peregrine_10q-ex10111.htm

Exhibit 10.2


     

    LOAN
AND SECURITY AGREEMENT

     

    THIS LOAN AND SECURITY
AGREEMENT (this “Agreement”) dated as of
December 9, 2008 (the “Effective Date”) among BLUECREST CAPITAL FINANCE,
L.P., a Delaware limited
partnership (“BlueCrest”), the other Lenders
listed on Schedule 1.1 hereof and otherwise party hereto, and BlueCrest in its
capacity as agent for the Lenders (the “Agent”), BlueCrest in its
capacity as lead arranger (in such capacity, the “Arranger”), and PEREGRINE PHARMACEUTICALS,
INC., a Delaware corporation (“Peregrine”), and AVID BIOSERVICES, INC., a
Delaware corporation (“Avid,” and together with
Peregrine, jointly and severally, individually and collectively, referred to as
“Borrower”), provides
the terms on which Lenders shall lend to Borrower and Borrower shall repay
Lenders.  The parties agree as follows:

     

    1       
     ACCOUNTING AND OTHER
TERMS

     

    Accounting
terms not defined in this Agreement shall be construed following
GAAP.  Calculations and determinations must be made following
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.

     

    2        
    LOAN AND TERMS OF
PAYMENT

     

    2.1         
Promise to
Pay.  Borrower hereby unconditionally promises to pay Lenders
the outstanding principal amount of all Credit Extensions and accrued and unpaid
interest thereon as and when due in accordance with this Agreement.

     

    2.1.1      
Growth Capital
Advances.

     

    (a)           Availability.  Subject
to the terms and conditions of this Agreement, during the Growth Capital Draw
Period, Lenders agree, severally and not jointly, to make advances to Borrower
(each a “Growth Capital
Advance” and, collectively, the “Growth Capital Advances”) not
exceeding the Growth Capital Line according to each Lender's pro-rata share of
the Growth Capital Line (based upon the respective Commitment Percentage of each
Lender).  After repayment, no Growth Capital Advance may be
reborrowed.  The Growth Capital Advances shall be available in two
tranches.  The first tranche (“Tranche One”) shall be in an
amount equal to Five Million Dollars ($5,000,000) and shall be advanced within
ten (10) calendar days after the Effective Date.  The second tranche
(“Tranche Two”) shall be
in an amount equal to Five Million Dollars ($5,000,000) and shall be available
to be advanced only within the fifteen (15) Business Day period following the
satisfaction of the following conditions, but shall not be advanced after the
Growth Capital Commitment Termination Date:

     

    (i)           Peregrine
receives (in cash) at least (x) $7,500,000 in gross proceeds from the
issuance of new equity after the Effective Date or (y) $20,000,000 in net proceeds from the
sale of Avid;

     

    (ii)           the
interim results from either (x) the Phase II bavituximab and carboplatin breast
cancer study or (y) the Phase II bavituximab and carboplatin lung cancer study
meet the predetermined response rate sufficient to continue Stage B enrollment
as specified in the respective clinical protocol for such study, and proven to
the reasonable satisfaction of Agent; and

     

    (iii)           no
Default or Event of Default has occurred or is continuing.

     

    (c)           Repayment.  Commencing
on the seventh (7th)
Interest Payment Date for each Growth Capital Advance, and on each Interest
Payment Date thereafter, Borrower shall pay to Lenders as a principal payment
under such Growth Capital Advance outstanding an amount equal to the
“Amortization Payment” (defined below) as an amortization payment in respect of
such Growth Capital Advance.  The term “Amortization Payment” means
the principal payment based upon a straight-line amortization of equal monthly
principal payments through the Growth Capital Line Maturity Date.  The
final payment of all unpaid principal and accrued interest is due and payable in
full on the Growth Capital Line Maturity Date.

     

    (d)           Mandatory Prepayment Upon an
Acceleration.  If the Growth Capital Advances are accelerated
following the occurrence of an Event of Default, Borrower shall immediately pay
to Lenders an amount equal to the sum of (i) all outstanding principal plus
accrued and unpaid interest, (ii) the Final Payment, (iii) the Prepayment Fee,
and (iv) all other sums, if any, that shall have become due and payable,
including interest at the Default Rate with respect to any past due
amounts.

     
        
          

        

      

      
        
        

        
          

        

      

      
         


      

    


    (e)           Permitted Prepayment of
Growth Capital Advances.   So long as no Event of Default
has occurred and is continuing, Borrower shall have the option to prepay all,
but not less than all, of the Growth Capital Advances advanced by Lenders under
this Agreement, provided Borrower (i) delivers written notice to Agent of its
election to prepay the Growth Capital Advances at least thirty (30) days prior
to such prepayment, and (ii) pays to Lenders, on the date of such prepayment (A)
all outstanding principal plus accrued and unpaid interest, (B) the Final
Payment,  (C) the Prepayment Fee, and (D) all other sums, if any, that
shall have become due and payable, including interest at the Default Rate with
respect to any past due amounts.  Notwithstanding the foregoing,
Lenders shall waive fifty percent (50%) of the Prepayment Fee in the event
Borrower refinances all of the Obligations within thirty (30) days after
Lenders’ demand for Borrower to pay increased costs or additional costs pursuant
to Section 2.4 hereof.

     

    2.2           Payment of Interest on the Credit
Extensions.

     

    (a)           Computation of
Interest.  Interest on the Credit Extensions and all fees
payable hereunder shall be computed on the basis of a 360-day year and the
actual number of days elapsed in the period during which such interest
accrues.  In computing interest on any Credit Extension, the date of
the making of such Credit Extension shall be included and the date of payment
shall be excluded; provided, however, that if any Credit Extension is repaid on
the same day on which it is made, such day shall be included in computing
interest on such Credit Extension.

     

    (b)           Interest
Payments.  Subject to the provisions of Sections 2.2(c) and 3.5
below, each Growth Capital Advance shall bear interest on the outstanding
principal amount thereof from the date when made until paid in full at a rate
per annum equal to (i) the greater of (A) the LIBOR Rate in effect for the
applicable Interest Period or (B) three percent (3%), plus (ii) the LIBOR Rate
Margin, adjusted on the first day of each Interest Period and fixed for the
duration of each such Interest Period.  Pursuant to the terms hereof,
interest on each Growth Capital Advance shall be paid in arrears on each
Interest Payment Date.  Interest shall also be paid on the date of any
prepayment of any Growth Capital Advance pursuant to this Agreement for the
portion of any Growth Capital Advance so prepaid and upon payment (including
prepayment) in full thereof.  All accrued but unpaid interest on the
Growth Capital Advances shall be due and payable on the Growth Capital Line
Maturity Date.

     

    (c)           Default
Interest.  After and during the continuation of an Event of
Default, Obligations shall bear interest of five percent (5.00%) above the rate
that is otherwise applicable thereto (the “Default
Rate”).  Payment or acceptance of the increased interest rate
provided in this Section 2.2(c) 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 Agent or Lenders.

     

    (d)           Debit of
Accounts.  Lenders may debit any of Borrower’s deposit
accounts, including the Designated Deposit Account, for principal and interest
payments when due, or any other amounts Borrower owes Lenders under the Loan
Documents, when due.  These debits shall not constitute a
set-off.

     

    (e)           Payments.  Unless
otherwise provided, interest is payable monthly on each Interest Payment
Date.  Payments of principal and/or interest received after 12:00 noon
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.  All payments to be made by
Borrower hereunder or under any other Loan Document, including payments of
principal and interest made hereunder and pursuant to any other Loan Document,
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.  All payments required under this
Agreement are to be made directly to Lenders.

     


    
      
        

      

      
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    (f)           Maximum Lawful
Rate.  In no event shall the interest charged hereunder, with
respect to the notes (if any) or any other obligations of Borrower under any
Loan Documents exceed the maximum amount permitted under the Laws of the State
of Maryland or of any other applicable jurisdiction.  Notwithstanding
anything to the contrary herein or elsewhere, if at any time the rate of
interest payable hereunder or under any note or other Loan Document (the “Stated Rate”) would exceed the
highest rate of interest permitted under any applicable Law to be charged (the
“Maximum Lawful Rate”),
then for so long as the Maximum Lawful Rate would be so exceeded, the rate of
interest payable shall be equal to the Maximum Lawful Rate; provided, however, that if at
any time thereafter the Stated Rate is less than the Maximum Lawful Rate,
Borrower shall, to the extent permitted by Law, continue to pay interest at the
Maximum Lawful Rate until such time as the total interest received is equal to
the total interest which would have been received had the Stated Rate been (but
for the operation of this provision) the interest rate
payable.  Thereafter, the interest rate payable shall be the Stated
Rate unless and until the Stated Rate again would exceed the Maximum Lawful
Rate, in which event this provision shall again apply.  In no event
shall the total interest received by any Lender exceed the amount which it could
lawfully have received, had the interest been calculated for the full term
hereof at the Maximum Lawful Rate.  If, notwithstanding the prior
sentence, any Lender has received interest hereunder in excess of the Maximum
Lawful Rate, such excess amount shall be applied to the reduction of the
principal balance of the Growth Capital Advances or to other amounts (other than
interest) payable hereunder, and if no such principal or other amounts are then
outstanding, such excess or part thereof remaining shall be paid to
Borrower.  In computing interest payable with reference to the Maximum
Lawful Rate applicable to any Lender, such interest shall be calculated at a
daily rate equal to the Maximum Lawful Rate divided by the number of days
in the year in which such calculation is made.

     

    2.3           Fees.  Borrower
shall pay to Lenders:

     

    (a)           Commitment
Fee.  A fully earned, non-refundable commitment fee of (i)
$50,000 in regard to Tranche One, due and payable on the Effective Date, and
(ii) $50,000 in regard to Tranche Two (the “Tranche Two Commitment Fee”) due and
payable on the earliest to occur of (A) the funding of Tranche Two or (B) June
30, 2009 (if the condition in Section 2.1.1(a)(ii) has been met prior to such
date); provided, however, that the Tranche Two Commitment Fee shall be waived if
the condition in Section 2.1.1(a)(ii) has not been met prior to June 30,
2009;

     

    (b)           Prepayment
Fee.  The Prepayment Fee, when due hereunder;

     

    (c)           Final
Payment.  The Final Payment, when due hereunder;
and

     

    (d)           Lenders'
Expenses.  All Lenders' Expenses (including reasonable
attorneys’ fees and expenses, plus expenses, for documentation and negotiation
of this Agreement) incurred through and after the Effective Date, within ten
(10) Business Days following written demand therefor, net of the $50,000 deposit
previously paid by Borrower.

     

     

    2.4           Additional
Costs.  If any new Law or regulation increases Lender’s costs
or reduces its income for any loan, Borrower shall pay the increase in cost or
reduction in income or additional expense; provided, however, that Borrower
shall not be liable for any amount attributable to any period before 180 days
prior to the date Agent notifies Borrower of such increased
costs.  Each Lender agrees that it shall allocate any increased costs
among its customers similarly affected in good faith and in a manner consistent
with such Lender's customary practice.

     

    2.5           Payments and
Taxes.  Any and all payments made by Borrower under this
Agreement or any Loan Documents shall 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) other than any taxes imposed on or measured by any Lender’s
overall net income and franchise taxes imposed on it (in lieu of net income
taxes), by a jurisdiction (or any political subdivision thereof) as a result of
any Lender being organized or resident, conducting business (other than a
business deemed to arise from such Lender having executed, delivered or
performed its obligations or received a payment under, or enforced, or otherwise
with respect to, this Agreement or any Loan Documents) or having its principal
office in such jurisdiction (“Indemnified
Taxes”).  If any Indemnified Taxes shall be required by Law to
be withheld or deducted from or in respect of any sum payable under this
Agreement or any Loan Documents to any Lender (w) an additional amount shall be
payable as may be necessary so that, after making all required withholdings or
deductions (including withholdings or deductions applicable to additional sums
payable under this Section) such Lender receives an amount equal to the sum it
would have received had no such withholdings or deductions been made, (x)
Borrower shall make such withholdings or deductions, (y) Borrower shall pay the
full amount withheld or deducted to the relevant taxing authority or other
authority in accordance with applicable Law and (z) Borrower shall deliver to
such Lender evidence of such payment.  Borrower’s obligation hereunder
shall survive the termination of this Agreement.

     


    
      
          

        

      
      
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    3            
 CONDITIONS OF
LOANS

     

    3.1        
 Conditions Precedent to
Initial Credit Extension.  Each Lender’s obligation to make the
initial Credit Extension is subject to the condition precedent that Borrower
shall consent to or shall have delivered, in form and substance satisfactory to
Lenders, such documents, and completion of such other matters, as Lenders may
reasonably deem necessary or appropriate, including, without
limitation:

     

    (a)           Agent
shall have received duly executed original signatures to the Loan Documents to
which Borrower is a party;

     

    (b)           Agent
shall have received duly executed original signatures to the Control
Agreement[s];

     

    (c)           Agent
shall have received Operating Documents and a good standing certificate of
Borrower certified by the Secretary of State of the State of Delaware as of a
date no earlier than thirty (30) days prior to the Effective Date;

     

    (d)           Agent
shall have received duly executed original signatures to the completed Borrowing
Resolutions for Borrower;

     

    (e)           Agent
shall have received certified copies, dated as of a recent date, of financing
statement searches, as 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;

     

    (f)           Agent
shall have received the Perfection Certificate executed by
Borrower;

     

    (g)           Agent
shall have received a legal opinion of Borrower’s counsel dated as of the
Effective Date together with the duly executed original signatures
thereto;

     

    (h)           BlueCrest
shall have (i) assigned to another Lender (the “Assignee Lender”) a seventy
percent (70%) Commitment Percentage under the Growth Capital Line and all
rights, remedies and obligations in connection therewith, and resigned as Agent
and agreed to permit such Assignee Lender to become the Agent and Arranger;


     

    (i)           Agent
shall have received payment of the fees and Lenders' Expenses then due as
specified in Section 2.3 hereof; and

     

    (j)           Agent
shall have received evidence, satisfactory to Agent, that all Liens set forth in
clause (l) of the definition of “Permitted Liens” have been
terminated.

     

    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:

     

    (a)           (i)
Agent’s receipt of a promissory note or promissory notes, as the case may be, in
substantially the form agreed upon by the parties hereto as of the Effective
Date, executed by Borrower in favor of each Lender (one promissory note per
Lender) with a face amount equal to the portion of the applicable Credit
Extension to be funded by the applicable Lender, and (ii) except as otherwise
provided in Section 3.4, timely receipt of an executed Advance Request
Form;

     

    (b)           the
representations and warranties in Section 5 shall be true, correct and complete
in all material respects on the date of the 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 Default or 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 remain true 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;
and

     


    
      
         
          
          

        

      

      
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    (c)           in
such Lender’s sole discretion, there has not been any material impairment in the
general affairs, management, results of operation, financial condition or the
prospect of repayment of the Obligations, nor has there been any material
adverse deviation by Borrower from the most recent business plan of Borrower
presented to and accepted by Agent.

     

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

     

    3.4           Procedures for
Borrowing.  Subject to the prior satisfaction of all other
applicable conditions to the making of a Growth Capital Advance set forth in
this Agreement, to obtain a Growth Capital Advance, Borrower shall notify Agent
(which notice shall be irrevocable) by electronic mail, facsimile, or telephone
by 12:00 noon Eastern time five (5) Business Days prior to the date the Growth
Capital Advance is to be made.  Together with any such electronic or
facsimile notification, Borrower shall deliver to Agent by electronic mail or
facsimile a completed Advance Request Form executed by a Responsible Officer or
his or her designee.  Upon receipt of an Advance Request Form, Agent
shall promptly provide a copy of the same to each Lender.  Agent may
rely on any telephone notice given by a person whom such Agent believes is a
Responsible Officer or designee.  On the Funding Date, each Lender
shall credit and/or transfer (as applicable) to Borrower's Designated Deposit
Account, an amount equal to its Commitment Percentage multiplied by the amount
of the Growth Capital Advance.  Each Lender may make Growth Capital
Advances under this Agreement based on instructions from a Responsible Officer
or his or her designee or without instructions if the Growth Capital Advances
are necessary to meet Obligations which have become due.

     

    3.5           Special Provisions Governing Growth
Capital Advances.

     

    Notwithstanding
any other provision of this Agreement to the contrary, the following provisions
shall govern with respect to the matters covered:

     

    (a)           Determination of Applicable
Interest Rate.  As soon as practicable on each Interest Rate
Determination Date, Agent shall determine (which determination shall, absent
manifest error in calculation, be final, conclusive and binding upon all
parties) the interest rate that shall apply to the Growth Capital Advances for
which an interest rate is then being determined for the applicable Interest
Period and shall promptly give notice thereof (in writing or by telephone
confirmed in writing) to Borrower.

     

    (b)           No Breakage
Fees.  Borrower shall not incur any breakage fees associated
with the prepayment of Growth Capital Advances on a day that is not the last day
of the relevant Interest Period.

     

    (c)           Inability to Determine
Applicable Interest Rate.  In the event that Agent shall have
determined (which determination shall be final and conclusive and binding upon
all parties hereto), on any Interest Rate Determination Date with respect to any
Growth Capital Advance, that adequate and fair means do not exist for
ascertaining the interest rate applicable to such Growth Capital Advance on the
basis provided for in the definition of LIBOR Rate, then Agent may select a
comparable replacement index and corresponding margin.

     

    4          
   CREATION
OF SECURITY INTEREST

     

    4.1           Grant of Security
Interest.  Borrower hereby grants 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 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 security interest in the Collateral (subject only to Permitted
Liens that may have superior priority under this Agreement).  If
Borrower shall acquire a commercial tort claim (as defined in the Code),
Borrower shall promptly notify Agent in a writing signed by Borrower of the
general details thereof (and further details as may be required by Agent) and
grant to 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 Agent.  If this Agreement is terminated, Agent’s Lien
in the Collateral shall continue until the Obligations are repaid in full in
cash.  Upon payment in full in cash of the Obligations and at such
time as the Lenders' obligation to make Credit Extensions has terminated, the
Agent, at Borrower’s sole cost and expense, shall release its Liens in the
Collateral and all rights therein shall revert to Borrower.

     


    
      
        
            

        

      

      
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    4.2           Authorization to File Financing
Statements.  Borrower hereby authorizes Agent to file financing
statements, without notice to Borrower, with all appropriate jurisdictions to
perfect or protect Agent’s  and each Lender's interest or rights
hereunder, including a notice that any disposition of the Collateral, by either
Borrower or any other Person, shall be deemed to violate the rights of the Agent
and the Lenders under the Code.

     

    5       
       REPRESENTATIONS AND
WARRANTIES

     

    Borrower
represents and warrants as follows:

     

    5.1           Due Organization and
Authorization.  Borrower and each of its Subsidiaries, if any,
are duly existing and in good standing, as Registered Organizations in their
respective jurisdictions of formation and are qualified and licensed to do
business and are in good standing in any jurisdiction in which the conduct of
their business or their ownership of property requires that they be qualified
except where the failure to do so could not reasonably be expected to have a
material adverse effect on Borrower’s business.  In connection with
this Agreement, Borrower has delivered to Agent a completed perfection
certificate signed
by Borrower (the “Perfection Certificate”).  Borrower represents and
warrants that (a) Borrower’s exact legal name is that indicated on the
Perfection Certificate and on the signature page hereof; (b) Borrower is an
organization of the type and is organized in the jurisdiction set forth in the
Perfection Certificate; (c) the Perfection Certificate accurately sets forth
Borrower’s organizational identification number or accurately states that
Borrower has none; (d) the Perfection Certificate accurately sets forth
Borrower’s place of business, or, if more than one, its chief executive office
as well as Borrower’s mailing address (if different than its chief executive
office); (e) Borrower (and each of its predecessors) has not, in the past
five (5) years, changed its jurisdiction of formation, organizational structure
or type (except for changes to its authorized capital and the establishment of a
stockholders’ rights plan), or any organizational number assigned by its
jurisdiction; and (f) all other information set forth on the Perfection
Certificate pertaining to Borrower and each of its Subsidiaries is accurate and
complete (it being understood and agreed that Borrower may from time to time
update certain information in the Perfection Certificate after the Effective
Date to the extent permitted by one or more specific provisions in this
Agreement).  If Borrower is not now a Registered Organization but
later becomes one, Borrower shall promptly notify Agent of such occurrence and
provide Agent with Borrower’s organizational identification number.

     

    The
execution, delivery and performance by Borrower of the Loan Documents to which
it is a party have been duly authorized, and do not (i) conflict with any of
Borrower’s organizational documents, (ii) contravene, conflict with, constitute
a default under or violate any material Requirement of Law, (iii) contravene,
conflict or violate any applicable order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority by which Borrower or any of
its Subsidiaries 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) nor constitute an event of
default under any material agreement by which Borrower is
bound.  Borrower is not in default under any agreement to which it is
a party or by which it is bound in which the default could reasonably be
expected to have a
material adverse effect on Borrower’s business.

     

    5.2           Collateral.

     

    (a)           Borrower
has good title to, has rights in, and the power to transfer each item of the
Collateral upon which it purports to grant a Lien hereunder, free and clear of
any and all Liens except Permitted Liens.  Borrower has no Collateral
Accounts other than the Collateral Accounts with Agent, the Collateral Accounts,
if any, described in the Perfection Certificate, or of which Borrower has given
Agent notice and taken such actions as are necessary to give Agent for the
ratable benefit of all Lenders a perfected security interest
therein.

     


    
      
        
            

        

      

      
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    (b)           The
Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection
Certificate.  None of the components of the Collateral shall be
maintained at locations other than as provided in the Perfection Certificate or
as Borrower has given Agent notice pursuant to Section 7.2.  In the
event that Borrower, after the date hereof, intends to store or otherwise
deliver any portion of the Collateral to a bailee, then Borrower will first
receive the written consent of Agent and such bailee must execute and deliver a
bailee agreement in form and substance satisfactory to Agent in its sole
discretion.

     

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

     

    (d)           All
of Borrower’s Material Intellectual Property, including all licenses under which
Borrower is the licensee of any such Material Intellectual Property owned by
another Person, are set forth on Schedule 5.2.  Such Schedule 5.2
indicates in each case the expiration date of such Material Intellectual
Property and whether such Material Intellectual Property (or application
therefor) is owned or licensed by Borrower, and in the case of any such licensed
Material Intellectual Property, lists the name and address of the licensor and
the name and date of the agreement pursuant to which such item of Material
Intellectual Property is licensed, the expiration date of such license and the
expiration date of the underlying Material Intellectual Property, whether or not
such license is an exclusive license and whether there are any purported
restrictions in such license on the ability to Borrower to grant a security
interest in and/or to transfer any of its rights as a licensee under such
license.

     

    5.3           Litigation.  Except
as set forth in Schedule 5.3 and except for actions or proceedings in regard to
which Agent has received notice under Section 6.2(a)(iv), there are no actions
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 Deviation in Financial
Statements.  All consolidated financial statements for Borrower
and any of its Subsidiaries delivered to Agent fairly present, in conformity
with GAAP, in all material respects Borrower’s consolidated financial condition
and Borrower’s consolidated results of operations.  There has not been
any material deterioration in Borrower’s consolidated financial condition since
the date of the most recent financial statements submitted to
Agent.

     

    5.5           Solvency.  The fair
salable value of Borrower’s assets (including goodwill minus disposition costs)
exceeds the fair value of its liabilities; Borrower is not left with
unreasonably small capital after the transactions in this Agreement; and
Borrower is able to pay its debts (including trade debts) as they
mature.

     

    5.6           Regulatory
Compliance.  Borrower is not an “investment company” or a
company “controlled” by an “investment company” or a “subsidiary” of an
“investment company” under the Investment Company Act of
1940.  Borrower is not engaged in extending credit for margin stock
(under Regulations T and U of the Federal Reserve Board of
Governors).  Borrower 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” or 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.  Borrower has not
violated any Laws, ordinances or rules, the violation of which could reasonably
be expected to have a material adverse effect on its business.  None
of Borrower’s or any of its Subsidiaries’ properties or assets has been used by
Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous
Persons, in disposing, producing, storing, treating, or transporting any
hazardous substance other than legally.  Borrower has obtained all
Required Permits, or has contracted with third parties holding Required Permits,
necessary for compliance with all Laws and all such Required Permits are
current.  Borrower and each of its Subsidiaries have 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
the Borrower, its 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) engages in or
conspires 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.  Neither
Borrower nor, to the knowledge of Borrower, any of its 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.

     


    
      
        
            

        

      

      
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    5.7           Subsidiaries;
Investments.  Borrower does not own any stock, partnership
interest or other equity securities except for Permitted
Investments.

     

    5.8           Tax Returns and Payments; Pension
Contributions.  Borrower has timely filed all required tax
returns and reports (including those relating to employee tax withholding,
social security and unemployment taxes), and Borrower and its Subsidiaries have
timely paid all foreign, federal, state and local taxes, assessments, deposits
and contributions owed by Borrower.  Borrower may defer payment of any
contested taxes, provided that Borrower (a) in good faith contests its
obligation to pay the taxes by appropriate proceedings promptly and diligently
instituted and conducted, (b) notifies Agent in writing of the commencement of,
and any material development in, the proceedings, (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”.  Borrower is unaware of any claims or
adjustments proposed for any of Borrower's prior tax years which could result in
additional taxes becoming due and payable by Borrower.  Borrower has
paid all amounts necessary to fund all present pension, profit sharing and
deferred compensation plans in accordance with their terms, and Borrower has not
withdrawn from participation in, and has 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, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.

     

    5.9           Use of
Proceeds.  Borrower shall use the proceeds of the Credit
Extensions solely as working capital

     

    5.10         Full Disclosure.  No
written representation, warranty or other statement of Borrower in any
certificate or written statement given to 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 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 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).

     

    5.11         Regulatory
Developments.

     

    (a)           All
Products and all Required Permits are listed on Schedule 5.11 (as updated from
time to time pursuant to Section 6.2(d)), and Borrower has delivered to Agent a
copy of all Required Permits to the extent requested by Agent pursuant to
Section 6.2(d);

     

    (b)           Without
limiting the generality of Section 5.6 above, with respect to any Product being
tested or manufactured by Borrower, Borrower has received, and such Product is
the subject of, all Required Permits needed in connection with the testing or
manufacture of such Product as such testing is currently being conducted by or
on behalf of Borrower, and Borrower has not received any notice from any
applicable Governmental Authority, specifically including the FDA, that such
Governmental Authority is conducting an investigation or review of (A)
Borrower’s manufacturing facilities and processes for such Product which have
disclosed any material deficiencies or violations of Laws and/or the Required
Permits related to the manufacture of such Product, or (B) any such Required
Permit or that any such Required Permit has been revoked or withdrawn, nor has
any such Governmental Authority issued any order or recommendation stating that
the development, testing and/or manufacturing of such Product by Borrower should
cease;

     

    (c)           Without
limiting the generality of Section 5.6 above, with respect to any Product
marketed or sold by Borrower, Borrower shall have received, and such Product is
the subject of, all Required Permits needed in connection with the marketing and
sales of such Product as currently being marketed or sold by Borrower, and
Borrower has not received any notice from any applicable Governmental Authority,
specifically including the FDA, that such Governmental Authority is conducting
an investigation or review of any such Required Permit or approval or that any
such Required Permit has been revoked or withdrawn, nor has any such
Governmental Authority issued any order or recommendation stating that such
marketing or sales of such Product cease or that such Product be withdrawn from
the marketplace;

     


    
      
        
            

        

      

      
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    (d)           Without
limiting the generality of Section 5.6 above, (i) there have been no adverse
clinical test results which could cause a Material Adverse Change, and (ii)
there have been no Product recalls or voluntary Product withdrawals from any
market; and

     

    (e)           Borrower
has not (since the Effective Date) experienced any significant failures in their
manufacturing of any Product such that the amount of such Product successfully
manufactured by Borrower in accordance with all specifications thereof and the
required payments related thereto in any month shall decrease significantly with
respect to the quantities of such Product produced in the prior
month.

     

    6        
     AFFIRMATIVE
COVENANTS

     

    Until all
Obligations have been satisfied in full and Lenders are under no further
obligation to make Credit Extensions hereunder, Borrower shall do all of the
following:

     

    6.1           Government
Compliance.

     

    (a)           Maintain
its and all its Subsidiaries’ legal existence and good standing in their
respective jurisdictions of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
have a material adverse effect on Borrower’s business or
operations.  Borrower shall comply, and have each Subsidiary comply,
with all Laws, ordinances and regulations to which it is subject, the
noncompliance with which could have a material adverse effect on Borrower’s
business.

     

    (b)           Use
commercially reasonable efforts to obtain all of the Governmental Approvals
necessary for the performance by Borrower of its obligations under the Loan
Documents to which it is a party and the grant of a security interest to Agent
for the ratable benefit of the Lenders, in all of its
property.  Borrower shall promptly provide copies of any such obtained
Governmental Approvals to Agent.

     

    (c)           In
connection with the development, testing, manufacture, marketing or sale of each
and any Product by Borrower, Borrower shall comply fully and completely in all
respects with all Required Permits at all times issued by any Governmental
Authority the noncompliance with which could have a material adverse effect on
Borrower’s business, specifically including the FDA, with respect to such
development, testing, manufacture, marketing or sales of such Product by
Borrower as such activities are at any such time being conducted by
Borrower.

     

    6.2           Financial Statements, Reports,
Certificates.

     

    (a)           Deliver
to Agent:  (i) as soon as available, but no later than five (5) days
after filing with the Securities Exchange Commission, Peregrine’s 10K, 10Q, and
8K reports; (ii) a Compliance Certificate together with delivery of the 10K and
10Q reports; (iii) within 60 days after the end of each fiscal year, annual
financial projections for the following fiscal year (on a quarterly basis) as
approved by Peregrine’s board of directors, together with any related business
forecasts used in the preparation of such annual financial projections;
(iv) a prompt report of any litigation or governmental proceedings pending
or threatened against Borrower or any Subsidiary that could result in damages or
costs to Borrower or any Subsidiary of $100,000 or more or could result in a
Material Adverse Change; (v) prompt notice of an event that materially and
adversely affects the value of the Borrower’s Intellectual Property; and (vi)
budgets, sales projections, operating plans or other financial information Agent
reasonably requests.  Peregrine’s 10K, 10Q, and 8K reports required to
be delivered pursuant to Section 6.2(a)(i) shall be deemed to have been
delivered on the date on which Peregrine posts such report or provides a link
thereto on Borrower’s or another website on the Internet; provided, that
Borrower shall provide paper copies to Agent of the Compliance Certificates
required by Section 6.2(a)(ii).

     

    (b)           Borrower
will keep proper books of record and account in accordance with GAAP in which
full, true and correct entries shall be made of all dealings and transactions in
relation to its business and activities.  Borrower shall allow, at the
sole cost of Borrower, Agent, and Lenders to visit and inspect any of its
properties, to examine and make abstracts or copies from any of their respective
books and records, to conduct a collateral audit and analysis of its operations
and the Collateral, to verify the amount and age of the accounts, the identity
and credit of the respective account debtors, to review the billing practices of
Borrower and to discuss its respective affairs, finances and accounts with their
respective officers, employees and independent public accountants as often as
may reasonably be desired.  Notwithstanding the foregoing, such audits
shall be conducted at Borrower's expense no more often than once every twelve
(12) months unless an Event of Default has occurred and is
continuing.

     


    
      
        
            

        

      

      
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    (c)           Borrower
shall deliver to Agent an updated Schedule 5.2 promptly upon Borrower’s
acquisition or development of any Material Intellectual Property not already
listed on Schedule 5.2 and upon any other material change in Borrower’s Material
Intellectual Property from that listed on Schedule 5.2.

     

    (d)           If
after the Effective Date, Borrower wishes to manufacture, sell, develop, test or
market any new Product, Borrower shall give prior written notice to Agent of
such intention (which shall include a brief description of such Product, plus a
list of all Required Permits relating to such new Product (and a copy of such
Required Permits if requested by Agent) and/or Borrower’s manufacture, sale,
development, testing or marketing thereof issued or outstanding as of the date
of such notice) along with a copy of an amended and restated Schedule 5.11; and
further, provided,
that, if
Borrower shall at any time obtain any new or additional Required Permits from
the FDA, DEA, or parallel state or local authorities, or foreign counterparts of
the FDA, DEA, or parallel state or local authorities, with respect to any
Product which has previously been disclosed to Agent, Borrower shall promptly
give written notice to Agent of such new or additional Required Permits (along
with a copy thereof if requested by Agent).

     

    6.3           Inventory;
Returns.  Keep all Inventory in good and marketable condition,
free from material defects.  Returns and allowances between Borrower
and its Account Debtors shall follow Borrower’s customary practices as they
exist at the Effective Date.  Borrower must promptly notify Agent of
all returns, recoveries, disputes and claims that involve more than One Hundred
Thousand Dollars ($100,000).

     

    6.4           Taxes;
Pensions.  Make, and cause each of its Subsidiaries to make,
timely payment of all foreign, federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting pursuant to the
terms of Section 5.8 hereof) and shall deliver to Agent, within a reasonable
period of time (not to exceed five (5) Business Days) following 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 their terms.

     

    6.5           Insurance.  Keep its
business and the Collateral insured for risks and in amounts standard for
companies in Borrower’s industry and location and as Agent may reasonably
request.  Insurance policies shall be in a form, with companies, and
in amounts that are satisfactory to Agent.  All property policies
shall have a lender’s loss payable endorsement showing Agent as lender loss
payee and waive subrogation against Agent, and all liability policies shall
show, or have endorsements showing, the Agent, as an additional
insured.  All policies (or the loss payable and additional insured
endorsements) shall provide that the insurer must give Agent at least twenty
(20) days notice before canceling, amending, or declining to renew its
policy.  At Agent’s request, Borrower shall deliver certified copies
of policies and evidence of all premium payments.  Proceeds payable
under any policy with respect to any casualty event involving the Collateral
shall, at Lenders’ option, be payable to 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 $50,000 with respect to any
loss, but not exceeding $100,000, in the aggregate, for all losses under all
casualty policies in any one year, toward the replacement or repair of destroyed
or damaged Collateral; provided that any such replaced or repaired Collateral
(i) shall be of equal or like value as the replaced or repaired Collateral and
(ii) shall be deemed Collateral in which Agent and Lenders have 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 with respect to any casualty event involving the Collateral
shall, at the option of Lenders, be payable to Lenders on account of the
Obligations.  If Borrower 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 and Agent, Agent may make all or part of such payment
or obtain such insurance policies required in this Section 6.5, and take any
action under the policies Agent deems prudent.

     

    6.6           Operating
Accounts.  For each Collateral Account that Borrower at any
time maintains with institutions other than Agent, provided the Borrower
received prior consent from the Agent, Borrower shall cause the applicable bank
or financial institution (other than Agent) at or with which any Collateral
Account is maintained to execute and deliver a Control Agreement or other
appropriate instrument with respect to such Collateral Account to perfect
Agent's Lien in such Collateral Account in accordance with the terms
hereunder.  The provisions of the previous sentence shall not apply to
deposit accounts exclusively used for payroll, payroll taxes and other employee
wage and benefit payments to or for the benefit of Borrower’s employees and
identified to Agent by Borrower as such.

     


    
      
        
            

        

      

      
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    6.7           Intellectual Property
Rights.  Borrower shall own, or be licensed to use or otherwise
have the right to use, all Material Intellectual Property.  Except as
indicated on Schedule 5.2, Borrower is and all times shall be the sole and
exclusive owner or licensee of the entire and unencumbered right, title and
interest in and to each such Material Intellectual Property, free and clear of
any Liens and/or licenses in favor of third parties or agreements or covenants
not to sue such third parties for infringement.  All Material
Intellectual Property is and shall be fully protected and/or duly and properly
registered, filed or issued in the appropriate office and jurisdictions for such
registrations, filings or issuances, except where the failure to do so would not
reasonably be expected to result in a Material Adverse
Change.  Borrower shall not become a party to, nor become bound by,
any material license or other agreement with respect to which Borrower is the
licensee that prohibits or otherwise restricts Borrower from granting a security
interest in Borrower’s interest in such license or agreement or other
property.  Borrower shall, to the extent it determines, in the
exercise of its reasonable business judgment, that it is prudent to do the
following: (a) protect, defend and maintain the validity and enforceability of
its Intellectual Property; (b) promptly advise Agent in writing of material
infringements of its Intellectual Property; and (c) not allow any Material
Intellectual Property to be abandoned, forfeited or dedicated to the public
without Agent’s prior written consent.  Within ten (10) days after the
end of each calendar quarter, Borrower shall provide written notice to Agent of
(i) any patent, registered trademark or servicemark, registered mask work, or
any pending application for any of the foregoing, obtained by Borrower, whether
as owner, licensee or otherwise, and (ii) any patent or the registration of any
trademark or servicemark applied for by Borrower, and Borrower shall execute
such intellectual property security agreements and other documents and take such
other actions as Agent shall request in its good faith business judgment to
perfect and maintain a first priority security interest in favor of Agent, for
the ratable benefit of Lenders, in such property.  If Borrower obtains
any registered copyright or any pending application for any copyright, then
Borrower shall immediately provide written notice thereof to Agent and shall
execute such intellectual property security agreements and other documents and
take such other actions as Agent shall request in its good faith business
judgment to perfect and maintain a first priority security interest in favor of
Agent, for the ratable benefit of Lenders, in such property.   If
Borrower decides to register any copyrights or mask works in the United States
Copyright Office, Borrower shall: (x) provide Agent with at least fifteen (15)
days prior written notice of Borrower’s intent to register such copyrights or
mask works together with a copy of the application it intends to file with the
United States Copyright Office (excluding exhibits thereto); (y) execute an
intellectual property security agreement and such other documents and take such
other actions as Agent may request in its good faith business judgment to
perfect and maintain a first priority perfected security interest in favor of
Agent, for the ratable benefit of the Lenders, in the copyrights or mask works
intended to be registered with the United States Copyright Office; and (z)
record such intellectual property security agreement with the Untied States
Copyright Office contemporaneously with filing the copyright or mask work
application(s) with the United States Copyright Office.  Concurrently
with the delivery of the notices required under this Section 6.7 for the
applications described above, Borrower shall provide Agent with evidence of the
recording of the intellectual property security agreement necessary for Agent,
for the ratable benefit of the Lenders, to perfect and maintain a first priority
perfected security interest in such property.

     

    6.8           Litigation
Cooperation.  From the date hereof and continuing through the
termination of this Agreement, make available to Agent, without expense to
Agent, Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Agent may deem them reasonably necessary to
prosecute or defend any third-party suit or proceeding instituted by or against
Agent with respect to any Collateral or relating to Borrower.

     

    6.9           Further
Assurances.  Execute any further instruments and take further
action as Agent reasonably requests to perfect or continue Agent’s Lien in the
Collateral or to effect the purposes of this Agreement.  Deliver to
Agent, within five (5) days after the same are sent or received, copies of all
correspondence, reports, documents and other filings with any Governmental
Authority regarding compliance with or maintenance of Governmental Approvals or
Requirements of Law or that could reasonably be expected to have a material
effect on any of the Governmental Approvals or otherwise on the operations of
Borrower or any of its Subsidiaries.  For the avoidance of doubt, the
foregoing requirement to deliver copies of correspondence shall not apply to
filings and communications with the FDA respecting protocols for clinical trials
that have yet to commence.

     


    
      
        
            

        

      

      
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    6.10         Notices of Defaults and Events of
Default.  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 Default
or Event of Default, Borrower shall give written notice to Agent of such
occurrence, which such notice shall include a reasonably detailed description of
such Default or Event of Default.

     

    6.11         Cash and Cash
Equivalents.  In the event of the termination of or other
material adverse change to Borrower’s current contract with the U.S. Department
of Defense for the study of bavituximab in treating viral hemorrhagic fever,
Borrower shall be required at all times thereafter to maintain cash and Cash
Equivalents of at least eighty percent (80%) of the then outstanding principal
balance under the Growth Capital Advances in a restricted account over which
Borrower shall not be permitted to make withdrawals or otherwise exercise
control, and with respect to which Borrower has complied with the requirements
of Section 6.6.

     

    6.12         Evidence of
Insurance.  Within ten (10) days after the Effective Date,
Borrower shall deliver to Agent evidence that the insurance policies required by
Section 6.5 hereof are in full force and effect, together with appropriate
evidence showing lender loss payable and/or additional insured clauses or
endorsements in favor of Agent, for the ratable benefit of the
Lenders.

     

    6.13         Landlord
Waiver.  Within forty-five (45) days after the Effective Date,
Peregrine shall deliver to Agent a landlord’s consent acceptable to Agent and
executed in favor of Agent, for the ratable benefit of the Lenders, for
Peregrine’s leased premises at 14282 Franklin Avenue, Tustin, California
92780 and 5353 W. Alabama, Suite 306, Houston, Texas 77056.

     

    7        
     NEGATIVE
COVENANTS

     

    Until all
Obligations have been satisfied in full and Agent and Lenders are under no
further obligation to make Credit Extensions hereunder, Borrower shall not do
any of the following without Agent’s prior written consent:

     

    7.1           Dispositions.  Convey,
sell, lease, transfer, assign, or otherwise dispose of (collectively, “Transfer”), or permit any of
its Subsidiaries to Transfer, all or any part of its business or property,
except for Transfers (a) of Inventory in the ordinary course of business;
(b) of worn-out or obsolete Equipment; (c) in connection with Permitted Liens
and Permitted Investments; and (d) comprised of the sale of the capital
stock of Avid by Peregrine or the sale of all or substantially all of Avid’s
assets so long as in either case Peregrine receives at least $15,000,000 in
upfront net cash proceeds from such sale (the “Permitted Avid
Transaction”).  Agent and Lenders hereby agree to release the
Avid Liens, at Borrower’s expense, upon the closing of the Permitted Avid
Transaction.

     

    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
currently engaged in by Borrower and such Subsidiary, as applicable, or
reasonably related thereto; (b) liquidate or dissolve; or (c) permit or
suffer any Change in Control (except a change in ownership of Avid in connection
with the Permitted Avid Transaction).  Borrower shall not, without at
least thirty (30) days prior written notice to Agent: (1) add any new
offices or business locations, including warehouses (unless such new offices or
business locations contain less than Twenty Five Thousand Dollars ($25,000) in
Borrower’s assets or property), (2) change its jurisdiction of organization,
(3) change its organizational type, (4) change its legal name, or
(5) change any organizational number (if any) assigned by its jurisdiction
of organization.  Borrower shall deliver a landlord's waiver, bailee
agreement or similar agreement, in form and substance acceptable to Agent in its
reasonable discretion, for any location that contains greater than Twenty Five
Thousand Dollars ($25,000) in assets (other than in regard to 8858 Rochester
Avenue, Rancho Cucamonga, California).

     

    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 or property of another Person, except for the Permitted Avid
Transaction.  A Subsidiary may merge or consolidate into another
Subsidiary or into Borrower.

     

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

     


    
      
        
            

        

      

      
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    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, or
enter into any agreement, document, instrument or other arrangement (except with
or in favor of Agent) with any Person which directly or indirectly prohibits or
has the effect of prohibiting Borrower or any Subsidiary from assigning,
mortgaging, pledging, granting a security interest in or upon, or encumbering
any of Borrower’s or any Subsidiary’s Intellectual Property, except as is
otherwise permitted in Section 7.1 hereof and the definition of “Permitted
Liens” herein.  For the avoidance of doubt, the foregoing provision
shall not prohibit the Borrower from in-licensing Intellectual
Property.

     

    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 or make any distribution or
payment or redeem, retire or purchase any capital stock provided that (i)
Borrower may pay dividends solely in common stock or preferred stock to the
extent permitted under clause (g) of the definition of “Permitted Indebtedness”
in Section 13.1 below, and (ii) Borrower may repurchase the stock of former
employees or consultants pursuant to stock repurchase agreements so long as no
Default or Event of Default exists at the time of such repurchase and would
exist after giving effect to such repurchase, provided such repurchases do not
exceed in the aggregate Fifty Thousand Dollars ($50,0000) in any twelve-month
period, or (b) directly or indirectly make any Investment other than Permitted
Investments, or permit any of its Subsidiaries to do so.

     

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

     

    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 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 effect on Borrower’s
business, 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, including any
liability to the Pension Benefit Guaranty Corporation or its successors or any
other governmental agency.

     

    7.11         Compliance with Anti-Terrorism
Laws.  Agent hereby notifies Borrower that pursuant to the
requirements of Anti-Terrorism Laws, and Agent's policies and practices, Agent
is required to obtain, verify and record certain information and documentation
that identifies Borrower and its principals, which information includes the name
and address of Borrower and its principals and such other information that will
allow Agent to identify such party in accordance with Anti-Terrorism
Laws.  Borrower will not, nor will Borrower permit any Subsidiary or
Affiliate to, directly or indirectly, knowingly enter into any documents,
instruments, agreements or contracts with any Person listed on the OFAC
Lists.  Borrower shall immediately notify Agent if Borrower has
knowledge that Borrower or any Subsidiary or Affiliate 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.  Borrower will
not, nor will Borrower permit any Subsidiary or 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, 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.

     


    
      
        
          

        

      

      
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    7.12         Third Party Possession of
Assets.  Maintain assets with a value in excess of $750,000 at
8858 Rochester Avenue, Rancho Cucamonga, California.

     

    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 (provided,
however, that if such failure results from a failure of an auto-debit to occur
through no fault of Borrower, then no “Event of Default” shall be deemed to have
occurred unless Borrower fails to make the applicable payment within two (2)
Business Days after Borrower’s receipt of notice from Agent of the failure of
such auto-debit), 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 Growth Capital
Line Maturity Date).  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 fails or neglects to perform any obligation in Sections 6.1(c), 6.5,
6.6, 6.12, 6.13 or violates any covenant in Section 7;

     

    (b)
Borrower fails or neglects to perform any obligation in Sections 6.2 or 6.4 and
fails to cure the default within five (5) days after the occurrence thereof;
or

     

    (c)
Borrower 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).

     

    8.3           Material Adverse
Change.  A Material Adverse Change occurs;

     

    8.4           Attachment.  (a) Any
material portion of Borrower’s assets is attached, seized, levied on, or comes
into possession of a trustee or receiver and the attachment, seizure or levy is
not removed in ten (10) days; (b) the service of process seeking to attach,
by trustee or similar process, any funds of Borrower, or of any entity under
control of Borrower (including a Subsidiary), on deposit with the Lenders and/or
Agent or an Affiliate; (c) Borrower is enjoined, restrained, or prevented by
court order from conducting a material part of its business; (d) a judgment or
other claim in excess of One Hundred Thousand Dollars ($100,000.00) becomes a
Lien on any of Borrower’s assets; or (e) a notice of lien, levy, or assessment
is filed against any of Borrower’s assets by any government agency and not paid
within ten (10) days after Borrower receives notice.  These are not
Events of Default if stayed or if a bond is posted pending contest by Borrower
(but no Credit Extensions shall be made during the cure period);

     

    8.5           Insolvency. (a) Borrower is
unable to pay its debts (including trade debts) as they become due or otherwise
becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an
Insolvency Proceeding is begun against Borrower and not dismissed or stayed
within forty five (45) days (but no Credit Extensions shall be made while of any
of the conditions described in clause (a) exist and/or until any Insolvency
Proceeding is dismissed);

     


    
      
        
            

        

      

      
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    8.6           Other
Agreements.  (a) There is a default under the UTSW Agreement or
any other agreement to which Borrower 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 Fifty
Thousand Dollars ($50,000) or that could have a material adverse effect on
Borrower’s business, (b) delivery of written notice by UT Southwestern to
Borrower of an intended termination under Section 7.2 of the UTSW Agreement, or
(c) the termination of the UTSW Agreement.

     

    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) (not covered by independent third-party insurance as to which
liability has been accepted by such insurance carrier) shall be rendered against
Borrower 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 Person acting for Borrower makes any representation, warranty, or other
statement now or later in this Agreement, any Loan Document or in any writing
delivered to Agent and/or Lenders or to induce Agent and/or Lenders to enter
this Agreement or any Loan Document, and such representation, warranty, or other
statement is incorrect in any material respect when made; or

     

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

     

    8.10         Governmental
Approvals.  Any Governmental Approval shall have been (a)
revoked, rescinded, suspended, modified in an adverse manner or not renewed in
the ordinary course for a full term or (b) subject to any decision by a
Governmental Authority that designates a hearing with respect to any
applications for renewal of any of such Governmental Approval or that could
result in the Governmental Authority taking any of the actions described in
clause (a) above, and such decision or such revocation, rescission, suspension,
modification or non-renewal (i) has, or could reasonably be expected to have, a
Material Adverse Change, or (ii) adversely affects the legal qualifications of
Borrower or any of its Subsidiaries to hold such Governmental Approval in any
applicable jurisdiction and such revocation, rescission, suspension,
modification or non-renewal could reasonably be expected to affect the status of
or legal qualifications of Borrower or any of its Subsidiaries to hold any
Governmental Approval in any other jurisdiction.  For the avoidance of
doubt, the foregoing covenant shall not apply to filings or communications with
the FDA with respect to protocols for clinical trials that have yet to
commence.

     

    8.11         Withdrawals, Recalls, Adverse Test
Results and Other Matters.  (a) The institution of any
proceeding by FDA or similar Governmental Authority to order the withdrawal of
any Product or Product category from the market or to enjoin Borrower or any
representative of Borrower from manufacturing, marketing, selling or
distributing any Product or Product category, (b) the institution of any action
or proceeding by any DEA, FDA, or any other Governmental Authority to revoke,
suspend, reject, withdraw, limit, or restrict any Required Permit held by
Borrower or any representative of Borrower, which, in each case, could cause a
Material Adverse Change,  (c) the commencement of any enforcement
action against Borrower by DEA, FDA, or any other Governmental Authority, (d)
the recall of any Products from the market, the voluntary withdrawal of any
Products from the market, or actions to discontinue the sale of any Products, or
(e) the occurrence of adverse test results in connection with a Product which
could cause a Material Adverse Change.

     

    8.12         Criminal
Proceeding.  The institution by any Governmental Authority of
criminal proceedings against Borrower.

     

    8.13         Lien
Priority.   Except as permitted by Agent, any Lien created
hereunder or by any other Loan Document shall at any time fail to constitute a
valid and perfected Lien on all of the Collateral purported to be secured
thereby, subject to no prior or equal Lien.

     

    9           
  RIGHTS AND
REMEDIES

     

    9.1           Rights and
Remedies.  While an Event of Default occurs and continues Agent
may, without notice or demand, do any or all of the following:

     


    
      
        
            

        

      

      
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    (a)           declare
all Obligations immediately due and payable (but if an Event of Default
described in Section 8.5 occurs all Obligations are immediately due and payable
without any action by Agent or Lenders);

     

    (b)           stop
advancing money or extending credit for Borrower’s benefit under this Agreement
or under any other agreement between Borrower and Agent and/or
Lenders;

     

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

     

    (d)           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 Agent requests and make it available as Agent
designates.  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 Agent a license
to enter and occupy any of its premises, without charge, to exercise any of
Agent’s rights or remedies;

     

    (e)           apply
to the Obligations any (i) balances and deposits of Borrower it holds, or (ii)
any amount held by Agent or Lenders owing to or for the credit or the account of
Borrower;

     

    (f)           ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
for sale, and sell the Collateral.  Agent is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s 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 Agent’s exercise of its rights under this Section, Borrower’s
rights under all licenses and all franchise agreements inure to Agent for
the  benefit of the Lenders;

     

    (g)           place
a “hold” on any account maintained with Agent or 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;

     

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

     

    (i)           exercise
all rights and remedies available to Agent 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).

     

    9.2           Power of
Attorney.  Borrower hereby irrevocably appoints Agent as its
lawful attorney-in-fact, exercisable only upon the occurrence and during the
continuance of an Event of Default, to:  (a) endorse Borrower’s name
on any checks or other forms of payment or security; (b) sign Borrower’s 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 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 Agent or a third party as the Code permits.  Borrower
hereby appoints Agent as its lawful attorney-in-fact to sign Borrower’s name on
any documents necessary to perfect or continue the perfection of Agent’s and
Lenders' security interest in the Collateral regardless of whether an Event of
Default has occurred until all Obligations have been satisfied in full and Agent
and Lenders are under no further obligation to make Credit Extensions
hereunder.  Agent’s foregoing appointment as Borrower’s attorney in
fact, and all of Agent’s rights and powers, coupled with an interest, are
irrevocable until all Obligations have been fully repaid and performed and
Agent’s and Lenders' obligation to provide Credit Extensions
terminates.

     

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

     


    
      
          

        

      
      
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    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 Agent from or
on behalf of Borrower of all or any part of the Obligations, and, as between
Borrower on the one hand and Agent and Lenders on the other, 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 Agent may deem advisable
notwithstanding any previous application by 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 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.

     

    9.5           Liability for
Collateral.  So long as the Agent and Lenders comply with
reasonable banking practices regarding the safekeeping of the Collateral in the
possession or under the control of the Agent and Lenders, the Agent and 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.

     

    9.6           No Waiver; Remedies
Cumulative.  Agent’s failure, 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 Agent thereafter
to demand strict performance and compliance herewith or therewith.  No
waiver hereunder shall be effective unless signed by Agent and then is only
effective for the specific instance and purpose for which it is
given.  Agent’s rights and remedies under this Agreement and the other
Loan Documents are cumulative.  Agent has all rights and remedies
provided under the Code, by law, or in equity.  Agent’s exercise of
one right or remedy is not an election, and Agent’s waiver of any Event of
Default is not a continuing waiver.  Agent’s delay in exercising any
remedy is not a waiver, election, or acquiescence.

     

    9.7           Demand
Waiver.  Borrower waives 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 Agent on which Borrower is
liable.

     

    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 electronic mail or
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.  Agent, any Lender or Borrower may change its 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

                Attention:
      Paul Lytle

              

            


    

     

     

    
      
        
          

        

      

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

            	
              Snell & Wilmer L.L.P.

              
                600
      Anton Boulevard, Suite 1400

                
                  Costa
      Mesa, California 92626-7689

                

                
                  Attention :
      Mark R. Ziebell

                

              

            


    

     

    
      	
            	
              If
      to Agent or Lenders: 

            	
              BlueCrest
      Capital Finance, L.P.

              
                225
      West Washington, Suite 200

                Chicago,
      Illinois 60606

                Attention:
      Mark King

                Phone:
      (312) 368-4978

                Facsimile:
      (312) 443-0126

              

            


    

     

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

            	
              
                Troutman
      Sanders LLP

                1660
      International Drive, 6th
      floor

                McLean,
      Virginia 22102

                Attention:
      David J. Lawson

              

            


    

    


    11         
  CHOICE OF
LAW, VENUE AND JURY TRIAL WAIVER

     

    Maryland
Law governs the Loan Documents (other than the Warrant) without regard to
principles of conflicts of law.  Borrower, Lenders and Agent each
submit to the exclusive jurisdiction of the State and Federal courts in
Maryland.  Notwithstanding the foregoing, nothing in this Agreement
shall be deemed to operate to preclude Agent from bringing suit or taking other
legal action in any other jurisdiction to realize on the Collateral or any other
security for the Obligations, or to enforce a judgment or other court order in
favor of Agent and Lenders.  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 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, proper postage
prepaid.

     

    TO THE EXTENT PERMITTED BY APPLICABLE
LAW, BORROWER, LENDERS AND AGENT 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 BOTH PARTIES
TO ENTER INTO THIS AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER
WITH ITS COUNSEL.

     

    12           GENERAL
PROVISIONS

     

    12.1         Joint
Liability.  Each Person included in the term “Borrower” hereby
covenants and agrees with Agent and Lenders as follows:

     

    (a)           The
Obligations include all present and future indebtedness, duties, obligations,
and liabilities under the Loan Documents, whether now existing or contemplated
or hereafter arising, of any one or more of the Persons included in the term
“Borrower”.

     

    (b)           Reference
in this Agreement and the other Loan Documents to the “Borrower” or otherwise
with respect to any one or more of the Persons now or hereafter included in the
definition of “Borrower” shall mean each and every such Person and any one or
more of such Persons, jointly and severally, unless the context requires
otherwise.

     

    (c)           Each
Person included in the term “Borrower” in the discretion of its respective
management is to agree among themselves as to the allocation of the benefits of
the proceeds of the Credit Extensions, provided, however, that each such Person
shall be deemed to have represented and warranted to Agent and Lenders at the
time of allocation that each benefit and use of proceeds is permitted under this
Agreement.

     


    
      
        
            

        

      

      
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    (d)           Neither
Agent nor any Lender assumes any responsibility or liability for any errors,
mistakes, and/or discrepancies in the oral, telephonic, written or other
transmissions of any instructions, orders, requests and confirmations by any one
or more of the Persons included in the term “Borrower” in connection with any
Credit Extension or any other transaction in connection with the provisions of
this Agreement.

     

    12.1.2     Inter-Company Debt,
Contribution.  Without implying any limitation on the joint and
several nature of the Obligations, Agent and Lenders agree that, notwithstanding
any other provision of this Agreement, the Persons included in the term
“Borrower” may create reasonable inter-company indebtedness between or among the
Persons included in the term “Borrower” with respect to the allocation of the
benefits and proceeds of the Credit Extensions under this
Agreement.  The Persons included in the term “Borrower” agree among
themselves, and Agent and Lenders consent to that agreement, that each such
Person shall have rights of contribution from all of such Persons to the extent
such Person incurs Obligations in excess of the proceeds of the Credit
Extensions received by, or allocated to such Person.  All such
indebtedness and rights shall be, and are hereby agreed by the Persons included
in the term “Borrower” to be, subordinate in priority and payment to the
indefeasible repayment in full in cash of the Obligations, and, unless Agent
agrees in writing otherwise, shall not be exercised or repaid in whole or in
part until all of the Obligations have been indefeasibly paid in full in
cash.  Each Person included in the term “Borrower” agrees that all of
such inter-company indebtedness and rights of contribution are part of the
Collateral and secure the Obligations.  Each Person included in the
term “Borrower” hereby waives all rights of counter claim, recoupment and offset
between or among themselves arising on account of that indebtedness and
otherwise.  No Person included in the term “Borrower” shall evidence
the inter-company indebtedness or rights of contribution by note or other
instrument, and shall not secure such indebtedness or rights of contribution
with any Lien or security.

     

    12.1.3     Borrowers are Integrated
Group.

     

    Each
Person included in the term “Borrower” hereby represents and warrants to Agent
and Lenders that each of them will derive benefits, directly and indirectly,
from each Credit Extension, both in their separate capacity and as a member of
the integrated group to which each such Person belongs and because the
successful operation of the integrated group is dependent upon the continued
successful performance of the functions of the integrated group as a whole,
because (i) the terms of the Credit Extensions provided under this Agreement are
more favorable than would otherwise would be obtainable by such Persons
individually, and (ii) the additional administrative and other costs and reduced
flexibility associated with individual loan arrangements which would otherwise
be required if obtainable would substantially reduce the value to such Persons
of the Credit Extensions.

     

    12.1.4     Primary
Obligations.

     

    The obligations and liabilities of each
Person included in the term “Borrower” shall be primary, direct and immediate,
shall not be subject to any counterclaim, recoupment, set off, reduction or
defense based upon any claim that such Person may have against any one or more
of the other Persons included in the term “Borrower”, Agent, any Lender and/or
any other guarantor and shall not be conditional or contingent upon pursuit or
enforcement by Agent and Lenders of any remedies they may have against Persons
included in the term “Borrower” with respect to this Agreement, or any of the
other Loan Documents, whether pursuant to the terms thereof or by operation of
law.  Without limiting the generality of the foregoing, neither Agent
nor any Lender shall be required to make any demand upon any of the Persons
included in the term “Borrower”, or to sell the Collateral or otherwise pursue,
enforce or exhaust its or their remedies against the Persons included in the
term “Borrower” or the Collateral either before, concurrently with or after
pursuing or enforcing its rights and remedies hereunder.  Any one or
more successive or concurrent actions or proceedings may be brought against each
Person included in the term “Borrower”, either in the same action, if any,
brought against any one or more of the Persons included in the term “Borrower”
or in separate actions or proceedings, as often as Agent or Lenders may deem
expedient or advisable.  Without limiting the foregoing, it is
specifically understood that any modification, limitation or discharge of any of
the liabilities or obligations of any one or more of the Persons included in the
term “Borrower”, any other guarantor or any obligor under any of the Loan
Documents, arising out of, or by virtue of, any bankruptcy, arrangement,
reorganization or similar proceeding for relief of debtors under federal or
state Law initiated by or against any one or more of the Persons included in the
term “Borrower”, in their respective capacities as borrowers and guarantors
under this Agreement, or under any of the Loan Documents shall not modify,
limit, lessen, reduce, impair, discharge, or otherwise affect the liability of
any other Borrower under this Agreement in any manner whatsoever, and this
Agreement shall remain and continue in full force and effect.  It is
the intent and purpose of this Agreement that each Person included in the term
“Borrower” shall and does hereby waive all rights and benefits which might
accrue to any other guarantor by reason of any such proceeding, and the Persons
included in the term “Borrower” agree that they shall be liable for the full
amount of the obligations and liabilities under this Agreement regardless of,
and irrespective to, any modification, limitation or discharge of the liability
of any one or more of the Persons included in the term “Borrower”, any other
guarantor or any other obligor under any of the Loan Documents, that may result
from any such proceedings.

     


    
      
        
            

        

      

      
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    12.2         Successors and
Assigns.  This Agreement binds and is for the benefit of the
successors and permitted assigns of each party.  Borrower may not
assign this Agreement or any rights or obligations under it without Agent’s
prior written consent (which may be granted or withheld in Agent’s
discretion).  Lenders and Agent have the right, without the consent of
or notice to Borrower, to sell, transfer, assign, negotiate, or grant
participation in all or any part of, or any interest in, Lenders’ obligations,
rights, and benefits under this Agreement and the other Loan Documents,
including without limitation, an assignment to any Affiliate or any related
party.  Borrower shall establish and maintain a record of ownership
(the “Register”) in
which it agrees to register by book entry each Lender’s and each initial and
subsequent assignee’s interest in each Credit Extension, and in the right to
receive any payments hereunder and any assignment of any such
interest.  Notwithstanding anything to the contrary contained in this
Agreement, the Credit Extensions (including the notes in respect hereof) are
registered obligations and the right, title, and interest of each Lender and its
assignees therein shall be transferable upon notation of such transfer in the
Register, pursuant to Borrower’s obligation above.  In no event is any
note to be considered a bearer instrument or bearer obligation.  This
Section shall be construed so that the Credit Extensions are at all times
maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2)
and 881(c)(2) of the Internal Revenue Code and any related regulations (or any
successor provisions of the Code or such regulations).

     

    12.3         Indemnification/Expenses.

     

    (a)           Borrower
agrees to indemnify, defend and hold Agent and the Lenders and their respective
directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Agent or the Lenders harmless
against:  (a) all obligations, demands, claims, and liabilities
(collectively, “Claims”)
asserted by any other party in connection with the transactions contemplated by
the Loan Documents; and (b) all losses or Lenders' Expenses incurred, or paid by
Lenders and/or Agent from, following, or arising from transactions between
Agent, and/or Lenders and Borrower (including reasonable attorneys’ fees and
expenses), except for Claims and/or losses directly caused by Agent’s or
Lenders' gross negligence, willful misconduct or violation of the
Law.

     

    (b)           Borrower
hereby indemnifies, defends and holds Agent and the Lenders and their respective
officers, employees, and agents (collectively called the “Indemnitees”) 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
Indemnitee) in connection with any investigative, response, remedial,
administrative or judicial matter or proceeding, whether or not such Indemnitee
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 Agent or Lenders) asserting any right to payment for the
transactions contemplated hereby which may be imposed on, incurred by or
asserted against such Indemnitee as a result of or in connection with the
transactions contemplated hereby and the use or intended use of the proceeds of
the Growth Capital Advances, except that Borrower shall not have any obligation
hereunder to an Indemnitee with respect to any liability resulting from the
gross negligence, willful misconduct or violation of the Law of such Indemnitee,
as determined by a final non-appealable judgment of a court of competent
jurisdiction.  To the extent that the undertaking set forth in the
immediately preceding sentence may be unenforceable, Borrower shall contribute
the maximum portion which it is permitted to pay and satisfy under applicable
Law to the payment and satisfaction of all such indemnified liabilities incurred
by the Indemnitees or any of them.

     

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

     

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

     

    12.6         Amendments in Writing;
Integration.  All amendments to this Agreement must be in
writing and signed by Agent, Lenders and Borrower.  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.

     


    
      
        
            

        

      

      
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    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 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.  The obligation of Borrower in Section 12.3 to
indemnify each Lender and Agent 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, Lenders and Agent shall exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made: (a) to Lenders' and Agent’s Subsidiaries,
Affiliates; (b) to prospective transferees or purchasers of any interest in the
Credit Extensions (provided, however, Lenders and Agent shall obtain such
prospective transferee’s or purchaser’s agreement to the terms of this
provision); (c) as required by Law, regulation, subpoena, or other order;
(d) to regulators or as otherwise required in connection with an
examination or audit; and (e) as Agent considers appropriate in exercising
remedies under this Agreement.  Confidential information does not
include information that either: (i) is in the public domain or in Lenders'
and/or Agent’s possession when disclosed to Lenders and/or Agent, or becomes
part of the public domain after disclosure to Lenders and/or Agent; or (ii) is
disclosed to Lenders and/or Agent by a third party, if Lenders and/or Agent does
not know that the third party is prohibited from disclosing the
information.

     

    12.10       Right of Set
Off.   Borrower hereby grants to Agent and to each Lender,
a lien, security interest and right of set off as security for all Obligations
to 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 Agent or Lenders
or any entity under the control of Agent or Lenders (including an 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, Agent or 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 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       Publicity.

     

    Borrower
will not directly or indirectly publish, disclose or otherwise use in any public
disclosure, advertising material, promotional material, press release or
interview, any reference to the name, logo or any trademark of Agent or any
Lender or any of their Affiliates or any reference to this Agreement or the
financing evidenced hereby, in any case except as required by applicable Law
(including the rules and regulations of the Securities and Exchange Commission),
subpoena or judicial or similar order, in which case Borrower shall endeavor to
give Agent prior written notice of such publication or other
disclosure.

     

    Each
Lender and Borrower hereby authorizes each Lender to publish the name of such
Lender and Borrower, the existence of the financing arrangements referenced
under this Agreement, the primary purpose and/or structure of those
arrangements, the amount of credit extended under each facility, the title and
role of each party to this Agreement, and the total amount of the financing
evidenced hereby in any “tombstone”, comparable advertisement or press release
which such Lender elects to submit for publication.  In addition, each
Lender and Borrower agrees that each Lender may provide lending industry trade
organizations with information necessary and customary for inclusion in league
table measurements after the Closing Date.  With respect to any of the
foregoing, such authorization shall be subject to such Lender providing Borrower
and the other Lenders with an opportunity to review and confer with such Lender
regarding, and approve, the contents of any such tombstone, advertisement or
information, as applicable, prior to its initial submission for publication, but
subsequent publications of the same tombstone, advertisement or information
shall not require Borrower's approval.

     


    
      
        
            

        

      

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

     

    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.

     

    “Advance Request Form” is that
certain form attached hereto as Exhibit
B.

     

    “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.  For purposes of Section 12.9, the term “Affiliates” in
regard to a Lender shall also include any entity that provides capital to such
Lender to facilitate such Lender’s business activities.

     

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

     

    “Agreement” is defined in the
preamble hereof.

     

    “Anti-Terrorism Laws” means 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.

     

    “Arrangers” is defined in the
preamble hereof.

     

    “Assignee Lender” is defined in
Section 3.1(h).

     

    “Avid” is defined in the
preamble hereof.

     

    “Avid Liens” means the Liens
granted by Peregrine in favor of Agent, for the ratable benefit of Lenders, on
the capital stock of Avid and the Liens granted by Avid in favor of Agent, for
the ratable benefit of Lenders, on the assets of Avid.

     

    “Base LIBOR Rate” means, for
any Interest Period, the rate per annum, determined by Agent in accordance with
its customary procedures, and utilizing such electronic or other quotation
sources as it considers appropriate (rounded upwards, if necessary, to the next
1/100%), to be the rate at which Dollar deposits (for delivery on the first day
of such Interest Period of, if such day is not a Business Day on the preceding
Business Day) in the amount of $1,000,000 are offered to major banks in the
London interbank market on or about 11:00 a.m. (New York time) two (2) Business
Days prior to the commencement of such Interest Period, for a term comparable to
such Interest Period, which determination shall be conclusive in the absence of
manifest error.

     

    “Blocked Person” means 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.

     


    
      
        
            

        

      

      
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    “BlueCrest” is defined in the
preamble hereof.

     

    “Borrower” is defined in the
preamble hereof.

     

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

     

    “Borrowing Resolutions” are,
with respect to any Person, those resolutions adopted by such Person’s Board of
Directors and delivered by such Person to Agent approving the Loan Documents to
which such Person is a party and the transactions contemplated thereby, together
with a certificate executed by its secretary on behalf of such Person certifying
that (a) such Person has the authority to execute, deliver, and perform its
obligations under each of the Loan Documents to which it is a party,
(b) that attached as Exhibit A to such certificate is a true, correct, and
complete copy of the resolutions then in full force and effect authorizing and
ratifying the execution, delivery, and performance by such Person of the Loan
Documents to which it is a party, (c) the name(s) of the Person(s) authorized to
execute the Loan Documents on behalf of such Person, together with a sample of
the true signature(s) of such Person(s), and (d) that Agent may
conclusively rely on such certificate unless and until such Person shall have
delivered to Agent a further certificate canceling or amending such prior
certificate.

     

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

     

    “Cash Equivalents” means
(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; 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.

     

    “Change in Control” is a
transaction in which any “person” or “group” (within the meaning of
Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended)
becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended), directly or indirectly, of greater than 35% of the shares of
all classes of stock then outstanding of Borrower ordinarily entitled to vote in
the election of directors.

     

    “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 Maryland; 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, Agent's
Lien on any Collateral is governed by the Uniform Commercial Code in effect in a
jurisdiction other than the State of Maryland, the term “Code” shall mean the Uniform
Commercial Code as enacted and in effect in such other jurisdiction solely for
purposes on 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.

     

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

     

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

     


    
      

        
      
      
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    “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 maintains a Deposit Account or the securities intermediary or commodity
intermediary at which Borrower maintains a Securities Account or a Commodity
Account, Borrower, and Agent pursuant to which Agent obtains control (within the
meaning of the Code) for the benefit of the Lenders over such Deposit Account,
Securities Account, or Commodity Account.

     

    “Credit Extension” is any
Growth Capital Advance or any other extension of credit by Agent or Lenders
under this Agreement or the Loan Documents for Borrower’s benefit.

     

    “DEA” means the Drug
Enforcement Administration of the United States of America and any successor
agency thereof.

     

    “Default” is any event which
with notice or passage of time or both, would constitute an Event of
Default.

     

    “Default Rate” is defined in
Section 2.2(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
collectively Borrower’s deposit account, account numbers 033003xxxx, 033003xxxx,
and 033003xxxx, maintained with Union Bank of California and over which Agent
has been granted control for the ratable benefit of all Lenders.

     

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

     

    “Drug Application” means a new
drug application, an abbreviated drug application, or a product license
application for any Product, as appropriate, as those terms are defined in the
FDCA.

     

    “Effective Amount” means with
respect to any Growth Capital Advances on any date, the aggregate outstanding
principal amount thereof after giving effect to any borrowing and prepayments or
repayments thereof occurring on such date.

     

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

     

    “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.

     

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

     

    “Event of Default” is defined
in Section 8.

     


    
      
        
            

        

      

      
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    “FDA” means the Food and Drug
Administration of the United States of America or any successor entity
thereto.

     

    “FDCA” means the Federal Food,
Drug and Cosmetic Act, as amended, 21 U.S.C. Section 301 et seq. and all
regulations promulgated thereunder.

     

    “Final Payment” is a payment in
regard to each Growth Capital Advance (in addition to and not a substitution for
the regular monthly payments of principal plus accrued interest) equal to the
amount of such Growth Capital Advance multiplied by the Final Payment
Percentage, due on the earlier of (a) the Growth Capital Line Maturity Date,
(b) the acceleration of such Growth Capital Advance or (c) the prepayment
of the Growth Capital Advances in accordance with Section 2.1.1(e); provided,
however, that fifty percent (50%) of the portion of the Final Payment owed to
any Lender shall be waived by such Lender in the event of a prepayment using
proceeds of a credit facility provided in whole or in part by such Lender which
refinances the Obligations.

     

    “Final Payment Percentage” is,
for each Growth Capital Advance, three percent (3.0%).

     

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

     

    “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, which are
applicable to the circumstances as of the date of determination.

     

    “General Intangibles” is 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.

     

    “Growth Capital Advance” or
“Growth Capital
Advances” is defined in Section 2.1.1(a).

     

    “Growth Capital Draw Period” is
the period of time commencing upon the Effective Date and continuing through the
earliest to occur of (i) the Growth Capital Commitment Termination Date, (ii) an
Event of Default, or (iii) the existence of any Default.

     

    “Growth Capital Commitment Termination
Date” is June 30, 2009.

     

    “Growth Capital Line” is a
Growth Capital Advance or Growth Capital Advances in an aggregate amount of up
to Ten Million Dollars ($10,000,000.00).

     

    “Growth Capital Line Maturity
Date” is, for each Growth Capital Advance, December 9, 2011.

     

    “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

     


    
      
         

        

      

      
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    “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, (d) Contingent Obligations and (e)
preferred stock issued by Borrower.

     

    “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.

     

    “Intellectual Property” means,
with respect to any Person, all patents, patent applications and like
protections, including improvements, divisions, continuation, renewals,
reissues, extensions and continuations in part of the same, trademarks, trade
names, trade styles, trade dress, service marks, logos and other business
identifiers and, to the extent permitted under applicable Law, any applications
therefore, whether registered or not, and the goodwill of the business of such
Person connected with and symbolized thereby, copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative works, whether published or unpublished, technology,
know-how and processes, operating manuals, trade secrets, computer hardware and
software, rights to unpatented inventions and all applications and licenses
therefor, used in or necessary for the conduct of business by such Person and
all claims for damages by way of any past, present or future infringement of any
of the foregoing.

     

    “Interest Payment Date” means
the first day of each month.

     

    “Interest Period” means the
one-month period starting on the first day of each month and ending on the last
day of such month; provided, however, that the first Interest Period for each
Growth Capital Advance shall commence on the date that the applicable Growth
Capital Advance is made and end on the last day of such month.

     

    “Interest Rate Determination
Date” means the second Business Day prior to the first day of the related
Interest Period.

     

    “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 Borrower’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 or capital contribution to any
Person.

     

    “IP Agreement” is that certain
Intellectual Property Security Agreement executed and delivered by Borrower to
Agent dated of even date herewith.

     

    “Laws” means any and all
federal, state, provincial, territorial, local and foreign statutes, laws,
judicial decisions, regulations, guidances, guidelines, ordinances, rules,
judgments, orders, decrees, codes, plans, injunctions, permits, concessions,
grants, franchises, governmental agreements and governmental restrictions,
whether now or hereafter in effect, which are applicable to any Borrower in any
particular circumstance.

     

    “Lender” is any one of the
Lenders.

     

    “Lenders” shall mean 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,
subject to specific limitations contained in the Loan Documents, all audit fees
and expenses, costs, and expenses (including reasonable attorneys’ fees and
expenses) of Lenders and Agent 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 with respect to Borrower relating to this Agreement or to
the other Loan Documents, provided that, if requested by Borrower in writing,
all such fees, expenses, and costs are supported by written invoices or
statements.

     


    
      
        
            

        

      

      
        -26-

        
          

        

      

      
         


      

    


    “LIBOR Rate” means for each
Interest Period, the rate per annum determined by Agent (rounded upwards, if
necessary, to the next 1/100th%) by dividing (a) the Base LIBOR Rate for such
Interest Period, by (b) 100% minus the Reserve
Percentage.  The LIBOR Rate shall be adjusted on and as of the
effective day of any change in the Reserve Percentage.

     

    “LIBOR Rate Margin” is nine
percentage points (9.0%) per annum.

     

    “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 Warrants, the Perfection Certificate, the IP
Agreement, any note, or notes or guaranties executed by Borrower or any
Guarantor in connection with the indebtedness governed by this Agreement, and
any other present or future agreement made by Borrower or any Guarantor for the
benefit of Lenders and Agent in connection with this Agreement, all as amended,
restated, or otherwise modified.

     

    “Material Adverse Change” is
(a) a material impairment in the priority of Lenders' 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 (c) a material
impairment of the prospect of repayment of any portion of the
Obligations.

     

    “Material Intellectual
Property” is all of Borrower’s Intellectual Property that is material to
the condition (financial or other), business or operations of
Borrower.

     

    “Obligations” are Borrower’s
obligation to pay when due any debts, principal, interest, Lenders' Expenses,
Prepayment Fees, Final Payments, and other amounts Borrower owes Lenders now or
later, whether under this Agreement, the Loan Documents, or otherwise,
including, without limitation, all obligations relating to letters of credit
(including reimbursement obligations for drawn and undrawn letters of credit),
cash management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin (whether or not allowed)
and debts, liabilities, or obligations of Borrower assigned to Lenders and/or
Agent, and the performance of Borrower’s duties under the Loan
Documents.

     

    “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 with the Secretary
of State of such Person’s state of formation on a date that is no earlier than
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.

     

    “Peregrine” is defined in the
preamble hereof.

     

    “Perfection Certificate” is
defined in Section 5.1.

     

    “Permits” means licenses,
certificates, accreditations, product clearances or approvals, provider numbers
or provider authorizations, marketing authorizations, other authorizations,
registrations, permits, consents and approvals required in connection with the
conduct of Borrower’s or any Subsidiary’s business or to comply with any
applicable Laws, including, without limitation, drug listings and drug
establishment registrations under 21 U.S.C. Section 510, registrations issued by
DEA under 21 U.S.C. Section 823 (if applicable to any Product), and those issued
by State governments for the conduct of Borrower’s or any Subsidiary’s
business.

     

    “Permitted Avid Transaction” is
defined in Section 7.1.

     


    
      
        
            

        

      

      
        -27-

        
          

        

      

      
         


      

    


    “Permitted Indebtedness”
is:

     

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

     

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

     

    (c)           Subordinated
Debt;

     

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

     

    (e)           Indebtedness
incurred as a result of endorsing negotiable instruments received in the
ordinary course of business; and

     

    (f)           Indebtedness
secured by Permitted Liens;

     

    (g)           preferred
stock issued by Borrower which is not subject to any redemption right or
obligation or any other right or obligation which, if exercised or otherwise
enforced, would violate Section 7.7 or any other provision of this Agreement;
and

     

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

     

    “Permitted Investments”
are:

     

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

     

    (b)           Investments
consisting of Cash Equivalents;

     

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

     

    (d)           Investments
consisting of deposit accounts in which Agent, for the ratable benefit of
Lenders, has a perfected security interest;

     

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

     

    (f)           Investments
by Subsidiaries in or to other Subsidiaries or Borrower and Investments by
Borrower in Subsidiaries not to exceed $100,000 in the aggregate in any fiscal
year;

     

    (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;

     

    (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; and

     

    (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.

     

    “Permitted Liens”
are:

     

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

     


    
      
         

        

      

      
        -28-

        
          

        

      

      
         


      

    

    (b)           Liens
for taxes, fees, assessments or other government charges or levies, either not
delinquent or being contested in good faith and for which Borrower maintains
adequate reserves on Borrower’s Books, if they have no
priority over any of Lenders’ Liens;

     

    (c)        
   purchase money Liens (i) on Equipment acquired or held by
Borrower incurred for financing the acquisition of the Equipment securing no
more than One Hundred Thousand Dollars ($100,000.00) in the aggregate amount
outstanding, or (ii) existing on Equipment when acquired, if the Lien is
confined to the property and improvements and the proceeds of the
Equipment;

     

    (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
$100,000 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);

     

    (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 business, and
leases, subleases, non-exclusive licenses or sublicenses of property (other than
real property or Intellectual Property) granted in the ordinary course of
Borrower’s business, if the leases,
subleases, licenses and sublicenses do not prohibit granting Agent a security
interest;

     

    (h)           non-exclusive
license of Intellectual Property granted to third parties in the ordinary course
of business;

     

    (i)           exclusive
licenses of Intellectual Property so long as (i) Borrower’s Board of Directors
has approved each such exclusive license and (ii) no such exclusive license
involves the products bavituximab or Cotara;

     

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

     

    (k)           Liens
in favor of other financial institutions arising in connection with Borrower’s
deposit and/or securities accounts held at such institutions, provided that
Agent, for the ratable benefit of Lenders, has a perfected security interest in
the amounts held in such deposit and/or securities accounts and such Lien does
not secure borrowed money; and

     

    (l)            Liens
in favor of XMark Fund, L.P. and Xmark Fund Ltd on (i) Peregrine’s registered
trademark for “COTARA” registered on February 24, 2004 with registration number
2,817,648 and (ii) certain of Peregrine’s patents, including, without
limitation, DETECTION OF NECROTIC MALIGNANT TISSUE AND ASSOCIATED THERAPY
registered on May 28, 1991 with registration number 5,019,368; provided,
however, that the Liens described in this clause (l) must be terminated prior to
advance of the initial Credit Extension hereunder.

     

    “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.

     

    “Prepayment Fee” shall be an
amount equal to:

     

    
      	
               
      

            	
              (i)

            	
              for
      a prepayment accruing on or prior to December 9, 2009, the Yield
      Maintenance Amount;

            


    

     


    
      
        
            

        

      

      
        -29-

        
          

        

      

      
         


      

    


    
      	
               
      

            	
              (ii)

            	
              for
      a prepayment accruing after December 9, 2009 and on or prior to December
      9, 2010, five percent (5.0%) of the principal amount of any Growth Capital
      Advance prepaid; or

            


    

     

    
      	
               
      

            	
              (iii)

            	
              for
      a prepayment accruing after December 9, 2010, three percent (3.0%) of the
      principal amount of any Growth Capital Advance
  prepaid.

            


    

     

    “Products” means any products
manufactured, sold, developed, tested or marketed by any Borrower or any of its
Subsidiaries, including without limitation, those products set forth on Schedule
5.11 (as updated from time to time in accordance with Section 6.2(d) above);
provided that, if Borrower shall fail to comply with the obligations under
Section 6.2(d) to give notice to Agent and update Schedule 5.11 prior to
manufacturing, selling, developing, testing or marketing any new Product, any
such improperly undisclosed Product shall be deemed to be included in this
definition; and provided, further, that products manufactured by Avid for
unaffiliated third parties shall not be deemed “Products”
hereunder.

     

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

     

    “Regulatory Change” means, with respect to
Lenders, any change on or after the date of this Agreement in United States
federal, state, or foreign Laws or regulations, including Regulation D, or the
adoption or making on or after such date of any interpretations, directives, or
requests applying to a class of lenders including Lenders, of or under any
United States federal or state, or any foreign Laws or regulations (whether or
not having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.

     

    “Required Permit” means a
Permit (a) issued or required under Laws applicable to the business of Borrower
or any of its Subsidiaries or necessary in the manufacturing, importing,
exporting, possession, ownership, warehousing, marketing, promoting, sale,
labeling, furnishing, distribution or delivery of goods or services under Laws
applicable to the business of Borrower or any of its Subsidiaries or any Drug
Application (including without limitation, at any point in time, all licenses,
approvals and permits issued by the FDA or any other applicable Governmental
Authority necessary for the testing, manufacture, marketing or sale of any
Product by any applicable Borrower(s) as such activities are being conducted by
such Borrower with respect to such Product at such time), and (b) issued by any
Person from which Borrower or any of their Subsidiaries have received an
accreditation.

     

    “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.

     

    “Reserve Percentage” means, on
any day, for any Lender, the maximum percentage prescribed by the Board of
Governors of the Federal Reserve System (or any successor Governmental
Authority) for determining the reserve requirements (including any basic,
supplemental, marginal, or emergency reserves) that are in effect on such date
with respect to eurocurrency funding (currently referred to as “eurocurrency
liabilities”) of that Lender, but so long as such Lender is not required or
directed under applicable regulations to maintain such reserves, the Reserve
Percentage shall be zero.

     

    “Responsible Officer” is any of
the Chief Executive Officer, President, Chief Financial Officer and Controller
of Borrower.

     

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

     

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

     

    “Subsidiary” means, with
respect to any Person, any Person of which more than 50.0% 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.

     


    
      
        
            

        

      

      
        -30-

        
          

        

      

      
         


      

    


    “Transfer” is defined in
Section 7.1.

     

    “UT Southwestern” has the
meaning set forth in the UTSW Agreement.

     

    “UTSW Agreement” means that
certain Exclusive Patent License Agreement between the University of Texas
Southwestern and Peregrine Pharmaceuticals, Inc. effective as of August 1,
2001.

     

    “Warrants” are those certain
Warrants to Purchase Stock dated as of the Effective Date executed by Borrower
in favor of each Lender.

     

    “Yield Maintenance Amount”
means the sum of the present values (but in any event, not less than zero) of
the “Term Margin
Component” (defined below) of the remaining payments of interest under
this Agreement that will not be made by reason of the early termination of the
Growth Capital Line or Lenders’ funding obligations in respect thereof, all as
estimated and determined by Agent in accordance with the formula set forth
below.  The “Term
Margin Component” means the portion of the remaining payments of interest
under this Agreement calculated based on (i) an amortized principal sum
initially equal to the amount prepaid and the LIBOR Rate Margin and (ii) the sum
of the LIBOR Rate Margin plus the amount (if any) by which 3% exceeds the LIBOR
Rate.  The present value of each such estimated monthly payment shall
be calculated by discounting such estimated payment to the date of prepayment by
the Discount Rate.  The “Discount Rate” for each such
payment is the rate which, when compounded monthly, is equivalent to the
Treasury Rate (as hereinafter defined), when compounded
semi-annually.  The “Treasury Rate” is the yield
calculated by the linear interpolation of the nominal yields, as reported in the
Federal Reserve Statistical Release H.15 Selected Interest Rates (the “Release”) under the heading
“U.S. government securities” and the subheading “Treasury Constant Maturities”
for the week ending prior to the date of prepayment, of U.S. Treasury Constant
Maturities with maturity dates (one longer and one shorter) most nearly
approximating what would have been the payment due date of each such estimated
payment amount but for the termination or default.  In the event the
Release is no longer published, Administrative Agent shall select a comparable
publication to determine the Treasury Rate in its commercially reasonable
discretion. Borrower agrees that the foregoing calculations are a reasonable
approximation of Lenders’ lost profits in view of the difficulties and
impracticality of determining actual damages resulting from an early termination
of this Agreement or Lenders’ funding obligations hereunder.

     

    [Signature
Page Follows]

     


    
      
         

        

      

      
        -31-

        
          

        

      

      
         


      

    

    


     

    IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed as a sealed instrument
under the Laws of the State of Maryland as of the Effective Date.

     

    BORROWER:

     

    PEREGRINE
PHARMACEUTICALS, INC.

     

    By:/s/ Steven
King                                      

    Name:
Steven
King                                      

    Title:
President and
CEO                            


     

    AVID
BIOSERVICES, INC.

     

    
      By:/s/ Steven
King                                      

      Name:
Steven
King                                      

      Title:
President and
CEO                                                                                       

    

     

    AGENT:

     

    BLUECREST
CAPITAL FINANCE, L.P., as
Agent

    By:
BlueCrest Capital Finance GP, LLC, its General Partner


    
 

    By: /s/ Mark
King                                 

    Name:
Mark
King                                  


    Title:
Managing
Director                     

     

    LENDERS:

     

    BLUECREST
CAPITAL FINANCE, L.P., as a Lender

    By:
BlueCrest Capital Finance GP, LLC, its General Partner

    


     

    
      By: /s/ Mark
King                                 

      Name:
Mark
King                                  


      Title:
Managing
Director                     



    
      [Signature
page to Loan and Security Agreement]

    


    
      
        
            

        

      

      
        -32-

        
          

        

      

      
         


      

    


    


    SCHEDULE
1.1

    


    LENDERS AND
COMMITMENTS

    


    
      	
              Lender

            	
              Commitment

            	
              Commitment Percentage

            
	
              BlueCrest
      Capital Finance, L.P.

            	
              $10,000,000.00

            	
              100.00%

            
	 	 	 
	
              TOTAL

            	
              $10,000,000.00

            	
              100.00%

            


    

    


     

     

     

     

     

     

     

     

     

     

    
      [Schedule
1.1 to Loan and Security Agreement]

    


    
      
        
           

        

      

      
        -33-

        
          

        

      

      
         


      

    


    


    SCHEDULE
5.2

    


    MATERIAL INTELLECTUAL
PROPERTY

    


    


    Peregrine
has exclusive rights to market and sell world-wide the bavituximab family of
antibodies for treatment of all solid tumors, 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

              
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                Naked
      anti-PS antibodies

              	
                Univ.
      of Texas System

              	
                201
      W. 7th Street, Austin, TX 78701

              	
                Upon
      exp of Patents

              	
                2018

              	
                Yes

              	
                Transferable
      to successor

              
	
                VTA

              	
                Univ.
      of Texas System

              	
                201
      W. 7th Street, Austin, TX 78701

              	
                Upon
      exp of Patents

              	
                2014

              	
                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

              	
                Univ.
      of Texas System

              	
                201
      W. 7th Street, Austin, TX 78701

              	
                Upon
      exp of Patents

              	
                2022

              	
                Yes

              	
                Transferable
      to successor

              


      

    

    


    


    


    Peregrine
has exclusive rights to market and sell world-wide (except China) the product
known as Cotara® (a chimeric antibody labeled with radioactive iodine-131 that
targets necrotic tumor cells) for treatment of brain, colon, liver, lung,
prostate and pancreatic cancers, through the following list of patents and
license agreements:

    


    
      
        	
                Description

              	 	
                Registration/

                Application

                Number

              	 	
                Registration/

                Application

                Date

              
	
                CONTINUOUS
      LARGE SCALE METHOD FOR PROTEIN LABELING (US)

              	 	
                10/877,959

              	 	
                06/25/04

              
	
                CONTINUOUS
      LARGE SCALE METHOD FOR PROTEIN LABELING (PCT)

              	 	
                PCT/US04/020492

              	 	
                11/25/05

              
	
                CONTINUOUS
      LARGE SCALE METHOD FOR PROTEIN LABELING (PCT)

              	 	
                2004253924

              	 	
                11/24/05

              
	
                CONTINUOUS
      LARGE SCALE METHOD FOR PROTEIN LABELING (PCT)

              	 	
                200480017742.X

              	 	
                12/23/05

              
	
                CONTINUOUS
      LARGE SCALE METHOD FOR PROTEIN LABELING (EPO – Belgium, Switzerland,
      Germany, Denmark, Finland, France, Great Britain, Ireland, Netherlands
      & Sweden)

              	 	
                04785799.0

              	 	
                01/05/06

              
	
                CONTINUOUS
      LARGE SCALE METHOD FOR PROTEIN LABELING (HK)

              	 	
                06109573.0

              	 	
                08/28/06

              


      

    


    
      
        
          

        

      

      
        -34-

        
          

        

      

      
         


      

    


    


    
      	
              CONTINUOUS
      LARGE SCALE METHOD FOR PROTEIN LABELING (EPO DIV)

            	 	
              08010871.5

            	 	
              06/13/08

            
	
              CONTINUOUS
      LARGE SCALE METHOD FOR PROTEIN LABELING (India)

            	 	
              419/DELNP/2006

            	 	
              01/23/06

            
	
              CONTINUOUS
      LARGE SCALE METHOD FOR PROTEIN LABELING (New Zealand)

            	 	
              543495

            	 	
              11/10/05

            
	
              Specific
      binding proteins including antibodies which bind to the necrotic centre of
      tumours, and uses thereof (Australia)

            	 	
              766564

            	 	
              7/2/1999

            
	
              Specific
      binding proteins including antibodies which bind to the necrotic centre of
      tumours, and uses thereof (Canada)

            	 	
              2336114

            	 	
              7/2/1999

            
	
              Specific
      binding proteins including antibodies which bind to the necrotic centre of
      tumours, and uses thereof (EPO – Denmark, France, Great Britain,
      Netherlands)

            	 	
              EP1092028B1

            	 	
              7/2/1999

            
	
              Specific
      binding proteins including antibodies which bind to the necrotic centre of
      tumours, and uses thereof (Japan)

            	 	
              2000-558212

            	 	
              7/2/1999

            
	
              Specific
      binding proteins including antibodies which bind to the necrotic centre of
      tumours, and uses thereof (US)

            	 	
              6827925

            	 	
              9/27/2001

            
	
              Specific
      binding proteins including antibodies which bind to the necrotic centre of
      tumours, and uses thereof (US)

            	 	
              10/890,945

            	 	
              7/13/2004

            
	
              Specific
      binding proteins including antibodies which bind to the necrotic centre of
      tumours, and uses thereof (EP DIV)

            	 	
              EP0510644.2

            	 	
              5/17/2005

            
	
              Specific
      binding proteins including antibodies which bind to the necrotic centre of
      tumours, and uses thereof (Hong Kong)

            	 	
              06108478.8

            	 	
              7/2/1999

            
	
              Detection
      of necrotic malignant tissue and associated therapy (US)

            	 	
              5019368

            	 	
              2/23/1989

            
	
              Detection
      of necrotic malignant tissue and associated therapy (US)

            	 	
              5882626

            	 	
              3/13/1991

            
	
              MODIFIED
      ANTIBODIES (US)

            	 	
              5194594

            	 	
              9/7/1990

            
	
              MODIFIED
      ANTIBODIES (UPO – Denmark, France, Great Britain, Italy,
      Switzerland)

            	 	
              550663

            	 	
              8/28/1991

            
	
              MODIFIED
      ANTIBODIES (Canada)

            	 	
              2090700

            	 	
              8/28/1991

            
	
              MODIFIED
      ANTIBODIES (Japan)

            	 	
              3549525

            	 	
              8/28/1991

            
	
              MODIFIED
      ANTIBODIES (Japan Div)

            	 	
              2004-13610

            	 	
              8/28/1991

            
	
              MODIFIED
      ANTIBODIES (Australia)

            	 	
              649079

            	 	
              8/28/1991

            
	
              ANTIBODIES
      WITH REDUCED NET POSITIVE CHARGE (US)

            	 	
              5990286

            	 	
              1/10/1997

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

            	 	
              0873139

            	 	
              1/6/1997

            
	
              ANTIBODIES
      WITH REDUCED NET POSITIVE CHARGE (Australia)

            	 	
              730388

            	 	
              1/6/1997

            


    


    
      
        
            

        

      

      
        2

        
          

        

      

      
         


      

    


    


    
      	
              ANTIBODIES
      WITH REDUCED NET POSITIVE CHARGE (Canada)

            	 	
              2242750

            	 	
              1/6/1997

            
	
              ANTIBODIES
      WITH REDUCED NET POSITIVE CHARGE (Japan)

            	 	
              525384/1997

            	 	
              1/6/1997

            
	
              ANTIBODIES
      WITH REDUCED NET POSITIVE CHARGE (Korea)

            	 	
              485240

            	 	
              1/6/1997

            
	
              ANTIBODIES
      WITH REDUCED NET POSITIVE CHARGE (Mexico)

            	 	
              985565

            	 	
              1/6/1997

            


    

    


    


    Peregrine
has the right to develop, market and sell other technologies such as
vasopermeation agents, vascular targeting agents and other technologies
(excluding those covering bavituximab and Cotara) through the following list of
patents and license agreements: 

    


    
      	
              Licensed
      Product

            	
              Licensor
      Name

            	
              Licensor
      Address

            	
              Lic.
      Exp. Date

            	
              IP
      Exp. Date

            	
              Exclusive?

            	
              Restrictions

            
	 	 	 	 	 	 	 
	
              VEA

            	
              University
      of Southern California

            	
              3740
      McClintock Ave, Hughes Center EEB 131, Los Angeles, CA
      90089-2561

            	
              Upon
      exp of Patents

            	
              2009

            	
              Yes

            	
              Transferable
      to successor

            
	
              PEP

            	
              University
      of Southern California

            	
              3740
      McClintock Ave, Hughes Center EEB 131, Los Angeles, CA
      90089-2561

            	
              Upon
      exp of Patents

            	
              2016

            	
              Yes

            	
              Transferable
      to successor

            
	
              Coaguligand

            	
              Univ.
      of Texas System

            	
              201
      W. 7th Street, Austin, TX 78701

            	
              Upon
      exp of Patents

            	
              2014

            	
              Yes

            	
              Transferable
      to successor

            
	
              Coaguligand

            	
              SCRIPPS
      Research Inst.

            	
              10550
      North Torrey Pines Road, La Jolla CA  92037

            	
              Upon
      exp of Patents

            	
              2014

            	
              Yes

            	
              Transferable
      to successor

            
	
              VTA

            	
              Univ.
      of Texas System

            	
              201
      W. 7th Street, Austin, TX 78701

            	
              Upon
      exp of Patents

            	
              2014

            	
              Yes

            	
              Transferable
      to successor

            
	
              Tissue
      Factor

            	
              Univ.
      of Texas System

            	
              201
      W. 7th Street, Austin, TX 78701

            	
              Upon
      exp of Patents

            	
              2017

            	
              Yes

            	
              Transferable
      to successor

            
	
              AntiPS-Conjugates

            	
              Univ.
      of Texas System

            	
              201
      W. 7th Street, Austin, TX 78701

            	
              Upon
      exp of Patents

            	
              2018

            	
              Yes

            	
              Transferable
      to successor

            
	
              VPF

            	
              Beth
      Israel Deaconess Medical Center

            	
              330
      Brookline Ave, FN 2, Boston, MA 02215

            	
              Upon
      exp of Patents

            	
              2011

            	
              Yes

            	
              Transferable
      to successor

            
	
              Anti-VEGF

            	
              Univ.
      of Texas System

            	
              201
      W. 7th Street, Austin, TX 78701

            	
              Upon
      exp of Patents

            	
              2019

            	
              Yes

            	
              Transferable
      to successor

            
	
              PS-peptide
      conjugate

            	
              MD
      Anderson Cancer Center

            	
              1515
      Holcombe Blvd, Houston, TX 77030

            	
              Upon
      exp of Patents

            	
              2017

            	
              Yes

            	
              Transferable
      to successor

            
	
              Nicked
      Beta-2GP1

            	
              MD
      Anderson Cancer Center

            	
              1515
      Holcombe Blvd, Houston, TX 77030

            	
              Upon
      exp of Patents

            	
              2022

            	
              Yes

            	
              Transferable
      to successor

            


    

    


    



    
      
        
            

        

      

      
        3

        
          

        

      

      
         


      

    


    


    SCHEDULE
5.3

    


    LITIGATION

    


    On
January 12, 2007, Peregrine filed a complaint in the Superior Court of the State
of California for the County of Orange against Cancer Therapeutics Laboratories
(“CTL”).  The original complaint has been amended three times based on
the ongoing discovery to include claims against Shanghai MediPharm and its
related entities, and Alan Epstein, MD.  The lawsuit alleges claims
for breach of contract, interference with contractual relations, declaratory
relief, and injunctive relief against the defendants.  Peregrine's
claims stem from a 1995 license agreement with CTL, and two amendments thereto
(collectively referred to as the "License Agreement").  Peregrine
claims that CTL breached the License Agreement by, among other things, (i) not
sharing with Peregrine all inventions, technology, know-how, patents and other
information, derived and/or developed in the People’s Republic of China and/or
at the CTL laboratory, as was required under the License Agreement; (ii) not
splitting revenue appropriately with Peregrine as required under the License
Agreement; (iii) utilizing Peregrine's licensed technologies outside of the
People’s Republic of China; and (iv) failing to enter a sublicense agreement
with a Chinese sponsor obligating the Chinese sponsor to comply with the terms
and obligations in the License Agreement.  Peregrine further alleges
that Medibiotech and Shanghai Medipharm Biotech Co., Ltd. ("Medipharm Entities")
interfered with the License Agreement, leading to CTL's
breaches.  This interference by the Medipharm Entities includes: 1)
posturing Shanghai Medipharm as the designated sublicensee under the License
Agreement, without binding any of the Medipharm Entities  to the terms
and obligations of an appropriate sublicense agreement called for under the
License Agreement; 2) entering into a license agreement with defendant Epstein
("Epstein License Agreement") instead of CTL; 3) restricting the information CTL
was allowed to provide to Peregrine, thereby prohibiting CTL from providing to
Peregrine all information required under the License Agreement; and 4) providing
compensation to CTL, and its principals, so that CTL would enter agreements that
prohibited CTL from performing under the License Agreement.  These
same monetary inducements also interfered with the 1999 Material Transfer
Agreement between Peregrine and Dr. Epstein ("MTA"), and caused Dr. Epstein to
breach the MTA.  Dr. Epstein has attempted to have our claims against
him referred to binding arbitration.  The Superior Court has declined
his request.

    


    On March
28, 2007, CTL filed a cross-complaint, which it amended on May 30, 2007,
alleging that the Company breached the Agreement, improperly terminated the
Agreement, is interfering with CTL’s agreements with various MediPharm entities
and is double-licensing the technology licensed to CTL to another
party.  CTL’s cross-complaint, which seeks $20 million in damages, is
in part predicated on the existence of a sublicense agreement between CTL and
MediPharm.  Peregrine is challenging the cross-complaint on the basis
that not only did CTL fail to allege an agreement with which the Company
interfered, they have been unable to produce the alleged sublicense agreement
with MediPharm despite our repeated demands.

    


    On
February 22, 2008, the MediPharm entities filed a cross-complaint alleging, as a
third party beneficiary, that that the Company breached the Agreement by
double-licensing the technology licensed to CTL to another party, intentionally
interfered with a prospective economic advantage, and unjust
enrichment.  MediPharm’s cross-complaint, which seeks $30 million in
damages, is in part predicated on MediPharm being the “Chinese Sponsor” under
the Agreement.  Peregrine intends to bring pre-trial motions to
dispose of the MediPharm Cross-Complaint.


    
      
        
            

        

      

      
        1

        
          

        

      

      
         


      

    


    


    SCHEDULE
5.11

    


    PRODUCTS

    


    ANTI-PS
PLATFORM TECHNOLOGY:

    


    Borrower has a number of Products in
discovery and pre-clinical research that are covered under the Borrower’s
Anti-PS platform technology.   The following represents Products
that are in clinical trials or later stage pre-clinical
development:  bavituximab, PGN635, and PGN632.

    


    TNT
PLATFORM TECHNOLOGY:

    


    Borrower has a number of Products in
discovery and pre-clinical research that are covered under the Borrower’s TNT
platform technology.  The following represent Products that are in
clinical trials or later stage pre-clinical development:  Cotara® and
NHS76.

    


    PERMITS:

    


    
      The
following represents a list of Required Permits:

    

    


    
      	
              Permit

            	
              Permit
      Number

            
	
              California
      Drug Manufacturing License

            	
              63637

            
	
              Designated
      Representative License

            	
              EXC
      14347

            
	
               FDA
      Labeler Code

            	
              67062

            
	
               California
      Device Manufacturing License

            	
              63637

            


    

    


    



    
      
         

        

      

      
        1

        
          

        

      

      
         


      

    

    


    EXHIBIT
A

    


    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, goods, leases, license
agreements, franchise agreements, General Intangibles (including Intellectual
Property), commercial tort claims, including without limitation claims for
interference with contractual relations and other tort claims arising from Peregrine Pharmaceuticals, Inc. v.
Cancer Therapeutics Laboratories et al., filed on January 12, 2007 in the
Superior Court of the State of California for the County of Orange as Case No.
07CC00544, documents, instruments (including any promissory notes), chattel
paper (whether tangible or electronic), cash, 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.

     

    


     

     

     

     

     

     

     

     

     

     


    
      
        
            

        

      

      
        1

        
          

        

      

      
         


      

    


    


    EXHIBIT
B

    Advance Request
Form

    Deadline
for same day processing is Noon E.S.T.

    


    Date:
______________

    


    Re:  Loan
and Security Agreement dated December 9, 2008 (“Loan Agreement”)

    


    Borrower(s)
Name:  PEREGRINE PHARMACEUTICALS, INC. and AVID BIOSERVICES,
INC.

    


    LOAN ADVANCE
REQUEST

    


    The
undersigned Borrower hereby requests an advance under the Loan Agreement in the
gross amount of $___________________.  Borrower consents to the
application of the gross advance to the following expenses and acknowledges that
the net loan advance will be the amount shown below:

    


    
      	
              Gross
      Advance:

            	
              $___________

            
	 
      	 
      
	
              Less:

            	 
      
	
              Legal
      fees, including search expenses:

            	
              $___________

            
	
              Background
      searches

            	
              $___________

            
	
              Insurance
      review

            	
              $___________

            
	
              Diligence
      fees

            	
              $___________

            
	
              Document
      preparation fee

            	
              $___________

            
	
              Commitment
      fee or installment thereof

            	
              $___________

            
	
              Payoff

            	
              $___________

            
	
              Other

            	
              $___________

            
	 
      	 
      
	
              Plus:

            	 
      
	
              Good
      faith deposit

            	
              $___________

            
	 
      	 
      
	
              Net
      loan advance:

            	
              $___________

            


    

    


    PLEASE FILL-OUT OUTGOING
WIRE INSTRUCTIONS (FORM ATTACHED) FOR THE FULL AMOUNT OF THE NET LOAN
ADVANCE.

    


    All
Borrower’s representations and warranties in the Loan Agreement are true,
correct and complete in all material respects on the date of the request for an
advance; 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.  All conditions precedent to the credit extension herein
requested, as set forth in Section 3 of the Loan Agreement, have been
satisfied.

    


    BORROWER:

     

    PEREGRINE
PHARMACEUTICALS, INC.

     

    By:________________________________________

    Name:______________________________________

    Title:_______________________________________

     

    AVID
BIOSERVICES, INC.

     

    By:_________________________________________

    Name:______________________________________

    Title:_______________________________________


    
      
        
            

        

      

      
        1

        
          

        

      

      
         


      

    


    


     

    EXHIBIT
B

    Advance Request
Form

    Deadline
for same day processing is Noon E.S.T.

    


    


    OUTGOING WIRE
INSTRUCTIONS

    


    


    Amount of
wire:

    Beneficiary
Name:

    Beneficiary
Bank:

    City and
State:

    Beneficiary
Bank Transit (ABA) #:

    Contact:

    Special
instructions:

    


    Amount of
wire:

    Beneficiary
Name:

    Beneficiary
Bank:

    City and
State:

    Beneficiary
Bank Transit (ABA) #:

    Contact:

    Special
instructions:

    


    


    Amount of
wire:

    Beneficiary
Name:

    Beneficiary
Bank:

    City and
State:

    Beneficiary
Bank Transit (ABA) #:

    Contact:

    Special
instructions:

    


    


    Amount of
wire:

    Beneficiary
Name:

    Beneficiary
Bank:

    City and
State:

    Beneficiary
Bank Transit (ABA) #:

    Contact:

    Special
instructions:

    


    


    Amount of
wire:

    Beneficiary
Name:

    Beneficiary
Bank:

    City and
State:

    Beneficiary
Bank Transit (ABA) #:

    Contact:

    Special
instructions:


    
      
        
            

        

      

      
        2

        
          

        

      

      
         


      

    


    


    


    EXHIBIT
C

    COMPLIANCE
CERTIFICATE

    


    
      	
              TO:

            	
              BLUECREST
      CAPITAL FINANCE, L.P., as Agent

            	
              Date:  ________________________

            
	
              FROM:

            	
              PEREGRINE
      PHARMACEUTICALS, INC. and AVID BIOSERVICES, INC.

            	 
      


    

    


    The
undersigned authorized officer on behalf of Peregrine Pharmaceuticals, Inc. and
Avid Bioservices, Inc. (individually and collectively, “Borrower”)
certifies that under the terms and conditions of the Loan and Security Agreement
among Borrower, Agent and the Lenders (the “Agreement”), (1) Borrower is in
complete compliance for the period ending _______________ with all required
covenants except as noted below, (2) there are no Events of Default,
(3) all representations and warranties in the Agreement are true and
correct in all material respects on this date except as noted below; 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, (4)
Borrower, and each of its Subsidiaries, has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state
and local taxes, assessments, deposits and contributions owed by Borrower except
as otherwise permitted pursuant to the terms of Section 5.8 of the Agreement,
and (5) 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 Agent.  Attached
are the required documents supporting the certification.  The
undersigned certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.  The undersigned acknowledges that
no borrowings may be requested at any time or date of determination that
Borrower is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is
delivered.  Capitalized terms used but not otherwise defined herein
shall have the meanings given them in the Agreement.

     

    
      	
              Please
      indicate compliance status by circling Yes/No under “Complies”
      column.

            


    

     

    
      	
              Reporting
      Covenant

            	
              Required

            	
              Complies

            
	 
      	 
      	 
      
	
              10-Q,
      10-K and 8-K

            	
              Within
      5 days after filing with SEC

            	
              Yes   No

            
	
              Compliance
      Certificate

            	
              With
      10-Q and 10-K

            	
              Yes   No

            
	
              Board
      Approved Projections

            	
              FYE
      within 60 days

            	
              Yes   No

            
	 
      
	
              The
      following Intellectual Property was registered after the Effective Date
      (if not registrations, state
“None”)

            


    

    


    The following are the exceptions with
respect to the certification above:  (If no exceptions exist, state
“No exceptions to note.”)

     

      
        

      

    

    
      
        

      

      
        

      



    
      	
              PEREGRINE
      PHARMACEUTICALS, INC. and AVID BIOSERVICES, INC.

               

               

              By:                                                       

              Name:                                                       

              Title:                                                       

               

            	
              AGENT
      USE ONLY

               

              Received
      by: _____________________

              authorized
      signer

              Date:   _________________________

               

              Verified:
      ________________________

              authorized
      signer

              Date:  _________________________

               

              Compliance
      Status:      Yes     No

            


    

    


    
      

    

    1