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                                                                   Exhibit 10.30

                               COMMERCIAL LEASE

     THIS LEASE is made as of the date specified in the Basic Lease Information,
by and between TRANOD, a California general partnership, ("Landlord") and
PETOPIA.COM ("Tenant").

                                   ARTICLE 1
                                   Premises

1.1  Subject to the reservation specified in Paragraph 1.2, and subject to all
     recorded easements, covenants, encumbrances and conditions, Landlord hereby
     leases to Tenant, and Tenant hereby leases from Landlord, for the term and
     subject to the covenants hereinafter set forth, the Premises and the
     Building situated thereon.

                                   ARTICLE 2
                                     Term

2.1  The term of this Lease shall be the term specified in the Basic Lease
     Information. The term shall commence on the Commencement Date specified in
     the Basic Lease Information (the "Commencement Date") and, unless sooner
     terminated as hereinafter provided, shall end on the expiration date
     specified in the Basic Lease Information (the "Expiration Date").
     Notwithstanding the foregoing, the term of this Lease shall not commence
     until Landlord substantially completes the ground floor improvements and
     delivers to Tenant the ground floor space of the Building for Tenant's
     temporary use and occupation during the construction of improvements on the
     second floor of the Building. If Landlord, for any reason whatsoever, is
     not able to deliver possession of the ground floor on the Commencement Date
     this Lease shall not be void or voidable and Landlord shall not be liable
     to Tenant for any loss or damage resulting therefrom, but the Commencement
     Date shall be postponed until the date on which Landlord delivers
     possession of the ground floor, provided, however, if Landlord does not
     substantially complete Landlord's work as described in paragraph 23.1
     hereof, then Tenant shall have the right to terminate this Lease. Any delay
     in delivery of possession shall not operate to extend the term hereof.

2.2  If any part of the Premises is suitable for occupancy by Tenant prior to
     the scheduled Commencement Date, Tenant may take early occupancy of that
     part of the Premises prior to the scheduled Commencement Date, but the term
     of this Lease shall not commence until the scheduled Commencement Date. If
     Tenant takes early occupancy of part of the Premises under this paragraph
     2.2, Tenant's early occupancy shall be subject to all of the covenants in
     this Lease, which shall be binding on and apply to Tenant during the early
     occupancy except that Tenant will be relieved of any obligation to pay to
     Landlord the Base Rent payable under paragraph 3.1 hereof. Instead, Tenant
     shall pay to Landlord a fee to be agreed upon as between Tenant and
     Landlord prior to early occupancy. Tenant shall give Landlord written
     notice of Tenant's request to take early occupancy of any part of the
     premises; the notice shall specify the requested date of early occupancy
     and the part of the Premises to be

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occupied.

                                   ARTICLE 3
                                     Rent

3.1  During the term of this Lease, with the exception of the period of
     construction of the Landlord and Tenant Improvements, Tenant shall pay to
     Landlord the base monthly rent specified in the Basic Lease Information
     (the "Base Rent"), subject to increase as provided in paragraph 3.2. Tenant
     shall pay Landlord a reduced monthly rent in the sum of until substantial
     completion of the Landlord and Tenant Improvements specified in Exhibits
     "C" and "D" and the delivery of the entire Premises to Tenant.

3.2  The Base Rent shall be increased on the first day of the 13/th/ month of
     the term of this Lease, and on each anniversary thereafter (the "Rental
     Adjustment Date") by 2.5 percent per annum.

3.3  Throughout the term of this Lease, Tenant shall pay, as additional rent,
     all amounts of money and charges required to be paid by Tenant under this
     Lease, whether or not those amounts of money or charges are designated
     "additional rent." As used in this Lease, "rent" shall mean any sum payable
     by Tenant to Landlord under this Lease.

3.4  It is the intention of Landlord and Tenant that the Base Rent (including
     annual increases) payable by Tenant to Landlord during the entire term of
     this Lease shall be absolutely net of all Operating Expenses, Property
     Taxes and Insurance Expenses. The provisions of this Lease for payment by
     Tenant of all Operating Expenses and all Property Taxes and Insurance
     Expenses are intended to pass on to Tenant and to reimburse Landlord for
     other costs associated with the Building or the Premises. Landlord and
     Tenant agree that statements in this Lease to the effect the Landlord is to
     perform certain of its obligations hereunder at its own or sole cost or
     expense shall not be interpreted as excluding any cost or expense from
     Operating Expenses, Property Taxes, or Insurance Expenses if the cost or
     expense is an Operating Expense, Property Tax, or Insurance Expense
     pursuant to this Lease.

3.5  Tenant shall pay all Base Rent and additional monthly rent to Landlord, in
     advance, on or before the first day of each and every calendar month during
     the term of this Lease. Tenant shall pay all rent to Landlord without
     notice, demand, deduction or offset, in lawful money of the United States
     of America, at the address of Landlord specified in the Basic Lease
     Information, or to any other person or at any other place that Landlord may
     from time to time designate in writing.

                                   ARTICLE 4
           Operating Expenses, Insurance Expenses and Property Taxes

4.1  Tenant shall pay all "Operating Expenses" related to the Building or the
     Premises commencing upon the date that Landlord delivers possession of the
     ground floor to Tenant. As used in this Lease, "Operating Expenses" means
     all costs and expenses incurred in connection with the ownership,
     management, operation, maintenance or repair of the

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     Building or the Premises (excluding Insurance Expenses, which are specified
     below in paragraph 4.3) or in connection with providing services in
     accordance with this Lease, including the following: expenses relating to
     the operation, maintenance or repair of the Building or the Premises; water
     and sewer charges or fees; license, permit and inspection fees;
     electricity, water, air conditioning, gas fuel, steam, heat, light, power
     and other utilities; sales, use and excise taxes on goods and services
     purchased for the Building or the Premises; telephone, delivery, postage,
     stationery supplies and other expenses relating to the Building or the
     Premises; repairs to and maintenance of the Building, including Building
     systems and accessories thereto and repair and replacement of worn-out or
     broken equipment, facilities, parts and installations, and the replacement
     of major Building systems if required by the Tenant during the term of the
     Lease; janitorial, window cleaning, security, guard, extermination, water
     treatment, garbage and waste disposal, rubbish removal, plumbing and other
     services.

     Additionally, Operating Expenses shall not include the following:

     (i)    Any Landlord bad debt loss, rent loss, or reserves for bad debts or
            rent loss;

     (ii)   Reserves of any kind;

     (iii)  Costs relating to compliance with earthquake retrofit ordinances
            enacted prior to Commencement Date and which is exclusive of any
            retrofitting of the Base Building;

     (iv)   Costs incurred due to default by Landlord of the terms and
            conditions of this Lease;

     (v)    Interest on debt or amortization payments on any mortgage or
            mortgages, and rental under any ground or underlying leases or lease
            for the Premises or the Building;

     (vi)   Landlord's general overhead or general administrative expenses not
            specifically incurred in the operation of the Building, except for
            allocated overhead costs to cover accounting, audit, management and
            related costs;

     (vii)  Rentals and other related expenses incurred in leasing permanent
            air-conditioning systems, elevators or other building equipment
            ordinarily considered to be of a capital nature, except temporary
            equipment which is used in providing janitorial, maintenance or
            engineering services and which is not permanently affixed to the
            Building;

     (viii) All items and services for which Tenant reimburses Landlord or pays
            to other persons;

     (ix)   Advertising and promotional expenditures associated with obtaining
            tenants for the Building, or not having a reasonably foreseeable
            benefit for Tenant except for such expenses that are incurred as a
            result of the Tenant's default or early termination of the Lease;

     (x)    Wages, salaries, commissions or other compensation paid to employees
            above the level

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            of overall manager of the Building;

     (xi)   Charitable contributions made by Landlord;

     (xii)  Purchase costs of paintings, sculptures or other art work purchased
            for display in the Building;

     (xiii) Environmental or hazardous waste clean-up costs incurred by Landlord
            with respect to the Building except any such costs attributed to
            contamination caused by Tenant.

4.2  Tenant shall pay all Property Taxes relating to the Premises or the
     Building. As used in this Lease, "Property Taxes" shall mean all taxes,
     assessments, excises, levies, fees and charges (and any tax, assessment,
     excise, levy, fee or charge levied wholly or partly in lieu thereof or as a
     substitute therefor or as an addition thereto) of every kind and
     description, general or special, ordinary or extraordinary, foreseen or
     unforeseen, secured or unsecured, whether or not now customary or within
     the contemplation of Landlord and Tenant, that are levied, assessed,
     charged, confirmed or imposed by any public or government authority on or
     against, or otherwise with respect to, the Building or any part thereof or
     any personal property used in connection with the Building. Property Taxes
     shall not include net income (measured by the income of Landlord from all
     sources or from sources other than solely rent), franchise, excess profit
     taxes, gift taxes, documentary transfer inheritance or capital stock taxes
     of Landlord, unless levied or assessed against Landlord in whole or in part
     in lieu of, as a substitute for, or as an addition to any Property Taxes.
     Notwithstanding the foregoing, Tenant shall not be responsible for paying
     any increase in real property tax specified in tax assessor's records and
     worksheets as being caused by any sale, transfer, or exchange of the
     Building or any part thereof.

4.3  Tenant shall pay all Insurance Expenses relating to the Premises or the
     Building. As used in this Lease, "Insurance Expenses" shall mean cost of
     acquiring liability, property, and other insurance on the Building and/or
     the Premises as the Landlord may, in Landlord's reasonable discretion, deem
     appropriate; provided, however, that "Insurance Expenses" shall not include
     the cost of acquiring earthquake or flood insurance on the Building and/or
     the Premises.

4.4  Landlord shall provide reasonable notice to Tenant of the nature and amount
     of any Operating Expenses, Property Taxes, and/or Insurance Expenses that
     are incurred by or billed to Landlord. Tenant shall provide Landlord with
     either direct payment or proof of payment of any invoice or bill for
     Operating Expenses within thirty (30) days of Landlord's notice. If at any
     time during the term of this Lease, Tenant fails to pay the Operating
     Expenses, Insurance Expenses and/or Property Taxes as required hereunder,
     Landlord may make that payment, and Tenant shall immediately reimburse
     Landlord. Tenant shall have the right to inspect, copy and review
     Landlord's books and records with respect to Operating Expenses. In the
     event that any review of Operating Expenses made at Tenant's request by
     independent accountants, selected by Tenant and reasonably satisfactory to
     Landlord, shall result in a decrease of the amount of Operating Expenses
     for any year of 5% or more, Landlord shall pay the cost of such review.

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                                   ARTICLE 5
                                      Use

5.1  The Premises shall be used for office, multimedia, software engineering,
     consulting, customer service, sales and administration thereto and no other
     purpose without the Landlord's prior written consent, which shall not be
     unreasonably withheld. Tenant shall have exclusive signage rights for the
     entire Premises. Tenant shall not do, nor permit to be done, in, on or
     about the Premises, nor bring or keep or permit to be brought or kept
     therein, anything which is prohibited by or will in any way conflict with
     any law, ordinance, rule, regulation or order now in force or which may
     hereafter be enacted, or which is prohibited by any insurance policy
     carried by Landlord for the Building, or will in any way increase the
     existing rate of, cause a cancellation of, or affect any insurance for the
     Building. Tenant shall not bring or keep, nor permit to be brought or kept,
     in the Premises or the Building any toxic or hazardous substance, material
     or waste or any other contaminant or pollutant. Tenant shall not do or
     permit anything to be done in or about the Premises which will in any way
     obstruct or interfere with the rights of Landlord or other tenants of the
     Building, or injure or annoy them. Tenant shall not use nor allow the
     Premises to be used for any improper, immoral, unlawful or objectionable
     activity, nor shall Tenant cause, maintain or permit any nuisance in, on or
     about the premises or commit or suffer to be committed any waste in, on or
     about the Premises. Tenant may bring pets into the Building and the
     Premises subject to such reasonable rules and regulations as Landlord may
     establish.

                                   ARTICLE 6
                  No Services, Warranties or Representations

6.1  Landlord shall supply no services to the Building or the Premises. Tenant
     shall take the Premises in their "AS IS" condition. Except for the work of
     the Landlord described on Exhibit C, Tenant hereby acknowledges and agrees
     that the lease of the Premises and the Building is made on an "AS IS" basis
     and that the Landlord has not made, and does not make, any representation,
     warranties or guarantees of any kind or character whatsoever, whether
     express or implied, oral or written, concerning or with respect to the
     Premises or the Building; except as set forth in paragraph 6.2.

6.2  Landlord represents that (i) it is the sole owner of the Building, (ii) it
     has the power and authority to execute and deliver this Lease and that this
     Lease is binding upon Landlord in accordance with its terms, (iii) the
     Premises, in the state existing on the Commencement Date, but without
     regard to alterations or improvements made by Tenant or the use for which
     Tenant will occupy the Premises, does not violate any covenants or
     restrictions of record, or any applicable building code, regulation or
     ordinance in effect on the Commencement Date, including, without
     limitation, the federal Americans With Disabilities Act and regulations
     thereunder, (iv) there is no pending litigation relating to the Premises or
     the Building, (v) there are no known defects in the Premises or the
     Building, (vi) all equipment and building systems in the Premises and the
     Building are in good operating condition and repair as of the Commencement
     Date, (vii) the Premises and the Building are in compliance with all laws
     relating to the storage, use and disposal of hazardous materials, and
     (viii) the

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     Premises and the Building are free of any asbestos-containing materials.

                                   ARTICLE 7
                            Maintenance and Repairs

7.1  Landlord shall make necessary repairs to the roof and exterior structural
     elements of the Building, including the Base Building mechanical (heating,
     ventilating and air conditioning) and electrical systems. Tenant shall, at
     all times during the term of this Lease and at Tenant's sole cost and
     expense, maintain and repair the Building interior and every part thereof
     and all equipment, fixtures and improvements therein. Tenant shall maintain
     the mechanical (heating, ventilating and air conditioning) and electrical
     systems of the Building and keep them clean and in good order and operating
     condition. Subject to paragraph 8.2 hereof, Tenant shall, at the end of the
     term of this Lease, surrender to Landlord the Premises and all alterations,
     additions, fixtures and improvements therein or thereto in the same
     condition as when received, ordinary wear and tear and damage thereto by
     fire or other casualty excepted.

                                   ARTICLE 8
                                  Alterations

8.1  Except as shown on Exhibit D, Tenant shall not make any alterations,
     additions or improvements in or to the Premises or any part thereof, or
     attach any fixtures or equipment thereto, without Landlord's prior written
     consent which consent shall not be unreasonably withheld or delayed.
     Notwithstanding the preceding sentence, Tenant may make alterations,
     additions or improvements without Landlord's consent if the total cost of
     those alterations, additions or improvements is no more than Five Thousand
     Dollars ($5,000.00) per occurrence and the alterations, additions or
     improvements will not affect in any way the structural, exterior or roof
     elements of the Building or the elevator, mechanical, electrical, plumbing
     or life safety systems of the Building. Tenant shall give prior written
     notice of any such allowed alterations, additions or improvements to
     Landlord. All alterations, additions and improvements in or to the Premises
     to which Landlord consents shall be made by Landlord at Tenant's sole cost
     and expense. Tenant shall give written notice to Landlord of the date on
     which construction of any work will be commenced at least five (5) days
     prior to that date. Tenant shall keep the Premises and the Building free
     from mechanics' liens and all other liens arising out of any work
     performed, labor supplied, materials furnished or other obligations
     incurred by Tenant. Tenant shall promptly and fully pay and discharge all
     claims on which any such lien could be based or shall provide a bond or
     other adequate security therefor. Landlord shall have the right to post and
     keep posted on the Premises any notices that may be provided by law or
     which Landlord may deem to be proper for the protection of Landlord, the
     Premises and the Building from liens, and, upon thirty (30) days' prior
     written notice to Tenant, to take any other action Landlord deems necessary
     to remove or discharge liens or encumbrances at the expense of Tenant.

8.2  All alterations, additions, fixtures and improvements shall become part of
     the Building and Landlord's property. All movable furniture, equipment,
     trade fixtures, computers, office

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     machines and other personal property shall remain the property of Tenant.
     Upon termination of this Lease, Tenant shall, at Tenant's expense, remove
     all such movable furniture, equipment, trade fixtures, computers, office
     machines and other personal property from the Building and repair all
     damage caused by the removal. Termination of this Lease shall not affect
     the obligations of Tenant pursuant to this paragraph 8.2 to be performed
     after termination.

                                   ARTICLE 9
                                   Insurance

9.1  Landlord shall not be liable to Tenant for any damage to or loss or theft
     of any property or for any bodily or personal injury, illness or death of
     any person in, on or about the Premises or the Building arising at any time
     and from any cause whatsoever, except to the extent caused by the
     negligence or willful misconduct of Landlord. Tenant waives all claims
     against Landlord arising from any liability described in this paragraph
     9.1, except to the extent caused by the negligence or willful misconduct of
     Landlord.

9.2  Tenant shall indemnify and defend Landlord against and hold Landlord
     harmless from all claims, demands, liabilities, damages, losses, costs and
     expenses, including reasonable attorneys' fees and disbursements, arising
     from or related to any use or occupancy of the Premises, or the Building,
     or any condition of the Premises, or any default in the performance of
     Tenant's obligations, or any damage to any property (including property or
     employees and invitees of Tenant) or any bodily or personal injury, illness
     or death of any person (including employees and invitees of Tenant)
     occurring in, on or about the Premises or any part thereof arising at any
     time and from any cause whatsoever (except to the extent caused by the
     negligence or willful misconduct of Landlord) or occurring in, on or about
     any part of the Building other than the Premises when the damage, bodily or
     personal injury, illness or death is caused by any act or omission of
     Tenant or its agents, officers, employees, contractors, invitees or
     licensees. This paragraph 9.2 shall survive the termination of this Lease
     with respect to any damage, bodily or personal injury, illness or death
     occurring prior to termination.

9.3  Landlord shall indemnify and defend Tenant against and hold Tenant harmless
     from all claims, demands, liabilities, damages, losses, costs and expenses,
     including reasonable attorney's fees and disbursements, arising from or
     related to (i) Landlord's negligence or willful misconduct, or (ii) any
     default in the performance of Landlord's obligations under this Lease. This
     paragraph 9.3 shall survive the termination of this Lease with respect to
     any damage, bodily or personal injury, illness or death occurring prior to
     termination.

9.4  Landlord shall indemnify, defend and hold harmless Tenant and any and all
     officers, directors, employees, shareholders, agents or affiliates of
     Tenant from and against any and all direct and indirect, actual and
     consequential costs, expenses, losses, demands, claims, liabilities,
     judgments, causes of action, proceedings or hearings which arise from the
     use, disposal, emission, discharge, injection, spill, escape, leak, release
     or threatened release of any hazardous material in the Building or the
     Premises on or before the Commencement

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     Date, or brought onto the Premises or the Building by or for Landlord or by
     anyone under Landlord's control.

9.5  Tenant shall procure and maintain, at its own expense, with companies
     satisfactory to Landlord in its reasonable discretion, the following
     insurance coverage:

     a. All Risk Property insurance which insures the Building and Tenant's
        Property on site from fire and vandalism on a replacement basis, with
        business interruption coverage equal to at least one year's rent.

     b. Workers' Compensation and Employers' Liability Insurance as required by
        California law, affording 30 days' notice of cancellation to the Owner.
        The Employers' liability coverage shall have the limits required by law.

     c. General Liability Insurance on an "occurrence" basis, having a limit of
        not less than $1,000,000 for bodily injury and not less than $1,000,000
        for property damage liability, including:

        (1) Premises and Operations coverage with X, C and U exclusions deleted,
            if applicable;
        (2) Products and Completed Operations coverage;
        (3) Broad Form Property Damage coverage, including completed operations;
        (4) Blanket Contractual coverage (specifically covering this Lease);
        (5) Personal Injury coverage;
        (6) An endorsement affording 30 days' notice of cancellation to Landlord
            in the event of cancellation or material reduction in coverage;
        (7) An endorsement providing that the insurance as afforded is primary,
            and any other insurance maintained by Landlord is excess and
            noncontributing with the insurance required hereunder;
        (8) Business interruption insurance, in an amount equal to at least one
            year's rent.

     d. Business Auto Liability in the amount of $1,000,000 combined single
        limit for bodily injury and/or property damage liability including:

        (1) Owned autos and trucks;
        (2) Hired or borrowed autos and trucks;
        (3) Non-owned autos and trucks;
        (4) An endorsement affording 30 days' notice of cancellation to Landlord
            in the event of cancellation or material reduction in coverage.

     e. Excess or Umbrella Bodily Injury and/or Property Damage Liability
        Insurance with limits not less than $1,000,000 per occurrence for bodily
        injury and/or property damage liability, listing the above-described
        General Liability, Employers' Liability and Comprehensive Auto Liability
        as underlying policies and including:

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        (1) A Broad-as-Primary endorsement;
        (2) An endorsement naming Landlord as an additional insured;
        (3) An endorsement affording 30 days' notice of cancellation to Landlord
            in the event of cancellation or material reduction in coverage;
        (4) An endorsement providing that the insurance as afforded is primary,
            and any other insurance maintained by Landlord is excess and
            noncontributing with the insurance required hereunder.

     Tenant shall, at Tenants' sole cost and expense, be responsible for
     insuring Tenant's furniture, equipment, fixtures, computers, office
     machines, automobiles and vehicles, and all other personal property.

9.6  All insurance required under this Article 9 and all renewals thereof shall
     be issued by good and responsible companies qualified to do and doing
     business in the State of California. Each policy shall expressly provide
     that the policy shall not be canceled or altered without thirty (30) days'
     prior written notice to Landlord and shall remain in effect notwithstanding
     any cancellation or alteration until notice has been given to Landlord and
     the thirty-day period has expired. All liability insurance under this
     Article 9 shall name Landlord, and any other parties designated by
     Landlord, as an additional insured, shall be primary and noncontributing
     with any insurance that may be carried by Landlord, shall afford coverage
     for all claims based on any act, omission, event or condition that occurred
     or arose (or the onset of which occurred or arose) during the policy
     period, and shall expressly provide that Landlord, although named as an
     insured, shall nevertheless be entitled to recover under the policy for any
     loss, injury or damage to the Landlord. Upon the issuance thereof, Tenant
     shall deliver each policy or a certified copy and a certificate thereof to
     Landlord for retention by Landlord. If Tenant fails to insure or fails to
     furnish to Landlord upon thirty (30) days' written notice to do so any
     policy or certified copy and certificate thereof as required, Landlord
     shall have the right from time to time to effect such insurance for the
     benefit of Tenant or Landlord or both of them, and all premiums paid
     therefor by Landlord shall be payable by Tenant as additional rent on
     demand.

9.7  Tenant waives on behalf of all insurers under all policies of property,
     liability and other insurance (excluding workers' compensation) now or
     hereafter carried by Tenant insuring or covering the Premises, or any
     portion or any contents thereof, or any operations therein, all rights of
     subrogation that any insurer might otherwise, if at all, have to any claims
     of Tenant against Landlord. Landlord waives on behalf of all insurers under
     all policies of property, liability and other insurance (excluding workers'
     compensation) now or hereafter carried by Landlord insuring or covering the
     Building or any portion or any contents thereof, or any operations therein,
     all rights of subrogation that any insurer might otherwise, if at all, have
     to any claims of Landlord against Tenant. Tenant shall, prior to or
     immediately after the date of this Lease, procure from each of the insurers
     under all policies of property, liability and other insurance (excluding
     workers' compensation) now or hereafter carried by Tenant insuring or
     covering the Premises, or any portion or any contents thereof, or any
     operations therein, a waiver of all rights of subrogation that the insurer
     might otherwise, if

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     at all, have to any claims of Tenant against Landlord as required by this
     paragraph 9.5.

                                  ARTICLE 10
                      Compliance with Legal Requirements

10.1 Tenant shall, at Tenant's sole cost and expense, promptly comply with all
     laws, ordinances, rules, regulations, orders and other requirements of any
     government or public authority now in force or which may hereafter be in
     force, with all requirements of any board of fire underwriters or other
     similar body now or hereafter constituted, and with all directions and
     certificates of occupancy issued pursuant to any law by any governmental
     agency or officer, insofar as any of them relate to or are required by the
     condition, use or occupancy of the Premises or the operation, use or
     maintenance of any personal property, fixtures, machinery, equipment or
     improvements in the Premises, or the Building. Tenant shall not be required
     to make structural changes or to make improvements required by the ADA
     unless such structural changes or such improvements required by the ADA are
     related to or required by Tenant's acts or particular use of the Premises
     or by improvements made by or for Tenant. Similarly, Tenant shall not be
     required to make changes to the electrical, water, HVAC or other utility
     systems of the Building unless such changes are related to or required by
     Tenant's acts or particular use of the Premises or by improvements made by
     or for Tenant.

                                  ARTICLE 11
                            Assignment or Sublease

11.1 Tenant shall not, directly or indirectly, without the prior written consent
     of Landlord (which consent shall not be unreasonably withheld), assign this
     Lease or any interest herein or sublease the Premises or any part thereof,
     or permit the use or occupancy of the Premises by any person or entity
     other than Tenant. Tenant shall not, directly or indirectly, without the
     prior written consent of Landlord, which consent shall not be unreasonably
     withheld or delayed, pledge, mortgage or hypothecate this Lease or any
     interest herein. This Lease shall not, nor shall any interest herein, be
     assignable as to the interest of Tenant involuntarily or by operation of
     Law without the prior written consent of Landlord, which consent shall not
     be unreasonably withheld or delayed. Any of the foregoing acts without
     prior written consent of Landlord shall be void and shall, at the option of
     Landlord, constitute a default that entitles Landlord to terminate this
     Lease. Without limiting or excluding other reasons for withholding
     Landlord's consent Landlord shall have the right to withhold consent if it
     is not demonstrated to the satisfaction of Landlord that the proposed
     assignee or subtenant is financially able to perform all of the obligations
     of Tenant under this Lease (as evidenced by financial statements and
     business and credit references acceptable to Landlord). Tenant agrees that
     the instrument by which any assignment or sublease to which Landlord
     consents is accomplished shall expressly provide that the assignee or
     subtenant will perform all of the covenants to be performed by Tenant under
     this Lease (in the case of a sublease, only insofar as such covenants
     relate to the portion of the Premises subject to the sublease) as and when
     performance is due after the effective date of the assignment or sublease
     and that Landlord will have the right to enforce those covenants directly
     against the assignee or subtenant. Any purported assignment or sublease
     without an instrument containing the foregoing provisions

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     shall be void. Tenant shall in all cases remain liable for the performance
     by any assignee or subtenant of all covenants and obligations of this
     Lease. Notwithstanding anything in this Article 11 or elsewhere in this
     Lease to the contrary, Tenant may assign or sublet the Premises, or any
     portion thereof, without consent, to any entity which controls, is
     controlled by or is under common control with Tenant, or to any entity
     resulting from the merger, initial public offering or consolidation with
     Tenant, or to any person or entity which acquires all the assets of Tenant
     as a going concern of the business that is being conducted on the Premises,
     provided that before such assignment or sublet shall be effective said
     entity shall assume, in full, the obligations of Tenant under this Lease.

11.2 If Tenant wishes to assign this Lease or sublease all or any part of the
     Premises, Tenant shall give written notice to Landlord identifying the
     intended assignee or subtenant by name and address and specifying all of
     the terms of the intended assignment or sublease. Tenant shall give
     Landlord any additional information concerning the intended assignee or
     subtenant (including complete financial statements and a business history)
     or the intended assignment or sublease (including true copies thereof) as
     Landlord reasonably requests. For a period of fifteen (15) days after
     written notice is given by Tenant, Landlord shall have the right, by giving
     written notice to Tenant, (a) to consent in writing to the intended
     assignment or sublease, unless Landlord determines not to consent, or (b)
     to enter into an assignment of this Lease or a sublease of the Premises, as
     the case may be, with Tenant upon the terms set forth in such written
     notice, or (c) in the case of an assignment of this Lease or sublease of
     the entire Premises for substantially the balance of the term of this
     Lease, to terminate this Lease, effective as of the date on which the
     intended assignment or sublease would have been effective if Landlord had
     not exercised this termination right. If Landlord does not exercise any of
     the rights set forth in the preceding sentence by giving written notice to
     Tenant within fifteen (15) days, Landlord shall be deemed to consent in
     writing to the intended assignment or sublease. If Landlord elects to enter
     into an assignment of this Lease or a sublease of the Premises or to
     terminate this Lease, Landlord may enter into a new lease or agreement
     covering the Premises or any portion thereof with the intended assignee or
     subtenant on any terms to which Landlord and the assignee or subtenant may
     agree, or enter into a new lease or agreement covering the Premises or any
     portion thereof with any other person or entity. In such event, Tenant
     shall not be entitled to any portion of the profit, if any, that Landlord
     may realize on account of the new lease or agreement. If Landlord elects to
     terminate this Lease, then from and after the date of termination, Landlord
     and Tenant each shall have nor further obligation to the other under this
     Lease with respect to the Premises except for matters occurring or
     obligations arising hereunder prior to the date of termination.

11.3 If Landlord consents in writing (or is deemed to consent in writing in
     accordance with paragraph 11.2), Tenant may complete the intended
     assignment or sublease subject to the following covenants: (a) the
     assignment or sublease shall be on the same terms as set forth in the
     written notice given by Tenant to Landlord, (b) no assignment or sublease
     shall be valid and no assignee or subtenant shall take possession of the
     Premises or any part thereof until an executed duplicate original of the
     assignment or sublease, in compliance with paragraph 11.1 hereof, has been
     delivered to Landlord, (c) no assignee or subtenant shall

                                      -11-
<PAGE>

     have a right further to assign or sublease, and (d) one-half of all
     "Excess Rent" (as hereinafter defined) derived from the assignment or
     sublease is paid to Landlord. Tenant shall pay Excess Rent to Landlord
     immediately as and when it is received by Tenant. As used in this paragraph
     11.3, "Excess Rent" shall mean the amount by which the total money and
     other economic consideration to be paid by the assignee or subtenant as a
     result of an assignment or sublease, whether denominated rent or otherwise,
     after a deduction has been made for Tenant's real estate leasing
     commissions and tenant improvement costs, exceeds, in the aggregate, the
     total amount of rent that Tenant is obligated to pay to Landlord under this
     Lease.

11.4 No assignment or sublease whatsoever shall release Tenant from Tenant's
     obligations and liabilities under this Lease or alter the primary liability
     of Tenant to pay all rent and to perform all obligations to be paid and
     performed by Tenant. The acceptance of rent by Landlord from any other
     person or entity shall not be deemed to be a waiver by Landlord of any
     provision of this Lease. Consent to one assignment or sublease shall not be
     deemed consent to any subsequent assignment or sublease. If any assignee,
     subtenant or successor of Tenant defaults in the performance of any
     obligation to be performed by Tenant under this Lease, Landlord may proceed
     directly against Tenant without the necessity of exhausting remedies
     against the assignee, subtenant or successor.

11.5 If Tenant requests the consent or approval of Landlord to any assignment,
     sublease or other action by Tenant, Tenant shall pay to Landlord on demand,
     as additional rent, all costs and expenses, including reasonable attorneys'
     fees and disbursements, incurred by Landlord in connection therewith.

                                  ARTICLE 12
                               Entry by Landlord

12.1 Landlord shall have the right to enter the Premises and/or the Building at
     any time upon prior notice and accompanied by a representative of Tenant to
     (a) inspect the premises, (b) exhibit the Premises to prospective
     purchasers, lenders or tenants, (c) determine whether Tenant is performing
     all of Tenant's obligations, and (d) post notices of non-responsibility.
     Except for damages caused by Landlord's negligence or willful misconduct,
     Tenant waives all claims for damages for any injury or inconvenience to or
     interference with Tenant's business, any loss of occupancy or quiet
     enjoyment of the Premises or any other loss occasioned by Landlord's entry.
     Tenant shall provide to Landlord, and Landlord shall at all times have, a
     key to unlock all doors to the Premises, and Landlord shall have the right
     to use any and all means which Landlord may deem proper to open doors in an
     emergency to obtain entry to the Premises and/or the Building. Any such
     entry by Landlord shall not under any circumstances be construed or deemed
     to be a forcible or unlawful entry into or a detainer of the Premises or an
     eviction, actual or constructive, of Tenant from the Premises, or any
     portion thereof

                                      -12-
<PAGE>

                                  ARTICLE 13
                        Events of Default and Remedies

13.1 The occurrence of any one or more of the following events ("Event of
     Default") shall constitute a breach of this Lease by Tenant:

     a. Tenant fails to pay any Base Rent, and that failure continues for more
        than five (5) business days after Tenant's receipt of written notice
        from Landlord pursuant to the notice provisions herein.

     b. Tenant fails to pay any additional rent or other amount of money or
        charge payable by Tenant hereunder as and when it becomes due and
        payable, and that failure continues for more than ten (10) business days
        after Tenant's receipt of written notice from Landlord pursuant to the
        notice provisions herein.

     c. Tenant fails to perform or breaches any other agreement or covenant of
        this Lease to be performed or observed by Tenant as and when performance
        or observance is due, and that failure to breach continues for more than
        thirty (30) days after Landlord gives written notice thereof to Tenant.
        If, by the nature of the agreement or covenant, the failure or breach
        cannot reasonably be cured within a period of thirty (30) days, an Event
        of Default shall not exist as long as Tenant commences with due
        diligence and dispatch the curing of the failure or breach within the
        period of thirty (30) days and, having so commenced, thereafter
        prosecutes with diligence and dispatch and completes the curing of the
        failure or breach.

     d. Tenant (1) files, or consents by answer or otherwise to the filing
        against it of a petition for relief or reorganization or arrangement or
        any other petition in bankruptcy or for liquidation or to take advantage
        of any bankruptcy, insolvency or other debtors' relief law of any
        jurisdiction, (2) makes an assignment for the benefit of its creditors,
        (3) consents to the appointment of a custodian, receiver, trustee or
        other officer with similar powers of Tenant or of any substantial part
        of Tenant's property, or (4) takes action for the purpose of any of the
        foregoing.

     e. Without consent by Tenant, a court or government authority enters an
        order, and the order is not vacated within thirty (30) days, (1)
        appointing a custodian, receiver, trustee or other officer with similar
        powers with respect to Tenant or with respect to any substantial part of
        Tenant's property, or (2) constituting an order for relief or approving
        a petition for relief or reorganization or arrangement or any other
        petition in bankruptcy or for liquidation or to take advantage of any
        bankruptcy, insolvency or other debtors' relief law of any jurisdiction,
        or (3) ordering the dissolution, winding-up or liquidation of Tenant.

     f. This Lease or any estate of Tenant hereunder is levied upon under any
        attachment or execution, and the attachment or execution is not vacated
        within sixty (60) days or Tenant does not provide a bond or other
        adequate security therefor.

                                      -13-
<PAGE>

     g. Tenant intentionally abandons the Premises.

13.2 If an Event of Default occurs, Landlord shall have the right at any time to
     give a written termination notice to Tenant and, on the date specified in
     the notice, Tenants' right to possession shall terminate and this Lease
     shall terminate. Upon termination, Landlord shall have the right to recover
     from Tenant:

     a. The worth at the time of award of all unpaid rent that had been earned
        at the time of termination;

     b. The worth at the time of award of the amount by which all unpaid rent
        that would have been earned after termination until the time of award
        exceeds the amount of rental loss that Tenant proves could have been
        reasonably avoided;

     c. The worth at the time of award of the amount by which all unpaid rent
        for the balance of the term of this Lease after the time of award
        exceeds the amount of rental loss that Tenant proves could be reasonably
        avoided; and

     d. All other amounts necessary to compensate Landlord for all detriment
        proximately caused by Tenant's failure to perform all of Tenant's
        obligations under this Lease or which in the ordinary course of things
        would be likely to result therefrom. The "worth at the time of award" of
        the amounts referred to in clauses a. and b. above shall be computed by
        allowing interest at the lesser of the maximum annual interest rate
        allowed by law for business loans (not primarily for personal, family or
        household purposes) not exempt from the usury law at the time of
        termination or twelve percent (12%) per annum. The "worth at the time of
        award" of the amount referred to in clause c. above shall be computed by
        discounting the amount at the discount rate of the Federal Reserve Bank
        of San Francisco at the time of award plus one percent (11%). For the
        purpose of determining unpaid rent under clauses a., b. and c. above,
        the rent reserved in this Lease shall be deemed to be the total rent
        payable by Tenant under Articles 3, 4 and 5 hereof.

13.3 Even though Tenant has breached this Lease, this Lease shall continue in
     effect for so long as Landlord does not terminate Tenant's right to
     possession, and Landlord shall have the right to enforce all of its rights
     and remedies under this Lease, including the right to recover all rent as
     it becomes due under this Lease. Acts of maintenance or preservation or
     efforts to re-let the Premises or the appointment of a receiver upon
     initiative of Landlord to protect Landlord's interest under this Lease
     shall not constitute a termination of Tenant's right to possession unless
     written notice of termination is given by Landlord to Tenant.

13.4 The remedies provided for in this Lease are in addition to all other
     remedies available to Landlord at law or in equity by statute or otherwise.

13.5 All agreements and covenants to be performed or observed by Tenant under
     this Lease shall be at Tenant's sole cost and expense and without any
     abatement of rent. If Tenant fails to

                                      -14-
<PAGE>

     pay any sum of money to be paid by Tenant or to perform any other act to be
     performed by Tenant under this Lease, Landlord shall have the right, but
     shall not be obligated, upon thirty (30) days prior written notice to
     Tenant and without waiving or releasing Tenant from any obligations of
     Tenant, to make any such payment or to perform any such other act on behalf
     of Tenant in accordance with this Lease. All sums so paid by Landlord and
     all necessary incidental costs shall be deemed additional rent hereunder
     and shall be payable by Tenant to Landlord on demand, together with
     interest from the date of expenditure by Landlord to the date of repayment
     by Tenant at the lesser of the maximum annual interest rate allowed by law
     for business loans (not primarily for personal, family or household
     purposes) not exempt from the usury law at the date of expenditure or
     twelve percent (12%) per annum. Landlord shall have, in addition to all
     other rights and remedies of Landlord, the same rights and remedies in the
     event of the nonpayment of these sums plus interest by Tenant as in the
     case of default by Tenant in the payment of rent.

13.6 If Tenant abandons or surrenders the Premises, or is dispossessed by
     process of law or otherwise, any movable furniture, equipment, trade
     fixtures or personal property belonging to Tenant and left in the Premises
     shall be deemed to have been abandoned, at the option of Landlord, and
     Landlord shall have the right, upon thirty (30) days prior written notice
     to Tenant, to sell or otherwise dispose of the abandoned personal property
     in any commercially reasonable manner.

13.7 Landlord shall be in default of this Lease if it fails or refuses to
     perform any provision of this Lease that it is obligated to perform if the
     failure to perform is not cured within thirty (30) days after Landlord's
     receipt of notice of the default pursuant to the notice provisions in this
     Lease. If the default cannot be reasonably cured within thirty (30) days,
     Landlord shall not be in default of this Lease if Landlord commences to
     cure the default within the thirty (30) day period and diligently and in
     good faith continues to cure the default. Tenant, at any time after
     Landlord commits a default, can cure the default at Landlord's cost. If
     Tenant at any time, by reason of Landlord's default, pays any sum or does
     any act that requires the payment of any sum, the sum paid by Tenant shall
     be due immediately from Landlord to Tenant at the time the sum is paid. If
     Landlord fails to reimburse Tenant as required by this paragraph, Tenant
     shall have the right to withhold from future rent due the sum Tenant has
     paid until Tenant is reimbursed in full for said sum.

                                  ARTICLE 14
                             Damage or Destruction

14.1 If the Building or the Premises, or any part thereof, is damaged by fire or
     other casualty before the Commencement Date or during the term of this
     Lease, and this Lease is not terminated pursuant to paragraph 14.2 hereof,
     Landlord shall repair the damage and restore the Building and the Premises
     to substantially the same condition in which the Building and the Premises
     existed before the occurrence of the fire or other casualty and this Lease
     shall, subject to this paragraph 14.1, remain in full force and effect. If
     the fire or other casualty damages the Premises or the Building necessary
     for Tenant's use and occupancy of the Premises and if the damage is not the
     result of the negligence or willful misconduct of

                                      -15-
<PAGE>

     Tenant or Tenant's agents, officers, employees, contractors, licensees or
     invitees, then, during the period the Premises are rendered unusable by the
     damage, Tenant shall be entitled to a reduction in Base Rent in the
     proportion that the area of the Premises rendered unusable bears to the
     total area of the Premises. Landlord shall not be obligated to repair any
     damage to, or to make any replacement of, any movable furniture, equipment,
     trade fixtures or personal property in the Premises. Tenant shall, at
     Tenant's sole cost and expense, repair and replace all such movable
     furniture, equipment trade fixtures and personal property. Tenant hereby
     waives California Civil Code sections 1932(2) and 1933(4).

14.2 If the Building or the Premises, or any part thereof, is damaged by fire or
     other casualty before the Commencement Date or during the term of this
     Lease and (a) the fire or other casualty occurs during the last twelve (12)
     months of the term of this Lease and the repair and restoration work to be
     performed by Landlord in accordance with paragraph 14.1 cannot, as
     reasonably estimated by Landlord, be completed within two (2) months after
     the occurrence of the fire or other casualty, or (b) the insurance proceeds
     received by Landlord in respect of the damage are not adequate to pay the
     entire cost, as reasonably estimated by Landlord, of the repair and
     restoration work to be performed by Landlord in accordance with paragraph
     14.1, and Tenant does not elect in its sole discretion to pay the
     difference thereof or (c) the repair and restoration work to be performed
     by Landlord in accordance with paragraph 14.1 hereof cannot, as reasonably
     estimated by Landlord, be completed within six (6) months after the
     occurrence of the fire or other casualty, then Landlord shall have the
     right, by giving written notice to Tenant within sixty (60) days after the
     occurrence of the fire or other casualty, to terminate this Lease as of the
     date of the notice. In such event, Rent shall abate as of the date of such
     casualty in the proportion that the area of the Premises rendered unusable
     bears to the total area of the Premises. If Landlord does not exercise the
     right to terminate this Lease in accordance with this paragraph, Landlord
     shall repair the damage and restore the Building and the Premises in
     accordance with paragraph 16.1 hereof and this Lease shall remain in full
     force and effect. A total destruction of the Building shall automatically
     terminate this Lease effective as of the date of the total destruction.

                                  ARTICLE 15
                                Eminent Domain

15.1 If any part, but less than all, of the Premises is taken by exercise of the
     power of eminent domain before the Commencement Date, Landlord or Tenant
     may terminate this Lease upon notice to the other within thirty (30) days
     after the date of taking and before the Commencement Date. If any part, but
     less than all, of the Premises is taken during the term of this Lease, and
     if the remaining portion of the Premises is not reasonably suitable for
     Tenant's purposes, Tenant may terminate this Lease, by giving written
     notice to Landlord within thirty (30) days after the date of the taking. If
     either Landlord or Tenant exercises its right to terminate this Lease in
     accordance with this paragraph, this Lease shall terminate as of the date
     of the taking. If neither Landlord nor Tenant exercises its right to
     terminate this Lease in accordance with this paragraph, this Lease shall
     terminate as to the portion of the Premises taken as of the date of taking
     and shall remain in full force and effect as to the portion of the Premises
     not taken, and the Base Rent shall be reduced as of the date of taking

                                      -16-
<PAGE>

     in the proportion that the area of the Premises taken bears to the total
     area of the Premises. If all of the Premises is taken by exercise of the
     power of eminent domain before the Commencement Date or during the term of
     this Lease, this Lease shall terminate as of the date of the taking.

15.2 If all or any part of the Premises is taken by exercise of the power of
     eminent domain, all awards, compensation, damages, income, rent and
     interest payable in connection with the taking shall, except as expressly
     set forth in this paragraph, be paid to and become the property of
     Landlord, and Tenant hereby assigns to Landlord all of the foregoing
     monies. Tenant shall have the right to claim and receive directly from the
     entity exercising the power of eminent domain only the share of any award
     determined to be owing to Tenant for the taking of improvements installed
     in the taken portion of the Premises by Tenant at Tenant's sole cost and
     expense, based on the unamortized cost actually paid by Tenant for the
     improvements, for the taking of Tenant's movable furniture, equipment trade
     fixtures and personal property, for loss of goodwill, for interference with
     or interruption of Tenant's business, or for removal and relocation
     expenses.

15.3 Notwithstanding paragraphs 15.1 and 15.2 hereof to the contrary, if the use
     of all or any part of the Premises is taken by exercise of the power of
     eminent domain during the term of this Lease on a temporary basis for a
     period less than the term of this Lease remaining after the taking, this
     Lease shall continue in full force and effect, Tenant shall continue to pay
     all of the rent and to perform all of the covenants of Tenant in accordance
     with this Lease, to the extent reasonably practicable under the
     circumstances, and the, condemnation proceeds in respect of the temporary
     taking shall be paid to Tenant; provided, however, that Rent shall abate in
     the proportion that the area of the Premises so taken bears to the total
     area of the Premises to the extent any condemnation proceedings are not
     specifically earmarked therefore.

15.4 As used in this Article 15, a "taking" means the acquisition of all or part
     of the Premises for a public use by exercise of the power of eminent domain
     or by a transfer in lieu thereof. A taking shall be considered to occur as
     of the earlier of the date on which possession of the Premises (or portion
     thereof) by the entity exercising the power of eminent domain is authorized
     as stated in an order for possession, or the date on which title to the
     Premises (or portion thereof) vests in the entity exercising the power of
     eminent domain. Tenant hereby waives California Code of Civil Procedure
     sections 1265.110 through 1265.160.

                                  ARTICLE 16
                        Subordination, Merger and Sale

16.1 This Lease shall be subject and subordinate at all times to the lien of all
     mortgages and deeds of trust securing any amount or amounts whatsoever that
     may now exist or hereafter be placed on or against the Building or on or
     against Landlord's interest or estate therein, all without the necessity of
     having further instruments executed by Tenant to effect the subordination.
     Notwithstanding the foregoing, in the event of a foreclosure of any such
     mortgage or deed of trust or of any other action or proceeding for the
     enforcement thereof,

                                      -17-
<PAGE>

     or of any sale thereunder, this Lease shall not be terminated or
     extinguished, nor shall the rights and possession of Tenant hereunder be
     disturbed, if no Event of Default then exists under this Lease, and Tenant
     shall attorn to the person who acquires Landlord's interest hereunder
     through any such mortgage or deed of trust. Tenant agrees to execute,
     acknowledge and deliver upon demand any further instruments evidencing
     subordination of this Lease to the lien of all such mortgages and deeds of
     trust that may reasonably be required by Landlord, but Tenants' covenant to
     subordinate this Lease to mortgages or deeds of trust hereafter executed is
     conditioned upon the inclusion of the commitments specified in the
     preceding sentence in each such senior mortgage or deed of trust, or in a
     separate subordination agreement. Landlord shall obtain from the holder of
     each current mortgage, deed of trust and ground lease, a non-disturbance
     agreement in recordable form, providing that in the event of any
     foreclosure or termination, or transfer in lieu of any of the foregoing, or
     the exercise of any other remedy under such mortgage, deed of trust or
     ground lease that: (a) Tenant's use, possession and enjoyment of the
     Premises shall not be disturbed and this Lease shall continue in full force
     and effect as long as Tenant is not in default, and (b) this Lease shall
     automatically become a lease directly between any successor to Landlord's
     interest and Tenant.

16.2 The voluntary or other surrender of this Lease by Tenant, or a mutual
     cancellation thereof, shall not work a merger and shall, at the option of
     Landlord, terminate all or any existing subleases or subtenancies or
     operate as an assignment to Landlord of any or all subleases or
     subtenancies.

16.3 If the original Landlord hereunder, or any successor owner of the Building,
     sells or conveys the Building, all liabilities and obligations on the part
     of the original Landlord, or the successor owner, under this Lease accruing
     after the sale or conveyance shall terminate and the original Landlord, or
     the successor owner, shall automatically be released therefrom, and
     thereupon all of Landlord's liabilities and obligations shall be binding
     upon the new owner. Tenant agrees to attorn to the new owner.

                                  ARTICLE 17
                             Estoppel Certificate

17.1 At any time and from time to time, Tenant shall, within ten (10) days after
     written request by Landlord, execute, acknowledge and deliver to Landlord a
     certificate certifying: (a) that this Lease is unmodified and in full force
     and effect (or, if there have been modifications, that this Lease is in
     full force and effect as modified, and stating the date and nature of each
     modification); (b) the Commencement Date and the Expiration Date determined
     in accordance with Article 2 hereof and the date, if any, to which all rent
     and other sums payable hereunder have been paid; (c) that no notice has
     been received by Tenant of any default by Tenant hereunder that has not
     been cured, except as to defaults specified in the certificate; (d) that
     Landlord is not in default under this Lease, except as to defaults
     specified in the certificate; and (e) any other matters that may be
     reasonably requested by Landlord or any actual or prospective purchaser or
     mortgage lender. Any such certificate may be relied upon by Landlord and
     any actual or prospective purchaser or mortgage lender of the Building

                                      -18-
<PAGE>

     or any part thereof At any time and from time to time, Tenant shall, within
     ten (10) days after written request by Landlord, deliver to Landlord copies
     of current financial statements (including, without limitation, a balance
     sheet, an income statement, and an accumulated retained earnings
     statement), annual reports, and other financial and operating information
     and data of Tenant prepared by Tenant in the course of Tenant's business as
     reasonably requested by Landlord. Unless available to the public, Landlord
     shall disclose Tenant's financial statements, annual reports and other
     information or data only to actual or prospective purchasers or mortgage
     lenders of the Building or any part thereof, and otherwise keep them
     confidential unless other disclosure is required by law.

                                  ARTICLE 18
                                 Holding Over

18.1 If, without objection by Landlord, Tenant holds possession of the Premises
     after expiration of the term of this Lease, Tenant shall become a tenant
     from month to month upon the terms herein specified but at a Base Rent
     equal to One Hundred Fifty Percent (150%) of the Base Rent in effect at the
     expiration of the term of this Lease pursuant to Article 3 hereof, payable
     in advance on or before the first day of each month. The month-to-month
     tenancy may be terminated by either Landlord or Tenant upon thirty (30)
     days' written notice of termination to the other at any time.

                                  ARTICLE 19
                               Security Deposit

19.1 Upon signing this Lease, Tenant shall pay to Landlord the sum of
     (the"Deposit"). The Deposit shall be held by Landlord as security for the
     performance by Tenant of all of the covenants of this Lease to be performed
     by Tenant, and Tenant shall be entitled to interest thereon. If Tenant
     fails to perform any of the covenants of this Lease to be performed by
     Tenant, then Landlord shall have the right, but no obligation, to apply the
     Deposit, or so much thereof as may be necessary, to cure any failure by
     Tenant. If Landlord applies the Deposit or any part thereof to cure any
     failure by Tenant, then Tenant shall immediately pay to Landlord the sum
     necessary to restore the Deposit to the full amount required by this
     paragraph. Any remaining portion of the Deposit shall be returned to Tenant
     upon termination of this Lease. Upon termination of the original Landlord's
     or any successor owner's interest in the Premises or the Building, the
     original Landlord or the successor owner shall be released from further
     liability with respect to the Deposit upon the original Landlord's or
     successor owner's compliance with California Civil Code section 1950.7.

                                  ARTICLE 20
                               Letter of Credit

20.1 Tenant shall, on execution of this Lease, deliver to Landlord and cause to
     be in effect during the Lease term, an unconditional, irrevocable Letter of
     Credit in the amount equal to nine (9) months of the Base Rent. The Letter
     of Credit shall be issued by a Letter of Credit bank selected by Tenant and
     acceptable to Landlord. A Letter of Credit bank is a bank that

                                      -19-
<PAGE>

     accepts deposits, maintains accounts, has a local San Francisco office that
     will negotiate a letter of credit, and the deposits of which are insured by
     the Federal Deposit Insurance Corporation. Tenant shall pay all expenses,
     points, or fees incurred by Tenant in obtaining the Letter of Credit.

20.2 The amount of the Letter of Credit shall be reduced by twenty percent (20%)
     on each rental adjustment date. The replacement Letter of Credit shall be
     effective at least thirty (30) days before expiration of the Letter of
     Credit that it replaces. Each replacement Letter of Credit shall be issued
     by a Letter of Credit bank acceptable to Landlord and shall otherwise
     comply with the requirements of this Article 20.

20.3 Landlord shall hold the Letter of Credit as security for the performance of
     Tenant's obligations under this Lease. If, after notice and failure to cure
     within the applicable period, Tenant defaults on any provision of this
     Lease, Landlord may, without prejudice to any other remedy it has, draw on
     that portion of the Letter of Credit necessary to:

     a)  Pay any rent or other sum in default;
     b)  Pay or reimburse Landlord for any amount that Landlord may spend or
         become obligated to spend in exercise Landlord's rights under Article
         13; or
     c)  Compensate Landlord for any expense, loss or damage that Landlord may
         suffer because of Tenant's default.

     If Tenant fails to renew or replace the Letter of Credit at least thirty
     (30) days before its expiration, Landlord may, without prejudice to any
     other remedy it has, draw on all of the Letter of Credit.

                                  ARTICLE 21
                                    Waiver

21.1 The waiver by Landlord or Tenant of any breach of any covenant in this
     Lease shall not be deemed to be a waiver of any subsequent breach of the
     same or any other covenant in this Lease, nor shall any custom or practice
     which may grow up between Landlord and Tenant in the administration of this
     Lease be construed to waive or to lessen the right of Landlord or Tenant to
     insist upon performance by Landlord or Tenant in strict accordance with
     this Lease. The subsequent acceptance of rent hereunder by Landlord or the
     payment of rent by Tenant shall not waive any preceding breach by Tenant of
     any covenant in this Lease, nor cure any Event of Default, nor waive any
     forfeiture of this Lease or unlawful detainer action, other than the
     failure of Tenant to pay the particular rent so accepted, regardless of
     Landlord's or Tenant's knowledge of the preceding breach at the time of
     acceptance or payment of that rent.

                                  ARTICLE 22
                                    Notices

22.1 All requests, approvals, consents, notices and other communications given
     by Landlord or

                                      -20-
<PAGE>

     Tenant under this Lease shall be properly given only if made in writing and
     either deposited in the United States mail, postage prepaid, certified with
     return receipt requested, or delivered by hand (which may be through a
     messenger or recognized delivery or courier service) and addressed, if to
     Landlord, at the address of Landlord specified in the Basic Lease
     Information, or at another place as Landlord may from, time to time
     designate in a written notice to Tenant, or if to Tenant before the
     Commencement Date, at the address of Tenant specified in the Basic Lease
     Information, and after the Commencement Date at the Premises, or at another
     place as Tenant may from time to time designate in a written notice to
     Landlord. All requests, approvals, consents, notices and other
     communications shall be effective on the date of receipt as evidenced by
     the certified mail receipt if mailed, or on the date of delivery if hand-
     delivered.

                                  ARTICLE 23
                                 Improvements

23.1 Landlord shall, at Landlord's sole cost and expense, make the improvements
     to the Building which are specified in Exhibit "C" attached hereto. It is
     expected that Landlord will substantially complete the construction of the
     improvements specified in Exhibit "C" and Exhibit "D" attached hereto by
     November 1, 1999. The term "substantial completion," shall be as defined by
     the American Institute of Architects ("AIA") in AIA Document C704, a copy
     of which is attached hereto as Exhibit "E." If the improvements are not
     substantially completed by November 1, 1999 Tenant shall have the right to
     terminate this Lease by giving Landlord written notice of election to
     cancel the Lease within ten (10) days after November 1, 1999.
     Notwithstanding the foregoing, the date of completion of the Landlord's
     construction shall not affect the Tenant's obligation to pay rent as set
     forth in paragraph 3.1.

23.2 Tenant shall be entitled to a tenant improvement allowance (the "Tenant
     Improvement Allowance) in the amount of $20 for each of the 21,504 rentable
     square feet of the Building for the costs relating to the design and
     construction of Tenant's improvements which are permanently affixed to the
     Premises (the "Tenant Improvements"). In no event shall Landlord be
     obligated to make disbursements for Tenant Improvements in a total amount
     which exceeds the Tenant Improvement Allowance. If upon completion of the
     work specified in Exhibits C and D the entire Tenant Improvement Allowance
     is not exhausted, the remaining balance shall be paid to Tenant in the form
     of a Base Rent credit in an equivalent amount.

23.3 The Tenant Improvement Allowance shall be disbursed by Landlord for costs
     related to the construction of the Tenant Improvements. The Tenant
     Improvements are specified in Exhibit D. The costs of the Tenant
     Improvements covered by the Tenant Improvement Allowance shall include:

     a)  Professional fees for architects and engineers and the costs of
         documents and materials supplied by Landlord and Landlord's consultant
         in connection with the preparation and review of construction drawings
         for Tenant Improvements specified in Exhibit D;

                                      -21-
<PAGE>

     b)  The cost of any changes to the construction drawings or Tenant
         Improvements required by Code;

     c)  Any overhead costs associated with the construction of the Tenant
         Improvements such as equipment rental, utilities and off-site parking
         charges.

23.4 Landlord has established specifications for the Building standard
     components to be used in construction of the Tenant Improvements in the
     Building which specifications shall be supplied to Tenant by Landlord. The
     quality of Tenant Improvements shall be equal to or of greater quality than
     the quality of the specifications, provided that Landlord may, at
     Landlord's reasonable discretion, require the Tenant Improvements to comply
     with certain specifications. Landlord may make reasonable changes to the
     specifications from time to time.

23.5 Landlord shall retain the architect to prepare construction drawings.
     Landlord shall retain the engineer to prepare all plans and engineering
     drawings related to the Tenant Improvements. The plans and drawings to be
     prepared by Architect and Engineer shall be known collectively as the
     "Construction Drawings." All Construction Drawings shall reflect the design
     and specifications requested by Tenant and shall be subject to Landlord's
     and Tenant's reasonable approval. Landlord's review of the Construction
     Drawings shall be for its sole purpose and shall not imply Landlord's
     review of the same, or obligate Landlord to review the same, for quality,
     design, code compliance or other like matters. Landlord shall not be
     responsible for any omissions or errors contained in the Construction
     Drawings.

23.6 Landlord shall submit the Construction Drawings to the appropriate
     municipal authorities for all applicable building permits necessary to
     commence and fully complete the construction of the Tenant Improvements.
     Landlord hereby agrees that neither Tenant nor Tenant's consultants shall
     be responsible for obtaining any building permit or certificate of
     occupancy for the Building and that obtaining the same shall be the
     Landlord's responsibility; provided, however, that Tenant shall, in any
     event, cooperate with Landlord in executing permit applications and
     performing other administerial acts reasonably necessary to enable Landlord
     to obtain any such permit or certificate of occupancy.

23.7 After the Construction Drawings are approved by Landlord and Tenant, the
     Landlord will provide Tenant with a cost proposal which shall include, as
     nearly as possible, the cost of all Tenant Improvement Allowance Items to
     be incurred by Tenant in. connection with the design and construction of
     the Tenant Improvements. Tenant shall approve the cost proposal of the
     contractor whom Tenant elects for Landlord to retain to construct the
     Tenant improvements. Landlord shall thereafter be released by Tenant to
     engage the contractor to commence the construction of the Tenant
     Improvements.

23.8 If the approved Cost Proposal exceeds the Tenant Improvement Allowance,
     Tenant shall deliver to Landlord cash in an amount (the "Over-Allowance
     Amount") equal to the difference between (i) the amount of the Cost
     Proposal and (ii) the amount of the Tenant Improvement Allowance. The Over-
     Allowance Amount shall be disbursed by Landlord

                                      -22-
<PAGE>

      prior to the disbursement of any then-remaining portion of the Tenant
      Improvement Allowance, and such disbursements shall be pursuant to the
      same procedure as the Tenant Improvement Allowance. In the event that,
      after the cost proposal is approved by Tenant, any revisions, changes, or
      substitutions shall be made to the Construction Drawings or the Tenant
      Improvements, except revisions, changes and substitutions made by Landlord
      or upon Landlord's request, any additional costs which arise in connection
      with such revisions, changes or substitutions or any other additional
      costs shall be paid by Tenant to Landlord immediately upon Landlord's
      request as an addition to the Over-Allowance Amount.

23.9  Landlord hereby assigns to Tenant all warranties and guarantees by
      Contractor relating to the Tenant Improvements, and Tenant hereby waives
      all claims against Landlord relating to or arising out of construction of
      the Tenant Improvements, except for claims arising from Landlord's direct
      negligence or willful misconduct.

23.10 Tenant has designated David Fraze as its sole representative with respect
      to the matters set forth in this Article 23 who, until further notice to
      Landlord, shall have full authority and responsibility to act on behalf of
      the Tenant as is required in this article.

23.11 Landlord has designated Greg Faulkner as its sole representative with
      respect to the matters set forth in this Article 23 who, until further
      notice to Tenant, shall have full authority and responsibility to act on
      behalf of the Landlord as required in this article.

23.12 Notwithstanding provision to the contrary contained in this Lease, if an
      event vent of default as described in Article 13 of the Lease, or a
      default by Tenant under this Article 23, has occurred at any time or
      before the substantial completion of the Tenant Improvements, then, in
      addition to all the rights and remedies granted to Landlord pursuant to
      the Lease, Landlord shall have the right to withhold payment of all or any
      portion of the Tenant Improvement Allowance and/or Landlord may cause
      Contractor to cease the construction of the Tenant Improvements. In
      addition, all other obligations of Landlord under the terms of this
      Article 23 shall be forgiven until such time as such default is cured
      pursuant to the terms of the Lease.

                                  ARTICLE 24
                                 Miscellaneous

24.1  The words "Landlord" and "Tenant" as used herein shall include the plural
      as well as the singular. The words "'include," "includes" and "including"
      shall be deemed to be followed by the phrase "without limitation." If
      there is more than one Tenant, the obligations hereunder imposed upon
      Tenant shall be joint and several. Time is of the essence of this Lease
      and each and all of its provisions. Submission of this instrument for
      examination or signature by Tenant does not constitute a reservation of or
      option for lease, and it is not effective as a lease or otherwise until
      execution and delivery by both Landlord and Tenant. Subject to Article 11
      hereof, this Lease shall benefit and bind Landlord and Tenant and the
      personal representatives, heirs, successors and assigns of Landlord and
      Tenant. Tenant shall not use the name of the Building for any purpose
      whatsoever other than as the address of

                                      -23-
<PAGE>

     Tenant at the Premises. If any provision of this Lease is determined to be
     illegal or unenforceable, that determination shall not affect any other
     provision of this Lease and all other provisions shall remain in full force
     and effect.

24.2 Tenant acknowledges that the late payment by Tenant of any monthly
     installment of Base Rent or additional monthly rent will cause Landlord to
     incur costs and expenses, the exact amount of which is extremely difficult
     and impractical to fix. These costs and expenses will include
     administration and collection costs and processing and accounting expenses.
     Therefore, if any monthly installment of Base Rent or additional monthly
     rent is not received by Landlord within ten (10) days after payment is due,
     Tenant shall immediately pay to Landlord a late charge equal to four
     percent (4%) of the delinquent installment. Landlord and Tenant agree that
     this late charge represents a reasonable estimate of the costs and expenses
     and is fair compensation to Landlord for the loss suffered by Tenant's
     failure to make timely payment. In no event shall the late charge be deemed
     to grant to Tenant a grace period or extension of time within which to pay
     any monthly rent or prevent Landlord from exercising any right or enforcing
     any remedy available to Landlord upon Tenant's failure to pay each
     installment of monthly rent due under this Lease in a timely fashion,
     including the right to terminate this Lease. All amounts of money payable
     by Tenant to Landlord hereunder, if not paid when due, shall bear interest
     from the due date until paid at the lesser of the maximum annual interest
     rate allowed by law for business loans (not primarily for personal, family
     or household purposes) not exempt from the usury law at the due date or
     twelve percent (12%) per annum.

24.3 If there is any legal action or proceeding between Landlord and Tenant to
     enforce this lease or to protect or establish any right or remedy under
     this Lease, the unsuccessful party to the action or proceeding shall pay to
     the prevailing party all costs and expenses, including reasonable
     attorneys' fees and disbursements, incurred by such prevailing party in the
     action or proceeding and in any appeal in connection therewith. If the
     prevailing party recovers a judgment in any such action, proceeding or
     appeal, its costs, expenses and attorneys' fees and disbursements shall be
     included in and as a part of the judgment.

24.4 There are no oral agreements between Landlord and Tenant affecting this
     Lease, and this Lease supersedes and cancels any and all previous
     negotiations, arrangements, brochures, offers, agreements and
     understandings, oral or written, if any, between Landlord and Tenant or
     displayed by Landlord or Tenant with respect to the subject matter of this
     Lease, the Premises or the Building. There are no representations between
     Landlord and Tenant or between any real estate broker and Tenant other than
     those expressly set forth in this Lease and all reliance with respect to
     any representations is solely upon representations expressly set forth in
     this Lease. This Lease may not be amended or modified in any respect
     whatsoever except by an instrument in writing signed by Landlord and
     Tenant.

24.5 Landlord shall be solely responsible for payment of any real estate
     brokerage commissions owed to the Landlord's and Tenant's respective
     brokers as a consequence of this Lease. Landlord shall indemnify, protect,
     defend and hold harmless the Tenant against all claims, demands, losses,
     liabilities, judgements and expenses for any real estate commission alleged

                                      -24-
<PAGE>

     to be owing to the other's real estate broker upon the execution and
     commencement of this Lease. Landlord's obligations hereunder shall not
     extend to any claim made for a broker commission, finder's fee, referral
     fee, or other compensation by a broker who is not specified in the Basic
     Lease Information.

24.6 This Lease shall be governed by and construed in accordance with the laws
of the State of California. All exhibits attached to this Lease are thereby made
a part of this Lease.

IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the date
set forth below.

                                  LANDLORD:

                                  TRANOD, a California general partnership

Dated:  7/15,   1999              By /s/ GREG FAULKNER
        ----                         -----------------
                                         Greg Faulkner, Partner

Dated:  7/15,   1999              By /s/ ART KERMOYAN
        ----                         ----------------
                                         Art Kermoyan, Partner

                                  TENANT:

                                  PETOPIA.COM

Dated:   7/15, 1999               By /s/ DAVID FRAZE
                                     ---------------
                                         David Fraze, CFO

Dated:  ______________, 1999      By _____________________

                                     -25-<PAGE>

                                                                   EXHIBIT 10.36

                          Loan and Security Agreement

Borrower:      PETOPIA.COM, INC.
Address:       1200 Folsom Street
               San Francisco, California 94103

Date:          January 31, 2000

This Loan and Security Agreement is entered into on the above date between
GREYROCK CAPITAL, a division of Banc of America Commercial Finance 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. LOAN.

  1.1 Term Loan. Greyrock will make a term loan to Borrower (the Loan), in the
amount (the Term Loan Limit) shown on the Schedule, provided no Default or Event
of Default has occurred and is continuing. The Loan shall be repayable in
accordance with terms of the Secured Promissory Note executed concurrently
herewith by Borrower in favor of Greyrock.

  1.2 Interest. The Loan 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 Loan.

  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.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

  In order to induce Greyrock to enter into this Agreement and to make the Loan,
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

                                      -1-
<PAGE>

            Greyrock Capital                       Loan and Security 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. Borrower shall promptly provide notice to Greyrock if Borrower conducts
business under any fictitious 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 prior written notice
before opening any additional place of business, changing its chief executive
office, or moving any material portion 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 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 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.
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 in all material respects 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 currently solvent.

  3.8  Tax Returns and Payments; Pension Contributions. Borrower has timely
filed, and will timely file, all material 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 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. Within ninety (90) days after the closing hereunder, 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

                                      -2-
<PAGE>

            Greyrock Capital                       Loan and Security Agreement
--------------------------------------------------------------------------------

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 the Loan shall be used solely for lawful
business purposes.

  3.12 Board Meetings. Borrower will notify Greyrock of all meetings and actions
by written consent of the board of directors of Borrower and each committee
thereof at the same time and in the same manner as notice of any meetings or
actions by written consent of such board or committee is required to be given to
its directors who do not waive such notice. Greyrock shall have the right to
send one representative selected by Greyrock (the "Greyrock Representative") to
each such meeting, who shall be permitted to attend such meeting and any
adjournments thereof (other than any portion of such meeting devoted to
discussion of Greyrock). If Borrower receives advice from Borrower's legal
counsel that discussing a specified matter in the presence of the Greyrock
Representative might compromise Borrower's attorney-client privilege with
respect to a specified matter, Borrower may exclude the Greyrock Representative
from a meeting or a portion thereof, provided, however, that Borrower shall
promptly notify the Greyrock Representative that any exclusion from a meeting or
portion thereof was effected to preserve its attorney-client privilege. Except
as permitted under Section 5.3 hereof, Greyrock agrees to maintain, and cause
the Greyrock Representative to maintain, the confidentiality of any confidential
information of Borrower obtained by Greyrock or the Greyrock Representative in
connection with any such board of directors meeting (or any action taken by the
board of directors pursuant to written consent).

4. RECEIVABLES.

  4.1  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 all signatories and endorsers have the capacity to contract. All sales and
other transactions underlying or giving rise to each Receivable shall comply
with all applicable laws and governmental rules and regulations. 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.

  4.2  Collection of Receivables. Borrower shall have the right to collect all
Receivables, unless and until a Default or an Event of Default has occurred and
is continuing. Upon the occurrence and during the continuation of an Event of
Default, 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 the order set forth in
Section 9.2.

  4.3  Disputes. Borrower shall notify Greyrock promptly of all material
disputes or claims relating to Receivables on the regular reports to Greyrock.
Borrower shall not forgive, or settle any material Receivable for less than
payment in full, or agree to do any of the foregoing, except that Borrower may
do so, provided that 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.

  4.4  Verification. Upon the occurrence and during the continuation of an Event
of Default, 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.

  4.5  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 set
forth in the Schedule, 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, Borrower shall apply such proceeds for the replacement of the
Collateral 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.

  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 two
Business Days' notice, Greyrock, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy Borrower's

                                      -3-
<PAGE>

            Greyrock Capital                       Loan and Security Agreement
--------------------------------------------------------------------------------

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, provided
however, that 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 once per calendar year, and provided further, 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 one addition audit per calendar year
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. Upon the occurrence and during the continuation
of an Event of Default, 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. Upon the occurrence of an Event of Default,
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, not to be unreasonably
withheld or delayed, do any of the following: (i) merge or consolidate with
another corporation or entity; other mergers or consolidations that do not
result in cash payments to shareholders or other parties and the acquisition or
assumption of indebtedness exceeding in the aggregate $5,000,000 for any
individual merger or consolidation or, together with all other such mergers or
consolidations, $15,000,000 in the aggregate per calendar year and so long as
Greyrock retains a first priority perfected security interest in the surviving
entity's assets (subject to Permitted Liens); (ii) enter into any transaction
outside the ordinary course of business which is not contemplated by Borrower's
business plan (as of the date of this Agreement), other than (a) asset
acquisitions of related businesses which do not exceed $5,000,000 individually
or, together with all other such asset acquisitions, $15,000,000 in the
aggregate per calendar year (with such amount referring to the sum of the cash
purchase price plus the aggregate amount of debt assumed), and (b) strategic
alliance transactions which do not involve payments by Borrower exceeding
$5,000,000 over the life of each such transaction or, together with all other
such transactions entered into during the course of each calendar year,
$15,000,000 over the life of all such transactions in the aggregate; (iii) sell
or transfer all or substantially all of the Collateral; (iv) except as otherwise
permitted in Section 3.3 hereof, store any Inventory or other Collateral with
any warehouseman or other third party; (v) make any loans of any money or other
assets other than purchase money loans to employees for the purpose of acquiring
shares of Borrower's common stock; (vi) 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; (vii) guarantee or otherwise
become liable with respect to the obligations of another party or entity; (viii)
pay or declare any dividends on Borrower's stock (except for dividends payable
solely in stock of Borrower); (ix) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of Borrower's stock, except pursuant to
Borrower's right of repurchase or right of first offer with respect to shares of
stock held by Borrower's employees, directors, consultants, or advisors (which
shall not exceed, however, $1,000,000 per year in the aggregate); (x) 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; (xi)
dissolve or elect to dissolve; or (xii) 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, except for suits or proceedings relating to
Greyrock's gross negligence or willful misconduct, 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 executive 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 occurrence and during the continuation of
an Event of Default, 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 retain all Investment Property payments and distributions, unless and
until a Default or an Event of Default has occurred and is continuing. 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 occurrence and during the continuation of a Default or Event
of Default, any such distributions and payments with respect to any Investment
Property held in any securities account shall

                                      -4-
<PAGE>

            Greyrock Capital                       Loan and Security Agreement
--------------------------------------------------------------------------------

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).

  6.2  Early Termination. This Agreement may be terminated prior to the Maturity
Date as follows: (i) by Borrower, effective three (3) 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.

  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. 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 of any Event of Default of which it becomes
aware: (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 the Loan or any interest
thereon or any other monetary Obligation within three (3) Business Days after
written notice of such failure is given to Borrower; or (c) Borrower shall fail
to perform any non-monetary Obligation, which failure is not cured within ten
(10) Business Days after written notice of such failure is given to Borrower; or
(d) 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 ten (10) Business Days after written notice of such matter is given to
Borrower; or (e) any default or event of default occurs under any obligation
secured by a Permitted Lien in excess of two hundred fifty thousand dollars
($250,000), which is not cured within any applicable cure period or waived in
writing by the holder of the Permitted Lien; or (f) 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 (g)
dissolution, termination of existence, insolvency or business failure of
Borrower; or appointment of a receiver, trustee or custodian, for all or any
part of the property of, assignment for the benefit of creditors by, or the
commencement of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect; or (h) the
commencement of any proceeding against Borrower under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect,
which is not cured by the dismissal thereof within 45 days after the date
commenced; or (i) 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 (j) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset valued in excess of $250,000 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 (k) Borrower makes any payment on account of
any indebtedness or

                                      -5-
<PAGE>

            Greyrock Capital                       Loan and Security Agreement
--------------------------------------------------------------------------------

obligation that has been subordinated to the Obligations pursuant to a
subordination agreement other than as permitted in the applicable subordination
agreement (Greyrock acknowledges that Borrower shall be permitted to repay that
certain promissory note issued to the former holders of C/R Catalog Corp. in
accordance with the subordination agreement entered into in connection with such
note), or if any Person who has subordinated such indebtedness or obligations
terminates or in any way limits or terminates its subordination agreement; or
(l) 35% or more of Borrower's capital stock outstanding as of the date hereof
(calculated on a fully-diluted basis) is sold or transferred for value to
unrelated third parties, without the prior written consent of Greyrock;
provided, however, that this subsection shall not apply to shares sold or
--------  -------
transferred between and among affiliates (so long as one of the affiliates is
currently a shareholder of Borrower) or between and among existing shareholders;
or (m) 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 (n) there shall be a material adverse change in
Borrower's business or financial condition. Greyrock may cease making any Loan
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, 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 the Loan 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, 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 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,
nonspecific 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

                                      -6-
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            Greyrock Capital                       Loan and Security Agreement
--------------------------------------------------------------------------------

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 (1) Take any
action or pay any sum required of Borrower pursuant to this Agreement and any
other present or future agreements.  Any and all reasonable sums paid and any
and all reasonable costs, expenses, liabilities, obligations and 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, 10% partner, 10%
  ---------
shareholder, director, or officer 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.
  ------------

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

                                      -7-
<PAGE>

            Greyrock Capital                       Loan and Security Agreement
-------------------------------------------------------------------------------

  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.
  ---------------

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

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

  General Intangibles means all general intangibles of Borrower, whether now
  -------------------
owned or hereafter created or acquired by Borrower, including, without
limitation, all choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against 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.

  Obligations means the Loan and 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 instrument or
agreement between Borrower and Greyrock.

  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.

  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

                                      -8-
<PAGE>

            Greyrock Capital                       Loan and Security Agreement
--------------------------------------------------------------------------------

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.

  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 payment of the Obligations in full) shall be deemed applied by
Greyrock on account of the Obligations on the Business Day of receipt by
Greyrock of immediately available funds. 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
shall be applied, to the Obligations, as follows: first, to cost, fees and
expenses referred to herein, next to accrued and unpaid interest, and the
remaining balance to the payment of principal.

  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 Loan.

  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, 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

                                      -9-
<PAGE>

            Greyrock Capital                       Loan and Security Agreement
--------------------------------------------------------------------------------

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; provided, however, that the
fees and costs incurred by Greyrock in connection with or relating to the
preparation, negotiation and consummation of this Agreement and the documents
relating hereto shall not exceed twenty-five thousand dollars ($25,000). 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 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:

   PETOPIA.COM, INC.,
   a Delaware corporation

   By /s/ GREGORY SMITH
      -----------------

   By
      -----------------

 Greyrock:

   GREYROCK CAPITAL,
   a division of Banc of America Commercial
   Finance Corporation

   By
     ------------------
   Title
        ---------------

                                      -10-

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