceuticals, Inc. and Celator Pharmaceuticals Corp.
(“Borrower”) hereby requests from Hercules Technology Growth Capital, Inc. (“Lender”) an Advance in the
amount of _____________________ Dollars ($________________) on ______________, _____ (the “Advance Date”) pursuant
to the Loan and Security Agreement among Borrower, Agent and Lender (the “Agreement”). Capitalized words and other
terms used but not otherwise defined herein are used with the same meanings as defined in the Agreement.


Please:


 


(a)           Issue
a check payable to Borrower                           ________


or


(b)           Wire
Funds to Borrower’s account                          ________





	 	Bank:	 	 
	 	Address:  	 	 
	 	 	 	 
	 	ABA Number:	 	 
	 	Account Number:	 	 
	 	Account Name:	 	 




 


Borrower represents
that the conditions precedent to the Advance set forth in the Agreement are satisfied and shall be satisfied upon the making of
such Advance, including but not limited to: (i) that no event that has had or could reasonably be expected to have a Material
Adverse Effect has occurred and is continuing; (ii) that the representations and warranties set forth in the Agreement and
in the Warrant are and shall be true and correct in all material respects on and as of the Advance Date with the same effect as
though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date;
(iii) that Borrower is in compliance with all the terms and provisions set forth in each Loan Document on its part to be observed
or performed; and (iv) that as of the Advance Date, no fact or condition exists that would (or would, with the passage of
time, the giving of notice, or both) constitute an Event of Default under the Loan Documents. Borrower understands and acknowledges
that Agent has the right to review the financial information supporting this representation and, based upon such review in its
sole discretion, Lender may decline to fund the requested Advance.


 


Borrower hereby represents
that Borrower’s corporate status and locations have not changed since the date of the Agreement or, if the Attachment to
this Advance Request is completed, are as set forth in the Attachment to this Advance Request.


 


Borrower agrees to
notify Agent promptly before the funding of the Loan if any of the matters which have been represented above shall not be true
and correct on the Borrowing Date and if Agent has received no such notice before the Advance Date then the statements set forth
above shall be deemed to have been made and shall be deemed to be true and correct as of the Advance Date.


 


(SIGNATURE PAGE FOLLOWS)


 




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Executed as of [ ],
2014.


BORROWER: CELATOR PHARMACEUTICALS, INC.


SIGNATURE:________________________

TITLE:_____________________________

PRINT NAME:______________________


 


BORROWER: CELATOR PHARMACEUTICALS CORP.


SIGNATURE:________________________

TITLE:_____________________________

PRINT NAME:______________________


 




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ATTACHMENT
TO ADVANCE REQUEST


 


Dated: _______________________


 


Borrower hereby represents and warrants to Agent that Borrower’s
current name and organizational status is as follows:


 


	Name:	Celator Pharmaceuticals, Inc.
	Type of organization:	Corporation
	State of organization:	Delaware
	Organization file number:	3946959
	 	 
	Name:	Celator Pharmaceuticals Corp.
	Type of organization:	Unlimited Liability Company
	State of organization:	 
	Organization file number:	 


 


			



Borrower hereby represents and warrants to Agent that the street
addresses, cities, states and postal codes of its current locations are as follows:


 




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EXHIBIT
B


 


PROMISSORY
NOTE


 


	$[  ],000,000	Advance Date:  ___ __, 20[  ]
	 	Maturity Date:  _____ ___, 20[ ]


 


FOR VALUE RECEIVED,
Celator Pharmaceuticals, Inc., a Delaware corporation, and Celator Pharmaceuticals Corp., in each case for itself and its Subsidiaries
(the “Borrower”) hereby promises to pay to the order of Hercules Technology Growth Capital, Inc., a Maryland corporation
or the holder of this Note (the “Lender”) at 400 Hamilton Avenue, Suite 310, Palo Alto, CA 94301 or such other place
of payment as the holder of this Secured Term Promissory Note (this “Promissory Note”) may specify from time to time
in writing, in lawful money of the United States of America, the principal amount of [ ] Million Dollars ($[ ],000,000) or such
other principal amount as Lender has advanced to Borrower, together with interest at a floating per annum rate equal to the greater
of either (i) nine and three quarters of one percent (9.75%), or (ii) the sum of (A) nine and three quarters of one percent (9.75%),
plus (B) the Prime Rate minus three and one quarter of one percent (3.25%) based upon a year consisting of 360 days, with interest
computed daily based on the actual number of days in each month.


 


This Promissory Note
is the Note referred to in, and is executed and delivered in connection with, that certain Loan and Security Agreement dated [
], 20[ ], by and among Borrower, Hercules Technology Growth Capital, Inc., a Maryland corporation (the “Agent”) and
the several banks and other financial institutions or entities from time to time party thereto as lender (as the same may from
time to time be amended, modified or supplemented in accordance with its terms, the “Loan Agreement”), and is entitled
to the benefit and security of the Loan Agreement and the other Loan Documents (as defined in the Loan Agreement), to which reference
is made for a statement of all of the terms and conditions thereof. All payments shall be made in accordance with the Loan Agreement.
All terms defined in the Loan Agreement shall have the same definitions when used herein, unless otherwise defined herein. An Event
of Default under the Loan Agreement shall constitute a default under this Promissory Note.


 


Borrower waives presentment
and demand for payment, notice of dishonor, protest and notice of protest under the UCC or any applicable law. Borrower agrees
to make all payments under this Promissory Note without setoff, recoupment or deduction and regardless of any counterclaim or defense.
This Promissory Note has been negotiated and delivered to Lender and is payable in the State of California. This Promissory Note
shall be governed by and construed and enforced in accordance with, the laws of the State of California, excluding any conflicts
of law rules or principles that would cause the application of the laws of any other jurisdiction.


 


	BORROWER FOR ITSELF AND	 	 
	ON BEHALF OF ITS SUBSIDIARIES:	CELATOR PHARMACEUTICALS, INC.
	 	By:	 
	 	Title:	 
	 	 	 
	 	CELATOR PHARMACEUTICALS CORP.
	 	By:	 
	 	Title:	 


 




    	 



    	 



    

 


EXHIBIT
C


 


NAME, LOCATIONS,
AND OTHER INFORMATION FOR BORROWER


 


1. Borrower represents
and warrants to Agent that Borrower’s current name and organizational status as of the Closing Date is as follows:


 


	Name:	Celator Pharmaceuticals, Inc.
	 	 
	 	Celator Pharmaceuticals Corp.
	 	 
	Type of organization:	Corporation
	 	 
	State of organization:	Delaware
	 	 
	Organization file number:	3946959


 


2. Borrower represents
and warrants to Agent that for five (5) years prior to the Closing Date, Borrower did not do business under any other name or organization
or form except the following: NONE.


 


Name:

Used during dates of:

Type of Organization:

State of organization:

Organization file Number:

Borrower’s fiscal year ends on _____

Borrower’s federal employer tax identification number is: _______________


 


3. Borrower represents
and warrants to Agent that its chief executive office is located at 200 PrincetonSouth Corporate Center, Suite 180, Ewing, New
Jersey, USA 08628.


 




    	 



    	 



    

 


EXHIBIT
D


 


BORROWER’S
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES


 




    	 



    	 



    

 


EXHIBIT
E


 


BORROWER’S
DEPOSIT ACCOUNTS AND INVESTMENT ACCOUNTS


 




    	 



    	 



    

 


EXHIBIT
F


 


COMPLIANCE
CERTIFICATE


 


Hercules Technology Growth Capital, Inc. (as “Agent”)

400 Hamilton Avenue, Suite 310

Palo Alto, CA 94301


 


Reference is made to
that certain Loan and Security Agreement dated [ ], 20[ ] and all ancillary documents entered into in connection with such Loan
and Security Agreement all as may be amended from time to time, (hereinafter referred to collectively as the “Loan Agreement”)
by and among Hercules Technology Growth Capital, Inc. (the “Agent”), the several banks and other financial institutions
or entities from time to time party thereto (collectively, the “Lender”) and Hercules Technology Growth Capital, Inc.,
as agent for the Lender (the “Agent”) and Celator Pharmaceuticals, Inc. and Celator Pharmaceuticals Corp. (the “Borrower”)
as Borrower. All capitalized terms not defined herein shall have the same meaning as defined in the Loan Agreement.


 


The undersigned is
an Officer of the Borrower, knowledgeable of all Borrower financial matters, and is authorized to provide certification of information
regarding the Borrower; hereby certifies that in accordance with the terms and conditions of the Loan Agreement, the Borrower is
in compliance for the period ending ___________ of all covenants, conditions and terms and hereby reaffirms that all representations
and warranties contained therein are true and correct on and as of the date of this Compliance Certificate with the same effect
as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier
date, after giving effect in all cases to any standard(s) of materiality contained in the Loan Agreement as to such representations
and warranties. Attached are the required documents supporting the above certification. The undersigned further certifies that
these are prepared in accordance with GAAP (except for the absence of footnotes with respect to unaudited financial statement and
subject to normal year end adjustments) and are consistent from one period to the next except as explained below.


 


	 	 	CHECK IF
	REPORTING REQUIREMENT	REQUIRED	 ATTACHED
	Interim Financial Statements 	Monthly within 30 days	 
	Interim Financial Statements 	Quarterly within 45 days	 
	Audited Financial Statements 	FYE within 150 days	 


  


	ACCOUNT BALANCES	 
	Name of Bank	Balance of Account (as of the delivery of the Compliance Certificate)
	 	 
	Bank of America	$________________


 


	 	Very Truly Yours,
	 	CELATOR PHARMACEUTICALS, INC.
	 	By:	 
	 	Name:	 
	 	Its:	 
	 	 	 
	 	CELATOR PHARMACEUTICALS CORP.
	 	By:	 
	 	Name:	 
	 	Its:	 


 




    	 



    	 



    

 


EXHIBIT
G


 


FORM OF
JOINDER AGREEMENT


 


This Joinder Agreement
(the “Joinder Agreement”) is made and dated as of [ ], 20[ ], and is entered into by and between__________________.,
a ___________ corporation (“Subsidiary”), and HERCULES TECHNOLOGY GROWTH CAPITAL, INC., a Maryland corporation (as
“Agent”).


 


RECITALS


 


A. Subsidiary’s
Affiliate, Celator Pharmaceuticals, Inc. and Celator Pharmaceuticals Corp.(“Borrower”) [has entered/desires to enter]
into that certain Loan and Security Agreement dated [ ], 2014, with the several banks and other financial institutions or entities
from time to time party thereto as lender (collectively, the “Lender”) and the Agent, as such agreement may be amended
(the “Loan Agreement”), together with the other agreements executed and delivered in connection therewith;


 


B. Subsidiary acknowledges
and agrees that it will benefit both directly and indirectly from Borrower’s execution of the Loan Agreement and the other
agreements executed and delivered in connection therewith;


 


AGREEMENT


 


NOW THEREFORE, Subsidiary
and Agent agree as follows:


 


		1.	The recitals set forth above are incorporated into and
made part of this Joinder Agreement. Capitalized terms not defined herein shall have the meaning provided in the Loan Agreement.



 


		2.	By signing this Joinder Agreement, Subsidiary shall be
bound by the terms and conditions of the Loan Agreement the same as if it were the Borrower (as defined in the Loan Agreement)
under the Loan Agreement, mutatis mutandis, provided however, that (a) with respect to (i) Section 5.1 of the Loan Agreement,
Subsidiary represents that it is an entity duly organized, legally existing and in good standing under the laws of [ ], (b) neither
Agent nor Lender shall have any duties, responsibilities or obligations to Subsidiary arising under or related to the Loan Agreement
or the other agreements executed and delivered in connection therewith, (c) that if Subsidiary is covered by Borrower’s
insurance, Subsidiary shall not be required to maintain separate insurance or comply with the provisions of Sections 6.1 and 6.2
of the Loan Agreement, and (d) that as long as Borrower satisfies the requirements of Section 7.1 of the Loan Agreement, Subsidiary
shall not have to provide Agent separate Financial Statements. To the extent that Agent or Lender has any duties, responsibilities
or obligations arising under or related to the Loan Agreement or the other agreements executed and delivered in connection therewith,
those duties, responsibilities or obligations shall flow only to Borrower and not to Subsidiary or any other Person or entity.
By way of example (and not an exclusive list): (i) Agent’s providing notice to Borrower in accordance with the Loan Agreement
or as otherwise agreed among Borrower, Agent and Lender shall be deemed provided to Subsidiary; (ii) a Lender’s providing
an Advance to Borrower shall be deemed an Advance to Subsidiary; and (iii) Subsidiary shall have no right to request an Advance
or make any other demand on Lender.



 


		3.	Subsidiary agrees not to certificate its equity securities
without Agent’s prior written consent, which consent may be conditioned on the delivery of such equity securities to Agent
in order to perfect Agent’s security interest in such equity securities.



 


		4.	Subsidiary acknowledges that it benefits, both directly
and indirectly, from the Loan Agreement, and hereby waives, for itself and on behalf on any and all successors in interest (including
without limitation any assignee for the benefit of creditors, receiver, bankruptcy trustee or itself as debtor-in-possession under
any bankruptcy proceeding) to the fullest extent provided by law, any and all claims, rights or defenses to the enforcement of
this Joinder Agreement on the basis that (a) it failed to receive adequate consideration for the execution and delivery of this
Joinder Agreement or (b) its obligations under this Joinder Agreement are avoidable as a fraudulent conveyance.



 


[REMAINDER OF PAGE INTENTIONALLY
LEFT BLANK]


 




    	 



    	 



    

 


[SIGNATURE PAGE TO JOINDER
AGREEMENT]


 





	SUBSIDIARY:	 
	 	 
	_________________________________.	 


 





	 	By:
	 	Name:
	 	Title:
	 	 
	 	Address:
	 	 
	 	Telephone: ___________
	 	Facsimile: ____________







  


AGENT:


 


HERCULES TECHNOLOGY GROWTH CAPITAL,
INC.


 


	 	By:	 	 
	 	Name:	 	 
	 	Title: 	 	 


 


	 	Address:
	 	400 Hamilton Ave., Suite 310
	 	Palo Alto, CA 94301
	 	Facsimile:  650-473-9194
	 	Telephone:  650-289-3060


 




    	 



    	 



    

 


EXHIBIT
H


 


ACH DEBIT
AUTHORIZATION AGREEMENT


 


Hercules Technology Growth Capital, Inc.

400 Hamilton Avenue, Suite 310

Palo Alto, CA 94301


 


Re:      Loan and Security Agreement dated
_______________ between Celator Pharmaceuticals, Inc. and Celator Pharmaceuticals Corp. (“Borrower”) and Hercules Technology
Growth Capital, Inc. (“Agent”) (the “Agreement”)


 


In connection with the above referenced
Agreement, the Borrower hereby authorizes the Agent to initiate debit entries for the periodic payments due under the Agreement
to the Borrower’s account indicated below. The Borrower authorizes the depository institution named below to debit to such
account.


 


	Depository Name	Branch
	City	State and Zip Code
	Transit/ABA Number	Account Number


 


This authority will remain in full force
and effect so long as any amounts are due under the Agreement.


 


	 	 
	(Borrower)(Please Print)	 
	By:	 	 
	Date:	 	 


 


 




    	 



    	 



    

 


EXHIBIT
I


 


BORROWER
REPAYMENT ELECTION NOTICE


 


[INSERT DATE]


 


Hercules Technology Growth Capital, Inc.


400 Hamilton Avenue, Suite 310


Palo Alto, CA 94301


 


Reference is made to
that certain Loan and Security Agreement dated [ ], 20[ ] and all ancillary documents entered into in connection with such Loan
and Security Agreement all as may be amended from time to time, (hereinafter referred to collectively as the “Loan Agreement”)
by and among Hercules Technology Growth Capital, Inc. (the “Agent”), the several banks and other financial institutions
or entities from time to time party thereto (collectively, the “Lender”) and Hercules Technology Growth Capital, Inc.,
as agent for the Lender (the “Agent”) and Celator Pharmaceuticals, Inc. and Celator Pharmaceuticals Corp. (the “Borrower”)
as Borrower. All capitalized terms not defined herein shall have the same meaning as defined in the Loan Agreement.


 


Borrower hereby irrevocably
elects to make the Principal Installment Payment in the amount of $_________ due on [________] (the “Delivery Date”)
in shares of Common Stock in accordance with Section 8.1 of the Loan Agreement.1 The number
of shares of Common Stock to be delivered to Agent, on or prior to the Delivery Date, is [_____________], which amount was determined
in accordance with Section 8.2 of the Loan Agreement. The stock certificates shall be delivered free and clear of any restrictive
legends.


 


Borrower hereby represents,
warrants and certifies to Agent and Lender that, as of the Delivery Date, all of the Stock Payment Conditions shall be satisfied.
Borrower acknowledges and agrees that its right to pay the Principal Installment Payment in Common Stock in accordance with this
Borrower Repayment Election Notice is subject to the satisfaction of all of the Stock Payment Conditions on the Delivery Date and,
to the extent any of the Stock Payment Conditions are not satisfied on the Delivery Date, Borrower shall pay the Principal Installment
Payment in cash.


 


	 	Sincerely,
	 	 
	 	Very Truly Yours,
	 	CELATOR PHARMACEUTICALS, INC.
	 	By:	 
	 	Name:  	 
	 	Its:	 
	 	 	 
	 	CELATOR PHARMACEUTICALS CORP.
	 	By:	 
	 	Name:    	 
	 	Its:	 


 





 






1 Note: In accordance
with Section 8.2 of the Loan Agreement, the date of delivery of this Borrower Repayment Election Notice must occur at least 5
days prior to the Delivery Date.


 


 




    	 



    	 



    

 


SCHEDULE
1.1


COMMITMENTS


 


	LENDER	 	TERM COMMITMENT	 
	Hercules Technology Growth Capital, Inc.	 	$	15,000,000	 
	TOTAL COMMITMENTS	 	$	15,000,000