**Exhibit 10.1**

**MASTERSECURITY AGREEMENT**

**No. 6081133**

Dated as of December 26, 2006 **(“Agreement”)**

**THISAGREEMENT**is betweenOxford Finance Corporation (together with its successors and assigns, if any, ***“Secured Party”***) and **Pharmacopeia Drug Discovery, Inc. (*“Debtor”*)*.***Secured Party has anoffice at 133 N. Fairfax Street, Alexandria, VA 22314. Debtor is a corporationorganized and existing under the laws of the State of Delaware. Debtor’smailing address and principal place of business is 3000 Eastpark Boulevard,Cranbury, NJ 08512.

**1.****                  ****CREATION OF SECURITY INTEREST.**

Debtorgrants to Secured Party, its successors and assigns, a security interest in andagainst all property listed on any collateral schedule now or in the futureannexed to or made a part of this Agreement *(**“Collateral Schedule”**),*and in and against alladditions, attachments, accessories and accessions to such property, allsubstitutions, replacements or exchanges therefore, and all insurance and/orother proceeds thereof (all such property is individually and collectivelycalled the ***“Collateral”****).*This security interest is given tosecure the payment and performance of all debts, obligations and liabilitieshereunder of any kind whatsoever of Debtor to Secured Party, now existing orarising in the future, including but not limited to the payment and performanceof certain Promissory Notes front time to time identified on any CollateralSchedule (collectively ***“Notes”*****and each a ***“Note”****),*andany renewals, extensions and modifications of such debts, obligations andliabilities (such Notes, debts, obligations and liabilities are called the ***“Indebtedness”****).*Debtor acknowledges that,notwithstanding that the Note(s) may be paid in full, this Agreement shallcontinue to secure the payment and performance of all other debts, fees,obligations and liabilities hereunder of any kind whatsoever of Debtor toSecured Party, now existing or arising in the future, and that Secured Partyshall be under no obligation to release the Collateral unless and until all suchIndebtedness of Debtor to Secured Party has been paid and satisfied; provided,however, Secured Party, in its sole and exclusive discretion, may elect torelease some of the Collateral without prejudice to Secured Party’s securityinterest in the remaining Collateral.

**2.****                  ****REPRESENTATIONS, WARRANTIES AND COVENANTS OF DEBTOR.**

Debtorrepresents, warrants and covenants as of the date of this Agreement and as ofthe date of each Collateral Schedule that:

(a)               Due Organization. Debtor’s exact legal name is as set forth in the preamble of thisAgreement and Debtor is, and will remain, duly organized, existing and in goodstanding under the laws of the State set forth in the preamble of thisAgreement, has its chief executive offices at the location specified in the preamble,and is, and will remain duly qualified and licensed in every jurisdictionwherever necessary to carry on its business and operations, except where thefailure to be or remain so duly qualified and licensed would not, individuallyor in the aggregate, reasonably be expected to have a material adverse effecton the business and operations of Debtor;

(b)              Power and Capacity to Enter Into and PerformObligations.  Debtor has adequate power and capacity toenter into, and to perform its obligations under this Agreement, eachCollateral Schedule, each Note and any other documents evidencing, or given inconnection with, any of the Indebtedness (all of the foregoing are called the ***“Debt Documents”****);*

(c)               Due Authorization.  ThisAgreement and the other Debt Documents have been duly authorized, executed anddelivered by Debtor and constitute legal, valid and binding agreementsenforceable in accordance with their terms, except to the extent that theenforcement of remedies may be limited under general principles of equitywhether applied in a court of law or a court of equity and under applicablebankruptcy, insolvency, moratorium and similar laws affecting creditors’ rightsand remedies generally;

(d)              Approvals and Consents.  Noapproval, consent or withholding of objections is required from anygovernmental authority or instrumentality with respect to the entry into, orperformance by Debtor of any of the Debt Documents, except any alreadyobtained;

(e)               No Violations or Defaults.  Theentry into, and performance by, Debtor of the Debt Documents will not (i)violate any of the organizational documents of Debtor or any judgment, order,law or regulation applicable to Debtor, or (ii) result in any breach of byDebtor or constitute a default by Debtor under any contract to which Debtor isa party, or result in the creation of any lien, claim or encumbrance on any ofDebtor’s property (except for liens in favor of Secured Party) pursuant to anyindenture, mortgage, deed of trust, bank loan, credit agreement, or otheragreement or instrument to which Debtor is a party;

(f)                 Litigation. There are no suits or proceedings pending in court or before anycommission, board or other administrative agency against or affecting Debtorwhich could, in the aggregate, have a material adverse effect on Debtor, itsbusiness or operations, or its ability to perform its obligations under theDebt Documents, nor does Debtor have reason to believe that any such suits orproceedings are threatened;

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(g)              Solvency. The fair salable value of Debtor’s assets (including goodwill minusdisposition costs) exceeds the fair value of its liabilities; the Debtor is notleft with unreasonably small capital after the transactions in this Agreementor any Collateral Schedule and Debtor is able to pay its debts (including tradedebts) as they mature.

 (h)           FinancialStatements Prepared In Accordance with GAAP.  All financial statementsdelivered to Secured Party in connection with the Indebtedness have beenprepared in accordance with Generally Accepted Accounting Principles (“GAAP”),and since the date of the most recent financial statement, there has been nomaterial adverse change in Debtor’s financial condition;

 (i)               Useof Collateral.  The Collateral is not, and will not be, usedby Debtor for personal, family or household purposes;

 (j)               Collateralin Good Condition and Repair.  The Collateral is, and will remain, in goodcondition and repair and Debtor will not be negligent in its care and use;

 (k)            Locationof Collateral.  Except for any laptop computers used by theCustomer offsite in the ordinary course of business, all of the tangibleCollateral is located at the locations set forth on each Collateral Schedule.Debtor shall give the Secured Party 30 days prior written notice of anyrelocation of any Collateral;

(l)                  Ownership of Collateral.  Debtor is, and will remain, the sole andlawful owner, and in possession of, the Collateral, and has the sole right andlawful authority to grant the security interest described in this Agreement;

(m)            Encumbrances.  The Collateral is, and willremain, free and clear of all liens, claims and encumbrances of any kindwhatsoever, except for Permitted Liens;

(n)              Intellectual Property Rights. Debtor will protect, defend and maintain the validity and enforceabilityof the Intellectual Property that is material to Debtor’s business andoperations and promptly advise Secured Party in writing of materialinfringements.

(o)              Taxes.  All federal, state and localtax returns required to be filed by Debtor have been filed with the appropriategovernmental agencies and all taxes due and payable by Debtor have been timelypaid, except where the failure to timely pay would not, individually or in theaggregate, reasonably be expected to have a material adverse effect on the businessand operations of Debtor. Debtor will pay when due all taxes, assessments andother liabilities except as contested in good faith and by appropriateproceedings and for which adequate reserves have been established;

(p)              No Defaults.  No event or condition existsunder any material agreement, instrument or document to which Debtor is a partyor is subject, or by which Debtor or any of its properties are bound, whichconstitutes a default or an event of default thereunder on the part of Debtor,or, with the giving of notice, passage of time, or both, would constitute adefault or event of default thereunder on the part of Debtor;

(q)              Certification of Financial Information.  Allreports, certificates, schedules, notices and financial information submittedby Debtor to the Secured Party pursuant to this Agreement shall be certified astrue and correct by the president or chief financial officer of Debtor; and

(r)                 Notice of Material Adverse Change. Debtor shall give the Secured Party prompt written notice of any event,occurrence or other matter which (a) has resulted in a material adverse changein its financial condition, business operations, prospects, productdevelopment, technology, or business or contractual relations with thirdparties of Debtor, or (b) which would impair the ability of Debtor to performits obligations hereunder, or (c) which would impair the ability of SecuredParty to enforce the Indebtedness or realize upon the Collateral.

(s)               Audits.  Debtor shall allow SecuredParty to audit Debtor’s Collateral at Debtor’s expense. Such audits will beconducted no more often than every twelve (12) months unless a default hasoccurred and is continuing.

(t)                 Perfection Certificate. Debtor has previously delivered to the Secured Party a certificatesigned by the Debtor and entitled “Perfection Certificate” (the ***“Perfection Certificate”****).*The Debtor represents and warrants tothe Secured Party as follows: (a) the Debtor’s exact legal name is thatindicated on the Perfection Certificate and on the signature page hereof, (b)the Debtor is an organization of the type, and is organized in the jurisdictionset forth in the Perfection Certificate, (c) the Perfection Certificateaccurately sets forth the Debtor’s organizational identification number or accuratelystates that the Debtor has none, (d) the Perfection Certificate accurately setsforth the Debtor’s place of business or, if more than one, its chief executiveoffice, as well as the Debtor’s mailing address, if different, (e) all otherinformation set forth on the Perfection Certificate pertaining to the Debtor isaccurate and complete, and (f) that there has been no change in any informationprovided in the Perfection Certificate since the date on which it was executedby the Debtor.

(u)              Primary Accountand Wire Transfer Instructions.  Debtor maintains its Primary Account (the ***“Primary Operating*Account*”****)*andthe Wire Transfer Instructions for the Primary Operating Account are asfollows:

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Debtor hereby agrees thatLoans will be advanced to the account specified above and regularly scheduledpayments will be automatically debited from the same account.

**3.****                  ****COLLATERAL.**

The Debtor, covenants andagrees that, so long as any of the Debt Documents shall remain in effect, orunless the Secured Party shall otherwise consent in writing:

(a)               Possession of Collateral; Inspection ofCollateral.  Until the declaration of any default, Debtorshall remain in possession of the Collateral; except that Secured Party shallhave the right to possess (i) any chattel paper or instrument that constitutesa part of the Collateral, and (ii) any other Collateral in which Secured Party’ssecurity interest may be perfected only by possession. Secured Party mayinspect any of the Collateral during normal business hours after giving Debtorreasonable prior notice. Debtor is notified hereby that Secured Party shallinspect the Collateral set forth in each Collateral Schedule within seven (7)days following the date of each funding of a Collateral Schedule.

(b)              Maintenance of Collateral. Debtor shall (i) use the Collateral only in its trade or business, (ii) maintain all of the Collateral in good operating order and repair,normal wear and tear excepted, (iii) use and maintain the Collateral only incompliance with manufacturers’ recommendations and all applicable laws, and(iv) keep all of the Collateral free and clear of all liens, claims and encumbrances(except for Permitted Liens).

(c)               Disposition of Collateral. Except with the prior written consent ofSecured Party, Debtor agrees it shall not (i) part with possession of any ofthe Collateral (except to Secured Party or for maintenance and repair), (ii)remove any of the Collateral from the continental United States, or (iii) sell,rent, lease, mortgage, license, grant a security interest in or otherwisetransfer or encumber (except for Permitted Liens) any of the Collateral, otherthan in connection with a transaction in which all or substantially all theassets of Debtor or more than fifty percent (50%) of the outstanding equitysecurities of Debtor are sold, provided, that in the event of any dispositionof Collateral resulting from the consummation of a transaction described inthis Section 3(c)(iii), then, at the sole discretion and option of SecuredParty, Secured Party may declare all of the Indebtedness immediately due andpayable, and in the event of such declaration by Secured Party, Debtor agreesto prepay within sixty (60) days all amounts of principal then outstandingunder each Note issued to Secured Party, together with all accrued interest andany applicable prepayment premium due to Secured Party as set forth in eachNote.

(d)              Taxes.   Debtor shall pay promptly whendue all taxes, license fees, assessments and public and private charges leviedor assessed on any of the Collateral, on its use, or on this Agreement or anyof the other Debt Documents. At its option, Secured Party may discharge taxes,liens, security interests or other encumbrances at any time levied or placed onthe Collateral and may pay for the maintenance, insurance and preservation ofthe Collateral and effect compliance with the terms of this Agreement or any ofthe other Debt Documents. Debtor agrees to reimburse Secured Party, on demand,all reasonable costs and expenses incurred by Secured Party in connection withsuch payment or performance and agrees that such reimbursement obligation shallconstitute Indebtedness.

(e)               Books and Records. Debtor shall, at all times, keep accurate and complete records of theCollateral, and Secured Party shall have the right to inspect and make copiesof all of Debtor’s books and records relating to the Collateral during normalbusiness hours, after giving Debtor reasonable prior notice.

(f)                 Third Party Possession of Collateral. Debtor agrees and acknowledges that anythird person who may at any time possess all or any portion of the Collateralshall be deemed to hold, and shall hold, the Collateral as the agent of, and aspledge holder for, Secured Party. Secured Party may at any time give notice toany third person described in the preceding sentence that such third person isholding the Collateral as the agent of, and as pledge holder for, the SecuredParty.

(g)              Change of Address, Name or Jurisdiction. The Debtor has not at any time within thepast four (4) months either changed its name or changed the state ofjurisdiction in which it is organized and existing, nor has it maintained itschief executive office or any of the Collateral at any other location, exceptas set forth above, and shall not do so hereafter except upon prior writtennotice to the Secured Party. The Secured Party shall be entitled to rely uponthe foregoing unless it receives 14 days’ advance written notice of a change inthe Debtor’s name, state of jurisdiction, address of the Debtor’s chiefexecutive offices or location of the Collateral.

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(h)              Fixtures.  Debtor shall not permit anyitem of the Collateral to become a fixture to real estate or an accession toother property without the prior written consent of the Secured Party, and theCollateral is now and shall at all times remain personal property except withthe Secured Party’s prior written consent. If any of the Collateral is or willbe attached to real estate in such a manner as to become a fixture underapplicable state law and if such real estate is encumbered, the Debtor willobtain from the holder of each Lien or encumbrance a written consent and subordinationto the security interest hereby granted, or a written disclaimer of anyinterest in the Collateral, in a form acceptable to the Secured Party.

(i)                  Indebtedness Payments. Debtor shall not (i) prepay, redeem, purchase, defease or otherwisesatisfy in any manner prior to the scheduled repayment thereof any AdditionalIndebtedness for borrowed money or lease obligations, (ii) amend, modify orotherwise change the terms of any Additional Indebtedness for borrowed money orlease obligations so as to accelerate the scheduled repayment thereof or (iii)repay any notes to officers, directors or shareholders except as expresslyprovided for in a duly executed subordination agreement in favor of, andapproved by Secured Party.

(j)                  Additional Indebtedness. Debtor shall not create, incur, assume orpermit to exist any Additional Indebtedness except Permitted Indebtedness.

**4.****                  ****INSURANCE.**

(a)               Risk of Loss. Debtor shall at all times bear the entire risk of any loss, theft,damage to, or destruction of, any of the Collateral from any cause whatsoever.

(b)              Insurance Requirements. Debtor agrees to keep the Collateral insured at all times against lossor damage by fire and extended coverage perils, theft, burglary, and for any orall Collateral, which are vehicles, for risk of loss by collision, and ifrequested by Secured Party, against such other risks as Secured Party mayreasonably require. The insurance coverage shall be in an amount no less thanthe full replacement value of the Collateral, and deductible amounts, insurersand policies shall be acceptable to Secured Party. Debtor shall deliver toSecured Party any policies and certificates of insurance evidencing suchcoverage as may be requested by Secured Party. Each policy shall name SecuredParty as a loss payee, shall provide for coverage to Secured Party regardlessof the breach by Debtor of any warranty or representation made therein, shallnot be subject to co-insurance, and shall provide that coverage may not becanceled or altered by the insurer except upon thirty (30) days prior writtennotice by Debtor to Secured Party. Proceeds of any of insurance in excess of$1,000,000 in connection with any single occurrence or any single claim shallbe applied, at the option of Secured Party, to repair or replace the Collateralor to reduce any of the Indebtedness.

**5.****                  ****REPORTS.**

(a)               Notice of Events. Debtor shall promptly notify Secured Partyof (i) any change in the name of Debtor, (ii) any change in the state of itsincorporation or registration, (iii) any relocation of its chief executiveoffices, (iv) any of the Collateral being relocated, lost, stolen, missing,destroyed, materially damaged or worn out, (v) any lien, claim or encumbranceother than Permitted Liens attaching to or being made against any of theCollateral, or (vi) any occurrence of any default pursuant to Section 7herein.

(b)              Financial Statements, Reports and Certificates. Debtor will deliver to Secured Party withinninety (90) days of the close of each fiscal year of Debtor, Debtor’s completefinancial statements including a balance sheet, income statement, statement ofshareholders’ equity and statement of cash flows, each prepared in accordancewith GAAP consistently applied, certified by a recognized firm of certifiedpublic accountants satisfactory to Secured Party. Debtor will deliver toSecured Party copies of Debtor’s quarterly financial statements including abalance sheet, income statement and statement of cash flows, each prepared byDebtor in accordance with GAAP consistently applied by Debtor and certified byDebtor’s chief financial officer, within forty-five (45) days after the closeof each of Debtor’s fiscal quarter. Debtor will deliver to Secured Party copiesof all Forms l0-K and l0-Q, if any, within 30 days after the dates on which theyare filed with the Securities and Exchange Commission. Debtor will deliver toSecured Party promptly upon request of Secured Party, in form satisfactory toSecured Party, such other and additional information as Secured Party mayreasonably request from time to time.

**6.****                  ****FURTHER ASSURANCES.**

(a)               Further Assurances Regarding SecurityInterests.  Debtor shall, upon request of Secured Party,furnish to Secured Party such further information, execute and deliver toSecured Party such documents and instruments (including, without limitation,Uniform Commercial Code financing statements) and shall do such other acts andthings as Secured Party may at any time reasonably request relating to theperfection or protection of the security interest created by this Agreement orfor the purpose of carrying out the intent of this Agreement. Without limitingthe foregoing, Debtor shall cooperate and do all acts deemed necessary oradvisable by Secured Party to continue in Secured Party a perfected firstsecurity interest in the Collateral, and shall obtain and furnish to SecuredParty any subordinations, releases, landlord waivers, lessor waivers, mortgageewaivers, or control agreements, and similar documents as may be from time to timerequested by, and in form and substance satisfactory to, Secured Party.

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(b)              Authorization To File Financing Statements. Debtor shall perform any and all acts reasonably requested by theSecured Party to establish, maintain and continue the Secured Party’s securityinterest and liens in the Collateral, including but not limited to, executingor authenticating financing statements and such other instruments and documentswhen and as reasonably requested by the Secured Party. Debtor hereby authorizesSecured Party through any of Secured Party’s employees, agents or attorneys tofile any and all financing statements, including, without limitation, anyoriginal filings, continuations, transfers or amendments thereof required toperfect Secured Party’s security interest and liens in the Collateral under theUCC without authentication or execution by Debtor. Debtor hereby irrevocablyauthorizes the Secured Party at any time and from time to time to file in anyfiling office in any Uniform Commercial Code jurisdiction any initial financingstatement(s) and amendments thereto that (a) indicate the Collateral (i) issubject to Secured Party’s security interest, regardless of whether anyparticular asset comprised in the Collateral falls within the scope of Article9 of the Uniform Commercial Code of the State or such jurisdiction, or (ii) asbeing of an equal or lesser scope or with greater detail, and (b) provide anyother information required by part 5 of Article 9 of the Uniform CommercialCode of the State or such other jurisdiction for the sufficiency or filingoffice acceptance of any financing statement or amendment, including (i)whether the Debtor is an organization, the type of organization and anyorganization identification number issued to the Debtor, and (ii) in the caseof a financing statement filed as a fixture filing, a sufficient description ofreal property to which the Collateral relates. The Debtor agrees to furnish anysuch information to the Secured Party promptly upon the Secured Party’srequest.

(c)               Payment of Costs, Fees and Expenses. Debtor shall timely pay in full, uponrequest of Secured Party, all reasonable costs, feet and expenses incurred bySecured Party to establish, maintain, and continue the Secured Party’s securityinterest and liens in the Collateral, including but not limited to lien andrelated due diligence searches, verification of corporate good standing,preparation, execution, transmission and recording of documents, inspections,appraisals, attorney fees and any and all other related costs, fees andexpenses of Secured Party to establish, maintain, and continue the SecuredParty’s security interest and liens in the Collateral.

(d)              Indemnification. Debtor shall indemnify and defend theSecured Party, its successors and assigns, and their respective directors,officers and employees, from and against all claims, actions and suits(including, without limitation, related reasonable attorneys’ fees) of any kindwhatsoever arising, directly or indirectly, in connection with any of theCollateral or the Debt Documents; provided, however, that such indemnificationand defense shall not extend to claims, actions, suits and losses arising,directly or indirectly from the bad faith, gross negligence or willfulmisconduct of the Secured Party or its Affiliates.

**7.****                  ****DEFAULT AND REMEDIES.**

(a)               Defaults. Debtor shall be in default under this Agreement and each of the otherDebt Documents if****any one of the following should occur:
| (i)    | Debtor breaches  its obligation to pay when due any installment or other amount due or coming  due under any of the Debt Documents;                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (ii)   | Debtor, without  the prior written consent of Secured Party, and other than in connection with  a transaction in which all or substantially all the assets of Debtor or more  than fifty percent (50%) of the outstanding equity securities of Debtor are  sold, does sell, rent, lease, license, mortgage, grant a security interest in,  or otherwise transfer or encumber, or allow Liens (except for Permitted  Liens) upon, any of the Collateral (subject to terms and conditions of  Section 3(c)(iii);                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (iii)  | Debtor breaches  any of its insurance obligations under Section 4;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (iv)   | Debtor breaches  any of its obligations under Sections 2(m), 2 (o), 2(q) or Sections 3(c),  3(f), 3(i), 3(j), or 3(k);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (v)    | Debtor breaches  any of its other non-payment obligations under any of the Debt Documents and  fails to cure that breach within thirty (30) days after it has occurred;                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (vi)   | Any warranty,  representation or statement made by Debtor in any of the Debt Documents or  otherwise in connection with any of the Indebtedness shall be false or  misleading in any material respect;                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (vii)  | Any of the  Collateral is subjected to attachment, execution, levy, seizure or  confiscation in any legal proceeding or otherwise, if any legal or  administrative proceeding is commenced against Debtor or any of the  Collateral, which in the good faith judgment of Secured Party subjects any of  the Collateral to a material risk of attachment, execution, levy, seizure or confiscation  and no bond is posted or protective order obtained to negate such risk or if  there is a material impairment in the perfection or priority of the Secured  Party’s security interest in the Collateral; |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (viii) | Debtor breaches  or is in default under any other agreement between Debtor and Secured Party;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (ix)   | Debtor or any  guarantor or other obligor for any of the Indebtedness (collectively ***“Guarantor”***) dissolves,  terminates its existence, becomes insolvent or ceases to do business as a  going concern;                                                                                                                                                                                                                                                                                                                                                                                          |

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| (x)     | If Debtor or any  Guarantor is a natural person, and Debtor or any such Guarantor dies or  becomes incompetent;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (xi)    | A receiver is  appointed for all or of any part of the property of Debtor or any Guarantor,  or Debtor or any Guarantor makes any assignment for the benefit of creditors;                                                                                                                                                                                                                                                                                                                                                                                                                       |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (xii)   | Debtor or any  Guarantor files a petition under any bankruptcy, insolvency or similar law,  or any such petition is filed against Debtor or any Guarantor and is not  dismissed within forty-five (45) days;                                                                                                                                                                                                                                                                                                                                                                                     |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (xiii)  | Debtor’s  improper filing of an amendment or termination statement relating to a filed  financing statement describing the Collateral;                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (xiv)   | Debtor shall  merge with or consolidate into any other entity or sell all or substantially  all of its assets or in any manner terminate its existence (subject to terms  and conditions of Section 3(c)(iii);                                                                                                                                                                                                                                                                                                                                                                                   |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (xv)    | There shall be a  change in the ownership of Debtor’s stock such that Debtor is no longer subject  to the reporting requirements of Section 13 of the Securities Exchange Act of  1934 or no longer has a class of equity securities registered under Section  12 of the Securities Exchange Act of 1934;                                                                                                                                                                                                                                                                                   |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (xvi)   | Debtor defaults  under any agreement to pay Additional Indebtedness or any other financing  arrangement between Debtor and a third party;                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (xvii)  | Secured Party  shall have determined in its sole and good faith judgment that (a) it is the  clear intention of Debtor’s investors to not continue to fund the Debtor in  the amounts and timeframe necessary to enable Debtor to satisfy the  Indebtedness as it becomes due and payable; or                                                                                                                                                                                                                                                                                               |
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (xviii) | Secured Party  shall have determined in its sole and good faith judgment that there has been  a material adverse change in the financial condition, business, operations,  prospects, product development, technology, or business or contractual  relations with third parties of Debtor from the date hereof, or a change or  event shall have occurred which would impair the ability of Debtor to perform  its obligations hereunder or under any of the other financing agreements to  which it is a party or of Secured Party to enforce the Indebtedness or  realize upon the Collateral. |

 

(b)         Acceleration.  If Debtor is in default, theSecured Party, at its option, may declare any or all of the Indebtedness to beimmediately due and payable, without demand or notice to Debtor or anyGuarantor (provided that if there is a default as a result of a bankruptcy orinsolvency all Indebtedness shall become immediately due and payable withoutany action by Secured Party).  Theaccelerated obligations and liabilities shall bear interest (both before andafter any judgment) until paid in full at the Default Rate.

(c)          Rights and Remedies.  SecuredParty shall have all of the rights and remedies of a Secured Party under the UniformCommercial Code, and under any other applicable law.  Without limiting the foregoing, Secured Partyshall have the right to (i) notify any account debtor of Debtor or any obligoron any instrument which constitutes part of the Collateral to make payment tothe Secured Party, (ii) with or without legal process, enter any premises wherethe Collateral may be and take possession of and remove the Collateral from thepremises or store it on the premises, (iii) sell the Collateral at public or private sale, in whole or in part, andhave the right to bid and purchase at said sale, or (iv) lease or otherwisedispose of all or part of the Collateral, applying proceeds from suchdisposition to the obligations then in default. If requested by Secured Party,Debtor shall promptly assemble the Collateral and make it available to SecuredParty at a place to be designated by Secured Party, which is reasonablyconvenient to both parties. Secured Party may also render any or all of theCollateral unusable at the Debtor’s premises and may dispose of such Collateralon such premises without liability for rent or costs. Any notice that SecuredParty is required to give to Debtor under the Uniform Commercial Code of thetime and place of any public sale or the time after which any private sale orother intended disposition of the Collateral is to be made shall be deemed toconstitute reasonable notice if such notice is given to the last known addressof Debtor at least five (5) days prior to such action. Upon the occurrence andduring the continuation of a default, Debtor hereby appoints Secured Party asDebtor’s attorney-in-fact, with full authority in Debtor’s place and stead andin Debtor’s name or otherwise, from time to time in Secured Party’s sole andarbitrary discretion, to take any action and to execute any instrument whichSecured Party may deem necessary or advisable to accomplish the purpose of thisAgreement. Secured Party is granted a non-exclusive royalty free license to useDebtor’s Intellectual Property in connection with Secured Party’s dispositionof Collateral in the exercise of Secured Party’s rights or remedies hereunder.

(d)         Application of Proceeds.  Theproceeds and/or avails of the Collateral, or any part thereof, and the proceedsand the avails of any remedy hereunder (as well as any other amounts of anykind held by Secured Party, at the time of or received by Secured Party afterthe occurrence of a default hereunder) shall be paid so and applied as follows:

a.                  First, to the payment of out-of-pocket costs and expenses, including allamounts expended to preserve the value of the Collateral, all costs ofrepossession, storage, and disposition including without limitation reasonableattorneys’, appraisers’, and auctioneers’ fees, of foreclosure or suit, if any,and of such sale and the exercise of any other rights or remedies, and of allproper fees, expenses, liability and advances, including 

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reasonable legal expenses andattorneys’ fees, incurred or made hereunder by Secured Party, including withoutlimitation, Secured Party’s Expenses;

b                    Second, to the payment to Secured Party of the amount then owing or unpaid onthe Loans for scheduled payments, any accrued and unpaid interest, and allother indebtedness (provided, however, if such proceeds shall beinsufficient to pay in full the whole amount so due, owing or unpaid upon theLoans, then to the unpaid interest thereon, then to the outstanding principalamount of the Loans, and then to the payment of other amounts then payable toSecured Party under any of the Debt Documents or otherwise); and

c.                  Third, to the payment of the surplus, if any, to Debtor, its successors andassigns, or to whomsoever may be lawfully entitled to receive the same.

(e)         Fees and Costs.  Debtoragrees to pay all reasonable attorneys’ fees and other costs incurred bySecured Party in connection with the enforcement, assertion, defense orpreservation of Secured Party’s rights and remedies under this Agreement, or ifprohibited by law, such lesser sum as may be permitted. Debtor further agreesthat such fees and costs shall constitute Indebtedness.

(f)           Remedies Cumulative.  SecuredParty’s rights and remedies under this Agreement or otherwise arising arecumulative and may be exercised singularly or concurrently. Neither the failurenor any delay on the part of the Secured Party to exercise any right, power orprivilege under this Agreement shall operate as a waiver, nor shall any singleor partial exercise of any right, power or privilege preclude any other orfurther exercise of that or any other right, power or privilege. SECURED PARTYSHALL NOT BE DEEMED TO HAVE WAIVED ANY OF ITS RIGHTS UNDER THIS AGREEMENT ORUNDER ANY OTHER AGREEMENT, INSTRUMENT OR PAPER SIGNED BY DEBTOR UNLESS SUCHWAIVER IS EXPRESSED IN WRITING AND SIGNED BY SECURED PARTY. A waiver on any oneoccasion shall not be construed as a bar to or waiver of any right or remedy onany future occasion.

(g)        WAIVER OF JURY TRIAL. DEBTOR AND SECURED PARTY UNCONDITIONALLYWAIVE THEIR RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPONOR ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER DEBT DOCUMENTS, ANY OF THEINDEBTEDNESS SECURED HEREBY, ANY DEALINGS BETWEEN DEBTOR AND SECURED PARTY RELATINGTO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/ORTHE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN DEBTOR AND SECURED PARTY.THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALLDISPUTES THAT MAY BE FILED IN ANY COURT. THIS WAIVER IS IRREVOCABLE. THISWAIVER MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. THE WAIVER ALSO SHALLAPPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TOTHIS AGREEMENT, ANY OTHER DEBT DOCUMENTS, OR TO ANY OTHER DOCUMENTS ORAGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED TRANSACTION. THISAGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

 

**8.****                  ****MISCELLANEOUS.**

(a)         Assignment. This Agreement and/or any of the other Debt Documents may be assigned,in whole or in part, by Secured Party without notice to Debtor. Debtor agreesthat if Debtor receives written notice of an assignment from Secured Party,Debtor will pay all amounts payable under any assigned Debt Documents to suchassignee or as instructed in writing by Secured Party. Debtor also agrees toconfirm in writing receipt of the notice of assignment as may be reasonablyrequested by Secured Party or assignee.

(b)        Notices. All notices to be given in connection with this Agreement shall be inwriting, shall be addressed to the parties at their respective addresses setforth in this Agreement (unless and until a different address may be specifiedin a written notice to the other party), and shall be deemed given (i) on thedate of receipt if delivered in hand or by facsimile transmission, (ii) on thenext business day after being sent by express mail, and (iii) on the fourthbusiness day after being sent by regular, registered or certified mail. As usedherein, the term “business day” shall mean and include any day other thanSaturdays, Sundays, or other days on which commercial banks in New York, NewYork are required or authorized to be closed.

(c)         Correction of Errors. Secured Party may correct patent errors andfill in all blanks in this Agreement, any Collateral Schedule or in any Noteconsistent with the agreement of the parties.

(d)        Time is of the Essence. Time is of the essence of this Agreement.This Agreement shall be binding, jointly and severally, upon all partiesdescribed as the “Debtor” and their respective heirs, executors,representatives, successors and assigns, and shall inure to the benefit ofSecured Party, its successors and assigns.

(e)         Entire Agreement. This Agreement and the Debt Documentsconstitute the entire agreement between the parties with respect to the subjectmatter of this Agreement and supersede all prior understandings (whetherwritten, verbal or implied) with respect to such subject matter. NEITHER THISAGREEMENT NOR ANY OF THE DEBT DOCUMENTS SHALL BE CHANGED OR TERMINATED ORALLYOR BY COURSE OF CONDUCT, BUT ONLY BY A WRITING SIGNED BY BOTH PARTIES. Sectionheadings contained in this Agreement have been included for 

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convenience only, and shallnot affect the construction or interpretation of this Agreement. This Agreementis the result of negotiations between and has been reviewed by each of Debtorand Secured Party executing this Agreement as of the date hereof and theirrespective counsel; accordingly, this Agreement shall be deemed to be theproduct of the parties hereto, and no ambiguity shall be construed in favor ofor against Debtor or Secured Party.

(f)           Termination of Agreement. This Agreement shall continue in full forceand effect until all of the Indebtedness has been indefeasibly paid in full toSecured Party or its assignee; provided, that Debtor’s indemnityobligations set forth in Section 6(c) shall survive until all applicablestatute of limitations periods with respect to actions that may be broughtagainst Secured Party have run. The surrender, upon payment or otherwise, ofany Note or any of the other documents evidencing any of the Indebtedness shallnot affect the right of Secured Party to retain the Collateral for such otherIndebtedness as may then exist or as it may be reasonably contemplated willexist in the future. This Agreement shall automatically be reinstated ifSecured Party is ever required to return or restore the payment of all or anyportion of the Indebtedness (all as though such payment had never been made).Secured Party shall, at Debtor’s sole cost and expense, execute such furtherdocuments and take such further actions as may be reasonably necessary toeffect the release of its security interests contemplated by this paragraph,including duly executing and delivering termination statements for filing inall relevant jurisdictions under the Code.

(g)        CHOICE OF LAW. DEBTOR AGREES THAT SECURED PARTY AND/OR ITSSUCCESSORS AND ASSIGNS SHALL HAVE THE OPTION BY WHICH STATE LAWS THIS AGREEMENTSHALL BE GOVERNED AND CONSTRUED: (A) THE LAWS OF THE COMMONWEALTH OF VIRGINIA;OR (B) IF COLLATERAL HAS BEEN PLEDGED TO SECURE THE LIABILITIES, THEN BY THELAWS OF THE STATE OR STATES WHERE THE COLLATERAL IS LOCATED, AT SECURED PARTY’SOPTION. THIS CHOICE OF STATE LAWS IS EXCLUSIVE TO THE SECURED PARTY. DEBTORSHALL NOT HAVE ANY OPTION TO CHOOSE THE LAWS BY WHICH THIS AGREEMENT SHALL BEGOVERNED. DEBTOR ACKNOWLEDGES THAT THIS AGREEMENT IS BEING SIGNED BY THESECURED PARTY IN PARTIAL CONSIDERATION OF SECURED PARTY’S RIGHT TO ENFORCE INTHE JURISDICTION STATED ABOVE. DEBTOR CONSENTS TO JURISDICTION IN THECOMMONWEALTH OF VIRGINIA OR THE STATE IN WHICH ANY COLLATERAL IS LOCATED ANDVENUE IN ANY FEDERAL OR STATE COURT IN THE COMMONWEALTH OF VIRGINIA OR THESTATE IN WHICH COLLATERAL IS LOCATED FOR SUCH PURPOSES AND WAIVES ANY AND ALLRIGHTS TO CONTEST SAID JURISDICTION AND VENUE AND ANY OBJECTION THAT SAIDCOUNTY IS NOT CONVENIENT. DEBTOR WAIVES ANY RIGHTS TO COMMENCE ANY ACTIONAGAINST SECURED PARTY IN ANY JURISDICTION EXCEPT VIRGINIA, OR IF SECURED PARTYCHOOSES TO LITIGATE IN A STATE WHERE COLLATERAL IS LOCATED THEN IN SUCH COUNTYAND STATE; PROVIDED, HOWEVER, THAT SUCH WAIVER SHALL NOT APPLY WITH RESPECT TOANY ACTIONS AGAINST SECURED PARTY ARISING DIRECTLY OR INDIRECTLY PROM THE BADFAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SECURED PARTY.

(h)        Power of Attorney. To facilitate direct collection, but onlyafter a default has occurred and is continuing, the Debtor hereby appoints theSecured Party and any officer or employee of the Secured Party, as the SecuredParty may from time to time designate, as attorney-in-fact for the Debtor to(a) endorse the name of the Debtor in favor of the Secured Party upon any andall checks, drafts, money orders, notes, acceptances or other evidences of paymentor Collateral that may come into the Secured Party’s possession; (b) do allacts and things necessary to carry out this Agreement and the transactionscontemplated hereby, including signing the name of the Debtor on anyinstruments required by law in connection with the transactions contemplatedhereby and on financing statements as permitted by the Virginia UniformCommercial Code. The Debtor hereby ratifies and approves all acts of suchattorneys-in-fact, and neither the Secured Party nor any other suchattorney-in-fact shall be liable for any acts of commission or omission, or forany error of judgment or mistake of fact or law of any such attorney-in-fact.This power, being coupled with an interest, is irrevocable so long as the Loanremains unsatisfied, or any Debt Document remains effective, as solelydetermined by the Secured Party.

(i)            Loss, Depreciation or Other Damage. The Secured Party shall not be liable for orprejudiced by any loss, depreciation or other damage to Collateral unlesscaused by the Secured Party’s willful and malicious act, and the Secured Partyshall have no duty to take any action to preserve or collect any Collateral.

(j)            Demand Protest. Debtor waives demand, protest, notice ofprotest, notice of default or dishonor, notice of payment and nonpayment,notice of any default, nonpayment at maturity, release, compromise, settlement,extension, or renewal of accounts, documents, instruments, chattel paper, andguarantees at any time held by Secured Party on which Debtor may in any way beliable.

**9.****                 ****DEFINITIONS.**

Asused herein, the following terms, when initial capital letters are used, shallhave the respective meanings set forth below. In addition, all terms defined inthe Code shall have the meanings given therein unless otherwise defined herein.

Defined Terms. As used in this Agreement, the followingterms shall have the following meanings, unless the context otherwise requires:

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“Additional Indebtedness”means, with respect to Debtor or any of its subsidiaries, the aggregate amountof, without duplication, (a) all obligations of such Person for borrowed money,(b) all obligations of such Person evidenced by bonds, debentures, notes orother similar instruments, (c) all obligations of such Person to pay thedeferred purchase price of property or services (excluding trade payables agedless than one hundred eighty (180) days), (d) all capital lease obligations ofsuch Person, (e) all obligations or liabilities of others secured by a Lien onany asset of such Person, whether or not such obligation or liability isassumed, (f) all obligations or liabilities of others guaranteed by suchPerson, and (g) any other obligations or liabilities which are required by GAAPto be shown as debt on the balance sheet of such Person. Unless otherwiseindicated, the term “Additional Indebtedness” shall include all Indebtedness ofDebtor and all of its subsidiaries.

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

***“Code”***meansthe Virginia Uniform Commercial Code (including revised Article 9 thereof).

***“Collateral”***has the meaning given such capitalized term in Section 1.

***“Collateral Schedule”***has the meaning given such capitalized term in Section 1.

***“Debt Documents****”*hasthe meaning given such capitalized term in Section 2(b).

***“Default Rate”***is the lower of eighteen percent (18%) per annum or the maximum rate notprohibited by applicable law.

*“**GAAP**”*has the meaning given in Section 2(h).

***“Indebtedness”***has the meaning given such capitalized term in Section 1.

***“Intellectual Property”***shall mean (a) all of the Debtor’s right, title and interest, whethernow owned or existing or hereafter acquired or arising, in and to all domesticand foreign copyrights, copyright registrations and copyright applications,whether or not registered or filed with any governmental authority, togetherwith (i) all renewals thereof, (ii) all present and future rights of the Debtorunder all present and future license agreements relating thereto, whether theDebtor in licensee or licensor thereunder, (iii) all income, royalties, damagesand payments now or hereafter due and/or payable to the Debtor thereunder orwith respect thereto, including, without limitation, damages and payments forpast, present or future infringements thereof, (iv) all of the Debtor’s presentand future claims, causes of action and rights to sue for past, present orfuture infringements thereof, and (v) all rights corresponding theretothroughout the world (collectively **“CopyrightRights**”); (b) all of the Debtor’s right, title and interest, whethernow owned or existing or hereafter acquired or arising, in and to all UnitedStates and foreign patents, and pending and abandoned United States and foreignpatent applications, including, without limitation, the inventions andimprovements described or claimed therein, together with (i) any reissues,divisions, continuations, certificates of re-examination, extensions andcontinuations-in-part thereof, (ii) all present and future rights of the Debtorunder all present and future license agreements relating thereto, whether theDebtor is licensee or licensor thereunder, (iii) all income, royalties, damagesand payments now or hereafter due and/or payable to the Debtor thereunder orwith respect thereto, including, without limitation, damages and payments forpast, present or future infringements thereof, (iv) all of the Debtor’s presentand future claims, causes of action and rights to sue for past, present orfuture infringements thereof, and (v) all rights corresponding theretothroughout the world (collectively **“PatentRights**”); (c) all of the Debtor’s right, title and interest, whethernow owned or existing or hereafter acquired or arising, in and to all domesticand foreign trademarks, trademark registrations, trademark applications andtrade names, whether or not registered or filed with any governmentalauthority, together with (i) all renewals thereof, (ii) all present and futurerights of the Debtor under all present and future license agreements relatingthereto, whether the Debtor is licensee or licensor thereunder, (iii) allincome, royalties, damages and payments now or hereafter due and/or payable tothe Debtor thereunder or with respect thereto, including, without limitation,damages and payments for past, present or future infringements thereof, (iv)all of the Debtor’s present and future claims, causes of action and rights tosue for past, present or future infringements thereof, and (v) all rightscorresponding thereto throughout the world (collectively **“Trademark Rights”)**; (d**)**all present andfuture licenses and license agreements of the Debtor, and all rights of theDebtor under or in connection therewith, whether the Debtor is licensee orlicensor thereunder, including, without limitation, any present or futurefranchise agreements under which the Debtor is franchisee or franchisor,together with (i) all renewals thereof, (ii) all income, royalties, damages andpayments now or hereafter due and/or payable to the Debtor thereunder or withrespect thereto, including, without limitation, damages and payments for past,present or future infringements thereof, (iii) all claims, causes of action andrights to sue for past, present or future infringements thereof, and (iv) allrights corresponding thereto throughout the world (collectively **“License Rights”**); (e) all present and future trade secrets of the Debtor; and (f)all other present and future intellectual property of the Debtor.

*“**Lien(s**)”*shall mean any voluntary or involuntarymortgage, pledge, deed of trust, assignment, security interest, encumbrance,hypothecation, lien, or charge of any kind (including any conditional sale orother title retention agreement, any financing lease having substantially thesame economic effect as any of the foregoing, and the filing of, or agreementto give, any financing statement under the Uniform Commercial Code orcomparable law of any jurisdiction).

*“**Loan**”*means an advance of credit by Secured Party toDebtor.

*“**Note**”*has the meaning given such capitalized term inSection 1.

“Permitted Indebtedness”means and includes: (i) Indebtedness of Debtor to Secured Party, (ii)Additional Indebtedness arising from the endorsement of instruments in theordinary course of business, (iii) Additional Indebtedness existing on the datehereof and set forth in Schedule B, (iv) Subordinated Indebtedness, (v)Additional Indebtedness secured by Liens permitted under clause (vi) of thedefinition of Permitted Liens, and (vi) Additional Indebtedness secured byliens that (A) do not attach to the collateral and (B) do not exceed, in theaggregate, $10,000,000 in principal, at any time.

***“Permitted Liens”***means: (i) liens in favor of Secured Party, (ii) liens for taxes not yetdue or for taxes being contested in good faith and which do not involve, in thejudgment of Secured Party, any risk of the sale, forfeiture or loss of any ofthe Collateral, (iii) inchoate material men’s, mechanic’s, repairmen’s andsimilar liens arising by operation of law in the normal course of business foramounts which are not delinquent, (iv) Liens existing on the date hereof andset forth in Schedule B, (v) licenses of Intellectual Property for theordinary course of business, and (vi) Liens upon any Equipment acquired byDebtor after the date hereof to secure (i) the purchase price of such equipmentor other personal property, or (ii) lease obligations or indebtedness incurredsolely for the purpose of financing the acquisition of such Equipment; providedthat (A) such Liens are 

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confined solely to theEquipment so acquired and the amount secured does not exceed the acquisitionprice thereof, and (B) no such Lien shall be created, incurred, assumed orsuffered to exist in favor of Debtor’s officers, directors or shareholdersholding five percent (5%) or more of Debtor’s equity securities.

***“Person”***inany individual, sole proprietorship, partnership, limited liability company, jointventure, company association, trust, unincorporated organization, association,corporation, institution, public benefit corporation, firm, joint stockcompany, estate, entity or government agency.

*“**Primary Operating******Account”*** has the meaning given such capitalized term inSection 2(w).

***“Secured Party’s Expenses”*** means all reasonable costs or expenses(including reasonable attorneys’ fees and expenses) incurred in connection withthe preparation, negotiation, documentation, administration and funding of theDebt Documents; and Secured Party’s reasonable attorneys’ fees, costs andexpenses incurred in amending, modifying, enforcing or defending the Debt Documents(including fees and expenses of appeal or review), including the exercise ofany rights or remedies afforded hereunder or under applicable law, whether ornot suit is brought, whether before or after bankruptcy or insolvency,including without limitation all fees and costs incurred by Secured Party inconnection with Secured Party’s enforcement of its rights in a bankruptcy orinsolvency proceeding filed by or against Debtor or its property.

***“Subordinated Indeb******tedness”***means Additional Indebtedness subordinated tothe Indebtedness of Debtor to Secured Party on terms and conditions acceptableto Secured Party in its sole discretion.

**IN WITNESSWHEREOF**, Debtor andSecured Party, intending to be legally bound hereby, have duly executed thisAgreement in one or more counterparts, each of which shall be deemed to be anoriginal, as of the day and year first aforesaid.
| SECURED PARTY:                  | DEBTOR:                               |
|---------------------------------|---------------------------------------|
|                            |                                  |
| **Oxford  Finance Corporation** | **Pharmacopeia Drug Discovery, Inc.** |
| ** **                      | ** **                            |
| By:                             | /s/ Michael J.  Altenburger           |   | By: | /s/ Brian M. Posner |   |
|                            |                                  |
| Name:                           | Michael J.  Altenburger               |   | Name: Brian M. Posner |
|                            |                                  |
| Title:                          | Chief Financial  Officer              |   | Title: Executive Vice President, Chief Financial  Officer and |
|                            | Treasurer                             |
|                                 |                                       |  |  |  |  |  |  |  |

 

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**SCHEDULE****A**

**FORM OF**

**COMPLIANCECERTIFICATE**

Oxford Finance Corporation

133 N. Fairfax Street

Alexandria,VA 22314

Re:                             *<Debtor>*

Gentlemen:

Referenceis made to the Master Security Agreement dated as of                   ,200     , (as the same have been and may be amended from time to time inwriting, the **“Loan Agreement”**, the capitalized terms used herein asdefined therein), between Oxford Finance Corporation and *<Debtor>*(the **“Company”**).

The undersigned authorized representative of the Company herebycertifies that in accordance with the terms and conditions of the LoanAgreement, the Company is in complete compliance for the financial reportingperiod ending                        with all required financial reporting under the Loan Agreement, except as notedbelow. Attached herewith are the required documents supporting the foregoingcertification. The undersigned further certifies that the accompanyingfinancial statements have been prepared in accordance with Generally AcceptedAccounting Principles, and are consistent from one period to the next, exceptas explained below.

*Indicate**compliance status**by circling Yes/No under “Complies”*
| REPORTING REQUIREMENT                                    | ** ** | **REQUIRED**             | ** ** | **COMPLIES** |
|----------------------------------------------------------|------------|--------------------------|------------|--------------|
| Interim  Financial Statements                            |       | Quarterly within 45 days |       | YES / NO     |
| Audited  Financial Statements                            |       | FYE within 90 days       |       |         |
|                                                     |       |                     |       |         |
| Date of most  recent Board-approved                      |       |                     |       |         |
| budget/plan                                              |       |                     |       |         |   |   |   |   |
| Submitted with  Borrowing Request                        |       |                     |       | YES / NO     |
|                                                     |       |                     |       |         |
| Any change in  budget/plan since prior Borrowing Request |       | YES / NO                 |       |         |
|                                                          |            |                          |            |              |  |  |  |  |

 

**EXPLANATIONS**
|     | Very truly yours, |
|----------|-------------------|
|     |              |
| * * | *<Debtor>*  |
|     | By:               |   |   |
|     | Name:             |
|     | Title: *          |

 

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*         Must be executed by Debtor’s Chief Financial Officer.

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**SCHEDULE B**

Listing of Additional Indebtedness
| ** **         | ** ** | **Type of Indebtedness (i.e. equipment** | ** ** | **Amount of Indebtedness as of date** | ** ** | ** **        |
|--------------------|------------|------------------------------------------|------------|---------------------------------------|------------|-------------------|
| **Payee**          | ** ** | **financing/lease, etc.)**               | ** ** | **of this Agreement**                 | ** ** | **Payment Terms** |
| None               |       | None                                     |       | None                                  |       | None              |
|     |       |                                     |       |                                  |       |              |
|     |       |                                     |       |                                  |       |              |

 

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