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                                                                  EXHIBIT 10.4

                         Loan and Security Agreement

Borrower:         Pilot Network Services, Inc.
Address:          1080 Marina Village Parkway
                  Alameda, California  94501

Date:             November 9, 1999

This Loan and Security Agreement is entered into on the above date between
Greyrock Capital, a Division of Banc of America Commercial Financial Corporation
(Greyrock), whose address is 10880 Wilshire Blvd. Suite 1850, Los Angeles, CA
90024 and the borrower named above (Borrower), whose chief executive office is
located at the above address (Borrower's Address). The Schedule to this
Agreement (the Schedule) being signed concurrently is an integral part of this
Agreement. (Definitions of certain terms used in this Agreement are set forth in
Section 8 below.)

1.   LOANS.

     1.1 Loans. (a) Revolving Credit Loans. Greyrock will make loans to Borrower
(the Revolving Credit Loans), in amounts determined by Greyrock in its sole
discretion, up to the amounts (the Revolving Credit Limit) shown on the
Schedule, provided no Default or Event of Default has occurred and is
continuing.

     (b) Term Loan. Greyrock will make a term loan to Borrower (the Term Loan),
in the amount (the Term Loan Limit) shown on the Schedule, provided no Default
or Event of Default has occurred and is continuing.

     (c) If at any time or for any reason the outstanding aggregate amount of
all outstanding Revolving Credit Loans, the Term Loan and all other Obligations
exceeds the amount shown on the Schedule as the Total Credit Limit (the Total
Credit Limit), Borrower shall immediately pay the amount of the excess to
Greyrock, without notice or demand. The Revolving Credit Loans and the Term Loan
are sometimes collectively referred to herein as the "Loans."

     1.2 Interest. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement or in another written agreement signed by
Greyrock and Borrower. Interest shall be payable monthly, on the last day of the
month. Interest may, in Greyrock's discretion, be charged to Borrower's loan
account, and the same shall thereafter bear interest at the same rate as the
other Loans.

     1.3 Fees. Borrower shall pay Greyrock the fee(s) shown on the Schedule,
which are in addition to all interest and other sums payable to Greyrock and are
not refundable.

     1.4 Manner of Payments. All payments by Borrower hereunder (including
principal and interest payments) shall be made in lawful money of the United
States of America, on the date on which such payment shall be due. If a payment
hereunder becomes due and payable on a Saturday, Sunday or legal holiday, the
due date thereof shall be extended to the next succeeding business day, and
interest shall be payable thereon during such extension.

2.  SECURITY INTEREST.

     2.1 Security Interest. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Greyrock a security interest in
all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located (collectively, the Collateral): All Receivables,
Inventory, Equipment, Investment Property and General Intangibles, including,
without limitation, all of Borrower's Deposit Accounts, all money, all
collateral in which Greyrock is granted a security interest pursuant to any
other present or future agreement, all property now or at any time in the future
in Greyrock's possession, and all proceeds (including proceeds of any insurance
policies, proceeds of proceeds and claims against third parties), all products
of the foregoing, and all books and records related to any of the foregoing.
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3.   REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.

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

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

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

     3.3 Place of Business; Location of Collateral. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Greyrock at least 30 days prior
written notice before opening any additional place of business, changing its
chief executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on the Schedule.

     3.4 Title to Collateral; Permitted Liens. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens. Greyrock now has, and will
continue to have, a first-priority perfected and enforceable security interest
in all of the Collateral, subject only to the Permitted Liens, and Borrower will
at all times defend Greyrock and the Collateral against all claims of others. So
long as any Loan is outstanding which is a term loan, none of the Collateral now
is or will be affixed to any real property in such a manner, or with such
intent, as to become a fixture. Borrower is not and will not become a lessee
under any real property lease pursuant to which the lessor may obtain any rights
in any of the Collateral and no such lease now prohibits, restrains, impairs or
will prohibit, restrain or impair Borrower's right to remove any Collateral from
the leased premises. Whenever any Collateral having an aggregate value in excess
of $50,000 is located upon premises in which any third party has an interest
(whether as owner, mortgagee, beneficiary under a deed of trust, lien or
otherwise), Borrower shall, whenever requested by Greyrock, use its best efforts
to cause such third party to execute and deliver to Greyrock, in form reasonably
acceptable to Greyrock, such waivers and subordinations as Greyrock shall
specify, so as to ensure that Greyrock's rights in the Collateral are, and will
continue to be, superior to the rights of any such third party and that Greyrock
will have access to such premises to exercise remedies against the Collateral.
Borrower will keep in full force and effect, and will comply with all the terms
of, any lease of real property where any of the Collateral now or in the future
may be located.

     3.5 Maintenance of Collateral. Borrower will maintain the Collateral in
good working condition, ordinary wear and tear excepted, and Borrower will not
use the Collateral for any unlawful purpose. Borrower will immediately advise
Greyrock in writing of any material loss or damage to the Collateral.

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

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

     3.8 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed, and will timely file, all tax returns and reports required by applicable
law, and Borrower has timely paid, and will timely pay, all applicable taxes,
assessments, deposits and contributions now or in the future owed by Borrower.
Borrower may, however, defer payment of any contested taxes, provided

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that Borrower (i) in good faith contests Borrower's obligation to pay the
taxes by appropriate proceedings promptly and diligently instituted and
conducted, (ii) notifies Greyrock in writing of the commencement of, and any
material development in, the proceedings, and (iii) posts bonds or takes any
other steps required to keep the contested taxes from becoming a lien upon any
of the Collateral. Borrower is unaware of any claims or adjustments proposed
for any of Borrower's prior tax years which could result in additional taxes
becoming due and payable by Borrower. Borrower has paid, and shall continue to
pay all amounts necessary to fund all present and future pension, profit
sharing and deferred compensation plans in accordance with their terms, and
Borrower has not and will not withdraw from participation in, permit partial
or complete termination of, or permit the occurrence of any other event with
respect to, any such plan which could result in any liability of Borrower,
including any liability to the Pension Benefit Guarantee Corporation or any
other governmental agency. Borrower shall, at all times, maintain a separate
payroll account which shall be used exclusively for payment of payroll and
payroll taxes and other items related directly to payroll.

     3.9 Compliance with Law. Borrower has complied, and will comply, in all
material respects, with all provisions of all applicable laws and regulations,
including, but not limited to, those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business, and all
environmental matters.

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

     3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for
lawful business purposes.

     3.12 Year 2000 Compliance. The Borrower has (i) initiated a review and
assessment of all areas within its and each of its subsidiaries' business and
operations (including those affected by suppliers and vendors) that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrower or any of its subsidiaries (or its suppliers
and vendors) may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date after December 31,
1999), (ii) developed a plan and timeline for addressing the Year 2000 Problem
on a timely basis, and (iii) to date, implemented that plan in accordance with
that timetable. The Borrower reasonably believes that all computer applications
(including those of its suppliers and vendors) that are material to its or any
of its subsidiaries' business and operations will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after January
1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a failure
to do so could not reasonably be expected to have material adverse effect. The
Borrower will promptly notify Greyrock in the event the Borrower discovers or
determines that any computer application (including those of its suppliers and
vendors) that is material to its or any of its subsidiaries' business and
operations will not be Year 2000 compliant on a timely basis, except to the
extent that such failure could not reasonably be expected to have a material
adverse effect.

4.   Receivables.

     4.1 Representations Relating to Receivables. Borrower represents and
warrants to Greyrock as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made,
represent an undisputed, bona fide, existing, unconditional obligation of the
Account Debtor created by the sale, delivery, and acceptance of goods or the
rendition of services, in the ordinary course of Borrower's business.

     4.2 Representations Relating to Documents and Legal Compliance. Borrower
represents and warrants to Greyrock as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and (to the best of Borrower's knowledge) all signatories and endorsers have the
capacity to contract. All sales and other transactions underlying or giving rise
to each Receivable shall comply in all material respects with all applicable
laws and governmental rules and regulations. To the best of Borrower's
knowledge, all signatures and indorsements on all documents, instruments, and
agreements relating to all Receivables are and shall be genuine, and all such
documents, instruments and agreements are and shall be legally enforceable in
accordance with their terms.

     4.3 Schedules and Documents relating to Receivables. Borrower shall deliver
to Greyrock transaction reports and loan requests, schedules and assignments of
all Receivables, and schedules of collections, all on Greyrock's standard forms;
provided, however, that Borrower's failure to execute and deliver the same shall

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not affect or limit Greyrock's security interest and other rights in all of
Borrower's Receivables, nor shall Greyrock's failure to advance or lend against
a specific Receivable affect or limit Greyrock's security interest and other
rights therein. Together with each such schedule and assignment, or later if
requested by Greyrock, Borrower shall furnish Greyrock with copies (or, at
Greyrock's request, originals) of all contracts, orders, invoices, and other
similar documents, and all original shipping instructions, delivery receipts,
bills of lading, and other evidence of delivery, for any goods the sale or
disposition of which gave rise to such Receivables, and Borrower warrants the
genuineness of all of the foregoing. Borrower shall also furnish to Greyrock an
aged accounts receivable trial balance in such form and at such intervals as
Greyrock shall request. In addition, Borrower shall deliver to Greyrock, at
Greyrock's request, the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Receivables, immediately upon receipt thereof and in the same form as
received, with all necessary indorsements.

     4.4 Collection of Receivables. Borrower shall have the right to collect all
Receivables, unless and until a Default or an Event of Default has occurred.
Borrower shall hold all payments on, and proceeds of, Receivables in trust for
Greyrock, and Borrower shall deliver all such payments and proceeds to Greyrock,
within one business day after receipt of the same, in their original form, duly
endorsed, to be applied to the Obligations in such order as Greyrock shall
determine.

     4.5 Disputes. Borrower shall notify Greyrock promptly of all disputes or
claims relating to Receivables on the regular reports to Greyrock. Borrower
shall not forgive, or settle any Receivable for less than payment in full, or
agree to do any of the foregoing, except that Borrower may do so, provided that:
(i) Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to Greyrock on the regular reports provided to Greyrock; (ii) no
Default or Event of Default has occurred and is continuing; and (iii) taking
into account all such settlements and forgiveness, the total outstanding Loans
and other Obligations will not exceed the Total Credit Limit.

     4.6 Returns. Provided no Event of Default has occurred and is continuing,
if any Account Debtor returns any Inventory to Borrower in the ordinary course
of its business, Borrower shall promptly determine the reason for such return
and promptly issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to Greyrock). In the event any attempted return occurs
after the occurrence of any Event of Default, Borrower shall (i) not accept any
return without Greyrock's prior written consent, (ii) hold the returned
Inventory in trust for Greyrock, (iii) segregate all returned Inventory from all
of Borrower's other property, (iv) conspicuously label the returned Inventory as
Greyrock's property, and (v) immediately notify Greyrock of the return of any
Inventory, specifying the reason for such return, the location and condition of
the returned Inventory, and on Greyrock's request deliver such returned
Inventory to Greyrock.

     4.7 Verification. Greyrock may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Greyrock or such other name as Greyrock may choose, and Greyrock or
its designee may, at any time, notify Account Debtors that it has a security
interest in the Receivables.

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

5.   ADDITIONAL DUTIES OF THE BORROWER.

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

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

     5.3 Access to Collateral, Books and Records. At reasonable times, and on
one business day's notice, Greyrock, or its agents, shall have the right to
inspect the Collateral, and the right to audit and copy Borrower's books and
records. Greyrock shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Greyrock shall have
the right to disclose any such information to its auditors, regulatory agencies,
and attorneys, and pursuant to any subpoena or other legal process. The
foregoing inspections and audits shall be at Borrower's expense and the charge
therefor shall be $600 per person per day (or such higher amount as shall
represent Greyrock's then current standard charge for the same), plus reasonable
out-of-pockets expenses. Borrower shall not be charged more than $3,000 per
audit (plus reasonable out-of-pockets expenses), nor shall audits be done more
frequently than four times per calendar year, provided that the foregoing limits
shall not apply after the occurrence of a Default or Event of Default, nor shall
they restrict Greyrock's right to conduct audits at its own expense (whether or
not a Default or Event of Default has occurred). Borrower will not enter into
any agreement with any accounting firm, service bureau or third party to store
Borrower's books or records at any location other than Borrower's Address,
without first obtaining Greyrock's written consent, which may be conditioned
upon such accounting firm, service bureau or other third party agreeing to give
Greyrock the same rights with respect to access to books and records and related
rights as Greyrock has under this Agreement.

     5.4 Remittance of Proceeds. All proceeds arising from the sale or other
disposition of any Collateral shall be delivered, in kind, by Borrower to
Greyrock in the original form in which received by Borrower not later than the
following business day after receipt by Borrower, to be applied to the
Obligations in such order as Greyrock shall determine; provided that, if no
Default or Event of Default has occurred and is continuing, and if no term loan
is outstanding hereunder, then Borrower shall not be obligated to remit to
Greyrock the proceeds of the sale of Equipment which is sold in the ordinary
course of business, in a good-faith arm's length transaction. Except for the
proceeds of the sale of Equipment as set forth above, Borrower shall not
commingle proceeds of Collateral with any of Borrower's other funds or property,
and shall hold such proceeds separate and apart from such other funds and
property and in an express trust for Greyrock. Nothing in this Section limits
the restrictions on disposition of Collateral set forth elsewhere in this
Agreement.

     5.5 Negative Covenants. Except as may be permitted in the Schedule,
Borrower shall not, without Greyrock's prior written consent, do any of the
following: (i) merge or consolidate with another corporation or entity; (ii)
acquire any assets, except in the ordinary course of business; (iii) enter into
any other transaction outside the ordinary course of business; (iv) sell or
transfer any Collateral, except that, provided no Default or Event of Default
has occurred and is continuing, Borrower may (a) sell finished Inventory in the
ordinary course of Borrower's business, (b) if no term loan is outstanding
hereunder, sell Equipment in the ordinary course of business, in good-faith
arm's length transactions, and (c) sell or otherwise transfer items of
Collateral valued at no more than $200,000 in the aggregate; (v) store any
Inventory or other Collateral with any warehouseman or other third party; (vi)
sell any Inventory on a sale-or-return, guaranteed sale, consignment, or other
contingent basis; (vii) make any loans of any money or other assets other than
loans to Borrower's officers and employees not exceeding at any one time an
aggregate amount in excess of $5,000; (viii) incur any debts, outside the
ordinary course of business, which would have a material, adverse effect on
Borrower or on the prospect of repayment of the Obligations; (ix) guarantee or
otherwise become liable with respect to the obligations of another party or
entity; (x) pay or declare any dividends on Borrower's stock (except for
dividends payable solely in stock of Borrower); (xi) redeem, retire, purchase or
otherwise acquire, directly or indirectly, any of Borrower's stock; (xii) make
any change in Borrower's capital structure which would have a material adverse
effect on Borrower or on the prospect of repayment of the Obligations; or (xiii)
dissolve or elect to dissolve; or (xiv) agree to do any of the foregoing.

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

     5.7 Notification of Changes. Borrower will promptly notify Greyrock in
writing of any change in its officers or directors, the opening of any new bank
account or other deposit account, and any material adverse change in the
business or financial affairs of Borrower.

     5.8 Investment Property. Upon the request of Greyrock, Borrower shall
deliver to Greyrock all certificated securities included in Investment Property,
with all necessary indorsements, and obtain such account control agreements with
securities intermediaries and take such other action with respect to any
Investment Property, as Greyrock shall request, in form and substance
satisfactory to Greyrock. Borrower shall have the right to

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retain all Investment Property payments and distributions, unless and until a
Default or an Event of Default has occurred. If a Default or an Event of
Default exists, Borrower shall hold all payments on, and proceeds of, and
distributions with respect to, Investment Property in trust for Greyrock, and
Borrower shall deliver all such payments, proceeds and distributions to
Greyrock, immediately upon receipt, in their original form, duly endorsed, to
be applied to the Obligations in such order as Greyrock shall determine. Upon
the request of Greyrock, any such distributions and payments with respect to
any Investment Property held in any securities account shall be held and
retained in such securities account as part of the Collateral.

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

     5.10 Indemnity. Borrower hereby agrees to indemnify Greyrock and hold
Greyrock harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses
(including attorneys' fees), of every nature, character and description, which
Greyrock may sustain or incur based upon or arising out of any of the
Obligations, any actual or alleged failure to collect and pay over any
withholding or other tax relating to Borrower or its employees, any relationship
or agreement between Greyrock and Borrower, any actual or alleged failure of
Greyrock to comply with any writ of attachment or other legal process relating
to Borrower or any of its property, or any other matter, cause or thing
whatsoever occurred, done, omitted or suffered to be done by Greyrock relating
to Borrower or the Obligations (except any such amounts sustained or incurred as
the result of the gross negligence or willful misconduct of Greyrock or any of
its directors, officers, employees, agents, attorneys, or any other person
affiliated with or representing Greyrock). Notwithstanding any provision in this
Agreement to the contrary, the indemnity agreement set forth in this Section
shall survive any termination of this Agreement and shall for all purposes
continue in full force and effect.

6.   TERM.

     6.1 Maturity Date. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the Maturity Date); provided that the
Maturity Date shall automatically be extended, and this Agreement shall
automatically and continuously renew, for successive additional terms of one
year each, unless one party gives written notice to the other, not less than
sixty days prior to the next Maturity Date, that such party elects to terminate
this Agreement effective on the next Maturity Date.

     6.2 Early Termination. This Agreement may be terminated prior to the
Maturity Date as follows: (i) by Borrower, effective three business days after
written notice of termination is given to Greyrock; or (ii) by Greyrock at any
time after the occurrence of an Event of Default, without notice, effective
immediately. In addition to the foregoing, the Term Loan shall be due and
payable in full upon the occurrence of any Fundamental Change, Change of
Control, or Liquidity Event with respect to Borrower.

     6.3 Payment of Obligations. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, or on
any earlier effective date of termination, there are any outstanding letters of
credit issued based upon an application, guarantee, indemnity or similar
agreement on the part of Greyrock, then on such date Borrower shall provide to
Greyrock cash collateral in an amount equal to 110% of the face amount of all
such letters of credit plus all interest, fees and costs due or (in Greyrock's
estimation) likely to become due in connection therewith, to secure all of the
Obligations relating to said letters of credit, pursuant to Greyrock's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Greyrock's security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Greyrock, Greyrock may, in its sole discretion, refuse to make any further Loans
after termination. No termination shall in any way affect or impair any right or
remedy of Greyrock, nor shall any such termination relieve Borrower of any
Obligation to Greyrock, until all of the Obligations have been paid and
performed in full. Upon payment and performance in full of all the Obligations
and termination of this Agreement, Greyrock shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be reasonably required to terminate Greyrock's security interests.

7.   EVENTS OF DEFAULT AND REMEDIES.

     7.1 Events of Default. The occurrence of any of the following events shall
constitute an Event of Default under this Agreement, and Borrower shall give
Greyrock immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Greyrock by Borrower or
any of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect; or (b) Borrower shall fail to pay
when due any Loan or any interest thereon or fail to pay any other monetary
Obligation within 5 business days after demand thereof; or

                                      -6-
<PAGE>

(c) the total Loans and other Obligations outstanding at any time shall
the Total Credit Limit; or (d) Borrower shall fail to perform any non-
monetary Obligation which by its nature cannot be cured; or (e) Borrower shall
fail to perform any other non-monetary Obligation, which failure is not cured
within 5 business days after the date performance is due; or (f) any levy,
assessment, attachment, seizure, lien or encumbrance (other than a Permitted
Lien) is made on all or any part of the Collateral which is not cured within
10 days after the occurrence of the same; or (g) any default or event of
default occurs under any obligation secured by a Permitted Lien, which is not
cured within any applicable cure period or waived in writing by the holder of
the Permitted Lien; or (h) Borrower breaches any material contract or
obligation, which has or may reasonably be expected to have a material adverse
effect on Borrower's business or financial condition; or (i) dissolution,
termination of existence, insolvency or business failure of Borrower or any
Guarantor; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower or any Guarantor under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower
or any Guarantor under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute
of any jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 45 days after the date commenced; or (k) revocation
or termination of, or limitation or denial of liability upon, any guaranty of
the Obligations or any attempt to do any of the foregoing; or (l) revocation
or termination of, or limitation or denial of liability upon, any pledge of
any certificate of deposit, securities or other property or asset pledged by
any third party to secure any or all of the Obligations, or any attempt to do
any of the foregoing, or commencement of proceedings by or against any such
third party under any bankruptcy or insolvency law; or (m) Borrower makes any
payment on account of any indebtedness or obligation which has been
subordinated to the Obligations other than as permitted in the applicable
subordination agreement, or if any Person who has subordinated such
indebtedness or obligations terminates or in any way limits or terminates its
subordination agreement; or (n) there shall be a Change of Control, without
the prior written consent of Greyrock; or (o) Borrower shall generally not pay
its debts as they become due, or Borrower shall conceal, remove or transfer
any part of its property, with intent to hinder, delay or defraud its
creditors, or make or suffer any transfer of any of its property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar law; or (p)
there shall be a material adverse change in Borrower's business or financial
condition. Greyrock may cease making any Loans hereunder during any of the
above cure periods, and thereafter if an Event of Default has occurred.

     7.2 Remedies. Upon the occurrence and during the continuance of any Event
of Default, and at any time thereafter, Greyrock, at its option, and without
notice or demand of any kind (all of which are hereby expressly waived by
Borrower), may do any one or more of the following: (a) Cease making Loans or
otherwise extending credit to Borrower under this Agreement or any other
document or agreement; (b) Accelerate and declare all or any part of the
Obligations to be immediately due, payable, and performable, notwithstanding any
deferred or installment payments allowed by any instrument evidencing or
relating to any Obligation; (c) Take possession of any or all of the Collateral
wherever it may be found, and for that purpose Borrower hereby authorizes
Greyrock without judicial process to enter onto any of Borrower's premises
without interference to search for, take possession of, keep, store, or remove
any of the Collateral, and remain on the premises or cause a custodian to remain
on the premises in exclusive control thereof, without charge for so long as
Greyrock deems it reasonably necessary in order to complete the enforcement of
its rights under this Agreement or any other agreement; provided, however, that
should Greyrock seek to take possession of any of the Collateral by Court
process, Borrower hereby irrevocably waives: (i) any bond and any surety or
security relating thereto required by any statute, court rule or otherwise as an
incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii) any
requirement that Greyrock retain possession of, and not dispose of, any such
Collateral until after trial or final judgment; (d) Require Borrower to assemble
any or all of the Collateral and make it available to Greyrock at places
designated by Greyrock which are reasonably convenient to Greyrock and Borrower
within the state where such Collateral is located, and to remove the Collateral
to such locations as Greyrock may deem advisable; (e) Complete the processing,
manufacturing or repair of any Collateral prior to a disposition thereof and,
for such purpose and for the purpose of removal, Greyrock shall have the right
to use Borrower's premises, vehicles, hoists, lifts, cranes, equipment and all
other property without charge; (f) Collect, receive, dispose of and realize upon
any Investment Property, including withdrawal of any and all funds from any
securities accounts; (g) Sell, lease or otherwise dispose of any of the
Collateral, in its condition at the time Greyrock obtains possession of it or
after further manufacturing, processing or repair, at one or more public and/or
private sales, in lots or in bulk, for cash, exchange or other property, or on
credit, and to adjourn any such sale from time to time without notice other than
oral announcement at the time scheduled for sale. Greyrock shall have the right
to conduct such disposition on Borrower's premises without charge, for such time
or times as Greyrock deems reasonable, or on Greyrock's

                                      -7-
<PAGE>

premises, or elsewhere and the Collateral need not be located at the place of
disposition. Greyrock may directly or through any affiliated company purchase
or lease any Collateral at any such public disposition, and if permissible
under applicable law, at any private disposition. Any sale or other
disposition of Collateral shall not relieve Borrower of any liability Borrower
may have if any Collateral is defective as to title or physical condition or
otherwise at the time of sale; (h) Demand payment of, and collect any
Receivables and General Intangibles comprising Collateral and, in connection
therewith, Borrower irrevocably authorizes Greyrock to endorse or sign
Borrower's name on all collections, receipts, instruments and other documents,
to take possession of and open mail addressed to Borrower and remove therefrom
payments made with respect to any item of the Collateral or proceeds thereof,
and, in Greyrock's sole discretion, to grant extensions of time to pay,
compromise claims and settle Receivables, General Intangibles and the like for
less than face value; and (i) Demand and receive possession of any of
Borrower's federal and state income tax returns and the books and records
utilized in the preparation thereof or referring thereto. Borrower recognizes
that Greyrock may be unable to make a public sale of any or all of the
Investment Property, by reasons of prohibitions contained in applicable
securities laws or otherwise, and expressly agrees that a private sale to a
restricted group of purchasers for investment and not with a view to any
distribution thereof shall be considered a commercially reasonable sale. All
reasonable attorneys' fees, expenses, costs, liabilities and obligations
incurred by Greyrock with respect to the foregoing shall be added to and
become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations.

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

     7.4 Power of Attorney. Upon the occurrence and during the continuance of
any Event of Default, without limiting Greyrock's other rights and remedies,
Borrower grants to Greyrock an irrevocable power of attorney coupled with an
interest, authorizing and permitting Greyrock (acting through any of its
employees, attorneys or agents) at any time, at its option, but without
obligation, with or without notice to Borrower, and at Borrower's expense, to do
any or all of the following, in Borrower's name or otherwise, but Greyrock
agrees to exercise the following powers in a commercially reasonable manner: (a)
Execute on behalf of Borrower any documents that Greyrock may, in its sole
discretion, deem advisable in order to perfect and maintain Greyrock's security
interest in the Collateral, or in order to exercise a right of Borrower or
Greyrock, or in order to fully consummate all the transactions contemplated
under this Agreement, and all other present and future agreements; (b) Execute
on behalf of Borrower any document exercising, transferring or assigning any
option to purchase, sell or otherwise dispose of or to lease (as lessor or
lessee) any real or personal property which is part of Greyrock's Collateral or
in which Greyrock has an interest; (c) Execute on behalf of Borrower, any
invoices relating to any Receivable, any draft against any Account Debtor and
any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice
of Lien, claim of mechanic's, materialman's or other lien, or assignment or
satisfaction of mechanic's, materialman's or other lien; (d) Take control in any
manner of any cash or non-cash items of payment or proceeds of Collateral;
endorse the name of Borrower upon any instruments, or documents, evidence of
payment or Collateral that may come into Greyrock's possession; (e) Endorse all
checks and other forms of remittances received by Greyrock; (f) Pay, contest or
settle any lien, charge, encumbrance, security interest and adverse claim in or
to any of the Collateral, or any judgment based thereon, or otherwise take any
action to terminate or discharge the same; (g) Grant extensions of time to pay,
compromise claims and settle Receivables and General Intangibles for less than
face value and execute all releases and other documents in connection therewith;
(h) Pay any sums required on account of Borrower's taxes or to secure the
release of any liens therefor, or both; (i) Settle and adjust, and give releases
of, any insurance claim that relates to any of the Collateral and obtain payment
therefor; (j) Instruct any third party having custody or control of any books or
records belonging to, or relating to, Borrower to give Greyrock the same rights
of access and other rights with respect thereto as Greyrock has under this
Agreement; (k) Execute and deliver to any securities intermediary or other
Person any entitlement order, account control agreement or other notice,
document or instrument with respect to any Investment Property, and (l) Take any
action or pay any sum required of Borrower pursuant to this Agreement and any
other present or future agreements. Any and all reasonable sums paid and any and
all reasonable costs,

                                      -8-
<PAGE>

expenses, liabilities, obligations and reasonable attorneys' fees incurred by
Greyrock with respect to the foregoing shall be added to and become part of
the Obligations, shall be payable on demand, and shall bear interest at a rate
equal to the highest interest rate applicable to any of the Obligations. In no
event shall Greyrock's rights under the foregoing power of attorney or any of
Greyrock's other rights under this Agreement be deemed to indicate that
Greyrock is in control of the business, management or properties of Borrower.

     7.5 Application of Proceeds. All proceeds realized as the result of any
sale or other disposition of the Collateral shall be applied by Greyrock first
to the reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by Greyrock in the exercise of its rights under this Agreement, second
to the interest due upon any of the Obligations, and third to the principal of
the Obligations, in such order as Greyrock shall determine in its sole
discretion. Any surplus shall be paid to Borrower or other persons legally
entitled thereto; Borrower shall remain liable to Greyrock for any deficiency.
If Greyrock, in its sole discretion, directly or indirectly enters into a
deferred payment or other credit transaction with any purchaser at any sale of
Collateral, Greyrock shall have the option, exercisable at any time, in its sole
discretion, of either reducing the Obligations by the principal amount of
purchase price or deferring the reduction of the Obligations until the actual
receipt by Greyrock of the cash therefor.

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

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

     Account Debtor means the obligor on a Receivable.

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

     Agreement and this Agreement means this Loan and Security Agreement and all
modifications and amendments thereto, extensions thereof, and replacements
therefor.

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

     Change of Control shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly,
of more than 49% of the total voting power of all classes of stock then
outstanding of Borrower normally entitled to vote in the election of directors.

     Code means the Uniform Commercial Code as adopted and in effect in the
State of California from time to time.

     Collateral has the meaning set forth in Section 2.1 above.

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

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

     Eligible Receivables means unconditional Receivables arising in the
ordinary course of Borrower's business from the completed sale of goods or
rendition of services, which Greyrock, in its sole judgment, shall deem eligible
for borrowing, based on such considerations as Greyrock may from time to time
deem appropriate; provided, however, that the manner in which Greyrock
determines what constitutes Eligible Receivables shall be consistent with how
Greyrock determines what constitutes eligible receivables with respect to its
other customers holding similar types of receivables.

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

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

     Fundamental Change means any acquisition, merger, consolidation,
reorganization, or recapitalization, or reclassification of a Person's capital
stock, or liquidation, winding up, or dissolution of such Person, or conveyance,
sale, assignment, lease, transfer, or otherwise disposition of, in one
transaction or a series of transactions, all or any substantial part of such
Person's business, property, or assets, whether now owned or hereafter acquired,
or the acquisition by purchase or otherwise of all or substantially

                                      -9-
<PAGE>

all of the properties, assets, stock, or other evidence of beneficial
ownership of any other Person.

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

     Guarantor means any Person who has guaranteed any of the Obligations.

     Inventory means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including all raw materials,
work in process, finished goods and goods in transit), and all materials and
supplies of every kind, nature and description which are or might be used or
consumed in Borrower's business or used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods, merchandise
or other personal property, and all warehouse receipts, documents of title and
other documents representing any of the foregoing.

     Investment Property means any and all investment property of Borrower,
including 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, and whether now existing or hereafter acquired or arising.

     Liquidity Event means any offering of a debt or equity security by Borrower
in an aggregate amount in excess of $15,000,000, or any capital contribution or
additional paid in capital is received by Borrower in an aggregate amount in
excess of $15,000,000.

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

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

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

                                      -10-
<PAGE>

     Prime Rate means the variable rate of interest, per annum, most recently
announced by Bank of America, N.A., as its "prime rate" or "reference rate," as
the case may be, irrespective of whether such announced rate is the best rate
available from such financial institution. If the Prime Rate, as defined, is
unavailable, "Prime Rate" shall mean the highest of the prime rates published in
the Wall Street Journal, as the base rate on corporate loans at large U.S. money
center commercial banks.

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

     Trailing Recurring Revenue means the sum of the gross revenue generated by
Borrower in the ordinary course of business (and pursuant to service or
subscription agreements acceptable to Greyrock in Greyrock's discretion) during
the most recent three (3) calendar month period prior to the date of
determination, as determined by Greyrock in Greyrock's reasonable discretion.

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

9.   GENERAL PROVISIONS.

     9.1 Interest Computation. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Greyrock
(including proceeds of Receivables and payment of the Obligations in full) shall
be deemed applied by Greyrock on account of the Obligations three Business Days
after receipt by Greyrock of immediately available funds. Greyrock shall not,
however, be required to credit Borrower's account for the amount of any item of
payment which is unsatisfactory to Greyrock in its discretion, and Greyrock may
charge Borrower's Loan account for the amount of any item of payment which is
returned to Greyrock unpaid.

     9.2 Application of Payments. All payments with respect to the Obligations
may be applied, and in Greyrock's sole discretion reversed and re-applied, to
the Obligations, in such order and manner as Greyrock shall determine in its
sole discretion.

     9.3 Charges to Account. Greyrock may, in its discretion, require that
Borrower pay monetary Obligations in cash to Greyrock, or charge them to
Borrower's Loan account, in which event they will bear interest at the same rate
applicable to the Loans.

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

     9.5 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, or certified mail return receipt
requested, addressed to Greyrock or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party. All notices shall be deemed to have been given upon
delivery in the case of notices personally delivered, or at the expiration of
one business day following delivery to the private delivery service, or two
business days following the deposit thereof in the United States mail, with
postage prepaid.

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

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

     9.8 Waivers. The failure of Greyrock at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and Greyrock shall not waive
or diminish any right of Greyrock later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Greyrock shall be deemed to have been
waived by any act or knowledge of Greyrock or its agents or employees, but only
by a specific written waiver signed by an authorized officer of Greyrock and
delivered to Borrower. Borrower waives demand, protest,

                                      -11-
<PAGE>

notice of protest and notice of default or dishonor, notice of payment and
nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, instrument, account, General Intangible, document or
guaranty at any time held by Greyrock on which Borrower is or may in any way
be liable, and notice of any action taken by Greyrock, unless expressly
required by this Agreement.

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

     9.10 Time of Essence. Time is of the essence in the performance by Borrower
of each and every obligation under this Agreement.

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

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

     9.13 Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.

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

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

     9.16 Governing Law; Jurisdiction; Venue. This Agreement and all acts and
transactions hereunder and all rights and obligations of Greyrock and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Greyrock to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Greyrock's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Los Angeles County;
(ii) consents

                                      -12-
<PAGE>

to the jurisdiction and venue of any such court and consents to service of
process in any such action or proceeding by personal delivery or any other
method permitted by law; and (iii) waives any and all rights Borrower may have
to object to the jurisdiction of any such court, or to transfer or change the
venue of any such action or proceeding.

     9.17 Mutual Waiver of Jury Trial. Borrower and Greyrock each hereby waive
the right to trial by jury in any action or proceeding based upon, arising out
of, or in any way relating to, this Agreement or any other present or future
instrument or agreement between Greyrock and Borrower, or any conduct, acts or
omissions of Greyrock or Borrower or any of their directors, officers,
employees, agents, attorneys or any other persons affiliated with Greyrock or
Borrower, in all of the foregoing cases, whether sounding in contract or tort or
otherwise.

   Borrower:

         PILOT NETWORK SERVICES, INC.


         By  /s/ M. Marketta Silvera
            -----------------------------------
                President or Vice President

         By /s/ William C. Leetham
            -----------------------------------
                Secretary or Ass't Secretary

   Greyrock:

         Greyrock Capital,
         a Division of Banc of America Commercial Finance Corporation


         By /s/ Lisa Nagano
            -----------------------------------
         Title Senior Vice President
               --------------------------------

                                      -13-
<PAGE>

                                 Schedule to
                         Loan and Security Agreement

Borrower:         Pilot Network Services, Inc.
Address:          1080 Marina Village Parkway
                  Alameda, California  94501

Date:             November 9, 1999

This Schedule is an integral part of the Loan and Security Agreement between
Greyrock Capital, a Division of Banc of America Commercial Finance Corporation
(Greyrock) and the above-borrower (Borrower) of even date.

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

1.  Credit Limit
    (Section 1.1):      Total Credit Limit:   $8,000,000

                        Revolving Credit Limit:  An amount not to exceed the
                        lesser of (1) or (2) below:

                        (1) $5,000,000 at any one time outstanding; or

                        (2) an amount equal to the sum of (a) 80% of the
                            amount of Borrower's Eligible Receivables (as
                            defined in Section 8 above) consisting of
                            "installation" Eligible Receivables, plus
                            (without----duplication of clause (a)) (b) 100% of
                            Trailing Recurring Revenue (and defined in Section
                            8 above).

                            Term Loan Limit:  $3,000,000

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

2.  Interest.

         Interest Rate (Section 1.2):

                        The interest rate in effect throughout each calendar
                        month during the term of this Agreement shall be the
                        highest Prime Rate in effect during such month, plus
                        2% per annum, provided that the interest rate in
                        effect in each month shall not be less than 8% per
                        annum, and provided that the interest charged for each
                        month shall be a minimum of $15,000.00, regardless of
                        the amount of the Obligations
<PAGE>

                        outstanding. Interest shall be calculated on the basis
                        of a 360-day year for the actual number of days
                        elapsed. Prime Rate has the meaning set forth in
                        Section 8 above.

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

3.  Fees (Section 1.3/Section 6.2):

         Loan Fee:            $80,000.00, payable concurrently herewith.

         Termination Fee:     None

         NSF Check Charge:    $15.00 per item.

         Wire Transfers:      $15.00 per transfer.

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

4.  Maturity Date
    (Section 6.1):            October 31, 2000, subject to automatic renewal
                              as provided in Section 6.1 above, and early
                              termination as provided in Section 6.2 above.

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

5.  Reporting.
    (Section 5.2):

                              Borrower shall provide Greyrock with the
                              following:

                              1.  Annual financial statements, as soon as
                                  available, and in any event within 90 days
                                  following the end of Borrower's fiscal year,
                                  certified by independent certified public
                                  accountants acceptable to Greyrock.

                              2.  Quarterly unaudited financial statements, as
                                  soon as available, and in any event within
                                  30 days after the end of each fiscal quarter
                                  of Borrower.

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

                              4.  Monthly Receivable agings, aged by invoice
                                  date, within 10 days after the end of each
                                  month.

                              5.  Monthly accounts payable agings, aged by
                                  invoice date, and outstanding or held check
                                  registers within 10 days after the end of
                                  each month.

                              6.  Monthly perpetual inventory reports for the
                                  Inventory valued on a first-in, first-out
                                  basis at the lower of cost or market (in
                                  accordance with generally accepted
                                  accounting principles) or such other
                                  inventory reports as are reasonably
                                  requested by Greyrock, all within 30 days
                                  after the end of each month.
<PAGE>

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

6.  Borrower Information:

         Prior Names of
         Borrower
         (Section 3.2):                 None

         Prior Trade
         Names of Borrower
         (Section 3.2):                 None

         Existing Trade
         Names of Borrower
         (Section 3.2):                 None

         Other Locations and
         Addresses (Section 3.3):       (1) 2450 Mariner Square Loop,
                                            Alameda, CA 94501

                                        (2) 222 N. Sepulveda Blvd.,
                                            Suite 450, El Segundo, CA 90245

                                        (3) 111 Pavonia Avenue, Suite 320,
                                            Jersey City , NJ 07310-1755

                                        (4) 2100 Golf Road,
                                            Suites 410 and 480,
                                            Rolling Meadows, IL 60008-4232

                                        (5) One South Street, Suite 840,
                                            Baltimore, MD 21202

                                        (6) 300 Bent Street, Cambridge MA

                                        (7) 60 Lombard Street, London,
                                            United Kingdom EC3V9EA

                                        (8) 6 Harbour Exchange, London,
                                            United Kingdom E149GE

         Material Adverse
         Litigation (Section 3.10):  None


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

7.  Other Covenants:                    Borrower shall at all times comply
                                        with all of the following additional
                                        covenants:

(1) Pledge. Borrower shall concurrently execute and deliver to Greyrock a
    Pledge Agreement, on Greyrock's standard form, whereby Borrower shall
    grant to Greyrock a security interest in 65% of its interest in the issued
    outstanding capital stock directly or indirectly owned or controlled by
    Borrower as additional collateral for the Obligations. Such Pledge
    Agreement shall continue in full force and effect throughout the term of
    this Loan Agreement and so long as any portion of the Obligations remains
    outstanding.

(2) Patent and Trademark Security Agreement. Borrower shall concurrently
    execute and deliver to Greyrock a Patent and Trademark Security Agreement,
    on Greyrock's standard form, whereby Borrower shall grant to Greyrock a
    security interest in all of its trademarks, patents, and such rights
<PAGE>

    and interests capable of being protected as trademarks or patents, as
    additional collateral for the Obligations. Such Patent and Trademark
    Security Agreement shall continue in full force and effect throughout the
    term of this Loan Agreement and so long as any portion of the Obligations
    remains outstanding.

(3) Security Agreement in Copyrighted Works. Borrower shall concurrently
    execute and deliver to Greyrock a Security Agreement in Copyrighted Works,
    on Greyrock's standard form, whereby Borrower shall grant to Greyrock a
    security interest in all of its copyrights and such rights and interests
    capable of being protected as copyrights, as additional collateral for the
    Obligations. Such Security Agreement in Copyrighted Works shall continue
    in full force and effect throughout the term of this Loan Agreement and so
    long as any portion of the Obligations remains outstanding.

(4) Warrants. Borrower shall concurrently execute and deliver to Greyrock a
    Warrant for the purchase up to 121,212 shares of Borrower at a price of
    $8.25 per share for a five-year period ending on the fifth anniversary of
    this Agreement, and within 60 days after the closing date, an amendment to
    that certain Amended and Restated Investors' Rights Agreement dated as of
    March 31, 1997 (the "Investors' Rights Agreement") whereby Greyrock is
    added as a party to the Investors' Rights Agreement with respect to the
    Warrant, all in form and substance reasonably satisfactory to Greyrock.


Borrower:                               Greyrock:

PILOT NETWORK SERVICES, INC.            GREYROCK CAPITAL,
                                        a Division of Banc of America Commercial
                                        Finance Corporation

By  /s/ M. Marketta Silvera
  -----------------------------------   By  Lisa Nagano
      President or Vice President         -------------------------------------
                                        Title  Senior Vice President
By  /s/ William C. Leetham                   ----------------------------------
  ------------------------------------
       Secretary or Ass't Secretary