ARQULE INC
EX-10.24(7)
<DOCUMENT>
<TYPE>EX-10.24(7)
<SEQUENCE>4
<FILENAME>a2093399zex-10_247.txt
<DESCRIPTION>EX-10.24(7)
<TEXT>

<PAGE>

                                                                 EXHIBIT 10.24.7

                       SECOND LOAN MODIFICATION AGREEMENT

         This Second Loan Modification Agreement ("this Agreement") is made as
of September __, 2002 between ArQule, Inc., a Delaware corporation (the
"Borrower") and Fleet National Bank (the "Bank"). The Bank is the successor by
merger to the entity formerly known as "Fleet National Bank" ("Old FNB"). For
good and valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Bank act and agree as follows:

         1. Reference is made to: (i) that certain letter agreement dated March
18, 1999 (the "Original Letter Agreement") between the Borrower and Old FNB, the
Bank having succeeded to the rights and obligations of Old FNB thereunder; (ii)
that certain Loan Modification Agreement dated as of March 2, 2001 (the "First
Modification") between the Bank and the Borrower (the Original Letter Agreement,
as amended by the First Modification, being hereinafter referred to as the
"Letter Agreement"); (iii) that certain $15,000,000 face principal amount
promissory note dated March 18, 1999, as amended by Allonge to Note dated as of
March 2, 2001 (as so amended, the "Facility One Term Note") originally made by
the Borrower and payable to the order of Old FNB, the Bank having succeeded to
the interests of Old FNB thereunder; (iv) that certain Security Agreement
(Equipment) dated as of March 18, 1999, as amended by the First Modification (as
so amended, the "Old Security Agreement") originally given by the Borrower to
Old FNB, the Bank having succeeded to the interests of Old FNB thereunder; (v)
that certain $16,000,000 original principal amount promissory note dated as of
March 2, 2001 (the "Facility Two Term Note") made by the Borrower and payable to
the order of the Bank; (vi) that certain Mortgage and Security Agreement and
Assignment of Leases and Rents dated as of March 2, 2001 (the "Mortgage") given
by the Borrower, as mortgagor, to the Bank, as mortgagee; (vii) that certain
Environmental Compliance and Indemnity Agreement dated as of March 2, 2001 (the
"Environmental Agreement") given by the Borrower to the Bank; (viii) that
certain Security Agreement (All Assets Except Intellectual Property) of even
date herewith (the "New Security Agreement") from the Borrower to the Bank and
(ix) that certain $2,500,000 face principal amount promissory note of even date
herewith (the "Facility Three Term Note") made by the Borrower and payable to
the order of the Bank. The Letter Agreement, the Facility One Term Note, the
Facility Two Term Note, the Mortgage, the Environmental Agreement, the New
Security Agreement and the Facility Three Term Note are hereinafter collectively
referred to as the "Financing Documents".

         2. The Letter Agreement is hereby amended, effective as of the date
hereof:

         a. By deleting clause (ii) of Section 1.1 of the Letter Agreement and
by substituting in its stead the following:

         "(ii) that certain Security Agreement (All Assets Except Intellectual
         Property) dated as of September __, 2002 (the `Security Agreement')
         from the Borrower to the Bank,"

         b. By deleting the period at the end of Section 1.1 of the Letter
Agreement (as amended by the First Modification) and by substituting in its
stead the following:

<PAGE>

                  ", and (vi) that certain $2,500,000 face principal amount
                  promissory note (the `Facility Three Term Note') dated
                  September __, 2002 issued by the Borrower pursuant to
                  Section 1.4C below and payable to the order of the Bank."

         c. By deleting from clause (i) of the antepenultimate sentence of
Section 1.3 of the Letter Agreement the words "two (2) Business Days' prior" and
by substituting in their stead the following:

                  "three (3) Business Days' prior"

         d. By deleting in its entirety Section 1.4 of the Letter Agreement.

         e. By deleting from clause (i) of the third sentence of Section 1.4B of
the Letter Agreement (said Section having been inserted by the First
Modification) the words "two (2) Business Days' prior" and by substituting in
their stead the following:

            "three (3) Business Days' prior"

         f. By deleting in its entirety Section 4C of the Letter Agreement (said
Section having been inserted by the First Modification) and by substituting in
its stead the following:

            "1.4C. FACILITY THREE TERM LOANS; FACILITY THREE TERM NOTE. In
            addition to the foregoing, subject to the terms of this letter
            agreement, the Bank will make one or more loans (the `Facility Three
            Term Loans') to the Borrower, as the Borrower may request, in an
            aggregate principal amount of up to $2,500,000, in order to finance
            Qualifying Equipment and Qualifying Leasehold Improvements. A
            Facility Three Term Loan shall be made, no more than once per
            calendar quarter (except that more than one Facility Three Term Loan
            may be made in any calendar quarter provided that each additional
            Facility Three Term Loan in any one calendar quarter is in an amount
            of at least $500,000), in order to finance the costs of items of
            Qualifying Equipment acquired by the Borrower within the 90 days
            preceding the request for such Facility Three Term Loan and/or items
            of Qualifying Leasehold Improvements installed within the 90 days
            preceding the request for such Facility Three Term Loan, each such
            Facility Three Term Loan to be in such amount as may be requested by
            the Borrower; provided that (i) no Facility Three Term Loan will be
            made after the close of business on March 31, 2003; (ii) the
            aggregate original principal amounts of all Facility Three Term
            Loans will not exceed $2,500,000; and (iii) no Facility Three Term
            Loan will be in an amount in excess of 100% of the invoiced actual
            costs of the items of Qualifying Equipment and Qualifying Leasehold
            Improvements with respect to which such Facility Three Term Loan is
            made (excluding taxes, shipping, installation charges, software,
            training fees and other `soft costs', but including labor costs as
            to Qualifying Leasehold Improvements). Prior to the making of each
            Facility Three Term Loan, and as a precondition thereto, the
            Borrower will provide the Bank with: (i) invoices supporting the
            costs of the relevant Qualifying

                                      -2-
<PAGE>

            Equipment and Qualifying Leasehold Improvements; (ii) such evidence
            as the Bank may reasonably require showing that all Qualifying
            Equipment has been delivered to the Borrower's Redwood City, CA
            premises, has become fully operational, has been paid for by the
            Borrower and is owned by the Borrower free of all liens and
            interests of any other Person (other than the security interest of
            the Bank pursuant to the Security Agreement); (iii) such evidence as
            the Bank may reasonably require showing that all Qualifying
            Leasehold Improvements have been constructed or installed at the
            Borrower's Redwood City, CA premises, have been paid for by the
            Borrower and are owned by the Borrower free of all liens and
            interests of any other Person (other than the security interest of
            the Bank pursuant to the Security Agreement and, with respect to any
            Qualifying Leasehold Improvements which have been so attached to the
            real estate as to become an integral part thereof, the interest of
            the Borrower's landlord); (iv) Uniform Commercial Code financing
            statements (if needed) reflecting the relevant Qualifying Equipment
            and Qualifying Leasehold Improvements with respect to which such
            Facility Three Term Loan is being made and landlord's waivers (if
            not previously delivered); and (v) evidence satisfactory to the Bank
            that the Qualifying Equipment and Qualifying Leasehold Improvements
            are fully insured against casualty loss, with insurance naming the
            Bank as secured party and first loss payee.

            The Facility Three Term Loans will be evidenced by the Facility
            Three Term Note, to be executed and delivered by the Borrower prior
            to the making of the first Facility Three Term Loan. The Borrower
            hereby irrevocably authorizes the Bank to make or cause to be made,
            on a schedule attached to the Facility Three Term Note or on the
            books of the Bank, at or following the time of making any Facility
            Three Term Loan or of receiving any payment of principal of any
            Facility Three Term Loan, an appropriate notation reflecting such
            transaction and the then unpaid aggregate principal balance of the
            Facility Three Term Loans. The amount so noted shall constitute
            presumptive evidence as to the amount owed by the Borrower with
            respect to principal of the Facility Three Term Loans. Failure of
            the Bank to make any such notation shall not, however, affect any
            obligation of the Borrower or any right of the Bank hereunder or
            under the Facility Three Term Note.

            1.4D. PRINCIPAL REPAYMENT OF FACILITY THREE TERM LOANS. The Borrower
            shall repay principal of the Facility Three Term Loans in 35 equal
            consecutive monthly installments, commencing on April 30, 2003 and
            continuing on the last Business Day of each month thereafter through
            and including February 28, 2006 (each such monthly installment to be
            in an amount equal to 1/36th of the aggregate principal amount of
            the Facility Three Term Loans outstanding at the close of business
            on March 31, 2003), PLUS a 36th and final installment payment due on
            March 31, 2006 in an amount equal to the then outstanding principal
            balance of all Facility

                                      -3-
<PAGE>

            Three Term Loans and all interest then accrued but unpaid thereon.
            The Borrower may prepay, at any time or from time to time, without
            premium or penalty, the whole or any portion of the Facility Three
            Term Loans to the extent that same are Floating Rate Loans; provided
            that each such principal prepayment shall be accompanied by payment
            of all interest on the amount so prepaid accrued under the Facility
            Three Term Note but unpaid to the date of payment. Subject to
            Section 1.7, the Borrower may prepay the whole or any portion of
            any Facility Three Term Loan which is a LIBOR Loan; provided that
            (i) the Borrower gives the Bank not less than three (3) Business
            Days' prior written notice of its intent so to prepay, (ii) the
            Borrower pays all interest on such LIBOR Loan (or such portion
            thereof) so prepaid accrued to the date of such prepayment, (iii)
            any voluntary prepayment with respect to all or any portion of any
            Facility Three Term Loan which is a LIBOR Loan shall be in a
            principal amount which is $500,000 or an integral multiple of
            $100,000 in excess of $500,000 (provided that, in any event, no
            such LIBOR Loan will remain outstanding in a principal amount of
            less than $500,000), and (iv) if the Borrower for any reason makes
            any prepayment of any such LIBOR Loan prior to the last day of the
            Interest Period applicable thereto, the Borrower shall forthwith
            pay all amounts owing to the Bank pursuant to the provisions of
            Section 1.7. Any partial prepayment of principal of the Facility
            Three Term Loans will be applied to installments of principal of
            the Facility Three Term Loans thereafter coming due in inverse
            order of normal maturity. Amounts repaid or prepaid with respect
            to any Facility Three Term Loan are not available for reborrowing.

            1.4E. INTEREST RATE FOR ALL TERM LOANS. Except as otherwise provided
            below, interest on each Term Loan will be payable at a fluctuating
            rate per annum (the `Floating Rate') which shall at all times be
            equal to the Prime Rate as in effect from time to time (but in no
            event in excess of the maximum rate permitted by then applicable
            law), with a change in such rate of interest to become effective on
            each day when a change in the Prime Rate becomes effective, each
            such change to become effective without notice or demand of any
            kind. Subject to the conditions set forth herein, the Borrower may
            elect that all or any portion of any Facility Three Term Loan will
            be made as a LIBOR Loan, that all or any portion of any Floating
            Rate Loan (whether a Facility One Term Loan, the Facility Two Term
            Loan or a Facility Three Term Loan) will be converted to a LIBOR
            Loan and/or that any LIBOR Loan (whether a Facility One Term Loan,
            the Facility Two Term Loan or a Facility Three Term Loan) will be
            continued at the expiration of the Interest Period applicable
            thereto as a new LIBOR Loan. Such election shall be made by the
            Borrower giving to the Bank a written notice received by the Bank
            within the time period and containing the information described in
            the next following sentence (a `LIBOR Notice'). The LIBOR Notice
            must be received by the Bank no later than 10:00 a.m. (Boston time)
            on that day which is two Business Days prior to

                                      -4-
<PAGE>

            the date of the proposed borrowing, conversion or continuation, as
            the case may be, must specify the duration (one month, two months or
            three months) of the Interest Period requested and must specify the
            amount of the LIBOR Loan requested (which shall be $500,000 or an
            integral multiple of $100,000 in excess of $500,000), must identify
            the specific Term Loan or particular portion thereof so to be made,
            converted or continued, as the case may be, and must specify the
            proposed commencement date of the relevant Interest Period.
            Notwithstanding anything provided elsewhere in this letter
            agreement, the Borrower may not elect to have any installment of any
            Term Loan included in a LIBOR Loan if the Interest Period applicable
            thereto would continue after the scheduled due date of such
            installment. Any LIBOR Notice shall, upon receipt by the Bank,
            become irrevocable and binding on the Borrower, and the Borrower
            shall, upon demand and receipt of a Bank Certificate with respect
            thereto, forthwith indemnify the Bank against any loss or expense
            incurred by the Bank as a result of any failure by the Borrower to
            borrow any requested LIBOR Loan, including, without limitation, any
            loss or expense incurred by reason of the liquidation or
            redeployment of deposits or other funds acquired by the Bank to fund
            or maintain such LIBOR Loan. At the expiration of each Interest
            Period applicable to a LIBOR Loan, the principal amount of such
            LIBOR Loan may be continued as a new LIBOR Loan to the extent and on
            the terms and conditions contained in this letter agreement by
            delivery to the Bank of a new LIBOR Notice conforming to the
            requirements set forth above in this ss.1.4E (and any LIBOR Loan not
            repaid and not so continued as a new LIBOR Loan will be deemed to
            have been converted into a Floating Rate Loan). Notwithstanding any
            other provision of this letter agreement, the Bank need not make any
            LIBOR Loan nor allow any conversion of a Floating Rate Loan to a
            LIBOR Loan at any time when there exists any Default or Event of
            Default. Further, notwithstanding any other provision of this letter
            agreement, in no event will more than five Interest Periods for
            LIBOR Loans (whether relating to Facility One Term Loans, the
            Facility Two Term Loan and/or Facility Three Term Loans) be in
            effect at any one time.

            The Borrower may request and the Bank may issue caps, collars, swaps
            and other rate protection products, using the Bank's then customary
            documentation for such transactions. Such caps, collars, swaps and
            other rate protection products will be issued for such fees and upon
            such other terms and conditions as may be agreed upon by the Bank
            and the Borrower at the time of issuance thereof.

            Any request for a LIBOR Loan and any election to convert all or any
            portion of any Term Loan to a LIBOR Loan may be made on behalf of
            the Borrower only by a duly authorized officer; provided, however,
            that the Bank may conclusively rely upon any written or facsimile
            communication

                                      -5-
<PAGE>

            received from any individual whom the Bank believes in good faith to
            be such a duly authorized officer."

         g. By deleting in its entirety Section 1.7 of the Letter Agreement and
by substituting in its stead the following:

            "1.7. PREPAYMENT OF LIBOR LOANS. The following provisions of this
            Section 1.7 shall be effective only with respect to LIBOR Loans:
            The Borrower shall pay to the Bank, upon request of the Bank, such
            amount or amounts as shall be sufficient (in the reasonable opinion
            of the Bank) to compensate it for any loss, cost or expense incurred
            as a result of: (i) any payment of a LIBOR Loan on a date other than
            the last day of the Interest Period for such LIBOR Loan; (ii) any
            failure by the Borrower to borrow a LIBOR Loan on the date specified
            in any LIBOR Notice; and/or (iii) any failure by the Borrower to pay
            a LIBOR Loan on the date for payment specified in any notice given
            as to any prepayment. Without limiting the foregoing, if, due to
            acceleration of any Term Note or due to voluntary prepayment or
            mandatory repayment or prepayment or due to any other reason, the
            Bank receives payment of any principal of any LIBOR Loan on any date
            prior to the last day of the relevant Interest Period or if for any
            reason any LIBOR Loan is converted to a Floating Rate Loan prior to
            the expiration of the relevant Interest Period, the Borrower shall,
            upon demand and receipt of a Bank Certificate from the Bank with
            respect thereto, pay forthwith to the Bank a yield maintenance fee
            in an amount computed as follows: The current rate for United States
            Treasury securities (bills on a discounted basis shall be converted
            to a bond equivalent) with a maturity date closest to the last day
            of the Interest Period applicable to the affected LIBOR Loan shall
            be subtracted from the `fixed' component (I.E., reserve-adjusted
            LIBOR) of the LIBOR Interest Rate in effect with respect to the
            relevant LIBOR Loan at the date of such prepayment or conversion. If
            the result is zero or a negative number, there shall be no yield
            maintenance fee. If the result is a positive number, then the
            resulting percentage shall be multiplied by the amount of the
            principal balance being prepaid. The resulting amount shall be
            divided by 360 and multiplied by the number of days remaining in the
            relevant Interest Period. Said amount shall be reduced to present
            value calculated by using the number of days remaining in the
            relevant Interest Period and by using the above-referenced United
            States Treasury securities rate as the discount rate. The resulting
            amount shall be the yield maintenance fee due to the Bank upon
            prepayment or conversion of the applicable LIBOR Loan. Any
            acceleration of a LIBOR Loan due to an Event of Default will give
            rise to a yield maintenance fee calculated with the respect to such
            LIBOR Loan on the date of such acceleration in the same manner as
            though the Borrower had exercised a right of prepayment at that
            date, such yield maintenance fee being due and payable at that
            date."

                                      -6-
<PAGE>

         h. By deleting from Section 1.12 of the Letter Agreement the words "the
Term Note", in each place where same appear, and by substituting in their stead,
in each such place, the following:

            "the Term Notes"

         i. By deleting from the second sentence of Section 3.8 of the Letter
Agreement the words "Adjusted Liabilities" and by substituting in their stead
the following:

            "Total Liabilities"

         j. By deleting Section 3.9 of the Letter Agreement and by substituting
in its stead the following:

            "3.9. DEBT SERVICE COVERAGE. As used herein, `Determination Date'
            means the last day of each fiscal quarter of the Borrower. The
            Borrower will maintain on a consolidated basis, as at each
            Determination Date (commencing with its results as at September 30,
            2002), a Debt Service Coverage Ratio of not less than 1.5 to 1. As
            used herein, the `Debt Service Coverage Ratio', as determined as at
            any Determination Date, means the ratio of (x) EBITDA of the
            Borrower and Subsidiaries for the 12-month period ending on such
            Determination Date to (y) the total of (1) all interest on any
            Indebtedness (whether senior or subordinated, secured or unsecured,
            long-term or current), which interest was paid or payable or accrued
            by the Borrower or any Subsidiary of the Borrower during the
            12-month period ending on such Determination Date, PLUS (2) the
            aggregate current maturities of long-term debt of the Borrower and
            Subsidiaries outstanding at such Determination Date, PLUS (3) all
            Capital Expenditures incurred by the Borrower or any of its
            Subsidiaries during the 12-month period ending at such Determination
            Date and not financed either with the proceeds of a Facility Three
            Term Loan or with purchase money indebtedness permitted to be
            incurred under Section 4.1. As used herein, (A) `interest' on
            Indebtedness includes, without limitation, the interest component of
            any capitalized leases and all fees paid in respect of any letters
            of credit now or hereafter issued for the account of the Borrower
            and for any of its Subsidiaries, and (B) `current maturities of
            long-term debt' include, without limitation, current principal
            components of capitalized leases. Notwithstanding the foregoing, the
            Borrower need not comply with the foregoing provisions of this
            Section 3.9 as at any Determination Date if the Borrower's
            Unencumbered Cash Balance as at such Determination Date is equal
            to or greater than the then effective Minimum Cash Requirement.
            The `Minimum Cash Requirement', as determined at any time, will be
            deemed to be the greatest of (a) the product of (x) 1.75 TIMES
            (y) the total principal amount of Funded Debt then outstanding; or
            (b) the sum of (i) four times the quarterly Cash Burn during the
            fiscal quarter ended at the relevant Determination Date PLUS (ii)
            the aggregate

                                      -7-
<PAGE>

            principal amount of Funded Debt then outstanding; or (c) the sum of
            (i) the projected Cash Burn during the 12-month period immediately
            following the relevant Determination Date (the Borrower agreeing to
            provide to the Bank, upon request, projections of such Cash Burn for
            such 12-month period) PLUS (ii) the aggregate principal amount of
            Funded Debt then outstanding. As used herein, `Funded Debt' means,
            without duplication, all Indebtedness (secured or unsecured,
            long-term or current) of the Borrower and/or any of its Subsidiaries
            to the Bank or to any other financial institution and all other
            Indebtedness of the Borrower and/or any of its Subsidiaries for
            borrowed money, all liabilities (whether or not contingent) in
            respect of any letters of credit, all Indebtedness representing the
            deferred purchase price of any property, all Indebtedness secured by
            a Lien, the principal components of any capitalized leases and any
            guaranty relating to any of the foregoing. As used herein, `Cash
            Burn' for any period is the sum of (1) consolidated EBITDA of the
            Borrower and Subsidiaries for such period (negative EBITDA being
            expressed as a positive number for this purpose and positive EBITDA
            being expressed as a negative number for this purpose), PLUS (2) all
            taxes actually paid by the Borrower during such period, PLUS (3) all
            Capital Expenditures (except to the extent financed with a Term Loan
            or with other purchase money financing permitted under Section 4.1)
            incurred by the Borrower and/or any of its Subsidiaries during such
            period, PLUS (4) all payments on account of Debt Service paid or
            accrued by the Borrower and/or any of its Subsidiaries during such
            period. `Debt Service', with respect to any period, means the result
            of the following: (i) all amounts paid or payable by the Borrower
            and/or any Subsidiary of the Borrower during such period on account
            of principal of Indebtedness (including, without limitation, the
            principal components of any capitalized leases), PLUS (ii) all
            payments of or on account of interest (including, without
            limitation, the interest components of any capitalized leases) made
            or required to be made or accrued by the Borrower and/or any
            Subsidiary of the Borrower during such period."

         k. By deleting the unnumbered paragraph following clause (vii) of
Section 4.2 of the Letter Agreement and by substituting in its stead the
following:

            "Without limitation of the other representations, warranties,
            covenants and agreements of the Borrower set forth elsewhere in this
            letter agreement, the Borrower (i) represents and warrants that
            neither the Borrower nor any of its Subsidiaries is now a party to
            any Restrictive Agreement with respect to any of its intellectual
            property and (ii) agrees that the Borrower will not enter into (nor
            permit any of its Subsidiaries to enter into) any Restrictive
            Agreement with respect to any of its intellectual property. As used
            herein, a `Restrictive Agreement' is any agreement, covenant,
            undertaking or understanding (other than a commercially reasonable
            technology license entered into by the Borrower in the ordinary
            course of its business) which could have the effect of preventing
            the Borrower or

                                      -8-
<PAGE>

            any Subsidiary from granting a Lien on any of its intellectual
            property to the Bank."

         l. By deleting from the definition of "Bank Certificate" appearing in
Section 7.1 of the Letter Agreement (as amended by the First Modification) the
words "Section 1.4C, Section 1.7 or Section 1.8" and by substituting in their
stead the following:

         "Section 1.4E, Section 1.7 or Section 1.8"

         m. By deleting from Section 7.1 of the Letter Agreement the definitions
of "Facility One LIBOR Notice" and "Facility Two LIBOR Notice" (such definitions
having been inserted by the First Modification).

         n. By inserting into Section 7.1 of the Letter Agreement, immediately
after the definition of "Facility One Term Note" (such definition having been
inserted by the First Modification), the following:

            "'Facility Three Term Loan' - Any loan made pursuant to Section
1.4C.

            'Facility Three Term Note' - As defined in Section 1.1."

         o. By deleting from Section 7.1 of the Letter Agreement the definitions
of "Floating Rate" and "Floating Rate Loan" by substituting in their stead the
following:

            '"Floating Rate' - As defined in Section 1.4E.

            'Floating Rate Loan' - All or any portion of any Term Loan which
            bears interest at a rate calculated with reference to the Prime
            Rate."

         p. By deleting from Section 7.1 of the Letter Agreement the definition
of "Interest Period" and by substituting in its stead the following:

            "'Interest Period' - As to each LIBOR Loan, the period commencing
            with the date of the making of such LIBOR Loan or conversion into
            such LIBOR Loan or the date on which any prior LIBOR Loan is
            continued as the relevant LIBOR Loan and ending one month, two
            months or three months thereafter (as the Borrower may select in
            accordance with Section 1.4E); provided that (A) any such Interest
            Period which would otherwise end on a day which is not a Business
            Day shall be extended to the next succeeding Business Day unless
            such Business Day occurs in a new calendar month, in which case
            such Interest Period shall end on the immediately preceding
            Business Day, (B) any such Interest Period which begins on a day
            for which there is no numerically corresponding day in the
            calendar month during which such Interest Period is to end shall
            end on the last Business Day of such calendar month, and (C) no
            Interest Period may be selected as to any principal amount of any
            Term Loan if such Interest Period would end after the
            regularly-scheduled due date of such principal amount."

                                      -9-
<PAGE>

         q. By deleting the definition of "LIBOR Loan" appearing in Section 7.1
of the Letter Agreement and by substituting in its stead the following:

            "'LIBOR Loan' - All or any portion of a Term Loan which bears
            interest at a LIBOR Interest Rate.

            'LIBOR Notice' - As defined in Section 1.4E."

         r. By adding to the definition of "Qualifying Equipment" appearing in
Section 7.1 of the Letter Agreement, at the end of such definition, the
following:

                  "Notwithstanding the foregoing, as to Facility Three Term
                  Loans, 'Qualifying Equipment' will be deemed to mean
                  laboratory equipment and other capital equipment purchased by
                  the Borrower within the 90 days preceding the date of the
                  Facility Three Term Loan relating to same for use in the
                  Borrower's business and meeting all of the following criteria:
                  (i) such equipment consists of one or more of the items shown
                  on the Equipment and Leasehold Improvements List heretofore
                  delivered by the Borrower to the Bank or has otherwise been
                  approved by the Bank for use in supporting a Facility Three
                  Term Loan, (ii) each item of such equipment has been delivered
                  to and installed at the Borrower's premises at 1300 Seaport
                  Boulevard, Redwood City, CA and has become fully operational,
                  (iii) the Borrower has paid in full for each item of such
                  equipment and holds title to same, free of all interests and
                  claims of any other Person (other than the security interest
                  of the Bank), and (iv) the Bank has a fully perfected first
                  security interest in such equipment."

         s. By adding to the definition of "Qualifying Leasehold Improvements"
appearing in Section 7.1 of the Letter Agreement, at the end of such definition,
the following:

            "Notwithstanding the foregoing, as to Facility Three Term Loans,
            'Qualifying Leasehold Improvements' will be deemed to mean leasehold
            improvements affixed to, installed in and/or made to the Borrower's
            premises at 1300 Seaport Boulevard, Redwood City, CA within the
            90-day period prior to the date of the advance of the relevant
            Facility Three Term Loan, all of which leasehold improvements must
            meet all of the following criteria: (i) such leasehold improvements
            are shown on the Equipment and Leasehold Improvements List
            heretofore delivered by the Borrower to the Bank or otherwise have
            been approved by the Bank for use in supporting a Facility Three
            Term Loan, (ii) the Borrower has paid in full for such leasehold
            improvements and holds title to same, free of all interests and
            claims of any other Person (other than the security interest of the
            Bank), and (iii) the Bank has a fully perfected first priority
            security interest in such leasehold improvements, except as set
            forth in the next sentence. The Bank acknowledges that such
            leasehold improvements are to be affixed to the Borrower's premises
            and may become so built into such premises that they become part of
            the realty, with the result that the owner of the

                                      -10-
<PAGE>

            premises would have rights thereto upon the termination of the
            Borrower's lease and the Bank would no longer have a security
            interest therein."

         t. By deleting from Section 7.1 of the Letter Agreement the definitions
of "Term Loans" and "Term Notes" (such definitions having been inserted by the
First Modification) and by substituting in their stead the following:

            "'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."

         u. By adding to the definition of "Unencumbered Cash Balance" appearing
in Section 7.1 of the Loan Agreement, at the end of such definition, the
following:

            "Notwithstanding the foregoing, the `Unencumbered Cash Balance' will
            in no event include any cash or cash-equivalents specifically
            pledged to support any letter of credit."

         3. Wherever in any Financing Document, or in any certificate or opinion
to be delivered in connection therewith, reference is made to a "letter
agreement" or to the "Letter Agreement", from and after the date hereof same
will be deemed to refer to the Letter Agreement, as hereby amended.

         4. Simultaneously with the execution and delivery of this Agreement,
the Borrower is executing and delivering to the Bank the New Security Agreement,
in replacement of the Old Security Agreement. Wherever in the Letter Agreement
or in any other Financing Document, or in any certificate or opinion to be
delivered in connection therewith, reference is made to the "Security
Agreement", from and after the date hereof same will be deemed to refer to the
New Security Agreement.

         5. Simultaneously with the execution and delivery of this Agreement,
the Borrower is executing and delivering to the Bank the Facility Three Term
Note. The Facility Three Term Note is a $2,500,000 promissory note of the
Borrower, substantially in the form attached hereto as Exhibit 1.

         6. Simultaneously with the execution and delivery of this Agreement,
the Borrower is executing and delivering to the Bank an Amendment to Mortgage
(the "Mortgage Amendment"). Wherever in the Letter Agreement or in any other
Financing Document, or in any certificate or opinion to be delivered in
connection therewith, reference is made to the "Mortgage", from and after the
date hereof same will be deemed to refer to the Morgage, as amended by the
Mortgage Amendment.

         7. In order to induce the Bank to enter into this Agreement, the
Borrower agrees to pay to the Bank, at the date hereof, in respect of the
Facility Three Term Loans, a facility fee of $30,000. Said fee is in addition
to, and shall not be reduced by or applied against, any interest,

                                      -11-
<PAGE>

fees, charges or other amounts paid or payable with respect to the Letter
Agreement and/or with respect to any note issued thereunder.

         8. In order to induce the Bank to enter into this Agreement, the
Borrower also agrees to pay, promptly upon receipt of an invoice therefor, all
costs and expenses (including, without limitation, reasonable attorneys' fees)
incurred by the Bank with respect to this Agreement, the Mortgage Amendment, the
New Security Agreement and/or the Term Loans.

         9. In order to induce the Bank to enter into this Agreement, the
Borrower further represents and warrants as follows:

         a. The execution, delivery and performance of this Agreement, the
Facility Three Term Note, the New Security Agreement and the Mortgage Amendment
have been duly authorized by the Borrower by all necessary corporate and other
action, will not require the consent of any third party and will not conflict
with, violate the provisions of, or cause a default or constitute an event
which, with the passage of time or the giving of notice or both, could cause a
default on the part of the Borrower under its charter documents or by-laws or
under any contract, agreement, law, rule, order, ordinance, franchise,
instrument or other document, or result in the imposition of any lien or
encumbrance (except in favor of the Bank) on any property or assets of the
Borrower.

         b. The Borrower has duly executed and delivered each of this Agreement,
the Facility Three Term Note, the New Security Agreement and the Mortgage
Amendment.

         c. Each of this Agreement, the Facility Three Term Note, the New
Security Agreement and the Mortgage Amendment is the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its respective terms.

         d. The statements, representations and warranties of the Borrower made
in the Letter Agreement (as amended hereby) and/or in the New Security Agreement
continue to be correct as of the date hereof; except as amended, updated and/or
supplemented by the attached Supplemental Disclosure Schedule.

         e. The covenants and agreements of the Borrower contained in the Letter
Agreement (as amended hereby) and/or in the New Security Agreement have been
complied with on and as of the date hereof.

         f. No event which constitutes or which, with notice or lapse of time,
or both, could constitute, an Event of Default (as defined in the Letter
Agreement) has occurred and is continuing.

         g. No material adverse change has occurred in the financial condition
of the Borrower from that disclosed in the financial statements of the Borrower
heretofore most recently furnished to the Bank.

         10. Except as expressly affected hereby or by the Mortgage Amendment,
the Letter Agreement and each of the other Financing Documents remains in full
force and effect as

                                      -12-
<PAGE>

heretofore. All of the Borrower's obligations, indebtedness and liabilities to
the Bank as evidenced by or otherwise arising under the Financing Documents,
except as otherwise expressly modified in this Agreement, are, by the Borrower's
execution of this Agreement, ratified and confirmed in all respects by the
Borrower. In addition, by the Borrower's execution of this Agreement, the
Borrower represents and warrants that no counterclaim, right of set-off or
defense of any kind exists or is outstanding with respect to such obligations,
indebtedness and liabilities. The Borrower acknowledges that the security
interests and liens created by the New Security Agreement and/or the Mortgage
(as amended by the Mortgage Amendment) run in favor of the Bank and constitute
valid liens on the Collateral (as defined in the New Security Agreement) and the
Mortgaged Premises (as defined in the Mortgage) and the Borrower agrees that the
Borrower shall take no action to impair or invalidate said security interests
and liens. The Borrower acknowledges that the obligations secured by such
security interests and liens include, without limitation, the Facility One Term
Note, the Facility Two Term Note, the Facility Three Term Note and the Letter
Agreement (as affected by this Agreement).

11. Nothing contained herein nor in any documents delivered herewith will be
deemed to constitute a waiver or a release of any provision of any of the
Financing Documents. Nothing contained herein will in any event be deemed to
constitute an agreement to give a waiver or release or to agree to any amendment
or modification of any provision of any of the Financing Documents on any other
or future occasion.


                                      -13-
<PAGE>

         Executed, as an instrument under seal, as of the day and year first
above written.

                                 ARQULE, INC.

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

Accepted and agreed:
FLEET NATIONAL BANK


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



                                      -14-
<PAGE>

                                                                 EXHIBIT 10.24.7

                        SUPPLEMENTAL DISCLOSURE SCHEDULE

                    [To be provided by Borrower, if needed.]


</TEXT>
</DOCUMENT>
