Document:

<PAGE>

                                                                    Exhibit 10.7

                           LOAN AND SECURITY AGREEMENT

Agreement No. _______                                   Dated as of June 8, 1998

                                     between

                           MMC/GATX PARTNERSHIP NO. 1
                             Four Embarcadero Center
                                   Suite 2200
                             San Francisco, CA 94111

                                    as Lender

                                       and

                              PHARSIGHT CORPORATION
                            a California corporation
                        299 California Avenue, Suite 300
                               Palo Alto, CA 94306

                                   as Borrower

                            CREDIT AMOUNT: $2,000,000

                        Treasury Note Maturity: 30 months

                          Loan Margin: 800 basis points

                   Commitment Termination Date: June 30, 1998

      The defined terms and information set forth on this cover page are a part
of the Loan and Security Agreement, dated as of the date first written above
(this "Agreement"), entered into by and between MMC/GATX PARTNERSHIP NO. I
("Lender") and the borrower ("Borrower") set forth above. The terms and
conditions of this Agreement agreed to between Lender and Borrower are as
follows:
<PAGE>

                                     ARTICLE I
                                  INTERPRETATION

1.01. Certain Definitions. Unless otherwise indicated in this Agreement or any
other Operative Document, the following terms, when used in this Agreement or
any other Operative Document, shall have the following respective meanings:

      "Affiliate" means (i) any director, officer or employee of such Person,
(ii) any Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person, and (iii) any Person
beneficially owning or holding 10% or more of any class of voting securities of
such Person or any corporation of which such Person beneficially owns or holds,
in the aggregate, 10% or more of any class of voting securities. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise. The term
"Affiliate," when used herein without reference to any Person, shall mean an
Affiliate of Borrower.

      "Borrower's Home State" shall mean the state in which Borrower's principal
place of business is located.

      "Business Day" shall mean any day other than a Saturday, Sunday or public
holiday under the laws of California, Illinois or Borrower's Home State or other
day on which banking institutions are authorized or obligated to close in
California, Illinois or Borrower's Home State.

      "Claim" has the meaning given to that term in Section 10.03.

      "Collateral" has the meaning given to that term in Section 5.01.

      "Commitment Fee" has the meaning given to that term in Section 2.04.

      "Commitment Termination Date" shall mean the date specified on the cover
page of this Agreement.

      "Credit Amount" shall mean the maximum amount that Lender is committed to
lend (if the conditions specified in Schedule 3 are satisfied), which amount is
set forth following such term on the cover page of this Agreement.

      "Current Assets" shall mean the aggregate amount of all of the
consolidated assets of Borrower and its Subsidiaries that would, in accordance
with GAAP, be classified on a balance sheet as current assets.

      "Current Liabilities" shall mean the aggregate amount of all of the
consolidated liabilities of Borrower and its Subsidiaries that would, in
accordance with GAAP, be classified on a balance sheet as current liabilities.

      "Default" shall mean any event which with the passing of time or the
giving of notice or both would become an Event of Default hereunder.

      "Default Rate" shall mean the per annum rate of interest equal to the
higher of (i) 15% or (ii) the Prime Rate plus 4%, but such rate shall in no
event be more than the highest rate permitted by applicable law.

      "Disclosure Schedule" has the meaning set forth in the definition of the
term "Permitted Liens."

      "Environmental Law" shall mean the Resource Conservation and Recovery Act
of 1987, the Comprehensive Environmental Response, Compensation and Liability
Act, and any other federal, state or local

                                       1
<PAGE>

statute, law, ordinance, code, rule, regulation, order or decree (in each case
having the force of law) regulating or imposing liability or standards of
conduct concerning any Hazardous Material, as now or at any time hereafter in
effect.

      "Equity Securities" of any Person shall mean (a) all common stock,
preferred stock, participations, shares, partnership interests or other equity
interests in and of such Person (regardless of how designated and whether or not
voting or non-voting) and (b) all warrants, options and other rights to acquire
any of the foregoing.

      "Event of Default" has the meaning given to that term in Section 9.01.

      "Existing Loan Agreement" shall mean the Loan and Security Agreement,
dated as of March 31, 1998, between Borrower and Lender.

      "Funding Date" shall mean the date on which the Loan is made to or on
account of Borrower under this Agreement.

      "GAAP" shall mean generally accepted accounting principles and practices
as in effect in the United States of America from time to time, consistently
applied.

      "Hazardous Material" means any hazardous, dangerous or toxic constituent
material, pollutant, waste or other substance, whether solid, liquid or gaseous,
which is regulated by any federal, state or local governmental authority.

      "Indebtedness" shall mean, with respect to Borrower or any Subsidiary, the
aggregate amount of, without duplication, (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person to pay the deferred purchase price of property or services (excluding
trade payables aged less than 180 days), (d) all capital lease obligations of
such Person, (e) all obligations or liabilities of others secured by a lien on
any asset of such Person, whether or not such obligation or liability is
assumed, (f) all obligations or liabilities of others guaranteed by such Person;
and (g) any other obligations or liabilities which are required by GAAP to be
shown as debt on the balance sheet of such Person. Unless otherwise indicated,
the term "Indebtedness" shall include all Indebtedness of Borrower and the
Subsidiaries.

      "Intellectual Property" shall mean all of Borrower's right, title and
interest in and to patents, patent rights (and applications therefor),
trademarks and service marks (and applications and registrations therefor),
inventions, copyrights, mask works (and applications and registrations
therefor), trade names, trade styles, software and computer programs, trade
secrets, methods, processes, know how, drawings, specifications, descriptions,
and all memoranda, notes, and records with respect to any research and
development, all whether now owned or subsequently acquired or developed by
Borrower and whether in tangible or intangible form or contained on magnetic
media readable by machine together with all such magnetic media.

      "Investments"of any Person shall mean any loan or advance of funds by such
Person to any other Person (other than advances to employees of such Person for
moving and travel expense, drawing accounts and similar expenditures in the
ordinary course of business), any purchase or other acquisition of any Equity
Securities or Indebtedness of any other Person, any capital contribution by such
Person to or any other investment by such Person in any other Person (including,
without limitation, any Indebtedness incurred by such Person of the type
described in clauses (a) and (b) of the definition of "Indebtedness" on behalf
of any other Person); provided, however, that Investments shall not include
accounts receivable or other indebtedness owed by customers of such

                                       2
<PAGE>

Person which are current assets and arose from sales or non-exclusive licensing
in the ordinary course of such Person's business or the endorsement of
negotiable instruments for deposit or collection in the ordinary course of such
Person's business.

      "Lien" shall mean any pledge, bailment, lease, mortgage, hypothecation,
conditional sales and title retention agreements, charge, claim, encumbrance or
other lien in favor of any Person.

      "Loan" shall mean the loan advanced by Lender to Borrower under this
Agreement.

      "Loan Margin" shall mean the number of basis points set forth following
such term on the cover page of this Agreement.

      "Loan Rate" shall mean, with respect to the Loan, the per annum rate of
interest equal to the sum of (a) the U.S. Treasury note rate of a term equal to
the Treasury Note Maturity as quoted in The Wall Street Journal on the date the
applicable Note is prepared, plus (b) the Loan Margin.

      "Note"shall mean the secured promissory note of Borrower substantially in
the form of Exhibit A.

      "Obligations" has the meaning given to that term in Section 5.01.

      "Operative Documents" shall mean this Agreement, the Note, the Warrant,
and all other documents, instruments and agreements executed and delivered in
connection herewith or therewith or in respect of the closing of the
transactions contemplated hereby or thereby.

      "Payment Date" means the tenth (10th) day of each calendar month.

      "Permitted Indebtedness" shall mean and include:

            1. Indebtedness of Borrower to Lender;

            2. Indebtedness of Borrower secured by Liens permitted under clause
      (e) of the definition of Permitted Liens;

            3. Indebtedness existing on the date hereof and set forth on the
      Disclosure Schedule;

            4. Subordinated Indebtedness;

            5. Prepaid royalties and deferred revenue in connection with prepaid
      support services;

            6. Indebtedness to a seller incurred in connection with a
      transaction permitted under Section 7.01(f) so long as such Indebtedness
      is unsecured or secured only by the property acquired in such transaction;

            7. Other Indebtedness of Borrower not exceeding Two Hundred Fifty
      Thousand Dollars ($250,000) at any time; and

            8. Extensions, renewals, refundings, refinancings, modifications,
      amendments and restatements of any of the items of Permitted Indebtedness
      described in clauses (a) through (g) above, provided that the

                                       3
<PAGE>

      principal amount thereof is not increased, any Lien is limited to the
      property originally covered and the terms thereof are not modified to
      impose more burdensome terms upon Borrower.

      "Permitted Investments" shall mean and include:

            1. Deposits with commercial banks organized under the laws of the
      United States or a state thereof to the extent such deposits are fully
      insured by the Federal Deposit Insurance Corporation;

            2. Investments in marketable obligations issued or fully guaranteed
      by the United States and maturing not more than one (1) year from the date
      of issuance; and

            3. Investments in open market commercial paper rated at least "A-1"
      or "P-1" or higher by a national credit rating agency and maturing not
      more than one (1) year from the creation thereof.

            4. Investments pursuant to or arising under currency agreements or
      interest rate agreements entered into in the ordinary course of business;

            5. Investments consisting of deposit accounts of Borrower in which
      Lender has a perfected security interest;

            6. Investments (including debt obligations) received in connection
      with the bankruptcy or reorganization of customers or suppliers and in
      settlement of delinquent obligations of, and other disputes with,
      customers or suppliers arising in the ordinary course of business;

            7. Investments consisting of (i) travel advances and other employee
      loans and advances in the ordinary course of business, (ii) loans to
      employees, officers or directors relating to the purchase of equity
      securities of Borrower, and (iii) other loans to officers and employees
      (including relocation loans) approved by the Board of directors and not
      exceeding $250,000 at any time outstanding;

            8. Investments permitted under Borrower's current investment policy
      which is attached hereto as Schedule 5 or any amendment thereto, which in
      each case has been approved by Lender;

            9. Investments in connection with transactions permitted under
      Section 7.01(f); and

            10. Other Investments aggregating not in excess of Two Hundred Fifty
      Thousand Dollars ($250,000) at any time.

      "Permitted Liens" shall mean (a) the Lien created by this Agreement and
the Existing Loan Agreement, (b) Liens for fees, taxes, levies, imposts, duties
or other governmental charges of any kind which are not yet delinquent or which
are being contested in good faith by appropriate proceedings which suspend the
collection thereof (provided, however, that such proceedings do not involve any
substantial danger of the sale, forfeiture or loss of any item of equipment and
that Borrower has adequately bonded such Lien or reserves sufficient to
discharge such Lien have been provided on the books of Borrower), (c) Liens
existing as of the date of this Agreement identified on the disclosure schedule
attached hereto as Schedule 2 ("Disclosure Schedule"), (d) Liens to secure
payment of worker's compensation, employment insurance, old age pensions or
other social security obligations of Borrower in the ordinary course of business
of Borrower, (e) Liens upon any equipment or other personal property acquired by
Borrower after the date hereof to secure (i) the purchase price of such
equipment or other personal property or (ii) lease obligations or indebtedness
incurred solely for the purpose of financing the

                                       4
<PAGE>

acquisition of such equipment or other personal property; provided that (A) such
Liens are confined solely to the equipment or other personal property so
acquired and the amount secured does not exceed the acquisition price thereof,
and (B) no such Lien shall be created, incurred, assumed or suffered to exist in
favor of Borrower's officers, directors or shareholders holding five percent
(5%) or more of Borrower's Equity Securities, (f) carriers', warehousemen's,
mechanics', landlords', materialmen's, repairmen's or other similar Liens
arising in the ordinary course of business which are not delinquent or remain
payable without penalty or which are being contested in good faith and by
appropriate proceedings, (g) non-exclusive licenses of Intellectual Property
entered into in the ordinary course of business and licenses, Liens or similar
arrangements entered into in connection with joint ventures or corporate
collaborations, (h) non-exclusive licenses arising out of a merger or
acquisition transaction permitted hereunder; (i) other Liens securing
obligations which do not constitute Indebtedness, which obligations do not
exceed $50,000 in the aggregate; and (j) Liens to secure Indebtedness.

      "Person" shall mean and include an individual, a partnership, a
corporation, a business trust, a joint stock company, a limited liability
company, an unincorporated association or other entity and any domestic or
foreign national, state or local government, any political subdivision thereof,
and any department, agency, authority or bureau of any of the foregoing.

      "Prime Rate" shall mean the interest rate per annum publicly announced
from time to time by Bank of America NT & SA (or its successor) as its reference
rate, but such rate shall in no event be more than the highest interest rate
permitted by applicable law.

      "Qualified Financing" shall mean the closing of and receipt of net
proceeds of at least $5,000,000 from the sale of Equity Securities of Borrower
(in addition to the conversion of any Indebtedness to Equity Securities in
connection with such financing).

      "Subordinated Indebtedness" shall mean Indebtedness subordinated to the
Obligations on terms and conditions acceptable to Lender in its sole discretion.

      "Subsidiary" shall mean any corporation of which a majority of the
outstanding capital stock entitled to vote for the election of directors
(otherwise than as the result of a default) is owned by Borrower directly or
indirectly through Subsidiaries.

      "Term" shall mean the period from and after the date hereof until the
payment or satisfaction in full of all Obligations under this Agreement and the
other Operative Documents.

      "Treasury Note Maturity" shall mean the period of months set forth
following such term on the cover page of this Agreement.

      "Warrant" shall mean a warrant to purchase securities of Borrower
substantially in the form of Exhibit B.

      1.02. Headings. Headings in this Agreement and each of the other Operative
Documents are for convenience of reference only and are not part of the
substance hereof or thereof.

      1.03. Plural Terms. All terms defined in this Agreement or any other
Operative Document in the singular form shall have comparable meanings when used
in the plural form and vice versa.

      1.04. Construction. This Agreement is the result of negotiations among,
and has been reviewed by, Borrower and Lender and their respective counsel.
Accordingly, this Agreement shall be deemed to be the product of all parties
hereto, and no ambiguity shall be construed in favor of or against Borrower or
Lender.

                                       5
<PAGE>

      1.05. Entire Agreement. This Agreement, together with the terms set forth
in each of the other Operative Documents, taken together, constitute and,
contain the entire agreement of Borrower and Lender and, with regard to their
respective subject matters, supersede any and all prior agreements, term sheets,
negotiations, correspondence, understandings and communications among the
parties, whether written or oral, with respect to their respective subject
matters.

      1.06. Other Interpretive Provisions. References in this Agreement to
"Articles," "Sections," "Exhibits," "Schedules" and "Annexes" are to recitals,
articles, sections, exhibits, schedules and annexes herein and hereto unless
otherwise indicated. References in this Agreement and each of the other
Operative Documents to any document, instrument or agreement shall include (a)
all exhibits, schedules, annexes and other attachments thereto, (b) all
documents, instruments or agreements issued or executed in replacement thereof,
and (c) such document, instrument or agreement, or replacement or predecessor
thereto, as amended, modified and supplemented from time to time and in effect
at any given time. The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement or any other Operative Document shall
refer to this Agreement or such other Operative Document, as the case may be, as
a whole and not to any particular provision of this Agreement or such other
Operative Document, as the case may be. The words "include" and "including" and
words of similar import when used in this Agreement or any other Operative
Document shall not be construed to be limiting or exclusive. Unless otherwise
indicated in this Agreement or any other Operative Document, all accounting
terms used in this Agreement or any other Operative Document shall be construed,
and all accounting and financial computations hereunder or thereunder shall be
computed, in accordance with generally accepted accounting principles as in
effect in the United States of America from time to time.

                                   ARTICLE II
                                   THE CREDIT

      2.01. Credit Facility.

      (a) Commitment. On the terms and subject to the conditions hereof and
relying upon the representations and warranties herein set forth as and when
made or deemed to be made, Lender agrees to make a Loan in the principal amount
of Two Million Dollars ($2,000,000).

      (b) Loan Interest Rate. Borrower shall pay interest on the principal
amount of the Loan from the date of the Loan until the Loan is paid in full, at
a per annum rate of interest equal to the Loan Rate determined in accordance
with the definition of Loan Rate. The Loan Rate applicable to the Loan shall not
be subject to change in the absence of manifest error. All computations of
interest on the Loan shall be based on a year of 360 days and twelve 30 day
months. If Borrower pays interest on any Loan which is determined to be in
excess of the then legal maximum rate, then that portion of each interest
payment representing an amount in excess of the then legal maximum rate shall be
deemed a payment of principal and applied against the principal of the Loan.

      (c) Payments of Principal and Interest. On each of the first six Payment
Dates, commencing on July 10, 1998, Borrower shall make a payment of interest
only on the outstanding principal balance hereof. Commencing on January 10,
1999, and continuing for twenty-three (23) Payment Dates thereafter, Borrower
shall make twenty-three (23) payments of $83,333.33 plus accrued and unpaid
interest on the outstanding balance on each such Payment Date and a final
payment of $83,333.41 plus accrued and unpaid interest. Payments of principal
and interest on the Loan may not be prepaid prior to December 10, 1999, and
shall be prepaid only in a minimum amount of 50% of the then outstanding
principal balance of the Loan, but in no event less than $250,000; provided,
however, that if Borrower requests that Lender consent to an acquisition which
is otherwise prohibited under Section 7.01(f) and Lender does not give its
consent thereto, Borrower may prepay the Loan in full within thirty (30) days of
such refusal to give consent.

                                       6
<PAGE>

      2.02. Use of Proceeds; the Loan and the Note; Disbursement.

      (a) Use of Proceeds. The proceeds of the Loan shall be used for a portion
of the purchase price of certain assets from MGA Software.

      (b) The Loan and the Note. The obligation of Borrower to repay the unpaid
principal amount of and interest on the Loan shall be evidenced by the Note.
Lender may, and is hereby authorized by Borrower to, endorse on a grid annexed
to the Note appropriate notations regarding the Loan; provided, however, that
the failure to make, or an error in making, any such notation shall not limit or
otherwise affect the obligations of Borrower hereunder or under the Note.

      (c) Disbursement. Subject to the satisfaction of the conditions set forth
in this Agreement, Lender shall disburse such Loan by wire transfer to Borrower
unless otherwise directed in writing by Borrower.

      (d) Termination of Commitment to Lend. Notwithstanding anything to the
contrary in the Operative Documents, Lender's obligation to lend the undisbursed
portion of the Credit Amount to Borrower hereunder shall terminate on the
earlier of (i) upon notice to Borrower after the occurrence of any Event of
Default hereunder, and (ii) the Commitment Termination Date.

      2.03. Other Payment Terms.

      (a) Place and Manner. Borrower shall make all payments due to Lender in
lawful money of the United States, in immediately available funds, at the
address for payments and in the manner specified in Section 10.05(b).

      (b) Date. Whenever any payment due hereunder shall fall due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day, and such extension of time shall be included in the computation of interest
or fees, as the case may be.

      (c) Default Rate. If either (i) any amounts required to be paid by
Borrower under this Agreement or the other Operative Documents (including
principal or interest payable on the Loan, any fees or other amounts required to
be paid hereunder) remain unpaid after such amounts are due, or (ii) an Event of
Default has occurred and is continuing, Borrower shall pay interest on the
outstanding principal balance hereunder from the date due or from the date of
the Event of Default, as applicable, until such past due amounts are paid in
full or until all Events of Defaults are cured, as applicable, at a per annum
rate equal to the Default Rate, such rate to change from time to time as the
Prime Rate shall change. All computations of such interest at the Default Rate
shall be based on a year of 360 days and twelve 30 day months.

      2.04. Commitment Fee. Lender has received a commitment fee from Borrower
in the amount of $2,500 (the "Commitment Fee"). Any portion of the Commitment
Fee not utilized to pay Lender's expenses in connection with the negotiation,
documentation and funding of the Loan will be applied by Lender to amounts due
under the Note in the order in which such amounts are due. If the Loan is not
made, any remaining balance of the Commitment Fee shall be retained by Lender.

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

      3.01. Representations and Warranties. Except as set forth in the
Disclosure Schedule, Borrower makes the following representations and warranties
to Lender as of the date hereof and again on the Funding Date:

      (a) Organization and Qualification. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and is duly qualified to do business in Borrower's Home State.

                                       7
<PAGE>

      (b) Authority. Borrower has all necessary corporate power, authority and
legal right and has obtained all approvals and consents and has given all
notices necessary to execute and deliver this Agreement and the other Operative
Documents and to perform the terms hereof and thereof. Borrower has all
requisite corporate power and authority to own and operate its properties and to
carry on its businesses as now conducted.

      (c) Conflict with Other Instruments, etc. Neither the execution and
delivery of any Operative Document to which Borrower is a party nor the
consummation of the transactions therein contemplated nor compliance with the
terms, conditions and provisions thereof will conflict with or result in a
breach of any of the terms, conditions or provisions of the charter or the
bylaws of Borrower or, to its knowledge, any law or any regulation, order, writ,
injunction or decree of any court or governmental instrumentality or any
material agreement or instrument to which Borrower is a party or by which it or
any of its properties is bound or to which it or any of its properties is
subject, or constitute a default thereunder or result in the creation or
imposition of any Lien, other than Permitted Liens.

      (d) Title to Properties. Borrower has good and marketable title to the
Collateral, free and clear of all Liens, other than Permitted Liens. Borrower
has title and ownership of, or is licensed under, all Intellectual Property,
with no known infringement of the rights of others. Neither the Chief Executive
Officer nor Chief Financial Officer of Borrower is aware of receipt by Borrower
of any communications alleging that Borrower has violated, or by conducting its
business as proposed, would violate any proprietary rights of any other Person.
Neither the Chief Executive Officer nor Chief Financial Officer of Borrower is
aware of any infringement or violation by it of the intellectual property rights
of any third party and has no knowledge of any violation or infringement by a
third party of any of its Intellectual Property. The Collateral constitutes
substantially all of the assets and property of Borrower. Borrower does not own
any right, title or interest in or to any real property or motor vehicles, other
than motor vehicles leased for executives as part of a benefit arrangement and
leaseholds in real property. The Notice of Security Interest in Trademarks
executed in connection with this Agreement lists all trademarks and service
marks of Borrower registered or applied for with the United States Patent and
Trademark Office ("PTO").

      (e) Authorization, Governmental Approvals, etc. The execution and delivery
by Borrower of each Operative Document, the granting of the security interest in
the Collateral, the issuance of the Warrant, the issuance of the securities into
which the Warrant is exercisable, the issuance of any securities into which the
securities issuable upon exercise of the Warrant are convertible, and the
performance of the obligations herein and therein contemplated have each been
duly authorized by all necessary action on the part of Borrower. No
authorization, consent, approval, license or exemption of, and no registration,
qualification, designation, declaration or filing with, or notice to, any Person
is, was or will be necessary to (i) the valid execution and delivery of any
Operative Document to which Borrower is a party, (ii) the performance of
Borrower's obligations under any Operative Document, or (iii) the granting of
the security interest in the Collateral, except for filings in connection with
the perfection of the security interest in any of the Collateral or the issuance
of the Warrant. The Operative Documents have been or will be duly executed and
delivered and constitute or will constitute legal, valid and binding obligations
of Borrower, enforceable in accordance with their respective terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency or other
similar laws of general application relating to or affecting the enforcement of
creditors' rights or by general principles of equity.

      (f) Litigation. There are no actions, suits, proceedings or investigations
pending or, to the knowledge of Borrower, threatened against or affecting
Borrower, or the business or any property or asset owned by it, before any court
or governmental department, agency or instrumentality which, if adversely
determined, is reasonably likely to have a material adverse effect on the
financial condition, business or operations of Borrower.

      (g) Security Interest. Assuming the proper filing of one or more financing
statement(s) identifying the Collateral with the proper state and/or local
authorities, the United States Copyright Office (the "Copyright Office") and the
PTO, the security interests in the Collateral granted to Lender pursuant to this
Agreement (i) constitute and will continue to constitute first priority security
interests (except to the extent any other Permitted Lien existing on the date of
this Agreement may create any priority to Lender's Lien under this Agreement) to
the extent a security interest in such Collateral can be perfected by the filing
of a UCC-1 financing statement and by appropriate filings with the Copyright
Office and the Patent and Trademark Office and (ii) are and will continue to be
superior

                                       8
<PAGE>

and prior to the rights in the Collateral of all other creditors of Borrower
(except to the extent of such Permitted Liens).

      (h) Executive Offices. The principal place of business and chief executive
office of Borrower, and the office where Borrower will keep all records and
files regarding the Collateral, is set forth on the cover page of this
Agreement.

      (i) Solvency, Etc. Borrower is Solvent (as defined below) and, after the
execution and delivery of the Operative Documents and the consummation of the
transactions contemplated thereby, Borrower will be Solvent. "Solvent" shall
mean, with respect to any Person on any date, that on such date (a) the fair
value of the property of such Person is greater than the fair value of the
liabilities (including, without limitation, contingent liabilities) of such
Person, (b) the present fair saleable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature and (d)
such Person is not engaged in business or a transaction, and is not about to
engage in a business or a transaction, for which such Person's property would
constitute an unreasonably small capital.

      (j) Catastrophic Events; Labor Disputes. None of Borrower or its
properties is or has been affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or other casualty that could reasonably be expected to have a material
adverse effect on the financial condition, business or operations of Borrower.
There are no disputes presently subject to grievance procedure, arbitration or
litigation under any of the collective bargaining agreements, employment
contracts or employee welfare or incentive plans to which Borrower is a party,
and there are no strikes, lockouts, work stoppages or slowdowns, or, to the best
knowledge of Borrower, jurisdictional disputes or organizing activity occurring
or threatened which could reasonably be expected to have a material adverse
effect on the financial condition, business or operations of Borrower.

      (k) No Material Adverse Effect. No event has occurred and no condition
exists which is reasonably likely to have a material adverse effect on the
financial condition, business or operations of Borrower since December 31, 1997.

      (l) Accuracy of Information Furnished. None of the Operative Documents and
none of the other certificates, statements or information furnished to Lender in
writing by an officer of Borrower in connection with the Operative Documents or
the transactions contemplated thereby contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading in any material respect. The Lender
recognizes that all financial projections furnished to the Lender by or on
behalf of Borrower in connection with the Operative Documents or the
transactions contemplated thereby are not to be viewed as facts and that actual
results during the period or periods covered by such projections may differ from
the projected or forecasted results.

      (m) Certain Agreements of Officers, Employees and Consultants.

            (i) Neither the Chief Executive Officer nor Chief Financial Officer
of Borrower is aware that any officer, employee or consultant of Borrower is in
violation of any material term of any material employment contract, proprietary
information agreement, nondisclosure agreement, noncompetition agreement, or any
other material contract or agreement or any material restrictive covenant
relating to the right of any such officer, employee or consultant to be employed
by Borrower because of the nature of the business conducted or to be

                                       9
<PAGE>

conducted by Borrower or relating to the use of trade secrets or proprietary
information of others which the Chief Executive Officer and the Chief Financial
Officer believe is likely to have a material adverse effect, and neither the
Chief Executive Officer nor Chief Financial Officer of Borrower is aware that
continued employment of Borrower's officers, employees and consultants would
subject Borrower to any material liability for any claim or claims arising out
of or in connection with any such material contract, agreement, or covenant.

            (ii) To the knowledge of the chief executive officer of Borrower and
the chief financial officer of Borrower, no officers of Borrower, and no
employee or consultant of Borrower whose termination, either individually or in
the aggregate, is reasonably likely to have a Material Adverse Effect, has any
present intention of terminating his or her employment or consulting
relationship with Borrower.

                                   ARTICLE IV
                             REPORTING REQUIREMENTS

      4.01. Furnishing Reports. Borrower shall furnish to Lender:

      (a) Financial Statements. So long as Borrower is not subject to the
reporting requirements of Section 12 or Section 15 of the Securities and
Exchange Act of 1934, as amended, promptly as they are available, unaudited
monthly and audited annual financial statements of Borrower and such other
financial information as Lender may reasonably request from time to time. From
and after such time as Borrower becomes a publicly reporting company, promptly
as they are available and in any event: (i) at the time of filing of Borrower's
Form 10-K with the Securities and Exchange Commission after the end of each
fiscal year of Borrower, the financial statements of Borrower filed with such
Form 10-K; and (ii) at the time of filing of Borrower's Form 10-Q with the
Securities and Exchange Commission after the end of each of the first three
fiscal quarters of Borrower, the financial statements of Borrower filed with
such Form 10-Q.

      (b) Notice of Defaults. As soon as possible, and in any event within five
(5) Business Days after the discovery of a Default or Event of Default provide
Lender with an Officer's Certificate of Borrower setting forth the facts
relating to or giving rise to such Default or Event of Default and the action
which Borrower proposes to take with respect thereto.

      (c) Miscellaneous. Such other information as Lender may reasonably request
from time to time.

                                    ARTICLE V
                           GRANT OF SECURITY INTEREST
                     GENERAL PROVISIONS CONCERNING SECURITY

      5.01. Grant of Security Interest. Borrower, in order to secure the payment
of the principal and interest with respect to the Loan made pursuant to this
Agreement, all other sums due under and in respect hereof and of the other
Operative Documents, including fees, charges, expenses and attorneys' fees and
costs and the performance and observance by Borrower of all other terms,
conditions, covenants and agreements herein and in the other Operative Documents
(all such amounts and obligations being herein sometimes called the
"Obligations"), does hereby grant to Lender and its successors and assigns, a
security interest in and to the following property (collectively, the
"Collateral"): All right, title, interest, claims and demands of Borrower in and
to:

            (a) All goods and equipment now owned or hereafter acquired,
including, without limitation, all laboratory equipment, computer equipment,
office equipment, machinery, fixtures, vehicles (including motor

                                       10
<PAGE>

vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;

            (b) All inventory now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's books relating to any of the foregoing;

            (c) All contract rights and general intangibles, including
Intellectual Property, now owned or hereafter acquired, including, without
limitation, goodwill, franchise agreements, blueprints, drawings, purchase
orders, customer lists, route lists, infringements, claims, computer programs,
computer disks, computer tapes, literature, reports, catalogs, design rights,
income tax refunds, payments of insurance and rights to payment of any kind;

            (d) All now existing and hereafter arising accounts, contract
rights, royalties and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods, the licensing of technology or the rendering
of services by Borrower (subject, in each case, to the contractual rights of
third parties to require funds received by Borrower to be expended in a
particular manner), whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's books relating to any of the
foregoing;

            (e) All documents, cash, deposit accounts, letters of credit,
certificates of deposit, instruments, chattel paper and investment property,
including, without limitation, all securities, whether certificated or
uncertificated, security entitlements, securities accounts, commodity contracts
and commodity accounts, and all financial assets held in any securities account
or otherwise, wherever located, now owned or hereafter acquired and Borrower's
books relating to the foregoing; and

            (f) Any and all claims, rights and interests in any of the above and
all substitutions for, additions and accessions to and proceeds thereof,
including, without limitation, insurance, condemnation, requisition or similar
payments.

      5.02. Duration of Security Interest. Lender's security interest in the
Collateral shall continue until the payment in full and the satisfaction of all
Obligations, whereupon such security interest shall terminate. Lender, upon
payment in full and the satisfaction of the Obligations, shall execute such
further documents and take such further actions as may be necessary to effect
the release and/or termination contemplated by this Section 5.02, including duly
executing and delivering termination statements for filing in all relevant
jurisdictions. Upon the occurrence of a Qualified Financing, Lender shall
release in writing the security interest in Borrower's Intellectual Property and
Section 5.01 shall be amended to read in a manner identical to Section 5.01 of
the Existing Credit Agreement.

      5.03. Possession of Collateral. Except as set forth in Section 5.04, so
long as no Event of Default has occurred and is continuing, Borrower shall
remain in full possession, enjoyment and control of the Collateral (except only
as may be otherwise required by Lender for perfection of its security interest
therein) and to manage, operate and use the same and each part thereof with the
rights and franchises appertaining thereto; provided, however, that the
possession, enjoyment, control and use of the Collateral shall at all times be
subject to the observance and performance of the terms of this Agreement.

                                       11
<PAGE>

      5.04 Location of Collateral. The Collateral is and shall remain in the
possession of Borrower at Borrower's addresses stated on the cover page of this
Agreement, 425 Sherman Ave., Suite 210, Palo Alto, CA 94306 and 5625 Dillard
Road, Suite 215, Cary, North Carolina 27511.

      5.05 Lien Subordination. Lender agrees that the Liens granted to it
hereunder shall be subordinate to the Liens of existing and future lenders
providing equipment financing and equipment lessors; provided that such Liens
are confined solely to the equipment so financed and the proceeds thereof; and
provided, further, that the Obligations hereunder shall not be subordinate in
right of payment to any obligations to other lenders or equipment lessors and
Lender's rights and remedies hereunder shall not in any way (except to the
extent resulting from Lien subordination) be subordinate to the rights and
remedies of any such lenders or equipment lessors. Lender agrees to execute and
deliver such agreements and documents as may be reasonably requested by Borrower
from time to time which set forth the lien subordination described in this
Section 5.05 and are reasonably acceptable to Lender. Lender shall have no
obligation to execute any agreement or document which would impose obligations,
restrictions or lien priority on Lender which are less favorable to Lender than
those described in this Section 5.05.

      5.6 Registration of Copyrights. On or prior to October 15, 1998, Borrower
shall register the copyrights of its material software with the Copyright Office
and shall give Lender written notice of such registration and the registration
numbers of such copyrights. Borrower will subsequently execute and deliver to
Lender a notice of such security interest in a form supplied by Lender or which
is suitable for filing with the Copyright Office and reasonably satisfactory to
Lender.

                                   ARTICLE VI
                              AFFIRMATIVE COVENANTS

      6.01. Affirmative Covenants.

      (a) Payment of Taxes, etc. Borrower shall pay and discharge all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims which, if unpaid, might
become a Lien upon any of its properties; provided that there shall be no
requirement to pay any such tax, assessment, charge, levy or claim (i) which is
being contested in good faith and by appropriate proceedings or which presents
no risk of seizure, forfeiture, levy or other event which could jeopardize any
Collateral or (ii) for which payment in full is bonded or reserved in Borrower's
financial statements.

      (b) Inspection Rights. Subject to the confidentiality provisions of
Section 10.14, Borrower shall, at any reasonable time and from time to time, but
no more than twice per year except during the occurrence and continuation of an
Event of Default, permit Lender or any of its agents or representatives to
inspect the Collateral, to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, Borrower and to
discuss the affairs, finances and accounts of Borrower with any of its officers
or directors relating in each case to Lender's capacity as lender and secured
party hereunder and with respect to the Collateral.

      (c) Maintenance of Equipment and Similar Assets. Borrower shall keep and
maintain all items of equipment and other similar types of personal property
that form any significant portion or portions of the Collateral in good
operating condition and repair and shall make all necessary replacements thereof
and renewals thereto so that the value and operating efficiency thereof shall at
all times be maintained and preserved. Borrower shall not permit any such
material item of Collateral to become a fixture to real estate or an accession
to other personal property, without the prior written consent of Lender.
Borrower shall not permit any such material item of Collateral to be operated or
maintained in violation of any applicable law, statute, rule or regulation. With
respect to items of leased equipment (to the extent Lender has any security
interest in any residual Borrower's interest in such equipment under the lease),
Borrower shall keep, maintain, repair, replace and operate such leased equipment
in accordance with the terms of the applicable lease.

                                       12
<PAGE>

      (d) Insurance.

            (i) Borrower shall, obtain and maintain for the Term, at its own
expense, (x) "all risk" insurance against loss or damage to the Collateral, (y)
commercial general liability insurance (including contractual liability,
products liability and completed operations coverages) reasonably satisfactory
to Lender, and (z) such other insurance against such other risks of loss and
with such terms, as shall in each case be reasonably satisfactory to or
reasonably required by Lender (as to carriers, amounts and otherwise). The
amount of the "all risk" insurance shall be determined to Lender's reasonable
satisfaction as of each anniversary date of this Agreement and the appropriate
amount of coverage shall be put in effect on the next succeeding renewal or
inception date of such insurance.

            (ii) The deductible with respect to "all-risk" insurance required by
clause (x) above and product liability insurance required by clause (y) above
shall not exceed $25,000; otherwise there shall be no deductible with respect to
any insurance required to be maintained hereunder. The amount of commercial
general liability insurance (other than products liability coverage and
completed operations insurance) required by clause (y) above shall be at least
$2,000,000 per occurrence. The amount of the products liability and completed
operations insurance required by clause (y) above shall be at least $1,000,000
per occurrence. Each "all risk" policy shall: (x) name Lender as loss payee as
its interests appear, (y) provide for each insurer's waiver of its right of
subrogation against Lender, and (z) provide that such insurance (A) shall not be
invalidated by any action of, or breach of warranty by, Borrower of a provision
of any of its insurance policies, and (B) shall waive set-off, counterclaim or
offset against Lender. Each liability policy shall (w) name Lender as an
additional insured in the full amount of Borrower's liability coverage limits
(or the coverage limits of any successor to Borrower or such successor's parent
which is providing coverage) and (x) provide that such insurance shall have
cross-liability and severability of interest endorsements (which shall not
increase the aggregate policy limits of Borrower's insurance). All insurance
policies shall (y) provide that Borrower's insurance shall be primary without a
right of contribution of Lender's insurance, if any, or any obligation on the
part of Lender to pay premiums of Borrower, and (z) shall contain a clause
requiring the insurer to give Lender at least 30 days' prior written notice of
its cancellation (other than cancellation for non-payment for which 10 days'
notice shall be sufficient). Borrower shall on or prior to the first Funding
Date and prior to each policy renewal, furnish to Lender certificates of
insurance or other evidence satisfactory to Lender that such insurance coverage
is in effect.

                                   ARTICLE VII
                        NEGATIVE AND FINANCIAL COVENANTS

      7.01. Negative Covenants. So long as the Obligations remain outstanding,
Borrower shall not without the prior written consent of Lender:

      (a) Name; Location of Chief Executive Office and Collateral. Without
thirty (30) days prior written notice to Lender, change its chief executive
office or principal place of business or remove or cause to be removed from the
location set forth on the cover page hereof or those set forth in Section 5.04
or move any material, tangible Collateral to a location other than that set
forth on the cover page hereof or those set forth in Section 5.04.

      (b) Liens on Collateral. Create, incur, assume or suffer to exist any Lien
of any kind upon any Collateral, whether now owned or hereafter acquired, except
Permitted Liens.

      (c) Negative Pledge Regarding Intellectual Property. At any time at which
Intellectual Property does not constitute Collateral, create, incur, assume or
suffer to exist any Lien of any kind upon any Intellectual Property, whether now
owned or hereafter acquired, except Permitted Liens.

      (d) Dispositions of Collateral or Intellectual Property. Convey, sell,
offer to sell, lease, transfer, exchange or otherwise dispose of (collectively,
a "Transfer") all or any part of the Collateral or, at any time that
Intellectual Property does not constitute Collateral, Intellectual Property to
any Person, other than: (i) Transfers of inventory in the ordinary course of
business; (ii) Transfers of non-exclusive licenses and similar arrangements (or
exclusive licenses or similar arrangements for geographic regions) for the use
of the property of Borrower in the ordinary course of business; (iii) Transfers
of worn-out or obsolete equipment; (iv) expenditures of cash in the ordinary

                                       13
<PAGE>

course of business; and (v) other Transfers in the ordinary course of business
not exceeding $50,000 in the aggregate. It is expressly agreed and understood
that the ordinary course of Borrower's business includes entering into
agreements and arrangements with third parties for research, development,
manufacturing, sale or marketing of products and the licensing of Intellectual
Property in connection with such agreements and arrangements.

      (e) Distributions. (i) Pay any dividends or make any distributions of
assets, Equity Securities or other obligations or securities on its Equity
Securities; (ii) purchase, redeem, retire, defease or otherwise acquire for
value any of its Equity Securities (other than repurchases by cancellation of
indebtedness pursuant to the terms of employee stock purchase plans, employee
restricted stock agreements or similar arrangements in an aggregate amount not
to exceed $250,000); (iii) return any capital to any holder of its Equity
Securities as such; (iv) set apart any sum for any such purpose; provided,
however, that the foregoing shall not prevent Borrower from (x) paying dividends
payable solely in Common Stock; or (y) redeeming or making any payment with
respect to the Company's Series C Preferred Stock which is provided for in the
Company's Articles of Incorporation on the date hereof.

      (f) Mergers or Acquisitions. Merge or consolidate with or into any other
Person or acquire all or substantially all of the capital stock or assets of
another Person or permit any Person to acquire all or substantially all of the
capital stock or assets of Borrower; provided that Borrower may acquire certain
assets of MGA Software ("MGA").

      (g) Transactions With Affiliates. Enter into any contractual obligation
with any Affiliate or engage in any other transaction with any Affiliate,
except, in each case, upon terms at least as favorable to Borrower as an
arms-length transaction with unaffiliated Persons; provided, however, that the
Company may enter into transactions having a fair market value not to exceed
$50,000 in the aggregate without complying with the terms of this Section
7.01(g).

      (h) Maintenance of Accounts. Maintain any deposit accounts or accounts
holding securities owned by Borrower except (i) accounts located at Silicon
Valley Bank and (ii) other accounts with respect to which Borrower has given
Lender thirty (30) days prior written notice and taken such actions as Lender
may reasonably request to perfect Lender's security interest in such accounts,
including without limitation executing notices to the depositary institution of
Lender's security interest and obtaining control agreements with respect to
securities accounts; provided that Borrower may maintain a securities account
with Morgan Stanley & Company for up to forty-five (45) days after the date the
Loan is made so long as Borrower is diligently attempting to obtain an agreement
from Morgan Stanley & Company which would perfect Lender's security interest in
such account.

      (i) Indebtedness Payments. (i) Prepay, redeem, purchase, defease or
otherwise satisfy in any manner prior to the scheduled repayment thereof any
Indebtedness for borrowed money (other than amounts due under this Loan
Agreement or the Note) or lease obligations, (ii) amend, modify or otherwise
change the terms of any Indebtedness for borrowed money (other than the
Obligations) or lease obligations so as to accelerate the scheduled repayment
thereof or (iii) repay any notes to officers, directors or shareholders (except
those described on Schedule 4 or if Lender has consented in advance to the terms
of the repayment of such notes).

      (j) Indebtedness. Create, incur, assume or permit to exist any
Indebtedness except Permitted Indebtedness.

      (k) Investments. Make any Investment except for Permitted Investments.

                                       14
<PAGE>

      (l) Stock Pledges. Fail to execute and deliver to Lender a Stock Pledge
Agreement in the form of Exhibit D hereto (and comply with the perfection
requirements contained therein) with respect to the Equity Securities of any
Person acquired by Lender if such Person is not merged with and into Borrower
within thirty (30) days after the date of closing of the acquisition.

                                  ARTICLE VIII
                              CONDITIONS PRECEDENT

      8.01. Closing. At the time of execution and delivery of this Agreement,
Borrower shall have duly executed and/or delivered to Lender the items set forth
in Part I of Schedule 3.

      8.02. Other Conditions. The obligation of Lender to make the Loan shall be
subject to the execution and/or delivery to Lender of each of the items set
forth in Part I of Schedule 3 and the satisfaction of by Borrower of each
condition set forth in Part II of Schedule 3.

      8.03. Covenant to Deliver. Borrower agrees (not as a condition but as a
covenant) to deliver to Lender each item required to be delivered to Lender as a
condition to the Loan, if the Loan is advanced. Borrower expressly agrees that
the extension of the Loan prior to the receipt by Lender of any such item shall
not constitute a waiver by Lender of Borrower's obligation to deliver such item
(other than under clause (j) of Part I of Schedule 3 unless the Lender has
specifically requested an item under this clause).

                                   ARTICLE IX
                              DEFAULT AND REMEDIES

      9.01. Events of Default. An "Event of Default" shall mean the occurrence
of one or more of the following described events:

      (a) Borrower shall (i) default in the payment of principal of or interest
on the Loan for five (5) days after the same is due, or (ii) default in the
payment of any expense or other amount payable hereunder or thereunder for five
(5) days after receipt of written notice from Lender that the same is due; or

      (b) Borrower shall breach any provision of Section 7.01 or Section
6.01(d); or

      (c) Borrower shall default in the performance of any covenant, agreement
or obligation (other than a covenant, agreement or obligation referred to in,
Section 9.01(a) or Section 9.01(b)) contained in any Operative Document (other
than the Warrant) and Borrower shall fail to cure within thirty (30) days after
receipt of written notice from Lender any default in the performance of any such
covenant, agreement or obligation contained therein; or

      (d) Borrower shall have breached the terms of the Warrant; or

      (e) Any representation or warranty made herein or on the Funding Date by
Borrower in any Operative Document, or any certificate or financial statement
furnished pursuant to the provisions of any Operative Document, shall prove to
have been false or misleading in any material respect as of the time made or
furnished; or

      (f) Any Operative Document shall in any material respect cease to be, or
Borrower shall assert that any Operative Document is not, a legal, valid and
binding obligation of Borrower enforceable in accordance with its terms; or

                                       15
<PAGE>

      (g) A default shall exist under any agreement with any third party or
parties which consists of the failure to pay any Indebtedness at maturity or
which results in a right by such third party or parties, whether or not
exercised, to accelerate the maturity of any Indebtedness of Borrower in an
amount in excess of Two Hundred Fifty Thousand Dollars ($250,000); or

      (h) A proceeding shall have been instituted in a court of competent
jurisdiction seeking a decree or order for relief in respect of Borrower in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, custodian, trustee (or similar official) of Borrower or
for any substantial part of its property, or for the winding-up or liquidation
of its affairs, and such proceeding shall remain undismissed or unstayed and in
effect for a period of forty-five (45) consecutive days or such court shall
enter a decree or order granting the relief sought in such proceeding; or

      (i) Borrower shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian (or other similar official)
of Borrower or for any substantial part of its property, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action in furtherance of
any of the foregoing; or

      (j) A final judgment or order for the payment of money in excess of Two
Hundred Fifty Thousand Dollars ($250,000) (exclusive of amounts covered by
insurance issued by an insurer not an Affiliate of Borrower) shall be rendered
against Borrower and the same shall remain undischarged for a period of thirty
(30) days during which execution shall not be effectively stayed, or any
judgment, writ, assessment, warrant of attachment, or execution or similar
process shall be issued or levied against a substantial part of the property of
Borrower and such judgment, writ, or similar process shall not be released,
stayed, vacated or otherwise dismissed within thirty (30) days after issue or
levy.

      9.02. Consequences of Event of Default. (a) If an Event of Default
specified under any of clauses (a) through (g) or (j) of Section 9.01 shall
occur and be continuing, Lender may (i) declare the Loan, together with interest
thereon, and all other liabilities of Borrower hereunder and under the other
Operative Documents to be immediately due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived, and (ii) terminate its commitment to make the Loan and terminate any
commitment to advance money or extend credit to or for the benefit of Borrower
pursuant to any other agreement or commitment extended by Lender to Borrower.

      (b) If an Event of Default specified under clause (h) or (i) of Section
9.01 shall occur, then immediately and without notice (i) the Loan, together
with interest thereon, and all other liabilities of Borrower hereunder and under
the other Operative Documents shall automatically become due and payable,
without presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived, and (ii) Lender's commitment hereunder to make the Loan
and any other commitment of Lender to Borrower to advance money or extend credit
pursuant to any other agreement or commitment shall be terminated.

      9.03. Rights Regarding Collateral. Borrower agrees that when any Event of
Default has occurred and is continuing, Lender shall have the rights, options,
duties and remedies of a secured party as permitted by law and, in addition to
and without limiting the foregoing, Lender may exercise any one or more or all,
and in any order, of the remedies herein set forth, including the following:

                                       16
<PAGE>

      (a) Lender, personally or by agents or attorneys, shall have the right
(subject to compliance with any applicable mandatory legal requirements) to
require Borrower to assemble the Collateral and make it available to Lender at a
place to be designated by Lender or to take immediate possession of the
Collateral, or any portion thereof, and for that purpose may pursue the same
wherever it may be found, and may enter any of premises of Borrower, with or
without notice, demand, process of law or legal procedure, to the extent
permitted by applicable law, and search for, take possession of, remove, keep
and store the same, or use and operate or lease the same until sold. In
furtherance of Lender's rights hereunder, Borrower hereby grants to Lender an
irrevocable, non-exclusive license (exercisable without royalty or other payment
by Lender) to use, license or sublicense any patent, trademark, trade name,
copyright or other intellectual property in which Borrower now or hereafter has
any right, title or interest together with the right of access to all media in
which any of the foregoing may be recorded or stored; provided, however, that
such license shall only be exercisable in connection with the disposition of
Collateral upon Lender's exercise of its remedies hereunder. In connection with
the grant hereunder of a security interest in Borrower's intellectual property
rights, Borrower has executed and delivered a Special Power of Attorney to
Lender. Such Special Power of Attorney shall only be exercisable in connection
with Lender's exercise of its remedies hereunder.

      (b) Lender may, if at the time such action may be lawful and always
subject to compliance with any mandatory legal requirements, either with or
without taking possession and either before or after taking possession, without
instituting any legal proceedings whatsoever, having first given notice of such
sale by registered or certified mail to Borrower once at least ten (10) days
prior to the date of such sale, and having first given any other notice which
may be required by law, sell and dispose of the Collateral, or any part thereof,
at a private sale or at public auction, to the highest bidder, in one lot as an
entirety or in separate lots, and either for cash or on credit and on such terms
as Lender may determine, and at any place (whether or not it be the location of
the Collateral or any part thereof) designated in the notice referred to above.
To the extent permitted by applicable law, any such sale or sales may be
adjourned from time to time by announcement at the time and place appointed for
such sale or sales, or for any such adjourned sale or sales, without further
published notice, and Borrower, Lender or the holder or holders of the Note, or
of any interest therein, may bid and become the purchaser at any such sale.

      (c) Lender may proceed to protect and enforce this Agreement and the other
Operative Documents by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement herein contained or in execution or aid of any power herein granted;
or for foreclosure hereunder, or for the appointment of a receiver or receivers
for any real property security or any part thereof, or for the recovery of
judgment for the Obligations or for the enforcement of any other proper, legal
or equitable remedy available under applicable law.

      9.04. Effect of Sale. Any sale, whether under any power of sale available
to Lender or by virtue of judicial proceedings, shall operate to divest all
right, title, interest, claim and demand whatsoever, either at law or in equity,
of Borrower in and to the property sold, and shall be a perpetual bar, both at
law and in equity, against Borrower, its successors and assigns, and against any
and all persons claiming the property sold or any part thereof under, by or
through Borrower, its successors or assigns.

      9.05. Application of Collateral Proceeds. The proceeds and/or avails of
the Collateral, or any part thereof, and the proceeds and the avails of any
remedy hereunder (as well as any other amounts of any kind held by Lender at the
time of, or received by Lender after, the occurrence of an Event of Default
hereunder) shall be paid to and applied as follows:

      (a) First, to the payment of reasonable costs and expenses, including all
amounts expended to preserve the value of the Collateral, of foreclosure or
suit, if any, and of such sale and the exercise of any other rights or

                                       17
<PAGE>

remedies, and of all proper fees, expenses, liability and advances, including
reasonable legal expenses and attorneys' fees, incurred or made hereunder by
Lender;

      (b) Second, to the payment to Lender of the amount then owing or unpaid on
the Note, and in case such proceeds shall be insufficient to pay in full the
whole amount so due, owing or unpaid upon the Note, then first, to the unpaid
interest thereon, second, to unpaid principal thereof and third to the remaining
balance of the Obligations under the Note; such application to be made upon
presentation of the Note, and the notation thereon of the payment, if partially
paid, or the surrender and cancellation thereof, if fully paid;

      (c) Third, to the payment of other amounts then payable to Lender under
any of the Operative Documents; and

      (d) Fourth, to the payment of the surplus, if any, to Borrower, its
successors and assigns, or to whomsoever may be lawfully entitled to receive the
same.

      9.06. Reinstatement of Rights. If Lender shall have proceeded to enforce
any right under this Agreement or any other Operative Document by foreclosure,
sale, entry or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely, then and in
every such case (unless otherwise ordered by a court of competent jurisdiction),
Lender shall be restored to its former position and rights hereunder with
respect to the property subject to the security interest created under this
Agreement.

                                    ARTICLE X
                                  MISCELLANEOUS

      10.01. Modifications, Amendments or Waivers. The provisions of any
Operative Document may be modified, amended or waived only by a written
instrument signed by the parties thereto.

      10.02. No Implied Waivers; Cumulative Remedies; Writing Required. No delay
or failure of Lender in exercising any right, power or remedy hereunder shall
affect or operate as a waiver thereof; nor shall any single or partial exercise
thereof or any abandonment or discontinuance of steps to enforce such a right,
power or remedy preclude any further exercise thereof or of any other right,
power or remedy. The rights and remedies hereunder of Lender are cumulative and
not exclusive of any rights or remedies which it would otherwise have. Any
waiver, permit, consent or approval of any kind or character on the part of
Lender of any breach or default under this Agreement or any such waiver of any
provision or condition of this Agreement must be in writing and shall be
effective only in the specified instance and to the extent specifically set
forth in such writing.

      10.03. Expenses; Indemnification. Borrower agrees upon demand to pay or
reimburse Lender for all liabilities, obligations and out-of-pocket expenses,
including reasonable fees and expenses of counsel for Lender, from time to time
arising in connection with the enforcement or collection of sums due under the
Operative Documents. Borrower shall indemnify, reimburse and hold Lender, each
of Lender's general partners, and each of their respective successors, assigns,
agents, officers, directors, shareholders, servants, agents and employees
harmless from and against all liabilities, losses, damages, actions, suits,
demands, claims of any kind and nature (including claims relating to
environmental discharge, cleanup or compliance), all costs and expenses
whatsoever to the extent they may be incurred or suffered by such indemnified
party in connection therewith (including reasonable attorneys' fees and
expenses), fines, penalties (and other charges of applicable governmental
authorities), licensing fees relating to any item of Collateral, damage to or
loss of use of property (including consequential or special damages to third
parties or damages to Borrower's property), or bodily injury to or death of any
person (including any agent or employee of Borrower) (each, a "Claim"), directly
or indirectly relating to or arising out of the use of the proceeds of the Loan
or otherwise, the falsity of any representation or warranty of Borrower or
Borrower's failure to comply with the terms of this Agreement or any other
Operative Document during the Term. The foregoing indemnity shall cover, without
limitation, (i) any Claim in connection with a design or other defect (latent or
patent) in any item of equipment included in the Collateral, (ii) any Claim for
infringement of any patent, copyright, trademark or other intellectual property
right, (iii) any Claim resulting from the presence on or under or the escape,
seepage, leakage, spillage, discharge, emission or release of any Hazardous
Materials on the premises of Borrower, including any Claims asserted or arising
under any Environmental Law, or (iv) any Claim for negligence or strict or
absolute liability in tort; provided, however, that Borrower shall not indemnify
Lender for any liability to the extent incurred by Lender as a result of
Lender's gross negligence or

                                       18
<PAGE>

willful misconduct. Such indemnities shall continue in full force and effect,
notwithstanding the expiration or termination of this Agreement. Upon Lender's
written demand, Borrower shall assume and diligently conduct, at its sole cost
and expense, the entire defense of Lender, each of its partners, and each of
their respective, agents, employees, directors, officers, shareholders,
successors and assigns against any indemnified Claim described in this Section
10.03. Borrower shall not settle or compromise any Claim against or involving
Lender without first obtaining Lender's written consent thereto, which consent
shall not be unreasonably withheld.

      10.04. Certain Damages. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED
IN THIS AGREEMENT OR ANYWHERE ELSE, BORROWER AGREES THAT IT SHALL NOT SEEK FROM
LENDER UNDER ANY THEORY OF LIABILITY (INCLUDING ANY THEORY IN TORTS), ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.

      10.05. Notices; Payments. (a) All notices and other communications given
to or made upon any party hereto in connection with this Agreement shall be in
writing (including telexed, telecopied or telegraphic communication) and mailed
(by certified or registered mail), telexed, telegraphed, telecopied or delivered
to the respective parties, as follows:

            Borrower:   At the address set forth on the cover page of this
                        Agreement.

            Lender:     MMC/GATX PARTNERSHIP NO. I
                        c/o GATX Capital Corporation
                        Four Embarcadero Center
                        Suite 2200
                        San Francisco, California 94111
                        Telephone No.: 415-955-3200
                        Telecopier No.: 415-955-3493
                        Attention: Contract Administration

with a copy of all financial information to:

                        MEIER MITCHELL & COMPANY
                        4 Orinda Way, Suite 200B
                        Orinda, California 94563

or in accordance with any subsequent written direction from either party to the
other. All such notices and other communications shall, except as otherwise
expressly herein provided, be effective when received; or in the case of
delivery by messenger or overnight delivery service, when left at the
appropriate address.

      (b) Unless Lender specifies otherwise in writing, all payments shall be
made to:

                        GATX Capital Corporation
                        NationsBank
                        Box 198592
                        Atlanta, Georgia 30384-8592
                        Ref: Pharsight Invoice #___________

      10.06. Termination. This Agreement shall terminate at the end of the Term;
provided, however, that the termination of this Agreement shall not affect any
of the rights and remedies of Lender hereunder, it being understood and agreed
that all such rights and remedies shall continue in full force and effect until
payment of all amounts owed to Lender under or in connection with the Operative
Documents, whether on account of principal, interest, fees or otherwise.

      10.07. Severability. If any provision of any Operative Document is held
invalid or unenforceable to any extent or in any application, the remainder of
such Operative Document and all other Operative Documents, or the application of
such provision to different Persons or circumstances or in different
jurisdictions, shall not be affected thereby.

                                       19
<PAGE>

      10.08. Survival. All representations, warranties, covenants and agreements
of Borrower contained herein or made in writing in connection herewith shall
survive the execution and delivery of the Operative Documents, the making of the
Loan hereunder, the granting of security and the issuance of the Note.

      10.09. Governing Law. THIS AGREEMENT, THE OTHER OPERATIVE DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO AND THERETO SHALL BE GOVERNED
BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA. ANY ACTION TO ENFORCE THIS AGREEMENT AGAINST BORROWER MAY BE BROUGHT
IN CALIFORNIA OR, WITH REGARD TO COLLATERAL, MAY ALSO BE BROUGHT WHEREVER SUCH
COLLATERAL IS LOCATED.

      10.10. Successors and Assigns. This Agreement and the other Operative
Documents shall be binding upon and inure to the benefit of Lender, all future
holders of the Note, Borrower and their respective successors and permitted
assigns, except that Borrower may not assign or transfer its rights hereunder or
any interest herein without the prior written consent of Lender. Lender may sell
to any other financial entity (a "Participant") participation interests in
Lender's rights under this Agreement and the other Operative Documents; provided
that notwithstanding the sale of participations, Lender shall remain solely
responsible for the performance of its obligations under this Agreement, Lender
shall remain the holder of the Note for all purposes under this Agreement and
Borrower shall continue to deal solely and directly with Lender in connection
with this Agreement and the other Loan Documents. Lender may disclose the
Operative Documents and any other financial or other information relating to
Borrower or any Subsidiary to any potential Participant, provided that such
Participant agrees to protect the confidentiality of such documents and
information using the same measures that it uses to protect its own confidential
information.

      10.11. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.

      10.12. Further Assurances. Borrower will, at its own expense, from time to
time do, execute, acknowledge and deliver all further acts, deeds, conveyances,
transfers and assurances, and all financing and continuation statements and
similar notices, reasonably necessary or proper for the perfection of the
security interest being herein provided for in the Collateral, whether now owned
or hereafter acquired.

      10.13. Power of Attorney in Respect of the Collateral. Borrower does
hereby irrevocably appoint Lender (which appointment is coupled with an
interest), the true and lawful attorney-in-fact of Borrower with full power of
substitution, for it and in its name (a) to perform (but Lender shall not be
obligated to and shall incur no liability to Borrower or any third party for
failure to perform) any act which Borrower is obligated by this Agreement to
perform, (b) to ask, demand, collect, receive, receipt for, sue for, compound
and give acquittance for any and all rents, issues, profits, avails,
distributions, income, payment draws and other sums in which a security interest
is granted under Section 5.01 with full power to settle, adjust or compromise
any claim thereunder as fully as if Lender were Borrower itself, (c) to receive
payment of and to endorse the name of Borrower to any items of Collateral
(including checks, drafts and other orders for the payment of money) that come
into Lender's possession or under Lender's control, (d) to make all demands,
consents and waivers, or take any other action with respect to, the Collateral,
(e) in Lender's discretion, to file any claim or take any other action or
institute proceedings, either in its own name or in the name of Borrower or
otherwise, which Lender may reasonably deem necessary or appropriate to protect
and preserve the right, title and interest of Lender in and to the Collateral,
and (f) to otherwise act with respect thereto as though Lender were the outright
owner of the Collateral; provided, however, that the power of attorney herein
granted shall be exercisable only upon the occurrence and during the
continuation of an Event of Default unless in Lender's reasonable opinion and
commercially prudent judgment immediate action is necessary to preserve or
protect the Collateral. Borrower agrees to reimburse Lender upon demand for all
reasonable costs and expenses, including attorneys' fees and expenses, which
Lender may incur while acting as Borrower's attorney in fact hereunder, all of
which costs and expenses are included within the Obligations.

      10.14 Confidentiality. All information (other than periodic reports filed
by Borrower with the Securities and Exchange Commission) disclosed by Borrower
to Lender in writing or through inspection pursuant to this Agreement shall be
considered confidential. Lender agrees to use the same degree of care to
safeguard and prevent disclosure of such confidential information as Lender uses
with its own confidential information, but in any event

                                       20
<PAGE>

no less than a reasonable degree of care. Lender shall not disclose such
information to any third party (other than Lender's or Lender's partner's
attorneys and auditors subject to the same confidentiality obligation set forth
herein) and shall use such information only for purposes of evaluation of its
investment in Borrower and the exercise of Lender's rights and the enforcement
of its remedies under this Agreement and the other Operative Agreements. The
obligations of confidentiality shall not apply to any information that (a) was
known to the public prior to disclosure by Borrower under this Agreement, (b)
becomes known to the public through no fault of Lender, (c) is disclosed to
Lender by a third party' having a legal right to make such disclosure, or (d) is
independently developed by Lender.

                                       21
<PAGE>

              IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed this Agreement as of the day and year
first above written.

                                          PHARSIGHT CORPORATION

                                          By:   /s/ Robin A. Kehoe
                                             -----------------------------------

                                          Name:     Robin A. Kehoe
                                                --------------------------------

                                          Title:    Chief Financial Officer
                                                 -------------------------------

                                          MMC/GATX PARTNERSHIP NO. I

                                          By: Meier Mitchell & Company,
                                                as general partner

                                          By:   /s/ Patricia W. Leicher
                                             -----------------------------------

                                          Name:     Patricia W. Leicher
                                                --------------------------------

                                          Title:    Vice President
                                                 -------------------------------
<PAGE>

SCHEDULES

      1   Funding Certificate
      2   Disclosure Schedule
      3   Conditions Precedent
      4   Schedule of Indebtedness Payments
      5   Investment Policy

EXHIBITS

      A   Form of Secured Promissory Note
      B   Form of Warrant
      C   Form of Opinion of Counsel
      D   Form of Stock Pledge Agreement
<PAGE>

                                   SCHEDULE 1

                               FUNDING CERTIFICATE

      The undersigned,____________________, being the duly elected and acting
____________________ of PHARSIGHT CORPORATION, a California corporation
("Borrower"), does hereby certify to MMC/GATX Partnership No. I, in connection
with that certain Loan and Security Agreement dated as of June 8, 1998, (the
"Loan Agreement"; with other capitalized terms used below having the meanings
ascribed thereto in the Loan Agreement) that:

      1.    The representations and warranties made by Borrower in Article III
            of the Loan Agreement and in the other Operative Documents are true
            and correct in all material respects as of the date hereof.

      2.    No event or condition has occurred and is continuing that would
            constitute a Default or an Event of Default under the Loan Agreement
            or any other Operative Document.

      3.    Borrower is in compliance with the covenants and requirements
            contained in Articles IV, VI and VII of the Loan Agreement.

      4.    All conditions referred to in Article VIII of the Loan Agreement to
            the making of the Loan to be made on or about the date hereof been
            satisfied or waived in writing by Lender.

      5.    No material adverse change in the general affairs, management,
            results of operations, condition (financial or otherwise) or
            prospects of Borrower, whether or not arising from transactions in
            the ordinary course of business, has occurred.

Dated: June 10, 1998

                                          PHARSIGHT CORPORATION

                                          By:
                                             -----------------------------------

                                          Name:
                                                --------------------------------

                                          Title:
                                                 -------------------------------
<PAGE>

                                   SCHEDULE 2

                               DISCLOSURE SCHEDULE
<PAGE>

                                   SCHEDULE 3

                              CONDITIONS PRECEDENT

PART I:

      At the time of execution and delivery of this Agreement, there shall also
have been duly executed and delivered to Lender:

      (a)   The Warrant;

      (b)   An opinion of counsel for Borrower, dated as of the closing date,
            substantially in the form attached hereto as Exhibit C;

      (c)   Copies, certified by the Secretary, Assistant Secretary or Chief
            Financial Officer of Borrower as of the closing date, of Borrower's
            charter documents and bylaws and of all documents evidencing
            corporate action taken by Borrower authorizing the execution,
            delivery and performance of the Operative Documents to which
            Borrower is a party, in form and substance satisfactory to Lender
            and its counsel;

      (d)   Good standing certificate from Borrower's state of incorporation and
            the state in which Borrower's principal place of business is
            located, together with certificates of the applicable governmental
            authorities that Borrower is in compliance with the franchise tax
            laws of each such state, each dated as of a recent date;

      (e)   Evidence of the insurance coverage required by Section 6.01(d) of
            this Agreement;

      (f)   Copies certified by the secretary or an assistant secretary of
            Borrower, all necessary consents of shareholders and other third
            parties with respect to the execution, delivery and performance of
            this Agreement, the Warrant, the Note and the other Operative
            Documents;

      (g)   Form UCC-1 Financing Statements, duly executed by Borrower, or other
            documents, and Borrower shall have taken such actions, if any, as
            Lender shall reasonably determine are necessary or desirable to
            perfect and protect its security interest in the Collateral;

      (h)   Notices of Security Interest to Depository Banks in the forms
            provided by Lender;

      (i)   Notices of Security Interest in Trademarks; and

      (j)   All other documents as Lender shall have reasonably requested.

PART II

      On or prior to the Funding Date of the Loan, each of the items set forth
in Part I of this Schedule 3 shall have been delivered to Lender and the
following conditions shall have been satisfied or waived by Lender:

      (a)   Borrower shall have provided to Lender such documents, instruments
            and agreements as Lender shall reasonably request to evidence the
            perfection and priority of the security interests granted to Lender
            pursuant to Article V;

      (b)   No Event of Default or Default shall have occurred and be
            continuing;

      (c)   Borrower shall have duly executed and delivered to Lender the Note;

      (d)   In Lender's sole discretion, there shall not have occurred any
            material adverse change in the general affairs, management, results
            of operations, condition (financial or otherwise) or prospects of
            Borrower, whether or not arising from transactions in the ordinary
            course of business, and there shall not have occurred since the date
            first written on the cover page of this Agreement any material
            adverse deviation by Borrower from the business plan of Borrower
            presented to and not disapproved by Lender;
<PAGE>

      (e)   The representations and warranties contained in this Agreement and
            the other Operative Documents to which Borrower is a party shall be
            true and correct in all material respects as if made on such Funding
            Date;

      (f)   Each of the Operative Documents remains in full force and effect;
            and

      (g)   The Funding Date of the Loan shall not be later than the Commitment
            Termination Date.

<PAGE>

                                   SCHEDULE 4

                              INDEBTEDNESS PAYMENTS

Under a Promissory Note Dated December 17, 1998 executed in favor of Dan Weiner
an amount equal to $246,250 the first year, and $265,940 the following year;

Under a Non-Competition Agreement dated May 27, 1998, with Edward Mitchell, an
amount equal to $135,000 in the first year and $145,000 in the following year;

Under a Non-Competition Agreement dated May 27, 1998, with Joseph Gauthier, an
amount equal to $135,000 in the first year and $145,000 in the following year;

Under an obligation to pay costs associated with the closing of the Mitchell and
Gauthier Associates asset acquisition, including severance costs, in an amount
not to exceed $250,000 during the year following the May 27, 1998 closing.

<PAGE>

                                    EXHIBIT A

                             SECURED PROMISSORY NOTE

$2,000,000                                                 Dated:  June 10, 1998

      FOR VALUE RECEIVED, the undersigned, PHARSIGHT CORPORATION ("Borrower"), a
California corporation, HEREBY PROMISES TO PAY to the order of MMC/GATX
PARTNERSHIP NO. 1, a California general partnership ("Lender") the principal
amount of Two Million ($2,000,000) or such lesser amount as shall equal the
outstanding principal balance of the Loan made by Lender to Borrower pursuant to
the Loan and Security Agreement referred to below (the "Loan Agreement"), and to
pay all other amounts due with respect to the Loan on the dates and in the
amounts set forth in the Loan Agreement.

      Interest on the principal amount of this Note from the date of this Note
shall accrue at the Loan Rate or, if applicable, the Default Rate. The Loan Rate
for this Note is ____% per annum based on a year of twelve 30 day months. On
each of the first six Payment Dates (as defined in the Loan Agreement),
commencing on July 10, 1998, Borrower shall make a payment of interest only on
the outstanding principal balance hereof. On each of the first six Payment
Dates, commencing on July 10, 1998, Borrower shall make a payment of interest
only on the outstanding principal balance hereof. Commencing on January 10,
1999, and continuing for twenty-three (23) Payment Dates thereafter, Borrower
shall make twenty-three (23) payments of $83,333.33 plus accrued and unpaid
interest on the outstanding balance on each such Payment Date and a final
payment of $83,333.41 plus accrued and unpaid interest. Payments of principal
and interest on the Loan may not be prepaid prior to December 10, 1999, and
shall be prepaid only in a minimum amount of 50% of the then outstanding
principal balance of the Loan, but in no event less than $250,000; provided,
however, that if Borrower requests that Lender consent to an acquisition which
is otherwise prohibited under Section 7.01(f) of the Loan Agreement and Lender
does not give its consent thereto, Borrower may prepay the Loan in full within
thirty (30) days of such refusal to give consent.

      Principal, interest and all other amounts due with respect to the Loan,
are payable in lawful money of the United States of America to Lender as
follows: GATX Capital Corporation, P.O. Box 71316, Chicago, Illinois 60694, in
immediately available funds. The Loan made by Lender to Borrower and the
interest rate applicable thereto, and all payments made with respect thereto,
shall be recorded by Lender and, prior to any transfer hereof, endorsed on the
grid attached hereto which is part of this Note.

      This Note is the Note referred to in, and is entitled to the benefits of,
the Loan and Security Agreement, dated as of June 8, 1998, between Borrower and
Lender. The Loan Agreement, among other things, (a) provides for the making of a
secured Loan by Lender to Borrower in the principal amount first above
mentioned, and (b) contains provisions for acceleration of the maturity hereof
upon the happening of certain stated events.

      This Note and the obligation of Borrower to repay the unpaid principal
amount of the Loan, interest on the Loan and all other amounts due Lender under
the Loan Agreement is secured under the Loan Agreement.

      Presentment for payment, demand, notice of protest and all other demands
and notices of any kind in connection with the execution, delivery, performance
and enforcement of this Note are hereby waived.

      Borrower shall pay all reasonable fees and expenses, including, without
limitation, reasonable attorneys' fees and costs, incurred by Lender in the
enforcement or attempt to enforce any of Borrower's obligations hereunder not
performed when due. This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of California.

<PAGE>

      IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by
one of its officers thereunto duly authorized on the date hereof.

                                          PHARSIGHT CORPORATION

                                          By:   /s/ Robin A. Kehoe
                                             -----------------------------------

                                          Name:     Robin A. Kehoe
                                                --------------------------------

                                          Title:    Chief Financial Officer
                                                 -------------------------------

<PAGE>

                  LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL

                   Principal                       Scheduled
      Date           Amount     Interest Rate   Payment Amount   Notation By
      ----           ------     -------------   --------------   -----------
<PAGE>

                                    EXHIBIT B

                                     WARRANT
<PAGE>

                                    EXHIBIT C

                           FORM OF OPINION OF COUNSEL

                          [To Come from Cooley Godward]
<PAGE>

                                    EXHIBIT D

                         FORM OF STOCK PLEDGE AGREEMENT<PAGE>

                                                                    Exhibit 10.8

                                                               Customer No. 1198

                       MASTER LOAN AND SECURITY AGREEMENT

                  THIS AGREEMENT dated as of February 26, 1999, is made by
Pharsight Corporation (the "Borrower"), a California corporation having its
principal place of business and chief executive office at 800 W. El Camino Real,
Mountain View, California, 94040 in favor of Transamerica Business Credit
Corporation, a Delaware corporation (the "Lender"), having its principal office
at Riverway II, West Office Tower, 9399 West Higgins Road, Rosemont, Illinois
60018.

            WHEREAS, the Borrower has requested that the Lender make Loans to it
from time to time; and

            WHEREAS, the Lender has agreed to make such Loans on the terms and
conditions of this Agreement.

            NOW, THEREFORE, in consideration of the premises and to induce the
Lender to extend credit, the Borrower hereby agrees with the Lender as follows:

            SECTION 1. DEFINITIONS.

            As used herein, the following terms shall have the following
meanings, and shall be equally applicable to both the singular and plural forms
of the terms defined:

Agreement shall mean this Master Loan and Security Agreement together with all
schedules and exhibits hereto, as amended, supplemented, or otherwise modified
from time to time.

Applicable Law shall mean the laws of the State of Illinois (or any other
jurisdiction whose laws are mandatorily applicable notwithstanding the parties'
choice of Illinois law) or the laws of the United States of America, whichever
laws allow the greater interest, as such laws now exist or may be changed or
amended or come into effect in the future.

Business Day shall mean any day other than a Saturday, Sunday, or public holiday
or the equivalent for banks in New York City.

Code shall have the meaning specified in Section 8(d).

Collateral shall have the meaning specified in Section 2.

Collateral Access Agreement shall mean any landlord waiver, mortgagee waiver,
bailee letter, or similar acknowledgement of any warehouseman or processor in
possession of any Equipment.

Effective Date shall mean the date on which all of the conditions specified in
Section 3.3 shall have been satisfied.

Equipment shall have the meaning specified in Section 2.

Event of Default shall mean any event specified in Section 7.

Financial Statements shall have the meaning specified in Section 6.1.

GAAP shall mean generally accepted accounting principles in the United States of
America, as in effect from time to time.

Loans shall mean the loans and financial accommodations made by the Lender to
the Borrower in accordance with

<PAGE>

the terms of this Agreement and the Notes.

Loan Documents shall mean, collectively, this Agreement, the Notes, and all
other documents, agreements, certificates, instruments, and opinions executed
and delivered in connection herewith and therewith, as the same may be modified,
extended, restated, or supplemented from time to time.

"Material Adverse Change", "Material Adverse Effect" and/or "material" as each
of those terms may appear in the Loan Documents, shall mean, each in context, a
negative result arising directly from facts that, in the totality of the
circumstances, are substantive and germane to (a) the business, assets,
operations, financial or other condition of Borrower; (b) the ability of
Borrower to pay or perform in accordance with the terms of this Agreement or any
other Loan Document; (c) the rights and remedies of Lender under this Agreement
or any of the Loan Documents.

Note shall mean each Promissory Note in the form of Exhibit B attached hereto
and incorporated herein by this reference, made by the Borrower in favor of the
Lender, as amended, supplemented, or otherwise modified from time to time.

Obligations shall mean all indebtedness, obligations, and liabilities of the
Borrower under the Notes and under this Agreement, whether on account of
principal, interest, indemnities, fees (including, without limitation,
reasonable attorneys' fees, remarketing fees, origination fees, collection fees,
and all other professionals' fees), out-of-pocket costs, out-of-pocket expenses,
taxes, or otherwise.

Permitted Liens shall mean such of the following as to which no enforcement,
collection, execution, levy, or foreclosure proceeding shall have been
commenced: (a) liens for taxes, assessments, and other governmental charges or
levies or the claims or demands of landlords, carriers, warehousemen, mechanics,
laborers, materialmen, and other like Persons arising by operation of law in the
ordinary course of business for sums which are not yet due and payable, or liens
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP; (b) deposits or pledges to secure the payment of
worker's compensation, unemployment insurance, or other social security benefits
or obligations, public or statutory obligations, surety or appeal bonds, bid or
performance bonds, or other obligations of a like nature incurred in the
ordinary course of business; (c) licenses, restrictions, or covenants for or on
the use of the Equipment which do not materially impair either the use of the
Equipment in the operation of the business of the Borrower or the value of the
Equipment; and (d) attachment or judgment liens that do not constitute an Event
of Default.

Person shall mean any individual, sole proprietorship, partnership, limited
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, entity, party,
or government (including any division, agency, or department thereof), and the
successors, heirs, and assigns of each.

Schedule shall mean each Schedule in the form of Schedule A hereto delivered by
the Borrower to the Lender from time to time.

Solvent means, with respect to any Person, that as of the date as to which such
Person's solvency is measured:

            (a) the fair saleable value of its assets is in excess of the total
amount of its liabilities (including contingent liabilities as valued in
accordance with GAAP) as they become absolute and matured;

            (b) it has sufficient capital to conduct its business; and

            (c) it is able generally to meet its debts as they mature.

Taxes shall have the meaning specified in Section 5.5.

            SECTION 2. CREATION OF SECURITY INTEREST; COLLATERAL. The Borrower
hereby assigns and grants to the Lender a continuing general, first priority
lien on, and security interest in, all the

                                       2
<PAGE>

Borrower's right, title, and interest in and to the collateral described in the
next sentence (the "Collateral") to secure the payment and performance of all
the Obligations. The Collateral consists of all equipment set forth on all the
Schedules delivered from time to time under the terms of this Agreement (the
"Equipment"), together with all present and future additions, parts,
accessories, attachments, substitutions, repairs, improvements, and replacements
thereof or thereto, and any and all proceeds thereof, including, without
limitation, proceeds of insurance and all manuals, blueprints, know-how,
warranties, and records in connection therewith, all rights against suppliers,
warrantors, manufacturers, sellers, or others in connection therewith, and
together with all substitutes for any of the foregoing; provided, however, that
there shall be excluded from Collateral all general intangibles including,
without limitation, contract rights, which by their terms, or as a matter of
law, are nonassignable without the consent of the licensor or other third person
where and to the extent that the assignment effected by the foregoing creation
of a security interest (and the perfection thereof) would result in a default
under such general intangible for which the available remedies include the right
to terminate such general intangible.

            SECTION 3. THE CREDIT FACILITY.

                  SECTION 3.1. Borrowings. Each Loan shall be in an amount not
less than $50,000, and in no event shall the sum of the aggregate Loans made
exceed the amount of the Lender's written commitment to the Borrower in effect
from time to time. Notwithstanding anything herein to the contrary, the Lender
shall be obligated to make the initial Loan and each other Loan only after the
Lender, in its good faith business judgment, determines that the applicable
conditions for borrowing contained in Sections 3.3 and 3.4 are satisfied. The
timing and financial scope of Lender's obligation to make Loans hereunder are
limited as set forth in a commitment letter executed by Lender and Borrower,
dated as of December 11, 1998 and attached hereto as Exhibit A (the "Commitment
Letter").

                  SECTION 3.2. Application of Proceeds. The Borrower shall not
directly or indirectly use any proceeds of the Loans, or cause, assist, suffer,
or permit the use of any proceeds of the Loans, for any purpose other than for
the purchase, acquisition, installation, or upgrading of Equipment or the
reimbursement of the Borrower for its purchase, acquisition, installation, or
upgrading of Equipment.

                  SECTION 3.3. Conditions to Initial Loan.

            (a) The obligation of the Lender to make the initial Loan is subject
to the Lender's receipt of the following, each dated the date of the initial
Loan or as of an earlier date acceptable to the Lender, in form and substance
reasonably satisfactory to the Lender and its counsel:

                  (i) completed requests for information (Form UCC-11) listing
            all effective Uniform Commercial Code financing statements naming
            the Borrower as debtor and all tax lien, judgment, and litigation
            searches for the Borrower as the Lender shall deem necessary or
            desirable;

                  (ii) Uniform Commercial Code financing statements (Form UCC-1)
            duly executed by the Borrower (naming the Lender as secured party
            and the Borrower as debtor and in form acceptable for filing in all
            jurisdictions that the Lender deems necessary or desirable to
            perfect the security interests granted to it hereunder) and, if
            applicable, termination statements or other releases duly filed in
            all jurisdictions that the Lender deems necessary or desirable to
            perfect and protect the priority of the security interests granted
            to it hereunder in the Equipment related to such initial Loan;

                  (iii) a Note duly executed by the Borrower evidencing the
            amount of such Loan;

                  (iv) a Collateral Access Agreement duly executed by the lessor
            or mortgagee, as the case may be, of each premises where the
            Equipment is located;

                  (v) certificates of insurance required under Section 5.4 of
            this Agreement together with loss payee endorsements for all such
            policies naming the Lender as lender loss payee and as

                                       3
<PAGE>

            an additional insured;

                  (vi) a copy of the resolutions of the Board of Directors of
            the Borrower (or a unanimous consent of directors in lieu thereof)
            authorizing the execution, delivery, and performance of this
            Agreement, the other Loan Documents, and the transactions
            contemplated hereby and thereby, attached to which is a certificate
            of the Secretary or an Assistant Secretary of the Borrower
            certifying (A) that the copy of the resolutions is true, complete,
            and accurate, that such resolutions have not been amended or
            modified since the date of such certification and are in full force
            and effect and (B) the incumbency, names, and true signatures of the
            officers of the Borrower authorized to sign the Loan Documents to
            which it is a party; and

                  (vii) such other agreements and instruments as the Lender
            reasonably deems necessary in connection with the transactions
            contemplated hereby.

            (b) There shall be no pending or, to the knowledge of the Borrower
after due inquiry, threatened litigation, proceeding, inquiry, or other action
(i) seeking an injunction or other restraining order, damages, or other relief
with respect to the transactions contemplated by this Agreement or the other
Loan Documents or thereby or (ii) which affects or could reasonably be expected
to affect the business, operations, assets, liabilities, or condition (financial
or otherwise) of the Borrower, except, in the case of clause (ii), where such
litigation, proceeding, inquiry, or other action could not be expected to have a
Material Adverse Effect in the good faith business judgment of the Lender.

            (c) The Borrower shall have paid all fees and expenses required to
be paid by it to the Lender as of such date.

            (d) The security interests in the Equipment related to the initial
Loan granted in favor of the Lender under this Agreement shall have been duly
perfected and shall constitute first priority liens.

                  SECTION 3.4. Conditions Precedent to Each Loan. The obligation
of the Lender to make each Loan is subject to the satisfaction of the following
conditions precedent:

            (a) the Lender shall have received the documents, agreements, and
instruments set forth in Section 3.3(a)(i) through (v) applicable to such Loan,
each in form and substance reasonably satisfactory to the Lender and its counsel
and each dated the date of such Loan or as of an earlier date acceptable to the
Lender;

            (b) the Lender shall have received a Schedule of the Equipment and a
duly executed UCC-1 financing statement pertaining to such Equipment related to
such Loan, in form and substance reasonably satisfactory to the Lender and its
counsel, and there shall be no prior security interests in such Equipment
related to such Loan;

            (c) all representations and warranties contained in this Agreement
and the other Loan Documents shall be true and correct on and as of the date of
such Loan as if then made, other than representations and warranties that
expressly relate solely to an earlier date, in which case they shall have been
true and correct as of such earlier date;

            (d) no Event of Default or event which with the giving of notice or
the passage of time, or both, would constitute an Event of Default shall have
occurred and be continuing or would result from the making of the requested Loan
as of the date of such request; and

            (e) the Borrower shall be deemed to have hereby reaffirmed and
ratified all security interests, liens, and other encumbrances heretofore
granted by the Borrower to the Lender hereunder.

                                       4
<PAGE>

            SECTION 4. THE BORROWER'S REPRESENTATIONS AND WARRANTIES.

                  SECTION 4.1. Good Standing; Qualified to do Business. The
Borrower (a) is duly organized, validly existing, and in good standing under the
laws of the State of its organization, (b) has the power and authority to own
its properties and assets and to transact the businesses in which it is
presently, or proposes to be, engaged, and (c) is duly qualified and authorized
to do business and is in good standing in every jurisdiction in which the
failure to be so qualified could reasonably be expected to have a Material
Adverse Effect on (i) the Borrower, (ii) the Borrower's ability to perform its
obligations under the Loan Documents, or (iii) the rights of the Lender
hereunder.

                  SECTION 4.2. Due Execution, etc. The execution, delivery, and
performance by the Borrower of each of the Loan Documents to which it is a party
are within the powers of the Borrower, do not contravene the organizational
documents, if any, of the Borrower, and do not (a) violate any material law or
regulation, or any order or decree of any court or governmental authority, (b)
conflict with or result in a material breach of, or constitute a material
default under, any material indenture, mortgage, or deed of trust or any
material lease, agreement, or other instrument binding on the Borrower or any of
its properties, or (c) require the consent, authorization by, or approval of or
notice to or filing or registration with any governmental authority or other
Person. This Agreement is, and each of the other Loan Documents to which the
Borrower is or will be a party, when delivered hereunder or thereunder, will be,
the legal, valid, and binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, or similar laws affecting creditors' rights generally
and by general principles of equity.

                  SECTION 4.3. Solvency; No Liens. The Borrower is Solvent and
will be Solvent upon the completion of all transactions contemplated to occur
hereunder (including, without limitation, the Loan to be made on the Effective
Date); the security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral other than Permitted
Liens; and the Borrower is, or will be at the time additional Collateral is
acquired by it, the absolute owner of the Collateral with full right to pledge,
sell, consign, transfer, and create a security interest therein, free and clear
of any and all claims or liens in favor of any other Person other than Permitted
Liens.

                  SECTION 4.4. No Judgments, Litigation. No judgments are
outstanding against the Borrower nor is there now pending or, to the best of the
Borrower's knowledge after due inquiry, threatened any litigation, contested
claim, or governmental proceeding by or against the Borrower except judgments
and pending or threatened litigation, contested claims, and governmental
proceedings which would not, in the aggregate, have a Material Adverse Effect on
the Borrower.

                  SECTION 4.5. No Defaults. The Borrower is not in material
default or has not received a notice of default under any material contract,
lease, or commitment to which it is a party or by which it is bound. The
Borrower knows of no dispute regarding any contract, lease, or commitment which
could reasonably be expected to have a Material Adverse Effect on the Borrower.

                  SECTION 4.6. Collateral Locations. On the date hereof, each
item of the Collateral is located at the place of business specified in the
applicable Schedule.

                  SECTION 4.7. No Events of Default. No Event of Default has
occurred and is continuing nor has any event occurred which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default.

                  SECTION 4.8. No Limitation on Lender's Rights. Except as
permitted herein, none of the Collateral is subject to contractual obligations
that restrict or inhibit the Lender's rights or abilities to sell or dispose of
the Collateral or any part thereof after the occurrence of an Event of Default.

                  SECTION 4.9. Perfection and Priority of Security Interest.
This Agreement creates a valid and, upon completion of all required filings of
financing statements, perfected first priority security

                                       5
<PAGE>

interest in the Collateral, securing the payment of all the Obligations, to the
extent such a security interest can be perfected by the filing of such financing
statements.

                  SECTION 4.10. Model and Serial Numbers. To the Borrower's
knowledge, the Schedules set forth the true and correct model number and serial
number of each item of Equipment that constitutes Collateral.

                  SECTION 4.11. Accuracy and Completeness of Information. All
data, reports, and information heretofore, contemporaneously, or hereafter
furnished by or on behalf of the Borrower in writing to the Lender or for
purposes of or in connection with this Agreement or any other Loan Document, or
any transaction contemplated hereby or thereby, are or will be true and accurate
in all material respects on the date as of which such data, reports, and
information are dated or certified and not incomplete by omitting to state any
material fact necessary to make such data, reports, and information not
materially misleading at such time. There are no facts now known to the Borrower
which individually or in the aggregate would reasonably be expected to have a
Material Adverse Effect and which have not been specified herein, in the
Financial Statements, or in any certificate, opinion, or other written statement
previously furnished by the Borrower to the Lender.

                  SECTION 4.12. Price of Equipment. To the best of Borrower's
knowledge, the cost of each item of Equipment does not exceed the fair and usual
price for such type of equipment purchased in like quantity and reflects all
discounts, rebates and allowances for the Equipment (including, without
limitation, discounts for advertising, prompt payment, testing, or other
services) given to the Borrower by the manufacturer, supplier, or any other
person.

            SECTION 5. COVENANTS OF THE BORROWER.

                  SECTION 5.1. Existence, etc. The Borrower shall: (a) retain
its existence and its current yearly accounting cycle, (b) use best efforts to
maintain in full force and effect all licenses, bonds, franchises, leases,
trademarks, patents, contracts, and other rights necessary or desirable to the
profitable conduct of its business unless the failure to do so could not
reasonably be expected to have a Material Adverse Effect on the Borrower, (c)
continue in, and limit its operations to, the same general lines of business as
those presently conducted by it, and (d) use best efforts to comply with all
applicable laws and regulations of any federal, state, or local governmental
authority, except for such laws and regulations the violations of which would
not, in the aggregate, have a Material Adverse Effect on the Borrower.

                  SECTION 5.2. Notice to the Lender. As soon as possible, and in
any event within five business days after the Borrower learns of the following,
the Borrower will give written notice to the Lender of (a) any proceeding
instituted or threatened to be instituted by or against the Borrower in any
federal, state, local, or foreign court or before any commission or other
regulatory body (federal, state, local, or foreign) involving a sum, together
with the sum involved in all other similar proceedings, in excess of $100,000 in
the aggregate, (b) any contract that is terminated or amended and which has had
or could reasonably be expected to have a Material Adverse Effect on the
Borrower, (c) the occurrence of any Material Adverse Change with respect to the
Borrower, and (d) the occurrence of any Event of Default or event or condition
which, with notice or lapse of time or both, would constitute an Event of
Default, together with a statement of the action which the Borrower has taken or
proposes to take with respect thereto.

                  SECTION 5.3. Maintenance of Books and Records. The Borrower
will maintain books and records pertaining to the Collateral in such detail,
form, and scope as is commercially reasonable and in accordance with generally
accepted accounting principles. The Borrower agrees that the Lender or its
agents may enter upon the Borrower's premises once during each quarter upon
reasonable notice during normal business hours, and at any time upon the
occurrence and continuance of an Event of Default, for the purpose of inspecting
the Collateral and any and all records pertaining thereto.

                  SECTION 5.4. Insurance. The Borrower will maintain insurance
on the Collateral under such policies of insurance, with such insurance
companies, in such amounts, and covering such risks as are at

                                       6
<PAGE>

all times satisfactory to the Lender in the exercise of its good faith business
judgment. All such policies shall be made payable to the Lender, in case of
loss, under a standard non-contributory "lender" or "secured party" clause and
are to contain such other provisions as the Lender may reasonably require to
protect the Lender's interests in the Collateral and to any payments to be made
under such policies. Certificates of insurance policies are to be delivered to
the Lender, premium prepaid, with the loss payable endorsement in the Lender's
favor, and shall provide for not less than thirty days' prior written notice to
the Lender, of any alteration or cancellation of coverage. If the Borrower fails
to maintain such insurance, the Lender may arrange for (at the Borrower's
expense and without any responsibility on the Lender's part for) obtaining the
insurance. During an Event of Default hereunder, the Lender shall have the
right, in the name of the Lender or the Borrower, to file claims under any
insurance policies, to receive and give acquittance for any payments that may be
payable thereunder, and to execute any endorsements, receipts, releases,
assignments, reassignments, or other documents that may be necessary to effect
the collection, compromise, or settlement of any claims under any such insurance
policies.

                  SECTION 5.5. Taxes. The Borrower will pay, when due, all
taxes, assessments, claims, and other charges ("Taxes") lawfully levied or
assessed against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by the
Borrower in accordance with GAAP. If any Taxes remain unpaid after the date
fixed for the payment thereof, or if any lien shall be claimed therefor, then,
with notice to the Borrower, on the Borrower's behalf, the Lender may pay such
Taxes, and the amount thereof shall be included in the Obligations.

                  SECTION 5.6. Borrower to Defend Collateral Against Claims;
Fees on Collateral. The Borrower will defend the Collateral against all claims
of which it is aware and demands of which it is aware of all Persons at any time
claiming the same or any interest therein. The Borrower will not permit any
notice creating or otherwise relating to liens on the Collateral or any portion
thereof to exist or be on file in any public office other than Permitted Liens.
The Borrower shall promptly pay, when payable, all transportation, storage, and
warehousing charges and license fees, registration fees, assessments, charges,
permit fees, and taxes (municipal, state, and federal) which may now or
hereafter be imposed upon the ownership, leasing, renting, possession, sale, or
use of the Collateral, other than taxes on or measured by the Lender's income
and fees, assessments, charges, and taxes which are being contested in good
faith by appropriate proceedings diligently conducted and with respect to which
adequate reserves are maintained to the extent required by GAAP.

                  SECTION 5.7. No Change of Location, Structure, or Identity.
The Borrower will not (a) change the location of its chief executive office or
establish any place of business other than those specified herein or (b) move or
permit the movement of any item of Collateral from the location specified in the
applicable Schedule, except that the Borrower may change its chief executive
office and keep Collateral at other locations within the United States provided
that the Borrower has delivered to the Lender (i) prompt written notice thereof
and (ii) duly executed financing statements and other agreements and instruments
(all in form and substance reasonably satisfactory to the Lender) necessary or,
in the opinion of the Lender, desirable to perfect and maintain in favor of the
Lender a first priority security interest in the Collateral to the extent a
first priority security interest can be maintained by the execution of such
financing statements and agreements. Notwithstanding anything to the contrary in
the immediately preceding sentence, the Borrower may keep any Collateral
consisting of motor vehicles or rolling stock at any location in the United
States provided that the Lender's security interest in any such Collateral is
conspicuously marked on the certificate of title thereof and the Borrower has
complied with the provisions of Section 5.9.

                  SECTION 5.8. Use of Collateral; Licenses; Repair. The
Collateral shall be operated by competent, qualified personnel as determined by
Borrower in its good faith business judgment, in connection with the Borrower's
business purposes, for the purpose for which the Collateral was designed and in
accordance with applicable operating instructions, laws, and government
regulations, and the Borrower shall use every commercially reasonable precaution
to prevent loss or damage to the Collateral from fire and other hazards. The
Collateral shall not be used or operated for personal, family, or household
purposes. The Borrower shall procure and maintain in effect all material orders,
licenses, certificates, permits, approvals, and consents required by federal,
state, or local laws or by any governmental body, agency, or authority in
connection with the delivery,

                                       7
<PAGE>

installation, use, and operation of the Collateral. The Borrower shall keep all
of the Equipment in a satisfactory state of repair and satisfactory operating
condition in accordance with industry standards, and will make all repairs and
replacements when and where necessary and practical as determined by Borrower in
its good faith business judgment. The Borrower will not waste or destroy the
Equipment or any part thereof, and will not be negligent in the care or use
thereof. The Equipment shall not be annexed or affixed to or become part of any
realty without the Lender's prior written consent, which consent shall not be
unreasonably withheld.

                  SECTION 5.9. Further Assurances. The Borrower will, promptly
upon request by the Lender, execute and deliver or use its best efforts to
obtain any document reasonably required by the Lender (including, without
limitation, warehouseman or processor disclaimers, mortgagee waivers, landlord
disclaimers, or subordination agreements with respect to the Obligations and the
Collateral), give any notices, execute and file any financing statements,
mortgages, or other documents (all in form and substance reasonably satisfactory
to the Lender), mark any chattel paper, deliver any chattel paper or instruments
to the Lender, and take any other actions that are necessary or, in the good
faith opinion of the Lender, desirable to perfect or continue the perfection and
the first priority of the Lender's security interest in the Collateral, to
protect the Collateral against the rights, claims, or interests of any Persons,
or to effect the purposes of this Agreement. The Borrower hereby authorizes the
Lender to file one or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Collateral without the signature of
the Borrower where permitted by law. A carbon, photographic, or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law. To the extent required under this Agreement, the
Borrower will pay all costs incurred in connection with any of the foregoing.

                  SECTION 5.10. No Disposition of Collateral. The Borrower will
not in any way hypothecate or create or permit to exist any lien, security
interest, charge, or encumbrance on or other interest in any of the Collateral,
except for the lien and security interest granted hereby and Permitted Liens
which are junior to the lien and security interest of the Lender, and the
Borrower will not sell, transfer, assign, pledge, collaterally assign, exchange,
or otherwise dispose of any of the Collateral except used, worn out or obsolete
Equipment or Equipment which is no longer useful in Borrower's business having
an aggregate value of not more than $25,000, provided, however, that such
$25,000 limitation shall not apply to the disposal of any Collateral which is no
longer useful in Borrower's business so long as such Collateral is replaced with
equipment of equal or greater value and Lender is granted a first priority
security interest thereunder. In the event the Collateral, or any part thereof,
is sold, transferred, assigned, exchanged, or otherwise disposed of in violation
of these provisions, the security interest of the Lender shall continue in such
Collateral or part thereof notwithstanding such sale, transfer, assignment,
exchange, or other disposition, and the Borrower will hold the proceeds thereof
in a separate account for the benefit of the Lender. Following such a sale, the
Borrower will transfer such proceeds to the Lender in kind.

                  SECTION 5.11. No Limitation on Lender's Rights. The Borrower
will not enter into any contractual obligations which may restrict or inhibit
the Lender's rights or ability to sell or otherwise dispose of the Collateral or
any part thereof.

                  SECTION 5.12. Protection of Collateral. Upon notice to the
Borrower (provided that if an Event of Default has occurred and is continuing
the Lender need not give any notice), the Lender shall have the right at any
time to make any payments and do any other acts the Lender may deem necessary to
protect its security interests in the Collateral, including, without limitation,
the rights to satisfy, purchase, contest, or compromise any encumbrance, charge,
or lien which, in the reasonable judgment of the Lender, appears to be prior to
or superior to the security interests granted hereunder, and appear in, and
defend any action or proceeding purporting to affect its security interests in,
or the value of, any of the Collateral. The Borrower hereby agrees to reimburse
the Lender for all payments made and expenses incurred under this Agreement
including reasonable fees, expenses, and disbursements of attorneys and
paralegals (including the allocated costs of in-house counsel) acting for the
Lender, including any of the foregoing payments under, or acts taken to protect
its security interests in, any of the Collateral, which amounts shall be secured
under this Agreement, and agrees it shall be bound by any payment made or act
taken by the Lender hereunder absent the Lender's gross negligence or willful
misconduct. The Lender shall have no obligation to make any of the foregoing
payments or perform any of the foregoing acts.

                                       8
<PAGE>

                  SECTION 5.13. Delivery of Items. The Borrower will (a)
promptly (but in no event later than one Business Day) after its receipt
thereof, deliver to the Lender any documents or certificates of title issued
with respect to any property included in the Collateral, and any promissory
notes, letters of credit or instruments related to or otherwise in connection
with any property included in the Collateral, which in any such case come into
the possession of the Borrower, or shall cause the issuer thereof to deliver any
of the same directly to the Lender, in each case with any necessary endorsements
in favor of the Lender and (b) deliver to the Lender as soon as available copies
of any and all press releases and other similar communications issued by the
Borrower.

                  SECTION 5.14. Solvency. The Borrower shall be and remain
Solvent at all times.

                  SECTION 5.15. Name Change. The Borrower shall not amend or
modify its name, unless the Borrower delivers to the Lender thirty days prior to
any such proposed amendment or modification written notice of such amendment or
modification and within ten days before such amendment or modification delivers
executed Uniform Commercial Code financing statements (in form and substance
satisfactory to the Lender).

                  SECTION 5.16. Fundamental Changes. The Borrower shall not (a)
merge or consolidate with any other entity or make any material change in its
capital structure, in each case without the Lender's prior written consent which
shall not be unreasonably withheld, provided, however, that if the Borrower is
the surviving entity in the transaction and the transaction will have no
Material Adverse Effect on the financial condition of the Borrower, then the
Borrower need only provide ten (10) days' advance notice of the transaction and
Lender's consent will not be required, or (b) permit, without the prior written
consent of the Lender (unless such consent is not required pursuant to the
foregoing clause (a)), a change resulting from a single transaction or series of
related transactions, but not from the sale of newly issued securities to
investors, in more than 35% of the ownership of the combined voting power of the
Borrower's then outstanding voting securities or permit more than 35% of such
voting securities to become subject to any contractual, judicial, or statutory
lien, charge, security interest, or encumbrance. Notwithstanding the foregoing,
in the event that Lender declines to consent to any transaction described in (a)
or (b) of this Section 5.16, Borrower may prepay the Notes by paying an amount
equal to the present value of the remaining payments (principal and interest)
due thereunder discounted at 6% simple interest per annum, together with all
interest, fees and other amounts payable on the amount so prepaid or in
connection therewith to the date of such prepayment.

                  SECTION 5.17. Additional Requirements. The Borrower shall take
all such further actions and execute all such further documents and instruments
as the Lender may reasonably request.

            SECTION 6. FINANCIAL STATEMENTS. Until the payment and satisfaction
in full of all Obligations, the Borrower shall deliver to the Lender the
following financial information:

                  SECTION 6.1. Annual Financial Statements. As soon as
available, but not later than 120 days after the end of each fiscal year of the
Borrower and its consolidated subsidiaries, the consolidated balance sheet,
income statement, and statements of cash flows and shareholders equity for the
Borrower and its consolidated subsidiaries (the "Financial Statements") for such
year, reported on by independent certified public accountants without an adverse
qualification; and

                  SECTION 6.2. Quarterly Financial Statements. As soon as
available, but not later than 60 days after the end of each of the first three
fiscal quarters in any fiscal year of the Borrower and its consolidated
subsidiaries, the Financial Statements for such fiscal quarter, together with a
certification duly executed by a responsible officer of the Borrower that such
Financial Statements have been prepared in accordance with GAAP and are fairly
stated in all material respects (subject to normal year-end audit adjustments).

            SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default hereunder:

                  (a) the Borrower shall fail to pay within two days after
notice of failure to pay when due any amount required to be paid by the Borrower
under or in connection with any Note and this Agreement;

                                       9
<PAGE>

                  (b) any representation or warranty made by the Borrower under
or in connection with any Loan Document or any Financial Statement shall prove
to have been false or incorrect in any material respect when made;

                  (c) the Borrower shall fail to perform or observe (i) any of
the terms, covenants or agreements contained in Sections 5.4, 5.10, 5.14, or
5.15 hereof or (ii) any other term, covenant, or agreement contained in any Loan
Document (other than the other Events of Default specified in this Section 7)
and such failure remains unremedied for the earlier of fifteen days from (A) the
date on which the Lender has given the Borrower written notice of such failure
and (B) the date on which the Borrower knew of such failure;

                  (d) any material provision of any Loan Document to which the
Borrower is a party shall for any reason cease to be valid and binding on the
Borrower, or the Borrower shall so state and the foregoing has an adverse effect
on the Borrower or impairs the ability of the Lender to be repaid or to exercise
its rights in accordance with the terms hereof;

                  (e) dissolution, liquidation, winding up, or cessation of the
Borrower's business, failure of the Borrower generally to pay its debts as they
mature, admission in writing by the Borrower of its inability generally to pay
its debts as they mature, or calling of a meeting of the Borrower's creditors
for purposes of compromising any of the Borrower's debts;

                  (f) the commencement by or against the Borrower of any
bankruptcy, insolvency, arrangement, reorganization, receivership, or similar
proceedings under any federal or state law and, in the case of any such
involuntary proceeding, such proceeding remains undismissed or unstayed for
sixty days following the commencement thereof, or any action by the Borrower is
taken authorizing any such proceedings;

                  (g) an assignment for the benefit of creditors is made by the
Borrower, whether voluntary or involuntary, the appointment of a trustee,
custodian, receiver, or similar official for the Borrower or for any substantial
property of the Borrower, or any action by the Borrower authorizing any such
proceeding;

                  (h) the Borrower shall default in (i) the payment of principal
or interest on any indebtedness in excess of $100,000 (other than the
Obligations) beyond the period of grace, if any, provided in the instrument or
agreement under which such indebtedness was created; or (ii) the observance or
performance of any other agreement or condition relating to any such
indebtedness or contained in any instrument or agreement relating thereto, or
any other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or holders of such
indebtedness to cause, with the giving of notice if required, such indebtedness
to become due prior to its stated maturity; or (iii) any loan or other agreement
under which the Borrower has received financing from Transamerica Corporation or
any of its affiliates;

                  (i) the Borrower suffers or sustains a Material Adverse
Change;

                  (j) any tax lien, other than a Permitted Lien, is filed of
record against the Borrower and is not bonded or discharged within twenty
Business Days;

                  (k) any judgment which has had or could reasonably be expected
to have a Material Adverse Effect on the Borrower and such judgment shall not be
stayed, vacated, bonded, or discharged within sixty days;

                  (l) any material covenant, agreement, or obligation, as
determined in the good faith judgment of the Lender, made by the Borrower and
contained in or evidenced by any of the Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms; the Borrower shall deny or disaffirm the Obligations under any of the
Loan Documents or any liens granted in connection therewith; or any liens
granted on any of the Collateral in favor of the Lender shall be determined to
be void, voidable, or invalid, or shall not be given the priority contemplated
by this Agreement; or

                                       10
<PAGE>

                  (m) more than 35% of the ownership of any equity interests of
the Borrower become subject to any contractual, judicial, or statutory lien,
charge, security interest, or encumbrance.

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

                  (a) The Lender may, without prejudice to any of its other
rights under any Loan Document or Applicable Law, declare all Obligations to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 7(f) hereof, in which case all Obligations shall automatically
become immediately due and payable without necessity of any declaration) without
presentment, representation, demand of payment, or protest, which are hereby
expressly waived.

                  (b) The Lender may take possession of the Collateral and, for
that purpose may enter, with the aid and assistance of any person or persons,
any premises where the Collateral or any part hereof is, or may be placed, and
remove the same.

                  (c) The obligation of the Lender, if any, to make additional
Loans or financial accommodations of any kind to the Borrower shall immediately
terminate.

                  (d) The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein (or in any Loan
Document) or otherwise available to it, all the rights and remedies of a secured
party under the applicable Uniform Commercial Code (the "Code") whether or not
the Code applies to the affected Collateral and also may (i) require the
Borrower to, and the Borrower hereby agrees that it will at its expense and upon
request of the Lender forthwith, assemble all or part of the Collateral as
directed by the Lender and make it available to the Lender at a place to be
designated by the Lender that is reasonably convenient to both parties and (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the Lender's
offices or elsewhere, for cash, on credit, or for future delivery, and upon such
other terms as the Lender may deem commercially reasonable. The Borrower agrees
that, to the extent notice of sale shall be required by law, at least ten days'
notice to the Borrower of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Lender may adjourn any
public or private sale from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.

                  (e) All cash proceeds received by the Lender in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Lender, be held by the Lender as
collateral for, or then or at any time thereafter applied in whole or in part by
the Lender against, all or any part of the Obligations in such order as the
Lender shall elect. Any surplus of such cash or cash proceeds held by the Lender
and remaining after the full and final payment of all the Obligations shall be
paid over to the Borrower or to such other Person to which the Lender may be
required under applicable law, or directed by a court of competent jurisdiction,
to make payment of such surplus.

            SECTION  9.  MISCELLANEOUS PROVISIONS.

                  SECTION 9.1. Notices. Except as otherwise provided herein, all
notices, approvals, consents, correspondence, or other communications required
or desired to be given hereunder shall be given in writing and shall be
delivered by overnight courier, hand delivery, or certified or registered mail,
postage prepaid, if to the Lender, then to Transamerica Technology Finance
Division, 76 Batterson Park Road, Farmington, Connecticut 06032, Attention:
Assistant Vice President, Lease Administration, with a copy to the Lender at
Riverway II, West Office Tower, 9399 West Higgins Road, Rosemont, Illinois
60018, Attention: Legal Department, and if to the Borrower, then to Pharsight
Corporation, 800 W. El Camino Real, Mountain View, California 94040, Attention:
Chief Financial Officer or such other address as shall be designated by the
Borrower or the Lender to the other party in accordance herewith. All such
notices and correspondence shall be effective when received.

                                       11
<PAGE>

                  SECTION 9.2. Headings. The headings in this Agreement are for
purposes of reference only and shall not affect the meaning or construction of
any provision of this Agreement.

                  SECTION 9.3. Assignments. The Borrower shall not have the
right to assign any Note or this Agreement or any interest therein unless the
Lender shall have given the Borrower prior written consent and the Borrower and
its assignee shall have delivered assignment documentation in form and substance
satisfactory to the Lender in its sole discretion. The Lender may assign its
rights and delegate its obligations under any Note or this Agreement.

                  SECTION 9.4. Amendments, Waivers, and Consents. Any amendment
or waiver of any provision of this Agreement and any consent to any departure by
the Borrower from any provision of this Agreement shall be effective only by a
writing signed by the Lender and shall bind and benefit the Borrower and the
Lender and their respective successors and assigns, subject, in the case of the
Borrower, to the first sentence of Section 9.3.

                  SECTION 9.5. Interpretation of Agreement. Time is of the
essence in each provision of this Agreement of which time is an element. All
terms not defined herein or in a Note shall have the meaning set forth in the
applicable Code, except where the context otherwise requires. To the extent a
term or provision of this Agreement conflicts with any Note, or any term or
provision thereof, and is not dealt with herein with more specificity, this
Agreement shall control with respect to the subject matter of such term or
provision. Acceptance of or acquiescence in a course of performance rendered
under this Agreement shall not be relevant in determining the meaning of this
Agreement even though the accepting or acquiescing party had knowledge of the
nature of the performance and opportunity for objection.

                  SECTION 9.6. Continuing Security Interest. This Agreement
shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until the indefeasible payment in full of the
Obligations, (ii) be binding upon the Borrower and its successors and assigns
and (iii) inure, together with the rights and remedies of the Lender hereunder,
to the benefit of the Lender and its successors, transferees, and assigns.

                  SECTION 9.7. Reinstatement. To the extent permitted by law,
this Agreement and the rights and powers granted to the Lender hereunder and
under the Loan Documents shall continue to be effective or be reinstated if at
any time any amount received by the Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee, or similar official for the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.

                  SECTION 9.8. Survival of Provisions. All representations,
warranties, and covenants of the Borrower contained herein shall survive the
execution and delivery of this Agreement, and shall terminate only upon the full
and final payment and performance by the Borrower of the Obligations secured
hereby.

                  SECTION 9.9. Indemnification. The Borrower agrees to indemnify
and hold harmless the Lender and its directors, officers, agents, employees, and
counsel from and against any and all costs, expenses, claims, or liability
incurred by the Lender or such Person hereunder and under any other Loan
Document or in connection herewith or therewith, unless such claim or liability
shall be due to willful misconduct or gross negligence on the part of the Lender
or such Person.

                  SECTION 9.10. Counterparts; Telecopied Signatures. This
Agreement may be executed in counterparts, each of which when so executed and
delivered shall be an original, but both of which shall together constitute one
and the same instrument. This Agreement and each of the other Loan Documents and
any notices given in connection herewith or therewith may be executed and
delivered by telecopier or other facsimile transmission all with the same force
and effect as if the same was a fully executed and delivered original manual
counterpart.

                                       12
<PAGE>

                  SECTION 9.11. Severability. In case any provision in or
obligation under this Agreement or any Note or any other Loan Document shall be
invalid, illegal, or unenforceable in any jurisdiction, the validity, legality,
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.

                  SECTION 9.12. Delays; Partial Exercise of Remedies. No delay
or omission of the Lender to exercise any right or remedy hereunder, whether
before or after the happening of any Event of Default, shall impair any such
right or shall operate as a waiver thereof or as a waiver of any such Event of
Default. No single or partial exercise by the Lender of any right or remedy
shall preclude any other or further exercise thereof, or preclude any other
right or remedy.

                  SECTION 9.13. Entire Agreement. The Borrower and the Lender
agree that this Agreement, the Schedule hereto, and the Commitment Letter are
the complete and exclusive statement and agreement between the parties with
respect to the subject matter hereof, superseding all proposals and prior
agreements, oral or written, and all other communications between the parties
with respect to the subject matter hereof. Should there exist any inconsistency
between the terms of the Commitment Letter and this Agreement, the terms of this
Agreement shall prevail.

                  SECTION 9.14. Setoff. In addition to and not in limitation of
all rights of offset that the Lender may have under Applicable Law, and whether
or not the Lender has made any demand or the Obligations of the Borrower have
matured, the Lender shall have the right to appropriate and apply to the payment
of the Obligations of the Borrower all deposits and other obligations then or
thereafter owing by the Lender to or for the credit or the account of the
Borrower.

                  SECTION 9.15. WAIVER OF JURY TRIAL. THE BORROWER AND THE
LENDER IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING,
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

                  SECTION 9.16. GOVERNING LAW. THE VALIDITY, INTERPRETATION, AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.

                  SECTION 9.17. Venue; Service of Process. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY, OR OF
THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION
OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION
WITH ANY SUCH ACTION OR PROCEEDING, (a) ANY OBJECTION, INCLUDING, WITHOUT
LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND (b) THE RIGHT TO
INTERPOSE ANY NONCOMPULSORY SETOFF, COUNTERCLAIM, OR CROSS-CLAIM. THE BORROWER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS
FOR IT SPECIFIED IN SECTION 9.1 HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER
JURISDICTION, SUBJECT IN EACH INSTANCE TO THE PROVISIONS HEREOF WITH RESPECT TO
RIGHTS AND REMEDIES.

                                       13
<PAGE>

                  IN WITNESS WHEREOF, the undersigned Borrower has caused this
Agreement to be duly executed and delivered by its proper and duly authorized
officer as of the date first set forth above.

                                          PHARSIGHT CORPORATION

                                          By:   /s/ Robin A. Kehoe
                                              ----------------------------------
                                              Name: Robin A. Kehoe
                                              Title: CFO
                                          Federal Tax ID: 77-0401273

Accepted as of the
26th day of February, 1999

TRANSAMERICA BUSINESS CREDIT CORPORATION

By:   /s/ Gary P. Moro
    ----------------------------------
    Name: Gary P. Moro
    Title: Vice President

Form16

                                       14

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00007-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00007-of-00352.parquet"}]]