Document:

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                                                               Exhibit 10.4

                                  IMPERIAL BANK
                                   Member FDIC

                                 LOAN AGREEMENT

                            Dated as of: July 10, 1998

This Loan Agreement (as amended or supplemented from time to time, "this
Agreement"), dated as of July 10, 1998, is entered into between VARIAGENICS,
INC., a Delaware corporation (herein called "Borrower"), and IMPERIAL BANK, a
California bank (herein called "Bank").

         1.       EQUIPMENT LOANS.

                  A. COMMITMENT TO MAKE EQUIPMENT LOANS. Bank hereby commits,
subject to all the terms and conditions of this Agreement (including, without
limitation, the conditions set forth in Section 4 hereof), and prior to the
termination of Bank's commitment to make Equipment Loans hereunder as
hereinafter provided, to make loans to Borrower from time to time ("Equipment
Loans") in such amounts up to, but not exceeding, in the aggregate for all such
Equipment Loans made on or after the date hereof (and without giving effect to
any repayment or prepayment of any Equipment Loans), the Equipment and Bridge
Loan Commitment Amount. The proceeds of each Equipment Loan shall be used by
Borrower on the date of such Equipment Loan to purchase Qualified Equipment. The
amount of any Equipment Loan for any Qualified Equipment shall not exceed the
full invoice purchase price of such Qualified Equipment, less (to the extent
included in such invoice purchase price) the amount of any sales taxes and
freight charges payable in respect of the purchase of such Qualified Equipment
or the delivery thereof to the location specified by Borrower.

                  B. REQUESTS FOR EQUIPMENT LOANS. Requests for Equipment Loans
hereunder shall be in writing duly executed by Borrower in a form satisfactory
to Bank and shall contain a certification (i) setting forth, in reasonable
detail, (a) the amount of the requested Equipment Loan, (b) a reasonably
detailed description of the equipment to be purchased with the proceeds of such
Equipment Loan (including the serial number, model and make of such equipment,
if applicable), and the location at which the equipment will be located, and (c)
a copy of the invoice for such equipment, (ii) that, upon the purchase thereof
by Borrower, such equipment will constitute Qualified Equipment, and (iii) that
no Default or Event of Default shall be continuing on the date of such requested
Equipment Loan or after giving effect thereto and to the use of proceeds
thereof. Anything herein to the contrary notwithstanding, Bank shall not be
obligated to make any Equipment Loan to Borrower while any Default or Event of
Default shall be continuing, or if any Default or Event of Default would arise
from the making of such Equipment Loan or the use of the proceeds thereof. Bank
shall not be required to make any Equipment Loan requested by Borrower hereunder
unless the amount of such Equipment Loan is equal to at least $50,000, or, if
less, the entire unused amount of Bank's commitment to make Equipment Loans
hereunder.

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                  C. TERMINATION OF EQUIPMENT LOAN COMMITMENT; REPAYMENTS AND
PREPAYMENTS OF EQUIPMENT LOANS. Bank's commitment to make Equipment Loans
hereunder shall terminate on March 9, 1999, and Bank shall have no obligation
hereunder to make any Equipment Loans to Borrower after that date. Bank's
commitment to make Equipment Loans hereunder may terminate prior to March 9,
1999 in accordance with Section 13 or 14 hereof. Bank's commitment to make
Equipment Loans hereunder shall also terminate on the date on which any
mandatory prepayment shall be required pursuant to Section 4 hereof.

         Borrower promises to pay to Bank the aggregate principal of all
Equipment Loans outstanding on March 9,1999 in thirty-three (33) equal monthly
installments on the last day of each calendar month commencing with the first
such installment payment on March 31, 1999, and with the final installment due
on the Equipment Loan Maturity Date. The outstanding principal amount of
Equipment Loans may be prepaid by Borrower at any time. Without limiting
Borrower's obligations under Section 12(b)(vi) of this Agreement, if any
Qualified Equipment purchased with the proceeds of any Equipment Loan is at any
time sold, assigned or otherwise transferred, Borrower will prepay the
outstanding principal of the Equipment Loans, on the date of such sale,
assignment or transfer, in an amount equal to the fair market value of the
proceeds received by Borrower on the date of such sale, assignment or transfer.
Any such optional or mandatory prepayments shall reduce each of the remaining
installment payments of principal on the Equipment Loans in the inverse order of
the maturities hereof, and in such manner among Equipment Loans as Bank shall
determine.

         Notwithstanding anything to the contrary set forth herein, Borrower
promises to pay to Bank the aggregate unpaid principal amount of all Equipment
Loans on January 31, 2002, or such earlier date on which the outstanding
principal of the Equipment Loans shall be declared to be or shall otherwise
become due and payable pursuant to Section 4, 13 or 14 hereof (January 31, 2002
or such earlier date being called the Equipment Loan Maturity Date.)

                  D. EQUIPMENT NOTE. The obligations of Borrower in respect of
the Equipment Loans and any interest accrued thereon shall be evidenced by a
Promissory Note executed and delivered to Bank on the date hereof, in the face
amount of $1,200,000 ("Equipment Note"). Borrower hereby irrevocably authorizes
Bank to make appropriate notations on any Schedule attached to the Equipment
Note, which notations, if made, shall evidence the date of, the outstanding
principal of, and payments on the Equipment Loans evidenced thereby. Bank's
notations on any Schedule attached to the Equipment Note shall constitute
rebuttable presumptive evidence of the principal amount of Equipment Loans
outstanding, but any failure to record any information on any such Schedule
shall not limit or affect the obligations of Borrower hereunder or under the
Equipment Note to make payments of principal or interest on the Equipment Loans
when due.

         2.       BRIDGE LOAN.

                  A. COMMITMENT TO MAKE BRIDGE LOANS. Bank hereby commits,
subject to all the terms and conditions of this Agreement (including, without
limitation, the conditions set forth in Section 3 hereof), and prior to the
termination of Bank's commitment to make Bridge Loans hereunder as hereinafter
provided, to make loans to Borrower from time to time ("Bridge

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Loans") in such amounts up to, but not exceeding in the aggregate unpaid
principal balance at any time, the Equipment and Bridge Loan Commitment Amount
at such time. Bank's commitment to make Bridge Loans hereunder shall terminate
on July 9, 1999, and Bank shall have no obligation hereunder to make any Bridge
Loans to Borrower after that date. Bank's commitment to make Bridge Loans
hereunder may terminate prior to July 9, 1999 in accordance with Section 13 or
14 hereof. Bank's commitment to make Bridge Loans hereunder shall terminate on
the date on which any mandatory prepayment shall be required pursuant to Section
4 hereof.

                  B. REQUESTS FOR BRIDGE LOANS. Each request for a Bridge Loan
hereunder shall be in writing duly executed by Borrower in a form satisfactory
to Bank and shall contain a certification (i) setting forth, in reasonable
detail, calculations establishing to the reasonable satisfaction of Bank that
Borrower is entitled hereunder to the amount of the Bridge Loan being requested,
(ii) that on the date of such Bridge Loan, and before and after giving effect to
such Bridge Loan, all representations and warranties of Borrower set forth
herein and in the other Loan Documents will be true and correct, and (iii) that
no Default or Event of Default shall be continuing on the date of such Bridge
Loan, either before or after giving effect to such Bridge Loan or the
application by Borrower of the proceeds thereof. Anything herein to the contrary
notwithstanding, Bank shall not be obligated to make any Bridge Loan to Borrower
while any Default or Event of Default shall be continuing, or if any Default or
Event of Default would arise from the making of such Bridge Loan or the
application of the proceeds thereof.

                  C. REPAYMENT OF BRIDGE LOANS. Borrower promises to pay to Bank
the aggregate outstanding principal of the Bridge Loans on July 9, 1999 or such
earlier date on which the outstanding principal of the Bridge Loans shall be
declared to be or shall otherwise become due and payable pursuant to Section 4,
13 or 14 hereof. The outstanding principal amount of the Bridge Loans may be
prepaid by Borrower at any time.

                  D. BRIDGE NOTE. The obligations of Borrower in respect of the
Bridge Loans and any interest accrued thereon shall be evidenced by a Promissory
Note executed and delivered to Bank on the date hereof, in the face amount of
$1,200,000 ("Bridge Note"). Borrower hereby irrevocably authorizes Bank to make
appropriate notations on any Schedule attached to the Bridge Note, which
notations, if made, shall evidence the date of, the outstanding principal of,
and payments on the Bridge Loans evidenced thereby. Bank's notations on any
Schedule attached to the Bridge Note shall constitute rebuttable presumptive
evidence of the aggregate principal amount of the Bridge Loans outstanding, but
any failure to record any information on any such Schedule shall not limit or
affect the obligations of Borrower hereunder or under the Bridge Note to make
payments of principal or interest on the Bridge Loans when due.

         3. LIMITATION ON OUTSTANDING OBLIGATIONS. Notwithstanding anything to
the contrary set forth herein, Bank shall not be required to make any Equipment
Loan or Bridge Loan if, after giving effect thereto, the sum of (a) the
aggregate outstanding principal amount of Equipment Loans, PLUS (b) the
aggregate outstanding principal amount of Bridge Loans would exceed the
Equipment and Bridge Loan Commitment Amount.

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         4. SPECIAL PAYMENT OBLIGATION. Borrower will prepay all of its
outstanding obligations under this Agreement and the other Loan Documents on the
date that is three business days prior to the date on which Borrower shall pay
or be required to pay any dividend on, or make or be required to make any
distribution on or in respect of, any of its capital stock, or shall make or be
required to make any payment or distribution in respect of the purchase,
repurchase, redemption or other acquisition of any of its capital stock.

         5. INTEREST. Borrower promises to pay to Bank interest (a) on the
aggregate outstanding principal amount of each Equipment Loan (i) at the rate of
one half of one percent (0.5%) per annum in excess of Bank's Prime Rate, or, at
Borrower's option, elected prior to the drawdown of such Equipment Loan (ii) at
a fixed interest rate of 83/4%, and (b) on the aggregate outstanding principal
amount of Bridge Loans at the rate of one quarter of one percent (0.25%) per
annum in excess of Bank's Prime Rate. Interest shall be computed at the above
rates on the basis of the actual number of days elapsed divided by 360, which
shall for interest computation purposes be considered one year. Interest accrued
on the outstanding principal of the Equipment Loans and on the outstanding
principal of the Bridge Loans, shall be payable in arrears on the first day of
each calendar month. Notwithstanding anything herein to the contrary, interest
on the aggregate outstanding principal amounts of the Equipment and Bridge Loans
will be reduced by one-quarter of one percent (0.25%) on the closing date of any
(A) Financing or (B) licensing, joint venture or other agreement, the Cash
Proceeds of which received by the Borrower on the closing date of such
transaction are not less than $8,000,000.

         6. DEFAULT INTEREST. Upon the occurrence and during the continuance of
any Event of Default, the entire principal balance of the Equipment Note and the
entire unpaid principal of the Bridge Note, and, to the extent permitted by
applicable law, all interest, fees, charges and other sums that may be due and
payable under this Agreement or any other Loan Document, shall bear interest at
the rate of [five percent (5%)] per year in excess of the rate otherwise
applicable to such principal, as it may vary from time to time, and shall be
payable upon demand by Bank.

         7. PAYMENTS. All payments required to be made by Borrower to Bank
hereunder or under any of the Loan Documents shall be made at the Santa Clara
Regional Office of Bank at 226 Airport Parkway, San Jose, California, on or
prior to 11:00 a.m., San Jose time, on the due date of such payment, without any
set-off or counterclaim, and in immediately available funds. Any partial
payments of the obligations of Borrower hereunder or under any of the other Loan
Documents, except where this Agreement or any other Loan Document otherwise
specifies, shall be applied FIRST, to any charges, sums or other amounts (other
than principal or interest) due and payable under the Loan Documents, SECOND, to
accrued and unpaid interest, and THIRD, to the principal of the Equipment Note
or Bridge Note in such manner as Bank shall determine.

         8. LETTER OF CREDIT; SECURITY. On June 4, 1998, Bank issued a letter of
credit in favor of Borrower in the face amount of $2,000,000 ("Letter of
Credit"). The Letter of Credit and all agreements executed by Borrower therewith
constitute Loan Documents for purposes of this Agreement. Borrower's obligations
under such documents are entitled to all of the benefits of the Collateral and
Borrower's covenants set forth in this Agreement and the other Loan

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Documents shall continue until all obligations of Borrower to the Bank under the
Letter of Credit and all agreements related thereto have been satisfied.

                  All of the obligations of Borrower to Bank under this
Agreement, the Equipment Note, the Bridge Note, and the other Loan Documents
shall be secured by and entitled to the benefit of certain Collateral. Reference
is made to the Loan Documents for a complete description of the Collateral and
of the rights of Bank with respect thereto.

         9. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:

                  "Ancillary Documents" means, collectively, (i) Borrower's
Certificate of Incorporation, as amended and in effect from time to time, and
(ii) each other agreement designated by Borrower and Bank from time to time as
an "Ancillary Document" for purposes of this Agreement and the other Loan
Documents.

                  "Associated Person" means (i) any person that is an affiliate
of Borrower (including, without limitation, any officer or director of
Borrower), (ii) any Family Member of any individual Associated Person described
in clause (i), (iii) any corporation, partnership, limited liability company or
other entity (other than Borrower) that controls or is controlled by any
Associated Person described in clause (i) or (ii), (iv) any Investor, and (v)
any corporation, partnership, limited liability company or other entity (other
than Borrower) that controls or is controlled by any Investor.

                  "Cash Proceeds" means, with respect to any Financing, the
aggregate amount of cash proceeds actually received by Borrower from and upon
the completion of the issuance and sale by Borrower of securities in such
Financing.

                  "Change of Control" means any event or series of events
(including, without limitation, any consolidation, merger, issue or sale of
capital stock or other securities, reorganization, voting agreement or
otherwise) by which the holders of Borrower's outstanding capital stock as of
the date of this Agreement shall cease to own and control, both legally and
beneficially, with full power to vote, shares of capital stock of Borrower
having voting power equal to at least sixty percent (60%) of the voting power of
all outstanding shares of capital stock of Borrower having voting power under
ordinary circumstances to elect the Board of Directors of Borrower.

                  "Collateral" means any and all property of Borrower which is
or shall be assigned to Bank as security or in which Bank now has or hereafter
acquires a security interest to secure the payment and performance of any of the
obligations of Borrower to Bank under this Agreement or any of the other Loan
Documents.

                  "Default" means any of the events specified in Section 13(i)
through 13(xii) hereof, whether or not any requirement for the giving of notice,
the lapse of time, or both, or any other condition has been satisfied.

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                  "Eligible Accounts" means all of Borrower's Accounts,
excluding, however, (i) Account balances over ninety (90) days from invoice
date, (ii) all Accounts against which the account debtor or any other person
obligated to make payment thereon shall have asserted any defense, offset,
counterclaim or other right to avoid or reduce the liability represented by the
Account (but only to the extent of such claim, defense or offset), (iii) fifty
percent (50%) of otherwise Eligible Accounts with respect to which 25% or more
of the account debtor's total accounts or obligations outstanding to Borrower
are more than 90 days from invoice date, (iv) for Accounts representing more
than 25% of Borrower's total Accounts, the balance in excess of the 25%, (v)
Accounts with respect to international transactions unless insured by an
insurance company acceptable to Bank or covered by letters of credit issued or
confirmed by a bank acceptable to Bank, (vi) Accounts with respect to which the
account debtor is an officer, director, shareholder, employee, subsidiary or
affiliate of Borrower, (vii) Accounts where the account debtor is a seller to
Borrower, whereby a potential offset (contra) exists, (viii) Accounts for
consignment or guaranteed sales, (ix) bill and hold Accounts, (x) collection
Accounts, (xi) distributor sample Accounts, whereby accounts are offset by
commissions payable, (xii) government receivables, unless formally assigned to
Bank in accordance with the Federal Assignment of Claims Act or applicable state
law, (xiii) Accounts for pre-billings, (xiv) any Accounts if the account debtor
or any other person liable in connection therewith is insolvent, subject to
bankruptcy or receivership proceedings or has made an assignment for the benefit
of creditors or whose credit standing is unacceptable to Bank and Bank has so
notified Borrower, and (xv) any other Accounts as Bank in its sole discretion
shall determine are ineligible from time to time, and Bank has so notified
Borrower.

                  "Equipment and Bridge Loan Commitment Amount" means
$1,200,000; PROVIDED, however, that the Equipment and Bridge Loan Commitment
Amount shall not exceed $600,000 prior to the closing date of a Qualified
Financing.

                  "Event of Default" is defined in Section 14 hereof.

                  "Family Member" means, in relation to any individual, any
spouse, parent, grandparent, aunt, uncle, child, grandchild, brother or sister
of such individual, the spouse of any of the foregoing, or any trust established
exclusively for the benefit of any of such persons.

                  "Financing" means any transaction or series of related
transactions involving the issuance and sale by Borrower at any time after the
date hereof of equity securities of Borrower or securities convertible into,
exercisable for or carrying any rights to purchase or acquire any equity
securities of Borrower, EXCLUDING, HOWEVER, (i) the issuance and sale of capital
stock to officers, directors or employees of, or consultants to, Borrower in
their respective capacities as such, and (ii) the issuance and sale of
securities in the form of debt instruments (such as promissory notes, debentures
or other similar debt instruments).

                  "Indebtedness for Borrowed Money" means, in relation to any
person at any time, (i) all indebtedness of such person for borrowed money
(including all notes payable and drafts accepted representing extensions of
credit and all obligations evidenced by bonds, debentures, notes or other
similar instruments on which interest charges are customarily paid), all
indebtedness of such person relative to the face amount of all letters of
credit, whether or not

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drawn, all indebtedness of such person constituting capitalized lease
obligations, and all other obligations of such person for the deferred purchase
price of property or services (other than in the ordinary course of business),
and (ii) all contingent obligations of such person in respect of any
indebtedness of any other persons of the kind described in clause (i) of this
definition.

                  "Investor" means, collectively, the holders from time to time
of Borrower's outstanding Preferred Stock.

                  "Loan Documents" means, collectively, (i) this Agreement, (ii)
each of the following documents or instruments executed by Borrower and
delivered to Bank in connection with the financing arrangements contemplated
hereby: the Equipment Note, the Bridge Note, the Letter of Credit and the
Security Agreement and (3) each other instrument or agreement evidencing,
guarantying or securing any of the obligations of Borrower to Bank under this
Agreement or any other Loan Document, in each case, as amended and in effect
from time to time.

                  "Materially Adverse Effect" means, in relation to any event,
occurrence or development, (i) a material adverse effect on the business,
property, operations or financial condition of Borrower, (ii) a material adverse
effect on the ability of Borrower to perform any of its or his obligations,
covenants or agreements under this Agreement or any other Loan Document, or
(iii) a material impairment of the validity or enforceability of any Loan
Document or Warrant, or a material impairment of the rights, remedies or
benefits available to Bank under any Loan Document or Warrant.

                  "Qualified Equipment" means equipment used or useful in the
ordinary course of business of Borrower that will be owned by Borrower free and
clear of any liens, security interests or other encumbrances, other than
security interests in favor of Bank, provided, however, that to the extent that
any of the Qualified Equipment consists of fixtures, such Qualified Equipment
may be subject to the interest of the owner of the property where such Qualified
Equipment is located.

                  "Qualified Financing" means a Financing involving exclusively
the issuance and sale by the Borrower of shares of Borrower's convertible
preferred stock for or in consideration of Cash Proceeds actually received by
Borrower at the initial closing thereof of $10,000,000 or more.

                  "Quick Ratio" means, at any time, the ratio equal to (i) the
sum of (A) all cash and cash equivalents of Borrower and its subsidiaries, plus
(B) the amount of all Eligible Accounts, divided by Indebtedness for Borrowed
Money; provided, however, that prior to the closing of a Qualified Financing,
"Indebtedness for Borrowed Money" for purposes hereof shall include only the
non-collateralized amount of the standby letter of credit commitment under the
Letter of Credit.

                  "Warrants" means, collectively, the Warrant issued by Borrower
to Bank on the date of this Agreement, and any Warrants issued upon
substitution, exchange or transfer of such initial Warrant in accordance with
the terms of the Warrants.

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         10. FINANCIAL INFORMATION. All financial covenants and financial
information referenced herein shall be interpreted and prepared in accordance
with generally accepted accounting principles applied on a basis consistent with
previous years.

         11. WARRANTIES. In order to induce Bank to make loans to Borrower under
this Agreement, Borrower represents and warrants to Bank that (each of which
representations will be deemed repeated as of the date of any Equipment Loan or
Bridge Loan hereunder as if made on such date):

                  A. ORGANIZATION; POWER AND AUTHORITY. Borrower is duly
organized and existing in the State of its incorporation; this Agreement and
each of the other Loan Documents has been duly and validly executed and
delivered by Borrower; and the execution, delivery and performance by Borrower
of this Agreement and each other Loan Document are within Borrower's corporate
powers, have been duly authorized by Borrower, and are not in conflict with any
applicable law or with the terms of Borrower's Certificate of Incorporation or
by-laws, as amended, or any indenture, material agreement or undertaking to
which Borrower is a party or by which Borrower is bound or affected. The
obligations of Borrower set forth in the Loan Documents constitute legal, valid
and binding obligations of Borrower, enforceable against Borrower in accordance
with their respective terms, subject, however, to any applicable bankruptcy or
insolvency laws affecting generally the enforcement of creditors' rights against
Borrower, and to the discretion of any court with respect to the enforcement of
any equitable remedies.

         The Warrant has been duly and validly executed and delivered by
Borrower; the execution, delivery and performance of the Warrant are within
Borrower's corporate powers, have been duly authorized and are not in conflict
with any applicable law or with the terms of Borrower's Certificate of
Incorporation or Bylaws, as amended, or any indenture, agreement or undertaking
to which Borrower is a party or by which Borrower is bound or affected. The
obligations of Borrower set forth in the Warrant constitute legal, valid and
binding obligations of Borrower, enforceable against Borrower in accordance with
their respective terms, subject, however, to any applicable bankruptcy or
insolvency laws affecting generally the enforcement of creditors rights against
Borrower, and to the discretion of any court with respect to the enforcement of
any equitable remedies.

                  B. LITIGATION. There is no litigation or other proceeding
pending or threatened against or affecting Borrower that could reasonably be
expected to have a Materially Adverse Effect, and Borrower is not in default
with respect to any order, writ, injunction, decree or demand of any court or
other governmental or regulatory authority.

                  C.       FINANCIAL CONDITION.

         i. The audited balance sheet of Borrower as of December 31, 1997,
and the related audited income statement and cash flows of Borrower, and the
unaudited balance sheet of Borrower as of April 30, 1998, and the related
unaudited income statement and cash flows of Borrower (collectively,
"Financials"), copies of which have heretofore been delivered to Bank by

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Borrower, and all other statements and data submitted in writing by Borrower to
Bank in connection with this request for credit, and not subsequently
supplemented, modified or amended in writing to Bank, are true and correct, and
the Financials fairly present the financial condition of Borrower as of the
dates thereof and the results of the operations of Borrower for the periods
covered thereby, and have been prepared in accordance with generally accepted
accounting principles on a basis consistently maintained. Since December 31,
1997, there have been no events or occurrences which, individually or in the
aggregate, have had or are reasonably likely to have a Materially Adverse
Effect. Borrower has no knowledge of any liabilities, contingent or otherwise,
at such date not reflected in said balance sheet which are required under such
generally accepted accounting principles to be so reflected, and Borrower has
not entered into any special commitments or substantial contracts since the date
of such balance sheet, other than in the ordinary and normal course of its
business which could not reasonably be expected to have a Materially Adverse
Effect. Except for Borrower's obligations under the Loan Documents, and the
Indebtedness for Borrowed Money reflected in SCHEDULE 13(b)(iv) attached hereto,
Borrower has no Indebtedness for Borrowed Money or guaranties or contingent
obligations in respect of Indebtedness for Borrowed Money.

         ii. The projected consolidated financial statements of Borrower and its
subsidiaries for the fiscal years ending December 31, 1998, December 31, 1999,
and December 31, 2000 ("Projections"), copies of which have heretofore been
delivered by Bank to Borrower, have been prepared on the basis of the
assumptions accompanying them and reflect the best good faith estimates by
Borrower of the performance of Borrower for the periods covered thereby, and the
financial condition of Borrower as of the dates thereof, based on such
assumptions.

                  D. TRADEMARKS, PATENTS, COPYRIGHTS. Borrower, as of the date
hereof, possesses all trademarks, service marks, trade names, copyrights,
patents, patent rights, and licenses that are necessary to conduct its business
as now operated, without any known conflict with any trademarks, trade names,
copyrights, patents or license rights of others. SCHEDULE 12(d) sets forth a
true and complete list and description of each (i) patent or patent application
held or filed by Borrower, (ii) registered trademark or service mark, or
trademark or service mark registration application, held or filed by Borrower,
and (iii) material copyright of Borrower, and, with respect to each such
copyright, whether such copyright has been registered by Borrower or whether
Borrower has applied for any such registration.

                  E. TAX STATUS. Borrower has no liability for any delinquent
state, local or federal taxes.

                  F. SUBSIDIARIES; CAPITALIZATION: Borrower has no subsidiaries.
SCHEDULE 12(f) sets forth a true and complete list of authorized capital stock
of Borrower of each series or class, the number of shares of capital stock of
each series or class of Borrower outstanding as of the date hereof, and the
holder of such capital stock. Except as set forth on SCHEDULE 12(f), there are
no outstanding options, warrants, subscription rights or other rights to
purchase or acquire any capital stock of Borrower, and there are no outstanding
securities convertible into or exchangeable for any capital stock of Borrower.

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                  G. PROPERTIES. SCHEDULE 12(g) sets forth a true and complete
list of each property owned or leased by Borrower, the address of such property
and the business conducted by Borrower at such property.

                  H. AFFILIATE TRANSACTIONS. Except as described in SCHEDULE
12(h) attached hereto, Borrower is not a party to or otherwise bound by any
written or oral contracts with any Associated Person. Except as described on
SCHEDULE 12(h), there is no Indebtedness for Borrowed Money owing by Borrower to
any Associated Person, and there is no Indebtedness for Borrowed Money owing by
any Associated Person to Borrower. Borrower has delivered to Bank a true and
complete copy of each contract (or, where such contract is oral, a true and
complete description thereof) described in SCHEDULE 12(h).

                  I. OTHER REPRESENTATIONS. Each of the representations and
warranties of Borrower in any of the other Loan Documents is true and correct.

         12.      COVENANTS.

                  A. CERTAIN AFFIRMATIVE COVENANTS. Borrower affirmatively
covenants that so long as any obligations of Borrower to Bank under this
Agreement or any other Loan Document remain outstanding or any commitment of
Bank to make loans to Borrower hereunder remains outstanding, Borrower will:

                            i. BANKING RELATIONSHIPS. Maintain with Bank all
of its primary banking and transaction accounts, including accounts to hold
cash or cash equivalent balances from the proceeds of the issuance of
Borrower's securities, upon terms which are reasonably similar to terms
provided to other customers of Bank similarly situated.

                           ii.      REPORTING.

                  (A) Within 20 days after each month-end, deliver to Bank an
Accounts receivable aging reconciled to the general ledger of Borrower, a
detailed accounts payable aging reconciled to Borrower's general ledger, and an
inventory certification outlining both inventory composition and activity for
the month. All the foregoing will be in form satisfactory to Bank.

                  (B) Within 20 days after each month-end, deliver to Bank a
balance sheet of Borrower as at the end of such month, together with related
statements of operations and cash flows for such month, inform satisfactory to
Bank, all certified as to fairness of presentation by the chief financial
officer of the Borrower.

                  (C) Deliver to Bank, promptly upon Bank's request, all other
information relating to the affairs or business of Borrower as Bank may
reasonably request.

                          iii. OTHER NOTICES. Promptly upon obtaining
knowledge thereof, deliver to Bank written notice of the occurrence of any
Default or Event of Default, or of any event which has had, or is reasonably
likely to have, a Materially Adverse Effect.

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                           iv. COMPLIANCE CERTIFICATE. Together with the
financial statements described in paragraph (ii)(A) for any month, deliver to
Bank a certificate, prepared and signed by the chief financial officer of
Borrower, certifying as to (A) compliance by Borrower with the covenants set
forth in paragraphs 13(b)(i) and (ii) hereof for the relevant period most
recently ended, and showing, in reasonable detail, the calculations necessary
to demonstrate such compliance and (B) the absence of any Default or Event of
Default.

                            v. RIGHTS AND FACILITIES. Maintain and preserve
all rights, franchises, licenses and other authorities adequate for the
conduct of its business; maintain its properties, equipment and facilities in
good order and repair; conduct its business in an orderly manner without
voluntary interruption and maintain and preserve its corporate existence and
good standing.

                          vi. INSURANCE. Maintain public liability, property
damage and workers' compensation insurance and insurance on all its insurable
property including, but not limited to, the Collateral against fire and other
hazards with responsible insurance carriers to the extent usually maintained
by similar businesses. At the request of Bank, Borrower will provide evidence
of property and casualty and general liability insurance in amounts and types
reasonably acceptable to Bank. Bank will be named as Loss Payee and
Additional Insured on such policies.

                          vii. TAXES AND OTHER LIABILITIES. Pay and
discharge, before the same become delinquent and before penalties accrue
thereon, all taxes, assessments and governmental charges upon or against it
or any of its properties, and all of its indebtedness and other liabilities,
except to the extent and so long as:

                  (A) the same are being contested in good faith and by
appropriate proceedings in such manner as not to cause any material adverse
effect upon its financial condition or the loss of any right of redemption from
any sale thereunder; and

                  (B) it shall have set aside on its books reserves segregated
(to the extent required by generally accepted accounting practice) and adequate
with respect thereto.

                         viii. RECORDS AND REPORTS. Maintain a system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; and permit Bank's representatives to have
access to, and to examine, its properties, books and records at all
reasonable times.

                           ix. FURTHER ASSURANCES. Borrower hereby agrees
that it will, upon the request of Bank from time to time at its own expense,
promptly execute and deliver all such further instruments including,
documents or agreements that Bank shall require, and take all such further
action that may be necessary or appropriate, or that Bank may reasonably
request, in order to perfect, preserve or protect any liens granted or
purported to be granted under the Loan Documents, to enable Bank to exercise
and enforce any of its rights or remedies under this Agreement or any of the
other Loan Documents or otherwise to carry out the intent of this Agreement
or any of the other Loan Documents.

                                       11
<PAGE>

                  b. CERTAIN NEGATIVE COVENANTS. Borrower agrees that so long as
any obligations of Borrower to Bank under this Agreement or any of the Loan
Documents remain outstanding, or any commitment of Bank to make any loans to
Borrower remains outstanding, Borrower will not without Bank's written consent:

                            i. QUICK RATIO. Permit the Quick Ratio, as at the
last day of any month, to be less than 1.4:1.

                           ii. TYPE OF BUSINESS. Make any material change in
the character of its business.

                          iii. OUTSIDE INDEBTEDNESS. Create, incur, assume or
permit to exist any Indebtedness for Borrowed Money other than (A) loans from
Bank, (B) obligations existing on the date hereof set forth on SCHEDULE
12(b)(iii), or (C) Indebtedness for Borrowed Money of Borrower incurred after
the date of this Agreement in the form of capitalized lease obligations.

                           iv. LIENS AND ENCUMBRANCES. Create, incur, assume
or permit to exist any mortgage, pledge, encumbrance, lien (except for liens
for taxes not yet due and payable or other similar liens incurred in the
ordinary course of Borrower's business) or charge of any kind upon any asset
now owned or hereafter acquired by it, other than (A) liens in Bank's favor,
(B) existing liens set forth on SCHEDULE 12(b)(iv), (C) liens of mechanics,
warehousemen and other similar liens which are either (1) in existence less
than 120 days from the date of creation in respect of obligations not yet
due, or (2) being contested in good faith by Borrower and bonded pending the
resolution of such dispute, and (E) liens over leased equipment securing
capitalized lease obligations of Borrower permitted by Section 12(b)(iii).

                            v. LOANS, INVESTMENTS, SECONDARY LIABILITIES.
Except as otherwise set forth below, make any loans or advances to any person
or other entity, other than to employees for relocation, travel or other
business expenses in the normal and ordinary course of its business; or make
any investment in the securities of any person or other entity, other than
the United States Government; or guarantee or otherwise become liable upon
the obligations of any other person or entity, except by endorsement of
negotiable instruments for deposit or collection in the ordinary and normal
course of its business; or make any other investments.

                           vi. ACQUISITION OR SALE OF BUSINESS; MERGER OR
CONSOLIDATION. Purchase or otherwise acquire the assets or business of any
person or other entity; or liquidate, dissolve, merge or consolidate, or
commence any proceedings therefore; or, except in the ordinary and normal
course of its business, sell (including without limitation the selling of any
property or other asset accompanied by leasing back of same) any property or
assets. Upon any sale of any property or assets not permitted hereunder,
Borrower shall pay to Bank, immediately upon receipt by Borrower, all of the
net proceeds of such sale, for application by Bank to the outstanding
obligations of Borrower under the Loan Documents in such manner as Bank shall
deem appropriate.

                          vii. DIVIDENDS, DISTRIBUTIONS, RESTRICTED PAYMENTS.
Declare or pay any dividend or make any other distribution on or in respect
of any capital stock of Borrower or any other securities convertible or
exchangeable for any capital stock of Borrower; make any payment in

                                       12
<PAGE>

respect of the purchase, repurchase, redemption or retirement of any of such
capital stock or other securities; or make any payment, prepayment or other
distribution on, or payment or distribution in respect of the purchase,
repurchase, retirement or other acquisition of, any Indebtedness for Borrowed
Money or other liability, of Borrower to any Associated Person. This paragraph
(viii) shall not prohibit the payment by Borrower of any salaries or bonuses to
employees, or the making by Borrower of any loans or advances to employees, in
each case in the normal and ordinary course of business of Borrower consistent
with past practices.

                         viii. TRANSACTIONS WITH ASSOCIATED PERSONS. Engage
in any transactions with any Associated Person, EXCEPT transactions in the
ordinary and normal course of business which (A) include only terms and
conditions that are fair and equitable to Borrower, (B) do not violate or
otherwise conflict with any of the terms and provisions of this Agreement or
any of the Loan Documents, (C) require the payment of no fees, charges or
commissions by Borrower to any Associated Person, and (D) involve terms no
less favorable to Borrower than would be the terms of a similar transaction
with any person other than an Associated Person.

                           ix. CHANGE OF CONTROL TRIGGERING EVENTS. Enter
into or undertake any transaction, arrangement or agreement (whether a
consolidation, merger, issue or sale of capital stock or other securities,
reorganization, voting agreement or otherwise) that will or could reasonably
be expected to result in a Change of Control.

                            x. FORMATION OF NEW SUBSIDIARIES. Form any new
subsidiaries.

                           xi. AMENDMENT OF CERTAIN DOCUMENTS. Amend, restate
or otherwise modify, or waive any of its rights under, (A) any agreements,
instruments or contracts (whether written or oral) between Borrower and any
Associated Person, or (B) any Ancillary Documents.

                  c. CERTAIN CONTINUING COVENANTS. Borrower agrees that, so long
as any obligations of Borrower to Bank under this Agreement or any other Loan
Document remain outstanding, or any commitment of Bank to make loans to Borrower
remains outstanding, and until such later date on which the Warrants shall have
been terminated or shall have been exercised in full, Borrower will:

                            i. FINANCIAL AND OTHER REPORTS.

                  (A) Within 30 days after each month-end, deliver to Bank a
balance sheet of Borrower as at the end of such month, together with related
statements of operations and cash flows for such month, in form satisfactory to
Bank, all certified as to fairness of presentation by the chief financial
officer of Borrower.

                  (B) Within 30 days after the end of each fiscal quarter of
Borrower, deliver to Bank a balance sheet of Borrower as at the end of such
fiscal quarter, together with related statements of operations and cash flows
for such fiscal quarter and for the portion of the fiscal year ended at the end
of such fiscal quarter, all certified at to fairness of presentation by the
chief financial officer of Borrower.

                                       13
<PAGE>

                  (C) Within 90 days after the end of each fiscal year of
Borrower, deliver to Bank a balance sheet of Borrower as at the end of such
fiscal year, together with the related statements of operations and cash flows
for such fiscal year, and together with a Changes in Financial Position
Statement, prepared on an audited basis with an unqualified opinion by an
independent certified public accountant selected by Borrower but reasonably
acceptable to Bank.

                  (D) Promptly upon completion thereof, and in any event not
later than March 1 of each fiscal year, deliver to Bank a copy of the annual
business plan and budget for such fiscal year, including budgeted results for
each fiscal quarter and for the fiscal year as a whole, and upon the delivery of
any financial statements relating to any period included in such budget, a
summary comparing the actual financial performance of Borrower during such
period to that shown in the budget.

                  (E) Promptly upon obtaining knowledge thereof, deliver to Bank
written notice of the occurrence of any event which has had, or is reasonably
likely to have, a Materially Adverse Affect.

                  (F) Deliver to Bank, promptly upon Bank's request, all other
information relating to the affairs or business of Borrower as Bank may
reasonably request.

                           ii. REIMBURSEMENT OBLIGATIONS. Reimburse Bank upon
demand for any and all legal costs, including reasonable attorneys' fees, and
other expenses incurred in connection with the enforcement of any term or
provision of this Agreement, any of the other Loan Documents or the Warrants,
the consideration of any legal questions relevant to the transactions
contemplated by this Agreement, the other Loan Documents and the Warrants and
the consideration and/or conduct of any proposed or actual "workout" of any
of the obligations of Borrower under this Agreement or any of the other Loan
Documents, and the structuring, preparation, negotiation, review, execution,
or delivery of this Agreement, any of the other Loan Documents or Warrants or
amendments or waivers hereunder or thereunder, or any related documents
(whether or not any of the same become effective). All such costs and
expenses accrued under this Agreement, the other Loan Documents and the
Warrants through the date of this Agreement shall be paid by Borrower upon
and in connection with Bank's execution and delivery of this Agreement.

                          iii. INDEMNIFICATION. Indemnify and hold free and
harmless Bank and each of its shareholders, officers, directors, employees,
agents, subsidiaries and affiliates ("Indemnified Parties"), upon demand,
from and against any and all actions, causes of action, suits, losses, costs,
liabilities, damages and expenses actually incurred in connection with any of
the financing transactions contemplated by any of the Loan Documents
(irrespective of whether such Indemnified Party is a party to the action for
which indemnification is sought), including all reasonable fees and
disbursements of counsel, all amounts paid in settlement and all court costs
incurred from time to time by the Indemnified Parties or any of them, and all
liabilities and expenses that may arise under any environmental laws.

         13. EVENTS OF DEFAULT; REMEDIES. Should any of the following events
occur (any such event being referred to as an "Event of Default"): (i) Default
by Borrower in the payment of any obligation of Borrower under this Agreement or
any of the other Loan Documents; (ii)

                                       14
<PAGE>

default by Borrower of any agreement, promise or covenant of Borrower under
Section 12.a(iii) or (vi) or 12.b; (iii) default by Borrower in the due
performance or observance of any of the agreements, promises or covenants of
Borrower under any of the Loan Documents or Warrants, other than any such
agreements, promises or covenants described in clause (i) or (ii) above, which
default shall continue unremedied for ten or more days; (iv) any default or
event of default by Borrower under any Ancillary Document; (v) any material
representation or warranty of Borrower set forth in any of the Loan Documents or
Warrants, or in any certificate, instrument or statement delivered to Bank
pursuant to any Loan Documents or Warrants, shall be untrue or incorrect in any
material respect when made; (vi) Borrower shall default in the payment when due
(whether at stated maturity, by acceleration or otherwise) of $50,000 or more of
any Indebtedness for Borrowed Money; (vii) Borrower shall default in the
observance or performance of any term, covenant or agreement contained in any
instrument governing or evidencing any Indebtedness for Borrowed Money, and such
default shall permit the holders of such Indebtedness for Borrower Money to
declare immediately due and payable or otherwise accelerate Indebtedness for
Borrowed Money in an aggregate amount exceeding $50,000; (viii) any Change of
Control shall occur; (ix) Borrower shall become insolvent or make an assignment
for the benefit of creditors; (x) Borrower shall apply for or consent to or
shall permit or suffer to exist the voluntary or involuntary appointment of a
trustee, receiver, custodian, or liquidator of all or any material part of its
or his property; (xi) Borrower shall have commenced against it, or shall
voluntarily commence, any bankruptcy, reorganization or other similar proceeding
under bankruptcy or insolvency laws or any dissolution, winding up or
liquidation proceeding, which, in the case of any such involuntary proceeding,
shall have been consented to by Borrower, as applicable, shall have resulted in
entry of an order for relief against Borrower, as applicable, or shall have
remained undismissed, undischarged or unbonded for a period of more than 60
days; or (xii) any other event or circumstance shall occur or arise which, in
the reasonable judgment of Bank, has had or is reasonably likely to have a
Materially Adverse Effect; then, in any such event, Bank may, at its option and
without demand first made and without notice to Borrower, do any one or more of
the following: (a) terminate its obligation to make loans (including, without
limitation, any Equipment Loans or Bridge Loans) to Borrower; (b) declare all
obligations of Borrower to Bank under this Agreement and the other Loan
Documents immediately due and payable; and (c) proceed to enforce all or any of
its rights under any of the Loan Documents or available at law or in equity. In
the event Bank sells or disposes of any Collateral, and a sufficient sum is not
realized from any such sale or disposition to pay all obligations of Borrower to
Bank tinder this Agreement, any of the other Loan Documents or otherwise,
Borrower shall be liable to Bank for any deficiency.

         14. ATTACHMENT, ETC. If any writ of attachment, garnishment, execution
or other legal process be issued against any property of Borrower, or if any
assessment for taxes against Borrower, other than real property, is made by any
Federal or State government or any department thereof relating to an amount
unpaid or in dispute in excess of $50,000, the commitment of Bank to make loans
(including, without limitation, any Revolving Loans, Equipment Loans or Bridge
Loans) to Borrower hereunder shall immediately terminate and all obligations
hereunder or. under any of the Loan Documents shall immediately become due and
payable without demand, presentment or notice of any kind.

                                       15
<PAGE>

         15. SETOFF. Regardless of the adequacy of any Collateral, during the
continuance of any Event of Default, any deposits or other sums credited by or
due from Bank to Borrower, and any securities or other investments or property
of Borrower in the possession of Bank, may be applied to or set off against any
obligations of Borrower to Bank under this Agreement or any other Loan Document.

         16. FEES. Borrower shall pay to Bank on the date of execution and
delivery of this Agreement by Bank, a non-refundable arrangement fee in an
amount equal to $3,500.

         17. SURVIVAL OF CERTAIN COVENANTS; TERMINATIONS OF COVENANTS. The
covenants and agreements of Borrower set forth in Section 12(c) are for the
benefit of Bank and the registered holders from time to time of the Warrants,
and the term "Bank," as used in Section 12(c), means the Bank and the holders
from time to time of the Warrants. Notwithstanding anything to the contrary set
forth herein, each of such covenants and agreements shall survive the
termination of all of Bank's commitments to make loans hereunder and the
repayment of all the obligations of Borrower under this Agreement and the other
Loan Documents until (a) all of such commitments have terminated and such
obligations shall have been paid in full, and (b) one of the following events
shall have occurred: (i) the Warrants shall be terminated in accordance with
Section 7 of the Warrants; or (ii) all the Warrants shall have been exercised in
full.

         18. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part
of Bank, in the exercise of any power, right or privilege hereunder or under any
Loan Document, shall operate as a waiver thereof, nor shall any single or
partial exercise thereof or of any other right, power or privilege preclude
other or further exercise thereof or of any other right, power or privilege. All
rights and remedies existing hereunder are cumulative to, not exclusive of, any
other rights or remedies provided in any of the Loan Documents or at law or in
equity.

         19. CHOICE OF LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT AND EACH OF THE
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF CALIFORNIA. BORROWER AGREES THAT ANY SUIT FOR THE
ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT
IN THE COURTS OF THE STATE OF CALIFORNIA OR ANY FEDERAL COURT SITTING THEREIN,
AND CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF SUCH COURTS AND TO SERVICE OF
PROCESS IN ANY SUCH SUIT BEING MADE UPON BORROWER IN ANY MANNER PERMITTED BY
CALIFORNIA LAW. EACH PARTY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THEREUNDER OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS.

         20. AMENDMENT AND WAIVER. This Agreement is subject to modification
only by a writing signed by Bank and Borrower. Bank shall not be deemed to have
waived any right hereunder unless such waiver shall be in writing and signed by
Bank. A waiver on any one occasion shall not be construed as a bar to or waiver
of any right on any future occasion.

                                       16
<PAGE>

         21. DATE OF AGREEMENT. This Agreement is executed by and on behalf of
the parties as of July 10, 1998.

         VARIAGENICS, INC.                      IMPERIAL BANK
         "Borrower"                             "Bank"

         By: /s/  FRED D. LEDLEY, M.D.          By: /s/ KAREN DUNN
            ------------------------               ---------------------------
         Title:   PRESIDENT                     Title: VICE PRESIDENT
              ---------------------                    -----------------------

                                       17<PAGE>
                                                                 Exhibit 10.5

                                  IMPERIAL BANK
                                   Member FDIC

                           GENERAL SECURITY AGREEMENT
                   (Tangible and Intangible Personal Property)

         This Agreement is executed on July 10, 1998, by VARIAGENICS, INC.
(hereinafter called "Obligor") and IMPERIAL BANK (hereinafter called "Bank"),
pursuant to the Loan Agreement, dated as of the date hereof ("Loan Agreement"),
between Obligor and Bank. Capitalized terms used but not defined herein that are
defined in the Loan Agreement shall have the meanings given to such terms in the
Loan Agreement. Terms defined in the Massachusetts Uniform Commercial Code, and
not otherwise defined herein or in the Loan Agreement, shall have the meanings
given to such terms in the Massachusetts Uniform Commercial Code.

GRANT OF SECURITY INTEREST. In consideration of financial accommodations
provided by Bank to Obligor under the Loan Agreement and the other Loan
Documents, Obligor grants to Bank, as security for the payment by Obligor of all
of its obligations under the Loan Agreement and the other Loan Documents,
whether now existing or hereafter arising, and whether absolute or contingent
(collectively, "Debt"), a security interest in (a) all property (i) delivered to
Bank by Obligor, (ii) which shall be in Bank's possession or control in any
manner or for any purpose, or (iii) described under the heading "Collateral"
below, whether now owned or hereafter acquired by Obligor; and (b) all proceeds,
income and products of such property, and all accessions thereto (all such
property described in clauses (a) and (b) above being collectively referred to
herein as the "Collateral").

COLLATERAL:

All personal property, whether presently existing or hereafter created or
acquired, and all proceeds and products thereof, including but not limited to:
all furniture, fixtures, equipment, inventory, or other goods, accounts,
contract rights, rights to the payment of money, insurance refund claims and all
other insurance claims and proceeds, tort claims, chattel paper, documents,
instruments, securities and other investment property, deposit accounts and all
general intangibles including, without limitation, returns, repossessions, books
and records relating thereto, equipment containing said books and records, all
tax refund claims, license fees, trade names, computer programs, computer
software, engineering drawings, customer lists, goodwill, and all licenses,
permits, agreements of any kind or nature pursuant to which Obligor possesses,
uses or has authority to possess or use property (whether tangible or
intangible) of others or others possess, use or have authority to possess or use
property (whether tangible or intangible) of Obligor, and all recorded data of
any kind or nature, regardless of the medium of recording including, without
limitation, all software, writings, plans, specifications and schematics.
Collateral shall not include any patents, registered trademarks, service marks
or copyrights.

Obligor represents, warrants and agrees:

<PAGE>

         1. Obligor will immediately pay on demand (a) Bank's costs incurred in
connection with the enforcement of any of its rights under this Agreement or
with respect to the Collateral, or in protecting, insuring or realizing on
Collateral, including reasonable attorneys' fees and expenses, and (b) any
deficiency after realization of any Collateral. Any amounts that may be payable
by Obligor to Bank pursuant to clause (a) above that shall not be paid when due
shall, to the extent permitted by applicable law, and in addition to any other
costs or charges that may be payable pursuant to the Loan Documents, accrue
interest, at the annual rate equal to the rate applicable to the Debt in
accordance with the Loan Agreement during the continuance of an Event of
Default, until such amounts are paid in full.

         2. As to all Collateral in Obligor's possession (unless specifically
otherwise agreed to by Bank in writing), Obligor will:

                  (a)      Have possession of the Collateral at the location
                           disclosed to Bank and will not remove the Collateral
                           from such location, except in the ordinary course of
                           business.

                  (b)      Keep the Collateral separate and identifiable.

                  (c)      Maintain the Collateral in good and saleable
                           condition, repair it if necessary, clean, feed,
                           shelter, water, medicate, fertilize, cultivate,
                           irrigate, prune and otherwise deal with the
                           Collateral in all such ways as are considered good
                           practice by owners of like property, use it lawfully
                           and only as permitted by insurance policies, and
                           permit Bank to inspect the Collateral at any
                           reasonable time.

                  (d)      Not sell, contract to sell, lease, encumber or
                           transfer the Collateral (other than inventory
                           Collateral), even though Bank has a security interest
                           in proceeds of such Collateral.

         3. As to Collateral which is inventory or Accounts, Obligor:

                  (a)      May, until notice from Bank while any Default or
                           Event of Default is continuing, sell, lease or
                           otherwise dispose of inventory in the ordinary course
                           of business, and collect the cash proceeds thereof.

                  (b)      Will, upon and during the continuance of any Default
                           or Event of Default and upon receipt of notice from
                           Bank, deposit all cash proceeds as received in a
                           demand deposit account with Bank, and deliver
                           statements identifying units of inventory disposed
                           of, Accounts which gave rise to proceeds, and all
                           acquisitions and returns of inventory, as required by
                           Bank.

                  (c)      Will, upon and during the continuance of any Default
                           or Event of Default and upon receipt of notice from
                           Bank, receive in trust, schedule on forms

                                       2
<PAGE>

                           satisfactory to Bank and deliver to Bank all non-cash
                           proceeds other than inventory received in trade.

         4. As to Collateral which are Accounts, chattel paper, general
intangibles and proceeds described in 3(c) above, Obligor warrants, represents
and agrees:

                  (a)      All such Collateral is genuine, enforceable in
                           accordance with its terms, free from default,
                           prepayment, defense and conditions precedent (except
                           as disclosed to and accepted by Bank in writing).
                           Obligor will supply Bank with duplicate invoices or
                           other evidence of Obligor's rights on Bank's request.

                  (b)      All persons appearing to be obligated on such
                           Collateral have authority and capacity to contract.

                  (c)      All chattel paper is in compliance with law as to
                           form, content and manner of preparation and execution
                           and has been properly registered, recorded, and/or
                           filed to protect Obligor's interest thereunder.

                  (d)      If an account debtor shall also be indebted to
                           Obligor on another obligation, any payment made by
                           him not specifically designated to be applied on any
                           particular obligation shall be considered to be a
                           payment on the Account in which Bank has a security
                           interest.

                  (e)      While any Default or Event of Default shall be
                           continuing, Obligor agrees not to compromise, settle
                           or adjust any Account or renew or extend the time of
                           payment thereof without Bank's prior written consent.

         5. Obligor owns all Collateral absolutely, and no other person has or
claims any interest in any Collateral, except as disclosed to and accepted by
Bank in writing. Obligor will defend any proceeding which may affect title to or
Bank's security interest in any Collateral, and will indemnify and hold Bank
free and harmless from all costs and expenses of Bank's defense.

         6. Obligor will pay when due all existing or future charges, liens or
encumbrances on and all taxes and assessments now or hereafter imposed on or
affecting the Collateral and, if the Collateral is in Obligor's possession, any
realty owned by Obligor on which the Collateral is located, except to the extent
and so long as (a) the same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any material adverse effect upon its
financial condition or the loss of any right of redemption from any sale
thereunder; and (b) Obligor shall have set aside on its books reserves
segregated (to the extent required by generally accepted accounting practice)
and adequate with respect thereto.

         7. Obligor will insure the Collateral with Bank as loss payee or
additional insured, as appropriate, in form and amounts with companies, and
against risks and liability satisfactory to Bank, to cancel the insurance on
Obligor's default, and to receive payment of and endorse any instrument in
payment of any loss or return premium. If Obligor should fail to deliver the

                                       3
<PAGE>

required policy or policies to Bank, Bank may, at Obligor's cost and expense,
without any duty to do so, get and pay for insurance naming as the insured, at
Bank's option, either both Obligor and Bank, or only Bank, and the cost thereof
shall constitute reimbursable expenses under Paragraph 1 above.

         8. Obligor will promptly notify Bank of any change of Obligor's chief
executive office, mailing address or location of Collateral.

         9. Bank is irrevocably appointed Obligor's attorney-in-fact, while any
Default or Event of Default in continuing, to do any act which Obligor is
obligated hereby to do, to exercise such rights as Obligor may exercise, to use
such equipment as Obligor might use, to enter Obligor's premises to give notice
of Bank's security interest, and to collect Collateral and proceeds and to
execute and file in Obligor's name any financing statements and amendments
thereto required to perfect Bank's security interest hereunder, all to protect
and preserve the Collateral and Bank's rights hereunder. In such capacity, while
any Default or Event of Default is continuing, Bank may:

                  (a)      endorse, collect and receive delivery or payment of
                           instruments and documents constituting Collateral;

                  (b)      make extension agreements with respect to or
                           affecting Collateral, exchange it for other
                           Collateral, release persons liable thereon or take
                           security for the payment thereof, and compromise
                           disputes in connection therewith; and

                  (c)      use or operate Collateral for the purpose of
                           preserving Collateral or its value and for preserving
                           or liquidating Collateral.

         10. Upon and during the continuance of any Event of Default, Bank may
exercise all rights and remedies available to Bank under this Agreement, under
any of the other Loan Documents or available to secured parties under the
Massachusetts Uniform Commercial Code, all without presentment, protest, notice
of protest, demand and notice of nonpayment, notice of sale and advertisement of
sale, except to the extent required by applicable law. While any Event of
Default is continuing, without limiting in any way any of Bank's other rights
under the Loan Documents or applicable law, Bank may sell, in one or more sales,
Collateral in any county where Bank has an office; Bank may purchase at any such
sale, effect sales for cash or on credit to a wholesaler, retailer or user of
the Collateral, or at public or private auction, all of which shall be
considered commercially reasonable; and Bank may require Obligor to assemble the
Collateral and make it available to Bank at the entrance to the location of the
Collateral, or at such other location designated by Bank.

         11. Bank's acceptance of partial or delinquent payments or the failure
of Bank to exercise any right or remedy shall not waive any obligation of
Obligor or right of Bank to modify this Agreement, or waive any other similar
default.

                                       4
<PAGE>

         12. On transfer of all or any part of the Debt, Bank may transfer all
or any part of the Collateral. Bank may deliver all or any part of the
Collateral to any Obligor at any time. Any such transfer or delivery shall
discharge Bank from all liability and responsibility with respect to such
Collateral transferred or delivered. This Agreement benefits Bank's successors
and assigns and binds Obligor's successors and assigns. Obligor agrees not to
assert against any assignee of Bank any claim or defense that may exist against
Bank. Time is of the essence. The Loan Agreement, this Agreement, the other
security agreements supplemental hereto, and the other Loan Documents contain
the entire security agreement between Bank and Obligor. Obligor will execute any
additional agreements, assignments or documents reasonably required by Bank to
carry this Agreement into effect.

         13. THIS AGREEMENT, AND EACH OF THE OTHER LOAN DOCUMENTS, ARE INTENDED
TO TAKE EFFECT AS SEALED INSTRUMENTS AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA. OBLIGOR WAIVES ITS RIGHT
TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS AGREEMENT, OR ANY OF THE OTHER LOAN DOCUMENTS, ANY
RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF ANY SUCH
RIGHTS OR OBLIGATIONS.

         14. This Agreement is subject to modification only by a writing signed
by Bank and Obligor. No party shall be deemed to have waived any right hereunder
unless such waiver shall be in writing and signed by such party. A waiver on any
one occasion shall not be construed as a bar to or waiver of any right on any
future occasion.

VARIAGENICS, INC.                           IMPERIAL BANK
"OBLIGOR"                                   BANK"

By:/s/  FRED D. LEDLEY, M.D.                By:/s/ KAREN DUNN
   ---------------------------                 ---------------------------
Title:   PRESIDENT                          Title: VICE PRESIDENT
      -----------------------                     ------------------------

                                       5

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