ARQULE INC
EX-10.24(8)
<DOCUMENT>
<TYPE>EX-10.24(8)
<SEQUENCE>5
<FILENAME>a2093399zex-10_248.txt
<DESCRIPTION>EX-10.24(8)
<TEXT>

<PAGE>

                                                               EXHIBIT  10.24.8

                               SECURITY AGREEMENT
                    (ALL ASSETS EXCEPT INTELLECTUAL PROPERTY)

         SECURITY AGREEMENT (ALL ASSETS EXCEPT INTELLECTUAL PROPERTY) dated as
of September ___, 2002 by and between ArQule, Inc., a Delaware corporation (the
"Debtor") and Fleet National Bank (the "Secured Party"). The Secured Party is
the successor by merger to the entity formerly known as "Fleet National Bank"
("Old FNB").

         WHEREAS, the Debtor is a party to that certain letter agreement dated
March 18, 1999 (the "Original Letter Agreement") originally made between the
Debtor and Old FNB, the Secured Party having succeeded by merger to the rights
of Old FNB thereunder; and

         WHEREAS, the Original Letter Agreement has been amended by that certain
Loan Modification Agreement dated as of March 2, 2001 (the "First Modification")
between the Debtor and the Secured Party and by that certain Second Loan
Modification Agreement of even date herewith (the "Second Modification") between
the Debtor and the Secured Party (the Original Loan Agreement, as amended by the
First Modification and the Second Modification, being hereinafter referred to as
the "Loan Agreement"); and

         WHEREAS, pursuant to the Loan Agreement, (i) the Secured Party and/or
Old FNB have made term loans (the "Facility One Term Loans") to the Debtor in an
aggregate principal amount of up to $15,000,000, evidenced by a $15,000,000 face
principal amount promissory note dated March 18, 1999, as amended (as so
amended, the "Facility One Term Note") made by the Debtor and payable to the
order of Old FNB, the Secured Party having succeeded to the rights of Old FNB
thereunder, (ii) the Secured Party has made a term loan (the "Facility Two Term
Loan") to the Debtor in the original principal amount of $16,000,000, evidenced
by a $16,000,000 original principal amount promissory note dated March 2, 2001
(the "Facility Two Term Note") made by the Debtor and payable to the order of
the Secured Party, and (iii) the Secured Party may make other term loans (the
"Facility Three Term Loans") to the Debtor in an aggregate principal amount of
up to $2,500,000, evidenced by a $2,500,000 original principal amount promissory
note of even date herewith (the "Facility Three Term Note") made by the Debtor
and payable to the order of the Secured Party; and

         WHEREAS, the Secured Party may also provide other credit facilities,
interest rate protection products and other facilities for the Debtor; and

         WHEREAS, as a condition to the Secured Party entering into the Second
Modification and making Facility Three Term Loans thereunder, the Secured Party
requires that the Debtor grant to the Secured Party a security interest in the
Collateral (as defined in Section 1);

         NOW, THEREFORE, in consideration of the aforesaid amendments and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby act and agree as follows:

<PAGE>

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

         "BANK DOCUMENTS" - This Security Agreement, the Loan Agreement, any
Term Note and any other instruments, documents or other agreements made by the
Debtor with or in favor of the Secured Party, whether in connection with any
Term Loans or otherwise, all whether now existing or hereafter entered into or
delivered.

         "COLLATERAL" - All of the following now or hereafter existing or owned
by the Debtor or in which the Debtor shall now or hereafter have any interest:

         (a) all Equipment;

         (b) all Receivables;

         (c) all contracts and contract rights (to the extent assignable); all
rights to the payment of money; all obligations owing to the Debtor of every
kind and nature; and all tax refunds of every kind and nature, including,
without limitation, loss carryback refunds; and all of the foregoing whether now
existing or hereafter acquired or arising;

         (d) all Inventory;

         (e) all general intangibles (other than Intellectual Property Rights),
goodwill, customer lists, choses in action, chattel paper, insurance policies,
bank deposits, deposit accounts, checking accounts, certificates of deposit,
money, cash, securities (whether certificated or uncertificated), securities
accounts, security entitlements, commodity contracts, commodity accounts,
documents and instruments (whether negotiable or non-negotiable and regardless
of attachment to chattel paper), whether arising out of, relating to or
evidencing all or any of the foregoing Collateral or otherwise, and all whether
now existing and owned by the Debtor or hereafter acquired or arising;

         (f) all liens, guaranties, securities, rights, remedies and privileges
pertaining to, and all products and proceeds (including, without limitation,
insurance proceeds) of and all accessions to, any of the foregoing items of
Collateral (all whether now existing and owned by the Debtor or hereafter
arising or acquired); and

         (g) all information, data, files, writings, correspondence, books and
records (including, without limitation, all electronically recorded data)
relating to any of the foregoing items of Collateral (all whether now existing
and owned by the Debtor or hereafter arising or acquired), but excluding
Intellectual Property Rights of the Debtor.

         "EQUIPMENT" - All of the Debtor's machinery, equipment, tools,
furniture, furnishings and fixtures, including, without limitation, all
processing and manufacturing equipment, machine tools, data processing and
computer equipment, furniture, tools, dies, molds, motor vehicles, rolling
stock, trailers, airplanes, vessels and other equipment of every kind and
description, and all accessions, additions, substitutions or replacements to or
for any of the foregoing and all

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attachments, components, accessories, parts and supplies relating thereto; all
whether now owned or existing or hereafter arising or acquired, whether movable
or affixed, and wherever located.

         "EVENT OF DEFAULT" - The occurrence of any one or more of the
following: (i) any "Event of Default" as defined in any Bank Document; or (ii)
any representation or warranty by the Debtor contained in this Security
Agreement shall prove to have been inaccurate or incomplete in any material
respect on the date when made; or (iii) the failure or default by the Debtor
under any of Subsections 4(a), 4(c), 4(d), 4(f) or 4(h); or (iv) any failure by
the Debtor to perform or observe any of its other obligations or agreements
under this Security Agreement, which failure remains uncured for thirty (30)
days after the earlier of (A) the date when notice thereof has been given to the
Debtor, or (B) the date when the Debtor first has knowledge of such failure.

         "INTELLECTUAL PROPERTY RIGHTS" - All of the Debtor's trade secrets,
copyrights, patents, trade names, trademarks and servicemarks, as well as
licenses with respect to any of the foregoing, now owned or hereafter acquired.

         "INVENTORY" - All goods now owned or hereafter acquired by the Debtor
and intended for sale, all raw materials, parts, work-in-process, finished
goods, and all materials and supplies which are used or which may be used in
manufacturing, selling, packing, shipping, advertising or furnishing of goods,
whether now owned or hereafter acquired or created and wherever located, as well
as all proceeds (including, without limitation, insurance proceeds) of any of
the foregoing.

         "LIEN" - Any lien, charge, encumbrance or security interest, whether
voluntary or involuntary.

         "OBLIGATIONS" - Any and all indebtedness, liabilities or obligations of
the Debtor, joint or several, direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter arising, to or for the benefit of the
Secured Party, including, without limitation, those arising out of or provided
for in any of the Bank Documents and/or with respect to any other credit
facilities, any interest rate protection products or any other facilities, such
term to include obligations to perform acts and refrain from taking action as
well as obligations to pay money.

         "PERSON" - As defined in the Loan Agreement.

         "PREMISES" - All locations owned, leased, operated or used by the
Debtor, all of which are listed on Exhibit A hereto together with the record
owner of each such location.

         "RECEIVABLES" - All of the Debtor's accounts (as defined in the UCC),
notes, bills, drafts, acceptances, instruments, documents, chattel paper and all
other debts, obligations and liabilities in whatever form owing to the Debtor
from any Person for goods (as defined in the UCC) sold by it or for services
rendered by it, or however otherwise established or created, all guaranties and
security therefor, all right, title and interest of the Debtor in the goods or
services which have given rise thereto, including rights to reclamation and
stoppage in transit and all rights of an unpaid seller of goods or services; all
whether any of the foregoing be now existing or hereafter arising, now or
hereafter received by or owing or belonging to the Debtor.

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<PAGE>

         "TERM LOANS" - Collectively, the Facility One Term Loans, the Facility
Two Term Loan and the Facility Three Term Loans.

         "TERM NOTES" - Collectively, the Facility One Term Note, the Facility
Two Term Note and the Facility Three Term Note.

         "UCC" - The Uniform Commercial Code as in effect from time to time and
applicable to the relevant Collateral.

         Any defined term used in the plural preceded by the definite article
shall be taken to encompass all members of the relevant class. Any defined term
used in the singular preceded by "any" shall be taken to indicate any number of
the members of the relevant class.

         2. GRANT OF SECURITY INTEREST. As security for the full and timely
satisfaction of the Obligations, the Debtor hereby grants to the Secured Party a
continuing security interest in the Collateral, and in each item thereof, all to
the maximum extent that the Debtor has an interest therein or at any time in the
future obtains such an interest.

         3. REPRESENTATIONS AND WARRANTIES. The Debtor represents and warrants
to the Secured Party that:

             (a) The execution, delivery and performance by the Debtor of this
Security Agreement, including the security interests herein granted or intended
to be granted, has been duly authorized by all necessary corporate and other
action and does not and will not:

             (i) require any waiver, consent or approval of the Debtor's
         stockholders, any governmental authority or any other Person, other
         than any such waiver, consent or approval which has been heretofore
         obtained;

             (ii) contravene the charter or by-laws of the Debtor;

             (iii) violate any provision of, or require any filing (other than
         the filing of financing statements under the UCC with respect to the
         security interests herein granted), registration, consent or approval
         under, any law, rule, regulation (including, without limitation,
         Regulation U), order, writ, judgment, injunction, decree, determination
         or award presently in effect having applicability to the Debtor;

             (iv) result in a breach of or constitute a default or require any
         waiver or consent under any indenture or loan or credit agreement or
         any other agreement, lease or instrument to which the Debtor is party
         or by which it or any of its properties may be bound or affected; or

             (v) result in, or require, the creation or imposition of any Lien
         (other than as created hereunder) upon or with respect to any of the
         properties now owned or hereafter acquired by the Debtor.

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         (b) This Security Agreement has been duly executed and delivered on
behalf of the Debtor and is a legal, valid and binding obligation of the Debtor,
enforceable against the Debtor in accordance with its terms.

         (c) No Obligation has been or will hereafter be incurred on account of
personal, family or household purposes.

         (d) The Debtor is a duly organized and existing Delaware corporation.
The principal place of business and chief executive offices of the Debtor are
currently located at 19 Presidential Way, Woburn, MA 01801 and all of the books
and records of the Debtor are kept at that location or at one of the locations
described on Exhibit A. All of the tangible Collateral is and will be kept at
the Premises. Except as otherwise described on Exhibit A, the Debtor is the
record owner of all of the Premises.

         (e) Except as otherwise described on Exhibit B, the Debtor does not
conduct business under any trade name or style other than its corporate name and
has not used any other corporate name within the last five years.

         (f) The Debtor owns the Collateral free and clear of all Liens except
(i) Liens in favor of the Secured Party, and (ii) Liens expressly permitted by
Section 4.2 of the Loan Agreement.

         (g) This Security Agreement, coupled with the filing of appropriate UCC
financing statements with the filing offices listed on Exhibit C hereto (these
being the only locations in which such filing is required by the UCC in order to
perfect the security interests granted herein), creates in favor of the Secured
Party a valid and perfected first priority security interest in all of the
Collateral, which security interest secures the Obligations.

         (h) Exhibit D hereto contains a true and complete list of all of the
Debtor's bank accounts, brokerage accounts and other accounts holding any
investment securities and any other securities of any nature held or owned by
the Debtor.

         4. COVENANTS. (a) PAYMENT AND PERFORMANCE. The Debtor will
unconditionally pay when due or within any applicable grace period (or on
demand, if so payable) each Obligation and will duly and punctually perform each
Obligation.

         (b) FURTHER ASSURANCES. The Debtor will from time to time, at its
expense, upon the Secured Party's request, promptly execute and deliver all such
further instruments and documents, and take all such further action, as may be
necessary or that the Secured Party may reasonably request in order to perfect
and/or protect the security interests granted or intended to be granted hereby
or to enable the Secured Party to enforce its rights and remedies hereunder with
respect to any Collateral, including, without limitation: executing and
delivering written assignments of Receivables (but failure to deliver the same
shall not affect or limit the Secured Party,s security interest therein);
furnishing copies of customer invoices and original shipping documents; marking
or otherwise identifying Equipment; furnishing the originals of all bills of
lading, trust receipts and warehousemen's receipts, with such endorsements as
may be required by the Secured Party; stamping chattel paper to reflect the
Secured Party's security interest or

                                      -5-
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delivering same to the Secured Party; and executing and filing financing
statements. The Debtor hereby authorizes the Secured Party to file financing or
continuation statements and amendments thereto relating to Collateral without
the signature of the Debtor. The Debtor will provide landlord's waivers
reasonably satisfactory to the Secured Party with respect to any premises where
any material amount of Collateral may be located. With respect to such contracts
and contract rights as are by their terms non-assignable, the Debtor agrees: (i)
to hold same in trust for the benefit of the Secured Party, (ii) at any time or
from time to time (if the Secured Party shall so request) to use its reasonable
efforts to seek the approval of the other parties to the relevant contracts so
that assignment to the Secured Party will be permitted and (iii) at the request
of the Secured Party, to assign to the Secured Party all rights in and to said
contracts and contract rights to the maximum extent that same may from time to
time be assignable.

         (c) INFORMATION. The Debtor shall maintain complete and accurate
records of all of its Collateral and its dealings with respect thereto. Upon
reasonable notice from time to time (and at any time and without notice after
the occurrence and during the continuance of any Event of Default), the Debtor
shall permit the Secured Party and its employees, representatives and agents
access to the Premises and the Secured Party shall have the right to inspect the
Collateral and make copies of such books and records. The Debtor shall from time
to time furnish to the Secured Party such information concerning the Collateral
as the Secured Party may reasonably request, and will promptly notify the
Secured Party if any representation or warranty of the Debtor in Section 3
hereof becomes inaccurate, incomplete or misleading in any material respect.
Without limiting the generality of the foregoing, the Debtor will upon the
Secured Party's request, with reasonable promptness, provide the Secured Party
with a written listing of all Collateral, and will provide the Secured Party
with such a listing immediately upon the occurrence of any Event of Default.

         (d) INSURANCE. The Debtor shall at its expense maintain fire and
extended coverage insurance policies insuring the Inventory and the Equipment,
with responsible and reputable insurance companies or associations, in amounts
sufficient to provide for full replacement cost coverage (with agreed amount
endorsement) and in any event not less than the amount necessary to avoid
co-insurance. All such casualty insurance shall name the Secured Party as
secured party and first loss payee. All policies of such insurance shall contain
a provision forbidding cancellation of such insurance either by the carrier or
by the insured without at least 30 days' prior written notice to the Secured
Party. The Debtor shall upon the Secured Party's request deliver to the Secured
Party duplicate policies of such insurance and/or binders, certificates or other
evidence thereof (with evidence of premiums having been paid) from the insurer
or a reputable insurance broker. Following any damage to or destruction of any
of the Collateral, the parties shall cooperate in order to recover any
applicable proceeds of insurance, with the Debtor to have primary responsibility
to recover the proceeds. Such proceeds shall be paid to the Secured Party. From
such proceeds, if any, as are actually received by the Secured Party, the
Secured Party shall provide for the payment or reimbursement of its reasonable
expenses (if any) of obtaining the recovery as reasonably determined by the
Secured Party. The Secured Party shall then give notice to the Debtor of such
expenses and of the amount of the remaining proceeds actually held by the
Secured Party (the "Net Proceeds"). If the Debtor desires to use any or all of
the Net Proceeds for repair, restoration or replacement of the Collateral, the
Debtor

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<PAGE>

shall request same from the Secured Party within 20 days after receipt of
the aforesaid notice of the amount of the Net Proceeds. Provided that all of the
below-described Readvancement Conditions shall have been satisfied as at the
time of each release of all or any portion of the Net Proceeds, the Secured
Party, subject to the other requirements described below, will permit the use of
the Net Proceeds, to the extent required, for such repair, restoration and
replacement. As used herein, the term "Readvancement Conditions" means each of
the following: (1) no Event of Default, nor any event or circumstance which with
the passage of time or the giving of notice or both could become an Event of
Default, shall have occurred and be then continuing, and (2) the Net Proceeds,
in the reasonable opinion of the Secured Party, shall be sufficient for the
purpose of the required repair, restoration and replacement (or, if
insufficient, the Debtor shall have deposited with the Secured Party, for
application as provided in this Subsection, additional funds in the amount of
such insufficiency). Any disbursement of such Net Proceeds and such additional
funds, if any, will be made subject to the reasonable requirements imposed by
the Secured Party, including, without limitation, requirements as to
certification by an architect or engineer, approval of plans, obtaining waivers
of liens, and the receipt of requisitions, affidavits and opinions in form and
substance reasonably satisfactory to the Secured Party. If for any reason the
Collateral is not promptly so repaired, restored and replaced (or if there shall
be any of such Net Proceeds or additional funds remaining after such repair,
restoration and replacement have been fully completed), the Net Proceeds and
additional funds, if any (or the balance thereof so remaining) are to be applied
against payment of the Obligations (or, at the option of the Secured Party, held
as further security therefor), being applied first to the payment of fees and
charges, if any, then owing in respect of any Obligations; then to the payment
of interest, if any, then owing with respect to any Obligations; then to the
payment of principal, if any, then owing with respect to any Obligations; and
then to the prepayment of the principal amount of the Obligations, together with
interest on the amount prepaid to the date of prepayment. If any of the
Readvancement Conditions shall not have been satisfied at any time when any Net
Proceeds remain in the control of the Secured Party, the Secured Party may (in
its sole discretion) either apply the Net Proceeds and additional funds, if any,
within its control to the outstanding Obligations (in the order of priority
described in the immediately preceding sentence) and/or hold same as further
security for such Obligations and/or use any or all of such Net Proceeds and
additional funds, if any, for the repair, restoration or replacement of the
Collateral. The Debtor hereby grants to the Secured Party full power and
authority, as attorney-in-fact irrevocable of the Debtor, to act after the
occurrence of an Event of Default in order to cancel or transfer the insurance
described in this Subsection, to collect and endorse any checks issued in the
name of the Debtor and to retain any premium or proceeds and to apply the same
to the debts secured hereby. Upon default by the Debtor hereunder and exercise
by the Secured Party of any of its rights or remedies hereunder, each such
insurance policy, including the right to unearned premiums, shall become
property of the Secured Party.

         (e) RECEIVABLES. The Debtor shall notify the Secured Party promptly of
all material returns and recoveries of merchandise and claims. The Debtor shall
not without prior written notice to the Secured Party settle or adjust any
dispute or claim which (together with all other such settlements or adjustments
relating to the Receivables of the Debtor) would exceed $50,000 in the aggregate
per fiscal quarter of the Debtor, nor shall the Debtor grant any discount,
credit or allowance except in the ordinary course of the Debtor's business nor
accept any return of

                                      -7-
<PAGE>

merchandise except in the ordinary course of the Debtor's business without the
Secured Party's consent. Upon the occurrence of any Event of Default, the
Secured Party may settle or adjust disputes or claims directly with customers or
account debtors for amounts and upon terms which it considers reasonably
advisable; in all such cases, the Debtor will be credited only with amounts
actually received by the Secured Party; and where the Debtor receives collateral
of any kind by reason of transactions between itself and its customers or
account debtors, it will hold the same on the Secured Party's behalf, subject to
the Secured Party's instructions, and as property forming part of the
Collateral. Upon the occurrence of an Event of Default, the Secured Party or its
designee may at any time notify the Debtor's customers or account debtors of the
Secured Party's security interest in Receivables, collect the same directly and
charge the collection costs and expenses to the Debtor; whenever the Secured
Party deems it desirable that any legal or other action be instituted in order
to collect any Receivable, the Secured Party may at its option reassign any such
Receivable to the Debtor (and any such reassignment shall be deemed to be
without recourse to the Secured Party in any event) and require the Debtor to
proceed with such legal or other action at the Debtor's sole liability, cost and
expense, in which event all amounts collected by the Debtor on such Receivable
shall nevertheless be subject to this Security Agreement; and the Debtor agrees
to pay to the Secured Party a reasonable collection charge on all Receivables
collected by the Secured Party under this Security Agreement. If the Secured
Party elects that the Debtor continue to collect the Receivables after the
occurrence of an Event of Default, the Debtor will collect its Receivables as
the Secured Party's collection agent, hold such collections in trust for the
Secured Party without commingling the same with other funds of the Debtor and,
if requested, by the Secured Party, will promptly, on the day of receipt
thereof, transmit such collections to the Secured Party in the identical form in
which they were received by the Debtor, with such endorsements as may be
appropriate.

         (f) TITLE; SALE OR REMOVAL OF COLLATERAL. The Debtor shall not create
or suffer to exist any Lien in or on any of the Collateral, except the Lien of
the Secured Party and other Liens expressly permitted by Section 4.2 of the Loan
Agreement. Except for dispositions of assets expressly permitted by Section 4.8
of the Loan Agreement, the Debtor shall not, without the Secured Party's prior
written approval, sell, transfer or otherwise dispose of any of the Collateral.
No Collateral will be located at any premises other than as described in
Subsection 3(d) above. The Debtor (i) shall maintain books and records relating
to Collateral only as described in Subsection 3(d) above, (ii) will not move its
chief executive office from the existing location described in Subsection 3(d)
above, (iii) will not change its name or identity, and (iv) will not make or
suffer to be made any change in its corporate structure or jurisdiction of
incorporation until, in each case, after receipt of a certificate from the
Secured Party, signed by an officer thereof, stating that the Secured Party has,
to its satisfaction, obtained all documentation that it deems necessary or
desirable to obtain, maintain, perfect and/or confirm the first priority
security interests granted or intended to be granted herein.

         (g) MAINTENANCE AND USE OF EQUIPMENT. The Debtor will maintain all
Equipment in good order and condition, reasonable wear and tear excepted, making
all necessary repairs thereto. The Debtor will not suffer any waste or
destruction of any Inventory or Equipment, nor use any Equipment in violation of
any applicable law or any insurance thereon. The Debtor will promptly restore or
replace any Inventory or Equipment damaged or destroyed by fire or other

                                      -8-
<PAGE>

casualty, and this obligation will not be limited by the availability or
sufficiency of insurance proceeds. The Debtor shall promptly furnish to the
Secured Party a statement as to any casualty, loss or damage in excess of
$10,000 to any Inventory or Equipment.

         (h) TAXES. The Debtor promptly shall pay, as they become due and
payable, all taxes, unemployment contributions and all other charges of any kind
or nature levied, assessed or claimed against the Debtor or the Collateral by
any Person whose claim could result in a Lien upon any of the Collateral, except
to the extent such taxes, contributions or other charges are being contested in
good faith and by appropriate proceedings which operate as a matter of law to
stay the enforcement of any such Lien and adequate reserves have been
established and are maintained by the Debtor.

         (i) CONDEMNATION. Notwithstanding any taking by eminent domain or other
injury to or decrease in value of the Collateral or any of the rights of the
Debtor therein by action of any public or quasi-public authority or corporation,
the Debtor shall continue to pay interest on the entire principal sum secured
hereby until the award or payment for any such taking, injury or decrease in
value shall have been actually received by the Secured Party and applied to the
debt secured hereby, and any reduction in the principal sum resulting from the
application by the Secured Party of such award or payment as hereinafter set
forth shall be deemed to take effect only on the date of such receipt. In the
event of any such taking, injury or decrease in value, the parties shall
cooperate as in Subsection 4(d) in order to recover any applicable proceeds.
Such proceeds shall be paid to the Secured Party. The Secured Party shall make
appropriate deductions from such proceeds, if any, as are actually received by
it as in the case of insurance proceeds and shall give notice to the Debtor of
such deductions and of the amount of the net proceeds remaining and actually
held by the Secured Party (the "Eminent Domain Net Proceeds"). Following any
such taking, injury or decrease in value, the Debtor shall proceed forthwith to
repair, restore and replace the Collateral to as nearly as possible its
condition immediately prior to such event or to a condition of at least
equivalent value (and in any event to such condition and within such time period
as shall be required in order to avoid any default under any leases, agreements
or other restrictions affecting the Collateral), regardless of whether or not
the Eminent Domain Net Proceeds resulting from such taking, injury or decrease
in value shall be available or sufficient to pay the cost thereof. If the Debtor
desires to use any or all of the Eminent Domain Net Proceeds for repair,
restoration or replacement of the Collateral, it shall request same from the
Secured Party within 20 days after receipt of the aforesaid notice of the amount
of the Eminent Domain Net Proceeds. Provided that all of the Readvancement
Conditions (as defined in Subsection 4(d)) shall have been satisfied as at the
time of each release of all or any portion of the Eminent Domain Net Proceeds,
the Secured Party, subject to the other requirements described below, will
permit the use of the Eminent Domain Net Proceeds to the extent required for
such repair, restoration and/or replacement. Any disbursement of such Eminent
Domain Net Proceeds and additional funds, if any, deposited with the Secured
Party will be made subject to the reasonable requirements of the Secured Party,
including, without limitation, requirements as to certification by an architect
or engineer, approval of plans, obtaining waivers of liens, and the receipt of
requisitions, affidavits and opinions in form and substance reasonably
satisfactory to the Secured Party. If for any reason the Collateral is not
promptly so repaired, restored and replaced (or if there shall be any of such
Eminent Domain Net

                                      -9-
<PAGE>

Proceeds or additional funds remaining after such repair, restoration and
replacement have been fully completed), the Eminent Domain Net Proceeds and
additional funds, if any (or the balance thereof so remaining) are to be applied
against payment of the Obligations (or, at the option of the Secured Party, held
as further security therefor), being applied first to the payment of fees and
charges, if any, then owing in respect of any Obligations; then to the payment
of interest, if any, then owing with respect to any Obligations; then to the
payment of principal, if any, then owing with respect to any Obligations; and
then to the prepayment of the principal amount of the Obligations, together with
interest on the amount prepaid to the date of prepayment. If any of the
Readvancement Conditions shall not have been satisfied at any time when any
Eminent Domain Net Proceeds remain in the control of the Secured Party, the
Secured Party may (in its sole discretion) either apply the Eminent Domain Net
Proceeds and additional funds, if any, within its control to the outstanding
Obligations (in the order of priority described in the immediately preceding
sentence) and/or hold same as further security for such Obligations and/or use
any or all of such Eminent Domain Net Proceeds and additional funds, if any, for
the repair, restoration, replacement or reconstruction of the Collateral.

         (j) DELIVERY OF PLEDGED SECURITIES AND CHATTEL PAPER. All securities of
the Debtor, whether now owned or hereafter acquired by the Debtor, shall be
promptly delivered to the Secured Party by the Debtor (which securities,
together with all other securities, security entitlements, securities accounts
and shares of stock which may hereafter be delivered to the Secured Party
pursuant to the terms hereof, are hereinafter called the "Pledged Securities"),
shall be in suitable form for transfer by delivery, or shall be accompanied by
duly executed instruments of transfer or assignments in blank, with signatures
appropriately guaranteed, and accompanied in each case by any required transfer
tax stamps, all in form and substance satisfactory to the Secured Party. The
Debtor shall inform the Secured Party promptly upon the acquisition, after the
date hereof, of any securities, security entitlements and/or security accounts
and shall, from time to time promptly and in accordance with the foregoing
provisions, deliver to the Secured Party any and all Pledged Securities which
may hereafter be acquired by the Debtor. The Debtor will execute and deliver to
the Secured Party all such control agreements with respect to Pledged Securities
as the Secured Party may from time to time reasonably request, and, if requested
by the Secured Party as a security device, will transfer the Pledged Securities
into the name of the Secured Party or its nominee. The Secured Party may at any
time or from time to time, in its sole discretion, require the Debtor to cause
any chattel paper included in the Debtor's Receivables to be delivered to the
Secured Party or any agent or representative designated by it, or to cause a
legend referring to the Secured Party's security interests to be placed on such
chattel paper and upon any ledgers or other records concerning the Debtor's
Receivables. The Debtor shall inform the Bank promptly of the establishment of
any bank account and will deliver to Bank control agreements, in form and
substance reasonably satisfactory to the Bank, from each depository bank.
Nothing contained herein will be deemed to permit the Debtor to have or maintain
any bank account at a bank other than the Secured Party, except to the extent
expressly authorized by the Loan Agreement.

         After the occurrence and during the continuance of an Event of Default,
the Secured Party may cause any or all of the Pledged Securities to be
transferred of record into the Secured Party's name. The Debtor will promptly
give to the Secured Party copies of any notices or other

                                      -10-
<PAGE>

communications received by the Debtor with respect to Pledged Securities
registered in the name of the Debtor.

         Unless an Event of Default shall occur and be continuing and the
Secured Party shall have given written notice to the Debtor of its election to
so vote, the Debtor shall have the right, from time to time, to vote and to give
consents, ratifications and waivers with respect to the Pledged Securities and
to exercise conversion rights with respect to the convertible securities
included therein, and the Secured Party shall, upon receiving a written request
from the Debtor accompanied by a certificate signed by its principal financial
officer stating that no Event of Default has occurred and is continuing, deliver
to the Debtor or as specified in such request such proxies, powers of attorney,
consents, ratifications and waivers as the Secured Party shall approve in
respect of any Pledged Securities which are registered in the Secured Party's
name, and make such arrangements with respect to the conversion of convertible
securities as shall be specified in the Debtor's request and shall be in form
and substance satisfactory to the Secured Party.

         If an Event of Default shall occur, and provided the Secured Party
elects to exercise the rights hereinafter set forth by written notice to the
Debtor of such election, the Secured Party shall have the right to the extent
permitted by law, and the Debtor shall take all such action as may be necessary
or appropriate to give effect to such right, to vote and to give consents,
ratifications and waivers and take any other action with respect to all the
Pledged Securities with the same force and effect as if the Secured Party were
the absolute and sole owner thereof. The curing of any such Event of Default
shall not divest Secured Party of its rights hereunder unless and until the
Secured Party in writing reinstates the rights of the Debtor which existed prior
to the occurrence of the breach.

         5. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. (a) The Debtor hereby
irrevocably appoints the Secured Party as the Debtor's attorney-in-fact, with
full authority after the occurrence and during the continuance of an Event of
Default in the name, place and stead of the Debtor, from time to time in the
Secured Party's discretion, to take any action and to execute any instrument
which the Secured Party may deem necessary or advisable to accomplish the
purposes of this Security Agreement, including, without limitation:

            (i) to obtain and adjust any insurance required pursuant to this
         Security Agreement and/or the Loan Agreement;

            (ii) to ask, demand, collect, sue for, recover, compromise, receive
         and give acquittances for monies due and to become due under or in
         respect of any of the Collateral;

            (iii) to receive, endorse and collect any notes, drafts or other
         instruments, documents and chattel paper;

            (iv) to file any claims or take any action or institute any
         proceedings for the collection of any of the Collateral or otherwise to
         enforce the rights of the Secured Party with respect to any of the
         Collateral;

                                      -11-
<PAGE>

            (v) to sign the name of the Debtor on invoices or bills of lading,
         drafts against customers, notices of assignment, verifications and
         schedules;

            (vi) to defend any suit, action or proceeding brought against the
         Debtor in respect of any Collateral, to settle, compromise or adjust
         any such suit, action or proceeding and, in connection therewith, to
         give such discharges or releases as the Secured Party may deem
         appropriate;

            (vii) to notify the U.S. Postal Service authorities to change the
         address for delivery of mail to an address designated by the Secured
         Party and to open and dispose of mail addressed to the Debtor; and,
         generally,

            (viii) to do all things necessary to carry out the intent of this
         Security Agreement.

         (b) The power of attorney granted pursuant to this Section 5 is a power
coupled with an interest and shall be irrevocable until the Obligations are paid
indefeasibly in full.

         6. SECURED PARTY MAY PERFORM. If the Debtor fails to perform any
agreement contained herein, the Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of the Secured Party incurred
in connection therewith shall be payable by the Debtor as provided under Section
9 hereof, with interest at the rate provided for in Section 6.1 of the Loan
Agreement.

         7. SECURED PARTY'S DUTIES. The powers conferred on the Secured Party
hereunder are solely to protect its interests in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral actually in its possession and the accounting for monies
actually received by it hereunder, the Secured Party shall have no duty as to
any Collateral. The Secured Party shall not be liable for any acts, omissions,
errors of judgment or mistakes of fact or law including, without limitation,
acts, omissions, errors or mistakes with respect to the Collateral, except for
those arising out of or in connection with the Secured Party's gross negligence
or willful misconduct. The Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of the Collateral in its
possession if the Collateral is accorded treatment substantially equal to that
which the Secured Party accords its own like property, it being understood that
the Secured Party shall be under no obligation to take any necessary steps to
collect any Collateral or preserve rights against prior parties or any other
rights pertaining to any Collateral, but may do so at its option, and all
expenses incurred in connection therewith shall be for the sole account of the
Debtor and shall be added to the Obligations.

         8. REMEDIES. If any Event of Default shall have occurred and be
continuing:

         (a) The Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party under the UCC and also may
without limitation:

                                      -12-
<PAGE>

            (i) require the Debtor to, and the Debtor hereby agrees that it
         will, at its expense and the upon reasonable request of the Secured
         Party, forthwith assemble all or any part of the Collateral as directed
         by the Secured Party and make it available to the Secured Party at a
         place or places to be designated by the Secured Party which is or are
         reasonably convenient to the respective parties;

            (ii) itself or through agents, without notice to any Person and
         without judicial process of any kind, enter the Debtor's Premises (or
         any other premises or location where any Collateral may be) and take
         physical possession of any Collateral or disassemble, render unusable
         and/or repossess any of the same, and the Debtor shall peacefully and
         quietly yield up and surrender the same; and

            (iii) without notice except as specified below, sell, lease, assign,
         grant an option or options to purchase or otherwise dispose of the
         Collateral or any part thereof in one or more parcels at public or
         private sale, at any exchange, broker's board or at the Secured Party's
         offices or elsewhere, for cash, on credit or for future delivery, and
         upon such other terms as are commercially reasonable.

         (b) The Secured Party may maintain possession of Collateral at the
Premises or remove the same or any part thereof to such places as the Secured
Party may elect. The Debtor waives all rights which it would otherwise have
under any applicable law to prohibit entry to any premises or to require notice
of any such action, to the maximum extent permitted by applicable law. The
Debtor agrees that, to the extent notice of sale shall be required by law, 10
days' prior written notice to the Debtor shall constitute reasonable
notification. Notice of any public sale shall be sufficient if it describes the
Collateral to be sold in general terms, stating the items or amounts thereof and
the location and nature thereof, and is published at least once in any newspaper
selected by the Secured Party and of general circulation in the locale of such
sale, not less than 7 days prior to the sale. The Secured Party shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given and may be the purchaser at any such sale, if public, to the extent
permitted by applicable law, free from any right of redemption. The Debtor shall
be fully liable for any deficiency. The Secured Party may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.

         (c) Any cash held by the Secured Party as Collateral and all cash or
other proceeds received by the Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral,
shall (subject to Subsections 4(d) and 4(i) with respect to insurance and
condemnation proceeds) be applied by the Secured Party in the following order of
priorities:

         FIRST, to the payment of the reasonable costs and expenses of any sale
or other expenses (including, without limitation, reasonable legal fees and
expenses), liabilities and advances made or incurred by the Secured Party in
connection therewith or referred to in Section 9 or provided for by the Loan
Agreement or arising in connection with any other facilities now or hereafter
provided by the Secured Party to or for the benefit of the Debtor;

                                      -13-
<PAGE>

         NEXT, to payment of interest on and principal of the Term Loans (in
such order as may be provided for in the Loan Agreement or as otherwise
determined by the Secured Party);

         NEXT, to the payment of any other Obligations (or may be held by the
Secured Party as security for any other Obligations not yet due and payable);
and

         FINALLY, after payment in full of all Obligations and termination of
all credit facilities, interest rate protection products and other facilities
now or hereafter provided by the Secured Party to the Debtor, to the payment to
the Debtor or its successors or assigns, or to whomsoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction may direct,
of any surplus then remaining of such cash.

         9. EXPENSES AND INDEMNIFICATION. The Debtor agrees to reimburse the
Secured Party for and to indemnify and hold harmless the Secured Party from and
against any and all liability, loss, damage, and all costs or expenses
(including, without limitation, reasonable fees and disbursements of counsel,
experts and agents) imposed on, incurred by or asserted against the Secured
Party arising out of or in connection with: preparation of this Security
Agreement, the documents relating hereto, or amendments, modifications or
waivers hereof; taxes (excluding any corporate excise or income taxes payable by
the Secured Party by reason hereof or otherwise) and other governmental charges
in connection with this Security Agreement and the Collateral; exercise of the
Secured Party's rights with respect to this Security Agreement and the
Collateral; any enforcement, collection or other proceedings resulting therefrom
or any negotiations or other measures to preserve the Secured Party's rights
hereunder; the custody or preservation of, or the sale of or other realization
upon, any of the Collateral; any failure by the Debtor to perform or observe any
of the provisions of this Security Agreement; any investigative, administrative
or judicial proceeding (whether or not the Secured Party is designated a party
thereto) relating to or arising out of this Security Agreement; or any
bankruptcy, insolvency or other similar proceeding relating to the Debtor,
unless the Secured Party was at fault with respect to such liability, loss,
damage, cost or expense or acted in bad faith with respect thereto. The Debtor's
obligations under the preceding sentence shall constitute Obligations and shall
survive the termination of this Security Agreement.

         10. TERMINATION. This Security Agreement shall remain in full force and
effect so long as any Term Loan and/or any Obligation remains outstanding and/or
any credit facility, interest rate protection product or other facility remains
in effect. Upon the satisfaction in full of all of the Obligations and the
termination or expiration of all credit and other facilities and all interest
rate protection products now or hereafter provided by the Secured Party for the
Debtor, the Secured Party shall, at the Debtor's expense, execute and deliver to
the Debtor all instruments of assignment or otherwise as may be necessary to
establish full title of the Debtor to any of the Collateral, subject to any
prior sale or other disposition thereof pursuant to Section 8. Until then, this
Security Agreement shall itself constitute conclusive evidence of the validity,
effectiveness and continuing force hereof, and any Person may rely hereon.

         11. WAIVER; RIGHTS CUMULATIVE. No failure to exercise and no delay in
exercising, on the part of the Secured Party, any right or remedy hereunder or
otherwise shall operate as a

                                      -14-
<PAGE>

waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right or remedy.
Waiver by the Secured Party of any right or remedy on any one occasion shall not
be construed as a bar to or waiver thereof or of any other right or remedy on
any future occasion. The Secured Party's rights and remedies hereunder and under
the Bank Documents shall be cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law.

         The provisions of this Security Agreement are not in derogation or
limitation of any obligations, liabilities or duties of the Debtor under any of
the other Bank Documents or any other agreement with or for the benefit of the
Secured Party. No inconsistency in default provisions between this Security
Agreement and any of the other Bank Documents or any such other agreement will
be deemed to create any additional grace period or otherwise derogate from the
express terms of each such default provision. No covenant, agreement or
obligation of the Debtor contained herein, nor any right or remedy of the
Secured Party contained herein, shall in any respect be limited by or be deemed
in limitation of any inconsistent or additional provisions contained in any of
the other Bank Documents or any such other agreement.

         12. SEVERABILITY. In the event that any provision of this Security
Agreement or the application thereof to any Person, property or circumstance
shall be held to any extent to be invalid or unenforceable, the remainder of
this Security Agreement and the application of such provision to Persons,
properties and circumstances other than those as to which it has been held
invalid or unenforceable shall not be affected thereby, and each provision of
this Security Agreement shall be valid and enforceable to the fullest extent
permitted by law.

         13. BINDING EFFECT; ASSIGNMENT. This Security Agreement shall be
binding upon the Debtor and its successors and assigns and shall inure to the
benefit of the Debtor and the Secured Party and their respective successors and
assigns.

         14. NOTICES. All notices and other communications under or relating to
this Security Agreement shall be given in the manner and to the addresses of the
parties provided for in the Loan Agreement.

         15. HEADINGS. Section headings in this Security Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Security Agreement for any other purpose.

         16. GOVERNING LAW. This Security Agreement shall be governed by, and
construed and enforced in accordance with, the laws of The Commonwealth of
Massachusetts, except that the law governing the creation, perfection and
enforcement of security interests in Collateral will be as provided for in the
UCC.

                                      -15-
<PAGE>

         IN WITNESS WHEREOF, the Debtor and the Secured Party have caused this
Security Agreement to be executed, as an instrument under seal, by their
respective officers thereunto duly authorized, as of the date first above
written.

                                               ARQULE, INC.

                                               By:
                                                  -----------------------------
                                                  Name:
                                                  Title:

                                               FLEET NATIONAL BANK

                                               By:
                                                  -----------------------------
                                                  Name:
                                                  Title:

                                      -16-
<PAGE>

                                                                 EXHIBIT 10.24.8

                                  EXHIBIT LIST

EXHIBIT A - Locations of Collateral

EXHIBIT B - Tradenames; Corporate Names Used in Last Five Years

EXHIBIT C - Filing Offices

EXHIBIT D - Bank accounts, brokerage accounts, investment accounts and other
            securities

<PAGE>

                                                                 EXHIBIT 10.24.8

                                    EXHIBIT A

                             LOCATIONS OF COLLATERAL

         LOCATION                                      RECORD OWNER OF PREMISES

                          [To be provided by Borrower.]

<PAGE>

                                    EXHIBIT B

               TRADENAMES; CORPORATE NAMES USED IN LAST FIVE YEARS


<PAGE>

                                    EXHIBIT C

                                 FILING OFFICES

         1. Delaware Secretary of State
         2. Middlesex (South) Registry of Deeds
         3. [Borrower to provide locations for fixture filings.]

<PAGE>

                                                                 EXHIBIT 10.24.8

                                    EXHIBIT D


   BANK ACCOUNTS, BROKERAGE ACCOUNTS, INVESTMENT ACCOUNTS AND OTHER SECURITIES

                          [To be provided by Borrower.]


</TEXT>
</DOCUMENT>
