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<SEC-DOCUMENT>0000898430-01-000617.txt : 20010223
<SEC-HEADER>0000898430-01-000617.hdr.sgml : 20010223
ACCESSION NUMBER:		0000898430-01-000617
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		8
CONFORMED PERIOD OF REPORT:	20001231
FILED AS OF DATE:		20010214

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DAILY JOURNAL CORP
		CENTRAL INDEX KEY:			0000783412
		STANDARD INDUSTRIAL CLASSIFICATION:	NEWSPAPERS:  PUBLISHING OR PUBLISHING & PRINTING [2711]
		IRS NUMBER:				954133299
		STATE OF INCORPORATION:			SC
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		
		SEC FILE NUMBER:	000-14665
		FILM NUMBER:		1543113

	BUSINESS ADDRESS:	
		STREET 1:		355 SOUTH GRAND AVENUE 34TH FLOOR
		CITY:			LOS ANGELES
		STATE:			CA
		ZIP:			90071-1560
		BUSINESS PHONE:		2136247715

	MAIL ADDRESS:	
		STREET 1:		355 SOUTH GRAND AVENUE 34TH FLOOR
		CITY:			LOS ANGELES
		STATE:			CA
		ZIP:			90071-1560

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DAILY JOURNAL CO
		DATE OF NAME CHANGE:	19870427
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>FORM 10-Q DATED DECEMBER 31, 2000
<TEXT>

<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                   FORM 10-Q

(Mark One)


[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934

For the quarterly period ended December 31, 2000

                                      OR

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
  ACT OF 1934

For the transition period from _______________ to ____________________

                        Commission File Number 0-14665

                           DAILY JOURNAL CORPORATION
                       ---------------------------------
            (Exact name of registrant as specified in its charter)


South Carolina                                                95-4133299
- -------------------------------                          -------------------
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                           Identification No.)


355 South Grand Ave., 34th floor
Los Angeles, California                                     90071-1560
- -----------------------                                     ----------
(Address of principal executive office)                      (Zip code)

Registrant's telephone number, including area code:        (213) 624-7715

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes: X No:

Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.

          Class                                  Outstanding at January 31, 2001
- -------------------------------                  ------------------------------
Common Stock, par value $ .01 per share                  1,533,521 shares

                                   1 of 10
<PAGE>

                           DAILY JOURNAL CORPORATION



                                     INDEX


<TABLE>
<CAPTION>
                                                            Page Nos.
<S>                                                         <C>
PART I Financial Information

     Item 1.  Financial statements

       Consolidated Balance Sheets -
         December 31, 2000 and September 30, 2000                3

       Consolidated Statements of Operations -
         Three months ended December 31, 2000 and 1999           4

       Consolidated Statements of Cash Flows -
         Three months ended December 31, 2000 and 1999           5

       Notes to Consolidated Financial Statements                6

     Item 2.  Management's Discussion and Analysis of
       Financial Condition and Results of Operations             8

PART II  Other Information

       Item 6.  Exhibits and Reports on Form 8-K                10
</TABLE>

                                    2 of 10

<PAGE>

                                    PART I
                         Item 1. Financial Statements
            DAILY JOURNAL CORPORATION - CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                  December 31          September 30
                                                                                     2000                 2000
                                                                                ----------------       ---------
<S>                                                                                  <C>             <C>
ASSETS
Current assets
   Cash and cash equivalents                                                         $    684,000    $    380,000
   U.S. Treasury Bills, at cost plus discount earned                                           --       1,972,000
   Accounts receivable, less allowance for doubtful
    account of $500,000                                                                 9,030,000       8,975,000
   Income tax receivable                                                                2,708,000       2,709,000
   Inventories                                                                             19,000          61,000
   Prepaid expenses and other assets                                                      203,000         171,000
   Deferred income taxes                                                                  544,000       1,143,000
                                                                                     ------------     -----------
       Total current assets                                                            13,188,000      15,411,000
                                                                                     ------------    ------------

Property, plant and equipment, at cost:
   Land, buildings and improvements                                                     8,452,000       8,363,000
   Furniture and office equipment                                                       6,824,000       6,442,000
   Machinery and equipment                                                              1,400,000       1,385,000
                                                                                      -----------     -----------
                                                                                       16,676,000      16,190,000
   Less accumulated depreciation                                                       (7,019,000)     (6,618,000)
                                                                                     ------------     -----------
                                                                                        9,657,000       9,572,000
Capitalized software, net                                                              11,382,000       8,786,000

Intangible assets, at cost, less accumulated amortization
   of $608,000 and $506,000 respectively                                                1,287,000       1,281,000
                                                                                      -----------     -----------
                                                                                      $35,514,000    $ 35,050,000
                                                                                      ===========     ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                                  $  4,336,000    $  3,714,000
   Accrued liabilities                                                                  3,499,000       2,058,000
   Deferred subscription revenue and other revenues                                     7,433,000       7,908,000
                                                                                     ------------    ------------
       Total current liabilities                                                       15,268,000      13,680,000
                                                                                     ------------    ------------

Deferred income taxes                                                                   2,304,000       2,934,000
                                                                                     ------------    ------------

Minority Interest (7% and 9%, respectively)                                               641,000         578,000
                                                                                     ------------    ------------

Shareholders' equity

   Preferred stock, $.01 par value, 5,000,000 shares authorized and
        no shares issued                                                                       --              --
   Common stock, $.01 par value, 5,000,000 shares authorized;
    1,533,581 shares and 1,553,256 shares, respectively, outstanding                       15,000          16,000
    Other paid-in capital                                                               1,950,000       1,974,000
    Retained earnings                                                                  16,125,000      16,657,000
    Less 43,271 treasury shares, at cost                                                 (789,000)       (789,000)
                                                                                     ------------   -------------
       Total shareholders' equity                                                      17,301,000      17,858,000
                                                                                     ------------   -------------
                                                                                     $ 35,514,000    $ 35,050,000
                                                                                     ============   =============
</TABLE>

See accompanying notes to consolidated financial statements.

                                     3 of 10
<PAGE>

                            DAILY JOURNAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                        Three months
                                                                                     ended December 31
                                                                                     -----------------

                                                                                    2000             1999
                                                                                 -----------     ------------
<S>                                                                              <C>             <C>
Revenues:
    Advertising                                                                  $ 4,481,000     $  4,666,000
    Circulation                                                                    2,889,000        2,996,000
    Information systems and services                                                 417,000          500,000
    Advertising service fees and other                                               777,000          758,000
                                                                                 ------------    ------------
                                                                                   8,564,000        8,920,000
                                                                                 ------------    ------------

Costs and expenses:
    Salaries and employee benefits                                                 4,308,000        4,430,000
    Newsprint and printing expenses                                                  777,000          712,000
    Commissions and other outside services                                         1,468,000        1,192,000
    Postage and delivery expenses                                                    486,000          537,000
    Depreciation and amortization                                                    655,000          483,000
    Other, including interest expenses                                               949,000          896,000
                                                                                 ------------    ------------
                                                                                   8,643,000        8,250,000
                                                                                 ------------    ------------

Income (Loss) before taxes                                                           (79,000)         670,000

(Benefits from) provision for income taxes                                           (30,000)         315,000
                                                                                 ------------    ------------


Income (Loss) before minority interest in net loss of subsidiary                     (49,000)         355,000
Minority interest in net loss of subsidiary                                           46,000           80,000
                                                                                 ------------    ------------
Net income (loss)                                                                $    (3,000)    $    435,000
                                                                                 ============    ============


Weighted average number of common
    shares outstanding - basic and diluted                                         1,508,677      1,561,494
                                                                                 ------------    ------------
Basic and diluted net income (loss) per share                                    $      (.00)    $      .28
                                                                                 ------------    ------------
</TABLE>

         See accompanying notes to consolidated financial statements.

                                    4 of 10
<PAGE>

                           DAILY JOURNAL CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                     Three months
                                                                                   ended December 31
                                                                               --------------------------
                                                                                  2000           1999
                                                                               -----------    -----------
<S>                                                                            <C>            <C>
Cash flows from operating activities:
      Net income (loss)                                                        $    (3,000)   $   435,000
      Adjustments to reconcile net income to net cash
         provided by operations:
           Depreciation and amortization                                           655,000        483,000
           Minority interest in consolidated subsidiary                            (46,000)       (80,000)
           Deferred income taxes                                                   (31,000)       309,000
           Income tax receivable                                                     1,000             --
           Discount earned on U.S. Treasury Bills                                       --        (98,000)
           Changes in assets and liabilities:
             (Increase) decrease in current assets
                Accounts receivable, net                                           (55,000)     1,387,000
                Inventories                                                         42,000         (8,000)
                Prepaid expenses and other assets                                  (32,000)        21,000
             Increase (decrease) in current liabilities
                Accounts payable                                                   622,000       (712,000)
                Accrued liabilities                                              1,441,000       (576,000)
                Income taxes payable                                                    --          5,000
                Deferred subscription and other revenues                          (475,000)      (336,000)
                                                                               -----------    -----------
                     Cash provided by operating activities                       2,119,000        830,000
                                                                               -----------    -----------
Cash flows from investing activities:
      Net sales in U.S. Treasury Bills                                           1,972,000        396,000
      Capital and capitalized software expenditures:
           Purchases of property, plant and equipment, net                        (487,000)      (601,000)
           Capitalized software                                                 (2,746,000)            --
                                                                               -----------    -----------
                     Net cash used for investing activities                     (1,261,000)      (205,000)
                                                                               -----------    -----------
Cash flows from financing activities:
      Purchase of common stock                                                    (554,000)      (124,000)
                                                                               -----------    -----------
                     Cash used for financing activities                           (554,000)      (124,000)
                                                                               -----------    -----------
Increase in cash and cash equivalents                                              304,000        501,000

Cash and cash equivalents:
      Beginning of period                                                          380,000        181,000
                                                                               -----------    -----------
      End of period                                                            $   684,000    $   682,000
                                                                               ===========    ===========
Interest paid during period                                                    $        --    $        --
</TABLE>

         See accompanying notes to consolidated financial statements.

                                    5 of 10
<PAGE>

                           DAILY JOURNAL CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

Note 1 - The Corporation and Operations:

     Daily Journal Corporation (the "Company") publishes newspapers in
California, Washington, Arizona, Colorado and Nevada, as well as the California
Lawyer and Corporate Counsel magazines and produces several specialized
information services. It also publishes The Code of Colorado Regulations and
serves as a newspaper representative specializing in public notice advertising.
SUSTAIN Technologies, Inc. ("Sustain"), now a 93% owned subsidiary as of
December 31, 2000, has been consolidated since it was acquired in January 1999.
It provides the SUSTAIN(R) family of products which consist of technologies and
applications to enable justice agencies to automate their operations and will in
the future allow users to file cases electronically and the courts to publish
information online. Essentially all of the Company's operations are based in
California, Arizona, Colorado, Nevada, Washington and Virginia.

Note 2 - Basis of Presentation:

     In the opinion of the Company, the accompanying interim unaudited
consolidated financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary for a fair statement of its financial
position as of December 31, 2000, the results of operations for the three-month
periods ended December 31, 2000 and 1999 and its cash flows for the three months
ended December 31, 2000 and 1999.

     The results of operations for the three months ended December 31, 2000 and
1999 are not necessarily indicative of the results to be expected for the full
year.

     The consolidated financial statements included herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. These financial statements should
be read in conjunction with the financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 2000.

Note 3 - Basic and Diluted Income (Loss) Per Share:

     The Company does not have any common stock equivalents, and therefore the
basic and diluted income (loss) per share are the same.

                                    6 of 10
<PAGE>

Note 4 - Operating Segments:

     Summarized financial information concerning the Company's reportable
segments is shown in the following table:

<TABLE>
<CAPTION>
                                                                              Operating  Segments
                                                            ------------------------------------------------------
                                                               Daily Journal         Sustain              Total
                                                               -------------         -------              -----
<S>                                                         <C>                    <C>               <C>
Three months ended December 31, 2000
- ------------------------------------
Revenues                                                        $ 8,137,000        $   427,000       $  8,564,000
Segment net income (loss) after minority interest                   589,000           (592,000)            (3,000)
Total assets                                                     17,282,000         18,232,000         35,514,000
Capital expenditures                                                440,000          2,793,000          3,233,000
Depreciation and amortization                                       348,000            307,000            655,000
Income tax expenses (benefits)                                      340,000           (370,000)           (30,000)

<CAPTION>
                                                               Daily Journal         Sustain              Total
                                                               -------------         -------              -----
<S>                                                         <C>                    <C>               <C>
Three months ended December 31, 1999
- ------------------------------------
Revenues                                                         $8,388,000        $    532,000      $  8,920,000
Segment net income (loss) after minority interest                   741,000            (306,000)          435,000
Total assets                                                     24,261,000           5,877,000        30,138,000
Capital expenditures                                                353,000             248,000           601,000
Depreciation and amortization                                       248,000             235,000           483,000
Income tax expenses (benefits)                                      490,000           (175,000)           315,000
</TABLE>

Note 5 - Capitalized Software, net:

     Capitalized Software, net, represents software costs accounted for pursuant
to Statement of Financial Accounts Standards No. 86, Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed. It is comprised of
purchased software of $3,023,000 capitalized upon the acquisition of Sustain and
development costs of $9,689,000 for software products that have reached
technological feasibility but are not available for general release. The
purchased software is being amortized over five years. As of December 30, 2000
and September 30, 2000, capitalized software costs totaled $12,712,000 (less
accumulated amortization of $1,330,000) and $9,966,0000 (less amortization of
$1,180,000), respectively.

Note 6 - Debt:

     In January 2001, the Company obtained a $4 million revolving bank line of
credit bearing interest payable monthly at a quarter point under the prime rate
and due in January 2002. Such line of credit is secured by substantially all of
the Company's non-real estate assets. In January, the Company borrowed $3
million under this line of credit. In addition, the Company obtained a $2
million real estate loan on its current Los Angeles facilities. This loan bears
interest at approximately 8% to be repayable in equal monthly installments
through 2016. The real estate loan is secured by the Company's existing
facilities in Los Angeles.

                                    7 of 10
<PAGE>

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Results of Operations

     Revenues were $8,564,000 and $8,920,000 for the three months ended December
31, 2000 and 1999, respectively. This decrease of $356,000 (4%) was primarily
attributable to the decline in revenues from display advertising and Sustain's
consulting revenues, partially offset by the advertising and subscription rate
increases.

     Display advertising and conference revenues were down by $303,000 primarily
because of a downturn in .com advertising while classified advertising revenues
increased by $96,000. Public notice advertising revenues increased by $22,000
primarily resulting from increased government notices. The Company's smaller
newspapers, those other than the Los Angeles and San Francisco Daily Journals
("The Daily Journals"), accounted for about 92% of the total public notice
advertising revenues. Public notice advertising revenues and related advertising
and other service fees constituted about 27% of the Company's total revenues.
Circulation revenues decreased an aggregate of $107,000 primarily because of
fewer subscriptions to the court rule services; some courts are now providing
their rules online. The Daily Journals accounted for about 72% of the Company's
total circulation revenues, and their circulation levels decreased slightly. The
court rule and judicial profile services generated about 18% of the total
circulation revenues, with the other newspapers and services accounting for the
balance. Sustain's revenues were down by $105,000.

     Costs and expenses increased by $393,000 (5%) to $8,643,000 from
$8,250,000. Total personnel costs were $4,308,000, representing a decrease of
$122,000 (3%). Newsprint and printing expenses increased by $65,000 (9%)
primarily because of the newsprint price increases. Commissions and other
outside services increased by $276,000 (23%) primarily for Sustain's additional
outside service expenses of $202,000. Postage and delivery expenses declined by
$51,000 (9%) mainly because of reduced newspaper bonus issues. Depreciation and
amortization expenses increased by $172,000 (36%) primarily as a result of the
amortization of Sustain's assets, including the Daily Journal's purchased
computer software and goodwill of $179,000. The increase in other expenses of
$53,000 (6%) primarily resulted from increased accounting and legal expenses.

     The Daily Journal's business segment pretax profit decreased by $349,000 to
$897,000 from $1,246,000 primarily because of a decline in .com display
advertising and fewer court rule subscriptions. Sustain's business segment
pretax loss increased by $399,000 primarily because of reduced consulting
revenues and increased depreciation and amortization and outside services. The
consolidated net loss was $3,000 as compared with a net income of $435,000 in
the comparable prior year period. Net income (loss) per share decreased to
($.00) from $.28.

Liquidity and Capital Resources

     During the three months ended September 30, 2000, the Company's cash and
cash equivalent position increased by $304,000, and the investments in U.S.
Treasury Bills decreased by $1,972,000. Cash and cash equivalents were used for
the net purchase of capital assets of $3,233,000, including significant
investments in Sustain software and to purchase common stock for an aggregate
amount of $554,000. The cash provided by operating activities of $2,119,000
included a net decrease in prepayments for subscriptions and others of $475,000.
Proceeds from the sale of subscriptions from newspapers, court rule books and
other publications and for software maintenance and other services are booked as
deferred revenue and are included in earned revenue only when the services are
provided. The cash flows from

                                    8 of 10
<PAGE>

operating activities increased by $1,289,000 during the three months ended
December 31, 2000 primarily due to the changes in accounts payable and accrued
liabilities. As of December 31, 2000, the Company had working capital of
$5,353,000 before deducting the liability for deferred subscription revenues and
other revenues of $7,433,000 which will be earned within one year.

     The Company expects its expenditures in fiscal 2001 to include an estimated
$2 million for the construction of a new building in Los Angeles. The Company
also expects its expenditures in support of the development of the Sustain
software to continue at a rate in excess of cash flow. In January the Company
obtained a $4 million revolving bank line of credit due in January 2002 and
secured by substantially all of the Company's non-real estate assets. In
January the Company borrowed $3 million under this line of credit. The Company
expects that it will be able to extend or refinance the amounts outstanding
under this line of credit on or before the maturity date. There can be no
assurance, however, that a change in the Company's business or prospects will
not result in an inability to refinance on the same or similar terms. The
Company also obtained a $2 million real estate loan secured by its current Los
Angeles facilities. The Company also has a commitment from a bank to loan the
Company up to an additional $2 million when its new building is completed. The
Company cannot predict whether the amounts received from these borrowings will
be sufficient to fully fund its development of the Sustain software. If
additional funds are required to support such development, the Company may,
among other things, change its development strategy or attempt to secure
additional financing, which may or may not be available to the Company on
acceptable terms.

Disclosure regarding Forward-Looking Statements

     This Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Certain statements contained in
this document, including without limitation those contained under the captions
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," are forward-looking statements. Forward-looking statements include
statements which are predictive in nature, which depend upon or refer to future
events or conditions, which include words such as "expects", "anticipates",
"intends", "plans", "believes", "estimates", or similar expressions. In
addition, any statements concerning future financial performance (including
future revenues, earnings or growth rates), ongoing business strategies or
prospects, and possible future Company actions, which may be provided by
management, are also forward-looking statements. Although the Company believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Important factors that could cause actual results to differ
materially from those in the forward-looking statements are disclosed in this
Report, including without limitation in conjunction with the forward-looking
statements themselves. The Company has no specific intention to update these
forward-looking statements.

                                    9 of 10
<PAGE>

                           DAILY JOURNAL CORPORATION

                          PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K:

     (A) Exhibits - The following exhibit is filed herewith:

         10.1  Note Secured by Deed of Trust, dated January 2, 2001, in the
               principal amount of $2,000,000 executed by Daily Journal
               Corporation in favor of City National Bank.

         10.2  Deed of Trust, Assignment of Rents and Fixture Filing, dated
               January 2, 2001, executed by Daily Journal Corporation in favor
               of City National Bank.

         10.3  Letter Agreement, dated January 2, 2001, regarding the Promissory
               Note dated January 2, 2001 in the principal amount of $4,000,000
               executed by Daily Journal Corporation and Sustain Technologies,
               Inc. in favor of City National Bank.

         10.4  Promissory Note, dated January 2, 2001, in the principal amount
               of $4,000,000 executed by Daily Journal Corporation and Sustain
               Technologies, Inc. in favor of City National Bank.

         10.5  Commercial Security Agreement, dated January 2, 2001, executed by
               Daily Journal Corporation in favor of City National Bank.

         10.6  Commercial Security Agreement, dated January 2, 2001, executed by
               Sustain Technologies, Inc. in favor of City National Bank.

         27    Financial Data Schedule.


                                   SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                             DAILY JOURNAL CORPORATION
                                             (Registrant)


                                             /s/ Gerald L. Salzman
                                             Gerald L. Salzman
                                             Chief Financial Officer

DATE: February 9, 2001

                                    10 of 10
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>NOTE SECURED BY DEED OF TRUST DATED 1/2/2001
<TEXT>

<PAGE>

                                                                  --------------
                                                                   Exhibit 10.1
                                                                  --------------

     DO NOT DESTROY THIS NOTE: When paid, this Note, with the Deed of Trust
     securing same, must be surrendered to trustee under the Deed of Trust
     for cancellation before reconveyance will be made.

                         NOTE SECURED BY DEED OF TRUST
                    INSTALLMENT - INTEREST (FIXED) INCLUDED

$2,000,000.00                                                    Loan No. 65393
                                                             Account No. 645442
                                             9701 Wilshire Boulevard, Suite 600
                                                Beverly Hills, California 90212
                                                                January 2, 2001


On March 1, 2016, DAILY JOURNAL CORPORATION, a South Carolina corporation
("Borrower") promises to pay in immediately available funds to the order of City
National Bank, a national banking association ("CNB"), at its office set forth
above, the principal sum of Two Million and 00/100ths Dollars ($2,000,000.00),
or so much thereof as may be outstanding, with interest thereon to be computed
from the date of its disbursement at a rate computed on a basis of a 360-day
year, actual days elapsed, equal to eight and two hundredths percent (8.02 %)
("Interest Rate").

The first payment under this Note shall be for accrued interest only and shall
be due on March 1, 2001, with principal and interest together payable in
installments of Nineteen Thousand Three Hundred Fifty-Six and 13/100ths Dollars
($19,356.13) each month commencing with the first day of April, 2001, and
continuing thereafter on the same day of each month until maturity, as above
stated, when all unpaid interest and principal shall be payable.  The above
stated monthly payments of principal and interest will amortize the loan in
fifteen (15) years.

This Note is secured by a Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing of even date herewith ("Deed of Trust') covering certain real
property, as therein described (the "Property").  It may also be secured by
other collateral.  This Note and the Deed of Trust are two of several Loan
Documents, as defined and designated in a Supplemental Terms Letter
("Supplemental Terms Letter") of even date herewith between CNB and Borrower.
Some or all of the Loan Documents, including the Supplemental Terms Letter,
contain provisions for the acceleration of the maturity of this Note.

The occurrence of any of the following with respect to Borrower or any guarantor
of this Note or any general partner of Borrower or such guarantor, shall
constitute an "Event of Default" hereunder:

1.   The failure to make any payment of principal or interest when due under
     this Note and does not cure that failure within ten (10) days of Notice;

2.   The filing of a petition by or against any of such parties under any
     provisions of the Bankruptcy Code;

                                       1
<PAGE>

3.   The appointment of a receiver or an assignee for the benefit of creditors;

4.   The commencement of dissolution or liquidation proceedings or the
     disqualification of any such parties which is a corporation, partnership,
     joint venture or any other type of entity;

5.   The death or incapacity of any of such parties which is an individual;

6.   The revocation of any guaranty, or any guaranty becomes unenforceable as to
     any future advances under this Note;

7.   Any financial statement provided by any of such parties to CNB is false or
     misleading in any material respect;

8.   Any sale or transfer of all or a substantial or material party of the
     assets of any of such parties other than in the ordinary course of
     business; or

9.   Any violation, breach or default under any letter agreement, guaranty,
     security agreement, deed of trust or any other contract or instrument
     executed in connection with this Note or securing this Note.

Upon the occurrence of an Event of Default, CNB, at its option, may declare all
sums outstanding hereunder to be immediately due and payable without
presentment, demand, protest or notice of dishonor, all of which are hereby
expressly waived by Borrower.  Borrower agrees to pay all costs and expenses,
including reasonable attorneys' fees, expended or incurred by CNB (or allocable
to CNB's in-house counsel) in connection with the enforcement of this Note or
the collection of any sums due hereunder and irrespective of whether suit is
filed.  Upon the occurrence and during the continuance of an Event of Default,
the unpaid principal balance hereunder shall bear additional interest at a rate
of five percent (5.0%) per year higher than the interest rate as determined and
computed above.

Borrower shall pay to CNB a late charge of 6% or $5.00, whichever is greater, of
each and every monthly installment not received by CNB on or before the tenth
(10th) day after the installment is due.

Should Borrower (or any successor in interest to Borrower) without the prior
written consent of CNB, sell, transfer, mortgage, pledge, hypothecate, assign or
encumber his interest in the Property (or any part thereof) which secured this
Note, whether voluntarily or involuntarily, then CNB may at its option declare
the whole sum of principal and interest (and all other sums secured by any Deed
of Trust taken as security for this Note) immediately due and payable.  This
provision shall apply to each and every sale, transfer, mortgage, pledge,
hypothecation, assignment or encumbrance regardless whether or not CNB has
consented to, or waived, its right hereunder, whether by action or non-action,
in connection with any previous sale, transfer, mortgage, pledge, hypothecation,
assignment or encumbrance, whether one or more.

Borrower shall have the right to prepay the principal of this Note, in whole or
in part at any time, which prepayment must be preceded by not less than thirty
(30) days prior written notice to CNB of Borrower's intention to make such
prepayment, the amount thereof, and the date upon which

                                       2
<PAGE>

such prepayment will be made, and there shall be paid to CNB concurrently with
such payment all then accrued interest and any and all other amounts then due
hereunder.

Should this Note be signed by more than one person and/or firm and/or
corporation, all of the obligations hereto contained shall be considered joint
and several obligations of each signer hereof.

"BORROWER"

DAILY JOURNAL CORPORATION,
a South Carolina corporation

By:  /s/ Gerald L. Salzman
     ------------------------------
     Gerald L. Salzman, President

                                       3
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>DEED OF TRUST DATED JANUARY 2, 2001
<TEXT>

<PAGE>

                                                                  --------------
                                                                   Exhibit 10.2
                                                                  --------------

Recording Requested By
And When Recorded Mail To:

City National Bank
9701 Wilshire Boulevard, Suite 600
Beverly Hills, CA 90212

Attn: Real Estate Group #054-01
      Pete de Leon
      Loan No. 65393
================================================================================

             DEED OF TRUST, ASSIGNMENT OF RENTS AND FIXTURE FILING

     This Deed of Trust, Assignment of Rents and Fixture Filing (this "Deed of
Trust") is made this 2nd day of January, 2001, between DAILY JOURNAL
CORPORATION, a South Carolina corporation, herein called TRUSTOR, whose address
is 915 E. First Street, Los Angeles, California 90012, Commonwealth Land Title
Insurance Company, a California corporation, herein called TRUSTEE, and City
National Bank, a national banking association, 9701 Wilshire Boulevard, Suite
600, Beverly Hills, California 90212, herein called BENEFICIARY.

     Trustor IRREVOCABLY GRANTS, TRANSFERS, CONVEYS AND ASSIGNS to TRUSTEE IN
TRUST, WITH POWER OF SALE AND RIGHT OF ENTRY AND POSSESSION, that certain real
property in Los Angeles County, California (the "Property"), commonly known as
915 E. First Street, Los Angeles, California 90012 and more particularly
described in Exhibit "A" attached hereto and by this reference incorporated
herein;

A.   TOGETHER WITH all the reversionary estate, right, title and interest of
Trustor in and to all leases and other occupancy agreements affecting the
Property or any portion thereof now or hereafter existing or entered into,
together with any and all amendments, extensions and renewals thereof (the
"Leases"), and any and all guaranties of the obligations of lessees under the
Leases and under any and all amendments, extensions and renewals thereof, and
all right, title and interest of Trustor thereunder, including, without
limitation, all cash or security deposits, advance rentals, and deposits or
payments of a similar nature;

B.   TOGETHER WITH an absolute assignment of all rents, income, receipts,
revenues, royalties, issues and profits and other benefits (collectively, the
"Rents") now due or which may become due or to which Trustor may now or shall
hereafter become entitled or may demand or claim, arising or issuing from or out
of the Leases, or from or out of the Trust Estate (as hereinafter defined) or
any part thereof, subject, however, to a license granted by Beneficiary to
Trustor, as hereinafter provided, to collect and receive all of the Rents;

C.   TOGETHER WITH any and all buildings and improvements now or hereafter
erected thereon (the "Improvements"), and all materials intended for
construction, re-construction, alteration and repair of the Improvements, all of
which materials shall be deemed to be included within the Property immediately
upon the delivery thereof to the Property and including, but not

                                       1
<PAGE>

limited to, the fixtures, attachments, and other articles attached to the
Improvements (unless the context clearly indicates otherwise, all references
herein to the "Property" shall be deemed to include not only the real property
described in Exhibit "A" attached hereto but also the Improvements and all
easements and other real property rights and interests appurtenant to the
Property);

D.   TOGETHER WITH all right, title and interest of Trustor in and to all
options to purchase or lease the Property or any portion thereof or interest
therein;

E.   TOGETHER WITH all right, title and interest of Trustor in and to all
easements, rights-of-way and rights used in connection therewith or as a means
of access thereto, and all tenements, hereditaments and appurtenances thereof
and thereto, and all development rights, mineral rights, water rights and shares
of stock evidencing the same;

F.   TOGETHER WITH all right, title and interest of Trustor in and to any land
lying within the right-of-way of any street, open or proposed, adjoining the
Property, and any and all sidewalks, alleys and strips and gores of land
adjacent to or used in connection with the Property;

G.   TOGETHER WITH all interests, estates or other claims, both in law and in
equity, which Trustor now has or may hereafter acquire in the Property; and

H.   Trustor further GRANTS, TRANSFERS, CONVEYS AND ASSIGNS to BENEFICIARY as
security for the Secured Obligations, as such term is defined below, all right,
title and interest of Trustor in and to all accounts held by Beneficiary in
connection with the loan transaction secured hereby, including the loan funds,
whether disbursed or not, and the account in which Trustor, as borrower, has or
will deposit borrower's funds in connection with such transaction;

I.   TOGETHER WITH all right, title and interest of Trustor in and to all
claims, causes of action and recoveries by settlement or otherwise for any
damage to, or loss, taking, or diminution in the value of, any of the Property,
or for any breach (or rejection in bankruptcy) of any lease of the Property or
Collateral (as hereinafter defined) to Trustor as lessee, by any lessor
thereunder (or such lessor's trustee in bankruptcy);

J.   TOGETHER WITH all right, title and interest of Trustor in and to any
fixtures or attachments used for generating or distributing air, water, heat,
electricity, light, fuel or refrigeration, or for ventilating or sanitary
purposes, or for the exclusion of vermin or insects, or for the removal of dust,
refuse or garbage; all wall beds, wall safes, built-in furniture and
installations, doorstops, vaults, motors, elevators, dumbwaiters, awnings,
window shades, venetian blinds, light fixtures, fire hoses and brackets and
boxes for the same, fire sprinklers, alarm systems, draperies, drapery rods and
brackets, mirrors, mantels, screens, linoleum, carpets and carpeting, plumbing,
bathtubs, sinks, basins, pipes, faucets, water closets, laundry equipment,
heating units, disposals, water heaters, incinerators, fixtures; together with
all additions to, substitutions for, changes in or replacements or renewals of
the whole or any part of such articles of property; all of such items, whether
now or hereafter installed, being hereby declared to be for all purposes of this
Deed of Trust a part of the Property;

K.   [Intentionally Omitted.]

                                       2
<PAGE>

L.   TOGETHER WITH all building permits and any other licenses and approvals
that may be required by the governmental authorities having or exercising
jurisdiction over the construction of the Improvements;

M.   TOGETHER WITH all plans and any working drawings that are used or intended
for use in constructing the Improvements, whether in the possession of the
Trustor, any architect employed by Trustor, the general contractor, any
subcontractor or materialman;

N.   TOGETHER WITH all the estate, interest, right, title or other claim or
demand, including claims or demands with respect to the proceeds of insurance in
effect with respect thereto, which Trustor now has or may hereafter acquire in
the Property, and any and all awards made for the taking by eminent domain, or
by any proceeding or purchase in lieu thereof, of the whole or any part of the
Property, including, without limitation, any awards resulting from a change of
grade of streets and awards for severance damages;

O.   TOGETHER WITH all refunds, rebates, reimbursements, reserves, deferred
payments, deposits, cost savings, governmental subsidy payments, government-
registered credits (such as emissions reduction credits), other credits, waivers
and payments, whether in cash or in kind, due from or payable by (i) any
federal, state, municipal or other governmental or quasi-governmental agency,
authority or district (a "Governmental Agency") or (ii) any insurance or utility
company, relating to any or all of the Property or arising out of the
satisfaction of any conditions imposed upon or the obtaining of any approvals
for the development of the Property;

P.   TOGETHER WITH all refunds, rebates, reimbursements, credits and payments of
any kind due from or payable by any Governmental Agency for any taxes, special
taxes, assessments, or similar governmental or quasi-governmental charges or
levies imposed upon Trustor with respect to the Property or upon any or all of
the Property itself or arising out of the satisfaction of any conditions imposed
upon or the obtaining of any approvals for the development of the Property; and

Q.   TOGETHER WITH all rights that Trustor may have as declarant under any
covenants, conditions or restrictions affecting the Property; and

R.   [Intentionally Omitted.]

     The entire estate, property and interest hereby conveyed to Trustee may
hereinafter be collectively referred to as the "Trust Estate."

     Notwithstanding anything to the contrary set forth herein, the term "Trust
Estate" shall not include (i) any of the printing presses used by Trustor in its
business and located at the Property, (ii) any personal property owned by
Trustor and located at the Property or (iii) any collateral in which Beneficiary
has granted a security interest in connection with that certain $4,000,000.00
revolving line of credit extended by Beneficiary to Trustor as of January 2,
2001, or any extension, modification or renewal thereof.

                                       3
<PAGE>

1.   THIS DEED OF TRUST IS MADE FOR THE PURPOSE OF SECURING THE FOLLOWING
OBLIGATIONS (THE "SECURED OBLIGATIONS") IN ANY ORDER OF PRIORITY THAT
BENEFICIARY MAY CHOOSE:

     1.1  Due, prompt and complete performance of each obligation, covenant and
agreement of Trustor herein contained, and repayment of any funds advanced by or
which Beneficiary or Trustee become obligated to advance under this Deed of
Trust with interest thereon, at the Default Rate, as hereinafter provided.

     1.2  Payment of the indebtedness in the principal sum of Two Million and
00/100ths Dollars ($2,000,000.00), with interest thereon, evidenced by one
Promissory Note ("Note") of even date herewith executed by Trustor, as Borrower,
in favor of Beneficiary or order, and any modification, replacement, extension
or renewal thereof, (the "Indebtedness").

     1.3  [Intentionally Omitted.]

     1.4  Payment and performance of such further sums and obligations of the
then record owner of Property arising from any and all existing and future
agreements and transactions with Beneficiary when a writing evidences the
parties' agreement that the obligation or advance be so secured.

     1.5  Due, prompt and complete payment and performance of each obligation,
covenant and agreement of Trustor under a Supplemental Terms Letter of even date
herewith executed by Trustor as "Borrower" and Beneficiary as "Lender," and all
supplements, amendments and modifications thereto and all extensions and
renewals thereof (the "Supplemental Letter"), or in any other instrument
heretofore or hereafter executed by Borrower having reference to or arising out
of the loan transaction secured hereby which recites that the obligations
thereunder are secured by this Deed of Trust.

     1.6  [Intentionally Omitted.]

     1.7  [Intentionally Omitted.]

     1.8  [Intentionally Omitted.]

     This Deed of Trust, the Supplemental Letter, any guaranty thereof and any
other instrument given to evidence or further secure the payment and performance
of any obligation secured hereby may hereinafter be referred to as the "Loan
Documents."  In no event shall this Deed of Trust be deemed given to secure the
obligations of Trustor, or any other "Indemnitor" thereunder, arising under any
Environmental Indemnity Agreement made in respect of the Property, or the
obligations of the guarantor under any guaranty given in support of the Secured
Obligations, or any other obligor under an instrument given to further secure
the Secured Obligations, notwithstanding the fact that such agreement, guaranty
and instrument shall constitute Loan Documents as herein defined.

                                       4
<PAGE>

2.   TRUSTOR WARRANTS TO BENEFICIARY AND TRUSTEE THAT:

     2.1  It has good and marketable title to an indefeasible fee estate in the
Property and good and marketable title to the balance of the Trust Estate,
subject to no liens, encumbrances, easements, assessments, security interest,
claims or defects of any kind except (a) those listed in Beneficiary's title
insurance policy and approved by Beneficiary in writing (the "Exceptions"), and
(b) real estate taxes for the current year;

     2.2  The Exceptions and the real estate taxes are not delinquent or in
default;

     2.3  It has the right to grant a security interest in the Trust Estate;

     2.4  Subject to the Exceptions, this Deed of Trust creates a first priority
lien on the Property;

     2.5  It will maintain and preserve the lien of this Deed of Trust until the
Indebtedness has been paid in full; and

     2.6  Subject to the Exceptions, it has good, right and lawful authority to
grant the liens and security interest as provided in and by this Deed of Trust.

3.   AFFIRMATIVE COVENANTS AND AGREEMENTS OF TRUSTOR:

     3.1  Payment of Indebtedness.  Trustor shall promptly pay and perform each
Secured Obligation in accordance with its terms.

     3.2  Maintenance, Repair and Alterations.  Trustor shall, with respect to
the Property:

          3.2.1   Keep the Property in good condition and repair;

          3.2.2   Not remove, demolish, diminish in any respect or materially
alter any of the Improvements (including landscaped and recreation areas) or any
on-site paved parking area and/or structures, and in the event of the demolition
or destruction in whole or in part of any of the fixtures covered hereby and so
long as such demolition or destruction is occasioned by a casualty for which
Trustor is required to maintain insurance under this Deed of Trust, the same
shall be replaced promptly by similar fixtures, of superior titles, liens and
claims and of a value at least equal to the value of the fixtures demolished or
destroyed;

          3.2.3   Except as otherwise may be contemplated under the Supplemental
Letter, Trustor shall not erect any new structures of any kind or additions to
existing buildings or other structures which would alter the nature or lessen
the quality of the Property or Improvements without the prior written consent of
Beneficiary, which consent shall not be unreasonably withheld;

          3.2.4   Complete or restore promptly and in good and workmanlike
manner any building or other structure that may be constructed, damaged or
destroyed and pay when due all claims for labor performed and materials
furnished therefor;

                                       5
<PAGE>

          3.2.5   Comply with all laws, ordinances, regulations, covenants,
conditions and restrictions now or hereafter affecting the Property or any part
thereof or requiring any alterations or improvements to be made thereon;

          3.2.6   Not commit, suffer or permit waste or deterioration of the
Property;

          3.2.7   Not commit, suffer or permit any act upon Property in
violation of law, including but not limited to all Federal, state and local
statutes, ordinances or regulations relating to hazardous or toxic waste or
waste products or hazardous substances (as more fully provided in the
Supplemental Letter);

          3.2.8   Cultivate, irrigate, fertilize, fumigate, prune and do all
other acts which from the character or use of the Property may be reasonably
necessary to maintain its value, the specific enumerations herein not excluding
the general;

          3.2.9   Provide, maintain and deliver to Beneficiary, at no expense to
Beneficiary or Trustee, such evidence of insurance coverage, in accordance with
the requirements set forth in the Insurance Letter and the Supplemental Letter,
as is satisfactory to and with loss payable to Beneficiary;

          3.2.10  Appear in and defend any action or proceeding purporting to
affect the security hereof or the rights or powers of Beneficiary or Trustee
created hereunder, and protect, preserve and defend the Property and title
thereto and right of possession thereof; and pay all costs and expenses,
including cost of evidence of title and attorneys' fees in a reasonable sum, in
any such action or proceeding in which Beneficiary or Trustee may appear, and in
any suit brought by Beneficiary to foreclose this Deed of Trust; and give
Beneficiary and Trustee prompt notice in writing if any claim is asserted which
does or could affect any of such matters, or if any action or proceeding is
commenced which alleges or relates to any such claim;

          3.2.11  Pay at prior to delinquency all taxes, levies, charges and
assessments affecting the Property, including assessments on appurtenant water
stock, imposed by any public or quasi-public authority or utility company
(including without limitation nongovernmental levies or assessments such as
maintenance charges, owner association dues, charges or fees, and levies or
charges resulting from covenants, conditions and restrictions affecting the
Property), which are (or, if not paid, may become) a lien on all or part of the
Property or any interest in it, or which may cause any decrease in the value of
the Property or any part of it;

          3.2.12  Pay and promptly discharge, at Trustor's cost and expense, all
liens, encumbrances and charges upon the Trust Estate, or any part thereof or
interest therein whether inferior or superior to this Deed of Trust and keep and
maintain the same free from the claim of all persons supplying labor or
materials that will enter into the construction of any and all buildings now
being erected or that hereafter may be erected on the Property regardless of by
whom such labor or materials may have been contracted, provided, however, that
Trustor shall have the right to contest any such claim or lien so long as
Trustor shall post a bond satisfactory to Beneficiary against such contested
claim or lien.  If Trustor shall fail to remove and discharge any such lien,
encumbrance or charge, then, in addition to any other right or remedy of
Beneficiary, Beneficiary may, but shall not be obligated to, discharge the same,
either by paying

                                       6
<PAGE>

the amount claimed to be due, or by procuring the discharge of such lien,
encumbrance or charge by depositing in a court a bond or the amount claimed or
otherwise giving security for such claim, or by procuring such discharge in such
manner as is or may be prescribed by law. Trustor shall, immediately upon demand
therefor by Beneficiary, pay to Beneficiary an amount equal to all costs and
expenses incurred by Beneficiary in connection with the exercise by Beneficiary
of the foregoing right to discharge any such lien, encumbrance or charge,
together with interest thereon from the date of such expenditure at the Default
Rate as hereinafter defined;

          3.2.13  Cure within the time specified in any lease or sublease, or
immediately if not specified, any defaults or breaches thereof and do all acts
necessary to insure that any such lease or sublease remain in full force and
effect;

          3.2.14  With respect to any property described above which is less
than a fee-simple estate, including but not limited to a leasehold estate:

               (a)  Trustor shall cure within the time specified in the above-
described lease, or other agreement, or immediately if not specified therein,
any default or breaches thereof and to do all acts necessary to insure the
above-described lease or other agreement remains in full force and effect;

               (b)  Trustor shall not voluntarily terminate, surrender or
subordinate any leasehold or other estate encumbered hereby and any attempt by
Trustor to do so shall be wholly void and without any force and effect.

4.   TRUSTOR FURTHER COVENANTS AND AGREES THAT TO EFFECTUATE THE TERMS AND
CONDITIONS OF THIS DEED OF TRUST:

     4.1  Inspections.  Beneficiary shall have the right to inspect the Property
with prior written notice.

     4.2  Actions of Beneficiary to Preserve Trust Estate.  Should Trustor fail
to make any payment or to do any act as herein provided, then Beneficiary or
Trustee, but without obligation so to do and without notice to or demand upon
Trustor and without releasing Trustor from any obligation hereof, may: make or
do the same in such manner and to such extent as either may deem necessary to
protect the security hereof, Beneficiary or Trustee being authorized to (i)
enter upon and take possession of the Property for such purposes; (ii) make
additions, alterations, repairs and improvements to the Trust Estate that
Beneficiary may consider necessary or proper to keep the Trust Estate in good
condition and repair; (iii) appear in and defend any action or proceeding
purporting to affect the security hereof or the rights or powers of Beneficiary
or Trustee; (iv) pay, purchase, contest or compromise any encumbrance, charge or
lien which in the judgment of either appears to be prior or superior hereto; and
(v) in exercising any such powers, pay necessary expenses, employ counsel and
pay reasonable fees therefor.  Trustor shall pay immediately and without demand
all sums so expended by Beneficiary or Trustee, with interest from date of
expenditure at the highest amount set forth in any obligation secured hereby
following a default, or if the obligation secured hereby does not specify a rate
of interest, at a rate of interest equal to the Beneficiary's Prime Rate as it
may exist from time to

                                       7
<PAGE>

time plus five percent (5.0%) but in no event less than ten percent (10.0%) per
annum (the "Default Rate").

     4.3  Indemnity.  Trustor agrees to indemnify and hold Beneficiary, and any
of its successors in interest, harmless from any waste or violations of law,
including but not limited to all Federal, state and local statutes, ordinances
or regulations relating to the environment and hazardous or toxic wastes.

     4.4  Condemnation.  Trustor hereby absolutely and irrevocably assigns to
Beneficiary, and authorizes the payor to pay to Beneficiary, all awards of
damages and all other compensation payable directly or indirectly in connection
with any condemnation, proposed condemnation or taking for public or private use
of or injury to the Property or any interest therein, and shall notify
Beneficiary immediately upon obtaining knowledge of the institution of any
proceedings therefor.  Beneficiary, if it so chooses, may participate in any
action or proceeding relating to any condemnation as herein contemplated.  All
moneys paid pursuant to this paragraph shall be applied first toward
reimbursement of all of Beneficiary's costs and expenses of recovering such
moneys, including attorneys' fees, and then in reduction of the principal amount
of the Indebtedness to the extent necessary to render its security unimpaired.
To the extent the Secured Obligations include obligations to reimburse the
Beneficiary for moneys the Beneficiary is committed to advance to Trustor or
third persons in the future, such award of damages shall be held as collateral
for such reimbursement obligation in lieu of the property that is condemned.  In
the event of a partial taking in condemnation, the proceeds shall be apportioned
in accord with the provisions of California Code of Civil Procedure Section
1265.225, as it is in effect at the time of the award.  An action for inverse
condemnation shall be deemed an action for condemnation under this paragraph.

     4.5  Insurance.  Trustor shall maintain the insurance described in the
Insurance Requirements Acknowledgment document.

                                       8
<PAGE>

5.   ASSIGNMENT OF RENTS.  Trustor hereby gives to, confers upon and absolutely
assigns to Beneficiary all of Trustor's right, power and interest, during the
continuance of these Trusts, in and to the rents, issues and profits of the
Property (the "Rents"), reserving unto Trustor the right, prior to the
occurrence of any Event of Default, as defined below, by Trustor, and authority
to collect and retain the Rents as they become due and payable.  Upon any such
Event of Default, Beneficiary may at any time without notice, either in person,
by agent, or by a receiver to be appointed by a court, and without regard to the
adequacy of any security for the indebtedness hereby secured, enter upon and
take possession of the Property or any part thereof, in its own name sue for or
otherwise collect the Rents including those past due and unpaid, and apply the
same, less costs and expenses of operation and collection, including reasonable
attorneys' fees, upon any indebtedness secured hereby, and in such order as
Beneficiary may determine, and Trustor hereby appoints Beneficiary its attorney-
in-fact, coupled with an interest, to perform any and all of the foregoing.  The
entering upon and taking possession of the Property, the collection of the Rents
and the application thereof as aforesaid, shall not cure or waive any default or
notice of default hereunder or invalidate any act done pursuant to such notice.
The assignment of the Rents contained in this Deed of Trust is absolute and
constitutes a present transfer of Trustor's interest in existing and future
Rents with respect to the Property described in this Deed of Trust, effective
upon the execution and delivery of this Deed of Trust.

6.   STATEMENT FEE.  Trustor or any other person legally entitled thereto agrees
to pay $60.00 for any statement provided for by law in effect at the date hereof
regarding the obligation secured hereby.

7.   SUBSTITUTION OF TRUSTEE.  Beneficiary, or any successor in ownership of any
indebtedness secured hereby, may from time to time, by instrument in writing,
substitute a successor or successors to any Trustee named herein or acting
hereunder, which instrument, executed by the Beneficiary and duly acknowledged
and recorded in the office of the recorder of the county or counties where the
Property is situated, shall be conclusive proof of proper substitution of such
successor Trustee or Trustees, who shall, without conveyance from the Trustee
predecessor, succeed to all its title, estate, rights, powers and duties.  Said
instrument must contain the name of the original Trustor, Trustee and
Beneficiary hereunder, the book and page where this Deed of Trust is recorded
and the name and address of the new Trustee.

8.   RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY.  At any time
or from time to time, without liability therefor and without notice, Beneficiary
may: release any person liable for payment of any Secured Obligations; extend
the time for payment or otherwise alter the terms of payment of any Secured
Obligation; accept additional real or personal property of any kind as security
for any Secured Obligation, whether evidenced by deeds of trust, mortgages,
security agreements or any other instruments of security; or alter, substitute
or release any property securing the Secured Obligations.  At any time or from
time to time, without liability therefor and without notice, upon written
request of Beneficiary and presentation of this Deed of Trust and the evidence
of the obligation secured hereby for endorsement, and without affecting the
personal liability of any person for payment of the indebtedness secured hereby,
Beneficiary may cause Trustee to:  reconvey any part of the Property without any
warranty; consent to the making of any map or plat thereof; join in granting any
easement thereon; or join in any extension agreement or any agreement
subordinating the lien or charge hereof.

                                       9
<PAGE>

9.   RECONVEYANCE.  Upon written request of Beneficiary stating that all of the
Secured Obligations have been paid and/or performed, Beneficiary's statement
that no further commitment exists to make future advances or extend credit, and
upon surrender of this Deed of Trust and the evidence of the Secured Obligations
to Trustee for cancellation and retention and upon payment of its fees, Trustee
shall reconvey, without warranty, the Property or the portion thereof then held
hereunder.  Upon written request of Beneficiary, if less than all sums secured
hereby have been paid, Trustee shall reconvey, without warranty, the portion of
the Property then held hereunder specified by Beneficiary.  The recitals in such
reconveyance of any matters or facts shall be conclusive proof of the
truthfulness thereof.  Neither Beneficiary nor Trustee shall have any duty to
determine the rights of persons claiming to be rightful grantees of any
reconveyance.  The grantee in such reconveyance may be described as "the person
or persons legally entitled thereto." Five (5) years after issuance of such full
reconveyance, Trustee may destroy the evidence of indebtedness and this Deed of
Trust (unless directed in such request to retain them).

10.  ACCELERATING TRANSFER, EVENTS OF DEFAULT AND REMEDIES.

     10.1 Accelerating Transfer.  SHOULD THE TRUSTOR WITHOUT THE PRIOR WRITTEN
CONSENT OF BENEFICIARY, SELL, CONVEY, TRANSFER, DISPOSE OF OR ENCUMBER THE
PROPERTY OR ANY PART THEREOF OR ANY INTEREST THEREIN, ENTER INTO A LEASE OF MORE
THAN 49% OF THE PROPERTY, WHETHER VOLUNTARILY, INVOLUNTARILY OR OTHERWISE, OR
ENTER INTO AN AGREEMENT SO TO DO WITHOUT THE PRIOR WRITTEN CONSENT OF
BENEFICIARY BEING FIRST HAD AND OBTAINED (ANY SUCH EVENT, AN "ACCELERATING
TRANSFER"), THEN BENEFICIARY MAY AT ITS OPTION DECLARE ALL SUMS SECURED HEREBY
IMMEDIATELY DUE AND PAYABLE.  THIS PROVISION SHALL APPLY TO EACH AND EVERY SALE,
CONVEYANCE, TRANSFER, DISPOSITION OR ENCUMBRANCE, REGARDLESS OF WHETHER OR NOT
BENEFICIARY HAS CONSENTED TO, OR WAIVED, ITS RIGHT HEREUNDER, WHETHER BY ACTION
OR NON-ACTION, IN CONNECTION WITH ANY PREVIOUS SALE, CONVEYANCE, TRANSFER,
DISPOSITION OR ENCUMBRANCE, WHETHER ONE OR MORE.  NOT WITHSTANDING ANYTHING TO
THE CONTRARY CONTAINED HEREIN, IN THE EVENT TRUSTOR PROPOSES TO LEASE ANY
PORTION OF THE PROPERTY, BENEFICIARY SHALL HAVE THE RIGHT TO APPROVE SUCH LEASE
AND PROPOSED LESSEE, IN THE EVENT ANY LESSEE REQUESTS THAT BENEFICIARY PROVIDE
TO LESSEE AN AGREEMENT OF NON-DISTURBANCE.

     10.2 Events of Default.  Any of the following events shall be deemed an
event of default ("Event(s) of Default") hereunder:

          10.2.1  Trustor fails to perform any obligation to pay money on the
Note or this Deed of Trust, or the Supplemental Letter, when and as the same
shall become due and payable, whether at maturity or by acceleration or as part
of a prepayment or otherwise, and does not cure that failure within ten (10)
days after written notice from Beneficiary or Trustee.

          10.2.2  [Intentionally Omitted.]

                                       10
<PAGE>

          10.2.3  Trustor fails in the due, prompt and complete observance and
performance of any obligation, covenant or agreement contained in this Deed of
Trust, other than one to pay money, and the continuation thereof for a period of
twenty (20) days after written notice thereof from Beneficiary to Trustor (the
"Initial Cure Period"), unless such failure cannot reasonably be cured within
the Initial Cure Period, in which case, Trustor shall have such longer period as
is necessary to cure such failure so long as Trustor is proceeding expeditiously
to cure the same.

          10.2.4  The occurrence of a default after applicable notice and cure
periods, under any Secured Obligation.

          10.2.5  The occurrence of any Event of Default, as defined therein,
under any of the other Loan Documents.

          10.2.6  Default under any agreement to which Trustor is a party, which
agreement relates to the borrowing of money by Trustor from any person and which
borrowing is secured by a lien on the Property, regardless of whether
Beneficiary has consented to such lien, and the indebtedness secured thereby is
declared due and payable prior to the date on which such indebtedness would
otherwise become due and payable.

     The enumeration of specific defaults above which are also covenants herein
shall not create any implication that other defaults which are also covenants
but are not specifically enumerated are of lesser dignity.

     10.3 Remedies.  Upon the occurrence and during the continuance of any Event
of Default, Beneficiary may, at its option and without notice or demand upon
Trustor, exercise any one or more of the following remedies:

          10.3.1  Declare all Indebtedness and any other sums secured hereby to
be immediately due and payable and the same shall thereupon become due and
payable without any presentment, demand, protest or notice of any kind;
provided, however, that the remedy set forth in this Paragraph 10.3.1 shall be
subject to Borrower's rights, if any, under this Deed of Trust to cure such
Event of Default in the manner set forth herein.

          10.3.2  In person or by agent or by a receiver appointed by a court,
with or without bringing any action or proceeding and without regard to the
adequacy of its security, the solvency of Trustor or the existence of waste,
enter upon, take possession of, manage and operate the Property, or any part
thereof, or any other portion of the Trust Estate, in its own name or in the
name of Trustee, and do any acts that Beneficiary deems necessary or desirable
to preserve the value, marketability or rentability of the Property and the
balance of the Trust Estate, or part thereof or interest therein, to increase
the income therefrom or to protect the security thereof, including without
limitation the right to do any of the following:  make, modify, enforce, cancel
or accept surrender of any Leases now in effect or hereafter in effect on the
Property or any part thereof; remove and evict any lessees; increase or decrease
rents; decorate, clean and repair; incur and pay reasonable management,
brokerage and attorneys' fees; maintain a reserve for replacement; and terminate
the license granted to Trustor to collect the Rents, and, with or without taking
possession of the Property, in Beneficiary's own name, demand, collect, receive,

                                       11
<PAGE>

sue for, attach and levy the Rents, including those past due and unpaid, and
apply the same, less costs and expenses of operation and collection including
attorneys' fees, upon any Indebtedness, all in such order as Beneficiary may
determine.  The entering upon and taking possession of the Property, the
collection of such Rents and the application thereof as aforesaid shall not cure
or waive any default or notice of default hereunder or invalidate any act done
in response to such default.  The enforcement of such right or remedy by
Beneficiary, once exercised, shall continue for so long as Beneficiary shall
elect notwithstanding that the collection and applications of the Rents may have
cured for the time being the original default, and, notwithstanding the
continuance in possession of the Property or the collection, receipt and
application of Rents.  Trustee or Beneficiary shall be entitled to exercise
every right provided for in any of the Loan Documents or by law upon occurrence
of any Event of Default, including the right to exercise the power of sale
contained herein.  Any of the actions referred to in this Paragraph 10.3.2 may
be taken by Beneficiary, either in person or by agent, with or without bringing
any action or proceeding, or by receiver appointed by a court, and any such
action may also be taken irrespective of whether any notice of default or
election to sell has been given hereunder.  Further, Beneficiary, at the expense
of Trustor, either by purchase, repair, or construction, may from time to time
maintain and restore the Property, or any part thereof, and Complete
construction of any Improvements uncompleted as of the date thereof and in the
course of such completion may make such changes in the contemplated Improvements
as Beneficiary may deem desirable and may insure the same.

          10.3.3  Commence an action to foreclose this Deed of Trust as a
mortgage, appoint a receiver, or specifically enforce any of the covenants
hereof.

          10.3.4  Deliver to Trustee a written declaration of default and demand
for sale, and a written notice of default and election to cause Trustor's
interest in the Trust Estate to be sold, which notice Trustee or Beneficiary
shall cause to be duly filed for record in the Official Records of the county in
which the Property is located.

          10.3.5  Proceed as to the real property in accordance with
Beneficiary's rights and remedies in respect of the Property.

          10.3.6  Exercise any or all of the other rights and remedies provided
for herein, in any of the Loan Documents or other document or agreement now or
hereafter securing all or any portion of the Secured Obligations, or available
under law or in equity.

     10.4 Non-Judicial Foreclosure.  Should Beneficiary elect to foreclose by
exercise of the power of sale herein contained, Beneficiary shall notify Trustee
and shall deposit with Trustee this Deed of Trust and the Note and such receipts
and evidence of expenditures made and secured hereby as Trustee may require.  To
the extent the obligation secured hereby arises from a commitment of Beneficiary
to make future advances either to Trustor or a third party or extend credit
subsequent to the recordation of a Notice of Default hereunder, the sums secured
hereby shall also include the amount of such commitment to make future advances
or extend credit, and subject to acceleration as provided in the previous
paragraph.  The Trustee shall pay such amount at such time as it pays all other
sums secured hereby and the Beneficiary shall hold same as additional collateral
for the obligation secured hereby, at such interest as is available to
Beneficiary's customers in an insured deposit account with no restrictions on
withdrawal.

                                       12
<PAGE>

          10.4.1  Upon receipt of such notice from Beneficiary, Trustee shall
cause to be recorded, mailed or delivered to Trustor such notice of default and
election to sell as is then required by law and by this Deed of Trust.  Trustee
shall, without demand on Trustor, after lapse of such time as may then be
required by law and after recordation of such notice of default and after notice
of sale has been given as required by law, sell the Trust Estate at time and
place of sale fixed by it in such notice of sale, either as a whole, or in
separate lots or parcels, and in such order as it may determine, at public
auction, to the highest bidder for cash in lawful money of the United States
payable at the time of sale.  If the Property consists of more than one lot or
parcel, the lots or parcels may be sold separately, together or in any
combination, and in such order as Beneficiary determines, at the sole discretion
of the Beneficiary.  Trustor waives the right to direct the order in which the
Property may be sold when it consists of more than one lot or parcel.  Trustee
shall deliver to such purchaser or purchasers thereof its good and sufficient
deed or deeds conveying the property so sold, but without any covenant or
warranty, express or implied.  The recitals in such deed of any matters or facts
shall be conclusive proof of the truthfulness thereof.  Any person, including
without limitation Trustor, Trustee or Beneficiary, may purchase at such sale
and Trustor hereby covenants to warrant and defend the title of such purchaser
or purchasers.  If allowed by law, Beneficiary, if it is the purchaser, may turn
in the Note at the amount owing thereon toward payment of the purchase price (or
for endorsement of the purchase price as a payment on the Note if the amount
owing thereon exceeds the purchase price).  Trustor hereby expressly waives any
right of redemption after sale that Trustor may have at the time of sale or that
may apply to the sale.

          10.4.2  After deducting all costs, fees and expenses of Trustee and of
this Trust, including cost of evidence of title in connection with sale, Trustee
shall apply the proceeds of sale to payment of:  all sums expended under the
terms hereof, not then repaid, with accrued interest at the amount allowed by
law in effect at the date hereof; all other sums then secured hereby; and the
remainder, if any, to the person or persons legally entitled thereto.

          10.4.3  Trustee may postpone sale of all or any portion of the Trust
Estate by public announcement at such time and place of sale, and from time to
time thereafter may postpone such sale by public announcement at the time fixed
by the preceding postponement or by subsequently noticed sale, and without
further notice make such sale at the time fixed by the last postponement; or
Trustee may, in its discretion, give a new notice of sale.  Beneficiary may
rescind any such notice of default at any time before Trustee's sale by
executing a notice of rescission and recording the same.  The recordation of
such notice shall constitute a cancellation of any prior declaration of default
and demand for sale and of any acceleration of maturity of the Indebtedness
effected by any prior declaration or notice of default.  The exercise by
Beneficiary of the right of rescission shall not constitute a waiver of any
default and demand for sale, or notices of default and of election to cause the
Property to be sold, nor otherwise affect the Note or this Deed of Trust, or any
of the rights, obligations or remedies of Beneficiary or Trustee hereunder.

11.  APPOINTMENT OF RECEIVER.  If an Event of Default shall have occurred and be
continuing, Beneficiary, as a matter of right and without notice to Trustor or
anyone claiming under Trustor, and without regard to the then value of the Trust
Estate or the interest of Trustor therein, shall have the right to apply to any
court having jurisdiction to appoint a receiver or receivers of the Trust
Estate, and Trustor hereby irrevocably consents to such appointment and

                                       13
<PAGE>

waives notice of any application therefor. Any such receiver or receivers shall
have all the usual powers and duties of receivers in like or similar cases and
all the powers and duties of Beneficiary in case of entry as provided in
Paragraph 10.3.2 and shall continue as such and exercise all such powers until
the later of (i) the date of confirmation of sale of the Trust Estate; (ii) the
disbursement of all proceeds of the Trust Estate collected by such receiver and
the payment of all expenses incurred in connection therewith; or (iii) the
termination of such receivership with the consent of Beneficiary or pursuant to
an order by a court of competent jurisdiction.

12.  REMEDIES NOT EXCLUSIVE.  Trustee and Beneficiary, and each of them, shall
be entitled to enforce payment and performance of any of the Secured Obligations
and to exercise all rights and powers under this Deed of Trust or under any of
the other Loan Documents or other agreement or any laws now or hereafter in
force, notwithstanding that some or all of the Indebtedness and Secured
Obligations may now or hereafter be otherwise secured, whether by mortgage, deed
of trust, pledge, lien, assignment or otherwise.  Neither the acceptance of this
Deed of Trust nor its enforcement, whether by court action or pursuant to the
power of sale or other powers herein contained, shall prejudice or in any manner
affect Trustee's or Beneficiary's right to realize upon or enforce any other
security now or hereafter held by Trustee or Beneficiary, it being agreed that
Trustee and Beneficiary, and each of them, shall be entitled to enforce this
Deed of Trust and any other security now or hereafter held by Beneficiary or
Trustee in such order and manner as they or either of them may in their absolute
discretion determine.  No remedy herein conferred upon or reserved to Trustee or
Beneficiary is intended to be exclusive of any other remedy herein or by law
provided or permitted, but each shall be cumulative and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute.  Every power or remedy given by any of the Loan Documents
to Trustee or Beneficiary, or to which either of them may be otherwise entitled,
may be exercised concurrently or independently, from time to time and as often
as may be deemed expedient by Trustee or Beneficiary, and either of them may
pursue inconsistent remedies.

13.  [Intentionally Omitted.]

14.  MISCELLANEOUS.

     14.1 Governing Law; Severability.  This Deed of Trust shall be governed by
the laws of the State of California.  In the event that any provision or clause
of any of the Loan Documents conflicts with applicable laws, such conflicts
shall not affect other provisions of such Loan Documents which can be given
effect without the conflicting provision, and to this end, the provisions of the
Loan Documents are declared to be severable.

     14.2 Amendment; No Implied Waiver.  This Deed of Trust cannot be modified,
waived, discharged or terminated orally, but only by a written instrument signed
by the party against whom enforcement of the modification, waiver, discharge or
termination is asserted.  No waiver by Beneficiary of any default or breach by
Trustor hereunder shall be implied from any omission by Beneficiary to take
action on account of such default if such default persists or is repeated, and
no express waiver shall affect any default other than the default identified in
the waiver and such waiver shall be operative only for the time and to the
extent therein stated.  Waivers of any covenant, term or condition contained
herein shall not be construed as a waiver

                                       14
<PAGE>

of any subsequent breach of the same covenant, term or condition. The consent or
approval by Beneficiary to or of any act by Trustor requiring further consent or
approval shall not be deemed to waive or render unnecessary the consent or
approval to or of any subsequent similar act.

     14.3 Notices.  All written notices or demands of any kind that any party
hereto may be required or may desire to serve on any other party hereto in
connection with this Agreement shall be served (as an alternative to personal
service) by registered or certified mail, recognized overnight courier service
or facsimile transmission.  Any such notice or demand so to be served by
registered or certified mail, recognized overnight courier service or facsimile
transmission shall be delivered with all applicable delivery charges thereon
fully prepaid and, if the party so to be served be Trustor, addressed to Trustor
as follows:

               Daily Journal Corporation
               915 E. First Street
               Los Angeles, CA 90012
               Attn: Mr. Gerald L. Salzman, President
               Fax No.: (213) 330-2666

With a copy thereof to:

               Munger, Tolles & Olson
               355 South Grand Avenue
               Los Angeles, CA 90071
               Attn: Ms. Ruth E. Fisher, Esq.
               Fax No.: (213) 687-3702

and, if the party so to be served be Beneficiary, addressed to Beneficiary as
follows:

               City National Bank
               9701 Wilshire Boulevard, Suite 600
               Beverly Hills, CA 90212
               Attention: Mr. Douglas C. Zimmerman,
               Vice President
               Fax No.: (310) 888-6493

with a copy thereof to

               City National Bank
               400 N. Roxbury Drive
               Beverly Hills, CA 90210
               Attention: General Counsel
               Fax No.: (310) 888-6232

     Service of any such notice or demand so made by mail, recognized overnight
courier or facsimile transmission shall be deemed complete on the date of actual
delivery as shown by the addressee's registry or certification receipt or
"answer back confirmation," as applicable, or at

                                       15
<PAGE>

the expiration of the third business day after the date of dispatch, whichever
is earlier in time. Either party hereto may from time to time, by notice in
writing served upon the other as aforesaid, designate a different mailing
address to which or a different person to whose attention all such notices or
demands are thereafter to be addressed.

     14.4  Successors and Assigns.  This Deed of Trust applies to, inures to the
benefit of, and binds all parties hereto, their heirs, legatees, devisees,
administrators, executors, successors and assigns.  The term Beneficiary shall
mean the owner and holder, including pledgees, of the evidence of the obligation
secured hereby, whether or not named as Beneficiary herein.  In this Deed of
Trust, whenever the context so requires, the masculine gender includes the
feminine and/or neuter, and the singular number includes the plural.  By
accepting payment of any sum secured hereby after its due date, Beneficiary does
not waive its right either to require prompt payment when due of all other sums
so secured or to declare default for failure so to pay.

     14.5  Trustee's Acceptance.  Trustee accepts this Trust when this Deed of
Trust, duly executed and acknowledged, is made a public record as provided by
law, and by its acceptance hereof, Trustee covenants faithfully to perform and
fulfill the trusts herein created, being liable, however, only for willful
negligence or misconduct, and Trustee hereby waives any statutory fee and agrees
to accept reasonable compensation, in lieu thereof, for any services rendered by
it in accordance with the terms hereof.  Trustee is not obligated to notify any
party hereto of pending sale under any other deed of trust or of any action or
proceeding in which Trustor, Beneficiary or Trustee shall be a party unless
brought by Trustee.

     14.6  Subrogation.  To the extent that proceeds of the Note are used,
directly or indirectly, to pay off, satisfy or discharge, in whole or in part,
any outstanding lien, charge or prior encumbrance against the Trust Estate or
any part thereof, then as additional security hereunder Beneficiary shall be
subrogated to any and all rights, superior titles and liens owned or claimed by
any owner or holder of such outstanding liens, charges and prior encumbrances,
however remote and irrespective of whether said liens, charges or encumbrances
have been released of record by the holder thereof upon payment.

     14.7  No Merger.  If both the lessor's and lessee's estates under any Lease
or any portion thereof that constitutes a part of the Trust Estate shall at any
time become vested in one owner, this Deed of Trust and the lien created hereby
shall not be destroyed or terminated by application of the doctrine of merger,
and, in such event, Beneficiary shall continue to have and enjoy all of the
rights and privileges of Beneficiary as to the separate estates.  In addition,
upon the foreclosure of the lien created by this Deed of Trust on the Trust
Estate pursuant to the provisions hereof, any leases or subleases then existing
and created by Trustor shall not be destroyed or terminated by application of
the law of merger or as a matter of law as a result of such foreclosure unless
Beneficiary or any purchaser at any such foreclosure sale shall so elect.  No
act by or on behalf of Beneficiary or any such purchaser shall constitute a
termination of any lease or sublease unless Beneficiary or such purchaser shall
give written notice to such tenant or subtenant.

     14.8  Certain Rights of Beneficiary.  Without affecting the liability of
Trustor or of any other person who is or shall become bound by the terms of this
Deed of Trust or who is or shall become liable for the performance of any
obligation secured hereby, Beneficiary may, in

                                       16
<PAGE>

such manner, upon such terms and at such times as it deems best and without
notice or demand, release any party now or hereafter liable for the performance
of any such obligation, extend the time for such performance, alter any of the
terms of any such obligation; or accept additional security therefor, and alter,
substitute or release any property securing such performance. No exercise or
non-exercise by Beneficiary of any of its rights under this Deed of Trust, no
dealing by Beneficiary with any person, firm or corporation and no change,
impairment, loss or suspension of any right or remedy of Beneficiary shall in
any way affect any of the obligations of Trustor hereunder or any security
furnished by Trustor, or give Trustor any recourse against Beneficiary.

     14.9  Headings. Headings are for convenience only and are not intended as a
limitation on the content of the paragraph following or as an aid to the
construction thereof.

     14.10 Counterparts.  This Deed of Trust may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.

     14.11 [Intentionally Omitted.]

     14.12 [Intentionally Omitted.]

     14.13 Copy of Notice of Default.  The undersigned Trustor requests that a
copy of any Notice of Default and of any Notice of Sale hereunder be mailed to
him at his address hereinbefore set forth.



     IN WITNESS WHEREOF, Trustor has caused this Deed of Trust to be executed as
of the day and year first written above.


DAILY JOURNAL CORPORATION,
a South Carolina corporation

By:  /s/ Gerald L. Salzman
     --------------------------
     Gerald L. Salzman, President



            (ALL SIGNATURES MUST BE ACKNOWLEDGED BY A NOTARY PUBLIC)

                                       17
<PAGE>

STATE OF CALIFORNIA
COUNTY OF                SS.


On this 29th day of January, 2001 before me, Debbie Ann Estrella, a Notary
Public in and for the State of California, personally appeared Gerald L.
Salzman, personally known to me to be the person whose name is subscribed to the
within instrument and acknowledged to me that he executed the same in his
authorized capacity, and that by his signature on the instrument the person, or
the entity upon behalf of which the person acted, executed the instrument.

WITNESS my hand and official seal.

Signature /s/ Debbie Ann Estrella
          -------------------------------

My commission expires January 9, 2003              [SEAL]
                      -------------------------

                                       18
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>LETTER AGREEMENT DATED JANUARY 2, 2001
<TEXT>

<PAGE>

                                                                    ------------
                                                                    Exhibit 10.3
                                                                    ------------

                              CITY NATIONAL BANK
                      633 West Fifth Street, Tenth Floor
                         Los Angeles, California 90071
                  PHONE  (213) 615-6349   FAX  (213) 615-8339

S. Steve Tsoflias                                           Downtown Commercial
Vice President                                              Banking Center

                                January 2, 2001

Mr. Gerald L. Salzman
Daily Journal Corporation
915 E. 1st Street
Los Angeles, CA 90012

     Re:  Revolving Note dated January 2, 2001, in the Original Principal Sum of
          $4,000,000.00 ("Note") executed by Daily Journal Corporation and
          Sustain Technologies (collectively "Borrower") in favor of City
          National Bank ("CNB")

Dear Mr. Salzman:

     This is to confirm that CNB will extend the credit facility more completely
described in the enclosed Note, subject to the additional terms and conditions
set forth herein. Capitalized terms not defined in this letter have the meanings
given them in the Note. This letter is hereby incorporated into the Note (this
letter and the Note, collectively, the "Note").

                       A. ADDITIONAL EVENTS OF DEFAULT.

     The following shall constitute additional Events of Default under the Note:

1.   Failure of Borrower to furnish CNB, within the times specified, the
     following statements:

     1.1  Within forty-five (45) days after the end of each quarterly accounting
          period of each fiscal year, a financial statement consisting of not
          less than a balance sheet, income statement, and statement of cash
          flows, with notes thereto, prepared in accordance with generally
          accepted accounting principles consistently applied, which financial
          statement may be internally prepared;

     1.2  Within ninety (90) days after the close of each fiscal year, a copy of
          the annual audit report for such year for Borrower and the
          Subsidiaries including therein a balance sheet, income statement,
          reconciliation of net worth and statement of cash flows, with notes
          thereto, the balance sheet, income statement and statement of cash
          flows to be audited by a certified public accountant acceptable to
          CNB, and certified by such accountants to have been prepared in
          accordance with generally accepted accounting principles consistently
          applied.
<PAGE>

     1.3  Within thirty (30) days after the end of each month, excluding months
          that coincide with the quarter ending or fiscal year ending, a
          financial statement consisting of not less than a balance sheet and
          income statement, prepared in accordance with generally accepted
          accounting principals consistently applied, which financial statements
          may be internally prepared;

     1.4  Such additional information, reports and/or statements as CNB may,
          from time to time, reasonably request;

2.   Declare or pay cash dividends and repurchase company stock in aggregate in
     excess of $500,000 during any fiscal period without CNB consent;

3.   Make acquisitions in excess of $500,000 during any fiscal period without
     consent from CNB;

4.   Change the majority of the existing Board of Directors, except through
     merger or sale of the Borrower so long as the buyer is a stronger credit
     and is approved by CNB in its sole discretion.

                      C. ADDITIONAL TERMS AND CONDITIONS.

     The following additional terms and conditions shall also apply to the Note:

     1.   Environmental Indemnification. In consideration of CNB extending
credit to Borrower, Borrower has agreed to indemnify CNB against any claims that
may arise as a result of Borrower's business activities that are environmental
in nature and for which CNB may be named as a liable party.

     Borrower agrees that it shall indemnify and hold harmless CNB, its parent
company, subsidiaries and all of their respective directors, officers,
employees, agents, successors, attorneys, and assigns from and against any loss,
damage, cost, expense, or liability directly or indirectly arising out of or
attributable to the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal, or presence of a hazardous substance
on, under, or about Borrower's property or operations or property leased to
Borrower, including but not limited to attorneys' fees (including the reasonable
estimate of the allocated cost of in-house counsel and staff). For these
purposes, the term "Hazardous substances" means any substance which is or
becomes designated as "hazardous" or "toxic" under any Federal, state, or local
law. This indemnity shall survive repayment of Borrower's obligations to CNB.
<PAGE>

     Except for documents and instruments specifically referenced herein or in
the Note, this letter and the Note constitute the entire agreement of the
parties hereto and supersedes any prior or contemporaneous oral or written
agreements, understandings, representations, warranties and negotiations, if
any, which are merged into this letter and the Note. If you agree to accept the
terms of this letter and the Note, please sign the enclosed acknowledgment copy
of this letter, as well as the enclosed Note, and return them to me on or before
January 2, 2001.

Sincerely,

City National Bank, a national
banking association,

By:    /s/ Paul L. Branks, SVP
       --------------------------------------
       S. Steve Tsoflias, Vice President

Accepted and Agreed this 8th day of
January, 2001

Daily Journal Corporation

By:    /s/ Gerald L. Salzman
       --------------------------------------
       Gerald L. Salzman
Title: President

Sustain Technologies, Inc.

By:    /s/ Gerald L. Salzman
       --------------------------------------
       Gerald L. Salzman
Title: Secretary
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>PROMISSORY NOTE DATED JANUARY 2, 2001
<TEXT>

<PAGE>

                                                                    ------------
                                                                    Exhibit 10.4
                                                                    ------------

CITY NATIONAL BANK
                                PROMISSORY NOTE

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
  Principal         Loan Date        Maturity        Loan No       Call       Collateral       Account       Officer       Initials
$4,000,000.00      01-02-2001       01-31-2002        38058                                    648112          SST           /s/JS
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                <C>              <C>              <C>           <C>        <C>              <C>           <C>           <C>
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
                                                             or item.
                         Any item above containing "***" has been omitted due to text length limitations.
- ------------------------------------------------------------------------------------------------------------------------------------

Borrower:  DAILY JOURNAL CORPORATION,        Lender:   City National Bank, NA
           A SOUTH CAROLINA CORPORATION                Downtown Los Angeles Commercial Banking Center
           SUSTAIN TECHNOLOGIES, INC.,                 #034000
           A VIRGINIA CORPORATION                      633 West Fifth Street, Tenth Floor
           915 EAST 1ST STREET                         Los Angeles, CA  90071
           LOS ANGELES, CA  90012

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

Principal Amount:  $4,000,000.00                        Initial Rate:  9.250%                  Date of Note:  January 2, 2001
</TABLE>


PROMISE TO PAY. DAILY JOURNAL CORPORATION, A SOUTH CAROLINA CORPORATION; and
SUSTAIN TECHNOLOGIES, INC., a VIRGINIA CORPORATION ("Borrower") jointly and
severally promise to pay to City National Bank, NA ("Lender"), or order, in
lawful money of the United States of America, the principal amount of Four
Million & 00/100 Dollars ($4,000,000.00) or so much as may be outstanding,
together with interest on the unpaid outstanding principal balance of each
advance. Interest shall be calculated form the date of each advance until
repayment of each advance.

PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on January 31, 2002. In addition, Borrower will
pay regular monthly payments of all accrued unpaid interest due as of each
payment date, beginning January 31, 2001, with all subsequent interest payments
to be due on the last day of each month after that. Unless otherwise agreed or
required by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid collection
costs. The annual interest rate for this Note is computed on a 365/360 basis;
that is, by applying the ratio of the annual interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing.

VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the City National Bank Prime
Rate (the "Index"). Prime Rate shall mean the rate most recently announced by
Lender at its principal office in Beverly Hills, California, as its "Prime
Rate". Any change in the Prime Rate shall become effective on the same business
day on which the Prime Rate shall change, without prior notice to Borrower.
Lender will tell Borrower the current Index rate upon Borrower's request. The
interest rate change will not occur more often than each day. Borrower
understands that Lender may make loans based on other rates as well. The Index
currently is 9.500%. The interest rate to be applied to the unpaid principal
balance of this Note will be at a rate of 0.250 percentage points under the
Index, resulting in an initial rate of 9.250%. NOTICE: Under no circumstances
will the interest rate on this note be more than the maximum rate allowed by
applicable law.

PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Note, Borrower understands that Lender is entitled to a minimum interest
charge of $100.00. Other than Borrower's obligation to pay any minimum interest
charge, Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, early payments will reduce the principal
balance due. Borrower agrees not to send Lender payments marked "paid in full",
"without recourse", or similar language. If Borrower sends such a payment,
Lender may accept it without losing any of Lender's rights under this Note, and
Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or other
payment instrument that indicates that the payment constitutes "payment in full"
of the amount owed or that is tendered with other conditions or limitations or
as full satisfaction of a disputed amount must be mailed or delivered to: City
National Bank, NA; Downtown Los Angeles Commercial Banking Center #034000; 633
West Fifth Street, Tenth Floor; Los Angeles, CA 90071.

INTEREST AFTER DEFAULT. Upon Borrower's failure to pay all amounts declared due
pursuant to this section, including failure to pay upon final maturity, Lender,
at its option, may, if permitted under applicable law, increase the variable
interest rate on this Note 5.000 percentage points.

DEFAULT.  Each of the following shall constitute an event of default ("Event of
Default") under this Note:

     Payment Default.  Borrower fails to make any payment when due under this
     Note.

     Other Defaults.  Borrower fails to comply with or to perform any other
     term, obligation, covenant or condition contained in this Note or in any of
     the related documents or to comply with or to perform any term, obligation,
     covenant or condition contained in any other agreement between Lender and
     Borrower.

     Default in Favor of Third Parties.  Borrower or any Grantor defaults under
     any loan, extension of credit, security agreement, purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that may materially affect any of Borrower's property or Borrower's ability
     to repay this Note or perform Borrower's obligations under this Note or any
     of the related documents.

     False Statements.  Any warranty, representation or statement made or
     furnished to Lender by Borrower or on Borrower's behalf under this Note or
     the related documents is false or misleading in any material respect,
     either now or at the time made or furnished or becomes false or misleading
     at any time thereafter.

     Insolvency.  The dissolution or termination of Borrower's existence as a
     going business, the insolvency of Borrower, the appointment of a receiver
     for any part of Borrower's property, any assignment for the benefit of
     creditors, any type of creditor workout, or the commencement of any
     proceeding under any bankruptcy or insolvency laws by or against Borrower.

     Creditor or Forfeiture Proceedings.  Commencement of foreclosure or
     forfeiture proceedings, whether by judicial proceeding, self-help,
     repossession or any other method, by any creditor of Borrower or by any
     governmental agency against any collateral securing the loan.  This
     includes a garnishment of any of Borrower's accounts, including deposit
     accounts, with Lender.  However, this Even of Default shall not apply if
     there is a good faith dispute by Borrower as to the validity or
     reasonableness of the claim which is the basis of the creditor or
     forfeiture proceeding and if Borrower gives Lender written notice of the
     creditor or forfeiture proceeding and deposits with Lender monies or a
     surety bond for the creditor or forfeiture proceeding, in an amount
     determined by Lender, in its sole discretion, as being an adequate reserve
     or bond for the dispute.
<PAGE>

                                PROMISSORY NOTE
                                  (Continued)
                                                                          Page 2
- --------------------------------------------------------------------------------

     Events Affecting Guarantor.  Any of the preceding events occurs with
     respect to any guarantor, endorser, surety, or accommodation party of any
     of the indebtedness or any guarantor, endorser, surety, or accommodation
     party dies or becomes incompetent, or revokes or disputes the validity of,
     or liability under, any guaranty of the indebtedness.

     Change in Ownership.  Any change in ownership* of twenty-five percent (25%)
     or more of the common stock of Borrower.

     Adverse Change.  A material adverse change occurs in Borrower's financial
     condition, or Lender believes the prospect of payment or performance of
     this Note is impaired.  *as a result of a single transaction or a series of
     related transactions


LANDER'S RIGHTS.  Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, and then
Borrower will pay that amount.

ATTORNEYS' FEES; EXPENSES.  Lender may hire or pay someone else to help collect
the loan if Borrower does not pay.  Borrower will pay Lender that amount.  This
includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees, expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), and appeals.  Borrower also
will pay any court costs, in addition to all other sums provided by law.

GOVERNING LAW.  This Note will be governed by, construed and enforced in
accordance with federal law and the laws of the State of California.  This Note
has been accepted by Lender in the State of California.

CHOICE OF VENUE.  If there is a lawsuit, Borrower agrees upon Lender's request
to submit to the jurisdiction of the courts of LOS ANGELES County, State of
California.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Borrower's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
indebtedness against any and all such accounts.

LINE OF CREDIT.  This Note evidences a revolving line of credit.  Advances under
this Note may be requested either orally or in writing by Borrower or as
provided in this paragraph.  Lender may, but need not, require that all oral
requests be confirmed in writing.  All communications, instructions, or
directions by telephone or otherwise to Lender are to be directed to Lender's
office shown above.  The following person currently is authorized to request
advances and authorize payments under the line of credit until Lender receives
from Borrower, at Lender's address shown above, written notice of revocation of
his or her authority:  GERALD L. SALZMAN.  Borrower agrees to be liable for all
sums either:  (A) advanced in accordance with the instructions of an authorized
person or (B) credited to any of Borrower's accounts with Lender.  The unpaid
principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs.  Lender will have no obligation to advance funds under this
Note if:  (A) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (B) Borrower or
any guarantor ceases doing business or is insolvent; (C) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (D) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized by
Lender; or (E) Lender in good faith believes itself insecure.

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon Borrower, and
upon Borrower's heirs, personal representatives, successors and assigns, and
shall inure to the benefit of Lender and Lender's successors and assigns.

GENERAL PROVISIONS.  Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them.  Each Borrower understands and
agrees that, with or without notice to Borrower, Lender may with respect to any
other Borrower (a) make one or more additional secured or unsecured loans or
otherwise extend additional credit; (b) alter, compromise, renew, extend,
accelerate, or otherwise change one or more times the time for payment or other
terms any indebtedness, including increases and decreases of the rate of
interest on the indebtedness; (c) exchange, enforce, waive, subordinate, fail or
decide not to perfect, and release any security, with or without the
substitution of new collateral; (d) apply such security and direct the order or
manner of sale thereof, including without limitation, any non-judicial sale
permitted by the terms of the controlling security agreements, as Lender in its
discretion may determine; (e) release, substitute, agree not to sue, or deal
with any one or more of Borrower' sureties, endorsers, or other guarantors on
any terms or in any manner Lender may choose; and (f) determine how, when and
what application of payments and credits shall be made on any other indebtedness
owing by such other Borrower.  Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations, presentment, demand for payment, and notice
of dishonor.  Upon any change in the terms of this Note, and unless otherwise
expressly stated in writing, no party who signs this Note, whether as maker,
guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan or release any party or guarantor or collateral; or
impair, fail to realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by lender without the
consent of or notice to anyone.  All such parties also agree that Lender may
modify this loan without the consent of or notice to anyone other than the party
with whom the modification is made.  The obligations under this Note are joint
and several.
<PAGE>

                                PROMISSORY NOTE
                                  (Continued)
                                                                          Page 3
- --------------------------------------------------------------------------------

PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. EACH BORROWER
AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.


BORROWER:

DAILY JOURNAL CORPORATION, A SOUTH CAROLINA CORPORATION

By: /s/ Gerald L. Salzman
    ------------------------------------------------
    GERALD L. SALZMAN, President/CFO/Treasurer of
    DAILY JOURNAL CORPORATION, A SOUTH
    CAROLINA CORPORATION

SUSTAIN TECHNOLOGIES, INC., A VIRGINA CORPORATION


By: /s/ Gerald L. Salzman
    ------------------------------------------------
    GERALD L. SALZMAN, Secretary of SUSTAIN
    TECHNOLOGIES, INC., A VIRGINIA CORPORATION
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>COMMERCIAL SECURITY AGRMNT. DATED JANUARY 2, 2001
<TEXT>

<PAGE>

                                                                    ------------
                                                                    Exhibit 10.5
                                                                    ------------

CITY NATIONAL BANK
                         COMMERCIAL SECURITY AGREEMENT

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
  Principal           Loan Date         Maturity        Loan No     Call       Collateral       Account      Officer       Initials
$4,000,000.00         01-02-2001       01-31-2002        38058                                   648112        SST          /s/JS
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                   <C>              <C>              <C>         <C>        <C>              <C>          <C>           <C>
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
                                                             or item.
                         Any item above containing "***" has been omitted due to text length limitations.
- ------------------------------------------------------------------------------------------------------------------------------------

Borrower:  DAILY JOURNAL CORPORATION,        Lender:   City National Bank, NA
           A SOUTH CAROLINA CORPORATION                Downtown Los Angeles Commercial Banking Center
           SUSTAIN TECHNOLOGIES, INC.,                 #034000
           A VIRGINIA CORPORATION                      633 West Fifth Street, Tenth Floor
           915 EAST 1ST STREET                         Los Angeles, CA  90071
           LOS ANGELES, CA  90012

Grantor:   DAILY JOURNAL CORPORATION,
           A SOUTH CAROLINA CORPORATION
           915 EAST 1ST STREET
           LOS ANGELES, CA  90012
====================================================================================================================================
</TABLE>


THIS COMMERCIAL SECURITY AGREEMENT dated January 2, 2001, is made and executed
among DAILY JOURNAL CORPORATION, A SOUTH CAROLINA CORPORATION ("Grantor"); DAILY
JOURNAL CORPORATION, A SOUTH CAROLINA CORPORATION; and SUSTAIN TECHNOLOGIES,
INC., A VIRGINIA CORPORATION ("Borrower"); and City National Bank, NA
("Lender").

GRANT OF SECURITY INTEREST.  For valuable consideration, Grantor grants to
Lender a security interest in the Collateral to secure the Indebtedness and
agrees that Lender shall have the rights stated in this Agreement with respect
to the Collateral, in addition to all other rights which Lender may have by law.

COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means
the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which
Grantor is giving to Lender a security interest for the payment of the
Indebtedness and performance of all other obligations under the Note and this
Agreement:

     All Inventory, Chattel Paper, Accounts, Equipment and General Intangibles

In addition, the word "Collateral" also includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:

     (A)  All accessions, attachments, accessories, tools, parts, supplies,
     replacements and additions to any of the collateral described herein,
     whether added now or later.

     (B)  All products and produce of any of the property described in this
     Collateral section.

     (C)  All accounts, general intangibles, instruments, rents, monies,
     payments, and all other rights, arising out of a sale, lease, or other
     disposition of any of the property described in this Collateral section.

     (D)  All proceeds (including insurance proceeds) from the sale,
     destruction, loss, or other disposition of any of the property described in
     this Collateral section, and sums due from a third party who has damaged or
     destroyed the Collateral or from that party's insurer, whether due to
     judgment, settlement or other process.

     (E)  All records and data relating to any of the property described in this
     Collateral section, whether in the form of a writing, photograph,
     microfilm, microfiche, or electronic media, together with all of Grantor's
     right, title, and interest in and to all computer software required to
     utilize, create, maintain, and process any such records or data on
     electronic media.

Despite any other provision of this Agreement, Lender is not granted, and will
not have, a nonpurchase money security interest in household goods, to the
extent such a security interest would be prohibited by applicable law.  In
addition, if because of the type of any Property, Lender is required to give a
notice of the right to cancel under Truth in Lending for the Indebtedness, then
Lender will not have a security interest in such Property unless and until such
a notice is given.

CROSS-COLLATERALIZATION.  In addition to the Note, this Agreement secures all
obligations, debts and liabilities, plus interest thereon, of Borrower to
Lender, or any one or more of them, as well as all claims by Lender against
Borrower or any one or more of them, whether now existing or hereafter arising,
whether related or unrelated to the purpose of the Note, whether voluntary or
otherwise, whether due or not due, direct or indirect, absolute or contingent,
liquidated or unliquidated and whether Borrower may be liable individually or
jointly with others, whether obligated as guarantor, surety, accommodation party
or otherwise, and whether recovery upon such amounts may be or hereafter may
become barred by any statute of limitations, and whether the obligation to repay
such amounts may be or hereafter may become otherwise unenforceable.

BORROWER'S WAIVERS AND RESPONSIBILITIES.  Except as otherwise required under
this Agreement or by applicable law, (A) Borrower agrees that Lender need not
tell Borrower about any action or inaction Lender takes in connection with this
Agreement; (B) Borrower assumes the responsibility for being and keeping
informed about the Collateral; and (C) Borrower waives any defenses that may
arise because of any action or inaction of Lender, including without limitation
any failure of Lender to realize upon the Collateral or any delay by Lender in
realizing upon the Collateral; and Borrower agrees to remain liable under the
Note no matter what action Lender takes or fails to take under this Agreement.

GRANTOR'S REPRESENTATIONS AND WARRANTIES.  Grantor warrants that:  (A) this
Agreement is executed at Borrower's request and not at the request of Lender;
(B) Grantor has the full right, power and authority to enter into this Agreement
and to pledge the Collateral to Lender; (C) Grantor has established adequate
means of obtaining from Borrower on a continuing basis information about
Borrower's financial condition; and (D) Lender has made no representation to
Grantor about Borrower or Borrower's creditworthiness.

GRANTOR'S WAIVERS.  Except as prohibited by applicable law, Grantor waives any
right to require Lender to (A)  make any presentment, protest, demand, or notice
of any kind, including notice of change of any terms of repayment of the
Indebtedness, default by Borrower or any other guarantor or surety, any action
or nonaction taken by Borrower, Lender, or any other guarantor or surety of
Borrower, or the creation of new or additional
<PAGE>

                         COMMERCIAL SECURITY AGREEMENT
                                  (Continued)
                                                                          Page 2
- --------------------------------------------------------------------------------

Indebtedness; (B) proceed against any person, including Borrower, before
proceeding against Grantor; (C) proceed against any collateral for the
Indebtedness, including Borrower's collateral, before proceeding against
Grantor; (D) apply any payments or proceeds received against the Indebtedness in
any order; (E) give notice of the terms, time, and place of any sale of any
collateral pursuant to the Uniform Commercial Code or any other law governing
such sale; (F) disclose any information about the Indebtedness, the Borrower,
any collateral, or any other guarantor or surety, or about any action or
nonaction of Lender; or (G) pursue any remedy or course of action in Lender's
power whatsoever.

Grantor also waives any and all rights or defenses arising by reason of (A) any
disability or other defense of Borrower, any other guarantor or surety or any
other person; (B) the cessation from any cause whatsoever, other than payment in
full, of the indebtedness; (C) the application of proceeds of the Indebtedness
by Borrower for purposes other than the purposes understood and intended by
Grantor and Lender; (D) any act of omission or commission by Lender which
directly or indirectly results in or contributes to the discharge of Borrower or
any other guarantor or surety, or the Indebtedness, or the loss or release of
any collateral by operation of law or otherwise; (E) any statute of limitations
in any action under this Agreement or on the Indebtedness; or (F) any
modification or change in terms of the Indebtedness, whatsoever, including
without limitation, the renewal, extension, acceleration, or other change in the
time payment of the Indebtedness is due and any change in the interest rate.
Until all Indebtedness is paid in full, Grantor shall have no right of
subrogation, and Grantor waives any defense Grantor may have based upon any
election of remedies by Lender which limits or destroys Grantor's subrogation
rights or Grantor's rights to seek reimbursement from Borrower or any other
guarantor or surety, including without limitation, any loss of rights Grantor
may suffer by reason of any rights or protections of Borrower in connection with
any anti-deficiency laws or other laws limiting or discharging the Indebtedness
or Borrower's obligations (including, without limitation, Sections 726, 580b,
and 580d of the California Code of Civil Procedure). Until all Indebtedness is
paid in full, Grantor waives any right to enforce any remedy Lender may have
against Borrower or any other guarantor, surety, or other person, and further,
Grantor waives any right to participate in any collateral for the Indebtedness
now or hereafter held by Grantor.

RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.

GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With
respect to the Collateral, Grantor represents and warrants to Lender that:

     Perfection of Security Interest. Grantor agrees to execute financing
     statements and to take whatever other actions are requested by Lender to
     perfect and continue Lender's security interest in the Collateral. Upon
     request of Lender, Grantor will deliver to Lender any and all of the
     documents evidencing or constituting the Collateral, and Grantor will note
     Lender's interest upon any and all chattel paper if not delivered to Lender
     for possession by Lender. This is a continuing Security Agreement and will
     continue in effect even though all or any part of the Indebtedness is paid
     in full and even though for a period of time Borrower may not be indebted
     to Lender.

     Notices to Lender. Grantor will notify Lender in writing at Lender's
     address shown above (or such other addresses as Lender may designate from
     time to time) prior to any (1) change in Grantor's name, (2) change in
     Grantor's assumed business name(s), (3) change in the management of
     Grantor, (4) change in the authorized signer(s), (5) change in Grantor's
     principal office address, (6) conversion of Grantor to a new or different
     type of business entity, or (7) change in any other aspect of Grantor that
     directly or indirectly relates to any agreements between Grantor and
     Lender. No change in Grantor's name will take effect until after Lender has
     been notified.

     No Violation. The execution and delivery of this Agreement will not violate
     any law or agreement governing Grantor or to which Grantor is a party, and
     its certificate or articles of incorporation and bylaws do not prohibit any
     term or condition of this Agreement.

     Enforceability of Collateral. To the extent the Collateral consists of
     accounts, chattel paper, or general intangibles, as defined by the Uniform
     Commercial Code, the Collateral is enforceable in accordance with its
     terms, is genuine, and fully complies with all applicable laws and
     regulations concerning form, content and manner of preparation and
     execution, and all persons appearing to be obligated on the Collateral have
     authority and capacity to contract and are in fact obligated as they appear
     to be on the Collateral. At the time any Account becomes subject to a
     security interest in favor of Lender, the Account shall be a good and valid
     account representing an undisputed, bona fide indebtedness incurred by the
     account debtor, for merchandise held subject to delivery instructions or
     previously shipped or delivered pursuant to a contract of sale, or for
     services previously performed by Grantor with or for the account debtor. So
     long as this Agreement remains in effect, Grantor shall not, without
     Lender's prior written consent, compromise, settle, adjust, or extend
     payment under or with regard to any such Accounts. There shall be no
     setoffs or counterclaims against any of the Collateral, and no agreement
     shall have been made under which any deductions or discounts may be claimed
     concerning the Collateral except those disclosed to Lender in writing.

     Location of the Collateral. Except in the ordinary course of Grantor's
     business, Grantor agrees to keep the Collateral (or to the extent the
     Collateral consists of intangible property such as accounts or general
     intangibles, the records concerning the Collateral) at Grantor's address
     shown above or at such other locations as are acceptable to Lender. Upon
     Lender's request, Grantor will deliver to Lender in form satisfactory to
     Lender a schedule of real properties and Collateral locations relating to
     Grantor's operations, including without limitation the following: (1) all
     real property Grantor owns or is purchasing; (2) all real property Grantor
     is renting or leasing; (3) all storage facilities Grantor owns, rents,
     leases, or uses; and (4) all other properties where Collateral is or may be
     located.

     Removal of the Collateral. Except in the ordinary course of Grantor's
     business, including the sales of inventory, Grantor shall not remove the
     collateral from its existing location without Lender's prior written
     consent. Grantor shall, whenever requested, advise Lender of the exact
     location of the Collateral.

     Transactions Involving Collateral. Except for inventory sold, licenses
     granted or accounts collected in the ordinary course of Grantor's business,
     Grantor shall not sell, offer to sell, or otherwise transfer or dispose of
     the Collateral. While Grantor is not in default under this Agreement,
     Grantor may sell inventory, but only in the ordinary course of its business
     and only to buyers who qualify as a buyer in the ordinary course of
     business. A sale in the ordinary course of Grantor's business does not
     include a transfer in partial or total satisfaction of a debt or any bulk
     sale. Grantor shall not pledge, mortgage, encumber or otherwise permit the
     Collateral to be subject to any lien, security interest, encumbrance, or
     charge, other than the security interest provided for in this Agreement and
     any other security interests or liens granted by Grantor to Lender or any
     affiliate of Lender, without the prior written consent of Lender. This
     includes security interests even if junior in right to the security
     interests granted under this Agreement. Unless waived by Lender, all
     proceeds from any disposition of the Collateral (for whatever
<PAGE>

                         COMMERCIAL SECURITY AGREEMENT
                                  (Continued)
                                                                          Page 3
- --------------------------------------------------------------------------------

     reason) shall be held in trust for Lender and shall not be commingled with
     any other funds; provided, however, this requirement shall not constitute
     consent by Lender to any sale or other disposition. Upon receipt, Grantor
     shall immediately deliver any such proceeds to Lender.

     Title. Grantor represents and warrants to Lender that Grantor holds good
     and marketable title to the Collateral, free and clear of all liens and
     encumbrances except for the lien of this Agreement and any other security
     interests or liens granted by Grantor to Lender or any affiliate of Lender.
     No financing statement covering any of the Collateral is on file in any
     public office other than those which reflect the security interest created
     by this Agreement or to which Lender has specifically consented. Grantor
     shall defend Lender's rights in the Collateral against the claims and
     demands of all other persons.

     Repairs and Maintenance. Grantor agrees to keep and maintain, and to cause
     others to keep and maintain, the Collateral in good order, repair and
     condition at all times while this Agreement remains in effect. Grantor
     further agrees to pay when due all claims for work done on, or services
     rendered or material furnished in connection with the Collateral so that no
     lien or encumbrance may ever attach to or be filed against the Collateral.

     Inspection of Collateral. Lender and Lender's designated representatives
     and agents shall have the right at all reasonable times to examine and
     inspect the Collateral wherever located.

     Taxes, Assessments and Liens. Grantor will pay when due all taxes,
     assessments and liens upon the Collateral, its use or operation, upon this
     Agreement, upon any promissory note or notes evidencing the Indebtedness,
     or upon any of the other Related Documents. Grantor may withhold any such
     payment or may elect to contest any lien if Grantor is in good faith
     conducting an appropriate proceeding to contest the obligation to pay and
     so long as Lender's interest in the Collateral is not jeopardized in
     Lender's sole opinion. If the Collateral is subjected to a lien other than
     a lien in favor of Lender or one or more of its affiliates which is not
     discharged within fifteen (15) days, Grantor shall deposit with Lender
     cash, a sufficient corporate surety bond or other security satisfactory to
     Lender in an amount adequate to provide for the discharge of the lien plus
     any interest, costs, attorneys' fees or other charges that could accrue as
     a result of foreclosure or sale of the Collateral. In any contest Grantor
     shall defend itself and Lender shall satisfy any final adverse judgment
     before enforcement against the Collateral. Grantor shall name Lender as an
     additional obligee under any surety bond furnished in the contest
     proceedings. Grantor further agrees to furnish Lender with evidence that
     such taxes, assessments, and governmental and other charges have been paid
     in full and in a timely manner. Grantor may withhold any such payment or
     may elect to contest any lien if Grantor is in good faith conducting an
     appropriate proceeding to contest the obligation to pay and so long as
     Lender's interest in the Collateral is not jeopardized.

     Compliance with Governmental Requirements. Grantor shall comply promptly
     with all laws, ordinances, rules and regulations of all governmental
     authorities, now or hereafter in effect, applicable to the ownership,
     production, disposition, or use of the Collateral. Grantor may contest in
     good faith any such law, ordinance or regulation and withhold compliance
     during any proceeding, including appropriate appeals, so long as Lender's
     interest in the Collateral, in Lender's opinion, is not jeopardized.

     Hazardous Substances. Grantor represents and warrants that the Collateral
     never has been, and never will be so long as this Agreement remains a lien
     on the Collateral, used in violation of any Environmental Laws or for the
     generation, manufacture, storage, transportation, treatment, disposal,
     release or threatened release of any Hazardous Substance. The
     representations and warranties contained herein are based on Grantor's due
     diligence in investigating the Collateral for Hazardous Substances. Grantor
     hereby (1) releases and waives any future claims against Lender for
     indemnity or contribution in the event Grantor becomes liable for cleanup
     or other costs under any Environmental Laws, and (2) agree to indemnify and
     hold harmless Lender against any and all claims and losses resulting from a
     breach of this provision of this Agreement. This obligation to indemnify
     shall survive the payment of the Indebtedness and the satisfaction of this
     Agreement.

     Maintenance of Casualty Insurance. Grantor shall procure and maintain all
     risks insurance, including without limitation fire, theft and liability
     coverage together with such other insurance as Lender may require with
     respect to the Collateral, in form, amounts, coverages and basis reasonably
     acceptable to Lender and issued by a company or companies reasonably
     acceptable to Lender. Grantor, upon request of Lender, will deliver to
     Lender from time to time the policies or certificates of insurance in form
     satisfactory to Lender, including stipulations that coverages will not be
     cancelled or diminished without at least seven (7) days' prior written
     notice to Lender and not including any disclaimer of the insurer's
     liability for failure to give such a notice. Each insurance policy also
     shall include an endorsement providing that coverage in favor of Lender
     will not be impaired in any way by any act, omission or default of Grantor
     or any other person. In connection with all policies covering assets in
     which Lender holds or is offered a security interest, Grantor will provide
     Lender with such loss payable or other endorsements as Lender may require.
     If Grantor at any time fails to obtain or maintain any insurance as
     required under this Agreement, Lender may (but shall not be obligated to)
     obtain such insurance as Lender deems appropriate, including if Lender so
     chooses "single interest insurance," which will cover only Lender's
     interest in the Collateral.

     Application of Insurance Proceeds. Grantor shall promptly notify Lender of
     any loss or damage to the Collateral. Lender may make proof of loss if
     Grantor fails to do so within fifteen (15) days of the casualty. All
     proceeds of any insurance on the Collateral, including accrued proceeds
     thereon, shall be held by Lender as part of the Collateral. If Lender
     consents to repair or replacement of the damaged or destroyed Collateral,
     Lender shall, upon satisfactory proof of expenditure, pay or reimburse
     Grantor from the proceeds for the reasonable cost of repair or restoration.
     If Lender does not consent to repair or replacement of the Collateral,
     Lender shall retain a sufficient amount of the proceeds to pay all of the
     Indebtedness, and shall pay the balance to Grantor. Any proceeds which have
     not been disbursed within six (6) months after their receipt and which
     Grantor has not committed to the repair or restoration of the Collateral
     shall be used to prepay the Indebtedness.

     Insurance Reserves. Lender may require Grantor to maintain with Lender
     reserves for payment of insurance premiums, which reserves shall be created
     by monthly payments from Grantor of a sum estimated by Lender to be
     sufficient to produce, at least fifteen (15) days before the premium due
     date, amounts at least equal to the insurance premiums to be paid. If
     fifteen (15) days before the payment is due, the reserve funds are
     insufficient, Grantor shall upon demand pay any deficiency to Lender. The
     reserve funds shall be held by Lender as a general deposit and shall
     constitute a non-interest-bearing account which Lender may satisfy by
     payment of the insurance premiums required to be paid by Grantor as they
     become due. Lender does not hold the reserve funds in trust for Grantor,
     and Lender is not the agent of Grantor for payment of the insurance
     premiums required to be paid by Grantor. The responsibility for the payment
     of premiums shall remain Grantor's sole responsibility.

     Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
     reports on each existing policy of insurance showing such information as
     Lender may reasonably request including the following: (1) the name of the
     insurer; (2) the risks insured; (3) the amount of the policy; (4) the
     property insured; (5) the then current value on the basis of which
     insurance has been obtained and the manner of determining that
<PAGE>

                         COMMERCIAL SECURITY AGREEMENT
                                  (Continued)
                                                                          Page 4
- --------------------------------------------------------------------------------

     value; and (6) the expiration date of the policy. In addition, Grantor
     shall upon request by Lender (however not more often than annually) have an
     independent appraiser satisfactory to Lender determine, as applicable, the
     cash value or replacement cost of the Collateral.

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS.  Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral.  Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts.  At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness.  If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care.  Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.

LENDER'S EXPENDITURES.  If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral.  All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor.  All such expenses will become a
part of the Indebtedness and, at Lender's option, will (A) be payable on demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity.  The Collateral also will secure payment of these amounts.  Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default.

DEFAULT.  Each of the following shall constitute an Event of Default under this
Agreement:

     Payment Default. Borrower fails to make any payment when due under the
     Indebtedness.

     Other Defaults. Borrower or Grantor fails to comply with or to perform any
     other term, obligation, covenant or condition contained in this Agreement
     or in any of the Related Documents or to comply with or to perform any
     term, obligation, covenant or condition contained in any other agreement
     between Lender and Borrower or Grantor.

     Default in Favor of Third Parties. Should Borrower or any Grantor default
     under any loan, extension of credit, security agreement, purchase or sales
     agreement, or any other agreement, in favor of any other creditor or person
     that may materially affect any of Borrower's property or Borrower's or any
     Grantor's ability to repay the Indebtedness or perform their respective
     obligations under this Agreement or any of the Related Documents.

     False Statements. Any warranty, representation or statement made or
     furnished to Lender by Borrower or Grantor or on Borrower's or Grantor's
     behalf under this Agreement, the Note, or the Related Documents is false or
     misleading in any material respect, either now or at the time made or
     furnished or becomes false or misleading at any time thereafter.

     Defective Collateralization. This Agreement or any of the Related Documents
     ceases to be in full force and effect (including failure of any collateral
     document to create a valid and perfected security interest or lien) at any
     time and for any reason.

     Insolvency. The dissolution or termination of Borrower's or Grantor's
     existence as a going business, the insolvency of Borrower or Grantor, the
     appointment of a receiver for any part of Borrower's or Grantor's property,
     any assignment for the benefit of creditors, any type of creditor workout,
     or the commencement of any proceeding under any bankruptcy or insolvency
     laws by or against Borrower or Grantor.

     Creditor or Forfeiture Proceedings. Commencement of foreclosure or
     forfeiture proceedings, whether by judicial proceeding, self-help,
     repossession or any other method, by any creditor of Borrower or Grantor or
     by any governmental agency against any collateral securing the
     Indebtedness. This includes a garnishment of any of Borrower's or Grantor's
     accounts, including deposit accounts, with Lender. However, this Event of
     Default shall not apply if there is a good faith dispute by Borrower or
     Grantor as to the validity or reasonableness of the claim which is the
     basis of the creditor or forfeiture proceeding and if Borrower or Grantor
     gives Lender written notice of the creditor or forfeiture proceeding and
     deposits with Lender monies or a surety bond for the creditor or forfeiture
     proceeding, in an amount determined by Lender, in its sole discretion, as
     being an adequate reserve or bond for the dispute.

     Events Affecting Guarantor. Any of the preceding events occurs with respect
     to guarantor, endorser, surety, or accommodation party of any of the
     Indebtedness or guarantor, endorser, surety, or accommodation party dies or
     becomes incompetent.

     Adverse Change. A material adverse change occurs in Borrower's or Grantor's
     financial condition, or Lender believes the prospect of payment or
     performance of the Indebtedness is impaired.


RIGHTS AND REMEDIES ON DEFAULT.  If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the California Uniform Commercial Code.  In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:

     Accelerate Indebtedness. Lender may declare the entire Indebtedness,
     including any prepayment penalty which Borrower would be required to pay,
     immediately due and payable, without notice of any kind to Borrower or
     Grantor.

     Assemble Collateral. Lender may require Grantor to deliver to Lender all or
     any portion of the Collateral and any and all certificates of title and
     other documents relating to the Collateral. Lender may require Grantor to
     assemble the Collateral and make it available to Lender at a place to be
     designated by Lender. Lender also shall have full power to enter upon the
     property of Grantor to take possession of and remove Collateral. If
<PAGE>

                         COMMERCIAL SECURITY AGREEMENT
                                  (Continued)
                                                                          Page 5
- --------------------------------------------------------------------------------

     the Collateral contains other goods not covered by this Agreement at the
     time of repossession, Grantor agrees Lender may take such other goods,
     provided that Lender makes reasonable efforts to return them to Grantor
     after repossession.

     Sell the Collateral. Lender shall have full power to sell, lease, transfer,
     or otherwise deal with the Collateral or proceeds thereof in Lender's own
     name or that of Grantor. Lender may sell the Collateral at public auction
     or private sale. Unless the Collateral threatens to decline speedily in
     value or is of a type customarily sold on a recognized market, Lender will
     give Grantor reasonable notice of the time after which any private sale or
     any other intended disposition of the Collateral is to be made. The
     requirements of reasonable notice shall be met if such notice is given at
     least fifteen (15) days, or such lesser time as required by state law,
     before the time of the sale or disposition. All expenses relating to the
     disposition of the Collateral, including without limitation the expenses of
     retaking, holding, insuring, preparing for sale and selling the Collateral,
     shall become a part of the Indebtedness secured by this Agreement and shall
     be payable on demand, with interest at the Note rate from date of
     expenditure until repaid.

     Appoint Receiver. Lender shall have the right to have a receiver appointed
     to take possession of all or any part of the Collateral, with the power to
     protect and preserve the Collateral, to operate the Collateral preceding
     foreclosure or sale, and to collect the Rents from the Collateral and apply
     the proceeds, over and above the cost of the receivership, against the
     Indebtedness. The receiver may serve without bond if permitted by law.
     Lender's rights to the appointment of a receiver shall exist whether or not
     the apparent value of the Collateral exceeds the Indebtedness by a
     substantial amount. Employment by Lender shall not disqualify a person from
     serving as a receiver.

     Collect Revenues, Apply Accounts. Lender, either itself or through
     receiver, may collect the payments, rents, income, and revenues from the
     Collateral. Lender may at any time in Lender's discretion transfer any
     Collateral into Lender's own name or that of Lender's nominee and receive
     the payments, rents, income, and revenues therefrom and hold the same as
     security for the Indebtedness or apply it to payment of the Indebtedness in
     such order of preference as Lender may determine. Insofar as the Collateral
     consists of accounts, general intangibles, insurance policies, instruments,
     chattel paper, choses in action, or similar property, Lender may demand,
     collect, receipt for, settle, compromise, adjust, sue for, foreclose, or
     realize on the Collateral as Lender may determine, whether or not
     Indebtedness or Collateral is then due. For these purposes, Lender may, on
     behalf of and in the name of Grantor, receive, open and dispose of mail
     addressed to Grantor; change any address to which mail and payments are to
     be sent; and endorse notes, checks, drafts, money orders, documents of
     title, instruments and items pertaining to payment, shipment, or storage of
     any Collateral. To facilitate collection, Lender may notify account debtors
     and obligors on any Collateral to make payments directly to Lender.

     Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
     Lender may obtain a judgment against Borrower for any deficiency remaining
     on the Indebtedness due to Lender after application of all amounts received
     from the exercise of the rights provided in this Agreement. Borrower shall
     be liable for a deficiency even if the transaction described in this
     subsection is a sale of accounts or chattel paper.

     Other Rights and Remedies. Lender shall have all the rights and remedies of
     a secured creditor under the provisions of the Uniform Commercial Code, as
     may be amended from time to time. In addition, Lender shall have and may
     exercise any or all other rights and remedies it may have available at law,
     in equity, or otherwise.

     Election Remedies. Except as may be prohibited by applicable law, all of
     Lender's rights and remedies, whether evidenced by this Agreement, the
     Related Documents, or by any other writing, shall be cumulative and may be
     exercised singularly or concurrently. Election by Lender to pursue any
     remedy will not bar any other remedy, and an election to make expenditures
     or to take action to perform an obligation of Grantor under this Agreement,
     after Grantor's failure to perform, shall not affect Lender's right to
     declare a default and exercise its remedies.

MISCELLANEOUS PROVISIONS.  The following miscellaneous provisions are a part of
this Agreement:

     Amendments. This Agreement, together with any Related Documents,
     constitutes the entire understanding and agreement of the parties as to the
     matters set forth in this Agreement. No alteration of or amendment to this
     Agreement shall be effective unless given in writing and signed by the
     party or parties sought to be charged or bound by the alteration or
     amendment.

     Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of
     Lender's costs and expenses, including Lender's attorneys' fees and
     Lender's legal expenses, incurred in connection with the enforcement of
     this Agreement. Lender may hire or pay someone else to help enforce this
     Agreement, and Grantor shall pay the costs and expenses of such
     enforcement. Costs and expenses include Lender's attorneys' fees and legal
     expenses whether or not there is a lawsuit, including attorneys' fees and
     legal expenses for bankruptcy proceedings (including efforts to modify or
     vacate any automatic stay or injunction), appeals, and any anticipated
     post-judgment collection services. Grantor also shall pay all court costs
     and such additional fees as may be directed by the court.

     Caption Headings. Caption headings in this Agreement are for convenience
     purposes only and are not to be used to interpret or define the provisions
     of this Agreement.

     Governing Law. This Agreement will be governed by, construed and enforced
     in accordance with federal law and the laws of the State of California.
     This Agreement has been accepted by Lender in the State of California.

     Choice of Venue. If there is a lawsuit, Grantor agrees upon Lender's
     request to submit to the jurisdiction of the courts of LOS ANGELES County,
     State of California.

     Joint and Several Liability. All obligations of Borrower and Grantor under
     this Agreement shall be joint and several, and all references to Grantor
     shall mean each and every Grantor, and all references to Borrower shall
     mean each and every Borrower. This means that each Borrower and Grantor
     signing below is responsible for all obligations in this Agreement. Where
     any one or more of the parties is a corporation, partnership, limited
     liability company or similar entity, it is not necessary for Lender to
     inquire into the powers of any of the officers, directors, partners,
     members, or other agents acting or purporting to act on the entity's
     behalf, and any obligations made or created in reliance upon the professed
     exercise of such powers shall be guaranteed under this Agreement.

     Preference Payments. Any monies Lender pays because of an asserted
     preference claim in Borrower's or Grantor's bankruptcy will become a part
     of the Indebtedness and, at Lender's option, shall be payable by Borrower
     and Grantor as provided in this Agreement.

     No Waiver by Lender. Lender shall not be deemed to have waived any rights
     under this Agreement unless such waiver is given in writing and signed by
     Lender. No delay or omission on the part of Lender in exercising any right
     shall operate as a waiver of such right or any other right. A waiver by
     Lender of a provision of this Agreement shall not prejudice or constitute a
     waiver of Lender's right otherwise to demand strict
<PAGE>

                         COMMERCIAL SECURITY AGREEMENT
                                  (Continued)
                                                                          Page 6
- --------------------------------------------------------------------------------

     compliance with that provision or any other provision of this Agreement. No
     prior waiver by Lender, nor any course of dealing between Lender and
     Grantor, shall constitute a waiver of any of Lender's rights or of any of
     Grantor's obligations as to any future transactions. Whenever the consent
     of Lender is required under this Agreement, the granting of such consent by
     Lender in any instance shall not constitute continuing consent to
     subsequent instances where such consent is required and in all cases such
     consent may be granted or withheld in the sole discretion of Lender.

     Notices. Any notice required to be given under this Agreement shall be
     given in writing, and shall be effective with actually delivered, when
     actually received by telefacsimile (unless otherwise required by law), when
     deposited with a nationally recognized overnight courier, or, if mailed,
     when deposited in the United States mail, as first class, certified or
     registered mail postage prepaid, directed to the addresses shown near the
     beginning of this Agreement. Any party may change its address for notices
     under this Agreement by giving formal written notice to the other parties,
     specifying that the purpose of the notice is to change the party's address.
     For notice purposes, Grantor agrees to keep Lender informed at all times of
     Grantor's current address. Unless otherwise provided or required by law, if
     there is more than one Grantor, any notice given by Lender to any Grantor
     is deemed to be notice given to all Grantors.

     Power of Attorney. Grantor hereby appoints Lender as Grantor's irrevocable
     attorney-in-fact for the purpose of executing any documents necessary to
     perfect or to continue the security interest granted in this Agreement.
     Lender may at any time, and without further authorization from Grantor,
     file a carbon, photographic or other reproduction of any financing
     statement or of this Agreement for use as a financing statement. Grantor
     will reimburse Lender for all expenses for the perfection and the
     continuation of the perfection of Lender's security interest in the
     Collateral.

     Waiver of Co-Obligor's Rights. If more than one person is obligated for the
     Indebtedness, Grantor irrevocably waives, disclaims and relinquishes all
     claims against such other person which Grantor has or would otherwise have
     by virtue of payment of the Indebtedness or any part thereof, specifically
     including but not limited to all rights of indemnity, contribution or
     exoneration.

     Severability. If a court of competent jurisdiction finds any provision of
     this Agreement to be illegal, invalid, or unenforceable as to any
     circumstance, that finding shall not make the offending provision illegal,
     invalid, or unenforceable as to any other circumstance. If feasible, the
     offending provision shall be considered modified so that it becomes legal,
     valid and enforceable. If the offending provision cannot be so modified, it
     shall be considered deleted from this Agreement. Unless otherwise required
     by law, the illegality, invalidity, or unenforceability of any provision of
     this Agreement shall not affect the legality, validity or enforceability of
     any other provision of this Agreement.

     Successors and Assigns. Subject to any limitations stated in this Agreement
     on transfer of Grantor's interest, this Agreement shall be binding upon and
     inure to the benefit of the parties, their successors and assigns. If
     ownership of the Collateral becomes vested in a person other than Grantor,
     Lender, without notice to Grantor, may deal with Grantor's successors with
     reference to this Agreement and the Indebtedness by way of forbearance or
     extension without releasing Grantor from the obligations of this Agreement
     or liability under the Indebtedness.

     Survival of Representations and Warranties. All representations,
     warranties, and agreements made by Grantor in this Agreement shall survive
     the execution and delivery of this Agreement, shall be continuing in
     nature, and shall remain in full force and effect until such time as
     Borrower's Indebtedness shall be paid in full.

     Time is of the Essence. Time is of the essence in the performance of this
     Agreement.

DEFINITIONS.  The following capitalized words and terms shall have the following
meanings when used in this Agreement.  Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America.  Words and terms used in the singular shall
include the plural, and the plural shall include the singular, as the context
may require.  Words and terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code:

     Account. The word "Account" means a trade account, account receivable,
     other receivable, or other right to payment for goods sold or services
     rendered owing to Grantor (or to a third party grantor acceptable to
     Lender).

     Agreement. The word "Agreement" means this Commercial Security Agreement,
     as this Commercial Security Agreement may be amended or modified from time
     to time, together with all exhibits and schedules attached to this
     Commercial Security Agreement from time to time.

     Borrower. The word "Borrower" means DAILY JOURNAL CORPORATION, A SOUTH
     CAROLINA CORPORATION; and SUSTAIN TECHNOLOGIES, INC., A VIRGINIA
     CORPORATION, and all other persons and entities signing the Note in
     whatever capacity.

     Collateral. The word "Collateral" means all of Grantor's right, title and
     interest in and to all the Collateral as described in the Collateral
     Description section of this Agreement.

     Default. The word "Default" means the Default set forth in this Agreement
     in the section titled "Default".

     Environmental Laws. The words "Environmental Laws" mean any and all state,
     federal and local statutes, regulations and ordinances relating to the
     protection of human health or the environment, including without limitation
     the Comprehensive Environmental Response, Compensation, and Liability Act
     of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the
     Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
     ("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section
     1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
     Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the
     California Health and Safety Code, Section 25100, et seq., or other
     applicable state or federal laws, rules, or regulations adopted pursuant
     thereto.

     Event of Default. The words "Event of Default" mean any of the Events of
     Default set forth in this Agreement in the Default section of this
     Agreement.

     Grantor. The word "Grantor" means DAILY JOURNAL CORPORATION, A SOUTH
     CAROLINA CORPORATION.

     Hazardous Substances. The words "Hazardous Substances" mean materials that,
     because of their quantity, concentration or physical, chemical or
     infectious characteristics, may cause or pose a present or potential hazard
     to human health or the environment when improperly used, treated, stored,
     disposed of, generated, manufactured, transported or otherwise handled. The
     words "Hazardous Substances" are used in their very broadest sense and
     include without limitation any and all hazardous or toxic substances,
     materials or waste as defined by or listed under the Environmental Laws.
     The term "Hazardous Substances" also includes, without limitation,
     petroleum and petroleum by-products or any fraction thereof and asbestos.
<PAGE>

                         COMMERCIAL SECURITY AGREEMENT
                                  (Continued)
                                                                          Page 7
- --------------------------------------------------------------------------------

     Indebtedness. The word "Indebtedness" means the indebtedness evidenced by
     the Note or Related Documents, including all principal and interest
     together with all other indebtedness and costs and expenses for which
     Borrower is responsible under this Agreement or under any of the Related
     Documents.

     Lender. The word "Lender" means City National Bank, NA, its successors and
     assigns.

     Note. The word "Note" means the Note executed by Borrower in the principal
     amount of $4,000,000.00 dated January 2, 2001, together with all renewals
     of, extensions of, modifications of, refinancings of, consolidations of,
     and substitutions for the note or credit agreement.

     Related Documents. The words "Related Documents" mean all promissory notes,
     credit agreements, loan agreements, environmental agreements, guaranties,
     security agreements, mortgages, deeds of trust, security deeds, collateral
     mortgages, and all other instruments, agreements and documents, whether now
     or hereafter existing, executed in connection with the Indebtedness.
<PAGE>

                         COMMERCIAL SECURITY AGREEMENT
                                  (Continued)
                                                                          Page 8
- --------------------------------------------------------------------------------

BORROWER AND GRANTOR HAVE READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT AND AGREE TO ITS TERMS. THIS AGREEMENT IS DATED
JANUARY 2, 2001.

GRANTOR:

DAILY JOURNAL CORPORATION, A SOUTH CAROLINA CORPORATION

By: /s/ Gerald L. Salzman
    ---------------------------------------------
    GERALD L. SALZMAN, President/CFO/Treasurer of
    DAILY JOURNAL CORPORATION, A SOUTH
    CAROLINA CORPORATION


BORROWER:

DAILY JOURNAL CORPORATION, A SOUTH CAROLINA CORPORATION

By: /s/ Gerald L. Salzman
    ---------------------------------------------
    GERALD L. SALZMAN, President/CFO/Treasurer of
    DAILY JOURNAL CORPORATION, A SOUTH
    CAROLINA CORPORATION


SUSTAIN TECHNOLOGIES, INC., A VIRGINA CORPORATION

By: /s/ Gerald L. Salzman
    ---------------------------------------------
    GERALD L. SALZMAN, Secretary of SUSTAIN
    TECHNOLOGIES, INC., A VIRGINIA CORPORATION
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>7
<FILENAME>0007.txt
<DESCRIPTION>COMMERCIAL SECURITY AGRMNT. DATED JANUARY 2, 2001
<TEXT>

<PAGE>

                                                                    ------------
                                                                    Exhibit 10.6
                                                                    ------------

CITY NATIONAL BANK
                         COMMERCIAL SECURITY AGREEMENT


<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
  Principal          Loan Date         Maturity         Loan No       Call     Collateral       Account       Officer       Initials
$4,000,000.00        01-02-2001       01-31-2002         38058                                  648112          SST           /s/JS
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                  <C>              <C>               <C>           <C>      <C>              <C>           <C>           <C>
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan
                                                             or item.
                         Any item above containing "***" has been omitted due to text length limitations.
- ------------------------------------------------------------------------------------------------------------------------------------
Borrower:  DAILY JOURNAL CORPORATION,        Lender:   City National Bank, NA
           A SOUTH CAROLINA CORPORATION                Downtown Los Angeles Commercial Banking Center
           SUSTAIN TECHNOLOGIES, INC.,                 #034000
           A VIRGINIA CORPORATION                      633 West Fifth Street, Tenth Floor
           915 EAST 1ST STREET                         Los Angeles, CA  90071
           LOS ANGELES, CA  90012

Grantor:   SUSTAIN TECHNOLOGIES, INC.,
           A VIRGINIA CORPORATION
           915 EAST 1ST STREET
           LOS ANGELES, CA  90012
====================================================================================================================================
</TABLE>


THIS COMMERCIAL SECURITY AGREEMENT dated January 2, 2001, is made and executed
among DAILY JOURNAL CORPORATION, A SOUTH CAROLINA CORPORATION ("Grantor"); DAILY
JOURNAL CORPORATION, A SOUTH CAROLINA CORPORATION; and SUSTAIN TECHNOLOGIES,
INC., A VIRGINIA CORPORATION ("Borrower"); and City National Bank, NA
("Lender").

GRANT OF SECURITY INTEREST.  For valuable consideration, Grantor grants to
Lender a security interest in the Collateral to secure the Indebtedness and
agrees that Lender shall have the rights stated in this Agreement with respect
to the Collateral, in addition to all other rights which Lender may have by law.

COLLATERAL DESCRIPTION.  The word "Collateral" as used in this Agreement means
the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which
Grantor is giving to Lender a security interest for the payment of the
Indebtedness and performance of all other obligations under the Note and this
Agreement:

   All Inventory, Chattel Paper, Accounts, Equipment and General Intangibles

In addition, the word "Collateral" also includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:

   (A)  All accessions, attachments, accessories, tools, parts, supplies,
   replacements and additions to any of the collateral described herein, whether
   added now or later.

   (B)  All products and produce of any of the property described in this
   Collateral section.

   (C)  All accounts, general intangibles, instruments, rents, monies, payments,
   and all other rights, arising out of a sale, lease, or other disposition of
   any of the property described in this Collateral section.

   (D)  All proceeds (including insurance proceeds) from the sale, destruction,
   loss, or other disposition of any of the property described in this
   Collateral section, and sums due from a third party who has damaged or
   destroyed the Collateral or from that party's insurer, whether due to
   judgment, settlement or other process.

   (E)  All records and data relating to any of the property described in this
   Collateral section, whether in the form of a writing, photograph, microfilm,
   microfiche, or electronic media, together with all of Grantor's right, title,
   and interest in and to all computer software required to utilize, create,
   maintain, and process any such records or data on electronic media.

Despite any other provision of this Agreement, Lender is not granted, and will
not have, a nonpurchase money security interest in household goods, to the
extent such a security interest would be prohibited by applicable law.  In
addition, if because of the type of any Property, Lender is required to give a
notice of the right to cancel under Truth in Lending for the Indebtedness, then
Lender will not have a security interest in such Property unless and until such
a notice is given.

CROSS-COLLATERALIZATION.  In addition to the Note, this Agreement secures all
obligations, debts and liabilities, plus interest thereon, of Borrower to
Lender, or any one or more of them, as well as all claims by Lender against
Borrower or any one or more of them, whether now existing or hereafter arising,
whether related or unrelated to the purpose of the Note, whether voluntary or
otherwise, whether due or not due, direct or indirect, absolute or contingent,
liquidated or unliquidated and whether Borrower may be liable individually or
jointly with others, whether obligated as guarantor, surety, accommodation party
or otherwise, and whether recovery upon such amounts may be or hereafter may
become barred by any statute of limitations, and whether the obligation to repay
such amounts may be or hereafter may become otherwise unenforceable.

BORROWER'S WAIVERS AND RESPONSIBILITIES.  Except as otherwise required under
this Agreement or by applicable law, (A) Borrower agrees that Lender need not
tell Borrower about any action or inaction Lender takes in connection with this
Agreement; (B) Borrower assumes the responsibility for being and keeping
informed about the Collateral; and (C) Borrower waives any defenses that may
arise because of any action or inaction of Lender, including without limitation
any failure of Lender to realize upon the Collateral or any delay by Lender in
realizing upon the Collateral; and Borrower agrees to remain liable under the
Note no matter what action Lender takes or fails to take under this Agreement.

GRANTOR'S REPRESENTATIONS AND WARRANTIES.  Grantor warrants that:  (A) this
Agreement is executed at Borrower's request and not at the request of Lender;
(B) Grantor has the full right, power and authority to enter into this Agreement
and to pledge the Collateral to Lender; (C) Grantor has established adequate
means of obtaining from Borrower on a continuing basis information about
Borrower's financial condition; and (D) Lender has made no representation to
Grantor about Borrower or Borrower's creditworthiness.

GRANTOR'S WAIVERS.  Except as prohibited by applicable law, Grantor waives any
right to require Lender to (A)  make any presentment, protest, demand, or notice
of any kind, including notice of change of any terms of repayment of the
Indebtedness, default by Borrower or any other guarantor or surety, any action
or nonaction taken by Borrower, Lender, or any other guarantor or surety of
Borrower, or the creation of new or additional
<PAGE>

                         COMMERCIAL SECURITY AGREEMENT
                                  (Continued)
                                                                          Page 2
- --------------------------------------------------------------------------------

Indebtedness; (B) proceed against any person, including Borrower, before
proceeding against Grantor; (C) proceed against any collateral for the
Indebtedness, including Borrower's collateral, before proceeding against
Grantor; (D) apply any payments or proceeds received against the Indebtedness in
any order; (E) give notice of the terms, time, and place of any sale of any
collateral pursuant to the Uniform Commercial Code or any other law governing
such sale; (F) disclose any information about the Indebtedness, the Borrower,
any collateral, or any other guarantor or surety, or about any action or
nonaction of Lender; or (G) pursue any remedy or course of action in Lender's
power whatsoever.

Grantor also waives any and all rights or defenses arising by reason of (A)  any
disability or other defense of Borrower, any other guarantor or surety or any
other person; (B)  the cessation from any cause whatsoever, other than payment
in full, of the indebtedness; (C)  the application of proceeds of the
Indebtedness by Borrower for purposes other than the purposes understood and
intended by Grantor and Lender; (D)  any act of omission or commission by Lender
which directly or indirectly results in or contributes to the discharge of
Borrower or any other guarantor or surety, or the Indebtedness, or the loss or
release of any collateral by operation of law or otherwise; (E)  any statute of
limitations in any action under this Agreement or on the Indebtedness; or (F)
any modification or change in terms of the Indebtedness, whatsoever, including
without limitation, the renewal, extension, acceleration, or other change in the
time payment of the Indebtedness is due and any change in the interest rate.
Until all Indebtedness is paid in full, Grantor shall have no right of
subrogation, and Grantor waives any defense Grantor may have based upon any
election of remedies by Lender which limits or destroys Grantor's subrogation
rights or Grantor's rights to seek reimbursement from Borrower or any other
guarantor or surety, including without limitation, any loss of rights Grantor
may suffer by reason of any rights or protections of Borrower in connection with
any anti-deficiency laws or other laws limiting or discharging the Indebtedness
or Borrower's obligations (including, without limitation, Sections 726, 580b,
and 580d of the California Code of Civil Procedure).  Until all Indebtedness is
paid in full, Grantor waives any right to enforce any remedy Lender may have
against Borrower or any other guarantor, surety, or other person, and further,
Grantor waives any right to participate in any collateral for the Indebtedness
now or hereafter held by Grantor.

RIGHT OF SETOFF.  To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account).  This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law.  Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.

GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL.  With
respect to the Collateral, Grantor represents and warrants to Lender that:

   Perfection of Security Interest.  Grantor agrees to execute financing
   statements and to take whatever other actions are requested by Lender to
   perfect and continue Lender's security interest in the Collateral.  Upon
   request of Lender, Grantor will deliver to Lender any and all of the
   documents evidencing or constituting the Collateral, and Grantor will note
   Lender's interest upon any and all chattel paper if not delivered to Lender
   for possession by Lender.  This is a continuing Security Agreement and will
   continue in effect even though all or any part of the Indebtedness is paid in
   full and even though for a period of time Borrower may not be indebted to
   Lender.

   Notices to Lender.  Grantor will notify Lender in writing at Lender's address
   shown above (or such other addresses as Lender may designate from time to
   time) prior to any (1) change in Grantor's name, (2) change in Grantor's
   assumed business name(s), (3) change in the management of Grantor, (4) change
   in the authorized signer(s), (5) change in Grantor's principal office
   address, (6) conversion of Grantor to a new or different type of business
   entity, or (7)  change in any other aspect of Grantor that directly or
   indirectly relates to any agreements between Grantor and Lender.  No change
   in Grantor's name will take effect until after Lender has been notified.

   No Violation.  The execution and delivery of this Agreement will not violate
   any law or agreement governing Grantor or to which Grantor is a party, and
   its certificate or articles of incorporation and bylaws do not prohibit any
   term or condition of this Agreement.

   Enforceability of Collateral.  To the extent the Collateral consists of
   accounts, chattel paper, or general intangibles, as defined by the Uniform
   Commercial Code, the Collateral is enforceable in accordance with its terms,
   is genuine, and fully complies with all applicable laws and regulations
   concerning form, content and manner of preparation and execution, and all
   persons appearing to be obligated on the Collateral have authority and
   capacity to contract and are in fact obligated as they appear to be on the
   Collateral.  At the time any Account becomes subject to a security interest
   in favor of Lender, the Account shall be a good and valid account
   representing an undisputed, bona fide indebtedness incurred by the account
   debtor, for merchandise held subject to delivery instructions or previously
   shipped or delivered pursuant to a contract of sale, or for services
   previously performed by Grantor with or for the account debtor.  So long as
   this Agreement remains in effect, Grantor shall not, without Lender's prior
   written consent, compromise, settle, adjust, or extend payment under or with
   regard to any such Accounts.  There shall be no setoffs or counterclaims
   against any of the Collateral, and no agreement shall have been made under
   which any deductions or discounts may be claimed concerning the Collateral
   except those disclosed to Lender in writing.

   Location of the Collateral.  Except in the ordinary course of Grantor's
   business, Grantor agrees to keep the Collateral (or to the extent the
   Collateral consists of intangible property such as accounts or general
   intangibles, the records concerning the Collateral) at Grantor's address
   shown above or at such other locations as are acceptable to Lender.  Upon
   Lender's request, Grantor will deliver to Lender in form satisfactory to
   Lender a schedule of real properties and Collateral locations relating to
   Grantor's operations, including without limitation the following:  (1) all
   real property Grantor owns or is purchasing; (2) all real property Grantor is
   renting or leasing; (3) all storage facilities Grantor owns, rents, leases,
   or uses; and (4) all other properties where Collateral is or may be located.

   Removal of the Collateral.  Except in the ordinary course of Grantor's
   business, including the sales of inventory, Grantor shall not remove the
   collateral from its existing location without Lender's prior written consent.
   Grantor shall, whenever requested, advise Lender of the exact location of the
   Collateral.

   Transactions Involving Collateral.  Except for inventory sold, licenses
   granted or accounts collected in the ordinary course of Grantor's business,
   Grantor shall not sell, offer to sell, or otherwise transfer or dispose of
   the Collateral.  While Grantor is not in default under this Agreement,
   Grantor may sell inventory, but only in the ordinary course of its business
   and only to buyers who qualify as a buyer in the ordinary course of business.
   A sale in the ordinary course of Grantor's business does not include a
   transfer in partial or total satisfaction of a debt or any bulk sale.
   Grantor shall not pledge, mortgage, encumber or otherwise permit the
   Collateral to be subject to any lien, security interest, encumbrance, or
   charge, other than the security interest provided for in this Agreement and
   any other security interests or liens granted by Grantor to Lender or any
   affiliate of Lender, without the prior written consent of Lender.  This
   includes security interests even if junior in right to the security interests
   granted under this Agreement.  Unless waived by Lender, all proceeds from any
   disposition of the Collateral (for whatever
<PAGE>

                         COMMERCIAL SECURITY AGREEMENT
                                  (Continued)
                                                                          Page 3
- --------------------------------------------------------------------------------

   reason) shall be held in trust for Lender and shall not be commingled with
   any other funds; provided, however, this requirement shall not constitute
   consent by Lender to any sale or other disposition. Upon receipt, Grantor
   shall immediately deliver any such proceeds to Lender.

   Title.  Grantor represents and warrants to Lender that Grantor holds good and
   marketable title to the Collateral, free and clear of all liens and
   encumbrances except for the lien of this Agreement and any other security
   interests or liens granted by Grantor to Lender or any affiliate of Lender.
   No financing statement covering any of the Collateral is on file in any
   public office other than those which reflect the security interest created by
   this Agreement or to which Lender has specifically consented.  Grantor shall
   defend Lender's rights in the Collateral against the claims and demands of
   all other persons.

   Repairs and Maintenance.  Grantor agrees to keep and maintain, and to cause
   others to keep and maintain, the Collateral in good order, repair and
   condition at all times while this Agreement remains in effect.  Grantor
   further agrees to pay when due all claims for work done on, or services
   rendered or material furnished in connection with the Collateral so that no
   lien or encumbrance may ever attach to or be filed against the Collateral.

   Inspection of Collateral.  Lender and Lender's designated representatives and
   agents shall have the right at all reasonable times to examine and inspect
   the Collateral wherever located.

   Taxes, Assessments and Liens.  Grantor will pay when due all taxes,
   assessments and liens upon the Collateral, its use or operation, upon this
   Agreement, upon any promissory note or notes evidencing the Indebtedness, or
   upon any of the other Related Documents.  Grantor may withhold any such
   payment or may elect to contest any lien if Grantor is in good faith
   conducting an appropriate proceeding to contest the obligation to pay and so
   long as Lender's interest in the Collateral is not jeopardized in Lender's
   sole opinion.  If the Collateral is subjected to a lien other than a lien in
   favor of Lender or one or more of its affiliates which is not discharged
   within fifteen (15) days, Grantor shall deposit with Lender cash, a
   sufficient corporate surety bond or other security satisfactory to Lender in
   an amount adequate to provide for the discharge of the lien plus any
   interest, costs, attorneys' fees or other charges that could accrue as a
   result of foreclosure or sale of the Collateral.  In any contest Grantor
   shall defend itself and Lender shall satisfy any final adverse judgment
   before enforcement against the Collateral.  Grantor shall name Lender as an
   additional obligee under any surety bond furnished in the contest
   proceedings.  Grantor further agrees to furnish Lender with evidence that
   such taxes, assessments, and governmental and other charges have been paid in
   full and in a timely manner.  Grantor may withhold any such payment or may
   elect to contest any lien if Grantor is in good faith conducting an
   appropriate proceeding to contest the obligation to pay and so long as
   Lender's interest in the Collateral is not jeopardized.

   Compliance with Governmental Requirements.  Grantor shall comply promptly
   with all laws, ordinances, rules and regulations of all governmental
   authorities, now or hereafter in effect, applicable to the ownership,
   production, disposition, or use of the Collateral.  Grantor may contest in
   good faith any such law, ordinance or regulation and withhold compliance
   during any proceeding, including appropriate appeals, so long as Lender's
   interest in the Collateral, in Lender's opinion, is not jeopardized.

   Hazardous Substances.  Grantor represents and warrants that the Collateral
   never has been, and never will be so long as this Agreement remains a lien on
   the Collateral, used in violation of any Environmental Laws or for the
   generation, manufacture, storage, transportation, treatment, disposal,
   release or threatened release of any Hazardous Substance.  The
   representations and warranties contained herein are based on Grantor's due
   diligence in investigating the Collateral for Hazardous Substances.  Grantor
   hereby (1) releases and waives any future claims against Lender for indemnity
   or contribution in the event Grantor becomes liable for cleanup or other
   costs under any Environmental Laws, and (2) agree to indemnify and hold
   harmless Lender against any and all claims and losses resulting from a breach
   of this provision of this Agreement.  This obligation to indemnify shall
   survive the payment of the Indebtedness and the satisfaction of this
   Agreement.

   Maintenance of Casualty Insurance.  Grantor shall procure and maintain all
   risks insurance, including without limitation fire, theft and liability
   coverage together with such other insurance as Lender may require with
   respect to the Collateral, in form, amounts, coverages and basis reasonably
   acceptable to Lender and issued by a company or companies reasonably
   acceptable to Lender.  Grantor, upon request of Lender, will deliver to
   Lender from time to time the policies or certificates of insurance in form
   satisfactory to Lender, including stipulations that coverages will not be
   cancelled or diminished without at least seven (7) days' prior written notice
   to Lender and not including any disclaimer of the insurer's liability for
   failure to give such a notice.  Each insurance policy also shall include an
   endorsement providing that coverage in favor of Lender will not be impaired
   in any way by any act, omission or default of Grantor or any other person.
   In connection with all policies covering assets in which Lender holds or is
   offered a security interest, Grantor will provide Lender with such loss
   payable or other endorsements as Lender may require.  If Grantor at any time
   fails to obtain or maintain any insurance as required under this Agreement,
   Lender may (but shall not be obligated to) obtain such insurance as Lender
   deems appropriate, including if Lender so chooses "single interest
   insurance," which will cover only Lender's interest in the Collateral.

   Application of Insurance Proceeds.  Grantor shall promptly notify Lender of
   any loss or damage to the Collateral.  Lender may make proof of loss if
   Grantor fails to do so within fifteen (15) days of the casualty.  All
   proceeds of any insurance on the Collateral, including accrued proceeds
   thereon, shall be held by Lender as part of the Collateral.  If Lender
   consents to repair or replacement of the damaged or destroyed Collateral,
   Lender shall, upon satisfactory proof of expenditure, pay or reimburse
   Grantor from the proceeds for the reasonable cost of repair or restoration.
   If Lender does not consent to repair or replacement of the Collateral, Lender
   shall retain a sufficient amount of the proceeds to pay all of the
   Indebtedness, and shall pay the balance to Grantor.  Any proceeds which have
   not been disbursed within six (6) months after their receipt and which
   Grantor has not committed to the repair or restoration of the Collateral
   shall be used to prepay the Indebtedness.

   Insurance Reserves.  Lender may require Grantor to maintain with Lender
   reserves for payment of insurance premiums, which reserves shall be created
   by monthly payments from Grantor of a sum estimated by Lender to be
   sufficient to produce, at least fifteen (15) days before the premium due
   date, amounts at least equal to the insurance premiums to be paid.  If
   fifteen (15) days before the payment is due, the reserve funds are
   insufficient, Grantor shall upon demand pay any deficiency to Lender.  The
   reserve funds shall be held by Lender as a general deposit and shall
   constitute a non-interest-bearing account which Lender may satisfy by payment
   of the insurance premiums required to be paid by Grantor as they become due.
   Lender does not hold the reserve funds in trust for Grantor, and Lender is
   not the agent of Grantor for payment of the insurance premiums required to be
   paid by Grantor.  The responsibility for the payment of premiums shall remain
   Grantor's sole responsibility.

   Insurance Reports.  Grantor, upon request of Lender, shall furnish to Lender
   reports on each existing policy of insurance showing such information as
   Lender may reasonably request including the following:  (1) the name of the
   insurer; (2) the risks insured; (3) the amount of the policy; (4) the
   property insured; (5) the then current value on the basis of which insurance
   has been obtained and the manner of determining that
<PAGE>

                         COMMERCIAL SECURITY AGREEMENT
                                  (Continued)
                                                                          Page 4
- --------------------------------------------------------------------------------

   value; and (6) the expiration date of the policy. In addition, Grantor shall
   upon request by Lender (however not more often than annually) have an
   independent appraiser satisfactory to Lender determine, as applicable, the
   cash value or replacement cost of the Collateral.

GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS.  Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral.  Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts.  At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the Indebtedness.  If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care.  Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
Indebtedness.

LENDER'S EXPENDITURES.  If any action or proceeding is commenced that would
materially affect Lender's interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral.  All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor.  All such expenses will become a
part of the Indebtedness and, at Lender's option, will (A) be payable on demand;
(B) be added to the balance of the Note and be apportioned among and be payable
with any installment payments to become due during either (1) the term of any
applicable insurance policy; or (2) the remaining term of the Note; or (C) be
treated as a balloon payment which will be due and payable at the Note's
maturity.  The Collateral also will secure payment of these amounts.  Such right
shall be in addition to all other rights and remedies to which Lender may be
entitled upon Default.

DEFAULT.  Each of the following shall constitute an Event of Default under this
Agreement:

   Payment Default.  Borrower fails to make any payment when due under the
   Indebtedness.

   Other Defaults.  Borrower or Grantor fails to comply with or to perform any
   other term, obligation, covenant or condition contained in this Agreement or
   in any of the Related Documents or to comply with or to perform any term,
   obligation, covenant or condition contained in any other agreement between
   Lender and Borrower or Grantor.

   Default in Favor of Third Parties.  Should Borrower or any Grantor default
   under any loan, extension of credit, security agreement, purchase or sales
   agreement, or any other agreement, in favor of any other creditor or person
   that may materially affect any of Borrower's property or Borrower's or any
   Grantor's ability to repay the Indebtedness or perform their respective
   obligations under this Agreement or any of the Related Documents.

   False Statements.  Any warranty, representation or statement made or
   furnished to Lender by Borrower or Grantor or on Borrower's or Grantor's
   behalf under this Agreement, the Note, or the Related Documents is false or
   misleading in any material respect, either now or at the time made or
   furnished or becomes false or misleading at any time thereafter.

   Defective Collateralization.  This Agreement or any of the Related Documents
   ceases to be in full force and effect (including failure of any collateral
   document to create a valid and perfected security interest or lien) at any
   time and for any reason.

   Insolvency.  The dissolution or termination of Borrower's or Grantor's
   existence as a going business, the insolvency of Borrower or Grantor, the
   appointment of a receiver for any part of Borrower's or Grantor's property,
   any assignment for the benefit of creditors, any type of creditor workout, or
   the commencement of any proceeding under any bankruptcy or insolvency laws by
   or against Borrower or Grantor.

   Creditor or Forfeiture Proceedings.  Commencement of foreclosure or
   forfeiture proceedings, whether by judicial proceeding, self-help,
   repossession or any other method, by any creditor of Borrower or Grantor or
   by any governmental agency against any collateral securing the Indebtedness.
   This includes a garnishment of any of Borrower's or Grantor's accounts,
   including deposit accounts, with Lender.  However, this Event of Default
   shall not apply if there is a good faith dispute by Borrower or Grantor as to
   the validity or reasonableness of the claim which is the basis of the
   creditor or forfeiture proceeding and if Borrower or Grantor gives Lender
   written notice of the creditor or forfeiture proceeding and deposits with
   Lender monies or a surety bond for the creditor or forfeiture proceeding, in
   an amount determined by Lender, in its sole discretion, as being an adequate
   reserve or bond for the dispute.

   Events Affecting Guarantor.  Any of the preceding events occurs with respect
   to guarantor, endorser, surety, or accommodation party of any of the
   Indebtedness or guarantor, endorser, surety, or accommodation party dies or
   becomes incompetent.

   Adverse Change.  A material adverse change occurs in Borrower's or Grantor's
   financial condition, or Lender believes the prospect of payment or
   performance of the Indebtedness is impaired.


RIGHTS AND REMEDIES ON DEFAULT.  If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the California Uniform Commercial Code.  In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:

   Accelerate Indebtedness.  Lender may declare the entire Indebtedness,
   including any prepayment penalty which Borrower would be required to pay,
   immediately due and payable, without notice of any kind to Borrower or
   Grantor.

   Assemble Collateral.  Lender may require Grantor to deliver to Lender all or
   any portion of the Collateral and any and all certificates of title and other
   documents relating to the Collateral.  Lender may require Grantor to assemble
   the Collateral and make it available to Lender at a place to be designated by
   Lender.  Lender also shall have full power to enter upon the property of
   Grantor to take possession of and remove Collateral.  If
<PAGE>

                         COMMERCIAL SECURITY AGREEMENT
                                  (Continued)
                                                                          Page 5
- --------------------------------------------------------------------------------

   the Collateral contains other goods not covered by this Agreement at the time
   of repossession, Grantor agrees Lender may take such other goods, provided
   that Lender makes reasonable efforts to return them to Grantor after
   repossession.

   Sell the Collateral.  Lender shall have full power to sell, lease, transfer,
   or otherwise deal with the Collateral or proceeds thereof in Lender's own
   name or that of Grantor.  Lender may sell the Collateral at public auction or
   private sale.  Unless the Collateral threatens to decline speedily in value
   or is of a type customarily sold on a recognized market, Lender will give
   Grantor reasonable notice of the time after which any private sale or any
   other intended disposition of the Collateral is to be made.  The requirements
   of reasonable notice shall be met if such notice is given at least fifteen
   (15) days, or such lesser time as required by state law, before the time of
   the sale or disposition.  All expenses relating to the disposition of the
   Collateral, including without limitation the expenses of retaking, holding,
   insuring, preparing for sale and selling the Collateral, shall become a part
   of the Indebtedness secured by this Agreement and shall be payable on demand,
   with interest at the Note rate from date of expenditure until repaid.

   Appoint Receiver.  Lender shall have the right to have a receiver appointed
   to take possession of all or any part of the Collateral, with the power to
   protect and preserve the Collateral, to operate the Collateral preceding
   foreclosure or sale, and to collect the Rents from the Collateral and apply
   the proceeds, over and above the cost of the receivership, against the
   Indebtedness.  The receiver may serve without bond if permitted by law.
   Lender's rights to the appointment of a receiver shall exist whether or not
   the apparent value of the Collateral exceeds the Indebtedness by a
   substantial amount.  Employment by Lender shall not disqualify a person from
   serving as a receiver.

   Collect Revenues, Apply Accounts.  Lender, either itself or through receiver,
   may collect the payments, rents, income, and revenues from the Collateral.
   Lender may at any time in Lender's discretion transfer any Collateral into
   Lender's own name or that of Lender's nominee and receive the payments,
   rents, income, and revenues therefrom and hold the same as security for the
   Indebtedness or apply it to payment of the Indebtedness in such order of
   preference as Lender may determine.  Insofar as the Collateral consists of
   accounts, general intangibles, insurance policies, instruments, chattel
   paper, choses in action, or similar property, Lender may demand, collect,
   receipt for, settle, compromise, adjust, sue for, foreclose, or realize on
   the Collateral as Lender may determine, whether or not Indebtedness or
   Collateral is then due.  For these purposes, Lender may, on behalf of and in
   the name of Grantor, receive, open and dispose of mail addressed to Grantor;
   change any address to which mail and payments are to be sent; and endorse
   notes, checks, drafts, money orders, documents of title, instruments and
   items pertaining to payment, shipment, or storage of any Collateral.  To
   facilitate collection, Lender may notify account debtors and obligors on any
   Collateral to make payments directly to Lender.

   Obtain Deficiency.  If Lender chooses to sell any or all of the Collateral,
   Lender may obtain a judgment against Borrower for any deficiency remaining on
   the Indebtedness due to Lender after application of all amounts received from
   the exercise of the rights provided in this Agreement.  Borrower shall be
   liable for a deficiency even if the transaction described in this subsection
   is a sale of accounts or chattel paper.

   Other Rights and Remedies.  Lender shall have all the rights and remedies of
   a secured creditor under the provisions of the Uniform Commercial Code, as
   may be amended from time to time.  In addition, Lender shall have and may
   exercise any or all other rights and remedies it may have available at law,
   in equity, or otherwise.

   Election Remedies.  Except as may be prohibited by applicable law, all of
   Lender's rights and remedies, whether evidenced by this Agreement, the
   Related Documents, or by any other writing, shall be cumulative and may be
   exercised singularly or concurrently.  Election by Lender to pursue any
   remedy will not bar any other remedy, and an election to make expenditures or
   to take action to perform an obligation of Grantor under this Agreement,
   after Grantor's failure to perform, shall not affect Lender's right to
   declare a default and exercise its remedies.

MISCELLANEOUS PROVISIONS.  The following miscellaneous provisions are a part of
this Agreement:

   Amendments.  This Agreement, together with any Related Documents, constitutes
   the entire understanding and agreement of the parties as to the matters set
   forth in this Agreement.  No alteration of or amendment to this Agreement
   shall be effective unless given in writing and signed by the party or parties
   sought to be charged or bound by the alteration or amendment.

   Attorneys' Fees; Expenses.  Grantor agrees to pay upon demand all of Lender's
   costs and expenses, including Lender's attorneys' fees and Lender's legal
   expenses, incurred in connection with the enforcement of this Agreement.
   Lender may hire or pay someone else to help enforce this Agreement, and
   Grantor shall pay the costs and expenses of such enforcement.  Costs and
   expenses include Lender's attorneys' fees and legal expenses whether or not
   there is a lawsuit, including attorneys' fees and legal expenses for
   bankruptcy proceedings (including efforts to modify or vacate any automatic
   stay or injunction), appeals, and any anticipated post-judgment collection
   services.  Grantor also shall pay all court costs and such additional fees as
   may be directed by the court.

   Caption Headings.  Caption headings in this Agreement are for convenience
   purposes only and are not to be used to interpret or define the provisions of
   this Agreement.

   Governing Law.  This Agreement will be governed by, construed and enforced in
   accordance with federal law and the laws of the State of California.  This
   Agreement has been accepted by Lender in the State of California.

   Choice of Venue.  If there is a lawsuit, Grantor agrees upon Lender's request
   to submit to the jurisdiction of the courts of LOS ANGELES County, State of
   California.

   Joint and Several Liability.  All obligations of Borrower and Grantor under
   this Agreement shall be joint and several, and all references to Grantor
   shall mean each and every Grantor, and all references to Borrower shall mean
   each and every Borrower.  This means that each Borrower and Grantor signing
   below is responsible for all obligations in this Agreement.  Where any one or
   more of the parties is a corporation, partnership, limited liability company
   or similar entity, it is not necessary for Lender to inquire into the powers
   of any of the officers, directors, partners, members, or other agents acting
   or purporting to act on the entity's behalf, and any obligations made or
   created in reliance upon the professed exercise of such powers shall be
   guaranteed under this Agreement.

   Preference Payments.  Any monies Lender pays because of an asserted
   preference claim in Borrower's or Grantor's bankruptcy will become a part of
   the Indebtedness and, at Lender's option, shall be payable by Borrower and
   Grantor as provided in this Agreement.

   No Waiver by Lender.  Lender shall not be deemed to have waived any rights
   under this Agreement unless such waiver is given in writing and signed by
   Lender.  No delay or omission on the part of Lender in exercising any right
   shall operate as a waiver of such right or any other right.  A waiver by
   Lender of a provision of this Agreement shall not prejudice or constitute a
   waiver of Lender's right otherwise to demand strict
<PAGE>

                         COMMERCIAL SECURITY AGREEMENT
                                  (Continued)
                                                                          Page 6
- --------------------------------------------------------------------------------

   compliance with that provision or any other provision of this Agreement. No
   prior waiver by Lender, nor any course of dealing between Lender and Grantor,
   shall constitute a waiver of any of Lender's rights or of any of Grantor's
   obligations as to any future transactions. Whenever the consent of Lender is
   required under this Agreement, the granting of such consent by Lender in any
   instance shall not constitute continuing consent to subsequent instances
   where such consent is required and in all cases such consent may be granted
   or withheld in the sole discretion of Lender.

   Notices.  Any notice required to be given under this Agreement shall be given
   in writing, and shall be effective with actually delivered, when actually
   received by telefacsimile (unless otherwise required by law), when deposited
   with a nationally recognized overnight courier, or, if mailed, when deposited
   in the United States mail, as first class, certified or registered mail
   postage prepaid, directed to the addresses shown near the beginning of this
   Agreement. Any party may change its address for notices under this Agreement
   by giving formal written notice to the other parties, specifying that the
   purpose of the notice is to change the party's address.  For notice purposes,
   Grantor agrees to keep Lender informed at all times of Grantor's current
   address.  Unless otherwise provided or required by law, if there is more than
   one Grantor, any notice given by Lender to any Grantor is deemed to be notice
   given to all Grantors.

   Power of Attorney.  Grantor hereby appoints Lender as Grantor's irrevocable
   attorney-in-fact for the purpose of executing any documents necessary to
   perfect or to continue the security interest granted in this Agreement.
   Lender may at any time, and without further authorization from Grantor, file
   a carbon, photographic or other reproduction of any financing statement or of
   this Agreement for use as a financing statement.  Grantor will reimburse
   Lender for all expenses for the perfection and the continuation of the
   perfection of Lender's security interest in the Collateral.

   Waiver of Co-Obligor's Rights.  If more than one person is obligated for the
   Indebtedness, Grantor irrevocably waives, disclaims and relinquishes all
   claims against such other person which Grantor has or would otherwise have by
   virtue of payment of the Indebtedness or any part thereof, specifically
   including but not limited to all rights of indemnity, contribution or
   exoneration.

   Severability.  If a court of competent jurisdiction finds any provision of
   this Agreement to be illegal, invalid, or unenforceable as to any
   circumstance, that finding shall not make the offending provision illegal,
   invalid, or unenforceable as to any other circumstance.  If feasible, the
   offending provision shall be considered modified so that it becomes legal,
   valid and enforceable.  If the offending provision cannot be so modified, it
   shall be considered deleted from this Agreement. Unless otherwise required by
   law, the illegality, invalidity, or unenforceability of any provision of this
   Agreement shall not affect the legality, validity or enforceability of any
   other provision of this Agreement.

   Successors and Assigns.  Subject to any limitations stated in this Agreement
   on transfer of Grantor's interest, this Agreement shall be binding upon and
   inure to the benefit of the parties, their successors and assigns.  If
   ownership of the Collateral becomes vested in a person other than Grantor,
   Lender, without notice to Grantor, may deal with Grantor's successors with
   reference to this Agreement and the Indebtedness by way of forbearance or
   extension without releasing Grantor from the obligations of this Agreement or
   liability under the Indebtedness.

   Survival of Representations and Warranties.  All representations, warranties,
   and agreements made by Grantor in this Agreement shall survive the execution
   and delivery of this Agreement, shall be continuing in nature, and shall
   remain in full force and effect until such time as Borrower's Indebtedness
   shall be paid in full.

   Time is of the Essence.  Time is of the essence in the performance of this
   Agreement.

DEFINITIONS.  The following capitalized words and terms shall have the following
meanings when used in this Agreement.  Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America.  Words and terms used in the singular shall
include the plural, and the plural shall include the singular, as the context
may require.  Words and terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code:

   Account.  The word "Account" means a trade account, account receivable, other
   receivable, or other right to payment for goods sold or services rendered
   owing to Grantor (or to a third party grantor acceptable to Lender).

   Agreement.  The word "Agreement" means this Commercial Security Agreement, as
   this Commercial Security Agreement may be amended or modified from time to
   time, together with all exhibits and schedules attached to this Commercial
   Security Agreement from time to time.

   Borrower.  The word "Borrower" means DAILY JOURNAL CORPORATION, A SOUTH
   CAROLINA CORPORATION; and SUSTAIN TECHNOLOGIES, INC., A VIRGINIA CORPORATION,
   and all other persons and entities signing the Note in whatever capacity.

   Collateral.  The word "Collateral" means all of Grantor's right, title and
   interest in and to all the Collateral as described in the Collateral
   Description section of this Agreement.

   Default.  The word "Default" means the Default set forth in this Agreement in
   the section titled "Default".

   Environmental Laws.  The words "Environmental Laws" mean any and all state,
   federal and local statutes, regulations and ordinances relating to the
   protection of human health or the environment, including without limitation
   the Comprehensive Environmental Response, Compensation, and Liability Act of
   1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
   Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"), the
   Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
   Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.,
   Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety
   Code, Section 25100, et seq., or other applicable state or federal laws,
   rules, or regulations adopted pursuant thereto.

   Event of Default.  The words "Event of Default" mean any of the Events of
   Default set forth in this Agreement in the Default section of this Agreement.

   Grantor.  The word "Grantor" means DAILY JOURNAL CORPORATION, A SOUTH
   CAROLINA CORPORATION.

   Hazardous Substances.  The words "Hazardous Substances" mean materials that,
   because of their quantity, concentration or physical, chemical or infectious
   characteristics, may cause or pose a present or potential hazard to human
   health or the environment when improperly used, treated, stored, disposed of,
   generated, manufactured, transported or otherwise handled.  The words
   "Hazardous Substances" are used in their very broadest sense and include
   without limitation any and all hazardous or toxic substances, materials or
   waste as defined by or listed under the Environmental Laws.  The term
   "Hazardous Substances" also includes, without limitation, petroleum and
   petroleum by-products or any fraction thereof and asbestos.
<PAGE>

                         COMMERCIAL SECURITY AGREEMENT
                                  (Continued)
                                                                          Page 7
- --------------------------------------------------------------------------------

   Indebtedness.  The word "Indebtedness" means the indebtedness evidenced by
   the Note or Related Documents, including all principal and interest together
   with all other indebtedness and costs and expenses for which Borrower is
   responsible under this Agreement or under any of the Related Documents.

   Lender.  The word "Lender" means City National Bank, NA, its successors and
   assigns.

   Note.  The word "Note" means the Note executed by Borrower in the principal
   amount of $4,000,000.00 dated January 2, 2001, together with all renewals of,
   extensions of, modifications of, refinancings of, consolidations of, and
   substitutions for the note or credit agreement.

   Related Documents.  The words "Related Documents" mean all promissory notes,
   credit agreements, loan agreements, environmental agreements, guaranties,
   security agreements, mortgages, deeds of trust, security deeds, collateral
   mortgages, and all other instruments, agreements and documents, whether now
   or hereafter existing, executed in connection with the Indebtedness.
<PAGE>

                         COMMERCIAL SECURITY AGREEMENT
                                  (Continued)
                                                                          Page 8
- --------------------------------------------------------------------------------

BORROWER AND GRANTOR HAVE READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT AND AGREE TO ITS TERMS. THIS AGREEMENT IS DATED
JANUARY 2, 2001.

GRANTOR:

SUSTAIN TECHNOLOGIES, INC., A VIRGINIA CORPORATION

By: /s/ Gerald L. Salzman
    ------------------------------------------
    GERALD L. SALZMAN, Secretary of SUSTAIN
    TECHNOLOGIES, INC., A VIRGINIA CORPORATION


BORROWER:

DAILY JOURNAL CORPORATION, A SOUTH CAROLINA CORPORATION

By: /s/ Gerald L. Salzman
    ---------------------
    GERALD L. SALZMAN, President/CFO/Treasurer of
    DAILY JOURNAL CORPORATION, A SOUTH
    CAROLINA CORPORATION

SUSTAIN TECHNOLOGIES, INC., A VIRGINA CORPORATION

By: /s/ Gerald L. Salzman
    ---------------------
    GERALD L. SALZMAN, Secretary of SUSTAIN
    TECHNOLOGIES, INC., A VIRGINIA CORPORATION
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>8
<FILENAME>0008.txt
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TEXT>

<TABLE> <S> <C>

<PAGE>

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and the Consolidated Statement of Income and is
qualified in its entirety by reference to such financial statements.
</LEGEND>

<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          SEP-30-2001
<PERIOD-START>                             OCT-01-2000
<PERIOD-END>                               DEC-31-2000
<CASH>                                         684,000
<SECURITIES>                                         0
<RECEIVABLES>                                9,530,000
<ALLOWANCES>                                   500,000
<INVENTORY>                                     19,000
<CURRENT-ASSETS>                            13,188,000
<PP&E>                                      16,676,000
<DEPRECIATION>                               7,019,000
<TOTAL-ASSETS>                              35,514,000
<CURRENT-LIABILITIES>                       15,268,000
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                        15,000
<OTHER-SE>                                  17,286,000
<TOTAL-LIABILITY-AND-EQUITY>                35,514,000
<SALES>                                      8,528,000
<TOTAL-REVENUES>                             8,564,000
<CGS>                                                0
<TOTAL-COSTS>                                8,643,000
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                52,000
<INTEREST-EXPENSE>                                   0
<INCOME-PRETAX>                               (79,000)
<INCOME-TAX>                                  (30,000)
<INCOME-CONTINUING>                            (3,000)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   (3,000)
<EPS-BASIC>                                     (0.00)
<EPS-DILUTED>                                   (0.00)


</TABLE>
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
