Exhibit 10.28

 

CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH
“[**]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION REQUESTING
CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (as the same may from time to time be amended,
modified, supplemented or restated, this “Agreement”) dated as of August 30,
2012 (the “Effective Date”) among OXFORD FINANCE LLC, a Delaware limited
liability company with an office located at 133 North Fairfax Street,
Alexandria, Virginia 22314 (“Oxford”), as collateral agent (in such capacity,
“Collateral Agent”), the Lenders listed on Schedule 1.1 hereof or otherwise a
party hereto from time to time including Oxford in its capacity as a Lender,
SILICON VALLEY BANK, a California corporation with an office located at 3003
Tasman Drive, Santa Clara, CA 95054 (“Bank” or “SVB”) and MIDCAP FINANCIAL SBIC,
LP, a Delaware limited partnership, with an office located at 7255 Woodmont
Avenue, Suite 200, Bethesda, Maryland 20814 (“MidCap”) (each a “Lender” and
collectively, the “Lenders”), and PEREGRINE PHARMACEUTICALS, INC., a Delaware
corporation (“Parent”) and AVID BIOSERVICES, INC., Delaware corporation, each
with offices located at 14282 Franklin Avenue, Tustin, California 92780
(individually and collectively, jointly and severally, “Borrower”), provides the
terms on which the Lenders shall lend to Borrower and Borrower shall repay the
Lenders. The parties agree as follows:

 

1.                ACCOUNTING AND OTHER TERMS

 

1.1 Accounting terms not defined in this Agreement shall be construed in
accordance with GAAP. Calculations and determinations must be made in accordance
with GAAP. Capitalized terms not otherwise defined in this Agreement shall have
the meanings set forth in Section 13. All other terms contained in this
Agreement, unless otherwise indicated, shall have the meaning provided by the
Code to the extent such terms are defined therein. All references to “Dollars”
or “$” are United States Dollars, unless otherwise noted.

 

2.                LOANS AND TERMS OF PAYMENT

 

2.1 Promise to Pay. Borrower hereby unconditionally promises to pay each Lender,
the outstanding principal amount of all Term Loans advanced to Borrower by such
Lender and accrued and unpaid interest thereon and any other amounts due
hereunder as and when due in accordance with this Agreement.

 

2.2 Term Loans.

 

(a) Availability. (i) Subject to the terms and conditions of this Agreement, the
Lenders agree, severally and not jointly, to make term loans to Borrower on the
Effective Date in an aggregate amount of Fifteen Million Dollars
($15,000,000.00) according to each Lender’s Term A Loan Commitment as set forth
on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a
“Term A Loan”, and collectively as the “Term A Loans”). After repayment, no Term
A Loan may be re-borrowed.

 

(ii) Subject to the terms and conditions of this Agreement, the Lenders agree,
severally and not jointly, during the Second Draw Period, to make term loans to
Borrower in an aggregate amount up to Fifteen Million Dollars ($15,000,000.00)
according to each Lender’s Term B Loan Commitment as set forth on Schedule 1.1
hereto (such term loans are hereinafter referred to singly as a “Term B Loan”,
and collectively as the “Term B Loans”; each Term A Loan or Term B Loan is
hereinafter referred to singly as a “Term Loan” and the Term A Loans and the
Term B Loans are hereinafter referred to collectively as the “Term Loans”).
After repayment, no Term B Loan may be re-borrowed.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

1

 

 

 

(b) Repayment. Borrower shall make monthly payments of interest only commencing
on the first (1st) Payment Date following the Funding Date of each Term Loan,
and continuing on the Payment Date of each successive month thereafter through
and including the Payment Date immediately preceding the Amortization Date.
Borrower agrees to pay, on the Funding Date of each Term Loan, any initial
partial monthly interest payment otherwise due for the period between the
Funding Date of such Term Loan and the first Payment Date thereof. Commencing on
the Amortization Date, and continuing on the Payment Date of each month
thereafter, Borrower shall make consecutive equal monthly payments of principal
and interest, in arrears, to each Lender, as calculated by Collateral Agent
(which calculations shall be deemed correct absent manifest error) based upon:
(1) the amount of such Lender’s Term Loan, (2) the effective rate of interest,
as determined in Section 2.3(a), and (3) a repayment schedule equal to thirty
(30) months. All unpaid principal and accrued and unpaid interest with respect
to each Term Loan is due and payable in full on the Maturity Date. Each
Term Loan may only be prepaid in accordance with Sections 2.2(c) and 2.2(d).

 

(c) Mandatory Prepayments. If the Term Loans are accelerated following the
occurrence of an Event of Default, Borrower shall immediately pay to Lenders,
payable to each Lender in accordance with its respective Pro Rata Share, an
amount equal to the sum of: (i) all outstanding principal of the Term Loans plus
accrued and unpaid interest thereon through the prepayment date, (ii) the Final
Payment, (iii) the Prepayment Fee, plus (iv) all other Obligations that are due
and payable, including Lenders’ Expenses and interest at the Default Rate with
respect to any past due amounts. Notwithstanding (but without duplication with)
the foregoing, on the Maturity Date, if the Final Payment had not previously
been paid in full in connection with the prepayment of the Term Loans in full,
Borrower shall pay to Collateral Agent, for payment to each Lender in accordance
with its respective Pro Rata Share, the Final Payment in respect of the Term
Loans.

 

(d) Permitted Prepayment of Term Loans. Borrower shall have the option to prepay
all or a portion of the Term Loans advanced by the Lenders under this Agreement,
provided Borrower (i) provides written notice to Collateral Agent of its
election to prepay the Term Loans or a portion thereof at least thirty (30) days
prior to such prepayment, and (ii) (x) in the case of a prepayment of the
aggregate outstanding principal amount of the Term Loans, pays to the Lenders on
the date of such prepayment, payable to each Lender in accordance with its
respective Pro Rata Share, an amount equal to the sum of (A) all outstanding
principal of the Term Loans plus accrued and unpaid interest thereon through the
prepayment date, plus (B) the Final Payment, plus (C) the Prepayment Fee, plus
(D) all other Obligations that are due and payable, including Lenders’ Expenses
and interest at the Default Rate with respect to any past due amounts, and (y)
in the case of prepayment of a portion of the Term Loans, pays to the Lenders on
the date of such prepayment, payable to each Lender in accordance with its
respective Pro Rata Share, an amount equal to the sum of (A) all outstanding
principal of the portion of the Term Loans being prepaid, plus accrued and
unpaid interest thereon through the prepayment date, plus (B) the Final Payment
allocable to the portion of the Term Loans being prepaid, plus (C) the
Prepayment Fee in respect of the Terms Loans being prepaid, plus (D) all other
Obligations that are then due and payable, including Lender’s Expenses and
interest at the Default Rate with respect to any past due amounts in accordance
with Section 2.3 (b). Partial prepayments of the Term Loans and the Final
Payment payable in connection therewith shall be allocated and applied pro rata
among the outstanding Term Loans.

 

2.3 Payment of Interest on the Credit Extensions.

 

(a) Interest Rate. Subject to Section 2.3(b), the principal amount outstanding
under the Term Loans shall accrue interest at a fixed per annum rate (which rate
shall be fixed for the duration of the applicable Term Loan) equal to the Basic
Rate, determined by Collateral Agent on the Funding Date of the applicable Term
Loan, which interest shall be payable monthly in arrears in accordance with
Sections 2.2(b) and 2.3(e). Interest shall accrue on each Term Loan commencing
on, and including, the Funding Date of such Term Loan, and shall accrue on the
principal amount outstanding under such Term Loan through and including the day
on which such Term Loan is paid in full.

 

(b) Default Rate. Immediately upon the occurrence and during the continuance of
an Event of Default, Obligations shall accrue interest at a fixed per annum rate
equal to the rate that is otherwise applicable thereto plus five percentage
points (5.00%) (the “Default Rate”). Payment or acceptance of the increased
interest rate provided in this Section 2.3(b) is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of Collateral Agent.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

2

 

 

(c) 360-Day Year. Interest shall be computed on the basis of a three hundred
sixty (360) day year consisting of twelve (12) months of thirty (30) days.

 

(d) Debit of Accounts. Collateral Agent and each Lender may debit (or ACH) any
deposit accounts, maintained by Borrower or any of its Subsidiaries, including
the Designated Deposit Account, for principal and interest payments or any other
amounts Borrower owes the Lenders under the Loan Documents when due. Any such
debits (or ACH activity) shall not constitute a set-off.

 

(e) Payments. Except as otherwise expressly provided herein, all payments by
Borrower under the Loan Documents shall be made to the respective Lender to
which such payments are owed, at such Lender’s office in immediately available
funds on the date specified herein. Unless otherwise provided, interest is
payable monthly on the Payment Date of each month. Payments of principal and/or
interest received after 2:00 p.m. Eastern time are considered received at the
opening of business on the next Business Day. When a payment is due on a day
that is not a Business Day, the payment is due the next Business Day and
additional fees or interest, as applicable, shall continue to accrue until paid.
All payments to be made by Borrower hereunder or under any other Loan Document,
including payments of principal and interest, and all fees, expenses,
indemnities and reimbursements, shall be made without set-off, recoupment or
counterclaim, in lawful money of the United States and in immediately available
funds.

 

2.4 Secured Promissory Notes. The Term Loans shall be evidenced by a Secured
Promissory Note or Notes in the form attached as Exhibit D hereto (each a
“Secured Promissory Note”), and shall be repayable as set forth in this
Agreement. Borrower irrevocably authorizes each Lender to make or cause to be
made, on or about the Funding Date of any Term Loan or at the time of receipt of
any payment of principal on such Lender’s Secured Promissory Note, an
appropriate notation on such Lender’s Secured Promissory Note Record reflecting
the making of such Term Loan or (as the case may be) the receipt of such
payment. The outstanding amount of each Term Loan set forth on such Lender’s
Secured Promissory Note Record shall be prima facie evidence of the principal
amount thereof owing and unpaid to such Lender, but the failure to record, or
any error in so recording, any such amount on such Lender’s Secured Promissory
Note Record shall not limit or otherwise affect the obligations of Borrower
under any Secured Promissory Note or any other Loan Document to make payments of
principal of or interest on any Secured Promissory Note when due. Upon receipt
of an affidavit of an officer of a Lender as to the loss, theft, destruction, or
mutilation of its Secured Promissory Note, Borrower shall issue, in lieu
thereof, a replacement Secured Promissory Note in the same principal amount
thereof and of like tenor.

 

2.5 Fees. Borrower shall pay to Collateral Agent:

 

(a) Facility Fee. A fully earned, non-refundable facility fee of Three Hundred
Thousand Dollars ($300,000.00) to be shared between the Lenders pursuant to
their respective Commitment Percentages payable as follows: (i) One Hundred
Fifty Thousand Dollars ($150,000.00) of the facility fee was paid on July 23,
2012 (receipt of which the Lenders hereby acknowledge), and (ii) the remaining
One Hundred Fifty Thousand Dollars ($150,000.00) of the facility fee shall be
due and payable on the earliest of (x) the Funding Date of the Term B Loan, (y)
March 31, 2013 or (z) acceleration of the Obligations following an Event of
Default;

 

(b) Final Payment. The Final Payment, when due hereunder, to be shared between
the Lenders in accordance with their respective Pro Rata Shares;

 

(c) Prepayment Fee. The Prepayment Fee, when due hereunder, to be shared between
the Lenders in accordance with their respective Pro Rata Shares;

 

(d) Non-Utilization Fee. The Non-Utilization Fee, when due hereunder, to be
shared between the Lenders in accordance with their respective Pro Rata Shares;
and

 

(e) Lenders’ Expenses. All Lenders’ Expenses (including reasonable attorneys’
fees and expenses for documentation and negotiation of this Agreement) incurred
through and after the Effective Date, when due (and in the absence of any other
due date specified herein, such Lenders’ Expenses shall be due within five (5)
days of demand therefor).

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

3

 

 

2.6 Withholding. Payments received by the Lenders from Borrower hereunder 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 the Lenders,
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, each 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 the Lenders with proof reasonably
satisfactory to the Lenders 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 2.6 shall survive the termination of this Agreement.

 

2.7 SBIC Acknowledgement. Borrower acknowledges that MidCap is a Federal
licensee under the Small Business Investment Act of 1958, as amended.

 

3. CONDITIONS OF LOANS

 

3.1 Conditions Precedent to Initial Credit Extension. Each Lender’s obligation
to make a Term A Loan is subject to the condition precedent that Collateral
Agent and each Lender shall consent to or shall have received, in form and
substance satisfactory to Collateral Agent and each Lender, such documents, and
completion of such other matters, as Collateral Agent and each Lender may
reasonably deem necessary or appropriate, including, without limitation:

 

(a) original Loan Documents, and Warrants in respect of the Term A Loan, each
duly executed by Borrower and each Subsidiary, as applicable;

 

(b) duly executed original Control Agreements with respect to any Collateral
Accounts maintained by Borrower or any of its domestic Subsidiaries;

 

(c) duly executed original Secured Promissory Notes in favor of each Lender
according to its Term A Loan Commitment Percentage;

 

(d) the original certificate(s) for the Shares, together with Assignment(s)
Separate from Certificate, duly executed in blank;

 

(e) the Operating Documents and good standing certificates of Borrower and its
domestic Subsidiaries certified by the Secretary of State (or equivalent agency)
of Borrower’s and such Subsidiaries’ jurisdiction of organization or formation
and each jurisdiction in which Borrower and each Subsidiary is qualified to
conduct business, each as of a date no earlier than thirty (30) days prior to
the Effective Date;

 

(f) a completed Perfection Certificate for Borrower and each of its
Subsidiaries;

 

(g) the Annual Projections, for the current calendar year;

 

(h) duly executed original officer’s certificate for Borrower and each
Subsidiary that is a party to the Loan Documents, in a form acceptable to
Collateral Agent and the Lenders;

 

(i) certified copies, dated as of date no earlier than thirty (30) days prior to
the Effective Date, of financing statement searches, as Collateral Agent shall
request, accompanied by written evidence (including any UCC termination
statements) that the Liens indicated in any such financing statements either
constitute Permitted Liens or have been or, in connection with the initial
Credit Extension, will be terminated or released;

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

4

 

 

(j) a landlord’s consent executed in favor of Collateral Agent in respect of all
of Borrower’s and each Subsidiaries’ leased locations in California;

 

(k) a bailee waiver executed in favor of Collateral Agent in respect of each
third party bailee where Borrower or any Subsidiary maintains Collateral having
a book value in excess of Two Hundred Fifty Thousand Dollars ($250,000.00);

 

(l) an executed legal opinion of counsel to Borrower dated as of the Effective
Date;

 

(m) evidence satisfactory to Collateral Agent and the Lenders that the insurance
policies required by Section 6.5 hereof are in full force and effect, together
with appropriate evidence showing loss payable and/or additional insured clauses
or endorsements in favor of Collateral Agent, for the ratable benefit of the
Lenders;

 

(n) payment of the fees and Lenders’ Expenses then due as specified in
Section 2.5 hereof; and

 

(o) completed SBA Forms 480, 652 and 1031 and the SBIC Side Letter.

 

3.2 Conditions Precedent to all Credit Extensions. The obligation of each Lender
to make each Credit Extension, including the initial Credit Extension, is
subject to the following conditions precedent:

 

(a) receipt by (i) the Lenders of an executed Disbursement Letter in the form of
Exhibit B-1 attached hereto; and (ii) SVB of an executed Loan Payment/Advance
Request Form in the form of Exhibit B-2 attached hereto;

 

(b) the representations and warranties in Section 5 hereof shall be true,
accurate and complete in all material respects on the date of the Disbursement
Letter (and the Loan Payment/Advance Request Form) and on the Funding Date of
each Credit Extension; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such date,
and no Event of Default shall have occurred and be continuing or result from the
Credit Extension. Each Credit Extension is Borrower’s representation and
warranty on that date that the representations and warranties in Section 5
hereof are true, accurate and complete in all material respects; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date;

 

(c) in such Lender’s sole discretion, there has not been any Material Adverse
Change or any material adverse deviation by Borrower from the Annual Projections
of Borrower presented to and accepted by Collateral Agent and each Lender;

 

(d) to the extent not delivered at the Effective Date, duly executed original
Secured Promissory Notes and Warrants, in number, form and content acceptable to
each Lender, and in favor of each Lender according to its Commitment Percentage,
with respect to each Credit Extension made by such Lender after the Effective
Date, it being acknowledged and agreed by Borrower that Borrower shall deliver
to each Lender, in connection with the making of the Term B Loans, Secured
Promissory Notes and Warrants, in number, form and content acceptable to each
Lender, and in favor of each Lender according to its Commitment Percentage of
the Term B Loans; and

 

(e) payment of the fees and Lenders’ Expenses then due as specified in
Section 2.5 hereof.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

5

 

 

3.3 Covenant to Deliver. Borrower agrees to deliver to Collateral Agent and the
Lenders each item required to be delivered to Collateral Agent under this
Agreement as a condition precedent to any Credit Extension. Borrower expressly
agrees that a Credit Extension made prior to the receipt by Collateral Agent or
any Lender of any such item shall not constitute a waiver by Collateral Agent or
any Lender of Borrower’s obligation to deliver such item, and any such Credit
Extension in the absence of a required item shall be made in each Lender’s sole
discretion.

 

3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other
applicable conditions to the making of a Term Loan set forth in this Agreement,
to obtain a Term Loan, Borrower shall notify the Lenders (which notice shall be
irrevocable) by electronic mail, facsimile, or telephone by 2:00 p.m. Eastern
time (x) three (3) Business Days prior to the date the Term A Loan is to be
made; and (y) fifteen (15) Business Days prior to the date the Term B Loan is to
be made. Together with any such electronic, facsimile or telephonic
notification, Borrower shall deliver to the Lenders by electronic mail or
facsimile a completed Disbursement Letter (and the Loan Payment/Advance Request
Form, with respect to SVB and MidCap) executed by a Responsible Officer or his
or her designee. The Lenders may rely on any telephone notice given by a person
whom a Lender reasonably believes is a Responsible Officer or designee. On the
Funding Date, each Lender shall credit and/or transfer (as applicable) to the
Designated Deposit Account, an amount equal to its Term Loan Commitment.

 

4. CREATION OF SECURITY INTEREST

 

4.1 Grant of Security Interest. Borrower hereby grants Collateral Agent, for the
ratable benefit of the Lenders, to secure the payment and performance in full of
all of the Obligations, a continuing security interest in, and pledges to
Collateral Agent, for the ratable benefit of the Lenders, the Collateral,
wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof. Borrower represents, warrants, and covenants that
the security interest granted herein is and shall at all times continue to be a
first priority perfected security interest in the Collateral, subject only to
Permitted Liens that are permitted by the terms of this Agreement to have
priority to Collateral Agent’s Lien. If Borrower shall acquire a commercial tort
claim (as defined in the Code), Borrower shall promptly notify Collateral Agent
in a writing signed by Borrower, as the case may be, of the general details
thereof (and further details as may be required by Collateral Agent) and grant
to Collateral Agent, for the ratable benefit of the Lenders, in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance reasonably
satisfactory to Collateral Agent.

 

Borrower may in the future enter into Bank Services Agreements with Bank.
Regardless of the terms of any Bank Services Agreement, Borrower agrees that any
amounts Borrower owes Bank thereunder shall be deemed to be Obligations
hereunder and that it is the intent of Borrower and Bank to have all such
Obligations secured by the first priority perfected security interest in the
Collateral granted herein (subject only to Permitted Liens that may have
superior priority to Bank’s Lien in this Agreement).

 

If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are
repaid in full in cash. Except as set forth in the succeeding sentence, upon
payment in full in cash of the Obligations (other than inchoate indemnity
obligations) and at such time as the Lenders’ obligation to make Credit
Extensions has terminated, Collateral Agent shall, at the sole cost and expense
of Borrower, release its Liens in the Collateral and all rights therein shall
revert to Borrower. In the event (x) all Obligations (other than inchoate
indemnity obligations), except for Bank Services, are satisfied in full, and (y)
this Agreement is terminated, Bank shall terminate the security interest granted
herein upon Borrower providing cash collateral acceptable to Bank in its good
faith business judgment for Bank Services, if any; in the event such Bank
Services consist of outstanding Letters of Credit, Borrower shall provide to
Bank cash collateral in an amount equal to (x) if such Letters of Credit are
denominated in Dollars, then one hundred five percent (105%); and (y) if such
Letters of Credit are denominated in a Foreign Currency, then one hundred ten
percent (110%), of the Dollar Equivalent of the face amount of all such Letters
of Credit plus all interest, fees, and costs due or to become due in connection
therewith (as estimated by Bank in its good faith business judgment), to secure
all of the Obligations relating to such Letters of Credit.

 

4.2 Authorization to File Financing Statements. Borrower hereby authorizes
Collateral Agent to file financing statements or take any other action required
to perfect Collateral Agent’s security interests in the Collateral, without
notice to Borrower, with all appropriate jurisdictions to perfect or protect
Collateral Agent’s interest or rights under the Loan Documents, including a
notice that any disposition of the Collateral, except to the extent permitted by
the terms of this Agreement, by Borrower, or any other Person, shall be deemed
to violate the rights of Collateral Agent under the Code.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

6

 

 

4.3 Pledge of Collateral. Borrower hereby pledges, assigns and grants to
Collateral Agent, for the ratable benefit of the Lenders, a security interest in
all the Shares, together with all proceeds and substitutions thereof, all cash,
stock and other moneys and property paid thereon, all rights to subscribe for
securities declared or granted in connection therewith, and all other cash and
noncash proceeds of the foregoing, as security for the performance of the
Obligations. On the Effective Date, or, to the extent not certificated as of the
Effective Date, within ten (10) days of the certification of any Shares, the
certificate or certificates for the Shares will be delivered to Collateral
Agent, accompanied by an instrument of assignment duly executed in blank by
Borrower. To the extent required by the terms and conditions governing the
Shares, Borrower shall cause the books of each entity whose Shares are part of
the Collateral and any transfer agent to reflect the pledge of the Shares. Upon
the occurrence and during the continuance of an Event of Default hereunder,
Collateral Agent may effect the transfer of any securities included in the
Collateral (including but not limited to the Shares) into the name of Collateral
Agent and cause new (as applicable) certificates representing such securities to
be issued in the name of Collateral Agent or its transferee. Borrower will
execute and deliver such documents, and take or cause to be taken such actions,
as Collateral Agent may reasonably request to perfect or continue the perfection
of Collateral Agent’s security interest in the Shares. Unless an Event of
Default shall have occurred and be continuing, Borrower shall be entitled to
exercise any voting rights with respect to the Shares and to give consents,
waivers and ratifications in respect thereof, provided that no vote shall be
cast or consent, waiver or ratification given or action taken which would be
inconsistent with any of the terms of this Agreement or which would constitute
or create any violation of any of such terms. All such rights to vote and give
consents, waivers and ratifications shall terminate upon the occurrence and
continuance of an Event of Default. Notwithstanding the foregoing, Parent shall
not be deemed to pledge the Shares of Peregrine China; Collateral Agent and the
Lenders reserve the right to require such pledge and to take such actions as
reasonable deemed necessary to effect such pledge and perfect Collateral Agent’s
Lien in the Shares of Peregrine China.

 

5. REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants to Collateral Agent and the Lenders as follows
at all times:

 

5.1 Due Organization, Authorization: Power and Authority. Borrower and each of
its domestic Subsidiaries is duly existing and in good standing as a Registered
Organization in its jurisdiction of organization or formation and Borrower and
each of its Subsidiaries is qualified and licensed to do business and is in good
standing in any jurisdiction in which the conduct of its businesses or its
ownership of property requires that it be qualified except where the failure to
do so could not reasonably be expected to have a Material Adverse Change. In
connection with this Agreement, Borrower and each of its domestic Subsidiaries
has delivered to Collateral Agent a completed perfection certificate signed by
an officer of Borrower or such Subsidiary (each a “Perfection Certificate” and
collectively, the “Perfection Certificates”). Borrower represents and warrants
that (a) Borrower and each of its Subsidiaries’ exact legal name is that which
is indicated on its respective Perfection Certificate and on the signature page
of each Loan Document to which it is a party; (b) Borrower and each of its
Subsidiaries is an organization of the type and is organized in the jurisdiction
set forth on its respective Perfection Certificate; (c) each Perfection
Certificate accurately sets forth each of Borrower’s and its Subsidiaries’
organizational identification number or accurately states that Borrower or such
Subsidiary has none; (d) each Perfection Certificate accurately sets forth
Borrower’s and each of its Subsidiaries’ place of business, or, if more than
one, its chief executive office as well as Borrower’s and each of its
Subsidiaries’ mailing address (if different than its chief executive office);
(e) Borrower and each of its Subsidiaries (and each of its respective
predecessors) have not, in the past five (5) years, changed its jurisdiction of
organization, organizational structure or type, or any organizational number
assigned by its jurisdiction; and (f) all other information set forth on the
Perfection Certificates pertaining to Borrower and each of its Subsidiaries, is
accurate and complete (it being understood and agreed that Borrower and each of
its Subsidiaries may from time to time update certain information in the
Perfection Certificates (including the information set forth in clause
(d) above) after the Effective Date to the extent permitted by one or more
specific provisions in this Agreement); such updated Perfection Certificates
subject to the review and approval of Collateral Agent. If Borrower or any of
its Subsidiaries is not now a Registered Organization but later becomes one,
Borrower shall notify Collateral Agent of such occurrence and provide Collateral
Agent with such Person’s organizational identification number within five (5)
Business Days of receiving such organizational identification number.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

7

 

 

The execution, delivery and performance by Borrower and each of its Subsidiaries
of the Loan Documents to which it is a party have been duly authorized, and do
not (i) conflict with any of Borrower’s or such Subsidiaries’ organizational
documents, including its respective Operating Documents, (ii) contravene,
conflict with, constitute a default under or violate any material Requirement of
Law applicable thereto, (iii) contravene, conflict or violate any applicable
order, writ, judgment, injunction, decree, determination or award of any
Governmental Authority by which Borrower or such Subsidiary, or any of their
property or assets may be bound or affected, (iv) require any action by, filing,
registration, or qualification with, or Governmental Approval from, any
Governmental Authority (except such Governmental Approvals which have already
been obtained and are in full force and effect) or are being obtained pursuant
to Section 6.1(b), or (v) constitute an event of default under any material
agreement by which Borrower or any of such Subsidiaries, or their respective
properties, is bound. Neither Borrower nor any of its Subsidiaries is in default
under any agreement to which it is a party or by which it or any of its assets
is bound in which such default could reasonably be expected to have a Material
Adverse Change.

 

5.2 Collateral.

 

(a) Borrower and each its Subsidiaries have good title to, have rights in, and
the power to transfer each item of the Collateral upon which it purports to
grant a Lien under the Loan Documents, free and clear of any and all Liens
except Permitted Liens, and neither Borrower nor any of its Subsidiaries have
any Deposit Accounts, Securities Accounts, Commodity Accounts or other
investment accounts other than the Collateral Accounts or the other investment
accounts, if any, described in the Perfection Certificates delivered to
Collateral Agent in connection herewith with respect of which Borrower or such
Subsidiary has given Collateral Agent notice and taken such actions as are
necessary to give Collateral Agent a perfected security interest therein,
subject to Collateral Agent having taken all required actions to perfect such
security interest. The Accounts are bona fide, existing obligations of the
Account Debtors.

 

(b) On the Effective Date, and except as disclosed on the Perfection Certificate
(i) the Collateral is not in the possession of any third party bailee (such as a
warehouse), and (ii)  no such third party bailee possesses components of the
Collateral in excess of Two Hundred Fifty Thousand Dollars ($250,000.00). None
of the components of the Collateral shall be maintained at locations other than
as disclosed in the Perfection Certificates on the Effective Date or as
permitted pursuant to Section 6.11.

 

(c) All Inventory is in all material respects of good and marketable quality,
free from material defects.

 

(d) A list of all of Borrower’s copyrights, copyright applications, trademarks,
trademark applications, patents and patent applications (“Subject Intellectual
Property”) and all license agreements (including all in-bound license
agreements, but excluding over-the-counter software that is commercially
available to the public) is set forth on Schedule 5.2(d), which indicates, for
each item of property: (i) the name of Borrower owning such Subject Intellectual
Property or licensee to such license agreement; (ii) Borrower’s identifier for
such property (i.e., name of patent, license, etc.), (iii) whether such property
is Subject Intellectual Property (or application therefor) owned by Borrower or
is property to which Borrower has rights pursuant to a license agreement, and
(iv) the expiration date of such Subject Intellectual Property or license
agreement. In the case of any license agreement, Schedule 5.2(d) further
indicates, for each: (A) the name and address of the licensor, (B) the name and
date of the license agreement pursuant to which Intellectual Property is
licensed, (C) whether or not such license agreement grants an exclusive license
to Borrower, and (D) whether there are any restrictions in such license
agreement as to the ability of Borrower to grant a security interest in and/or
to transfer any of its rights as a licensee under such license agreement. Except
as noted on Schedule 5.2(d), Borrower is the sole owner of its Subject
Intellectual Property, except for non-exclusive licenses granted to its
customers in the ordinary course of business. Each Patent is properly filed and
maintained, no part of the Subject Intellectual Property has been judged invalid
or unenforceable, in whole or in part, and to the best of Borrower’s knowledge
no claim has been made that any part of the Subject Intellectual Property
violates the rights of any third party, except to the extent such claim could
not reasonably be expected to result in a Material Adverse Change. Borrower
shall, and shall cause its Subsidiaries to, take such commercially reasonable
steps as Collateral Agent and any Lender requests to obtain the consent of, or
waiver by, any Person whose consent or waiver is necessary for (i) all licenses
or agreements with respect to which Borrower or any Subsidiary is the licensee
to be deemed “Collateral” and for Collateral Agent and each Lender to have a
security interest in it that might otherwise be restricted or prohibited by law
or by the terms of any such license or agreement, whether now existing or
entered into in the future, and (ii) Collateral Agent and each Lender shall have
the ability in the event of a liquidation of any Collateral to dispose of such
Collateral in accordance with Collateral Agent’s and such Lender’s rights and
remedies under this Agreement and the other Loan Documents.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

8

 

 

 

5.3 Litigation. Except as disclosed (i) on the Perfection Certificates, or
(ii) in accordance with Section 6.9 hereof, there are no actions, suits,
investigations, or proceedings pending or, to the knowledge of the Responsible
Officers, threatened in writing by or against Borrower or any of its
Subsidiaries involving more than One Hundred Thousand Dollars ($100,000.00).

 

5.4 No Material Deterioration in Financial Condition; Financial Statements. All
consolidated financial statements for Borrower and its Subsidiaries, delivered
to Collateral Agent fairly present, in conformity with GAAP, in all material
respects the consolidated financial condition of Borrower and its Subsidiaries,
and the consolidated results of operations of Borrower and its Subsidiaries.
There has not been any material deterioration in the consolidated financial
condition of Borrower and its Subsidiaries since the date of the most recent
financial statements submitted to any Lender.

 

5.5 Solvency. Borrower and each of its Subsidiaries is Solvent.

 

5.6 Regulatory Compliance. Neither Borrower nor any of its Subsidiaries is an
“investment company” or a company “controlled” by an “investment company” under
the Investment Company Act of 1940, as amended. Neither Borrower nor any of its
Subsidiaries is engaged as one of its important activities in extending credit
for margin stock (under Regulations X, T and U of the Federal Reserve Board of
Governors). Borrower and each of its Subsidiaries has complied in all material
respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of
its Subsidiaries is a “holding company” or an “affiliate” of a “holding company”
or a “subsidiary company” of a “holding company” as each term is defined and
used in the Public Utility Holding Company Act of 2005. Neither Borrower nor any
of its Subsidiaries has violated any laws, ordinances or rules, the violation of
which could reasonably be expected to have a Material Adverse Change. Neither
Borrower’s nor any of its Subsidiaries’ properties or assets has been used by
Borrower or such Subsidiary or, to Borrower’s knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than in material compliance with applicable laws. Borrower and each of its
Subsidiaries has obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all Governmental
Authorities that are necessary to continue their respective businesses as
currently conducted.

 

None of Borrower, any of its Subsidiaries, or any of Borrower’s or its
Subsidiaries’ Affiliates or any of their respective agents acting or benefiting
in any capacity in connection with the transactions contemplated by this
Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or
conspiring to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding or attempts to violate, any of the prohibitions
set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person. None of
Borrower, any of its Subsidiaries, or to the knowledge of Borrower and any of
their Affiliates or agents, acting or benefiting in any capacity in connection
with the transactions contemplated by this Agreement, (x) conducts any business
or engages in making or receiving any contribution of funds, goods or services
to or for the benefit of any Blocked Person, or (y) deals in, or otherwise
engages in any transaction relating to, any property or interest in property
blocked pursuant to Executive Order No. 13224, any similar executive order or
other Anti-Terrorism Law.

 

5.7 Investments. Neither Borrower nor any of its Subsidiaries owns any stock,
shares, partnership interests or other equity securities except for Permitted
Investments.

 

5.8 Tax Returns and Payments; Pension Contributions. Borrower and each of its
Subsidiaries has timely filed all required tax returns and reports, and Borrower
and each of its Subsidiaries, has timely paid all foreign, federal, state, and
local taxes, assessments, deposits and contributions owed by Borrower and such
Subsidiaries, in all jurisdictions in which Borrower or any such Subsidiary is
subject to taxes, including the United States, unless such taxes are being
contested in accordance with the following sentence. Borrower and each of its
Subsidiaries, may defer payment of any contested taxes, provided that Borrower
or such Subsidiary, (a) in good faith contests its obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted,
(b) notifies Collateral Agent in writing of the commencement of, and any
material development in, the proceedings, and (c) posts bonds or takes any other
steps required to prevent the Governmental Authority levying such contested
taxes from obtaining a Lien upon any of the Collateral that is other than a
“Permitted Lien.” Neither Borrower nor any of its Subsidiaries is aware of any
claims or adjustments proposed for any of Borrower’s or such Subsidiaries’,
prior tax years which could result in additional taxes becoming due and payable
by Borrower or its Subsidiaries. Borrower and each of its Subsidiaries have paid
all amounts necessary to fund all present pension, profit sharing and deferred
compensation plans in accordance with their terms, and neither Borrower nor any
of its Subsidiaries have, withdrawn from participation in, and have not
permitted partial or complete termination of, or permitted the occurrence of any
other event with respect to, any such plan which could reasonably be expected to
result in any liability of Borrower or its Subsidiaries, including any liability
to the Pension Benefit Guaranty Corporation or its successors or any other
Governmental Authority.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

9

 

 

5.9 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions
solely as working capital and to fund its general business requirements in
accordance with the provisions of this Agreement, and not for personal, family,
household or agricultural purposes.

 

5.10 Shares. Borrower has full power and authority to create a first lien on the
Shares and no disability or contractual obligation exists that would prohibit
Borrower from pledging the Shares pursuant to this Agreement. There are no
subscriptions, warrants, rights of first refusal or other restrictions on
transfer relative to, or options exercisable with respect to the Shares. The
Shares have been and will be duly authorized and validly issued, and are fully
paid and non-assessable. The Shares are not the subject of any present or, to
Borrower’s knowledge, threatened suit, action, arbitration, administrative or
other proceeding, and Borrower knows of no reasonable grounds for the
institution of any such proceedings.

 

5.11 Full Disclosure. No written representation, warranty or other statement of
Borrower or any of its Subsidiaries in any certificate or written statement
given to Collateral Agent or any Lender, as of the date such representation,
warranty, or other statement was made, taken together with all such written
certificates and written statements given to Collateral Agent or any Lender,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized that certain written statements
are subject to safe harbor statements contained therein and that the projections
and forecasts provided by Borrower in good faith and based upon reasonable
assumptions are not viewed as facts and that actual results during the period or
periods covered by such projections and forecasts may differ from the projected
or forecasted results).

 

5.12 Definition of “Knowledge.” For purposes of the Loan Documents, whenever a
representation or warranty is made to Borrower’s knowledge or awareness, to the
“best of” Borrower’s knowledge, or with a similar qualification, knowledge or
awareness means the actual knowledge, after reasonable investigation, of the
Responsible Officers.

 

6. AFFIRMATIVE COVENANTS

 

Borrower shall, and shall cause each of its Subsidiaries to, do all of the
following:

 

6.1 Government Compliance.

 

(a) Maintain its and all its Subsidiaries’ legal existence and good standing (as
applicable) in their respective jurisdictions of organization and maintain
qualification in each jurisdiction in which the failure to so qualify could
reasonably be expected to have a Material Adverse Change. Comply with all laws,
ordinances and regulations to which Borrower or any of its Subsidiaries is
subject, the noncompliance with which could reasonably be expected to have a
Material Adverse Change.

 

(b) Obtain and keep in full force and effect, all of the Governmental Approvals
necessary for the performance by Borrower and its Subsidiaries of their
respective businesses and obligations under the Loan Documents and the grant of
a security interest to Collateral Agent for the ratable benefit of the Lenders,
in all of the Collateral. Borrower shall promptly provide copies to Collateral
Agent of any material Governmental Approvals obtained by Borrower or any of its
Subsidiaries.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

10

 

 

6.2 Financial Statements, Reports, Certificates.

 

(a) Deliver to each Lender:

 

(i) as soon as available, but no later than thirty (30) days after the last day
of each month, a company prepared consolidated and consolidating balance sheet,
income statement and cash flow statement covering the consolidated operations of
Borrower and its Subsidiaries for such month certified by a Responsible Officer
and in a form reasonably acceptable to Collateral Agent;

 

(ii) as soon as available, but no later than one hundred twenty (120) days after
the last day of Borrower’s fiscal year or within five (5) days of filing with
the SEC, audited consolidated financial statements prepared under GAAP,
consistently applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm acceptable to
Collateral Agent in its reasonable discretion (it being agreed that Ernst &
Young LLP, the Borrower’s current independent certified public accounting firm,
is acceptable to the Collateral Agent);

 

(iii) as soon as available after approval thereof by Borrower’s Board of
Directors, but no later than thirty (30) days after the last day of each of
Borrower’s fiscal years, Borrower’s annual financial projections for the entire
current fiscal year as approved by Borrower’s Board of Directors, which such
annual financial projections shall be set forth in a month-by-month format (such
annual financial projections as originally delivered to Collateral Agent and the
Lenders are referred to herein as the “Annual Projections”; provided that, any
revisions of the Annual Projections approved by Borrower’s Board of Directors
shall be delivered to Collateral Agent and the Lenders no later than seven (7)
days after such approval and, unless Collateral Agent notifies Borrower to the
contrary in writing within thirty (30) days after receipt thereof, the term
“Annual Projections” shall include such revisions);

 

(iv) within five (5) days of delivery, copies of all statements, reports and
notices made available by Borrower to its security holders or holders of
Subordinated Debt;

 

(v) within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed
with the Securities and Exchange Commission,

 

(vi) prompt notice of any amendments of or other changes to the capitalization
table of Borrower and to the Operating Documents of Borrower or any of its
Subsidiaries, together with any copies reflecting such amendments or changes
with respect thereto; provided, however, that the foregoing shall not require
Borrower to give prompt notice of the issuance of any shares of common stock
from its existing shelf registration statements nor of the grant or exercise of
any stock options.

 

(vii) prompt notice of (A) any material change in the composition of the
Intellectual Property, (B) the registration of any copyright, including any
subsequent ownership right of Borrower or any of its Subsidiaries in or to any
copyright, patent or trademark, including a copy of any such registration, and
(C) any event that could reasonably be expected to materially and adversely
affect the value of the Intellectual Property;

 

(viii) as soon as available, but no later than thirty (30) days after the last
day of each month, copies of the month-end account statements for each
Collateral Account maintained by Borrower or its Subsidiaries, which statements
may be provided to Collateral Agent and each Lender by Borrower or directly from
the applicable institution(s);

 

(ix) within ninety (90) days after the end of each fiscal year of Borrower, and
at such other times as MidCap may reasonably request to the extent related to
SBA regulations, Borrower shall provide to MidCap such forms and financial and
other information with respect to any business or financial condition of
Borrower or any of its Subsidiaries required by the SBA, including, but not
limited to (i) forms and information with respect to MidCap’s or any Lender’s
reporting requirements under SBA Form 468 and (ii) information regarding the
full-time equivalent jobs created or retained in connection with any Lender’s
investment in Borrower, the impact of the financing on Borrower’s business in
terms of revenues and profits and on taxes paid by Borrower and its employees;

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

11

 

 

(x) upon request of MidCap, the Borrower shall use commercially reasonable
efforts to promptly (and in any event within twenty (20) days of such request)
furnish to MidCap all information reasonably requested, to the extent reasonably
available to the Borrower in order for MidCap or any Lender to comply with the
requirements of 13 C.F.R. Section 107.620 or to prepare or file SBA Form 468 and
any other information requested or required by the SBA; and

 

(xi) other financial information as reasonably requested by Collateral Agent or
any Lender.

 

Notwithstanding the foregoing, documents required to be delivered pursuant to
the terms hereof (to the extent any such documents are included in materials
otherwise filed with the SEC) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date on which Borrower
posts such documents, or provides a link thereto, on Borrower’s website on the
internet at Borrower’s website address.

 

(b) Concurrently with the delivery of the financial statements specified in
Section 6.2(a)(i) above but no later than thirty (30) days after the last day of
each month, deliver to each Lender, a duly completed Compliance Certificate
signed by a Responsible Officer.

 

(c) Keep proper books of record and account in accordance with GAAP in all
material respects, in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities. Borrower
shall, and shall cause each of its Subsidiaries to, allow, at the sole cost of
Borrower, Collateral Agent or any Lender, during regular business hours upon
reasonable prior notice (provided that no notice shall be required when an Event
of Default has occurred and is continuing), to visit and inspect any of its
properties, to examine and make abstracts or copies from any of its books and
records, and to conduct a collateral audit and analysis of its operations and
the Collateral. Such audits shall be conducted no more often than twice every
year unless (and more frequently if) an Event of Default has occurred and is
continuing.

 

6.3 Inventory; Returns. Keep all Inventory in good and marketable condition,
free from material defects. Returns and allowances between Borrower, or any of
its Subsidiaries, and their respective Account Debtors shall follow Borrower’s,
or such Subsidiary’s, customary practices as they exist at the Effective Date.
Borrower must promptly notify Collateral Agent and the Lenders of all returns,
recoveries, disputes and claims that involve more than Two Hundred Fifty
Thousand Dollars ($250,000.00) individually or in the aggregate in any calendar
year.

 

6.4 Taxes; Pensions. Timely file and require each of its Subsidiaries to timely
file, all required tax returns and reports and timely pay, and require each of
its Subsidiaries to timely file, all foreign, federal, state, and local taxes,
assessments, deposits and contributions owed by Borrower or its Subsidiaries,
except for deferred payment of any taxes contested pursuant to the terms of
Section 5.8 hereof, and shall deliver to Lenders, on demand, appropriate
certificates attesting to such payments, and pay all amounts necessary to fund
all present pension, profit sharing and deferred compensation plans in
accordance with the terms of such plans.

 

6.5 Insurance. Keep Borrower’s and its Subsidiaries’ business and the Collateral
insured for risks and in amounts standard for companies in Borrower’s and its
Subsidiaries’ industry and location and as Collateral Agent may reasonably
request. Insurance policies shall be in a form, with companies, and in amounts
that are reasonably satisfactory to Collateral Agent and Lenders. All property
policies shall have a lender’s loss payable endorsement showing Collateral Agent
as lender loss payee and waive subrogation against Collateral Agent, and all
liability policies shall show, or have endorsements showing, Collateral Agent,
as additional insured. The Collateral Agent shall be named as lender loss payee
and/or additional insured with respect to any such insurance providing coverage
in respect of any Collateral, and each provider of any such insurance shall
agree, by endorsement upon the policy or policies issued by it or by independent
instruments furnished to the Collateral Agent, that it will give the Borrower
(and Borrower hereby agrees that it will give Collateral Agent) thirty (30) days
prior written notice before any such policy or policies shall be canceled or
materially altered. At Collateral Agent’s request, Borrower shall deliver
certified copies of policies and evidence of all premium payments. Proceeds
payable under any policy shall, at Collateral Agent’s option, be payable to
Collateral Agent, for the ratable benefit of the Lenders, on account of the
Obligations. Notwithstanding the foregoing, (a) so long as no Event of Default
has occurred and is continuing, Borrower shall have the option of applying the
proceeds of any casualty policy up to One Hundred Thousand Dollars ($100,000.00)
with respect to any loss, but not exceeding One Hundred Thousand Dollars
($100,000.00), in the aggregate for all losses under all casualty policies in
any one year, toward the replacement or repair of destroyed or damaged property;
provided that any such replaced or repaired property (i) shall be of equal or
like value as the replaced or repaired Collateral and (ii) shall be deemed
Collateral in which Collateral Agent has been granted a first priority security
interest, and (b) after the occurrence and during the continuance of an Event of
Default, all proceeds payable under such casualty policy shall, at the option of
Collateral Agent, be payable to Collateral Agent, for the ratable benefit of the
Lenders, on account of the Obligations. If Borrower or any of its Subsidiaries
fails to obtain insurance as required under this Section 6.5 or to pay any
amount or furnish any required proof of payment to third persons, Collateral
Agent and/or any Lender may make, at Borrower’s expense, all or part of such
payment or obtain such insurance policies required in this Section 6.5, and take
any action under the policies Collateral Agent or such Lender deems prudent.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

12

 

 

6.6 Operating Accounts.

 

(a) Maintain all of Borrower’s and its domestic Subsidiaries’ Collateral
Accounts with financial instructions reasonably satisfactory to Collateral Agent
and in accounts which are subject to a Control Agreement in favor of Collateral
Agent.

 

(b) Borrower shall provide Collateral Agent five (5) days’ prior written notice
before Borrower or any of its Subsidiaries establishes any Collateral Account at
or with any Person. In addition, subject to the terms of the Post Closing Letter
for each Collateral Account that Borrower or any of its Subsidiaries, at any
time maintains, Borrower or such Subsidiary shall cause the applicable bank or
financial institution at or with which such Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Collateral Agent’s Lien in such
Collateral Account in accordance with the terms hereunder prior to the
establishment of such Collateral Account, which Control Agreement may not be
terminated without prior written consent of Collateral Agent. The provisions of
the previous sentence shall not apply to (i) deposit accounts exclusively used
for payroll, payroll taxes and other employee wage and benefit payments to or
for the benefit of Borrower’s, or any of its Subsidiaries’, employees and
identified to Collateral Agent by Borrower as such in the Perfection
Certificates; (ii) the brokerage account maintained at Bank of America Merrill
Lynch (the “Sweep Account”), provided (x) the Sweep Account continues to be a
sweep account from which all deposits are cleared to a Collateral Account (such
Collateral Account subject to a control agreement in favor of (and in form and
content reasonably acceptable to) Collateral Agent) within two (2) Business Days
of being credited to such Sweep Account; (y) such Sweep Account is subject to
standing instructions with respect thereto, in form and content reasonably
acceptable to Collateral Agent, and such instructions are not modified, amended
or terminated without Collateral Agent’s prior written consent, which may be
granted or withheld in Collateral Agent’s sole discretion; and (z) no amounts
are credited to the Sweep Account other than those amounts received in
connection with sale of Borrower’s equity securities; and (iii) accounts
maintained by Peregrine China outside of the United States provided that the
aggregate amount in all such accounts does not exceed Fifty Thousand Dollars
($50,000) at any time.

 

(c) Neither Borrower nor any of its Subsidiaries shall maintain any Collateral
Accounts except Collateral Accounts maintained in accordance with Sections
6.6(a) and (b).

 

6.7 Protection of Intellectual Property Rights. Borrower and each of its
Subsidiaries shall: (a) use commercially reasonable efforts to protect, defend
and maintain the validity and enforceability of its Intellectual Property that
is material to Borrower’s business; (b) promptly advise Collateral Agent in
writing of any known material infringement by a third party of its Intellectual
Property; and (c) not allow any Intellectual Property material to Borrower’s
business to be abandoned, forfeited or dedicated to the public without
Collateral Agent’s prior written consent.

 

6.8 Litigation Cooperation. Commencing on the Effective Date and continuing
through the termination of this Agreement, make available to Collateral Agent
and the Lenders, without expense to Collateral Agent or the Lenders, Borrower
and each of Borrower’s officers, employees and agents and Borrower’s Books, to
the extent that Collateral Agent or any Lender may reasonably deem them
necessary to prosecute or defend any third-party suit or proceeding instituted
by or against Collateral Agent or any Lender with respect to any Collateral or
relating to Borrower.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

13

 

 

 

6.9 Notices of Litigation and Default. Borrower will give prompt written notice
to Collateral Agent and the Lenders of any litigation or governmental
proceedings pending or threatened (in writing) against Borrower or any of its
Subsidiaries, which could reasonably be expected to result in damages or costs
to Borrower or any of its Subsidiaries of Two Hundred Fifty Thousand Dollars
($250,000.00) or more or which could reasonably be expected to have a Material
Adverse Change. Without limiting or contradicting any other more specific
provision of this Agreement, promptly (and in any event within three (3)
Business Days) upon Borrower becoming aware of the existence of any Event of
Default or event which, with the giving of notice or passage of time, or both,
would constitute an Event of Default, Borrower shall give written notice to
Collateral Agent and the Lenders of such occurrence, which such notice shall
include a reasonably detailed description of such Event of Default or event
which, with the giving of notice or passage of time, or both, would constitute
an Event of Default.

 

6.10 Financial Covenant. From and after the Funding Date of the Term B Loan,
Borrower shall at all times maintain unrestricted cash of at least Ten Million
Dollars ($10,000,00.00) in Collateral Accounts subject to Control Agreements in
favor of Collateral Agent for the ratable benefit of the Lenders.

 

6.11 Landlord Waivers; Bailee Waivers. In the event that Borrower or any of its
Subsidiaries, after the Effective Date, intends to add any new offices or
business locations, including warehouses, or otherwise store any portion of the
Collateral with, or deliver any portion of the Collateral to, a bailee, in each
case pursuant to Section 7.2, then Borrower or such Subsidiary will first
receive the written consent of Collateral Agent and, in the event that the
Collateral at any new location is valued in excess of Two Hundred Fifty Thousand
($250,000.00) in the aggregate, such bailee or landlord, as applicable, must
execute and deliver a bailee waiver or landlord waiver, as applicable, in form
and substance reasonably satisfactory to Collateral Agent prior to the addition
of any new offices or business locations, or any such storage with or delivery
to any such bailee, as the case may be.

 

6.12 Creation/Acquisition of Subsidiaries. In the event Borrower, or any of its
Subsidiaries creates or acquires any Subsidiary, Borrower shall provide prior
written notice to Collateral Agent and each Lender of the creation or
acquisition of such new Subsidiary and take all such action as may be reasonably
required by Collateral Agent or any Lender to cause each such Subsidiary to
become a co-Borrower hereunder or to guarantee the Obligations of Borrower under
the Loan Documents and, in each case, grant a continuing pledge and security
interest in and to the assets of such Subsidiary (substantially as described on
Exhibit A hereto); and Borrower (or its Subsidiary, as applicable) shall grant
and pledge to Collateral Agent, for the ratable benefit of the Lenders, a
perfected security interest in the Shares of each such newly created Subsidiary.

 

6.13 Further Assurances.

 

(a) Execute any further instruments and take further action as Collateral Agent
or any Lender reasonably requests to perfect or continue Collateral Agent’s Lien
in the Collateral or to effect the purposes of this Agreement.

 

(b) Deliver to Collateral Agent and Lenders, within five (5) days after the same
are sent or received, copies of all material correspondence, reports, documents
and other filings with any Governmental Authority that could reasonably be
expected to have a material adverse effect on any of the Governmental Approvals
material to Borrower’s business or otherwise could reasonably be expected to
have a Material Adverse Change.

 

7. NEGATIVE COVENANTS

 

Borrower shall not, and shall not permit any of its Subsidiaries to, do any of
the following without the prior written consent of the Required Lenders:

 

7.1 Dispositions. Convey, sell, lease, transfer, assign, dispose of or otherwise
make cash payments consisting of (collectively, “Transfer”), or permit any of
its Subsidiaries to Transfer, all or any part of its business or property,
except for Transfers (a) consisting of cash payments to trade creditors in the
ordinary course of business; (b) of Inventory in the ordinary course of
business; (c) of worn-out or obsolete Equipment; and (d) in connection with
Permitted Liens, Permitted Investments and Permitted Licenses.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

14

 

 

7.2 Changes in Business, Management, Ownership, or Business Locations.
(a) Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses engaged in by Borrower as of the Effective Date or
reasonably related thereto; (b) liquidate or dissolve (except in the case of
Peregrine China and VTT); or (c) (i) any Key Person shall cease to be actively
engaged in the management of Borrower unless a replacement for such Key Person
is approved by Borrower’s Board of Directors and engaged by Borrower within one
hundred twenty (120) days of such change, or (ii) enter into any transaction or
series of related transactions in which the stockholders of Borrower who were
not stockholders immediately prior to the first such transaction own more than
forty nine percent (49%) of the voting stock of Borrower immediately after
giving effect to such transaction or related series of such transactions (other
than by the sale of Borrower’s equity or unsecured debt securities in a public
offering, a private placement of public equity or to venture capital investors
so long as Borrower identifies to Collateral Agent the venture capital investors
prior to the closing of the transaction). Borrower shall not, without at least
thirty (30) days’ prior written notice to Collateral Agent: (A) add any new
offices or business locations, including warehouses (unless such new offices or
business locations contain less than One Hundred Thousand Dollars ($100,000.00)
in assets or property of Borrower or any of its Subsidiaries); (B) change its
jurisdiction of organization, (C) change its organizational structure or type,
(D) change its legal name, or (E) change any organizational number (if any)
assigned by its jurisdiction of organization.

 

7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock, shares or property of another Person. A Subsidiary may merge or
consolidate into another Subsidiary (provided such surviving Subsidiary is a
“co-Borrower” hereunder or has provided a secured Guaranty of Borrower’s
Obligations hereunder) or with (or into) Borrower provided Borrower is the
surviving legal entity, and as long as no Event of Default is occurring prior
thereto or arises as a result therefrom. Without limiting the foregoing,
Borrower shall not, without prior written consent of the Required Lenders, enter
into any binding contractual arrangement with any Person to attempt to
facilitate a merger or acquisition of Borrower, unless (i) no Event of Default
exists when such agreement is entered into by Borrower, (ii) such agreement does
not give such Person the right to claim any fees, payments or damages from
Borrower or any of its Subsidiaries, and (iii) Borrower notifies Collateral
Agent in advance of entering into such an agreement.

 

7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or
permit any Subsidiary to do so, other than Permitted Indebtedness.

 

7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein (except for Permitted Liens that are permitted by the
terms of this Agreement to have priority over Collateral Agent’s Lien), or enter
into any agreement, document, instrument or other arrangement (except with or in
favor of Collateral Agent, for the ratable benefit of the Lenders) with any
Person which directly or indirectly prohibits or has the effect of prohibiting
Borrower, or any of its Subsidiaries, from assigning, mortgaging, pledging,
granting a security interest in or upon, or encumbering any of Borrower’s or
such Subsidiary’s Intellectual Property, except as is otherwise permitted in
Section 7.1 hereof and the definitions of “Permitted Liens” and “Permitted
Licenses” herein and subject to the terms of Section 5.2(d).

 

7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except
pursuant to the terms of Section 6.6 hereof.

 

7.7 Distributions; Investments. (a) Pay any dividends (other than dividends
payable solely in capital stock) or make any distribution or payment in respect
of or redeem, retire or purchase any capital stock (other than repurchases
pursuant to the terms of employee stock purchase plans, employee restricted
stock agreements, stockholder rights plans, director or consultant stock option
plans, or similar plans, provided such repurchases do not exceed One Hundred
Thousand Dollars ($100,000.00) in the aggregate per fiscal year) or (b) directly
or indirectly make any Investment other than Permitted Investments, or permit
any of its Subsidiaries to do so.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

15

 

 

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower or any of its
Subsidiaries, except for (a) transactions that are in the ordinary course of
Borrower’s or such Subsidiary’s business, upon fair and reasonable terms that
are no less favorable to Borrower or such Subsidiary than would be obtained in
an arm’s length transaction with a non-affiliated Person, and (b) Subordinated
Debt or equity investments by Borrower’s investors in Borrower or its
Subsidiaries.

 

7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt,
except under the terms of the subordination, intercreditor, or other similar
agreement to which such Subordinated Debt is subject, or (b) amend any provision
in any document relating to the Subordinated Debt which would increase the
amount thereof or adversely affect the subordination thereof to Obligations owed
to the Lenders.

 

7.10 Compliance. Become an “investment company” or a company controlled by an
“investment company”, under the Investment Company Act of 1940, as amended, or
undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a Material
Adverse Change, or permit any of its Subsidiaries to do so; withdraw or permit
any Subsidiary to withdraw from participation in, permit partial or complete
termination of, or permit the occurrence of any other event with respect to, any
present pension, profit sharing and deferred compensation plan which could
reasonably be expected to result in any liability of Borrower or any of its
Subsidiaries, including any liability to the Pension Benefit Guaranty
Corporation or its successors or any other Governmental Authority.

 

7.11 Compliance with Anti-Terrorism Laws. Collateral Agent hereby notifies
Borrower and each of its Subsidiaries that pursuant to the requirements of
Anti-Terrorism Laws, and Collateral Agent’s policies and practices, Collateral
Agent is required to obtain, verify and record certain information and
documentation that identifies Borrower and each of its Subsidiaries and their
principals, which information includes the name and address of Borrower and each
of its Subsidiaries and their principals and such other information that will
allow Collateral Agent to identify such party in accordance with Anti-Terrorism
Laws. Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or
any of its Subsidiaries permit any Affiliate to, directly or indirectly,
knowingly enter into any documents, instruments, agreements or contracts with
any Person listed on the OFAC Lists. Borrower and each of its Subsidiaries shall
immediately notify Collateral Agent if Borrower or such Subsidiary has knowledge
that Borrower, or any Subsidiary or Affiliate of Borrower, is listed on the OFAC
Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on,
or (d) is arraigned and held over on charges involving money laundering or
predicate crimes to money laundering. Neither Borrower nor any of its
Subsidiaries shall, nor shall Borrower or any of its Subsidiaries, permit any
Affiliate to, directly or indirectly, (i) conduct any business or engage in any
transaction or dealing with any Blocked Person, including, without limitation,
the making or receiving of any contribution of funds, goods or services to or
for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any
transaction relating to, any property or interests in property blocked pursuant
to Executive Order No. 13224 or any similar executive order or other
Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction
that evades or avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in Executive Order No. 13224 or other
Anti-Terrorism Law.

 

7.12 Peregrine China Assets. Permit the aggregate value of assets held by
Peregrine China to exceed Seventy Five Thousand Dollars ($75,000.00) at any
time.

 

7.13 VTT Assets. Permit the aggregate value of assets held by VTT to exceed Five
Thousand Dollars ($5,000.00) at any time.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

16

 

 

 

8. EVENTS OF DEFAULT

 

Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:

 

8.1 Payment Default. Borrower fails to (a) make any payment of principal or
interest on any Credit Extension on its due date, or (b) pay any other
Obligations within three (3) Business Days after such Obligations are due and
payable (which three (3) Business Day grace period shall not apply to payments
due on the Maturity Date or the date of acceleration pursuant to Section 9.1
(a) hereof). During the cure period, the failure to cure the payment default is
not an Event of Default (but no Credit Extension will be made during the cure
period);

 

8.2 Covenant Default.

 

(a) Borrower or any of its Subsidiaries fails or neglects to perform any
obligation in Sections 6.2 (Financial Statements, Reports, Certificates), 6.4
(Taxes), 6.5 (Insurance), 6.6 (Operating Accounts), 6.7 (Protection of
Intellectual Property Rights), 6.9 (Notice of Litigation and Default), 6.10
(Financial Covenant), 6.11 (Landlord Waivers; Bailee Waivers), 6.12
(Creation/Acquisition of Subsidiaries) or 6.13 (Further Assurances) or Borrower
violates any covenant in Section 7; or

 

(b) Borrower, or any of its Subsidiaries, fails or neglects to perform, keep, or
observe any other term, provision, condition, covenant or agreement contained in
this Agreement or any Loan Documents, and as to any default (other than those
specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within
ten (10) days after the occurrence thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional period (which shall not in any case exceed thirty (30)
days) to attempt to cure such default, and within such reasonable time period
the failure to cure the default shall not be deemed an Event of Default (but no
Credit Extensions shall be made during such cure period). Grace periods provided
under this Section shall not apply, among other things, to financial covenants
or any other covenants set forth in subsection (a) above;

 

8.3 Material Adverse Change. A Material Adverse Change occurs;

 

8.4 Attachment; Levy; Restraint on Business.

 

(a) (i) The service of process seeking to attach, by trustee or similar process,
any funds of Borrower or any of its Subsidiaries or of any entity under control
of Borrower or its Subsidiaries on deposit with any Lender or any Lender’s
Affiliate or any bank or other institution at which Borrower or any of its
Subsidiaries maintains a Collateral Account, or (ii) a notice of lien, levy, or
assessment is filed against Borrower or any of its Subsidiaries or their
respective assets by any government agency, and the same under subclauses
(i) and (ii) hereof are not, within ten (10) days after the occurrence thereof,
discharged or stayed (whether through the posting of a bond or otherwise);
provided, however, no Credit Extensions shall be made during any ten (10) day
cure period; and

 

(b) (i) any material portion of Borrower’s or any of its Subsidiaries’ assets is
attached, seized, levied on, or comes into possession of a trustee or receiver,
or (ii) any court order enjoins, restrains, or prevents Borrower or any of its
Subsidiaries from conducting any part of its business;

 

8.5 Insolvency. (a) Borrower or any of its Subsidiaries is or becomes Insolvent;
(b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or
(c) an Insolvency Proceeding is begun against Borrower or any of its
Subsidiaries and not dismissed or stayed within forty-five (45) days (but no
Credit Extensions shall be made while Borrower or any Subsidiary is Insolvent
and/or until any Insolvency Proceeding is dismissed); provided, however, that
this Section 8.5 shall not apply to Peregrine Beijing nor VTT;

 

8.6 Other Agreements. There is a default in any agreement to which Borrower or
any of its Subsidiaries is a party with a third party or parties resulting in a
right by such third party or parties, whether or not exercised, to accelerate
the maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000.00) or that could reasonably be expected to have a Material
Adverse Change;

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

17

 

 

8.7 Judgments. One or more judgments, orders, or decrees for the payment of
money in an amount, individually or in the aggregate, of at least One Hundred
Thousand Dollars ($100,000.00) (not covered by independent third-party insurance
as to which liability has been accepted by such insurance carrier) shall be
rendered against Borrower or any of its Subsidiaries and shall remain
unsatisfied, unvacated, or unstayed for a period of ten (10) days after the
entry thereof (provided that no Credit Extensions will be made prior to the
satisfaction, vacation, or stay of such judgment, order or decree);

 

8.8 Misrepresentations. Borrower or any of its Subsidiaries or any Person acting
for Borrower or any of its Subsidiaries makes any representation, warranty, or
other statement now or later in this Agreement, any Loan Document or in any
writing delivered to Collateral Agent and/or Lenders or to induce Collateral
Agent and/or the Lenders to enter this Agreement or any Loan Document, and such
representation, warranty, or other statement is incorrect in any material
respect when made;

 

8.9 Subordinated Debt. A default or breach occurs under any agreement between
Borrower or any of its Subsidiaries and any creditor of Borrower or any of its
Subsidiaries that signed a subordination, intercreditor, or other similar
agreement with Collateral Agent or the Lenders, or any creditor that has signed
such an agreement with Collateral Agent or the Lenders breaches any terms of
such agreement;

 

8.10 Guaranty. (a) Any Guaranty terminates or ceases for any reason to be in
full force and effect; (b) any Guarantor does not perform any obligation or
covenant under any Guaranty; (c) any circumstance described in Sections 8.3,
8.4, 8.5, 8.7, or 8.8 occurs with respect to any Guarantor, or (d) the
liquidation, winding up, or termination of existence of any Guarantor;

 

8.11 Governmental Approvals. Any Governmental Approval shall have been revoked,
rescinded, suspended, modified in an adverse manner, or not renewed in the
ordinary course for a full term and such revocation, rescission, suspension,
modification or non-renewal has resulted in or could reasonably be expected to
result in a Material Adverse Change; or

 

8.12 Lien Priority. Any Lien created hereunder or by any other Loan Document
shall at any time, other than as a result of any action or inaction of
Collateral Agent or any Lender, fail to constitute a valid and perfected Lien on
any of the Collateral purported to be secured thereby, subject to no other Lien,
other than Permitted Liens.

 

8.13 End of Phase II Meeting. Borrower shall fail to have the End of Phase II
Meeting by June 30, 2013.

 

9. RIGHTS AND REMEDIES

 

9.1 Rights and Remedies.

 

(a) Upon the occurrence and during the continuance of an Event of Default,
Collateral Agent may, and at the written direction of any Lender shall, without
notice or demand, do any or all of the following: (i) deliver notice of the
Event of Default to Borrower, (ii) by notice to Borrower declare all
Obligations, including, without limitation, any unpaid portion of the Facility
Fee, immediately due and payable (but if an Event of Default described in
Section 8.5 occurs all Obligations shall be immediately due and payable without
any action by Collateral Agent or the Lenders) or (iii) by notice to Borrower
suspend or terminate the obligations, if any, of the Lenders to advance money or
extend credit for Borrower’s benefit under this Agreement or under any other
agreement between Borrower and Collateral Agent and/or the Lenders (but if an
Event of Default described in Section 8.5 occurs all obligations, if any, of the
Lenders to advance money or extend credit for Borrower’s benefit under this
Agreement or under any other agreement between Borrower and Collateral Agent
and/or the Lenders shall be immediately terminated without any action by
Collateral Agent or the Lenders).

 

(b) Without limiting the rights of Collateral Agent and the Lenders set forth in
Section 9.1(a) above, upon the occurrence and during the continuance of an Event
of Default, Collateral Agent shall have the right, at the written direction of
the Required Lenders, without notice or demand, to do any or all of the
following:

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

18

 

 

(i) foreclose upon and/or sell or otherwise liquidate, the Collateral;

 

(ii) apply to the Obligations any (a) balances and deposits of Borrower that
Collateral Agent or any Lender holds or controls, or (b) any amount held or
controlled by Collateral Agent or any Lender owing to or for the credit or the
account of Borrower; and/or

 

(iii) commence and prosecute an Insolvency Proceeding or consent to Borrower
commencing any Insolvency Proceeding.

 

(c) Without limiting the rights of Collateral Agent and the Lenders set forth in
Sections 9.1(a) and (b) above, upon the occurrence and during the continuance of
an Event of Default, Collateral Agent shall have the right, without notice or
demand, to do any or all of the following:

 

(i) settle or adjust disputes and claims directly with Account Debtors for
amounts on terms and in any order that Collateral Agent considers advisable,
notify any Person owing Borrower money of Collateral Agent’s security interest
in such funds, and verify the amount of such account;

 

(ii) make any payments and do any acts it considers necessary or reasonable to
protect the Collateral and/or its security interest in the Collateral. Borrower
shall assemble the Collateral if Collateral Agent requests and make it available
in a location as Collateral Agent reasonably designates. Collateral Agent may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest, or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Collateral Agent a license to enter and
occupy any of its premises, without charge, to exercise any of Collateral
Agent’s rights or remedies;

 

(iii) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
and/or advertise for sale, the Collateral. Collateral Agent is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s and each of its Subsidiaries’ labels, patents, copyrights, mask
works, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any similar property as it pertains to
the Collateral, in completing production of, advertising for sale, and selling
any Collateral and, in connection with Collateral Agent’s exercise of its rights
under this Section 9.1, Borrower’s and each of its Subsidiaries’ rights under
all licenses and all franchise agreements inure to Collateral Agent, for the
benefit of the Lenders;

 

(iv) place a “hold” on any account maintained with Collateral Agent or the
Lenders and/or deliver a notice of exclusive control, any entitlement order, or
other directions or instructions pursuant to any Control Agreement or similar
agreements providing control of any Collateral;

 

(v) demand and receive possession of Borrower’s Books;

 

(vi) appoint a receiver to seize, manage and realize any of the Collateral, and
such receiver shall have any right and authority as any competent court will
grant or authorize in accordance with any applicable law, including any power or
authority to manage the business of Borrower or any of its Subsidiaries;

 

(vii) subject to clauses 9.1(a) and (b), exercise all rights and remedies
available to Collateral Agent and each Lender under the Loan Documents or at law
or equity, including all remedies provided under the Code (including disposal of
the Collateral pursuant to the terms thereof);

 

(viii) for any Letters of Credit, demand that Borrower (i) deposit cash with
Bank in an amount equal to (x) if such Letters of Credit are denominated in
Dollars, then one hundred five percent (105%); and (y) if such Letters of Credit
are denominated in a Foreign Currency, then one hundred ten percent (110%), of
the Dollar Equivalent of the aggregate face amount of all Letters of Credit
remaining undrawn (plus all interest, fees, and costs due or to become due in
connection therewith (as estimated by Bank in its good faith business
judgment)), to secure all of the Obligations relating to such Letters of Credit,
as collateral security for the repayment of any future drawings under such
Letters of Credit, and Borrower shall forthwith deposit and pay such amounts,
and (ii) pay in advance all letter of credit fees scheduled to be paid or
payable over the remaining term of any Letters of Credit; and

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

19

 

 

(ix) terminate any FX Contracts.

 

Notwithstanding any provision of this Section 9.1 to the contrary, upon the
occurrence of any Event of Default, Collateral Agent shall have the right to
exercise any and all remedies referenced in this Section 9.1 without the written
consent of Required Lenders following the occurrence of an Exigent Circumstance.
As used in the immediately preceding sentence, “Exigent Circumstance” means any
event or circumstance that, in the reasonable judgment of Collateral Agent,
imminently threatens the ability of Collateral Agent to realize upon all or any
material portion of the Collateral, such as, without limitation, fraudulent
removal, concealment, or abscondment thereof, destruction or material waste
thereof, or failure of Borrower or any of its Subsidiaries after reasonable
demand to maintain or reinstate adequate casualty insurance coverage, or which,
in the judgment of Collateral Agent, could reasonably be expected to result in a
material diminution in value of the Collateral.

 

9.2 Power of Attorney. Borrower hereby irrevocably appoints Collateral Agent as
its lawful attorney-in-fact, exercisable upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrower’s or any of its
Subsidiaries’ name on any checks or other forms of payment or security; (b) sign
Borrower’s or any of its Subsidiaries’ name on any invoice or bill of lading for
any Account or drafts against Account Debtors; (c) settle and adjust disputes
and claims about the Accounts directly with Account Debtors, for amounts and on
terms Collateral Agent determines reasonable; (d) make, settle, and adjust all
claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien,
charge, encumbrance, security interest, and adverse claim in or to the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; and (f) transfer the Collateral into the name
of Collateral Agent or a third party as the Code or any applicable law permits.
Borrower hereby appoints Collateral Agent as its lawful attorney-in-fact to sign
Borrower’s or any of its Subsidiaries’ name on any documents necessary to
perfect or continue the perfection of Collateral Agent’s security interest in
the Collateral regardless of whether an Event of Default has occurred until all
Obligations (other than inchoate indemnity obligations) have been satisfied in
full and Collateral Agent and the Lenders are under no further obligation to
make Credit Extensions hereunder. Collateral Agent’s foregoing appointment as
Borrower’s or any of its Subsidiaries’ attorney in fact, and all of Collateral
Agent’s rights and powers, coupled with an interest, are irrevocable until all
Obligations (other than inchoate indemnity obligations) have been fully repaid
and performed and Collateral Agent’s and the Lenders’ obligation to provide
Credit Extensions terminates.

 

9.3 Protective Payments. If Borrower or any of its Subsidiaries fail to obtain
the insurance called for by Section 6.5 or fails to pay any premium thereon or
fails to pay any other amount which Borrower or any of its Subsidiaries is
obligated to pay under this Agreement or any other Loan Document, Collateral
Agent may obtain such insurance or make such payment, and all amounts so paid by
Collateral Agent are Lenders’ Expenses and immediately due and payable, bearing
interest at the Default Rate, and secured by the Collateral. Collateral Agent
will make reasonable efforts to provide Borrower with notice of Collateral Agent
obtaining such insurance or making such payment at the time it is obtained or
paid or within a reasonable time thereafter. No such payments by Collateral
Agent are deemed an agreement to make similar payments in the future or
Collateral Agent’s waiver of any Event of Default.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

20

 

 

9.4 Application of Payments and Proceeds. Notwithstanding anything to the
contrary contained in this Agreement, upon the occurrence and during the
continuance of an Event of Default, (a) Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times thereafter
received by Collateral Agent from or on behalf of Borrower or any of its
Subsidiaries of all or any part of the Obligations, and, as between Borrower on
the one hand and Collateral Agent and Lenders on the other, Collateral Agent
shall have the continuing and exclusive right to apply and to reapply any and
all payments received against the Obligations in such manner as Collateral Agent
may deem advisable notwithstanding any previous application by Collateral Agent,
and (b) the proceeds of any sale of, or other realization upon all or any part
of the Collateral shall be applied: first, to the Lenders’ Expenses; second, to
accrued and unpaid interest on the Obligations (including any interest which,
but for the provisions of the United States Bankruptcy Code, would have accrued
on such amounts); third, to the principal amount of the Obligations outstanding;
and fourth, to any other indebtedness or obligations of Borrower owing to
Collateral Agent or any Lender under the Loan Documents. Any balance remaining
shall be delivered to Borrower or to whoever may be lawfully entitled to receive
such balance or as a court of competent jurisdiction may direct. In carrying out
the foregoing, (x) amounts received shall be applied in the numerical order
provided until exhausted prior to the application to the next succeeding
category, and (y) each of the Persons entitled to receive a payment in any
particular category shall receive an amount equal to its pro rata share of
amounts available to be applied pursuant thereto for such category. Any
reference in this Agreement to an allocation between or sharing by the Lenders
of any right, interest or obligation “ratably,” “proportionally” or in similar
terms shall refer to Pro Rata Share unless expressly provided otherwise.
Collateral Agent, or if applicable, each Lender, shall promptly remit to the
other Lenders such sums as may be necessary to ensure the ratable repayment of
each Lender’s portion of any Term Loan and the ratable distribution of interest,
fees and reimbursements paid or made by Borrower. Notwithstanding the foregoing,
a Lender receiving a scheduled payment shall not be responsible for determining
whether the other Lenders also received their scheduled payment on such date;
provided, however, if it is later determined that a Lender received more than
its ratable share of scheduled payments made on any date or dates, then such
Lender shall remit to Collateral Agent or other Lenders such sums as may be
necessary to ensure the ratable payment of such scheduled payments, as
instructed by Collateral Agent. If any payment or distribution of any kind or
character, whether in cash, properties or securities, shall be received by a
Lender in excess of its ratable share, then the portion of such payment or
distribution in excess of such Lender’s ratable share shall be received by such
Lender in trust for and shall be promptly paid over to the other Lender for
application to the payments of amounts due on the other Lenders’ claims. To the
extent any payment for the account of Borrower is required to be returned as a
voidable transfer or otherwise, the Lenders shall contribute to one another as
is necessary to ensure that such return of payment is on a pro rata basis. If
any Lender shall obtain possession of any Collateral, it shall hold such
Collateral for itself and as agent and bailee for Collateral Agent and other
Lenders for purposes of perfecting Collateral Agent’s security interest therein.

 

9.5 Liability for Collateral. So long as Collateral Agent and the Lenders comply
with reasonable banking practices regarding the safekeeping of the Collateral in
the possession or under the control of Collateral Agent and the Lenders,
Collateral Agent and the Lenders shall not be liable or responsible for: (a) the
safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any
diminution in the value of the Collateral; or (d) any act or default of any
carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss,
damage or destruction of the Collateral, provided Collateral Agent and Lenders
have complied with such reasonable banking practices.

 

9.6 No Waiver; Remedies Cumulative. Failure by Collateral Agent or any Lender,
at any time or times, to require strict performance by Borrower of any provision
of this Agreement or any other Loan Document shall not waive, affect, or
diminish any right of Collateral Agent or any Lender thereafter to demand strict
performance and compliance herewith or therewith. No waiver hereunder shall be
effective unless signed by Collateral Agent and the Required Lenders and then is
only effective for the specific instance and purpose for which it is given. The
rights and remedies of Collateral Agent and the Lenders under this Agreement and
the other Loan Documents are cumulative. Collateral Agent and the Lenders have
all rights and remedies provided under the Code, any applicable law, by law, or
in equity. The exercise by Collateral Agent or any Lender of one right or remedy
is not an election, and Collateral Agent’s or any Lender’s waiver of any Event
of Default is not a continuing waiver. Collateral Agent’s or any Lender’s delay
in exercising any remedy is not a waiver, election, or acquiescence.

 

9.7 Demand Waiver. Borrower waives, to the fullest extent permitted by law,
demand, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees held by Collateral Agent or any Lender on which Borrower or any
Subsidiary is liable.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

21

 

 

10. NOTICES

 

All notices, consents, requests, approvals, demands, or other communication
(collectively, “Communication”) by any party to this Agreement or any other Loan
Document must be in writing and shall be deemed to have been validly served,
given, or delivered: (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the U.S. mail, first class, registered or
certified mail return receipt requested, with proper postage prepaid; (b) upon
transmission, when sent by facsimile transmission; (c) one (1) Business Day
after deposit with a reputable overnight courier with all charges prepaid; or
(d) when delivered, if hand-delivered by messenger, all of which shall be
addressed to the party to be notified and sent to the address, facsimile number,
or email address indicated below. Any of Collateral Agent, Lender or Borrower
may change its mailing address or facsimile number by giving the other party
written notice thereof in accordance with the terms of this Section 10.

 

  If to Borrower:

PEREGRINE PHARMACEUTICALS, INC.

14282 Franklin Avenue

Tustin, California 92780

Attn: Mark R. Ziebell

Fax: (714) 838-9433

Email: mziebell@peregrineinc.com

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

PEREGRINE PHARMACEUTICALS, INC.

14282 Franklin Avenue

Tustin, California 92780

Attn: Paul J. Lytle

Fax: (714) 838-9433

Email: plytle@peregrineinc.com

        If to Collateral Agent:

OXFORD FINANCE LLC

133 North Fairfax Street

Alexandria, Virginia 22314

Attention: Legal Department

Fax: (703) 519-5225

Email: LegalDepartment@oxfordfinance.com

        with a copy to

MIDCAP FINANCIAL SBIC, LP

7255 Woodmont Avenue, Suite 200

Bethesda, Maryland 20814

Attn: Portfolio Management- Life Sciences

Fax: (301) 941-1450

Email: lviera@midcapfinancial.com

        with a copy to

SILICON VALLEY BANK

38 Technology Drive West, Suite 150

Irvine, California 92618

Attn: Brian Maver

Fax: (949) 790-9020

Email: bmaver@svb.com

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

DLA Piper LLP (US)

4365 Executive Drive, Suite 1100

San Diego, California 92121-2133

Attn: Troy Zander

Fax: (858) 638-5086

Email: troy.zander@dlapiper.com

     

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

22

 

 

11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

 

New York law governs the Loan Documents without regard to principles of
conflicts of law. Borrower, Lenders and Collateral Agent each submit to the
exclusive jurisdiction of the State and Federal courts in the City of New York,
Borough of Manhattan. NOTWITHSTANDING THE FOREGOING, COLLATERAL AGENT AND THE
LENDERS SHALL HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER
OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH COLLATERAL AGENT
AND THE LENDERS (IN ACCORDANCE WITH THE PROVISIONS OF SECTION 9.1) DEEM
NECESSARY OR APPROPRIATE TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE
COLLATERAL AGENT’S AND THE LENDERS’ RIGHTS AGAINST BORROWER OR ITS PROPERTY.
Borrower expressly submits and consents in advance to such jurisdiction in any
action or suit commenced in any such court, and Borrower hereby waives any
objection that it may have based upon lack of personal jurisdiction, improper
venue, or forum non conveniens and hereby consents to the granting of such legal
or equitable relief as is deemed appropriate by such court. Borrower hereby
waives personal service of the summons, complaints, and other process issued in
such action or suit and agrees that service of such summons, complaints, and
other process may be made by registered or certified mail addressed to Borrower
at the address set forth in, or subsequently provided by Borrower in accordance
with, Section 10 of this Agreement and that service so made shall be deemed
completed upon the earlier to occur of Borrower’s actual receipt thereof or
three (3) days after deposit in the U.S. mails, first class, registered or
certified mail return receipt requested, proper postage prepaid.

 

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT,
AND THE LENDERS EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER
CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

12. GENERAL PROVISIONS

 

12.1 Successors and Assigns. This Agreement binds and is for the benefit of the
successors and permitted assigns of each party. Borrower may not transfer,
pledge or assign this Agreement or any rights or obligations under it without
Collateral Agent’s and each Lender’s prior written consent (which may be granted
or withheld in Collateral Agent’s and each Lender’s discretion, subject to
Section 12.6). Each Lender shall have the right, without the consent of or
notice to Borrower or any other Lender (i) to pledge or grant security interests
in all or any part of, or any interest in, such Lender’s obligations, rights,
and benefits under this Agreement and the other Loan Documents in connection
with financing transactions for such Lender or its Affiliates or securitization
transactions in which such Lender is involved, and (ii) to grant participations
in all or any part of, or any interest in, such Lender’s obligations, rights,
and benefits under this Agreement and the other Loan Documents; provided that no
such pledge, grant of a security interest or participation shall release such
Lender from any of its obligations hereunder. The Lenders have the right,
without the consent of or notice to Borrower, to sell, transfer, assign or
negotiate (any such sale, transfer, assignment or negotiation, a “Lender
Transfer”) all or any part of, or any interest in, the Lenders’ obligations,
rights, and benefits under this Agreement and the other Loan Documents;
provided, however, that any such Lender Transfer (other than a transfer, pledge,
sale or assignment to an Eligible Assignee) of its obligations, rights, and
benefits under this Agreement and the other Loan Documents shall require the
prior written consent of the Required Lenders (such approved assignee, an
“Approved Lender”). Borrower and Collateral Agent shall be entitled to continue
to deal solely and directly with such Lender in connection with the interests so
assigned until Collateral Agent shall have received and accepted an effective
assignment agreement in form satisfactory to Collateral Agent executed,
delivered and fully completed by the applicable parties thereto, and shall have
received such other information regarding such Eligible Assignee or Approved
Lender as Collateral Agent reasonably shall require. Notwithstanding anything to
the contrary contained herein, so long as no Event of Default has occurred and
is continuing, no Lender Transfer (other than a Lender Transfer (i) in respect
of the Warrants or (ii) in connection with (x) assignments by a Lender due to a
forced divestiture at the request of any regulatory agency; or (y) upon the
occurrence of a default, event of default or similar occurrence with respect to
a Lender’s own financing or securitization transactions) shall be permitted,
without Borrower’s consent, to any Person which is an Affiliate or Subsidiary of
Borrower, a direct competitor of Borrower or a vulture hedge fund, each as
determined by Collateral Agent. Additionally, no Lender Transfer, and no pledge,
security interest or grant of a participation interest in a Lender’s interests
under the Loan Documents, may be made to Borrower or an Affiliate or Subsidiary
of Borrower unless all Lenders shall have given their written consent thereto.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

23

 

 

12.2 Indemnification. Borrower agrees to indemnify, defend and hold Collateral
Agent and the Lenders and their respective directors, officers, employees,
agents, attorneys, or any other Person affiliated with or representing
Collateral Agent or the Lenders (each, an “Indemnified Person”) harmless
against: (a) all obligations, demands, claims, and liabilities (collectively,
“Claims”) asserted by any other party in connection with; related to; following;
or arising from, out of or under, the transactions contemplated by the Loan
Documents; and (b) all losses or Lenders’ Expenses incurred, or paid by
Indemnified Person in connection with; related to; following; or arising from,
out of or under, the transactions contemplated by the Loan Documents between
Collateral Agent, and/or the Lenders and Borrower (including reasonable
attorneys’ fees and expenses), except for Claims and/or losses directly caused
by such Indemnified Person’s gross negligence or willful misconduct. Borrower
hereby further indemnifies, defends and holds each Indemnified Person harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including the fees and disbursements of
counsel for such Indemnified Person) in connection with any investigative,
response, remedial, administrative or judicial matter or proceeding, whether or
not such Indemnified Person shall be designated a party thereto and including
any such proceeding initiated by or on behalf of Borrower, and the reasonable
expenses of investigation by engineers, environmental consultants and similar
technical personnel and any commission, fee or compensation claimed by any
broker (other than any broker retained by Collateral Agent or Lenders) asserting
any right to payment for the transactions contemplated hereby which may be
imposed on, incurred by or asserted against such Indemnified Person as a result
of or in connection with the transactions contemplated hereby and the use or
intended use of the proceeds of the loan proceeds except for liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements directly caused by such Indemnified Person’s
gross negligence or willful misconduct.

 

12.3 Time of Essence. Time is of the essence for the performance of all
Obligations in this Agreement.

 

12.4 Severability of Provisions. Each provision of this Agreement is severable
from every other provision in determining the enforceability of any provision.

 

12.5 Correction of Loan Documents. Collateral Agent and the Lenders may correct
patent errors and fill in any blanks in this Agreement and the other Loan
Documents consistent with the agreement of the parties.

 

12.6 Amendments in Writing; Integration. (a) No amendment, modification,
termination or waiver of any provision of this Agreement or any other Loan
Document, no approval or consent thereunder, or any consent to any departure by
Borrower or any of its Subsidiaries therefrom, shall in any event be effective
unless the same shall be in writing and signed by Borrower, Collateral Agent and
the Required Lenders provided that:

 

(i) no such amendment, waiver or other modification that would have the effect
of increasing or reducing a Lender’s Term Loan Commitment or Commitment
Percentage shall be effective as to such Lender without such Lender’s written
consent, and no such amendment, waiver, or other modification that would have
the effect of increasing any Lender’s Term Loan Commitment shall be effective
without the consent of the Required Lenders;

 

(ii) no such amendment, waiver or modification that would affect the rights and
duties of Collateral Agent shall be effective without Collateral Agent’s written
consent or signature;

 

(iii) no such amendment, waiver or other modification shall, unless signed by
all the Lenders directly affected thereby, (A) reduce the principal of, rate of
interest on or any fees with respect to any Term Loan or forgive any principal,
interest (other than default interest) or fees (other than late charges) with
respect to any Term Loan (B) postpone the date fixed for, or waive, any payment
of principal of any Term Loan or of interest on any Term Loan (other than
default interest) or any fees provided for hereunder (other than late charges or
for any termination of any commitment); (C) change the definition of the term
“Required Lenders” or the percentage of Lenders which shall be required for the
Lenders to take any action hereunder; (D) release all or substantially all of
any material portion of the Collateral or any Intellectual Property that is or
becomes Collateral or any IP Proceeds, authorize Borrower to sell or otherwise
dispose of all or substantially all or any material portion of the Collateral or
any Intellectual Property or IP Proceeds or release any Guarantor of all or any
portion of the Obligations or its guaranty obligations with respect thereto,
except, in each case with respect to this clause (D), as otherwise may be
expressly permitted under this Agreement or the other Loan Documents (including
in connection with any disposition permitted hereunder); (E) amend, waive or
otherwise modify this Section 12.6 or the definitions of the terms used in this
Section 12.6 insofar as the definitions affect the substance of this
Section 12.6; (F) consent to the assignment, delegation or other transfer by
Borrower of any of its rights and obligations under any Loan Document or release
Borrower of its payment obligations under any Loan Document, except, in each
case with respect to this clause (F), pursuant to a merger or consolidation
permitted pursuant to this Agreement; (G) amend any of the provisions of
Section 9.4 or amend any of the definitions of Pro Rata Share, Term Loan
Commitment, Commitment Percentage or that provide for the Lenders to receive
their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral
hereunder; (H) subordinate the Liens granted in favor of Collateral Agent
securing the Obligations; or (I) amend any of the provisions of Section 12.10.
It is hereby understood and agreed that all Lenders shall be deemed directly
affected by an amendment, waiver or other modification of the type described in
the preceding clauses (C), (D), (E), (F), (G), (H) and (I) of the preceding
sentence;

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

24

 

 

(iv) the provisions of the foregoing clauses (i), (ii) and (iii) are subject to
the provisions of any interlender or agency agreement among the Lenders and
Collateral Agent pursuant to which any Lender may agree to give its consent in
connection with any amendment, waiver or modification of the Loan Documents only
in the event of the unanimous agreement of all Lenders.

 

(b) This Agreement and the Loan Documents represent the entire agreement about
this subject matter and supersede prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement and the Loan
Documents merge into this Agreement and the Loan Documents.

 

12.7 Counterparts. This Agreement may be executed in any number of counterparts
and by different parties on separate counterparts, each of which, when executed
and delivered, is an original, and all taken together, constitute one Agreement.

 

12.8 Survival. All covenants, representations and warranties made in this
Agreement continue in full force and effect until this Agreement has terminated
pursuant to its terms and all Obligations (other than inchoate indemnity
obligations and any other obligations which, by their terms, are to survive the
termination of this Agreement) have been satisfied. Without limiting the
foregoing, except as otherwise provided in Section 4.1, the grant of security
interest by Borrower in Section 4.1 shall survive until the later to occur of
(a) the Obligations (other than inchoate indemnity obligations) having been
repaid in full in cash and (b) the termination of, or the posting of cash
collateral in respect of, all Bank Services Agreements. The obligation of
Borrower in Section 12.2 to indemnify each Lender and Collateral Agent, as well
as the confidentiality provisions in Section 12.9 below, shall survive until the
statute of limitations with respect to such claim or cause of action shall have
run.

 

12.9 Confidentiality. In handling any confidential information of Borrower, the
Lenders and Collateral Agent shall exercise the same degree of care that it
exercises for their own proprietary information, but disclosure of information
may be made: (a) subject to the terms and conditions of this Agreement, to the
Lenders’ and Collateral Agent’s Subsidiaries or Affiliates, or in connection
with a Lender’s own financing or securitization transactions and upon the
occurrence of a default, event of default or similar occurrence with respect to
such financing or securitization transaction; (b) to prospective transferees
(other than those identified in (a) above) or purchasers of any interest in the
Credit Extensions (provided, however, the Lenders and Collateral Agent shall,
except upon the occurrence and during the continuance of an Event of Default,
obtain such prospective transferee’s or purchaser’s agreement to the terms of
this provision or to similar confidentiality terms); (c) as required by law,
regulation, subpoena, or other order, provided reasonable efforts are made to
provide advance notice to Borrower in order to allow Borrower to seek an
appropriate protective order; (d) to Lenders’ or Collateral Agent’s regulators
or as otherwise required in connection with an examination, report or audit;
(e) as Collateral Agent reasonably considers appropriate in exercising remedies
under the Loan Documents; and (f) to third party service providers of the
Lenders and/or Collateral Agent so long as such service providers have executed
a confidentiality agreement with the Lenders and Collateral Agent with terms no
less restrictive than those contained herein. Confidential information does not
include information that either: (i) is in the public domain or in the Lenders’
and/or Collateral Agent’s possession when disclosed to the Lenders and/or
Collateral Agent, or becomes part of the public domain after disclosure to the
Lenders and/or Collateral Agent; or (ii) is disclosed to the Lenders and/or
Collateral Agent by a third party, if the Lenders and/or Collateral Agent does
not know that the third party is prohibited from disclosing the information.
Collateral Agent and the Lenders may use confidential information for any
purpose, including, without limitation, for the development of client databases,
reporting purposes, and market analysis. The provisions of the immediately
preceding sentence shall survive the termination of this Agreement. The
agreements provided under this Section 12.9 supersede all prior agreements,
understanding, representations, warranties, and negotiations between the parties
about the subject matter of this Section 12.9.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

25

 

 

12.10 Right of Set Off. Borrower hereby grants to Collateral Agent and to each
Lender, a lien, security interest and right of set off as security for all
Obligations to Collateral Agent and each Lender hereunder, whether now existing
or hereafter arising upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control of
Collateral Agent or the Lenders or any entity under the control of Collateral
Agent or the Lenders (including a Collateral Agent affiliate) or in transit to
any of them. At any time after the occurrence and during the continuance of an
Event of Default, without demand or notice, Collateral Agent or the Lenders may
set off the same or any part thereof and apply the same to any liability or
obligation of Borrower even though unmatured and regardless of the adequacy of
any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE
COLLATERAL AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER
COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

 

12.11 Silicon Valley Bank as Agent. Collateral Agent hereby appoints SVB as its
agent (and SVB hereby accepts such appointment) for the purpose of perfecting
Collateral Agent’s Liens in assets which, in accordance with Article 8 or
Article 9, as applicable, of the Code can be perfected by possession or control,
including without limitation, all Deposit Accounts, all to the extent maintained
at or by SVB.

 

12.12 Cooperation of Borrower. If necessary, Borrower agrees to (i) execute any
documents (including new Secured Promissory Notes) reasonably required to
effectuate and acknowledge each assignment of a Term Loan Commitment or Loan to
an assignee in accordance with Section 12.1, (ii) make Borrower’s management
available to meet with Collateral Agent and prospective participants and
assignees of Term Loan Commitments or Credit Extensions (which meetings shall be
conducted no more often than twice every twelve months unless an Event of
Default has occurred and is continuing), and (iii) assist Collateral Agent or
the Lenders in the preparation of information relating to the financial affairs
of Borrower as any prospective participant or assignee of a Term Loan Commitment
or Term Loan reasonably may request. Subject to the provisions of Section 12.9,
Borrower authorizes each Lender to disclose to any prospective participant or
assignee of a Term Loan Commitment, any and all information in such Lender’s
possession concerning Borrower and its financial affairs which has been
delivered to such Lender by or on behalf of Borrower pursuant to this Agreement,
or which has been delivered to such Lender by or on behalf of Borrower in
connection with such Lender’s credit evaluation of Borrower prior to entering
into this Agreement.

 

12.13 Borrower Liability. Either Borrower may, acting singly, request Credit
Extensions hereunder. Each Borrower hereby appoints the other as agent for the
other for all purposes hereunder, including with respect to requesting Credit
Extensions hereunder. Each Borrower hereunder shall be jointly and severally
obligated to repay all Credit Extensions made hereunder, regardless of which
Borrower actually receives said Credit Extension, as if each Borrower hereunder
directly received all Credit Extensions. Each Borrower waives (a) any suretyship
defenses available to it under the Code or any other applicable law, and (b) any
right to require Collateral Agent or any Lender to: (i) proceed against any
Borrower or any other person; (ii) proceed against or exhaust any security; or
(iii) pursue any other remedy. Collateral Agent and or any 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 Collateral Agent and the Lenders
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 Obligations, for any payment made
by Borrower with respect to the 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 Obligations as a result of any payment made by Borrower
with respect to the 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 Collateral Agent and the Lenders and such payment
shall be promptly delivered to Collateral Agent for application to the
Obligations, whether matured or unmatured.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

26

 

 

13. DEFINITIONS

 

13.1 Definitions. As used in this Agreement, the following terms have the
following meanings:

 

“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and other sums owing to Borrower.

 

“Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made.

 

“Affiliate” of any Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person’s senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person’s managers and members.

 

“Agreement” is defined in the preamble hereof.

 

“Amortization Date” is, (x) with respect to the Term A Loan, April 1, 2013 and
(y) with respect to the Term A Loan and the Term B Loan, if Borrower achieves
both (i) the Phase II Milestone Event and (ii) either (a) the End of Phase II
Meeting or (b) the Equity Event, and obtains the Term B Loan, October 1, 2013.

 

“Annual Projections” is defined in Section 6.2(a).

 

“Anti-Terrorism Laws” are any laws relating to terrorism or money laundering,
including Executive Order No. 13224 (effective September 24, 2001), the USA
PATRIOT Act, the laws comprising or implementing the Bank Secrecy Act, and the
laws administered by OFAC.

 

“Approved Fund” is any (i) investment company, fund, trust, securitization
vehicle or conduit that is (or will be) engaged in making, purchasing, holding
or otherwise investing in commercial loans and similar extensions of credit in
the ordinary course of its business or (ii) any Person (other than a natural
person) which temporarily warehouses loans for any Lender or any entity
described in the preceding clause (i) and that, with respect to each of the
preceding clauses (i) and (ii), is administered or managed by (a) a Lender,
(b) an Affiliate of a Lender or (c) a Person (other than a natural person) or an
Affiliate of a Person (other than a natural person) that administers or manages
a Lender.

 

“Approved Lender” is defined in Section 12.1.

 

“Bank Services” are any products, credit services, and/or financial
accommodations previously, now, or hereafter provided to Borrower or any of its
Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any
letters of credit, cash management services (including, without limitation,
merchant services, direct deposit of payroll, business credit cards, and check
cashing services), interest rate swap arrangements, and foreign exchange
services as any such products or services may be identified in Bank’s various
agreements related thereto (each, a “Bank Services Agreement”).

 

“Bank” is defined in the preamble hereof.

 

“Basic Rate” is, with respect to a Term Loan, the per annum rate of interest
(based on a year of three hundred sixty (360) days) equal to the greater of
either (i) seven and ninety-five one hundredths percent (7.95%) or (ii) the sum
of (a) the three (3) month U.S. LIBOR rate reported in the Wall Street Journal
three (3) Business Days prior to the Funding Date of such Term Loan (which shall
not be less than forty-five hundredths of one percent (0.45%), plus (b) seven
and one half percent (7.50%).

 

“Blocked Person” is any Person: (a) listed in the annex to, or is otherwise
subject to the provisions of, Executive Order No. 13224, (b) a Person owned or
controlled by, or acting for or on behalf of, any Person that is listed in the
annex to, or is otherwise subject to the provisions of, Executive Order No.
13224, (c) a Person with which any Lender is prohibited from dealing or
otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person
that commits, threatens or conspires to commit or supports “terrorism” as
defined in Executive Order No. 13224, or (e) a Person that is named a “specially
designated national” or “blocked person” on the most current list published by
OFAC or other similar list.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

27

 

 

“Borrower” is defined in the preamble hereof.

 

“Borrower’s Books” are Borrower’s or any of its Subsidiaries’ books and records
including ledgers, federal, and state tax returns, records regarding Borrower’s
or its Subsidiaries’ assets or liabilities, the Collateral, business operations
or financial condition, and all computer programs or storage or any equipment
containing such information.

 

“Business Day” is any day that is not a Saturday, Sunday or a day on which
Collateral Agent is closed.

 

“Cash Equivalents” are (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc.; (c) certificates of deposit maturing
no more than one (1) year after issue provided that the account in which any
such certificate of deposit is maintained is subject to a Control Agreement in
favor of Collateral Agent; and (d) money market funds at least ninety-five
percent (95%) of the assets of which constitute Cash Equivalents of the kinds
described in clauses (a) through (c) of this definition. For the avoidance of
doubt, the direct purchase by Borrower or any of its Subsidiaries of any Auction
Rate Securities, or purchasing participations in, or entering into any type of
swap or other derivative transaction, or otherwise holding or engaging in any
ownership interest in any type of Auction Rate Security by Borrower or any of
its Subsidiaries shall be conclusively determined by the Lenders as an
ineligible Cash Equivalent, and any such transaction shall expressly violate
each other provision of this Agreement governing Permitted Investments.
Notwithstanding the foregoing, Cash Equivalents does not include and Borrower,
and each of its Subsidiaries, are prohibited from purchasing, purchasing
participations in, entering into any type of swap or other equivalent derivative
transaction, or otherwise holding or engaging in any ownership interest in any
type of debt instrument, including, without limitation, any corporate or
municipal bonds with a long-term nominal maturity for which the interest rate is
reset through a dutch auction and more commonly referred to as an auction rate
security (each, an “Auction Rate Security”).

 

“Claims” are defined in Section 12.2.

 

“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the State of New York; provided, that, to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different Articles or Divisions of the Code, the
definition of such term contained in Article or Division 9 shall govern;
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, Collateral Agent’s Lien on any Collateral is governed by the Uniform
Commercial Code in effect in a jurisdiction other than the State of New York,
the term “Code” shall mean the Uniform Commercial Code as enacted and in effect
in such other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority, or remedies and for purposes
of definitions relating to such provisions.

 

“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.

 

“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account, or any other bank account maintained by Borrower or any Subsidiary at
any time.

 

“Collateral Agent” is, Oxford, not in its individual capacity, but solely in its
capacity as agent on behalf of and for the benefit of the Lenders.

 

“Commitment Percentage” is set forth in Schedule 1.1, as amended from time to
time.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

28

 

 

“Commodity Account” is any “commodity account” as defined in the Code with such
additions to such term as may hereafter be made.

 

“Communication” is defined in Section 10.

 

“Compliance Certificate” is that certain certificate in the form attached hereto
as Exhibit C.

 

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation directly
or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (b) any
obligations for undrawn letters of credit for the account of that Person; and
(c) all obligations from any interest rate, currency or commodity swap
agreement, interest rate cap or collar agreement, or other agreement or
arrangement designated to protect a Person against fluctuation in interest
rates, currency exchange rates or commodity prices; but “Contingent Obligation”
does not include endorsements in the ordinary course of business. The amount of
a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
any guarantee or other support arrangement.

 

“Control Agreement” is any control agreement entered into among the depository
institution at which Borrower or any of its Subsidiaries maintains a Deposit
Account or the securities intermediary or commodity intermediary at which
Borrower or any of its Subsidiaries maintains a Securities Account or a
Commodity Account, Borrower and such Subsidiary, and Collateral Agent pursuant
to which Collateral Agent obtains control (within the meaning of the Code) for
the benefit of the Lenders over such Deposit Account, Securities Account, or
Commodity Account.

 

“Copyrights” are any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret.

 

“Credit Extension” is any Term Loan or any other extension of credit by
Collateral Agent or Lenders for Borrower’s benefit.

 

“Default Rate” is defined in Section 2.3(b).

 

“Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.

 

“Designated Deposit Account” is Borrower’s deposit account with Union Bank, as
identified in the Perfection Certificate delivered to Collateral Agent as of the
Effective Date (and as such deposit account information may be updated in
writing from time to time).

 

“Disbursement Letter” is that certain form attached hereto as Exhibit B-1.

 

“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated
in Dollars, such amount, and (b) with respect to any amount denominated in a
Foreign Currency, the equivalent amount therefor in Dollars as determined by
Bank at such time on the basis of the then-prevailing rate of exchange in San
Francisco, California, for sales of the Foreign Currency for transfer to the
country issuing such Foreign Currency.

 

“Dollars,” “dollars” and “$” each mean lawful money of the United States.

 

“Effective Date” is defined in the preamble of this Agreement.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

29

 

 

“Eligible Assignee” is (i) a Lender, (ii) an Affiliate of a Lender, (iii) an
Approved Fund and (iv) any commercial bank, savings and loan association or
savings bank or any other entity which is an “accredited investor” (as defined
in Regulation D under the Securities Act of 1933, as amended) and which extends
credit or buys loans as one of its businesses, including insurance companies,
mutual funds, lease financing companies, small business investment companies,
business development companies and commercial finance companies, in each case,
which at as of the date that it becomes a Lender either (A) has a rating of BBB
or higher from Standard & Poor’s Rating Group and a rating of Baa2 or higher
from Moody’s Investors Service, Inc. or (B) together with its affiliated
entities, has total assets in excess of Seven Hundred Fifty Million Dollars
($750,000,000.00), and in each case of clauses (i) through (iv), which, through
its applicable lending office, is capable of lending to Borrower without the
imposition of any withholding or similar taxes; provided that notwithstanding
the foregoing, “Eligible Assignee” shall not include, Borrower or any of
Borrower’s Affiliates or, unless an Event of Default has occurred and is
continuing, a direct competitor of Borrower or a vulture hedge fund, each as
reasonably determined by Collateral Agent. Notwithstanding the foregoing, (x) in
connection with assignments by a Lender due to a forced divestiture at the
request of any regulatory agency, the restrictions set forth herein shall not
apply and Eligible Assignee shall mean any Person or party and (y) in connection
with a Lender’s own financing or securitization transactions, the restrictions
set forth herein shall not apply and Eligible Assignee shall mean any Person or
party providing such financing or formed to undertake such securitization
transaction and any transferee of such Person or party upon the occurrence of a
default, event of default or similar occurrence with respect to such financing
or securitization transaction; provided that no such sale, transfer, pledge or
assignment under this clause (y) shall release such Lender from any of its
obligations hereunder or substitute any such Person or party for such Lender as
a party hereto until Collateral Agent shall have received and accepted an
effective assignment agreement from such Person or party in form satisfactory to
Collateral Agent executed, delivered and fully completed by the applicable
parties thereto, and shall have received such other information regarding such
Eligible Assignee as Collateral Agent reasonably shall require.

 

“End of Phase II Meeting” is a positive End of Phase II meeting with the FDA on
the bavituximab second-line NSCLC program (defined as moving into Phase III
design); and evidence of the same in form and content reasonably acceptable to
the Lenders.

 

“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

 

“Equity Event” is the receipt by Borrower after the Effective Date of
unrestricted, non-recourse net cash proceeds of not less than [**] from a
combination of (i) the issuance and sale by Borrower of its equity securities
and (ii) an “up front” payment on Borrower’s bavituximab NSCLC program in
connection with a joint venture, collaboration or other partnering transaction
(any such transaction, a “Partnering Transaction”); provided that at least [**]
of the Equity Event must come from a Partnering Transaction.

 

“ERISA” is the Employee Retirement Income Security Act of 1974, as amended, and
its regulations.

 

“Event of Default” is defined in Section 8.

 

“FDA” is the U.S. Food and Drug Administration.

 

“Final Payment” is a payment (in addition to and not a substitution for the
regular monthly payments of principal plus accrued interest) due on the earliest
to occur of (a) the Maturity Date, or (b) the acceleration of any Term Loan, or
(c) the prepayment of a Term Loan pursuant to Section 2.2(c) or (d), equal to
the original principal amount of such Term Loan multiplied by the Final Payment
Percentage, payable to Lenders in accordance with their respective Pro Rata
Shares.

 

“Final Payment Percentage” is six and one-half percent (6.50%).

 

“Foreign Currency” means lawful money of a country other than the United States.

 

“Foreign Subsidiary” is a Subsidiary that is not an entity organized under the
laws of the United States or any territory thereof.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

30

 

 

“Funding Date” is any date on which a Credit Extension is made to or on account
of Borrower which shall be a Business Day.

 

“FX Contract” is any foreign exchange contract by and between Borrower and Bank
under which Borrower commits to purchase from or sell to Bank a specific amount
of Foreign Currency on a specified date.

 

“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession in the
United States, which are applicable to the circumstances as of the date of
determination.

 

“General Intangibles” are all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law, any
applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
tax refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.

 

“Governmental Approval” is any consent, authorization, approval, order, license,
franchise, permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any Governmental
Authority.

 

“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.

 

“Guarantor” is any Person providing a Guaranty in favor of Collateral Agent.

 

“Guaranty” is any guarantee of all or any part of the Obligations, as the same
may from time to time be amended, restated, modified or otherwise supplemented.

 

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and
(d) Contingent Obligations.

 

“Indemnified Person” is defined in Section 12.2.

 

“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 relief.

 

“Insolvent” means not Solvent.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

31

 

 

“Intellectual Property” means all of Borrower’s or any Subsidiary’s right, title
and interest in and to the following:

 

(a) its Copyrights, Trademarks and Patents;

 

(b) any and all trade secrets and trade secret rights, including, without
limitation, any rights to unpatented inventions, know-how, operating manuals;

 

(c) any and all source code;

 

(d) any and all design rights which may be available to Borrower;

 

(e) any and all claims for damages by way of past, present and future
infringement of any of the foregoing, with the right, but not the obligation, to
sue for and collect such damages for said use or infringement of the
Intellectual Property rights identified above; and

 

(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks
or Patents.

 

“Inventory” is all “inventory” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of any Person’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

 

“Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance, payment
or capital contribution to any Person.

 

“Key Person” is each of Borrower’s (i) President and Chief Executive Officer,
who is Steven W. King as of the Effective Date, (ii) Chief Financial Officer,
who is Paul J. Lytle as of the Effective Date and (iii) V.P., General Counsel,
who is Mark R. Ziebell as of the Effective Date.

 

“Lender” is any one of the Lenders.

 

“Lenders” are the Persons identified on Schedule 1.1 hereto and each assignee
that becomes a party to this Agreement pursuant to Section 12.1.

 

“Lenders’ Expenses” are all audit fees and expenses, costs, and expenses
(including reasonable attorneys’ fees and expenses, as well as appraisal fees,
fees incurred on account of lien searches, inspection fees, and filing fees) for
preparing, amending, negotiating, administering, defending and enforcing the
Loan Documents (including, without limitation, those incurred in connection with
appeals or Insolvency Proceedings) or otherwise incurred by Collateral Agent
and/or the Lenders in connection with the Loan Documents; provided, that, if
requested by Borrower in writing, all such fees, expenses and costs are
supported by summary invoices or statements (and further provided that the
failure to provide any such summary invoices or statements shall not render the
Lender Expenses not due and payable).

 

“Letter of Credit” is a standby or commercial letter of credit issued by Bank
upon request of Borrower based upon an application, guarantee, indemnity, or
similar agreement.

 

“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security
interest, or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.

 

“Loan Documents” are, collectively, this Agreement, the Perfection Certificates,
each Compliance Certificate, each Disbursement Letter, each Loan Payment/Advance
Request Form and any Bank Services Agreement, the Post Closing Letter, any
subordination agreements, any note, or notes or guaranties executed by Borrower
or any other Person, and any other present or future agreement entered into by
Borrower, any Guarantor or any other Person for the benefit of the Lenders and
Collateral Agent in connection with this Agreement (other than the Warrants);
all as amended, restated, or otherwise modified.

 

“Loan Payment/Advance Request Form” is that certain form attached hereto as
Exhibit B-2.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

32

 

 

“Material Adverse Change” is (a) a material impairment in the perfection or
priority of Collateral Agent’s Lien in the Collateral or in the value of such
Collateral; (b) a material adverse change in the business, operations or
condition (financial or otherwise) of Borrower or any Subsidiary; or (c) a
material impairment of the prospect of repayment of any portion of the
Obligations.

 

“Maturity Date” is, (x) with respect to the Term A Loan, September 1, 2015 and
(y) with respect to the Term A Loan and the Term B Loan, if Borrower achieves
both (i) the Phase II Milestone Event and (ii) either (a) the End of Phase II
Meeting or (b) the Equity Event, and obtains the Term B Loan, March 1, 2016.

 

“Medibiotech” is Medibiotech Co., Inc., a Delaware corporation.

 

“NSCLC” is non-small cell lung cancer.

 

“Non-Utilization Fee” is an additional fee payable to the Lenders, in the event
Borrower achieves (i) the Phase II Milestone Event and (ii)(a) the End of Phase
II Meeting or (b) the Equity Event, but declines to request the Term B Loan, in
amount equal to Two Hundred Twenty Five Thousand Dollars ($225,000.00); which
fee shall be due and payable, if at all, no later than March 31, 2013.

 

“Obligations” are all of Borrower’s obligations to pay when due any debts,
principal, interest, Lenders’ Expenses, the Prepayment Fee, the Final Payment,
the Non-Utilization Fee and other amounts Borrower owes the Lenders now or
later, in connection with, related to, following, or arising from, out of or
under, this Agreement or, the other Loan Documents (other than the Warrants), or
otherwise, including, without limitation, all obligations relating to letters of
credit (including reimbursement obligations for drawn and undrawn letters of
credit), Bank Services, if any, and including interest accruing after Insolvency
Proceedings begin (whether or not allowed) and debts, liabilities, or
obligations of Borrower assigned to the Lenders and/or Collateral Agent, and the
performance of Borrower’s duties under the Loan Documents (other than the
Warrants).

 

“OFAC” is the U.S. Department of Treasury Office of Foreign Assets Control.

 

“OFAC Lists” are, collectively, the Specially Designated Nationals and Blocked
Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed.
Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other
restricted Persons maintained pursuant to any of the rules and regulations of
OFAC or pursuant to any other applicable Executive Orders.

 

“Operating Documents” are, for any Person, such Person’s formation documents, as
certified by the Secretary of State (or equivalent agency) of such Person’s
jurisdiction of organization on a date that is no earlier than thirty (30) days
prior to the Effective Date, and, (a) if such Person is a corporation, its
bylaws in current form, (b) if such Person is a limited liability company, its
limited liability company agreement (or similar agreement), and (c) if such
Person is a partnership, its partnership agreement (or similar agreement), each
of the foregoing with all current amendments or modifications thereto.

 

“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

 

“Payment Date” is the first (1st) calendar day of each calendar month,
commencing on October 1, 2012.

 

“Peregrine China” is Peregrine (Beijing) Pharmaceutical Technology Ltd., an
entity organized under the laws of China and a wholly-owned Subsidiary of
Parent.

 

“Perfection Certificate” and “Perfection Certificates” is defined in
Section 5.1.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

33

 

 

“Permitted Indebtedness” is:

 

(a) Borrower’s Indebtedness to the Lenders and Collateral Agent under this
Agreement and the other Loan Documents;

 

(b) Indebtedness existing on the Effective Date and disclosed on the Perfection
Certificate(s);

 

(c) Subordinated Debt;

 

(d) unsecured Indebtedness to trade creditors incurred in the ordinary course of
business;

 

(e) Indebtedness consisting of capitalized lease obligations and purchase money
Indebtedness, in each case incurred by Borrower or any of its Subsidiaries to
finance the acquisition, repair, improvement or construction of fixed or capital
assets of such person, provided that (i) the aggregate outstanding principal
amount of all such Indebtedness does not exceed One Hundred Thousand Dollars
($100,000.00) at any time and (ii) the principal amount of such Indebtedness
does not exceed the lower of the cost or fair market value of the property so
acquired or built or of such repairs or improvements financed with such
Indebtedness (each measured at the time of such acquisition, repair, improvement
or construction is made);

 

(f) Indebtedness incurred as a result of endorsing negotiable instruments
received in the ordinary course of Borrower’s business; and

 

(g) extensions, refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness (a) through (e) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose materially more burdensome terms upon Borrower, or its Subsidiary, as
the case may be.

 

“Permitted Investments” are:

 

(a) Investments disclosed on the Perfection Certificate(s) and existing on the
Effective Date;

 

(b) (i) Investments consisting of cash and Cash Equivalents, and (ii) any
Investments permitted by Borrower’s investment policy, as amended from time to
time, provided that such investment policy (and any such amendment thereto) has
been approved in writing by Collateral Agent;

 

(c) Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
Borrower;

 

(d) Investments consisting of Deposit Accounts in which Collateral Agent has a
perfected security interest;

 

(e) Investments in connection with Transfers permitted by Section 7.1;

 

(f) Investments (i) by Borrower in Peregrine China following the Effective Date
not to exceed Twenty Thousand Dollars ($20,000.00) in the aggregate in any
fiscal year to cover rent and miscellaneous other expenses; and (ii) by
Peregrine China and/or VTT in Borrower or any other Subsidiary (other than
Peregrine China or VTT);

 

(g) Investments consisting of (i) travel advances and employee relocation loans
and other employee loans and advances in the ordinary course of business, and
(ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s Board of Directors; not to
exceed Twenty Five Thousand Dollars ($25,000.00) in the aggregate for (i) and
(ii) in any fiscal year;

 

(h) 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 business;

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

34

 

 

(i) 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 paragraph (i) shall not
apply to Investments of Borrower in any Subsidiary;

 

(j) Borrower’s ownership of 950,000 shares of common stock of Medibiotech; and

 

(k) non-cash Investments in joint ventures or strategic alliances in the
ordinary course of Borrower’s business consisting of the non-exclusive licensing
of technology, the development of technology or the providing of technical
support.

 

“Permitted Licenses” are (A) licenses of over-the-counter software that is
commercially available to the public, and (B) non-exclusive and exclusive
licenses for the use of the Intellectual Property of Borrower or any of its
Subsidiaries entered into in the ordinary course of business, provided, that,
with respect to each such license described in clause (B), (i) no Event of
Default has occurred or is continuing at the time of such license; (ii) the
license constitutes an arms-length transaction, the terms of which, on their
face, do not provide for a sale or assignment of any Intellectual Property and
do not restrict the ability of Borrower or any of its Subsidiaries, as
applicable, to pledge, grant a security interest in or lien on, or assign or
otherwise Transfer any Intellectual Property; (iii) in the case of any exclusive
license, (x) Borrower delivers twenty (20) days’ prior written notice and a
brief summary of the terms of the proposed license to Collateral Agent and the
Lenders and delivers to Collateral Agent and the Lenders copies of the final
executed licensing documents in connection with the exclusive license promptly
upon consummation thereof, (y) any such license is made in connection with a
bona fide corporate collaboration or partnership, and is approved by Borrower’s
(or the applicable Subsidiary’s) board of directors, and (z) any such license
could not result in a legal transfer of title of the licensed property but may
be exclusive in respects other than territory and may be exclusive as to
territory only as to discrete geographical areas outside of the United States;
and (iv) all upfront payments, royalties, milestone payments or other proceeds
arising from the licensing agreement that are payable to Borrower or any of its
Subsidiaries are paid to a Deposit Account that is governed by a Control
Agreement.

 

“Permitted Liens” are:

 

(a) Liens existing on the Effective Date and disclosed on the Perfection
Certificates or arising under this Agreement and the other Loan Documents;

 

(b) Liens for taxes, fees, assessments or other government charges or levies,
either (i) not due and payable or (ii) being contested in good faith and for
which Borrower maintains adequate reserves on its Books, provided that no notice
of any such Lien has been filed or recorded under the Internal Revenue Code of
1986, as amended, and the Treasury Regulations adopted thereunder;

 

(c) liens securing Indebtedness permitted under clause (e) of the definition of
“Permitted Indebtedness,” provided that (i) such liens exist prior to the
acquisition of, or attach substantially simultaneous with, or within twenty
(20) days after the, acquisition, lease, repair, improvement or construction of,
such property financed or leased by such Indebtedness and (ii) such liens do not
extend to any property of Borrower other than the property (and proceeds
thereof) acquired, leased or built, or the improvements or repairs, financed by
such Indebtedness;

 

(d) Liens of carriers, warehousemen, suppliers, or other Persons that are
possessory in nature arising in the ordinary course of business so long as such
Liens attach only to Inventory, securing liabilities in the aggregate amount not
to exceed Twenty Five Thousand Dollars ($25,000.00), and which are not
delinquent or remain payable without penalty or which are being contested in
good faith and by appropriate proceedings which proceedings have the effect of
preventing the forfeiture or sale of the property subject thereto;

 

(e) Liens to secure payment of workers’ compensation, employment insurance,
old-age pensions, social security and other like obligations incurred in the
ordinary course of business (other than Liens imposed by ERISA);

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

35

 

 

(f) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (c), but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the indebtedness may not increase;

 

(g) leases or subleases of real property granted in the ordinary course of
Borrower’s business (or, if referring to another Person, in the ordinary course
of such Person’s business), and leases, subleases, non-exclusive licenses or
sublicenses of personal property (other than Intellectual Property) granted in
the ordinary course of Borrower’s business (or, if referring to another Person,
in the ordinary course of such Person’s business), if the leases, subleases,
licenses and sublicenses do not prohibit granting Collateral Agent or any Lender
a security interest therein;

 

(h) banker’s liens, rights of setoff and Liens in favor of financial
institutions incurred in the ordinary course of business arising in connection
with Borrower’s deposit accounts or securities accounts held at such
institutions solely to secure payment of fees and similar costs and expenses and
provided such accounts are maintained in compliance with Section 6.6(b) hereof;

 

(i) Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Section 8.4 or 8.7; and

 

(j) Liens consisting of Permitted Licenses.

 

“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

 

“Phase II Milestone Event” is the receipt by Borrower, in form and content
reasonably acceptable to the Lenders, of positive overall survivability data in
Borrower’s bavituximab second-line Phase II non-small cell lung cancer program.

 

“Post Closing Letter” is that certain Post Closing Letter dated as of the
Effective Date by and between Collateral Agent and Borrower.

 

“Prepayment Fee” is, with respect to any Term Loan subject to prepayment prior
to the Maturity Date, whether by mandatory or voluntary prepayment, acceleration
or otherwise, an additional fee payable to the Lenders in amount equal to:

 

(i) for a prepayment made on or after the Funding Date of such Term Loan through
and including the first anniversary of the Funding Date of such Term Loan, three
percent (3.00%) of the principal amount of such Term Loan prepaid;

 

(ii) for a prepayment made after the date which is after the first anniversary
of the Funding Date of such Term Loan through and including the second
anniversary of the Funding Date of such Term Loan, two percent (2.00%) of the
principal amount of the Term Loans prepaid; and

 

(iii) for a prepayment made after the date which is after the second anniversary
of the Funding Date of such Term Loan and prior to the Maturity Date, one
percent (1.00%) of the principal amount of the Term Loans prepaid.

 

“Pro Rata Share” is, as of any date of determination, with respect to each
Lender, a percentage (expressed as a decimal, rounded to the ninth decimal
place) determined by dividing the outstanding principal amount of Term Loans
held by such Lender by the aggregate outstanding principal amount of all Term
Loans.

 

“Registered Organization” is any “registered organization” as defined in the
Code with such additions to such term as may hereafter be made

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

36

 

 

“Required Lenders” means (i) for so long as all of the Persons that are Lenders
on the Effective Date (each an “Original Lender”) have not assigned or
transferred any of their interests in their respective Term Loans, Lenders
holding one hundred percent (100%) of the aggregate outstanding principal
balance of the Term Loans, or (ii) at any time from and after any Original
Lender has assigned or transferred any interest in its Term Loans, Lenders
holding, sixty six percent (66%) or more of the aggregate outstanding principal
balance of the Term Loans, plus, in respect of this clause (ii), (A) each
Original Lender that has not assigned or transferred any portion of its
respective Term Loan, (B) each assignee of an Original Lender, (C) any Person or
party providing financing to an Original Lender, and any transferee of such
Person or party upon the occurrence of a default, event of default or similar
occurrence with respect to such financing, and (D) any Person or party formed to
undertake a securitization transaction with respect to an Original Lender and
any transferee of such Person or party upon the occurrence of a default, event
of default or similar occurrence with respect to such securitization transaction
(in each case in respect of clauses (A), (B), (C) and (D) of this clause (ii),
whether or not such Lender is included within the Lenders holding sixty six
percent (66%) of the Terms Loans); provided, however, that notwithstanding the
foregoing, for purposes of Section 9.1(b) hereof, “Required Lenders” means (i)
for so long as all Original Lenders retain one hundred percent (100%) of their
interests in their respective Term Loans, Lenders holding one hundred percent
(100%) of the aggregate outstanding principal balance of the Term Loans, or (ii)
at any time from and after any Original Lender has assigned or transferred any
interest in its Term Loans, Lenders holding, sixty six percent (66%) or more of
the aggregate outstanding principal balance of the Term Loans, plus, in respect
of this clause (ii), each Original Lender that has not assigned or transferred
any portion of its respective Term Loan (in each case in respect of this clause
(ii), whether or not such Original Lender is included within the Lenders holding
sixty six percent (66%) of the Term Loans). For purposes of this definition
only, a Lender and Original Lender shall be deemed to include itself, and any
Lender that is an Affiliate or Approved Fund of such Lender or Original Lender.

 

“Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

 

“Responsible Officer” is any of the President, Chief Executive Officer, or Chief
Financial Officer of Borrower acting alone.

 

“Second Draw Period” is the period commencing on the date on which Borrower has
achieved both (i) the Phase II Milestone Event and (ii) either (a) the End of
Phase II Meeting or (b) the Equity Event, and ending on the earliest of
(i) thirty (30) days after the commencement of such period; (ii) March 31, 2013;
and (iii) the occurrence of an Event of Default; provided, however, that the
Second Draw Period shall not commence if an Event of Default has occurred and is
continuing.

 

“SBA” is the United States Small Business Administration or any successor
thereto, and any analogous Governmental Authority.

 

“Secured Promissory Note” is defined in Section 2.4.

 

“Secured Promissory Note Record” is a record maintained by each Lender with
respect to the outstanding Obligations owed by Borrower to Lender and credits
made thereto.

 

“Securities Account” is any “securities account” as defined in the Code with
such additions to such term as may hereafter be made.

 

“Shares” is one hundred percent (100%) of the issued and outstanding capital
stock, membership units or other securities owned or held of record by Borrower
or Borrower’s Subsidiary, in any Subsidiary, and by Borrower in Medibiotech;
provided that, in the event Borrower, demonstrates to Collateral Agent’s
reasonable satisfaction, that a pledge of more than sixty five percent (65%) of
the Shares of a Subsidiary which is a Foreign Subsidiary, creates a present and
existing adverse tax consequence to Borrower under the U.S. Internal Revenue
Code, “Shares” shall mean sixty-five percent (65%) of the issued and outstanding
capital stock, membership units or other securities owned or held of record by
Borrower or its Subsidiary in such Foreign Subsidiary.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

37

 

 

“Solvent” is, with respect to any Person: the fair salable value of such
Person’s consolidated assets (including goodwill minus disposition costs)
exceeds the fair value of such Person’s liabilities; such Person is not left
with unreasonably small capital after the transactions in this Agreement; and
such Person is able to pay its debts (including trade debts) as they mature.

 

“Subject Intellectual Property” is defined in Section 5.2(d).

 

“Subordinated Debt” is indebtedness incurred by Borrower or any of its
Subsidiaries subordinated to all Indebtedness of Borrower and/or its
Subsidiaries to the Lenders (pursuant to a subordination, intercreditor, or
other similar agreement in form and substance satisfactory to Collateral Agent
and the Lenders entered into between Collateral Agent, Borrower, and/or any of
its Subsidiaries, and the other creditor), on terms acceptable to Collateral
Agent and the Lenders.

 

“Subsidiary” is, with respect to any Person, any Person of which more than fifty
percent (50%) of the voting stock or other equity interests (in the case of
Persons other than corporations) is owned or controlled, directly or indirectly,
by such Person or one or more of Affiliates of such Person; provided that
Medibiotech shall not be deemed a Subsidiary for purposes of this Agreement.

 

“Term A Loan” is defined in Section 2.2(a)(i) hereof.

 

“Term B Loan” is defined in Section 2.2(a)(ii) hereof.

 

“Term Loan” is defined in Section 2.2(a)(ii) hereof.

 

“Term Loan Commitment” is, for any Lender, the obligation of such Lender to make
a Term Loan, up to the principal amount shown on Schedule 1.1. “Term Loan
Commitments” means the aggregate amount of such commitments of all Lenders.

 

“Trademarks” means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks.

 

“Transfer” is defined in Section 7.1.

 

“VTT” means Vascular Targeting Technologies, Inc., a Delaware corporation and
wholly-owned, dormant Subsidiary of Parent.

 

“Warrants” are those certain Warrants to Purchase Stock dated as of the
Effective Date, or any date thereafter, issued by Borrower in favor of each
Lender or such Lender’s Affiliates.

 

 

[Balance of Page Intentionally Left Blank]

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission. 

 

38

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the Effective Date.

 

BORROWER:   BORROWER:           PEREGRINE PHARMACEUTICALS, INC.   AVID
BIOSERVICES, INC.                   By /s/ Paul Lytle                           
  By /s/ Paul Lytle                        Name: Paul
Lytle                              Name: Paul Lytle                       
Title: Chief Financial Officer   Title: Chief Financial Officer                
  COLLATERAL AGENT AND LENDER:               OXFORD FINANCE LLC                
      By /s/ Mark Davis                                  Name: Mark
Davis                                  Title: Vice President – Finance,
Secretary & Treasurer                       LENDER:   LENDER:           MIDCAP
FINANCIAL SBIC, LP   SILICON VALLEY BANK           By:  Midcap Financial SBIC
GP, LLC               By /s/ Josh Groman                           By: /s/ Brett
Mayer                        Name: Josh Groman                         Name:
Brett Maver                        Title: Authorized Signatory   Title:
Relationship Manager  

 

 

[Signature Page to Loan and Security Agreement]

 

 

 

 

 

SCHEDULE 1.1

Lenders and Commitments

 

  Term A Loans   Lender Term Loan Commitment Commitment Percentage OXFORD
FINANCE LLC $7,500,000.00 50.00000% MIDCAP FINANCIAL SBIC, LP $5,000,000.00
33.33333% SILICON VALLEY BANK $2,500,000.00 16.66667% TOTAL $15,000,000.00
100.00%

        Term B Loans   Lender Term Loan Commitment Commitment Percentage OXFORD
FINANCE LLC $7,500,000.00 50.00000% MIDCAP FINANCIAL SBIC, LP $5,000,000.00
33.33333% SILICON VALLEY BANK $2,500,000.00 16.66667% TOTAL $15,000,000.00
100.00%

        Aggregate (all Term Loans)   Lender Term Loan Commitment Commitment
Percentage OXFORD FINANCE LLC $15,000,000.00 50.00000% MIDCAP FINANCIAL SBIC, LP
$10,000,000.00 33.33333% SILICON VALLEY BANK $5,000,000.00 16.66667% TOTAL
$30,000,000.00 100.00%

 

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission

 

 

 

 

 

SCHEDULE 5.2

Subject Intellectual Property

 

Subject Intellectual Property

 

Patents and Patent Licenses

 

Peregrine has exclusive rights to market and sell world-wide the bavituximab
family of antibodies for treatment of all solid tumors and viral infections,
including non-small cell lung cancer, breast cancer, Hepatitis C and HIV through
the following list of patents and license agreements:

 

Product Covered

Licensor Name Licensor Address Lic. Exp.
Date IP Exp. Date Exclusive? Restriction               Unconjugated PS-targeting
antibodies Univ. of Texas System 201 W. 7th Street, Austin, TX 78701 Upon exp of
Patents 2019 Yes Transferable to successor PS-targeting conjugates Univ. of
Texas System 201 W. 7th Street, Austin, TX 78701 Upon exp of Patents 2021 Yes
Transferable to successor Bavituximab Univ. of Texas System 201 W. 7th Street,
Austin, TX 78701 Upon exp of Patents 2025 Yes Transferable to successor
Bavituximab Avanir Pharmaceuticals 101 Enterprise, Suite 300, Aliso Viejo, CA
92656 10 year from first commercial sale per country N/A Yes Transferable to
successor Anti-PS antibodies Genentech, Inc. 1 DNA Way, South San Francisco, CA
94080 Upon exp of Patents 2019 No Transferable to successor Bavituximab Lonza
Sales AG

Muenchensteinerstrasse 38, CH-4002, Basel,

Switzerland

Upon later of 15 years from first commercial sale or exp of Patents 2016 No
Transferable to successor

 

 

 

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

 

Peregrine has exclusive rights to market and sell in the United States, Europe
and certain other countries (except China and certain member nations of the Asia
Pacific Economic Cooperation, APEC) the product known as Cotara® (a chimeric
antibody labeled with radioactive iodine-131 that targets necrotic tumor cells)
, and the Cotara® family of antibodies, for treatment of brain, colon, liver,
lung, prostate, pancreatic and other cancers, through the following list of
Patents and license agreements:

 

Description

Registration/

Patent/Application

Number

Registration/

Issue/Application

Date

METHOD AND APPARATUS FOR CONTINUOUS LARGE-SCALE RADIOLABELING OF PROTEINS
(AUSTRALIA)

2004253924

11/12/09

METHOD AND APPARATUS FOR CONTINUOUS LARGE-SCALE RADIOLABELING OF PROTEINS
(CANADA)

2,527,054

11/24/05

METHOD AND APPARATUS FOR CONTINUOUS LARGE-SCALE RADIOLABELING OF PROTEINS
(CHINA)

ZL200480017742.X

03/25/09

METHOD AND APPARATUS FOR CONTINUOUS LARGE-SCALE RADIOLABELING OF PROTEINS (EPO -
Belgium, Switzerland, Germany, Denmark, Finland, France, Great Britain, Ireland,
Netherlands, Sweden)

1 638 989

07/30/09

METHOD AND APPARATUS FOR CONTINUOUS LARGE-SCALE RADIOLABELING OF PROTEINS (HONG
KONG)

1087417

10/24/08

METHOD AND APPARATUS FOR CONTINUOUS LARGE-SCALE RADIOLABELING OF PROTEINS
(INDIA)

419/DELNP/2006

01/23/06

METHOD AND APPARATUS FOR CONTINUOUS LARGE-SCALE RADIOLABELING OF PROTEINS (NEW
ZEALAND)

543495

08/13/09

METHODS AND APPARATUS FOR CONTINUOUS LARGE-SCALE RADIOLABELING OF PROTEINS (
UNITED STATES)

7,591,953

09/22/09

METHODS AND APPARATUS FOR CONTINUOUS LARGE-SCALE RADIOLABELING ( UNITED STATES)

8,137,540

03/20/12 ANTIBODIES WITH REDUCED NET POSITIVE CHARGE (EPO – Austria,
Switzerland, Denmark, Spain, France , Great Britain, Italy, Russia) 0873139

01/06/97

ANTIBODIES WITH REDUCED NET POSITIVE CHARGE (AUSTRALIA) 730388

01/06/97

ANTIBODIES WITH REDUCED NET POSITIVE CHARGE (CANADA) 2242750

01/06/97

ANTIBODIES WITH REDUCED NET POSITIVE CHARGE (JAPAN) 024825/2012

02/08/12

ANTIBODIES WITH REDUCED NET POSITIVE CHARGE (KOREA) 485240

01/06/97

ANTIBODIES WITH REDUCED NET POSITIVE CHARGE (MEXICO) 985565

01/06/97

ANTIBODIES WITH REDUCED NET POSITIVE CHARGE (UNITED STATES)

5,990,286

11/23/1999

SPECIFIC BINDING PROTEINS INCLUDING ANTIBODIES WHICH BIND TO THE NECROTIC CENTRE
OF TUMOURS, AND USES THEREOF (AUSTRALIA) 766564 07/02/1999 SPECIFIC BINDING
PROTEINS INCLUDING ANTIBODIES WHICH BIND TO THE NECROTIC CENTRE OF TUMOURS, AND
USES THEREOF (CANADA) 2336114 07/02/1999 SPECIFIC BINDING PROTEINS INCLUDING
ANTIBODIES WHICH BIND TO THE NECROTIC CENTRE OF TUMOURS, AND USES THEREOF
(JAPAN) 558212/2000 07/02/1999 SPECIFIC BINDING PROTEINS INCLUDING ANTIBODIES
WHICH BIND TO THE NECROTIC CENTRE OF TUMOURS, AND USES THEREOF (EPO - Germany,
France, Great Britain, Netherlands) 1092028 07/02/1999 SPECIFIC BINDING PROTEINS
INCLUDING ANTIBODIES WHICH BIND TO THE NECROTIC CENTRE OF TUMOURS, AND USES
THEREOF (EPO - Hong Kong) HK1086598 07/02/1999 SPECIFIC BINDING PROTEINS
INCLUDING ANTIBODIES WHICH BIND TO THE NECROTIC CENTRE OF TUMOURS, AND USES
THEREOF (UNITED STATES) 6,827,925 09/27/2001 SPECIFIC BINDING PROTEINS INCLUDING
ANTIBODIES WHICH BIND TO THE NECROTIC CENTRE OF TUMOURS, AND USES THEREOF
(UNITED STATES) 7,605,234 07/13/2004 SPECIFIC BINDING PROTEINS INCLUDING
ANTIBODIES WHICH BIND TO THE NECROTIC CENTRE OF TUMOURS, AND USES THEREOF (EPO -
Germany, France, Great Britain, Netherlands) 1621622 05/17/2005

 

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

 

Peregrine has the right to develop, market and sell other technologies
(excluding those covering the bavituximab and Cotara families of antibodies)
through the following list of patents and license agreements: 

 

Licensed Product Licensor Name Licensor Address Lic. Exp. Date IP Exp. Date
Exclusive? Restrictions Coaguligand Univ. of Texas System 201 W. 7th Street,
Austin, TX 78701 Upon exp of Patents 2016 Yes Transferable to successor
Coaguligand SCRIPPS Research Inst. 10550 North Torrey Pines Road, La Jolla CA 
92037 Upon exp of Patents 2016 Yes Transferable to successor VTA Univ. of Texas
System 201 W. 7th Street, Austin, TX 78701 Upon exp of Patents 2017 Yes
Transferable to successor Tissue Factor Univ. of Texas System 201 W. 7th Street,
Austin, TX 78701 Upon exp of Patents 2018 Yes Transferable to successor
Anti-VEGF Conjugates Univ. of Texas System 201 W. 7th Street, Austin, TX 78701
Upon exp of Patents 2020 Yes Transferable to successor PS-peptide conjugate

Univ. of Texas System

201 W. 7th Street, Austin, TX 78701

Upon exp of Patents 2018 Yes Transferable to successor 1N11/PGN635 Affitech AS

Gaustadalleen 21, N-0349

Oslo, Norway

negotiation of license in process N/A Yes Transferable to successor

 

 

Trademarks

 

Peregrine owns the following trademarks.

 

 

Description

Registration/

Application

Number

Registration/

Application

Date

AVID BIOSERVICES, INC. w/ design (Registered) 3,362,424 01/01/2008 AVID
BIOSERVICES (Registered) 3,348,388 12/04/2007 COTARA (Registered) 2,817,648
02/24/2004

 

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

 

 

 

EXHIBIT A

Description of Collateral

 

The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles (except as noted below), commercial
tort claims, documents, instruments (including any promissory notes), chattel
paper (whether tangible or electronic), cash, deposit accounts and other
Collateral Accounts, all certificates of deposit, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located; and

 

All Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

 

Notwithstanding the foregoing, the Collateral does not include any Intellectual
Property; provided, however, the Collateral shall include all Accounts and all
IP Proceeds. If a judicial authority (including a U.S. Bankruptcy Court) would
hold that a security interest in the underlying Intellectual Property is
necessary to have a security interest in such Accounts and such IP Proceeds,
then the Collateral shall automatically, and effective as of the Effective Date,
include the Intellectual Property to the extent necessary to permit perfection
of Collateral Agent’s security interest in such Accounts and such IP Proceeds.
“IP Proceeds” means, collectively, all cash, Accounts, license and royalty fees,
claims, products, awards, judgments, insurance claims, and other revenues,
proceeds or income, arising out of, derived from or relating to any Intellectual
Property of any Borrower, and any claims for damage by way of any past, present
or future infringement of any Intellectual Property of any Borrower (including,
without limitation, all cash, royalty fees, other proceeds, Accounts and General
Intangibles that consist of rights of payment to or on behalf of a Borrower and
the proceeds from the sale, licensing or other disposition of all or any part
of, or rights in, any Intellectual Property by or on behalf of a Borrower).

 

Pursuant to the terms of a certain negative pledge arrangement with Collateral
Agent and the Lenders, Borrower has agreed not to encumber any of its
Intellectual Property.

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

 

 

EXHIBIT B-1

Form of Disbursement Letter

[see attached]

 

 

 

 

 

 

 

 

 

 

 

 

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

 

 

DISBURSEMENT LETTER

August 30, 2012

 

The undersigned, being the duly elected and acting Chief Financial Officer of
PEREGRINE PHARMACEUTICALS, INC., a Delaware corporation, for and on behalf of
each Borrower under the Loan Agreement (as defined below), with offices located
at 14282 Franklin Avenue, Tustin, California 92780 (collectively, “Borrower”),
does hereby certify to OXFORD FINANCE LLC (“Oxford” and “Lender”), as collateral
agent (the “Collateral Agent”) in connection with that certain Loan and Security
Agreement dated as of August 30, 2012, by and among Borrower, Collateral Agent
and the Lenders from time to time party thereto (the “Loan Agreement”; with
other capitalized terms used below having the meanings ascribed thereto in the
Loan Agreement) that:

 

1. The representations and warranties made by Borrower in Section 5 of the Loan
Agreement and in the other Loan Documents are true and correct in all material
respects as of the date hereof.

 

2. No event or condition has occurred that would constitute an Event of Default
under the Loan Agreement or any other Loan Document.

 

3. Borrower is in compliance with the covenants and requirements contained in
Sections 4, 6 and 7 of the Loan Agreement.

 

4. All conditions referred to in Section 3 of the Loan Agreement to the making
of the Loan to be made on or about the date hereof have been satisfied or waived
by Collateral Agent.

 

5. No Material Adverse Change has occurred.

 

6. The undersigned is a Responsible Officer.

 

[Balance of Page Intentionally Left Blank]

 

 

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

 

 

7. The proceeds of the Term A Loan shall be disbursed as follows:

 

Disbursement from Oxford:   Loan Amount $7,500,000.00 Plus:   --Deposit Received
$150,000.00     Less:   --Facility Fee ($75,000.00) --Interim Interest
($1,656.25) --Lender’s Legal Fees ($67,032.73)*     Net Proceeds due from
Oxford: $7,506,311.02     Disbursement from MidCap:   Loan Amount $5,000,000.00
    Less:   --Facility Fee ($50,000.00) --Interim Interest ($1,104.17) --MidCap
Expenses ($8,639.44)     Net Proceeds due from MidCap: $4,940,256.39    
Disbursement from SVB:   Loan Amount $2,500,000.00     Less:   --Facility Fee
($25,000.00) --Interim Interest ($552.08)     Net Proceeds due from SVB:
$2,474,447.92     TOTAL TERM A LOAN NET PROCEEDS FROM LENDERS $14,921,015.33

 

8. The Term A Loan shall amortize in accordance with the Amortization Table
attached hereto.

 

9. The aggregate net proceeds of the Term Loans shall be transferred to the
Designated Deposit Account as follows:

 

Account Name:   Bank Name:   Bank Address:

  Account Number:   ABA Number:  

 

[Balance of Page Intentionally Left Blank]

 

 

__________

* Legal fees and costs are through the Effective Date. Post-closing legal fees
and costs, payable after the Effective Date, to be invoiced and paid
post-closing. 

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

 

 

Dated as of the date first set forth above.

 

BORROWER:       PEREGRINE PHARMACEUTICALS, INC., for
itself and on behalf of all Borrowers          
By                                       Name:                                
Title:                                         COLLATERAL AGENT AND LENDER:    
  OXFORD FINANCE LLC           By:                                
Name:                                 Title:                                    
    LENDER:       SILICON VALLEY BANK       By:                                
Name:                                 Title:                                    
    LENDER:       MIDCAP FINANCIAL SBIC, LP      

By: Midcap Financial SBIC GP, LLC

      By:                                 Name:                                
Title:                                

 

 

[Signature Pae to Disbursement Letter]

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

 

 

AMORTIZATION TABLE
(Term A Loan)

 

[see attached]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

 

EXHIBIT B-2

Loan Payment/Advance Request Form

 

Deadline for same day processing is Noon Pacific Time*

 

 

 [image001_ex1028.jpg]

 

 [image002_ex1028.jpg]

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

Loan Payment/Advance Request Form

 

Deadline is Noon E.S.T.

 

Date: __________________, 201__

 

[image003_ex1028.jpg] 

 

[image004_ex1028.jpg] 

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

 

 

EXHIBIT C

Compliance Certificate

 

TO: OXFORD FINANCE LLC, as Collateral Agent and Lender
MIDCAP FINANCIAL SBIC, LP, as Lender
SILICON VALLEY BANK, as Lender FROM: PEREGRINE PHARMACEUTICALS, INC., for itself
and on behalf of all Borrowers

 

The undersigned authorized officer (“Officer”) of PEREGRINE PHARMACEUTICALS,
INC. (for itself and on behalf of all Borrowers under and as defined in the Loan
Agreement (as defined below), collectively, “Borrower”), hereby certifies that
in accordance with the terms and conditions of the Loan and Security Agreement
by and among Borrower, Collateral Agent, and the Lenders from time to time party
thereto (the “Loan Agreement;” capitalized terms used but not otherwise defined
herein shall have the meanings given them in the Loan Agreement),

 

(a) Borrower is in complete compliance for the period ending _______________
with all required covenants except as noted below;

 

(b) There are no Events of Default, except as noted below;

 

(c) Except as noted below, all representations and warranties of Borrower stated
in the Loan Documents are true and correct in all material respects on this date
and for the period described in (a), above; provided, however, that such
materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date.

 

(d) Borrower, and each of Borrower’s Subsidiaries, has timely filed all required
tax returns and reports, Borrower, and each of Borrower’s Subsidiaries, has
timely paid all foreign, federal, state, and local taxes, assessments, deposits
and contributions owed by Borrower, or Subsidiary, except as otherwise permitted
pursuant to the terms of Section 5.8 of the Loan Agreement;

 

(e) No Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Collateral Agent and the
Lenders.

 

Attached are the required documents, if any, supporting our certification(s).
The Officer, on behalf of Borrower, further certifies that the attached
financial statements are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes and except, in
the case of unaudited financial statements, for the absence of footnotes and
subject to year-end audit adjustments as to the interim financial statements.

 

 

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

 

 

Please indicate compliance status since the last Compliance Certificate by
circling Yes, No, or N/A under “Complies” column.

 

  Reporting Covenant Requirement Actual Complies               1) Financial
statements Monthly within 30 days   Yes No N/A 2) Annual (CPA Audited)
statements Within 120 days after FYE   Yes No N/A 3) Annual Financial
Projections/Budget (prepared on a monthly basis) Annually (within 30 days of
FYE), and when revised   Yes No N/A 4) A/R & A/P agings If applicable   Yes No
N/A 5) 8-K, 10-K and 10-Q Filings within 5 days of filing   Yes No N/A 6)
Compliance Certificate Monthly within 30 days   Yes No N/A 7) IP Report When
required   Yes No N/A 8) Total amount of Borrower’s cash and cash equivalents at
the last day of the measurement period   $________ Yes No N/A 9) Total amount of
Borrower’s Subsidiaries’ cash and cash equivalents at the last day of the
measurement period   $________ Yes No N/A

Deposit and Securities Accounts

(Please list all accounts; attach separate sheet if additional space needed)

 

  Institution Name Account Number New Account? Account Control Agreement in
place? 1)     Yes No Yes No 2)     Yes No Yes No 3)     Yes No Yes No 4)     Yes
No Yes No

 

Financial Covenants

 

  Covenant Requirement Actual Compliance             1) Minimum Cash from and
after Funding Date of Term B Loan At least $10,000,000.00 $________ Yes No      
     

 

Other Matters

 

1) Have there been any changes in management since the last Compliance
Certificate? Yes No         2) Have there been any
transfers/sales/disposals/retirement of Collateral or IP prohibited by the Loan
Agreement? Yes No         3) Have there been any new or pending claims or causes
of action against Borrower that involve more than Two Hundred Fifty Thousand
Dollars ($250,000.00)? Yes No         4) Have there been any amendments of or
other changes to the capitalization table of Borrower and to the Operating
Documents of Borrower or any of its Subsidiaries? If yes, provide copies of any
such amendments or changes with this Compliance Certificate. Yes No

 

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

Exceptions

 

Please explain any exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions.” Attach separate sheet if additional
space needed.)

 

 

PEREGRINE PHARMACEUTICALS, INC.,

for itself and on behalf of all Borrowers

 

By:                                

Name:                           

Title:                            

 

Date:                          

 

LENDER USE ONLY     Received by:                      Date:                    
  Verified by:                       Date:                       Compliance
Status:           Yes                       No         

 

 

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

 

 

EXHIBIT D

Form of Secured Promissory Note

 

[see attached]

 

 

 

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

 

 

SECURED PROMISSORY NOTE
(Term A Loan)

 

 

$____________________ Dated:  August __, 2012

 

 

FOR VALUE RECEIVED, the undersigned, PEREGRINE PHARMACEUTICALS, INC., a Delaware
corporation and AVID BIOSERVICES, INC., Delaware corporation, each with offices
located at 14282 Franklin Avenue, Tustin, California 92780 (individually and
collectively, jointly and severally, “Borrower”) HEREBY PROMISES TO PAY to the
order of [OXFORD FINANCE LLC][MIDCAP FINANCIAL SBIC, LP][SILICON VALLEY BANK]
(“Lender”) the principal amount of [___________] MILLION DOLLARS
($______________) or such lesser amount as shall equal the outstanding principal
balance of the Term A Loan made to Borrower by Lender, plus interest on the
aggregate unpaid principal amount of such Term A Loan, at the rates and in
accordance with the terms of the Loan and Security Agreement dated August __,
2012 by and among Borrower, Lender, Oxford Finance LLC, as Collateral Agent, and
the other Lenders from time to time party thereto (as amended, restated,
supplemented or otherwise modified from time to time, the “Loan Agreement”). If
not sooner paid, the entire principal amount and all accrued and unpaid interest
hereunder shall be due and payable on the Maturity Date as set forth in the Loan
Agreement. Any capitalized term not otherwise defined herein shall have the
meaning attributed to such term in the Loan Agreement.

 

Principal, interest and all other amounts due with respect to the Term A Loan,
are payable in lawful money of the United States of America to Lender as set
forth in the Loan Agreement and this Secured Promissory Note (this “Note”). The
principal amount of this Note and the interest rate applicable thereto, and all
payments made with respect thereto, shall be recorded by Lender and, prior to
any transfer hereof, endorsed on the grid attached hereto which is part of this
Note.

 

The Loan Agreement, among other things, (a) provides for the making of a secured
Term A Loan by Lender to Borrower, and (b) contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events.

 

This Note may not be prepaid except as set forth in Section 2.2 (c) and
Section 2.2(d) of the Loan Agreement.

 

This Note and the obligation of Borrower to repay the unpaid principal amount of
the Term A Loan, interest on the Term A Loan and all other amounts due Lender
under the Loan Agreement is secured under the Loan Agreement.

 

Presentment for payment, demand, notice of protest and all other demands and
notices of any kind in connection with the execution, delivery, performance and
enforcement of this Note are hereby waived.

 

Borrower shall pay all reasonable fees and expenses, including, without
limitation, reasonable attorneys’ fees and costs, incurred by Lender in the
enforcement or attempt to enforce any of Borrower’s obligations hereunder not
performed when due.

 

This Note shall be governed by, and construed and interpreted in accordance
with, the internal laws of the State of New York.

 

The ownership of an interest in this Note shall be registered on a record of
ownership maintained by Lender or its agent. Notwithstanding anything else in
this Note to the contrary, the right to the principal of, and stated interest
on, this Note may be transferred only if the transfer is registered on such
record of ownership and the transferee is identified as the owner of an interest
in the obligation. Borrower shall be entitled to treat the registered holder of
this Note (as recorded on such record of ownership) as the owner in fact thereof
for all purposes and shall not be bound to recognize any equitable or other
claim to or interest in this Note on the part of any other person or entity.

 

[Balance of Page Intentionally Left Blank]

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.

 

 

 

 

 

 

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of
its officers thereunto duly authorized on the date hereof.

 

    BORROWER:           PEREGRINE PHARMACEUTICALS, INC.                
By                                   Name:                              
Title:                                            AVID BIOSERVICES, INC.        
        By                                   Name:                           
Title:                                                                         

 

 

[Oxford Finance LLC][Silicon Valley Bank][MidCap Financial SBIC, LP]

Term A Note

 

[**] = Portions of this exhibit have been omitted pursuant to a request of
confidentiality filed separately with the Securities and Exchange Commission.