Exhibit 10.24

                          Loan and Security Agreement

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SILICON VALLEY BANK

     LOAN AND SECURITY AGREEMENT

Borrower:   CollaGenex Pharmaceuticals, Inc.
Address:    41 University Drive
            Newtown, Pennsylvania 18940

Date:       March 19, 2001

THIS LOAN AND  SECURITY  AGREEMENT  is entered  into on the above  date  between
SILICON VALLEY BANK, a  California-chartered  bank,  with its principal place of
business at 3003 Tasman  Drive,  Santa Clara,  California  95054 and with a loan
production  office  located  at One  Newton  Executive  Park,  Suite  200,  2221
Washington  Street,  Newton,  Massachusetts  02646  ("Silicon") and the borrower
named  above  (the  "Borrower"),  with  offices  located  at the  above  address
("Borrower's  Address").  The  Schedule  and  Exhibits  to this  Agreement  (the
"Schedule" and the "Exhibits," respectively) shall for all purposes be deemed to
be part of this  Agreement,  and the same are integral parts of this  Agreement.
(Definitions  of certain terms used in this Agreement are set forth in Section 8
below.)

1.   LOANS.
     ------

      1.1 LOANS.  Silicon will make loans to Borrower (the "Loans"),  in amounts
determined  by  Silicon in its  commercially  reasonable  discretion,  up to the
amounts (the "Credit Limit") shown on the Schedule, provided no Default or Event
of Default has  occurred  and is  continuing,  and subject to  deduction  of any
Reserves for accrued  interest and such other  Reserves as Silicon  deems proper
from time to time.

      1.2  INTEREST.  All Loans and all other  monetary  Obligations  shall bear
interest at the rate shown on the Schedule,  except where expressly set forth to
the contrary in this Agreement.  Interest shall be payable monthly,  on the last
day of  the  month.  Interest  may,  in  Silicon's  discretion,  be  charged  to
Borrower's loan account, and the same shall thereafter bear interest at the same
rate as the other Loans.  Silicon  may, in its  discretion,  charge  interest to
Borrower's Deposit Accounts maintained with Silicon.

      1.3  OVERADVANCES.  If at any  time or for any  reason  the  total  of all
outstanding  Loans  and all  other  Obligations  exceeds  the  Credit  Limit (an
"Overadvance"),  Borrower  shall  immediately  pay the  amount of the  excess to
Silicon,  without notice or demand.  Without limiting  Borrower's  obligation to
repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay
Silicon interest on the outstanding  amount of any Overadvance,  on demand, at a
rate equal to the  interest  rate which would  otherwise  be  applicable  to the
Overadvance, plus an additional two percent (2%) per annum.

      1.4 FEES. Borrower shall pay Silicon the fees shown on the Schedule, which
are in addition to all  interest  and other sums  payable to Silicon and are not
refundable.

      1.5 LETTERS OF CREDIT.  At the request of  Borrower,  Silicon  may, in its
sole discretion,  issue or arrange for the issuance of letters of credit for the
account of Borrower, in each case in form and substance  satisfactory to Silicon
in its sole discretion  (collectively,  "Letters of Credit"). The aggregate face
amount of all outstanding  Letters of Credit from time to time (plus all Silicon
exposure under any foreign exchange contracts) shall not exceed the amount shown
on the Schedule (the "Letter of Credit Sublimit"), and shall be reserved against
Loans which would otherwise be available hereunder.  Borrower shall pay all bank
charges  (including  charges of Silicon)  for the

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issuance of Letters of Credit,  together with such  additional  fee as Silicon's
letter of credit  department shall charge in connection with the issuance of the
Letters of Credit.  Any payment by Silicon under or in connection  with a Letter
of Credit shall  constitute  a Loan  hereunder on the date such payment is made.
Each Letter of Credit  shall have an expiry date no later than thirty days prior
to the Maturity  Date.  Borrower  hereby  agrees to  indemnify,  save,  and hold
Silicon harmless from any loss, cost, expense, or liability,  including payments
made by Silicon,  expenses,  and reasonable  attorneys' fees incurred by Silicon
arising out of or in connection  with any Letters of Credit.  Borrower agrees to
be bound by the regulations and  interpretations of the issuer of any Letters of
Credit  guarantied by Silicon and opened for Borrower's  account or by Silicon's
interpretations  of any  Letter  of  Credit  issued by  Silicon  for  Borrower's
account,  and Borrower  understands  and agrees that Silicon shall not be liable
for any error,  negligence,  or mistake,  whether of omission or commission,  in
following Borrower's instructions or those contained in the Letters of Credit or
any modifications, amendments, or supplements thereto. Borrower understands that
Letters of Credit may require  Silicon to indemnify the issuing bank for certain
costs or  liabilities  arising out of claims by Borrower  against  such  issuing
bank. Borrower hereby agrees to indemnify and hold Silicon harmless with respect
to any loss, cost, expense, or liability incurred by Silicon under any Letter of
Credit as a result of Silicon's  indemnification  of any such issuing bank.  The
provisions of this Loan Agreement,  as it pertains to Letters of Credit, and any
other  present or future  documents or agreements  between  Borrower and Silicon
relating to Letters of Credit are cumulative.

2.   SECURITY INTEREST.
     -----------------

      2.1 SECURITY INTEREST. To secure the payment and performance of all of the
Obligations when due, and the performance of each of the Borrower's duties under
this  Agreement and all  documents  executed in  connection  herewith,  Borrower
hereby  grants to Silicon a continuing  security  interest in all of  Borrower's
interest in the following, whether now owned or hereafter acquired, and wherever
located:  All  Inventory,  Equipment,   Receivables,  and  General  Intangibles,
including,  without limitation,  all of Borrower's Intellectual Property, all of
Borrower's Deposit Accounts,  and all money, and all property now or at any time
in the future in Silicon's  possession  (including  claims and credit balances),
and all proceeds  (including  proceeds of any  insurance  policies,  proceeds of
proceeds  and claims  against  third  parties),  all  products and all books and
records related to any of the foregoing (all of the foregoing, together with all
other  property  in which  Silicon may now or in the future be granted a lien or
security interest,  is referred to herein,  collectively,  as the "Collateral").
The security interest granted herein shall be a first priority security interest
in the Collateral.  Silicon may place a "hold" on any Deposit Account pledged as
collateral.

      2.2  CONCERNING  REVISED  ARTICLE 9 OF THE  UNIFORM  COMMERCIAL  CODE.  In
anticipation of the possible  application,  in one or more  jurisdictions to the
transactions  contemplated  hereby,  of the  revised  Article  9 of the  Uniform
Commercial  Code in the  form  or  substantially  in the  form  approved  by the
American Law Institute and the National  Conference of  Commissioners on Uniform
State Law and contained in the 1999 Official Text of the Uniform Commercial Code
("Revised  Article  9"),  it is  hereby  agreed  that  applying  the  law of any
jurisdiction  in which  Revised  Article 9 is in effect,  the  Collateral is all
assets of the  Borrower,  whether or not within the scope of Revised  Article 9.
The Collateral shall include,  without limitation,  the following  categories of
assets as defined in Revised Article 9: goods  (including  inventory,  equipment
and  any  accessions  thereto),   instruments   (including   promissory  notes),
documents,  accounts (including  health-care-insurance  receivables, and license
fees),  chattel  paper  (whether  tangible  or  electronic),  deposit  accounts,
letter-of-credit  rights  (whether or not the letter of credit is evidenced by a
writing),  commercial tort claims, securities and all other investment property,
general intangibles  (including payment intangibles and software,  but excluding
Intellectual  Property),  supporting obligations and any and all proceeds of any
thereof,  wherever  located,  whether now owned or  hereafter  acquired.  If the
Borrower shall at any time, whether or not Revised Article 9 is in effect in any
particular jurisdiction,  acquire a commercial tort claim, as defined in Revised
Article 9, the Borrower shall promptly notify Silicon in a writing signed by the
Borrower of the brief  details  thereof  and grant to Silicon in such  writing a
security  interest  therein and in the proceeds  thereof,  all upon the terms of
this  Agreement,  with such writing to be in form and substance  satisfactory to
Silicon.


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3.   REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
     ---------------------------------------------------------

      In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower  represents and warrants to Silicon as follows,  and Borrower covenants
that the following  representations  will continue to be true, and that Borrower
will at all times comply with all of the following covenants:

      3.1 CORPORATE EXISTENCE AND AUTHORITY.  Borrower, if a corporation, is and
will continue to be, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Borrower is and will continue
to be qualified  and licensed to do business in all  jurisdictions  in which any
failure  to do so  would  have  a  material  adverse  effect  on  Borrower.  The
execution, delivery and performance by Borrower of this Agreement, and all other
documents  contemplated hereby (i) have been duly and validly  authorized,  (ii)
are  enforceable  against  Borrower in  accordance  with their terms  (except as
enforcement   may  be  limited  by  equitable   principles  and  by  bankruptcy,
insolvency,  reorganization,  moratorium  or similar laws relating to creditors'
rights generally),  (iii) do not violate  Borrower's  articles or certificate of
incorporation,  Borrower's  by-laws,  or any law or any  material  agreement  or
instrument  which is binding  upon  Borrower  or its  property,  and (iv) do not
constitute  grounds for acceleration of any material  indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.

      3.2 NAME;  TRADE NAMES AND STYLES.  The name of Borrower  set forth in the
heading to this  Agreement is its correct  name.  Listed on the Schedule are all
prior names of Borrower  and all of  Borrower's  present and prior trade  names.
Borrower  shall give Silicon 30 days' prior written  notice before  changing its
name or doing business under any other name. Borrower has complied,  and will in
the future  comply,  with all laws  relating to the conduct of business  under a
fictitious business name.

      3.3 PLACE OF BUSINESS;  LOCATION OF  COLLATERAL.  The address set forth in
the heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and  Collateral is located only at the locations
set forth on the  Schedule.  Borrower  will give  Silicon at least 30 days prior
written  notice before opening any  additional  place of business,  changing its
chief  executive  office,  changing  its state of formation or moving any of the
Collateral to a location other than  Borrower's  Address or one of the locations
set forth on the Schedule.  In addition,  the Borrower shall not be permitted to
maintain any  Collateral  with a value (as  determined  by Silicon) in excess of
$1,000,000.00 in the aggregate at its LaVergne,  Tennessee location set forth on
the Schedule.

      3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at all
times in the future be, the sole owner of all the  Collateral,  except for items
of Equipment which are leased by Borrower. The Collateral now is and will remain
free and clear of any and all liens, charges,  security interests,  encumbrances
and adverse  claims,  except for  Permitted  Liens.  Silicon  now has,  and will
continue to have, a first-priority  perfected and enforceable  security interest
in all of the Collateral, subject only to the Permitted Liens, and Borrower will
at all times  defend  Silicon and the  Collateral  against all claims of others.
None of the  Collateral now is or will be affixed to any real property in such a
manner,  or with such intent,  as to become a fixture.  Borrower is not and will
not become a lessee under any real property  lease  pursuant to which the lessor
may obtain any rights in any of the  Collateral and no such lease now prohibits,
restrains,  impairs or will  prohibit,  restrain or impair  Borrower's  right to
remove any  Collateral  from the leased  premises.  Whenever any  Collateral  is
located  upon  premises  in which any third  party has an  interest  (whether as
owner,  mortgagee,  beneficiary  under a deed  of  trust,  lien  or  otherwise),
Borrower  shall,  whenever  requested by Silicon,  use its best efforts to cause
such third  party to execute  and  deliver to  Silicon,  in form  acceptable  to
Silicon,  such waivers and  subordinations  as Silicon shall  specify,  so as to
ensure that  Silicon's  rights in the  Collateral  are, and will continue to be,
superior to the rights of any such third party. Borrower will keep in full force
and effect,  and will comply in all material respects with all the terms of, any
lease of real property  where any of the  Collateral now or in the future may be
located.

      3.5  MAINTENANCE OF  COLLATERAL.  Borrower will maintain the Collateral in
good  working  condition,  and  Borrower  will  not use the  Collateral  for any
unlawful  purpose.  Borrower will  immediately  advise Silicon in writing of any
material loss or damage to the Collateral.


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      3.6 BOOKS AND  RECORDS.  Borrower  has  maintained  and will  maintain  at
Borrower's  Address  complete and  accurate  books and  records,  comprising  an
accounting system in accordance with generally accepted accounting principles.

      3.7 FINANCIAL CONDITION,  STATEMENTS AND REPORTS. All financial statements
now or in the future  delivered to Silicon have been,  and will be,  prepared in
conformity  with  generally  accepted  accounting  principles and now and in the
future will  completely  and  accurately  reflect  the  financial  condition  of
Borrower, at the times and for the periods therein stated. Between the last date
covered by any such statement provided to Silicon and the date hereof, there has
been no  material  adverse  change in the  financial  condition  or  business of
Borrower. Borrower is now and will continue to be solvent.

      3.8 TAX RETURNS AND PAYMENTS;  PENSION CONTRIBUTIONS.  Borrower has timely
filed,  and will timely file,  all tax returns and reports  required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all  foreign,  federal,  state  and  local  taxes,  assessments,   deposits  and
contributions  now or in the future owed by  Borrower.  Borrower  may,  however,
defer payment of any contested  taxes,  provided that Borrower (i) in good faith
contests  Borrower's  obligation  to pay the  taxes by  appropriate  proceedings
promptly and  diligently  instituted  and  conducted,  (ii) notifies  Silicon in
writing  of  the  commencement   of,  and  any  material   development  in,  the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
contested  taxes from  becoming a lien upon any of the  Collateral.  Borrower is
unaware of any claims or  adjustments  proposed for any of Borrower's  prior tax
years  which  could  result in  additional  taxes  becoming  due and  payable by
Borrower.  Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future  pension,  profit sharing and deferred  compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete  termination of, or permit the
occurrence  of any other event with respect to, any such plan which could result
in any material  liability of Borrower,  including  any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.

      3.9 COMPLIANCE WITH LAW.  Borrower has complied,  and will comply,  in all
material respects, with all provisions of all foreign,  federal, state and local
laws and regulations relating to Borrower,  including, but not limited to, those
relating to Borrower's  ownership of real or personal property,  the conduct and
licensing of Borrower's business, and all environmental matters.

      3.10 LITIGATION.  Except as disclosed in the Schedule,  there is no claim,
suit, litigation,  proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any  governmental  agency (or any basis  therefor  known to Borrower)  which may
result, either separately or in the aggregate, in any material adverse change in
the financial  condition or business of Borrower,  or in any material impairment
in the ability of Borrower to carry on its  business in  substantially  the same
manner as it is now being  conducted.  Borrower will promptly  inform Silicon in
writing of any claim,  proceeding,  litigation  or  investigation  in the future
threatened or instituted  by or against  Borrower  involving any single claim of
$50,000 or more, or involving $100,000 or more in the aggregate.

      3.11 USE OF  PROCEEDS.  All proceeds of all Loans shall be used solely for
working  capital  purposes.  Borrower is not  purchasing or carrying any "margin
stock" (as  defined in  Regulation  U of the Board of  Governors  of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any  "margin  stock" or to extend  credit to others for the  purpose of
purchasing or carrying any "margin stock."

4.   RECEIVABLES.
     -----------

      4.1  REPRESENTATIONS  RELATING TO  RECEIVABLES.  Borrower  represents  and
warrants to Silicon as follows:  Each Receivable with respect to which Loans are
requested by Borrower  shall,  on the date each Loan is requested and made,  (i)
represent an  undisputed  bona fide  existing  unconditional  obligation  of the
Account  Debtor  created by


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the sale, delivery,  and acceptance of goods or the rendition of services in the
ordinary course of Borrower's  business,  and (ii) meet the Minimum  Eligibility
Requirements set forth in Section 8 below.

      4.2 REPRESENTATIONS  RELATING TO DOCUMENTS AND LEGAL COMPLIANCE.  Borrower
represents  and  warrants to Silicon as  follows:  All  statements  made and all
unpaid  balances  appearing in all  invoices,  instruments  and other  documents
evidencing  the  Receivables  are and  shall  be true and  correct  and all such
invoices,  instruments  and  other  documents  and all of  Borrower's  books and
records are and shall be genuine and in all  respects  what they  purport to be,
and all signatories  and endorsers have the capacity to contract.  All sales and
other  transactions  underlying  or giving rise to each  Receivable  shall fully
comply with all applicable  laws and  governmental  rules and  regulations.  All
signatures  and  endorsements  on all  documents,  instruments,  and  agreements
relating to all  Receivables  are and shall be genuine,  and all such documents,
instruments  and agreements  are and shall be legally  enforceable in accordance
with their terms.

      4.3  SCHEDULES  AND  DOCUMENTS  RELATING TO  RECEIVABLES.  Borrower  shall
deliver  to  Silicon  transaction  reports  and  loan  requests,  schedules  and
assignments of all Receivables,  and schedules of collections,  all on Silicon's
standard  forms;  provided,  however,  that  Borrower's  failure to execute  and
deliver the same shall not affect or limit Silicon's security interest and other
rights in all of Borrower's Receivables,  nor shall Silicon's failure to advance
or lend  against  a  specific  Receivable  affect  or limit  Silicon's  security
interest and other rights therein.  The Borrower shall furnish Silicon with loan
requests  thirty (30) days prior to the requested  funding  date.  Together with
each such loan  request,  schedule  and  assignment,  or later if  requested  by
Silicon,  Borrower shall furnish Silicon with copies (or, at Silicon's  request,
originals) of all contracts,  orders, invoices, and other similar documents, and
all original shipping  instructions,  delivery  receipts,  bills of lading,  and
other evidence of delivery,  for any goods the sale or disposition of which gave
rise to such  Receivables,  and Borrower  warrants the genuineness of all of the
foregoing.  Borrower  shall also furnish to Silicon an aged accounts  receivable
trial balance in such form and at such  intervals as Silicon shall  request.  In
addition,  Borrower  shall deliver to Silicon the originals of all  instruments,
chattel paper, security agreements,  guarantees and other documents and property
evidencing or securing any Receivables,  immediately upon receipt thereof and in
the same form as received, with all necessary  endorsements,  all of which shall
be with recourse.  Borrower shall also provide Silicon with copies of all credit
memos within two days after the date issued.

      4.4 COLLECTION OF RECEIVABLES. Borrower shall cause the Account Debtors to
remit all  Receivables  to Silicon and Silicon  shall hold all  payments on, and
proceeds of,  Receivables in a lockbox account,  or such other "blocked account"
as Silicon may specify,  pursuant to a blocked account agreement in such form as
Silicon may specify. All such payments on, and proceeds of, Receivables shall be
applied to the Obligations in such order as Silicon shall determine.  Silicon or
its designee may, at any time after the occurrence and during the continuance of
an Event of Default,  notify  Account  Debtors  that the  Receivables  have been
assigned to Silicon.

      4.5  REMITTANCE OF PROCEEDS.  All proceeds arising from the disposition of
any  Collateral  (other than the sale of  Inventory  in the  ordinary  course of
business)  shall be  delivered,  in kind, by Borrower to Silicon in the original
form in which  received by Borrower  not later than the  following  Business Day
after  receipt by Borrower,  to be applied to the  Obligations  in such order as
Silicon shall  determine;  provided  that, if no Default or Event of Default has
occurred,  Borrower  shall not be  obligated to remit to Silicon the proceeds of
the sale of worn out or obsolete equipment disposed of by Borrower in good faith
in an arm's length  transaction  for an aggregate  purchase  price of $25,000 or
less (for all such  transactions  in any fiscal year).  Borrower  agrees that it
will not commingle  proceeds of Collateral with any of Borrower's other funds or
property,  but will hold such proceeds  separate and apart from such other funds
and  property and in an express  trust for Silicon.  Nothing in this Section 4.5
limits the restrictions on disposition of Collateral set forth elsewhere in this
Agreement.

      4.6  DISPUTES.  Borrower  shall  notify  Silicon  promptly of all material
disputes  or  claims  relating  to  Receivables.   Borrower  shall  not  forgive
(completely  or  partially),  compromise or settle any  Receivable for less than
payment in full, or agree to do any of the  foregoing,  except that Borrower may
do so,  provided  that:  (i) Borrower does so in good faith,  in a  commercially
reasonable  manner,  in the  ordinary  course of  business,  and in arm's length


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transactions,  which are reported to Silicon on the regular reports  provided to
Silicon; (ii) no Default or Event of Default has occurred and is continuing; and
(iii) taking into account all such discounts  settlements and  forgiveness,  the
total  outstanding  Loans will not exceed the Credit Limit.  Silicon may, at any
time after the occurrence of an Event of Default,  settle or adjust  disputes or
claims  directly  with Account  Debtors for amounts and upon terms which Silicon
considers advisable in its reasonable credit judgment and, in all cases, Silicon
shall  credit  Borrower's  Loan  account  with only the net amounts  received by
Silicon in payment of any Receivables.

      4.7 RETURNS.  Provided no Event of Default has occurred and is continuing,
if any Account Debtor  returns any Inventory to Borrower in the ordinary  course
of its business,  Borrower shall  promptly  determine the reason for such return
and promptly issue a credit  memorandum to the Account Debtor in the appropriate
amount  (sending a copy to Silicon).  In the event any  attempted  return occurs
after  the  occurrence  of any  Event of  Default,  Borrower  shall (i) hold the
returned  Inventory in trust for Silicon,  (ii) segregate all returned Inventory
from all of Borrower's other property,  (iii)  conspicuously  label the returned
Inventory as Silicon's  property,  and (iv)  immediately  notify  Silicon of the
return of any Inventory, specifying the reason for such return, the location and
condition  of the returned  Inventory,  and on  Silicon's  request  deliver such
returned Inventory to Silicon.

      4.8 VERIFICATION. Silicon may, from time to time, verify directly with the
respective  Account Debtors the validity,  amount and other matters  relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.

      4.9 NO LIABILITY. Silicon shall not under any circumstances be responsible
or liable for any shortage or discrepancy  in, damage to, or loss or destruction
of,  any  goods,  the  sale  or  other  disposition  of  which  gives  rise to a
Receivable,  or for any error, act, omission,  or delay of any kind occurring in
the  settlement,  failure to  settle,  collection  or  failure  to  collect  any
Receivable,  or for settling any Receivable in good faith for less than the full
amount  thereof,  nor  shall  Silicon  be deemed  to be  responsible  for any of
Borrower's  obligations  under  any  contract  or  agreement  giving  rise  to a
Receivable.  Nothing herein shall,  however,  relieve Silicon from liability for
its own gross negligence or willful misconduct.

5.   ADDITIONAL DUTIES OF THE BORROWER.
     ---------------------------------

      5.1 FINANCIAL AND OTHER COVENANTS. Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.

      5.2  INSURANCE.  Borrower  shall,  at all times insure all of the tangible
personal  property  Collateral  and carry such other  business  insurance,  with
insurers  reasonably  acceptable to Silicon, in such form and amounts as Silicon
may reasonably require, and Borrower shall provide evidence of such insurance to
Silicon,  so that Silicon is satisfied that such insurance is, at all times,  in
full force and effect.  All such  insurance  policies  shall name  Silicon as an
additional  loss payee,  and shall contain a lenders loss payee  endorsement  in
form reasonably  acceptable to Silicon. Upon receipt of the proceeds of any such
insurance,  Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its sole discretion, except that, provided no Default
or Event of Default has occurred and is  continuing,  Silicon  shall  release to
Borrower  insurance  proceeds  with  respect  to  Equipment  totaling  less than
$100,000,  which  shall be  utilized  by  Borrower  for the  replacement  of the
Equipment  with respect to which the insurance  proceeds were paid.  Silicon may
require reasonable  assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Silicon may, but is
not obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to Silicon copies of all reports made to insurance companies.

      5.3 REPORTS.  Borrower,  at its expense,  shall  provide  Silicon with the
written  reports set forth in the Schedule,  and such other written reports with
respect to Borrower (including budgets,  sales projections,  operating plans and
other  financial  documentation),  as Silicon shall from time to time reasonably
specify.


                                       6


<PAGE>


          Silicon Valley Bank               Loan and Security Agreement
--------------------------------------------------------------------------------


      5.4 ACCESS TO COLLATERAL,  BOOKS AND RECORDS.  At reasonable times, and on
one  Business  Day's  notice,  Silicon,  or its agents,  shall have the right to
inspect the  Collateral,  and the right to audit and copy  Borrower's  books and
records.   Silicon  shall  take  reasonable  steps  to  keep   confidential  all
information obtained in any such inspection or audit, but Silicon shall have the
right to disclose any such information to its auditors, regulatory agencies, and
attorneys,  and pursuant to any subpoena or other legal  process.  The foregoing
inspections  and audits shall be at Borrower's  expense and the charge  therefor
shall be $600 per  person  per day (or such  higher  amount  as shall  represent
Silicon's then current  standard  charge for the same),  plus  reasonable out of
pocket expenses.  Borrower will not enter into any agreement with any accounting
firm,  service bureau or third party to store Borrower's books or records at any
location  other than  Borrower's  Address,  without  first  obtaining  Silicon's
written consent,  which may be conditioned  upon such accounting  firm,  service
bureau or other  third  party  agreeing  to give  Silicon  the same  rights with
respect to access to books and records  and related  rights as Silicon has under
this Loan  Agreement.  Borrower  waives  the  benefit  of any  accountant-client
privilege or other evidentiary  privilege precluding or limiting the disclosure,
divulgence  or delivery of any of its books and records  (except  that  Borrower
does not waive any attorney-client privilege).

      5.5  NEGATIVE  COVENANTS.  Except  as may be  permitted  in the  Schedule,
Borrower  shall not,  without  Silicon's  prior written  consent,  do any of the
following:  (i) merge or consolidate  with another  corporation or entity;  (ii)
acquire  any  assets,  except  in the  ordinary  course of  business,  provided,
however,  that the  acquisition  of  dental  and  dental  related  products  and
technologies  and  other   pharmaceutical   applications  as  described  in  the
Borrower's periodic filings with the Securities and Exchange Commission shall be
permitted;  (iii) except for that certain private placement of Borrower's Common
Stock, as contemplated by Borrower's February 2001Private  Placement Memorandum,
enter into any other transaction  outside the ordinary course of business;  (iv)
sell or transfer any  Collateral,  except for the sale of finished  Inventory in
the ordinary course of Borrower's business,  and except for the sale of obsolete
or  unneeded  Equipment  in the  ordinary  course  of  business;  (v)  store any
Inventory or other Collateral with any warehouseman or other third party; except
as  disclosed  to Silicon in  writing,  provided  that such third  parties  have
entered into such  agreements  with Silicon as Silicon may  reasonably  require;
(vi) sell any Inventory on a sale-or-return,  guaranteed sale,  consignment,  or
other  contingent  basis;  (vii)  make any loans of any  money or other  assets,
except for  advancement of employee  expenses in accordance  with the Borrower's
employee  policies;  (viii)  incur  any debts  outside  the  ordinary  course of
business;  (ix)  guarantee  or  otherwise  become  liable  with  respect  to the
obligations  of another  party or entity;  (x) pay or declare any  dividends  on
Borrower's  stock (except for dividends  payable solely in stock of Borrower and
except for dividends  payable to holders of the  Borrower's  Series D Cumulative
Convertible  Preferred  Stock (the "Series D Stock") ); (xi) except  pursuant to
the terms of  Borrower's  Series D Stock redeem,  retire,  purchase or otherwise
acquire, directly or indirectly,  any of Borrower's stock; (xii) make any change
in Borrower's  capital  structure which would have a material  adverse effect on
Borrower or on the prospect of repayment  of the  Obligations;  (xiii) pay total
compensation,  including  salaries,  fees, bonuses,  commissions,  and all other
payments,  whether directly or indirectly,  in money or otherwise, to Borrower's
executives,  officers and  directors  (or any relative  thereof) in an amount in
excess of the amount set forth on the  Schedule;  or (xiv)  dissolve or elect to
dissolve. Transactions permitted by the foregoing provisions of this Section 5.5
are only  permitted if no Default or Event of Default would occur as a result of
such transaction.

      5.6 LITIGATION  COOPERATION.  Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to Silicon, make available
Borrower  and its  officers,  employees  and  agents  and  Borrower's  books and
records, to the extent that Silicon may deem them reasonably  necessary in order
to prosecute or defend any such suit or proceeding.

      5.7 FURTHER  ASSURANCES.  Borrower agrees,  at its expense,  on request by
Silicon,  to execute all  documents  and take all  actions,  as Silicon may deem
reasonably  necessary  or  useful in order to  perfect  and  maintain  Silicon's
perfected security interest in the Collateral,  and in order to fully consummate
the transactions contemplated by this Agreement.


                                       7


<PAGE>


          Silicon Valley Bank               Loan and Security Agreement
--------------------------------------------------------------------------------


6.   TERM.
     ----

      6.1  MATURITY  DATE.  This  Agreement  shall  continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"); provided that the
Maturity Date may be extended upon written agreement of the parties hereto.

      6.2  PAYMENT  OF  OBLIGATIONS.  On the  Maturity  Date  or on any  earlier
effective  date of  termination,  Borrower  shall  pay and  perform  in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such  Obligations  are  otherwise  then due and  payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or on
any earlier effective date of termination,  there are any outstanding Letters of
Credit  issued by  Silicon  or  issued  by  another  institution  based  upon an
application,  guarantee,  indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to the face amount of all such Letters of Credit plus all  interest,  fees
and cost due or to become  due in  connection  therewith,  to secure  all of the
Obligations  relating  to said  Letters of Credit,  pursuant to  Silicon's  then
standard form cash pledge  agreement.  Notwithstanding  any  termination of this
Agreement,  all of Silicon's security interests in all of the Collateral and all
of the terms and provisions of this  Agreement  shall continue in full force and
effect until all  Obligations  have been paid and  performed  in full;  provided
that,  Silicon  may, in its sole  discretion,  refuse to make any further  Loans
after termination. No termination shall in any way affect or impair any right or
remedy of  Silicon,  nor  shall any such  termination  relieve  Borrower  of any
Obligation to Silicon, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and written
termination  of this  Agreement by Silicon,  Silicon shall  promptly  deliver to
Borrower  termination  statements,  requests  for  reconveyances  and such other
documents as may be required to fully terminate Silicon's security interests.

7.   EVENTS OF DEFAULT AND REMEDIES.
     ------------------------------

      7.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this  Agreement,  and Borrower shall give
Silicon  immediate  written notice  thereof:  (a) Any warranty,  representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of  Borrower's  officers,  employees or agents,  now or in the future,  shall be
untrue or misleading in a material  respect;  or (b) Borrower  shall fail to pay
when due any Loan or any interest thereon or any other monetary  Obligation;  or
(c) the total Loans and other  Obligations  outstanding at any time shall exceed
the Credit Limit; or (d) Borrower shall fail to comply with any of the financial
covenants  set  forth  in the  Schedule  or  shall  fail to  perform  any  other
non-monetary  Obligation  which by its nature  cannot be cured;  or (e) Borrower
shall fail to perform any other  non-monetary  Obligation,  which failure is not
cured within 10 Business  Days after the date due; or (f) any levy,  assessment,
attachment,  seizure,  lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured within 15 days after the
occurrence of the same; or (g) any default or event of default  occurs under any
obligation secured by a Permitted Lien, which is not cured within any applicable
cure  period or waived in writing by the holder of the  Permitted  Lien;  or (h)
Borrower  breaches  any  material  contract  or  obligation,  which  has  or may
reasonably be expected to have a material adverse effect on Borrower's  business
or financial condition; or (i) Dissolution, termination of existence, insolvency
or business  failure of  Borrower;  or  appointment  of a  receiver,  trustee or
custodian, for all or any part of the property of, assignment for the benefit of
creditors  by, or the  commencement  of any  proceeding  by  Borrower  under any
reorganization,  bankruptcy,  insolvency,  arrangement,  readjustment  of  debt,
dissolution or  liquidation  law or statute of any  jurisdiction,  now or in the
future in effect; or (j) the commencement of any proceeding  against Borrower or
any guarantor of any of the Obligations  under any  reorganization,  bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction,  now or in the future in effect, which is not cured
by the  dismissal  thereof  within  45 days  after  the date  commenced;  or (k)
revocation or  termination  of, or limitation or denial of liability  upon,  any
guaranty  of the  Obligations  or any  attempt  to do any of the  foregoing,  or
commencement of proceedings by any guarantor of any of the Obligations under any
bankruptcy or insolvency law; or (l) revocation or termination of, or limitation
or  denial  of  liability  upon,  any  pledge  of any  certificate  of  deposit,
securities or other  property or asset of any kind pledged by any third party to
secure any or all of the Obligations, or any attempt to do any of the foregoing,
or  commencement  of  proceedings  by or against  any such third party under any
bankruptcy  or insolvency  law; or (m) Borrower  makes any payment on account of
any  indebtedness or obligation  which has been  subordinated to the Obligations
other


                                       8


<PAGE>


          Silicon Valley Bank               Loan and Security Agreement
--------------------------------------------------------------------------------


than as permitted in the applicable  subordination  agreement,  or if any Person
who has subordinated such  indebtedness or obligations  terminates or in any way
limits his subordination  agreement;  or (n) the service of process upon Silicon
seeking to attach by trustee, mesne or other process , any funds of the Borrower
on deposit with Silicon;  or (o) Borrower  shall  generally not pay its debts as
they become due, or Borrower shall  conceal,  remove or transfer any part of its
property,  with  intent to hinder,  delay or defraud its  creditors,  or make or
suffer any transfer of any of its  property  which may be  fraudulent  under any
bankruptcy,  fraudulent  conveyance  or  similar  law;  or (p) there  shall be a
material adverse change in Borrower's  business or financial  condition;  or (q)
Silicon,  acting in good faith and in a commercially  reasonable  manner,  deems
itself  insecure  because of the  occurrence  of an event prior to the effective
date hereof of which Silicon had no knowledge on the  effective  date or because
of the  occurrence of an event on or  subsequent  to the effective  date; or (r)
Borrower shall breach any term of the IP Security  Agreement as defined  herein.
Silicon  may cease  making  any Loans  hereunder  during  any of the above  cure
periods, and thereafter if an Event of Default has occurred.

      7.2  REMEDIES.  Upon  the  occurrence  and  continuation  of any  Event of
Default,  and at any time thereafter,  Silicon, at its option, may do any one or
more of the following:  (a) Cease making Loans or otherwise  extending credit to
Borrower under this Agreement or any other document or agreement; (b) Accelerate
and declare all or any part of the Obligations to be immediately  due,  payable,
and performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation;  (c) Take possession of
any or all of the  Collateral  wherever  it may be found,  and for that  purpose
Borrower hereby authorizes Silicon without judicial process to enter onto any of
Borrower's  premises  without  interference  to search for, take  possession of,
keep,  store,  or remove any of the  Collateral,  and remain on the  premises or
cause a  custodian  to remain on the  premises  in  exclusive  control  thereof,
without charge for so long as Silicon deems it reasonably  necessary in order to
complete  the  enforcement  of its  rights  under  this  Agreement  or any other
agreement; provided, however, that should Silicon seek to take possession of any
of the Collateral by Court process,  Borrower hereby irrevocably waives: (i) any
bond and any surety or security relating thereto required by any statute,  court
rule or  otherwise  as an  incident  to such  possession;  (ii) any  demand  for
possession prior to the commencement of any suit or action to recover possession
thereof;  and (iii) any requirement  that Silicon retain  possession of, and not
dispose of, any such Collateral until after trial or final judgment; (d) Require
Borrower to  assemble  any or all of the  Collateral  and make it  available  to
Silicon at places  designated  by Silicon  which are  reasonably  convenient  to
Silicon and Borrower,  and to remove the Collateral to such locations as Silicon
may deem advisable; (e) Complete the processing,  manufacturing or repair of any
Collateral  prior to a  disposition  thereof  and,  for such purpose and for the
purpose of removal,  Silicon  shall have the right to use  Borrower's  premises,
vehicles,  hoists,  lifts,  cranes,  equipment  and all other  property  without
charge;  (f) Sell, lease or otherwise  dispose of any of the Collateral,  in its
condition  at  the  time  Silicon  obtains  possession  of it or  after  further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash,  exchange or other property,  or on credit, and to
adjourn  any  such  sale  from  time to time  without  notice  other  than  oral
announcement  at the time  scheduled  for sale.  Silicon shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Silicon deems reasonable,  or on Silicon's  premises,  or elsewhere and
the  Collateral  need not be located at the place of  disposition.  Silicon  may
directly or through any affiliated  company  purchase or lease any Collateral at
any such public  disposition,  and if permissible  under  applicable law, at any
private  disposition.  Any sale or other  disposition  of  Collateral  shall not
relieve  Borrower  of any  liability  Borrower  may  have if any  Collateral  is
defective  as to title or physical  condition  or otherwise at the time of sale;
(g) Demand  payment  of, and  collect any  Receivables  and General  Intangibles
comprising  Collateral  and,  in  connection  therewith,   Borrower  irrevocably
authorizes  Silicon  to  endorse  or sign  Borrower's  name on all  collections,
receipts,  instruments and other documents,  to take possession of and open mail
addressed to Borrower  and remove  therefrom  payments  made with respect to any
item of the Collateral or proceeds  thereof,  and, in Silicon's sole discretion,
to grant extensions of time to pay, compromise claims and settle Receivables and
the like  for less  than  face  value;  (h)  Offset  against  any sums in any of
Borrower's  general,  special or other Deposit  Accounts  with Silicon;  and (i)
Demand and receive  possession of any of Borrower's federal and state income tax
returns  and the  books and  records  utilized  in the  preparation  thereof  or
referring thereto. All reasonable attorneys' fees, expenses,  costs, liabilities
and obligations incurred by Silicon with respect to the foregoing shall be added
to and become part of the  Obligations,  shall be due on demand,  and shall bear
interest at a rate equal to the highest  interest rate  applicable to any of the
Obligations.  Without  limiting any of Silicon's  rights


                                       9


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          Silicon Valley Bank               Loan and Security Agreement
--------------------------------------------------------------------------------


and  remedies,  from and  after the  occurrence  of any  Event of  Default,  the
interest rate applicable to the Obligations  shall be increased by an additional
four percent (4%) per annum.

      7.3  STANDARDS FOR  DETERMINING  COMMERCIAL  REASONABLENESS.  Borrower and
Silicon  agree that a sale or other  disposition  (collectively,  "sale") of any
Collateral  which  complies with the following  standards will  conclusively  be
deemed  to be  commercially  reasonable:  (i)  Notice  of the  sale is  given to
Borrower  at least  seven days prior to the sale,  and,  in the case of a public
sale,  notice of the sale is  published at least seven days before the sale in a
newspaper  of  general  circulation  in  the  county  where  the  sale  is to be
conducted;  (ii)  Notice  of the  sale  describes  the  collateral  in  general,
non-specific  terms;  (iii)  The  sale is  conducted  at a place  designated  by
Silicon,  with or without the Collateral being present;  (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price in
cash or by cashier's  check or wire  transfer is required;  (vi) With respect to
any sale of any of the Collateral,  Silicon may (but is not obligated to) direct
any  prospective  purchaser  to  ascertain  directly  from  Borrower any and all
information  concerning the same.  Silicon shall be free to employ other methods
of  noticing  and  selling  the  Collateral,  in its  discretion,  if  they  are
commercially reasonable.

      7.4 POWER OF ATTORNEY.  Upon the occurrence and  continuation of any Event
of Default,  without  limiting  Silicon's  other rights and  remedies,  Borrower
grants to Silicon an  irrevocable  power of attorney  coupled  with an interest,
authorizing  and  permitting  Silicon  (acting  through  any of  its  employees,
attorneys or agents) at any time, at its option, but without obligation, with or
without notice to Borrower,  and at Borrower's  expense, to do any or all of the
following,  in Borrower's name or otherwise,  but Silicon agrees to exercise the
following powers in a commercially  reasonable  manner: (a) Execute on behalf of
Borrower any documents that Silicon may, in its sole discretion,  deem advisable
in order to perfect and maintain  Silicon's security interest in the Collateral,
or in order to exercise a right of  Borrower  or  Silicon,  or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
present and future  agreements;  (b) Execute on behalf of Borrower  any document
exercising,  transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of Silicon's Collateral or in which Silicon has an interest; (c) Execute
on behalf of  Borrower,  any  invoices  relating  to any  Receivable,  any draft
against any Account  Debtor and any notice to any Account  Debtor,  any proof of
claim in bankruptcy,  any Notice of Lien, claim of mechanic's,  materialman's or
other lien, or assignment or satisfaction of mechanic's,  materialman's or other
lien; (d) Take control in any manner of any cash or non-cash items of payment or
proceeds of Collateral;  endorse the name of Borrower upon any  instruments,  or
documents,  evidence  of  payment  or  Collateral  that may come into  Silicon's
possession;  (e) Endorse all checks and other forms of  remittances  received by
Silicon;  (f) Pay,  contest or settle any lien,  charge,  encumbrance,  security
interest and adverse claim in or to any of the Collateral, or any judgment based
thereon,  or otherwise  take any action to terminate or discharge the same;  (g)
Grant extensions of time to pay,  compromise  claims and settle  Receivables and
General  Intangibles for less than face value and execute all releases and other
documents  in  connection  therewith;  (h) Pay any sums  required  on account of
Borrower's  taxes or to secure the release of any liens  therefor,  or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the  Collateral  and obtain  payment  therefor;  (j) Instruct any third party
having custody or control of any books or records  belonging to, or relating to,
Borrower to give Silicon the same rights of access and other rights with respect
thereto as Silicon has under this Agreement;  and (k) Take any action or pay any
sum required of Borrower  pursuant to this  Agreement  and any other  present or
future  agreements.  Any and all reasonable sums paid and any and all reasonable
costs,  expenses,  liabilities,  obligations  and  attorneys'  fees  incurred by
Silicon with respect to the  foregoing  shall be added to and become part of the
Obligations, shall be payable on demand, and shall bear interest at a rate equal
to the highest interest rate applicable to any of the  Obligations.  In no event
shall Silicon's rights under the foregoing power of attorney or any of Silicon's
other  rights  under this  Agreement  be deemed to indicate  that  Silicon is in
control of the business, management or properties of Borrower.

      7.5  APPLICATION OF PROCEEDS.  All proceeds  realized as the result of any
sale of the  Collateral  shall be  applied by  Silicon  first to the  reasonable
costs,  expenses,  liabilities,  obligations  and  attorneys'  fees  incurred by
Silicon in the  exercise  of its  rights  under  this  Agreement,  second to the
interest  due upon any of the  Obligations,  and third to the  principal  of the
Obligations,  in such order as Silicon shall  determine in its sole  discretion.
Any surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to Silicon for any


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          Silicon Valley Bank               Loan and Security Agreement
--------------------------------------------------------------------------------


deficiency.  If, Silicon, in its sole discretion,  directly or indirectly enters
into a deferred  payment or other credit  transaction  with any purchaser at any
sale of Collateral,  Silicon shall have the option,  exercisable at any time, in
its sole discretion,  of either reducing the Obligations by the principal amount
of purchase price or deferring the reduction of the Obligations until the actual
receipt by Silicon of the cash therefor.

      7.6 REMEDIES CUMULATIVE.  In addition to the rights and remedies set forth
in this Agreement, Silicon shall have all the other rights and remedies accorded
a secured party under the  Massachusetts  Uniform  Commercial Code and under all
other applicable laws, and under any other instrument or agreement now or in the
future  entered into between  Silicon and  Borrower,  and all of such rights and
remedies are cumulative and none is exclusive.  Exercise or partial  exercise by
Silicon  of one or more  of its  rights  or  remedies  shall  not be  deemed  an
election,  nor bar Silicon from subsequent  exercise or partial  exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver  thereof,  but all rights and remedies
shall continue in full force and effect until all of the  Obligations  have been
fully paid and performed.

8.   DEFINITIONS.
     -----------

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

      "Account Debtor" means the obligor on a Receivable.

      "Affiliate"  means,  with  respect to any  Person,  a  relative,  partner,
shareholder,  director,  officer,  or employee of such Person,  or any parent or
subsidiary  of such Person,  or any Person  controlling,  controlled by or under
common control with such Person.

      "Business Day" means a day on which Silicon is open for business.

      "Code" means the Uniform  Commercial  Code as adopted and in effect in the
Commonwealth of Massachusetts from time to time.

      "Collateral" has the meaning set forth in Section 2.1 above.

      "Default"  means any event  which with  notice or passage of time or both,
would constitute an Event of Default.

      "Deposit Account" has the meaning set forth in Section 9105 of the Code.

      "Eligible Receivables" means Receivables arising in the ordinary course of
Borrower's  business  from the sale of goods or  rendition  of  services,  which
Silicon, in its sole judgment, shall deem eligible for borrowing,  based on such
considerations  as  Silicon  may from  time to time  deem  appropriate.  Without
limiting the fact that the  determination of which  Receivables are eligible for
borrowing is a matter of  Silicon's  discretion,  the  following  (the  "Minimum
Eligibility  Requirements") are the minimum  requirements for a Receivable to be
an Eligible Receivable: (i) the Receivable must not be outstanding for more than
90 days from its invoice date, (ii) the Receivable  must not represent  progress
billings,  or be due  under a  fulfillment  or  requirements  contract  with the
Account Debtor,  (iii) the Receivable  must not be subject to any  contingencies
(including  Receivables  arising from sales on  consignment,  guaranteed sale or
other terms pursuant to which payment by the Account Debtor may be  conditional,
except as may otherwise be acceptable  to Silicon in its  discretion),  (iv) the
Receivable  must not be owing from an Account  Debtor with whom the Borrower has
any dispute  (whether or not  relating to the  particular  Receivable),  (v) the
Receivable must not be owing from an Affiliate of Borrower,  (vi) the Receivable
must not be owing from an Account  Debtor which is subject to any  insolvency or
bankruptcy  proceeding,  or  whose  financial  condition  is not  acceptable  to
Silicon,  or which,  fails or goes out of a material  portion  of its  business,
(vii) the Receivable must not be owing from the United States or any department,
agency  or  instrumentality  thereof  (unless  there  has  been  compliance,  to
Silicon's satisfaction, with the United States Assignment of Claims Act), (viii)
the  Receivable  must not be owing


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          Silicon Valley Bank               Loan and Security Agreement
--------------------------------------------------------------------------------


from an Account Debtor located outside the United States (unless pre-approved by
Silicon  in  its  discretion  in  writing,  or  backed  by a  letter  of  credit
satisfactory to Silicon, or FCIA insured satisfactory to Silicon),  and (ix) the
Receivable  must not be owing from an Account  Debtor to whom Borrower is or may
be liable for goods purchased from such Account Debtor or otherwise. Receivables
owing from one Account  Debtor will not be deemed  Eligible  Receivables  to the
extent they exceed 25% (35% with respect to  Receivables  owing by Merck) of the
total Receivables outstanding.  In addition, if more than 50% of the Receivables
owing  from an  Account  Debtor  are  outstanding  more than 90 days from  their
invoice date (without regard to unapplied credits) or are otherwise not eligible
Receivables,  then all Receivables owing from that Account Debtor will be deemed
ineligible  for  borrowing.  Silicon may, from time to time, in its  discretion,
revise  the  Minimum  Eligibility  Requirements,  upon  written  notice  to  the
Borrower.

      "Equipment"  means  all  of  Borrower's  present  and  hereafter  acquired
machinery,  molds, machine tools,  motors,  furniture,  equipment,  furnishings,
fixtures,  trade fixtures,  motor vehicles,  tools, parts, dyes, jigs, goods and
other  tangible  personal  property  (other  than  Inventory)  of every kind and
description used in Borrower's  operations or owned by Borrower and any interest
in  any  of  the  foregoing,  and  all  attachments,   accessories,  accessions,
replacements,  substitutions, additions or improvements to any of the foregoing,
wherever located.

      "Event of  Default"  means any of the events  set forth in Section  7.1 of
this Agreement.

      "General  Intangibles" means all general intangibles of Borrower,  whether
now owned or  hereafter  created or acquired  by  Borrower,  including,  without
limitation,  all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions,  designs, drawings, blueprints,  patents,
patent  applications,  trademarks  and the goodwill of the  business  symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation  presently  or hereafter  pending for any cause or claim  (whether in
contract,  tort  or  otherwise),  and all  judgments  now or  hereafter  arising
therefrom,  all claims of Borrower against  Silicon,  rights to purchase or sell
real or  personal  property,  rights  as a  licensor  or  licensee  of any kind,
royalties, telephone numbers, proprietary information,  purchase orders, and all
insurance policies and claims (including without limitation life insurance,  key
man insurance,  credit insurance,  liability  insurance,  property insurance and
other insurance),  tax refunds and claims,  computer programs,  discs, tapes and
tape files,  claims under guaranties,  security interests or other security held
by or  granted  to  Borrower,  all  rights  to  indemnification  and  all  other
intangible property of every kind and nature (other than Receivables).

      "Inventory"  means all of  Borrower's  now owned  and  hereafter  acquired
goods, merchandise or other personal property, wherever located, to be furnished
under any  contract  of  service  or held for sale or lease  (including  without
limitation  all raw  materials,  work in  process,  finished  goods and goods in
transit),  and all materials and supplies of every kind,  nature and description
which  are or  might  be used or  consumed  in  Borrower's  business  or used in
connection with the  manufacture,  packing,  shipping,  advertising,  selling or
finishing  of such  goods,  merchandise  or  other  personal  property,  and all
warehouse receipts,  documents of title and other documents  representing any of
the foregoing.

      "Obligations"  means  all  present  and  future  Loans,  advances,  debts,
liabilities,  obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon,  whether  evidenced by this  Agreement or any
note or  other  instrument  or  document,  including,  without  limitation,  the
Borrower's  obligations  pursuant to the IP Security Agreement,  whether arising
from an extension of credit, opening of a letter of credit, banker's acceptance,
foreign  exchange  contracts,  loan,  guaranty,  indemnification  or  otherwise,
whether direct or indirect  (including,  without  limitation,  those acquired by
assignment  and any  participation  by  Silicon  in  Borrower's  debts  owing to
others),  absolute  or  contingent,  due or to become  due,  including,  without
limitation,  all interest,  charges,  expenses,  fees,  attorney's fees,  expert
witness fees,  audit fees,  letter of credit fees,  collateral  monitoring fees,
closing fees, facility fees,  termination fees, minimum interest charges and any
other  sums  chargeable  to  Borrower  under this  Agreement  or under any other
present or future instrument or agreement between Borrower and Silicon.


                                       12


<PAGE>


          Silicon Valley Bank               Loan and Security Agreement
--------------------------------------------------------------------------------


      "Permitted  Liens"  means  the  following:  (i)  purchase  money  security
interests  in specific  items of  Equipment;  (ii)  leases of specific  items of
Equipment;  (iii)  liens for taxes not yet  payable;  (iv)  additional  security
interests and liens consented to in writing by Silicon,  which consent shall not
be unreasonably withheld; (v) security interests being terminated  substantially
concurrently  with  this  Agreement;  (vi)  liens  of  materialmen,   mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection  with the extension,  renewal or  refinancing of the  indebtedness
secured  by liens of the type  described  above in  clauses  (i) or (ii)  above,
provided  that any  extension,  renewal  or  replacement  lien is limited to the
property  encumbered  by the  existing  lien  and the  principal  amount  of the
indebtedness  being  extended,  renewed or  refinanced  does not  increase;  and
(viii)Liens in favor of customs and revenue  authorities which secure payment of
customs duties in connection  with the  importation of goods.  Silicon will have
the right to require, as a condition to its consent under subsection (iv) above,
that  the  holder  of  the  additional   security   interest  or  lien  sign  an
intercreditor  agreement on Silicon's then standard form,  acknowledge  that the
security  interest is subordinate to the security  interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so
long as any  Obligations  remain  outstanding,  and that Borrower agree that any
uncured default in any obligation  secured by the subordinate  security interest
shall also constitute an Event of Default under this Agreement.

      "Person" means any individual,  sole  proprietorship,  partnership,  joint
venture,   trust,   unincorporated   organization,   association,   corporation,
government, or any agency or political division thereof, or any other entity.

      "Receivables"  means all of Borrower's  now owned and  hereafter  acquired
accounts  (whether or not earned by  performance),  letters of credit,  contract
rights, chattel paper, instruments,  securities, securities accounts, investment
property,  documents  and all other  forms of  obligations  at any time owing to
Borrower,  all guaranties and other security therefor,  all merchandise returned
to or  repossessed  by  Borrower,  and all rights of stoppage in transit and all
other rights or remedies of an unpaid vendor, lienor or secured party.

      "Reserves" means, as of any date of determination, such amounts as Silicon
may from time to time  establish and revise in good faith reducing the amount of
Loans,  Letters  of  Credit  and  other  financial  accommodations  which  would
otherwise be available to Borrower under the lending formula(s)  provided in the
Schedule:  (a) to reflect events,  conditions,  contingencies or risks which, as
determined by Silicon in good faith,  do or may affect (i) the Collateral or any
other  property which is security for the  Obligations  or its value  (including
without  limitation  any increase in  delinquencies  of  Receivables),  (ii) the
assets,  business  or  prospects  of  Borrower  or any  Guarantor,  or (iii) the
security interests and other rights of Silicon in the Collateral  (including the
enforceability,  perfection and priority  thereof);  or (b) to reflect Silicon's
good faith belief that any collateral report or financial  information furnished
by or on behalf of  Borrower  or any  guarantor  to  Silicon is or may have been
incomplete,  inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which  Silicon  determines  in good faith  constitutes  an
Event of Default or may,  with notice or passage of time or both,  constitute an
Event of Default.

      Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated,  shall  have the  meanings  given to such  terms in  accordance  with
generally accepted accounting principles,  consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.

9.   GENERAL PROVISIONS.
     ------------------

      9.1 INTEREST  COMPUTATION.  In computing interest on the Obligations,  all
checks, wire transfers and other items of payment received by Silicon (including
proceeds of Receivables  and payment of the Obligations in full) shall be deemed
applied  by Silicon on account  of the  Obligations  three  Business  Days after
receipt by Silicon of  immediately  available  funds,  and,  for purposes of the
foregoing,  any such funds  received after 12:00 Noon on any day shall be deemed
received on the next Business Day.  Silicon shall not,  however,  be required to
credit  Borrower's


                                       13


<PAGE>


          Silicon Valley Bank               Loan and Security Agreement
--------------------------------------------------------------------------------


account for the amount of any item of payment which is unsatisfactory to Silicon
in its sole discretion,  and Silicon may charge  Borrower's loan account for the
amount of any item of payment which is returned to Silicon unpaid.

      9.2 APPLICATION OF PAYMENTS.  All payments with respect to the Obligations
may be applied, and in Silicon's sole discretion reversed and re-applied, to the
Obligations,  in such order and manner as Silicon  shall  determine  in its sole
discretion.

      9.3 CHARGES TO  ACCOUNTS.  Silicon  may, in its  discretion,  require that
Borrower  pay  monetary  Obligations  in  cash to  Silicon,  or  charge  them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable  to the  Loans.  Silicon  may also,  in its  discretion,  charge  any
monetary Obligations to Borrower's Deposit Accounts maintained with Silicon.

      9.4 MONTHLY  ACCOUNTINGS.  Silicon shall provide  Borrower monthly with an
account of  advances,  charges,  expenses  and  payments  made  pursuant to this
Agreement.  Such  account  shall be deemed  correct,  accurate  and  binding  on
Borrower  and an account  stated  (except for  reverses  and  reapplications  of
payments made and corrections of errors discovered by Silicon),  unless Borrower
notifies  Silicon in  writing  to the  contrary  within  thirty  days after each
account is rendered, describing the nature of any alleged errors or admissions.

      9.5  NOTICES.  All  notices to be given under this  Agreement  shall be in
writing and shall be given either  personally or by reputable  private  delivery
service or by  regular  first-class  mail,  or  certified  mail  return  receipt
requested,  addressed  to  Silicon or  Borrower  at the  addresses  shown in the
heading to this Agreement,  or at any other address designated in writing by one
party to the other party. Notices to Silicon shall be directed to the Commercial
Finance  Division,  to the  attention  of the  Division  Manager or the Division
Credit Manager.  All notices shall be deemed to have been given upon delivery in
the case of notices personally  delivered,  or at the expiration of one Business
Day following  delivery to the private  delivery  service,  or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.

      9.6  SEVERABILITY.  Should any provision of this  Agreement be held by any
court of competent  jurisdiction to be void or unenforceable,  such defect shall
not affect the remainder of this  Agreement,  which shall continue in full force
and effect.

      9.7  INTEGRATION.  This  Agreement  and  such  other  written  agreements,
documents  and  instruments  as may be executed in  connection  herewith are the
final,  entire and complete agreement between Borrower and Silicon and supersede
all  prior  and  contemporaneous   negotiations  and  oral  representations  and
agreements,  all of which are merged and integrated in this Agreement. There are
no oral understandings,  representations or agreements between the parties which
are not set forth in this Agreement or in other written agreements signed by the
parties in connection herewith.

      9.8  WAIVERS.  The  failure  of  Silicon  at any time or times to  require
Borrower to strictly  comply with any of the provisions of this Agreement or any
other present or future  agreement  between Borrower and Silicon shall not waive
or diminish any right of Silicon later to demand and receive  strict  compliance
therewith.  Any  waiver of any  default  shall  not  waive or  affect  any other
default,  whether prior or subsequent,  and whether or not similar.  None of the
provisions  of  this  Agreement  or any  other  agreement  now or in the  future
executed  by  Borrower  and  delivered  to Silicon  shall be deemed to have been
waived by any act or knowledge of Silicon or its agents or  employees,  but only
by a specific  written  waiver  signed by an  authorized  officer of Silicon and
delivered to Borrower.  Borrower waives demand,  protest,  notice of protest and
notice of  default  or  dishonor,  notice of payment  and  nonpayment,  release,
compromise,   settlement,   extension  or  renewal  of  any  commercial   paper,
instrument,  account, General Intangible,  document or guaranty at any time held
by Silicon on which  Borrower is or may in any way be liable,  and notice of any
action taken by Silicon, unless expressly required by this Agreement.

      9.9 NO LIABILITY FOR ORDINARY NEGLIGENCE.  Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims,  demands,


                                       14


<PAGE>


          Silicon Valley Bank               Loan and Security Agreement
--------------------------------------------------------------------------------


losses or damages, of any kind whatsoever,  made, claimed,  incurred or suffered
by Borrower or any other party through the ordinary  negligence  of Silicon,  or
any of its directors, officers, employees, agents, attorneys or any other Person
affiliated  with or  representing  Silicon,  but nothing  herein  shall  relieve
Silicon from liability for its own gross negligence or willful misconduct.

      9.10  AMENDMENT.  The terms and  provisions  of this  Agreement may not be
waived  or  amended,  except  in a  writing  executed  by  Borrower  and a  duly
authorized officer of Silicon.

      9.11  TIME  OF  ESSENCE.  Time is of the  essence  in the  performance  by
Borrower of each and every obligation under this Agreement.

      9.12 ATTORNEYS FEES AND COSTS.  Borrower shall  reimburse  Silicon for all
reasonable attorneys' fees and all filing,  recording,  search, title insurance,
appraisal,  audit, and other reasonable costs incurred by Silicon,  pursuant to,
or in connection  with, or relating to this Agreement  (whether or not a lawsuit
is filed),  including,  but not limited to, any reasonable  attorneys'  fees and
costs Silicon  incurs in order to do the  following:  prepare and negotiate this
Agreement and the documents  relating to this Agreement;  obtain legal advice in
connection with this Agreement or Borrower;  enforce, or seek to enforce, any of
its rights;  prosecute  actions against,  or defend actions by, Account Debtors;
commence,  intervene  in,  or defend  any  action or  proceeding;  initiate  any
complaint to be relieved of the automatic stay in bankruptcy;  file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim; examine,
audit,  copy, and inspect any of the  Collateral or any of Borrower's  books and
records;  protect, obtain possession of, lease, dispose of, or otherwise enforce
Silicon's security interest in, the Collateral;  and otherwise represent Silicon
in any  litigation  relating to Borrower.  In satisfying  Borrower's  obligation
hereunder  to  reimburse   Silicon  for  attorneys   fees,   Borrower  may,  for
convenience,  issue checks directly to Silicon's attorneys, Riemer & Braunstein,
LLP,  but  Borrower  acknowledges  and agrees that Riemer &  Braunstein,  LLP is
representing only Silicon and not Borrower in connection with this Agreement. If
either Silicon or Borrower files any lawsuit  against the other  predicated on a
breach of this  Agreement,  Silicon shall be entitled to recover its  reasonable
costs and attorneys' fees, including (but not limited to) reasonable  attorneys'
fees and costs incurred in the enforcement of,  execution upon or defense of any
order, decree, award or judgment. All attorneys' fees and costs to which Silicon
may be entitled pursuant to this Section 9.12 shall  immediately  become part of
Borrower's  Obligations,  shall be due on demand,  and shall bear  interest at a
rate equal to the highest interest rate applicable to any of the Obligations.

      9.13 BENEFIT OF  AGREEMENT.  The  provisions  of this  Agreement  shall be
binding  upon and inure to the benefit of the  respective  successors,  assigns,
heirs,  beneficiaries  and  representatives  of Borrower and Silicon;  provided,
however,  that  Borrower may not assign or transfer any of its rights under this
Agreement  without  the prior  written  consent of Silicon,  and any  prohibited
assignment  shall be void. No consent by Silicon to any assignment shall release
Borrower from its liability for the Obligations.

      9.14 RIGHT OF SET-OFF. Borrower and any guarantor hereby grant to Silicon,
a lien, security interest and right of setoff as security for all Obligations to
Silicon,  whether  now  existing  or  hereafter  arising  upon and  against  all
deposits,  credits, collateral and property, now or hereafter in the possession,
custody,  safekeeping  or control of Silicon or any entity  under the control of
Silicon  Valley  Bank or in  transit  to any of  them.  At any  time  after  the
occurrence and during the  continuation of any Event of Default,  without demand
or notice,  Silicon may set off the same or any part  thereof and apply the same
to any  liability  or  obligation  of  Borrower  and any  guarantor  even though
unmatured and  regardless of the adequacy of any other  collateral  securing the
loan.  ANY AND ALL RIGHTS TO REQUIRE  SILICON TO EXERCISE ITS RIGHTS OR REMEDIES
WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING
ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS,  CREDITS OR OTHER PROPERTY OF
THE BORROWER OR ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
WAIVED.


                                       15


<PAGE>


          Silicon Valley Bank               Loan and Security Agreement
--------------------------------------------------------------------------------


      9.15 JOINT AND SEVERAL  LIABILITY.  If Borrower  consists of more than one
Person,  their liability  shall be joint and several,  and the compromise of any
claim with,  or the release of, any Borrower  shall not  constitute a compromise
with, or a release of, any other Borrower.

      9.16  LIMITATION  OF  ACTIONS.  Any claim or cause of  action by  Borrower
against Silicon,  its directors,  officers,  employees,  agents,  accountants or
attorneys,  based upon, arising from, or relating to this Loan Agreement, or any
other  present  or  future  document  or  agreement,  or any  other  transaction
contemplated  hereby or  thereby or  relating  hereto or  thereto,  or any other
matter,  cause or thing whatsoever,  occurred,  done,  omitted or suffered to be
done by Silicon,  its directors,  officers,  employees,  agents,  accountants or
attorneys, shall be barred unless asserted by Borrower by the commencement of an
action or  proceeding  in a court of competent  jurisdiction  by the filing of a
complaint within one year after the first act,  occurrence or omission was known
or should have been known to Borrower  upon which such claim or cause of action,
or any part thereof,  is based, and the service of a summons and complaint on an
officer of  Silicon,  or on any other  person  authorized  to accept  service on
behalf of Silicon, within thirty (30) days thereafter. Borrower agrees that such
one-year  period is a reasonable and sufficient time for Borrower to investigate
and act upon any such claim or cause of action.  The  one-year  period  provided
herein shall not be waived, tolled, or extended except by the written consent of
Silicon in its sole discretion.  This provision shall survive any termination of
this Loan Agreement or any other present or future agreement.

      9.17 SECTION  HEADINGS;  CONSTRUCTION.  Section  headings are only used in
this  Agreement  for  convenience.  Borrower  and Silicon  acknowledge  that the
headings  may not  describe  completely  the  subject  matter of the  applicable
section,  and the headings  shall not be used in any manner to construe,  limit,
define  or  interpret  any  term  or  provision  of  this  Agreement.  The  term
"including",  whenever used in this  Agreement,  shall mean  "including (but not
limited to)". This Agreement has been fully reviewed and negotiated  between the
parties  and no  uncertainty  or  ambiguity  in any  term or  provision  of this
Agreement shall be construed strictly against Silicon or Borrower under any rule
of construction or otherwise.

      9.18 GOVERNING LAW;  JURISDICTION;  VENUE. This Agreement and all acts and
transactions  hereunder and all rights and  obligations  of Silicon and Borrower
shall  be  governed  by the  laws of the  Commonwealth  of  Massachusetts.  As a
material  part of the  consideration  to Silicon  to enter into this  Agreement,
Borrower  (i) agrees  that all  actions  and  proceedings  relating  directly or
indirectly to this Agreement shall, at Silicon's  option,  be litigated in state
or  federal  courts  located   within   Massachusetts;   (ii)  consents  to  the
jurisdiction  and venue of any such court and  consents to service of process in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii)  waives any and all rights  Borrower may have to object to the
jurisdiction  of any such court,  or to transfer or change the venue of any such
action or proceeding,  provided,  however, that if for any reason Silicon cannot
avail  itself of such  courts in the  Commonwealth  of  Massachusetts,  Borrower
accepts jurisdiction of the courts and venue in Santa Clara, California.


                                       16


<PAGE>


          Silicon Valley Bank               Loan and Security Agreement
--------------------------------------------------------------------------------


      9.19 Mutual  Waiver of Jury Trial.  BORROWER AND SILICON EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING  BASED UPON,  ARISING OUT
OF, OR IN ANY WAY  RELATING TO, THIS  AGREEMENT  OR ANY OTHER  PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT  BETWEEN SILICON AND BORROWER,  OR ANY CONDUCT,  ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS,  ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER,  IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

      IN WITNESS  WHEREOF,  the parties  hereto have caused this Agreement to be
executed  as  a  sealed  instrument  under  the  laws  of  the  Commonwealth  of
Massachusetts as of the date first above written.

Borrower:

COLLAGENEX PHARMACEUTICALS, INC.


By  /s/  Brian M. Gallagher
   -------------------------------------
   President or Vice President


By  /s/  Nancy C. Broadbent
   -------------------------------------
   Secretary or Ass't Secretary


Silicon:

SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST


By  /s/  John V. Atanasoff
   -------------------------------------
   Title Vice President

618472.3



                                       17
<PAGE>


SILICON VALLEY BANK


                                   Schedule to
                           Loan and Security Agreement


Borrower:         COLLAGENEX PHARMACEUTICALS, INC.
Address:          41 University Drive
                  Newtown, Pennsylvania 18940

Date:             March 19, 2001


This Schedule forms an integral part of the Loan and Security  Agreement between
Silicon Valley Bank and the above-borrower of even date.
================================================================================

1.  CREDIT LIMIT

      (Section 1.1): An amount not to exceed the lesser of (A) or (B), below:

      ==========================================================================
      (A)
            ====================================================================

            (i)  $3,000,000 at any one time  outstanding  (the  "Maximum  Credit
            Limit"); minus
================================================================================
            ====================================================================
            (ii) the aggregate  amounts then undrawn on all outstanding  letters
            of credit,  foreign exchange contracts,  or any other accommodations
            issued or  incurred,  or caused to be issued or  incurred by Silicon
            for the account and/or benefit of the Borrower.
================================================================================
      (B)
            ====================================================================
            (i) 80% of the amount of Borrower's Eligible Receivables (as defined
            in Section 8 above) (the "Receivables Loans"); minus
================================================================================
            ====================================================================
            (ii) the aggregate  amounts then undrawn on all outstanding  letters
            of credit,  foreign exchange contracts,  or any other accommodations
            issued or  incurred,  or caused to be issued or  incurred by Silicon
            for the account and/or benefit of the Borrower.
================================================================================

      Letter of Credit/Foreign Exchange Contract Sublimit
      (Section 1.5):    $1,500,000

2.  INTEREST.

      Interest Rate (Section 1.2):

      A rate equal to the "Prime  Rate" in effect from time to time,  plus 1.50%
per annum.  Interest  shall be calculated on the basis of a 360-day year for the
actual number of days elapsed.  "Prime Rate" means the rate  announced from time
to time by Silicon as its "prime rate;" it is a base rate upon which other rates
charged by Silicon are based,  and it is not necessarily the best rate available
at Silicon. The interest rate applicable to the Obligations shall change on each
date there is a change in the Prime Rate.

      Minimum Monthly
      Interest (Section 1.2):    N/A.
================================================================================


                                       1


<PAGE>


          Silicon Valley Bank        Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------


3.  FEES (Section 1.4):

      Loan Fee:    $30,000.00 payable concurrently herewith..

      Collateral Handling Fee:    $800.00 per month, payable in arrears.

      Unused Line Fee: In the event,  in any calendar month (or portion  thereof
at the  beginning  and end of the term  hereof),  the  average  daily  principal
balance of the Loans outstanding during the month is less than the amount of the
Maximum Credit Limit, Borrower shall pay Silicon an unused line fee in an amount
equal to 0.50% per annum on the  difference  between  the amount of the  Maximum
Credit Limit and the average daily  principal  balance of the Loans  outstanding
during the month,  which unused line fee shall be computed and paid monthly,  in
arrears, on the first day of the following month.
================================================================================

4.  MATURITY DATE

      (Section 6.1):    One year from the date of this Agreement.
================================================================================

5.  FINANCIAL COVENANTS

      (Section   5.1):   Borrower  shall  comply  with  each  of  the  following
covenant(s).  Compliance shall be determined as of the end of each month, except
as otherwise specifically provided below:

      a. Minimum Tangible Net Worth:

      Borrower  shall  maintain a Tangible Net Worth of not less than the sum of
      (i) plus (ii) below:
      ==========================================================================
            (i)(a)  $5,250,000.00,  from the date of this  Agreement  until  and
      including June 30, 2001;
================================================================================
            (b) $4,000,000.00,  plus 75 % of the Borrower's cumulative quarterly
      profitability, thereafter;
      ==========================================================================
      (ii) 75% of all consideration received after the date hereof from proceeds
      from the  issuance of any equity  securities  of the  Borrower  and/or any
      subordinated debt incurred by the Borrower.
================================================================================

In no event  shall the amount of this  Minimum  Tangible  Net Worth  covenant be
decreased.

      ==========================================================================
      b.    Availability  in excess of borrowings  must be $800,000.00 or higher
            for a loan balance of $1,500,000.00 or less to be maintained without
            automatic repayment from cash collections.
================================================================================
      ==========================================================================
      c.    Borrower must maintain a minimum of  $2,000,000.00  in cash,  net of
            borrowings  under this  Agreement,  at all times  during the term of
            this Agreement.
================================================================================

      Definitions.  For  purposes  of the  foregoing  financial  covenants,  the
following term shall have the following meaning:

            "Liabilities"  shall have the meaning  ascribed thereto by generally
accepted accounting principles.

            "Tangible  Net Worth"  shall mean the  excess of total  assets  over
total liabilities,  determined in accordance with generally accepted  accounting
principles, with the following adjustments:


                                       2

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          Silicon Valley Bank        Schedule to Loan and Security Agreement
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            (A)  there  shall be  excluded  from  assets:  (i)  notes,  accounts
receivable  and other  obligations  owing to the  Borrower  from its officers or
other  Affiliates,  and (ii) all assets which would be  classified as intangible
assets  under  generally  accepted  accounting  principles,   including  without
limitation goodwill,  licenses,  patents,  trademarks,  trade names, copyrights,
capitalized software and organizational costs, licenses and franchises

            (B) there shall be excluded from liabilities: all indebtedness which
is  subordinated  to the  Obligations  under a  subordination  agreement in form
specified  by  Silicon  or  by  language  in  the   instrument   evidencing  the
indebtedness which is acceptable to Silicon in its discretion.
================================================================================

6.  REPORTING.

    (Section 5.3):

        Borrower shall provide Silicon with the following:

        1. Monthly  Receivable  agings,  aged by invoice  date,  and  receivable
reconciliations, within fifteen days after the end of each month.

        2.  Monthly  accounts   payable  agings,   aged  by  invoice  date,  and
outstanding or held check  registers,  if any, within fifteen days after the end
of each month.

        3. Weekly transaction reports.

        4. Monthly unaudited financial statements,  as soon as available, and in
any event within thirty days after the end of each month.

        5. Monthly Compliance Certificates,  within thirty days after the end of
each month,  in such form as Silicon  shall  reasonably  specify,  signed by the
Chief Financial Officer of Borrower, certifying that as of the end of such month
Borrower was in full  compliance  with all of the terms and  conditions  of this
Agreement,  and setting forth calculations showing compliance with the financial
covenants  set forth in this  Agreement  and such other  information  as Silicon
shall reasonably request, including, without limitation, a statement that at the
end of such month there were no held checks.

        6. Quarterly unaudited financial statements,  as soon as available,  and
in any event  within  forty-five  days after the end of each  fiscal  quarter of
Borrower.

        7. Annual operating budgets (including income statements, balance sheets
and cash flow  statements,  by month) for the  upcoming  fiscal year of Borrower
within thirty days prior to the end of each fiscal year of Borrower.

        8. Annual financial statements,  as soon as available,  and in any event
within 120 days  following  the end of  Borrower's  fiscal  year,  certified  by
independent certified public accountants acceptable to Silicon.

        9. Such  additional  reports and information as Silicon may from time to
time specify.


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          Silicon Valley Bank        Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------


================================================================================

7.  COMPENSATION

      (Section 5.5): Without Silicon's prior written consent, Borrower shall not
pay  total  compensation,   including  salaries,   withdrawals,  fees,  bonuses,
commissions,   drawing   accounts  and  other  payments,   whether  directly  or
indirectly,  in money or otherwise,  during any fiscal year to all of Borrower's
executives,  officers  and  directors  (or any  relative  thereof) as a group in
excess of 140% of the total amount thereof in the prior fiscal year.
================================================================================

8.  BORROWER INFORMATION:

      Prior Names of
      Borrower                    Collagenex, Inc.

      (Section 3.2):

      Prior Trade
      Names of Borrower           None

      (Section 3.2):

      Existing Trade
      Names of Borrower           None

      (Section 3.2):

      Other Locations and
      Addresses (Section 3.3):   CORD Logistics, Inc.
                                 15 Ingram Boulevard
                                 LaVergne, Tennessee 37086

      Material Adverse           None
      Litigation (Section 3.10):

================================================================================
9.  OTHER COVENANTS

      (Section  5.1):  Borrower  shall  at  all  times  comply  with  all of the
following additional covenants:

      (1) Banking  Relationship.  In order for  Silicon to properly  monitor its
loan  arrangement  with the Borrower,  Borrower  shall at all times maintain its
primary banking relationship with Silicon.

      (2)  Subordination of Inside Debt. All present and future  indebtedness of
the Borrower to its officers,  directors and shareholders ("Inside Debt") shall,
at all times, be  subordinated  to the  Obligations  pursuant to a subordination
agreement on Silicon's  standard  form.  Borrower  represents  and warrants that
there is no Inside Debt  presently  outstanding.  Prior to incurring  any Inside
Debt in the  future,  Borrower  shall  cause the person to whom such Inside Debt
will be owed to execute  and  deliver to Silicon a  subordination  agreement  on
Silicon's standard form.


                                       4


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          Silicon Valley Bank        Schedule to Loan and Security Agreement
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      (3)  Subordination  Agreements.  Except for a certain  Note payable of the
Borrower entered into in April 1999 with Textron  Financial  Corporation and now
held by The CIT Group to fund the  purchase of certain  Equipment,  Fixtures and
Furniture for the Borrower's  corporate  offices in Newtown,  Pennsylvania,  the
balance  of which,  as of the date  hereof  is  approximately  $102,000.00,  the
Borrower  represents  and  warrants to Silicon  that there is no debt  presently
outstanding to any third party, and, the Borrower will not incur any such future
debt without the prior written consent of Silicon,  which consent may be granted
by  Silicon  on  such  terms  and  conditions  as  Silicon  may  require  in its
discretion.

      (4) Intellectual Property Security Agreement.  As a condition precedent to
the effectiveness of this Agreement,  Borrower shall have executed and delivered
an  Intellectual  Property  Security  Agreement  (the "IP Security  Agreement"),
substantially in the form attached hereto as Exhibit B.


                                       5


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          Silicon Valley Bank        Schedule to Loan and Security Agreement
--------------------------------------------------------------------------------


      Borrower:                                       Silicon:

COLLAGENEX PHARMACEUTICALS, INC.                SILICON VALLEY BANK, d/b/a
                                                      SILICON VALLEY EAST

By /s/ Brian M. Gallagher                       By /s/ John V. Atanasoff
   -----------------------------                   -----------------------------
   President or Vice President                     Title   Vice President


By /s/ Nancy C. Broadbent
   -----------------------------
   Secretary or Ass't Secretary

618472.3


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