Document:

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                                                                    Exhibit 10.1

                               CREDIT AGREEMENT

     THIS CREDIT AGREEMENT (this "Agreement"), dated as of September 20, 2001,
is made between Amerigon Incorporated, a California corporation (the "Company"),
and Big Beaver Investments LLC, a Delaware limited liability company (the
"Lender").

     The Company has requested the Lender to make a term loan to the Company in
an aggregate principal amount of up to One Million Five Hundred Thousand Dollars
($1,500,000) as provided herein. The Lender is willing to make such loan upon
the terms and subject to the conditions set forth in this Agreement.

     The Lender may elect to convert some or all of such loan into Common Stock
of the Company as provided herein.

     In order to induce the Lender to enter into this Agreement, the Company has
agreed to issue a warrant to purchase shares of Common Stock of the Company to
the Lender or its members as provided herein.

     Accordingly, the parties hereto agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

     SECTION 1.01   CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:

     "AFFILIATE" means any Person which, directly or indirectly, controls, is
controlled by or is under common control with another Person. For purposes of
the foregoing, "control," "controlled by" and "under common control with" with
respect to any Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.

     "BRIDGE LOAN WARRANT" has the meaning set forth in Section 2.12.

     "BUSINESS DAY" means a day of the year on which commercial banks are not
required or authorized by law to close in Los Angeles, California.

     "CHARTER DOCUMENTS" means the Company's articles of incorporation, bylaws
and other organizational documents, each as may be amended, modified or restated
from time to time.

     "COMMON STOCK" means the Common Stock, no par value per share, of the
Company, and any securities or other property into or for which such Common
Stock may hereafter be converted or exchanged.
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     "CLOSING DATE" means the date upon which the conditions set forth in
Sections 3.01 and 3.02 are satisfied and the Lender makes the First Loan Advance
to the Company.

     "COLLATERAL" means the property described in one or more of the Collateral
Documents, and all other property now existing or hereafter acquired which may
at any time be or become subject to a Lien in favor of the Lender pursuant to
one or more of the Collateral Documents or otherwise, securing the payment and
performance of the Obligations.

     "COLLATERAL DOCUMENTS" means the Security Agreement, the Patent and
Trademark Security Agreement, the Membership Pledge Agreement, any other
agreement pursuant to which the Company provides a Lien on its assets in favor
of the Lender, and all filings (including, but not limited to, all U.C.C.
financing statements filed to perfect the security interests granted in the
Security Agreement), documents and agreements made or delivered pursuant
thereto.

     "COMMITMENT" means the Lender's obligation to make the Loan on the terms
and conditions set forth in this Agreement.

     "DEFAULT" means an Event of Default or an event or condition which with
notice or lapse of time or both would constitute an Event of Default.

     "ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances, judgments and codes, together
with all administrative orders, directives, requests, licenses, authorizations
and permits of, and agreements with (including consent decrees), any
governmental agencies or authorities, in each case relating to or imposing
liability or standards of conduct concerning public health, safety and/or
environmental protection matters, including Hazardous Substances.

     "EVENT OF DEFAULT" has the meaning set forth in Section 6.01.

     "FINAL MATURITY DATE" means the earlier to occur of (i) December 1, 2001,
(ii) the occurrence of a Trigger Event, or (iii) acceleration of the Loan
pursuant to Section 6.02.

     "GAAP" means generally accepted accounting principles in the United States,
consistently applied.

     "HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or other
hazardous substances, materials, wastes, contaminants or pollutants, including
asbestos, PCBs, petroleum products and byproducts, and any substances defined or
listed as "hazardous substances," "hazardous materials," "hazardous wastes" or
"toxic substances" (or similarly identified or having any constituent substances
displaying any of the foregoing characteristics), regulated under or forming the
basis for liability under any applicable Environmental Law.

     "INDEBTEDNESS" means, for any Person: (i) all indebtedness or other
obligations of such Person for borrowed money or for the deferred purchase price
of property or services which purchase price is (a) due more than six (6) months
from the date of incurrence of the obligation in respect thereof, or (b)
evidenced by a note or similar written instrument, but excluding trade payables
incurred in the ordinary course of business; (ii) all obligations evidenced by
notes,

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bonds, debentures or similar instruments, including obligations so evidenced
incurred in connection with the acquisition of property, assets or businesses
described in clause (i) above; (iii) all indebtedness created or arising under
any conditional sale or other title retention agreement with respect to property
acquired by such Person; (iv) all reimbursement and other obligations of such
Person in respect of letters of credit and bankers acceptances and all net
obligations in respect of interest rate swaps, caps, floors and collars,
currency swaps, and other similar financial products; (v) all obligations under
leases which shall have been or should be, in accordance with GAAP, recorded as
capital leases; and/or (vi) all indebtedness of another Person of the types
referred to in clauses (i) through (v) guaranteed directly or indirectly in any
manner by the Person for whom indebtedness is being determined, or in effect
guaranteed directly or indirectly by such Person through an agreement to
purchase or acquire such indebtedness, to advance or supply funds for the
payment or purchase of such indebtedness or otherwise assure a creditor against
loss, or secured by any Lien upon or in property owned by the Person for whom
indebtedness is being determined, whether or not such Person has assumed or
become liable for the payment of such indebtedness of such other Person.

     "INVESTORS RIGHTS AGREEMENT" means the Investors' Rights Agreement dated as
of June 8, 1999 among the Company, the Lender and Westar Capital II LLC, a
Delaware limited liability company ("Westar").

     "LIEN" means any mortgage, pledge, security interest, assignment, deposit
arrangement, charge or encumbrance, lien or other type of preferential
arrangement (other than a financing statement filed by a lessor in respect of an
operating lease in the ordinary course of business not intended as security).

     "LOAN ADVANCE" has the meaning set forth in Section 2.01.

     "LOAN DOCUMENTS" means this Agreement, the Note, the Collateral Documents
and all other certificates, documents, agreements and instruments delivered to
the Lender under or in connection with this Agreement or the Loan.

     "LOAN" has the meaning set forth in Section 2.01.

     "MARKET PRICE" shall mean (i) the average closing bid price of the Common
Stock, for ten (10) consecutive Business Days ending on the Closing Date, as
reported by Nasdaq, if the Common Stock is traded on the Nasdaq SmallCap Market,
or (ii) the average last reported sale price of the Common Stock, for ten (10)
consecutive Business Days ending on the Closing Date, as reported by the primary
exchange on which the Common Stock is traded, if the Common Stock is traded on a
national securities exchange, or by Nasdaq, if the Common Stock is traded on the
Nasdaq National Market; provided, however, that such price shall not be greater
than the average closing bid price or the last reported sale price, as the case
may be, for the ninety (90) calendar days ending on the Closing Date.

     "MATERIAL ADVERSE EFFECT" means any event, circumstance or condition that,
individually or in the aggregate: (i) has or could reasonably be expected to
have a material adverse effect on the business, operations, assets, liabilities
(including without limitation contingent liabilities), prospects, employee
relationships, customer or supplier relationships, or

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the condition (financial or otherwise) of the Company; (ii) would materially
impair the ability of the Company to perform or observe its obligations under or
in respect of any of the Loan Documents; or (iii) adversely affects the
legality, validity, binding effect or enforceability of any of the Loan
Documents or the perfection or priority of any Lien granted to the Lender under
any of the Collateral Documents.

     "MEMBERSHIP PLEDGE AGREEMENT" means the Membership Interest Pledge
Agreement between the Company and the Lender, in form and substance satisfactory
to the Lender.

     "NOTE" has the meaning set forth in Section 2.03.

     "OBLIGATIONS" means the indebtedness, liabilities and other obligations of
the Company to the Lender under or in connection with the Loan Documents,
including the Loan, all interest accrued thereon, all fees due under this
Agreement and all other amounts payable by the Company to the Lender thereunder
or in connection therewith.

     "PATENT AND TRADEMARK SECURITY AGREEMENT" means the Patent and Trademark
Security Agreement between the Company and the Lender, in form and substance
satisfactory to the Lender.

     "PERMITTED LIENS" means: (i) Liens in favor of the Lender; (ii) the
existing Liens (including leases and subleases) listed in Schedule 1 or incurred
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in connection with the extension, renewal or refinancing of the Indebtedness
secured by such existing Liens, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the Indebtedness being extended, renewed or
refinanced does not increase; (iii) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and which are adequately reserved for in
accordance with GAAP, provided the same does not have priority over any of the
Lender's Liens and no notice of tax lien has been filed of record; (iv) Liens of
materialmen, mechanics, warehousemen, carriers or employees or other similar
Liens provided for by mandatory provisions of law and securing obligations
either not delinquent or being contested in good faith by appropriate
proceedings and which do not in the aggregate materially impair the use or value
of the property or risk the loss or forfeiture thereof; (v) Liens consisting of
deposits or pledges to secure the performance of bids, trade contracts, leases,
public or statutory obligations, or other obligations of a like nature incurred
in the ordinary course of business (other than for Indebtedness); (vi) Liens
upon or in any equipment acquired or held by the Company to secure the purchase
price of such equipment, or Indebtedness incurred solely for the purpose of
financing the acquisition of such equipment; and (vii) restrictions and other
minor encumbrances on real property which do not in the aggregate materially
impair the use or value of such real property or risk the loss or forfeiture
thereof.

     "PERSON" means an individual, corporation, partnership, limited liability
company, joint venture, trust, unincorporated organization or any other entity
of whatever nature, or any governmental agency or authority.

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     "RESPONSIBLE OFFICER" means, with respect to any Person, the chief
executive officer, the president, the chief financial officer or the treasurer
of such Person, or any other senior officer of such Person having substantially
the same authority and responsibility.

     "SECURITY AGREEMENT" means the Security Agreement between the Company and
the Lender, in form and substance satisfactory to the Lender.

     "TRIGGER EVENT" means that the Company (or its Board of Directors) shall
have authorized, recommended, proposed or publicly announced its intention to
enter into (or has failed to recommend rejection of) any tender or exchange
offer, merger, consolidation, liquidation, dissolution, business combination,
recapitalization, acquisition, or disposition of a material amount of assets or
securities or any comparable transaction which has not been consented to in
writing by the Lender.

     SECTION 1.02   ACCOUNTING TERMS. Unless otherwise defined or the context
otherwise requires, all accounting terms not expressly defined herein shall be
construed, and all accounting determinations and computations required under
this Agreement or any other Loan Document shall be made, in accordance with
GAAP.

     SECTION 1.03   INTERPRETATION. In the Loan Documents, except to the extent
the context otherwise requires: (i) any reference to an Article, a Section, a
Schedule or an Exhibit is a reference to an article or section thereof, or a
schedule or an exhibit thereto, respectively, and to a subsection or a clause
is, unless otherwise stated, a reference to a subsection or a clause of the
Section or subsection in which the reference appears; (ii) the words "hereof,"
"herein," "hereto," "hereunder" and the like mean and refer to this Agreement or
any other Loan Document as a whole and not merely to the specific Article,
Section, subsection, paragraph or clause in which the respective word appears;
(iii) the meaning of defined terms shall be equally applicable to both the
singular and plural forms of the terms defined; (iv) the words "including,"
"includes" and "include" shall be deemed to be followed by the words "without
limitation"; (v) references to agreements and other contractual instruments
shall be deemed to include all subsequent amendments and other modifications
thereto, but only to the extent such amendments and other modifications are not
prohibited by the terms of the Loan Documents; (vi) references to statutes or
regulations are to be construed as including all statutory and regulatory
provisions consolidating, amending or replacing the statute or regulation
referred to; (vii) any table of contents, captions and headings are for
convenience of reference only and shall not affect the construction of this
Agreement or any other Loan Document; and (viii) in the computation of periods
of time from a specified date to a later specified date, the word "from" means
"from and including"; the words "to" and "until" each mean "to but excluding";
and the word "through" means "to and including."

                                  ARTICLE II

                                   THE LOAN

     SECTION 2.01   LOAN. Subject to the terms and conditions of this Agreement,
including satisfaction of the conditions set forth under Article III, the Lender
agrees to make a term loan to the Company in an aggregate principal amount of
One Million Five Hundred

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Thousand Dollars ($1,500,000) (the "Loan"), to be advanced to the Company in
four (4) installments as follows (each a "Loan Advance"): (i) the first
distribution of Five Hundred Thousand Dollars ($500,000) is to be advanced on
the Closing Date (the "First Loan Advance"); (ii) the second distribution of Two
Hundred Fifty-Thousand Dollars ($250,000) is to be advanced on October 1, 2001
(the "Second Loan Advance"); (iii) the third distribution of Two Hundred Fifty-
Thousand Dollars ($250,000) is to be advanced within two (2) Business Days after
the Company satisfies the conditions set forth in Section 3.04, but in no event
earlier than October 1, 2001 (the "Third Loan Advance"); and (iv) the fourth
distribution of Five Hundred Thousand Dollars ($500,000) is to be advanced on
November 1, 2001 (the "Fourth Loan Advance"). Whenever any Loan Advance
hereunder shall be stated to be made on a day other than a Business Day, then
such Loan Advance shall be made on the next succeeding Business Day.

     SECTION 2.02   [INTENTIONALLY OMITTED]

     SECTION 2.03   EVIDENCE OF INDEBTEDNESS. The Company shall execute and
deliver for account of the Lender a promissory note (the "Note"), in a form
reasonably acceptable to the Lender, as additional evidence of the Indebtedness
of the Company to the Lender resulting from the Loan.

     SECTION 2.04   INTEREST. The Company hereby promises to pay interest on the
unpaid principal amount of the Loan from the date of each Loan Advance until
maturity thereof, at a rate equal to ten percent (10%) per annum, on the date of
any prepayment of the Loan and at the Final Maturity Date.

     Any principal payments on the Loan not paid when due and, to the extent
permitted by applicable law, any interest payments on the Loan not paid when
due, in each case whether at stated maturity, by notice of prepayment, by
acceleration or otherwise, shall thereafter bear interest (including post-
petition interest in any proceeding under applicable bankruptcy laws) payable on
demand at a rate which is five percent (5%) per annum in excess of the interest
rate otherwise payable under this Agreement for the Loan. Payment or acceptance
of the increased rates of interest provided for in this paragraph is not a
permitted alternative to timely payment and shall not constitute a waiver of any
Event of Default or otherwise prejudice or limit any rights or remedies of the
Lender.

     SECTION 2.05   COMPUTATIONS. All computations of fees and interest
hereunder shall be made on the basis of a year of three hundred sixty (360) days
for the actual number of days occurring in the period for which any such
interest or fee is payable.

     SECTION 2.06   HIGHEST LAWFUL RATE. Anything herein to the contrary
notwithstanding, if during any period for which interest is computed hereunder,
the applicable interest rate, together with all fees, charges and other payments
which are treated as interest under applicable law, as provided for herein or in
any other Loan Document, would exceed the maximum rate of interest which may be
charged, contracted for, reserved, received or collected by the Lender in
connection with this Agreement under applicable law (the "Maximum Rate"), the
Company shall not be obligated to pay, and the Lender shall not be entitled to
charge, collect, receive, reserve or take, interest in excess of the Maximum
Rate, and during any such period the interest payable hereunder shall be limited
to the Maximum Rate.

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     SECTION 2.07   [INTENTIONALLY OMITTED]

     SECTION 2.08   REPAYMENT OF THE LOAN. The Company hereby promises to pay to
the Lender the outstanding principal amount of the Loan and any accrued interest
thereon in full on the Final Maturity Date.

     SECTION 2.09   PREPAYMENTS OF THE LOANS.

     (a)  OPTIONAL PREPAYMENTS. The Company may, upon prior notice to the
Lender, prepay the outstanding amount of the Loan in whole or in part, without
premium or penalty.

     (b)  NOTICE; APPLICATION. The notice given of any prepayment shall specify
the date and amount of the prepayment. If the notice of prepayment is given, the
Company shall make such prepayment and the prepayment amount specified in such
notice shall be due and payable on the date specified therein, with accrued
interest to such date. Each prepayment by or on behalf of the Company hereunder
shall, unless a specific determination is made by the Lender with respect
thereto, be applied (i) first, to accrued and unpaid interest due the Lender,
and (ii) second, to principal due the Lender.

     SECTION 2.10   PAYMENTS.

     (a)  PAYMENTS. The Company shall make each payment under the Loan
Documents, unconditionally in full without deduction, set-off, counterclaim or,
to the extent permitted by applicable law, other defense, and free and clear of,
and without reduction for or on account of, any present or future taxes or
withholdings (other than a tax on the overall net income of the Lender), and all
liabilities with respect thereto. Each payment shall be made not later than
11:00 A.M. (California time) on the day when due to the Lender in U.S. dollars
and in immediately available funds, or such other funds as shall be separately
agreed upon in writing by the Company and the Lender, in accordance with the
Lender's payment instructions.

     (b)  EXTENSION. Whenever any payment hereunder shall be stated to be due,
or whenever any interest payment date or any other date specified hereunder
would otherwise occur, on a day other than a Business Day, then, except as
otherwise provided herein, such payment shall be made, and such interest payment
date or other date shall occur, on the next succeeding Business Day, and such
extension of time shall in such case be included in the computation of payment
of accrued interest.

     (c)  APPLICATION. Each payment by or on behalf of the Company hereunder
shall, unless a specific determination is made by the Lender with respect
thereto, be applied (i) first, to accrued and unpaid interest due the Lender,
and (ii) second, to principal due the Lender.

     SECTION 2.11   CONVERSION OF LOANS INTO COMMON STOCK. The Lender shall have
conversion rights as follows (the "Conversion Rights"):

     (a)  CONVERSION RIGHTS. The Lender may elect in its sole discretion to
convert the principal of and/or interest accrued under all or a portion of the
Note into Common Stock at a conversion price equal to the Market Price of the
Common Stock; provided, however, that if the

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Company, while any of the Obligations shall remain unpaid or the Lender shall
have any Commitment, issues equity securities in excess of One Million Five
Hundred Thousand Dollars ($1,500,000) in an offering at an issuance price that
is less than the Market Price, the conversion price shall be reduced to such
issuance price (the "Conversion Price"). The Conversion Price shall be subject
to adjustment as set forth in Section 2.11(c).

     (b)  MECHANICS OF CONVERSION. Before the Lender shall be entitled to
convert the Note into shares of Common Stock, the Lender shall, in the case of a
partial conversion of the Note, indicate on the face of the Note the amount so
converted and provide a copy of the Note to the Company or, in the case of the
conversion of all of the remaining outstanding principal and interest due under
the Note, surrender the Note, duly endorsed, at the office of the Company and
shall give written notice to the Company at its principal corporate office, of
the election to convert the same or a portion thereof and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued. The Company shall, as soon as practicable thereafter,
issue and deliver at such office to the Lender, or to the nominee or nominees of
the Lender, a certificate or certificates for the number of shares of Common
Stock to which such persons shall be entitled as aforesaid. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the Note (or a copy thereof as provided herein)
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), the conversion may, at the option of the Lender, be conditioned upon the
closing with the underwriters of the sale of securities pursuant to such
offering, in which event the person or persons entitled to receive the Common
Stock upon conversion of the Note shall not be deemed to have converted such
Note until immediately prior to the closing of such sale of securities.

     (c)  CONVERSION PRICE ADJUSTMENTS OF NOTE FOR CERTAIN DILUTIVE SPLITS AND
COMBINATIONS. The Conversion Price of the Note shall be subject to adjustment
from time to time as follows:

          (i)   In the event the Company should at any time or from time to time
     after the Closing Date fix a record date for the effectuation of a split or
     subdivision of the outstanding shares of Common Stock or the determination
     of holders of Common Stock entitled to receive a dividend or other
     distribution payable in additional shares of Common Stock without payment
     of any consideration by such holder for the additional shares of Common
     Stock, then, as of such record date (or the date of such dividend
     distribution, split or subdivision if no record date is fixed), the
     Conversion Price of the Note shall be appropriately decreased so that the
     number of shares of Common Stock issuable on conversion of the Note shall
     be increased in proportion to such increase of the aggregate of shares of
     Common Stock outstanding.  In the event the Company shall declare or pay,
     without consideration, any dividend on the Common Stock payable in any
     right to acquire Common Stock for no consideration, then the Company shall
     be deemed to have made a dividend payable in Common Stock in an amount of
     shares equal to the maximum number of shares issuable upon exercise of such
     rights to acquire Common Stock.

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          (ii)  If the number of shares of Common Stock outstanding at any time
     after the Closing Date is decreased by a combination of the outstanding
     shares of common stock, then, following the record date of such
     combination, the Conversion Price for the Note shall be appropriately
     increased so that the number of shares of Common Stock issuable on
     conversion of the Note or a portion thereof shall be decreased in
     proportion to such decrease in outstanding shares.

          (iii) All adjustments to the Conversion Price will be calculated to
     the nearest cent of a dollar.  No adjustment in the Conversion Price will
     be required unless such adjustment would require an increase or decrease of
     at least one cent per dollar; provided, however, that any adjustments which
     by reason of this Section 2.11(c)(iii) are not required to be made shall be
     carried forward and taken into account in any subsequent adjustment.  All
     adjustments to the Conversion Price shall be made successively.

     (d)  RECAPITALIZATIONS AND REORGANIZATIONS. If the Common Stock issuable
upon conversion of the Note shall be changed into or exchanged for a different
class or classes of capital stock, or other securities or property whether by
reorganization, recapitalization or otherwise (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 2.11), provision shall be made so that the Lender shall thereafter
be entitled to receive upon conversion of the Note the number of shares of stock
or other securities or property to which a holder of Common Stock deliverable
upon conversion would have been entitled on such recapitalization or
reorganization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 2.11 with respect to the rights of
the Lender after the recapitalization or reorganization to the end that the
provisions of this Section 2.11 (including adjustment of the Conversion Price
then in effect and the number of shares purchasable upon conversion of the Note)
shall be applicable after the event as nearly equivalent as may be practicable.

     (e)  NO IMPAIRMENT. The Company will not, by amendment of any of its
Charter Documents or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performances of
any of the terms to be observed or performed hereunder by the Company, but will
at all times in good faith assist in the carrying out all of the provisions of
this Section 2.11 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the Lender against
impairment.

     (f)  NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.

          (i)   No fractional shares shall be issued upon the conversion of the
     Note and the number of shares of Common Stock to be issued shall be rounded
     to the nearest whole share.  Whether or not fractional shares are issuable
     upon such conversion shall be determined on the basis of the amount of the
     Note the Lender is at the time converting into Common Stock and the number
     of shares of Common Stock issuable upon such aggregate conversion.

          (ii)  Upon the occurrence of each adjustment or readjustment of the
     Conversion Price of the Note pursuant to this Section 2.11, the Company, at
     its expense,

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     shall promptly compute such adjustment or readjustment in accordance with
     the terms hereof and prepare and furnish to the Lender a certificate
     setting forth such adjustment or readjustment and showing in detail the
     facts upon which such adjustment or readjustment is based. The Company
     shall, upon the written request at any time of the Lender, furnish or cause
     to be furnished to the Lender a like certificate setting forth (A) such
     adjustment and readjustment, (B) the Conversion Price for the Note at the
     time in effect, and (C) the number of shares of Common Stock and the
     amount, if any, of other property which at the time would be received upon
     the conversion of the Note.

     (g)  NOTICES OF RECORD DATE. In the event of any taking by the Company of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right (except the right to vote), the Company
shall mail to the Lender at least twenty (20) days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right.

     (h)  RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting conversion of the Note,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of the Note; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of the Note, in addition to such other remedies as shall
be available to the Lender, the Company will take such corporate action as may,
in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes, including, without limitation, engaging in best efforts to
obtain the requisite shareholder approval of any necessary amendment to its
Charter Documents.

     (i)  NO SHAREHOLDER RIGHTS. Nothing contained in this Agreement shall be
construed as conferring upon the Lender or any other person the right to vote or
to consent to receive notice as a shareholder in respect of meeting of
shareholders for the election of directors of the Company or any or any other
matters or any other rights whatsoever as a shareholder of the Company and no
dividends or interest shall be payable or accrued in respect of the Note or the
Common Stock obtainable under this Section 2.11 until, and only to the extent
that, the Note shall have been converted.

     (j)  SATISFACTION OF THE LOAN UPON CONVERSION. If the Note is converted in
full into Common Stock as provided herein, it will be deemed to be payment in
full for all purposes of this Agreement and the other Loan Documents (except the
Bridge Loan Warrant), or if the Note is converted in part into Common Stock as
provided herein, it will be deemed to be payment under this Agreement and the
other Loan Documents (except the Bridge Loan Warrant) up to the amount of the
Note so converted.

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     SECTION 2.12   WARRANT.

     (a)  Concurrently with the execution of this Agreement, and in
consideration of the Lender's agreement to make the Loan to the Company, the
Company will issue to the Lender a warrant to purchase an amount of the Common
Stock of the Company equal to eighteen (18%) of the principal amount of the Loan
(i.e. 270,000) divided by the Exercise Price (as defined below) and on the terms
and conditions set forth in Exhibit A hereto (the "Bridge Loan Warrant").
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     (b)  The Exercise Price of the Warrant shall be equal to the Conversion
Price, as further provided in the Bridge Loan Warrant.

     SECTION 2.13   LIMITATION ON CONVERSION RIGHTS AND EXERCISE OF WARRANT.
To the extent that, after giving effect to the Lender's conversion under the
Note and exercise under the Bridge Loan Warrant, the Lender will have the right
to acquire twenty percent (20%) or more of the outstanding Common Stock of the
Company such that a shareholder vote is required under applicable NASDAQ rules,
the Lender will have (i) the right to acquire up to nineteen and ninety-nine one
hundredths percent (19.99%) of the outstanding Common Stock of the Company and
(ii) the conditional right to acquire a greater percentage of the outstanding
Common Stock, as contemplated by Sections 2.11 and 2.12, at such time that the
Company complies with applicable NASDAQ rules.  Notwithstanding anything to the
contrary, the Company will use its best efforts to comply with such NASDAQ
rules, including obtaining the necessary shareholder approval.

                                  ARTICLE III

                             CONDITIONS PRECEDENT

     SECTION 3.01   CONDITIONS PRECEDENT TO THE LOAN AND THE FIRST LOAN ADVANCE.
The obligation of the Lender to make the Loan and the First Loan Advance shall
be subject to the satisfaction of each of the following conditions precedent
before or concurrently on the Closing Date:

     (a)  FEES AND EXPENSES. The Company shall have paid all fees and invoiced
costs and expenses then due hereunder, including fees, costs and expenses set
forth in Section 7.04(a).

     (b)  LOAN DOCUMENTS. The Lender shall have received the following Loan
Documents: (i) this Agreement executed by the Company; (ii) the Note executed by
the Company; and (iii) the Collateral Documents executed by each of the
respective parties thereto.

     (c)  DOCUMENTS AND ACTIONS RELATING TO COLLATERAL. The Lender shall have
received, in form and substance satisfactory to it, results of such Lien
searches as it shall reasonably request, and evidence that all filings,
registrations and recordings have been made in the appropriate governmental
offices, and all other action has been taken, which shall be necessary to
create, in favor of the Lender, a perfected first priority Lien on the
Collateral, subject only to Permitted Liens.

                                       11
<PAGE>

     (d)  ADDITIONAL CLOSING DOCUMENTS. The Lender shall have received the
following, in form and substance satisfactory to it: (i) evidence that all (A)
authorizations or approvals of any governmental agency or authority, and (B)
approvals or consents of any other Person, required in connection with the
execution, delivery and performance of the Loan Documents shall have been
obtained; and (ii) a certificate of the Secretary or other appropriate officer
of the Company, dated the Closing Date, certifying (A) copies of its Charter
Documents and the resolutions and other actions taken or adopted by the Company
authorizing the execution, delivery and performance of the Loan Documents, and
(B) the incumbency, authority and signatures of each officer of the Company
authorized to execute and deliver the Loan Documents and act with respect
thereto.

     (e)  LEGAL OPINION. The Lender shall have received an opinion of legal
counsel to the Company dated the Closing Date, in the form attached hereto as
Exhibit B.
---------

     (f)  BRIDGE LOAN WARRANT. The Lender shall have received a duly executed
Bridge Loan Warrant, in the form attached hereto as Exhibit A.
                                                    ---------

     (g)  AMENDMENT TO INVESTORS RIGHTS AGREEMENT. The Company, the Lender and
Westar shall have entered into the Second Amendment to the Investors Rights'
Agreement, in substantially the form attached hereto as Exhibit C.
                                                        ---------

     (h)  AMENDMENT TO OPTION AGREEMENT. The Lender shall have received a duly
executed Third Amendment to Option Agreement, in the form attached hereto as
Exhibit D.
---------

     (i)  ESTOPPEL CERTIFICATE. The Lender shall have received a certificate, in
the form attached hereto as Exhibit E, executed by Westar and each of the
                            ---------
Company's directors and officers who hold capital stock or other securities of
the Company.

     (j)  LANDLORD'S WAIVER. The Lender shall have received an agreement and
waiver, in the form attached hereto as Exhibit F, executed by the Company's
                                       ---------
landlord for the premises located in Irwindale, California.

     SECTION 3.02   CONDITIONS PRECEDENT TO THE LOAN AND ALL LOAN ADVANCES. The
obligation of the Lender to make the Loan and each Loan Advance shall be subject
to the satisfaction of each of the following conditions precedent before or
concurrently on the date of the Loan and each Loan Advance:

     (a)  REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company contained in this Agreement and the other Loan Documents, or in any
certificate or document delivered pursuant to the provisions hereof or in
connection with the transactions contemplated hereby, shall be true on and as of
the date of the Loan and each Loan Advance as though such representations and
warranties were made at and as of such date(s).

     (b)  COMPLIANCE. The Company shall have performed and complied with all
agreements and conditions required by this Agreement and the other Loan
Documents to be performed or complied with by it.

                                       12
<PAGE>

     (c)  OFFICER'S CERTIFICATE. The Lender shall have received certificates
duly executed by the President of the Company dated the date of the Loan and
each Loan Advance certifying in such detail as the Lender may reasonably request
to the fulfillment of the conditions specified in Sections 3.02(a) and 3.02(b).

     (d)  MATERIAL ADVERSE EFFECT. On and as of the date of each Loan Advance,
there shall have occurred no change or event since the date of this Agreement
that has or could reasonably be expected to have a Material Adverse Effect.

     (e)  NO DEFAULT. On the date of each Loan Advance, both before and after
giving effect thereto and to the application of proceeds therefrom, no Default
shall have occurred and be continuing or shall result from the making of such
Loan Advance. The acceptance by the Company of the proceeds of each Loan Advance
shall be deemed a certification to the Lender that on and as of the date of such
Loan Advance no material Default shall have occurred or shall result from the
making of such Loan Advance.

     (f)  ADDITIONAL DOCUMENTS. The Lender shall have received, in form and
substance satisfactory to it, such additional approvals, opinions, documents and
other information as the Lender may reasonably request.

     SECTION 3.03   CONDITIONS PRECEDENT TO THE SECOND LOAN ADVANCE.  The
obligation of the Lender to make the Second Loan Advance shall be subject to the
satisfaction by the Company of all conditions set forth in Sections 3.01 and
3.02 before or concurrently on the date of the Second Loan Advance.

     SECTION 3.04   CONDITIONS PRECEDENT TO THE THIRD LOAN ADVANCE. The
obligation of the Lender to make the Third Loan Advance shall be subject to the
satisfaction of each of the following conditions precedent before or
concurrently on the date of the Third Loan Advance:

     (a)  COMPLIANCE. The Company shall have performed and complied with all
conditions precedent set forth in Sections 3.01 and 3.02.

     (b)  INVESTMENT BANKER LETTER. The Lender shall have received on or before
October 17, 2001, in form and substance satisfactory to it, an engagement letter
executed by the Company and a third-party investment banker of recognizable
reputation regarding future Company financing(s).

     SECTION 3.05   CONDITIONS PRECEDENT TO THE FOURTH LOAN ADVANCE. The
obligation of the Lender to make the Fourth Loan Advance shall be subject to the
satisfaction of each of the following conditions precedent before or
concurrently on the date of the Fourth Loan Advance:

     (a)  COMPLIANCE. The Company shall have performed and complied with all
conditions precedent set forth in Sections 3.01 and 3.02.

     (b)  MAKING OF THIRD LOAN ADVANCE. The Lender shall have made the Third
Loan Advance pursuant to the terms and conditions herein.

                                       13
<PAGE>

                                  ARTICLE IV

                        REPRESENTATIONS AND WARRANTIES

     SECTION 4.01   REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
specifically set forth in the Disclosure Letter, with each disclosure to
reference the Section or Sections hereof to which it relates, the Company
represents and warrants to the Lender that the following statements are true and
correct on and as of the date of this Agreement and will be true and correct on
and as of the date of each Loan Advance as if made on such date(s):

     (a)  ORGANIZATION AND POWERS. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California,
and has all requisite power and authority to execute, deliver and perform its
Obligations under the Loan Documents. The Company is qualified to do business
and is in good standing in each jurisdiction in which the failure so to qualify
or be in good standing would result in a Material Adverse Effect and has all
requisite power and authority to own its assets and carry on its business.

     (b)  AUTHORIZATION; NO CONFLICT. The execution, delivery and performance by
the Company of the Loan Documents have been duly authorized by all necessary
corporate action of the Company and do not and will not (i) result in a
violation of any of its Charter Documents, (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company or any of its properties is subject, or result in a
violation of any material law, rule, regulation, order, judgment or decree
(including U.S. federal and state securities laws and regulations, including
NASDAQ rules or other rules of any exchange) applicable to the Company or by
which any property or asset of the Company is bound or affected, and (iii)
except as contemplated by this Agreement, result in, or require, the creation or
imposition of any Lien upon or with respect to any of the properties, assets or
revenues of the Company. The Company is not in violation of any of its Charter
Documents, or of any judgment, order, writ, decree, law, rule or regulation to
which the Company or its properties is subject in any material respect. The
Company is not in default (and no event has occurred which, with notice or lapse
of time or both, would put the Company in default) under, nor has there occurred
any event giving others (with notice or lapse of time or both) any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Company is a party or any of its properties
is subject in any material respect.

     (c)  BINDING OBLIGATION. The Loan Documents constitute, or when delivered
under this Agreement, will constitute, legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their respective
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) as limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.

                                       14
<PAGE>

     (d)  CONSENTS. No authorization, consent, approval, license, exemption of,
or filing or registration with, any governmental agency or authority, or
approval or consent of any other Person, is required for the due execution,
delivery or performance by the Company of any of the Loan Documents, except for
such approvals as have been obtained or as set forth in Schedule 2 hereto.
                                                        ----------

     (e)  LITIGATION. There is no action, suit, proceeding or investigation
pending, or to the Company's knowledge, currently threatened against the
Company, except as which individually or in the aggregate would not have a
Material Adverse Effect. The Company is not a party or subject to the provisions
of any order, writ, injunction, judgment or decree of any court or government
agency or instrumentality. Except as set forth on the Disclosure Letter, there
is no material action, suit, proceeding or investigation by the Company
currently pending or that the Company intends to initiate.

     (f)  PATENTS AND TRADEMARKS. The Company owns or licenses from another
person all inventions, patents, patent rights, computer software, trademarks,
trademark rights, service marks, service mark rights, trade names, trade name
rights and copyrights (collectively, the "Intellectual Property") necessary for
its business without any conflict with or infringement of the valid rights of
others and the lack of which could materially and adversely affect the
operations or condition, financial or otherwise, of the Company, and the Company
has not received any notice of infringement upon or conflict with the asserted
rights of others. The Disclosure Letter contains a complete list of all such
patents, patent rights, trademarks, service marks, copyrights, all agreements
related to the foregoing, and all agreements pursuant to which the Company
licenses Intellectual Property from or to a third party (excluding "shrink wrap"
license agreements relating solely to off the shelf software which is not
material to the Company's business). All such Intellectual Property owned by the
Company is owned free and clear of all Liens, adverse claims, encumbrances, or
restrictions, except for restrictions contained in the terms of the licenses
listed in the Disclosure Letter. All such Intellectual Property licensed by the
Company is the subject of a license agreement which is legal, valid, binding and
enforceable and in full force and effect. The consummation of the transactions
contemplated hereby will not result in the termination or impairment of the
Company's ownership of, or right to use, any Intellectual Property. The Company
has a valuable body of trade secrets, including know-how, concepts, business
plans, and other technical data (the "Proprietary Information") for the
development, manufacture and sale of its products. The Company has the right to
use the Proprietary Information free and clear of any material rights, Liens,
encumbrances or claims of others. The Company is not aware, after reasonable
investigation, that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of his or her best efforts to promote
the interests of the Company or that would conflict with the Company's business
in any material respect.

     (g)  TITLE TO PROPERTIES; LIENS. The Company has good and marketable title
to, or valid and subsisting leasehold interests in, its properties and assets,
including all property forming a part of the Collateral, in all material
respects, and there is no Lien upon or with respect to any of such properties or
assets, including any of the Collateral, except for Permitted Liens.

                                       15
<PAGE>

     (h)  SEC DOCUMENTS AND FINANCIAL STATEMENTS. Since January 1, 1997, the
Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the Securities and Exchange Commission
("SEC") pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (all of the foregoing and all exhibits
included therein and financial statements and schedules thereto and documents
incorporated by reference therein, with amendments read together with underlying
documents, are referred to herein as the "SEC Documents"). As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
GAAP during the periods involved and fairly and accurately present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments). Except as
set forth in the most recent balance sheet provided to the Lender or the
Disclosure Letter, the Company has no liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
subsequent to the date of such financial statements and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under GAAP to be reflected in such financial statements, which,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company. Except as disclosed in such financial
statements or in the Disclosure Letter, the Company is not a guarantor or
indemnitor of any Indebtedness of any other Person.

     (i)  WARRANT AND CONVERSION RIGHTS. The Bridge Loan Warrant is duly
authorized and, upon issuance in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable, and will be free of Liens,
claims, encumbrances and restrictions on transfer, other than restrictions on
transfer under applicable state and federal securities laws or as set forth
therein. The shares of Common Stock issuable upon exercise of the Bridge Loan
Warrant and upon exercise of the Conversion Rights are duly authorized and
reserved for issuance, and, upon exercise of the Bridge Loan Warrant and the
Conversion Rights, as the case may be, in accordance with the terms thereof,
will be validly issued, fully paid and nonassessable, and will be free of Liens,
claims, encumbrances and restrictions on transfer, other than restrictions on
transfer under applicable state and federal securities laws or as set forth
therein. The Disclosure Letter sets forth (A) the number of authorized shares of
Common Stock, and (B) the number of issued and outstanding shares of Common
Stock.

     (j)  TAX RETURNS. The Company has timely filed all tax returns (federal,
state and local) required to be filed by it and such tax returns are true and
correct in all material respects. In addition, (i) the Company has not requested
any extension of time within which to file any tax returns in respect of any
fiscal year which have not since been filed and no request for waivers of the
time to assess any taxes are pending or outstanding, (ii) no claim for taxes has
become a Lien

                                       16
<PAGE>

against the property of the Company or is being asserted against the Company
other than liens for taxes not yet due and payable, (iii) no audit of any tax
return of the Company is being conducted by a tax authority, (iv) no extension
of the statute of limitations on the assessment of any taxes has been granted
to, by or applied for by, the Company and is currently in effect, and (v) there
is no agreement, contract or arrangement to which the Company is a party that
may result in the payment of any amount that would not be deductible by reason
of Sections 280G, 162 or 404 of the Internal Revenue Code.

     (k)  PERMITS. The Company has all material franchises, permits, licenses
and any similar authority necessary for the conduct of its business ("Permits").
The Company is not in default in any material respect under any of such Permits.

     (l)  ENVIRONMENTAL AND SAFETY LAWS. The Company is not in violation of any
applicable material statute, law or regulation relating to the environment or
occupational health and safety or Hazardous Substances, and no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.

     (m)  ORGANIZATION AND POWERS OF BSST. BSST LLC is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware. BSST is qualified to do business and is in good standing
in each jurisdiction in which the failure so to qualify or be in good standing
would result in a material adverse effect on BSST or its business or operations,
and has all requisite limited liability power and authority to own its assets
and carry on its business.

     (n)  VALID SENIOR LOAN. The Loan and the Obligations under the Loan
Documents constitute a valid senior secured debt of the Company owed to the
Lender, negotiated and consummated at arm's length, and in no respects
constitutes equity or an equity contribution to the Company or its Affiliates on
the part of the Lender or its Affiliates. The Company hereby forever waives any
and all rights and claims to characterize the Loan or any Obligation as equity
or equity contribution by the Lender or its Affiliates.

     (o)  NO USURY. The Loan Documents and the Obligations are in compliance
with California Corporations Code Section 25118, and do not violate any usury
laws of the State of California or the United States.

     SECTION 4.02   REPRESENTATIONS AND WARRANTIES OF THE LENDER. The Lender
represents and warrants to the Company that:

     (a)  INVESTMENT REPRESENTATIONS. The Lender: (i) will acquire the Note, the
Bridge Loan Warrant and shares underlying the Bridge Loan Warrant for its own
account for investment and not with a view to any resale or other distribution
(other than to Affiliates) of the Note in a transaction constituting a public
offering or otherwise requiring registration under the Securities Act, or in a
transaction that would result in noncompliance with applicable state securities
laws; (ii) has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and the risks of its acquisition of
the Note, the Bridge Loan Warrant (and shares underlying the Bridge Loan
Warrant) and credit extensions to the Company; (iii) is an accredited investor
as such term is defined in Rule 501 of Regulation D under the

                                       17
<PAGE>

Securities Act; and (iv) understands that the Note, the Bridge Loan Warrant and
the shares underlying the Bridge Loan Warrant have not been registered under the
Securities Act or any state securities laws.

     (b)  ORGANIZATION AND POWERS. The Lender is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has all requisite power and authority to execute, deliver
and perform its obligations under this Agreement.

     (c)  AUTHORIZATION; BINDING OBLIGATION. The execution, delivery and
performance by the Lender of this Agreement has been duly authorized by all
necessary organizational action of the Lender. This Agreement constitutes a
legal, valid and binding obligation of the Lender, enforceable against the
Lender in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.

     (d)  FINANCIAL CAPACITY. The Lender has access to adequate capital to
enable it to satisfy its obligations to make the Loan contemplated hereby.

                                   ARTICLE V

                                   COVENANTS

     SECTION 5.01   REPORTING COVENANTS. So long as any of the Obligations shall
remain unpaid or the Lender shall have any Commitment, the Company agrees that:

     (a)  FINANCIAL STATEMENTS AND OTHER REPORTS. The Company will furnish to
the Lender: (i) on Monday of each week, a statement of cash flow for the prior
week and projected cash flow for the following two (2) weeks; (ii) as soon as
available and in any event within ten (10) days after the end of a month,
monthly agings (aged from invoice date) of accounts receivable, payables
reports, and unaudited financial statements (including a balance sheet, income
statement and statement of cash flows) with respect to that month prepared on a
basis consistent with such statements prepared in prior months and otherwise in
accordance with GAAP and certified by a Responsible Officer as being prepared in
accordance with GAAP; and (iii) as soon as available and in any event within
forty-five (45) days after the end of each fiscal quarter, its quarterly
consolidated and, if requested by the Lender, consolidating financial statements
(including a balance sheet, income statement and statement of cash flows),
prepared in accordance with GAAP, together with a certificate of a Responsible
Officer of the Company stating that such financial statements fairly present in
all material respects the financial condition of the Company as at such date and
the results of operations of the Company for the period ended on such date and
have been prepared in accordance with GAAP, subject to changes resulting from
normal, year-end audit adjustments and except for the absence of notes.

     (b)  ADDITIONAL INFORMATION. The Company will furnish to the Lender: (i)
promptly after the Company has knowledge or becomes aware thereof, notice of the

                                       18
<PAGE>

occurrence of any Default; (ii) prompt written notice of all actions, suits and
proceedings before any governmental agency or authority or arbitrator pending,
or to the best of the Company's knowledge, threatened against or affecting the
Company; (iii) prompt written notice of any other condition or event which has
resulted, or that could reasonably be expected to result, in a Material Adverse
Effect; (iv) promptly after the same are released, copies of all press releases;
(v) promptly after the giving, sending or filing thereof, copies of all reports
and financial information, if any, which the Company sends to the holders of its
capital stock or other securities, and the holders, if any, of any other
Indebtedness, and of all reports or filings, if any, by the Company with the SEC
or any national securities exchange; and (vi) such other information respecting
the operations, properties, business or condition (financial or otherwise) of
the Company (including with respect to the Collateral) as the Lender may from
time to time reasonably request. Each notice pursuant to clauses (i) through
(iii) of this subsection (b) shall be accompanied by a written statement by a
Responsible Officer of the Company setting forth details of the occurrence
referred to therein.

     (c)  CERTAIN CONTRACTS. Upon the Lender's reasonable request, and at least
twice monthly after the date of this Agreement, the Company shall provide
reports to the Lender concerning the status of all programs with major
customers, in such detail as Lender may reasonably request.

     SECTION 5.02   AFFIRMATIVE COVENANTS. So long as any of the Obligations
shall remain unpaid or the Lender shall have any Commitment, the Company agrees
that:

     (a)  PRESERVATION OF EXISTENCE, ETC. The Company will maintain and preserve
its corporate existence, its rights to transact business and all other material
rights, franchises and privileges necessary or desirable in the normal course of
its business and operations and the ownership of its properties, except in
connection with any transactions expressly permitted by Section 5.03.

     (b)  PAYMENT OF TAXES, ETC. The Company will pay and discharge all taxes,
fees, assessments and governmental charges or levies imposed upon it or upon its
properties or assets prior to the date on which penalties attach thereto, and
all lawful claims for labor, materials and supplies which, if unpaid, might
become a Lien upon any properties or assets of the Company prior to the date on
which penalties attach thereto except to the extent such taxes, fees,
assessments or governmental charges or levies, or such claims, are being
contested in good faith by appropriate proceedings and are adequately reserved
against in accordance with GAAP.

     (c)  MAINTENANCE OF INSURANCE. The Company will carry and maintain in full
force and effect, at its own expense and with financially sound and reputable
insurance companies, insurance in such amounts, with such deductibles and
covering such risks as is consistent with the Company's past practices.

     (d)  KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company will keep
adequate records and books of account to permit preparation of financial
statements in accordance with GAAP.

                                       19
<PAGE>

     (e)  INSPECTION RIGHTS. The Company will at any reasonable time during
regular business hours and from time to time permit the Lender or any of its
agents or representatives to visit and inspect any of the properties of the
Company and to examine the records and books of account of the Company, and to
discuss the business affairs, finances and accounts of the Company with any of
the officers, employees or accountants of the Company, provided that the Company
may designate one or more individuals who will be present during such
discussions.

     (f)  COMPLIANCE WITH LAWS. The Company will comply in all material respects
with the requirements of all applicable laws, rules, regulations and orders of
any governmental agency or authority, including all Environmental Laws.

     (g)  MAINTENANCE OF PROPERTIES, ETC. The Company will maintain and preserve
all of its material properties necessary or useful in the proper conduct of its
business in good working order and condition in accordance with the general
practice of other corporations of similar character and size, ordinary wear and
tear excepted.

     (h)  LICENSES. The Company will obtain and maintain all licenses,
authorizations, consents, filings, exemptions, registrations and other
governmental approvals of any governmental agency or authority necessary in
connection with the execution, delivery and performance of the Loan Documents,
the consummation of the transactions therein contemplated or the operation and
conduct of its business and ownership of its properties, except where the
failure to do so would not have a Material Adverse Effect.

     (i)  USE OF PROCEEDS. The Company will use the proceeds of the Loan for its
general corporate purposes.

     (j)  FURTHER ASSURANCES AND ADDITIONAL ACTS. The Company will execute,
acknowledge, deliver, file, notarize and register at its own expense all such
further agreements, instruments, certificates, documents and assurances and
perform such acts as the Lender shall deem necessary or appropriate to
effectuate the purposes of the Loan Documents, and promptly provide the Lender
with evidence of the foregoing satisfactory in form and substance to the Lender.

     SECTION 5.03   NEGATIVE COVENANTS. So long as any of the Obligations shall
remain unpaid or the Lender shall have any Commitment, the Company agrees that
without the consent of Lender, which consent will not be unreasonably withheld:

     (a)  LIENS; NEGATIVE PLEDGES. (i) The Company will not create, incur,
assume or suffer to exist any Lien upon or with respect to any of its
properties, revenues or assets, whether now owned or hereafter acquired, other
than Permitted Liens. (ii) The Company will not enter into any agreement (other
than this Agreement or any other Loan Document) prohibiting the creation or
assumption of any Lien upon any of its properties, revenues or assets, whether
now owned or hereafter acquired.

     (b)  CHANGE IN NATURE OF BUSINESS. The Company will not engage in any
material line of business substantially different from those lines of business
carried on by it at the date hereof.

                                       20
<PAGE>

     (c)  RESTRICTIONS ON FUNDAMENTAL CHANGES. The Company will not merge with
or consolidate into, or acquire all or substantially all of the assets of, any
Person, or sell, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets.

     (d)  SALES OF ASSETS. The Company will not sell, lease, transfer, or
otherwise dispose of, or part with control of (whether in one transaction or a
series of transactions) any assets (including any shares of stock in any other
Person), except: (i) sales or other dispositions of inventory, and the license,
sublicense and grant of distribution and similar rights, in the ordinary course
of business; (ii) sales or other dispositions of assets in the ordinary course
of business which have become worn out or obsolete or which are promptly being
replaced; or (iii) sales or other dispositions of assets (other than accounts
receivable) outside the ordinary course of business not exceeding in the
aggregate Twenty-Five Thousand Dollars ($25,000) in any fiscal year.

     (e)  DISTRIBUTIONS. The Company will not declare or pay any dividends in
respect of the Company's capital stock, or purchase, redeem, retire or otherwise
acquire for value any of its capital stock now or hereafter outstanding, return
any capital to its shareholders as such, except that the Company may: (A)
declare and deliver dividends and distributions payable only in common stock of
the Company; and (B) purchase, redeem, retire, or otherwise acquire shares of
its capital stock with the proceeds received from a substantially concurrent
issue of new shares of its capital stock.

     (f)  LOANS AND INVESTMENTS. The Company will not purchase or otherwise
acquire the capital stock, assets (constituting a business unit), obligations or
other securities of or any interest in any Person, or otherwise extend any
credit to or make any additional investments in any Person, other than in
connection with: (i) extensions of credit in the nature of accounts receivable
or notes receivable arising from the sales of goods or services in the ordinary
course of business; and (ii) short term, investment grade money market
instruments, in accordance with the Company's usual and customary treasury
management policies.

     (g)  TRANSACTIONS WITH RELATED PARTIES. The Company will not enter into any
transaction, including the purchase, sale or exchange of property or the
rendering of any services, with any Affiliate, any officer or director thereof
or any Person which beneficially owns or holds five percent (5%) or more of the
equity securities, or five percent (5%) or more of the equity interest, thereof
(a "Related Party"), or enter into, assume or suffer to exist, any employment or
consulting contract with any Related Party, except a transaction or contract
which is in the ordinary course of the Company's business and which is upon fair
and reasonable terms not less favorable to the Company than it would obtain in a
comparable arm's length transaction with a Person not a Related Party.

     SECTION 5.04   CONFIDENTIALITY. The Lender will hold in confidence all, and
not disclose to others for any reason whatsoever any, material non-public
information received by it from the Company in connection with this Agreement,
except that the Lender may provide such confidential information in response to
legal process or applicable governmental regulations provided that the Lender
forthwith notifies the Company of its obligation to provide

                                       21
<PAGE>

such confidential information and fully cooperates (to the extent permitted by
law) with the Company to protect the confidentiality of such information.

                                  ARTICLE VI

                               EVENTS OF DEFAULT

     SECTION 6.01   EVENTS OF DEFAULT. Any of the following events which shall
occur shall constitute an "Event of Default":

     (a)  PAYMENTS. The Company shall fail to pay when due any amount of
principal of, or interest on, the Loan or the Note, or any fee or other amount
payable under any of the Loan Documents.

     (b)  REPRESENTATIONS AND WARRANTIES. Any representation or warranty by the
Company under or in connection with the Loan Documents shall prove to have been
incorrect in any material respect when made or deemed made.

     (c)  FAILURE BY COMPANY TO PERFORM CERTAIN COVENANTS. The Company shall
fail to perform or observe any term, covenant or agreement contained in Section
5.03 or Subsections (a), (i) or (j) of Section 5.02.

     (d)  FAILURE BY COMPANY TO PERFORM OTHER COVENANTS. The Company shall fail
to perform or observe any term, covenant or agreement, other than those
specified in Section 6.01(c), contained in any Loan Document on its part to be
performed or observed, and any such failure shall continue for a period of ten
(10) days from the occurrence thereof (unless the Lender determines that such
failure is not capable of remedy).

     (e)  INSOLVENCY. (i) The Company shall (A) make a general assignment for
the benefit of creditors or (B) be dissolved, liquidated, wound up or cease its
corporate existence; or (ii) the Company (A) shall file a voluntary petition in
bankruptcy or a petition or answer seeking reorganization, to effect a plan or
other arrangement with creditors or any other relief under the Bankruptcy Reform
Act of 1978 (the "Bankruptcy Code") or under any other state or federal law
relating to bankruptcy or reorganization granting relief to debtors, whether now
or hereafter in effect, or (B) shall file an answer admitting the jurisdiction
of the court and the material allegations of any involuntary petition filed
against the Company pursuant to the Bankruptcy Code or any such other state or
federal law; or (iii) the Company shall be adjudicated a bankrupt, or shall make
an assignment for the benefit of creditors, or shall apply for or consent to the
appointment of any custodian, receiver or trustee for all or any substantial
part of the Company's property, or shall take any action to authorize any of the
actions or events set forth above in this subsection; or (iv) an involuntary
petition seeking any of the relief specified in this subsection shall be filed
against the Company and not dismissed within sixty (60) days; or (v) any order
for relief shall be entered against the Company, in any involuntary proceeding
under the Bankruptcy Code or any such other state or federal law referred to in
this subsection (e).

     (f)  DISSOLUTION, ETC. The Company shall (i) liquidate, wind up or dissolve
(or suffer any liquidation, wind-up or dissolution), (ii) discontinue its
operations, or (iii) take any corporate action to authorize any of the actions
or events set forth above in this subsection (f).

                                       22
<PAGE>

     (g)  JUDGMENTS. (i) A final judgment or order for the payment of money in
excess of Fifty Thousand Dollars ($50,000) (or its equivalent in another
currency) which is not fully covered by third-party insurance shall be rendered
against the Company (or its equivalent in another currency); or (ii) any non-
monetary judgment or order shall be rendered against the Company which has or
would reasonably be expected to have a Material Adverse Effect; and in each case
there shall be any period of fifteen (15) consecutive days during which such
judgment continues unsatisfied or during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect.

     (h)  MATERIAL ADVERSE EFFECT. Any circumstance, condition, or event shall
have occurred which has or could reasonably be expected to have a Material
Adverse Effect.

     (i)  COLLATERAL DOCUMENTS. Any "Event of Default" as defined in the
Collateral Documents shall have occurred; or any of the Collateral Documents
after delivery thereof shall for any reason be revoked or invalidated, or
otherwise cease to be in full force and effect, or the Company or any other
Person shall contest in any manner the validity or enforceability thereof, or
the Company or any other Person shall deny that it has any further liability or
obligation thereunder; or any of the Collateral Documents for any reason, except
to the extent permitted by the terms thereof, shall cease to create a valid and
perfected first priority Lien subject only to Permitted Liens in any of the
Collateral purported to be covered thereby.

     SECTION 6.02   EFFECT OF EVENT OF DEFAULT. If any Event of Default shall
occur, the Lender may, by notice to the Company, declare the Commitment to be
terminated, whereupon the same shall forthwith terminate, and cease to make the
Loan and all or any Loan Advances. If any Event of Default under Section 6.01(e)
shall occur, the Lender may declare the entire unpaid principal amount of the
Loan and the Note, all interest accrued and unpaid thereon and all other
Obligations to be forthwith due and payable, whereupon the Loan and the Note,
all such accrued interest and all such other Obligations shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Company. In
addition, if any Event of Default under Section 6.01(a) or Section 6.01(e) shall
occur, the Lender may exercise any or all of the Lender's rights and remedies
under the Collateral Documents and proceed to enforce all other rights and
remedies available to the Lender under the Loan Documents and applicable law.

                                  ARTICLE VII

                                 MISCELLANEOUS

     SECTION 7.01   AMENDMENTS AND WAIVERS. No amendment to any provision of the
Loan Documents shall be effective unless it is in writing and has been signed by
the Lender and the Company, and no waiver of any provision of any Loan Document,
or consent to any departure by the Company therefrom, shall be effective unless
it is in writing and has been signed by the Lender. Any such amendment, waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.

     SECTION 7.02   NOTICES. All notices and other communications provided for
hereunder and under the other Loan Documents shall, unless otherwise stated
herein, be in

                                       23
<PAGE>

writing (including by facsimile transmission) and mailed, sent or delivered to
the respective parties hereto at or to their respective addresses or facsimile
numbers set forth below their names on the signature pages hereof, or at or to
such other address or facsimile number as shall be designated by any party in a
written notice to the other party hereto. All such notices and communications
shall be effective: (i) if delivered by hand, when delivered; (ii) if sent by
mail, upon the earlier of the date of receipt or five (5) Business Days after
deposit in the mail, first class, postage prepaid; or (iii) if sent by facsimile
transmission, when sent; provided, however, that notices and communications to
the Lender pursuant to Article II shall not be effective until received.

     SECTION 7.03   NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of
the Lender to exercise, no delay in exercising, and no course of dealing with
respect to, any right, remedy, power or privilege under any Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, remedy, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights and remedies under the Loan Documents are cumulative and not exclusive of
any rights, remedies, powers and privileges that may otherwise be available to
the Lender.

     SECTION 7.04   COSTS AND EXPENSES; INDEMNITY.

     (a)  COSTS AND EXPENSES. The Company agrees to pay on demand: (i) the
reasonable out-of-pocket costs and expenses of the Lender and any of its
Affiliates, and the reasonable fees and disbursements of counsel to the Lender
and its Affiliates, in connection with the Loan, including the negotiation,
preparation, execution, delivery and administration of the Loan Documents and
any amendments, modifications or waivers of the terms thereof, and (ii) all
reasonable costs and expenses of the Lender and its Affiliates, and fees and
disbursements of counsel, in connection with (A) any Default, (B) the
enforcement or attempted enforcement of, and preservation of any rights or
interests under, the Loan Documents, (C) any out-of-court workout or other
refinancing or restructuring or any bankruptcy or insolvency case or proceeding,
and (D) the preservation of and realization upon any of the Collateral. Without
limiting the foregoing, the costs and reasonable fees of counsel to the Lender
and its Affiliates incurred or reasonably expected to be incurred in connection
with the Loan will be automatically deducted from the disbursement of the Second
Loan Advance and, accordingly, the amount of the Second Loan Advance actually
disbursed to the Company will be less of such fees and costs.

     (b)  INDEMNIFICATION. Whether or not the transactions contemplated hereby
shall be consummated, the Company hereby agrees to indemnify the Lender, any
Affiliate thereof and their respective directors, officers, employees, agents,
counsel and other advisors (each an "Indemnified Person") against, and hold each
of them harmless from, any and all liabilities, obligations, losses, claims,
damages, demands, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever, including the reasonable fees
and disbursements of counsel to an Indemnified Person, which may be imposed on,
incurred by, or asserted against any Indemnified Person, (i) in any way relating
to or arising out of any of the Loan Documents, the use or intended use of the
proceeds of the Loan or the transactions contemplated hereby or thereby, (ii)
with respect to any investigation, litigation or other proceeding relating to
any of the foregoing, irrespective of whether the Indemnified Person shall be
designated a party thereto, and/or (iii) in any way relating to or arising out
of the use,

                                       24
<PAGE>

generation, manufacture, installation, treatment, storage or presence, or the
spillage, leakage, leaching, migration, dumping, deposit, discharge, disposal or
release, at any time, of any Hazardous Substances on, under, at or from any
properties of the Company, including any personal injury or property damage
suffered by any Person, and any investigation, site assessment, environmental
audit, feasibility study, monitoring, clean-up, removal, containment,
restoration, remedial response or remedial work undertaken by or on behalf of
any Indemnified Person at any time, voluntarily or involuntarily, with respect
to the Premises (the "Indemnified Liabilities"); provided that the Company shall
not be liable to any Indemnified Person for any portion of such Indemnified
Liabilities to the extent they are found by a final decision of a court of
competent jurisdiction to have resulted from such Indemnified Person's gross
negligence or willful misconduct. If and to the extent that the foregoing
indemnification is for any reason held unenforceable, the Company agrees to make
the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law.

     SECTION 7.05   SURVIVAL. All covenants, agreements, representations and
warranties made in any Loan Document shall, except to the extent otherwise
provided therein, survive the execution and delivery of this Agreement, the
making of the Loan, the making of all Loan Advances, and the execution and
delivery of the Note, and shall continue in full force and effect so long as the
Lender has any Commitment, the Loan remains outstanding or any other Obligations
remain unpaid or any obligation to perform any other act hereunder or under any
other Loan Document remains unsatisfied. Without limiting the generality of the
foregoing, the obligations of the Company under Section 7.04, and all similar
obligations under the other Loan Documents (including all obligations to pay
costs and expenses and all indemnity obligations), shall survive the repayment
of the Loans and the termination of the Commitment.

     SECTION 7.06   BENEFITS OF AGREEMENT. The Loan Documents are entered into
for the sole protection and benefit of the parties hereto and their permitted
successors and permitted assigns, and no other Person shall be a direct or
indirect beneficiary of, or shall have any direct or indirect cause of action or
claim in connection with, any Loan Document.

     SECTION 7.07   BINDING EFFECT; ASSIGNMENT. This Agreement shall become
effective when it shall have been executed by the Company and the Lender and
thereafter shall be binding upon, inure to the benefit of and be enforceable by
the Company, the Lender and their respective permitted successors and permitted
assigns. The Company shall not have the right to assign its rights or
Obligations or any interest herein or therein without the prior written consent
of the Lender. The Lender reserves the right freely to sell, assign, transfer or
grant participations in all or any portion of the Lender's rights and
obligations hereunder and under the other Loan Documents (i) to one or more
Affiliates of the Lender and/or (ii) with the prior consent of the Company
(which consent shall not be unreasonably withheld) to any other Person. In the
event of any such assignment, the assignee shall be deemed a "Lender" for all
purposes of the Loan Documents with respect to the rights and obligations
assigned to it, and the obligations of the Lender so assigned shall thereupon
terminate. The Company shall, from time to time upon request of the Lender,
enter into such amendments to the Loan Documents and execute and deliver such
other documents as shall be necessary to effect any such grant or assignment.
The Company agrees that in connection with any such grant or assignment, the
Lender may deliver to the prospective participant or assignee financial
statements and other

                                       25
<PAGE>

relevant information relating to the Company (subject to such Person entering
into a confidentiality agreement with the Company on terms reasonably
satisfactory to the Company).

     SECTION 7.08   GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA.

     SECTION 7.09   WAIVER OF JURY TRIAL. THE COMPANY AND THE LENDER EACH WAIVE
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS,
OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR
OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER
PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. THE COMPANY AND THE LENDER EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.

     SECTION 7.10   ENTIRE AGREEMENT. The Loan Documents reflect the entire
agreement between the Company and the Lender with respect to the matters set
forth herein and therein and supersede any prior agreements, commitments,
drafts, communication, discussions and understandings, oral or written, with
respect thereto.

     SECTION 7.11   SEVERABILITY. Whenever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of any of the
Loan Documents shall be prohibited by or invalid under any such law or
regulation in any jurisdiction, it shall, as to such jurisdiction, be deemed
modified to conform to the minimum requirements of such law or regulation, or,
if for any reason it is not deemed so modified, it shall be ineffective and
invalid only to the extent of such prohibition or invalidity without affecting
the remaining provisions of such Loan Document, or the validity or effectiveness
of such provision in any other jurisdiction.

     SECTION 7.12   COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute but one and the same agreement.

        [Remainder of page intentionally left blank; signatures follow]

                                       26
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Credit
Agreement, as of the date first above written.

                                        THE COMPANY:
                                        AMERIGON INCORPORATED, a California
                                        corporation

                                        By: /s/ Richard A. Weisbart
                                            ---------------------------------
                                            Richard A. Weisbart,
                                            President & CEO

                                        Address:
                                        5462 Irwindale Avenue
                                        Irwindale, California  91706
                                        Attn:  Richard A. Weisbart
                                             --------------------------------
                                        Fax:   (626) 815-7441
                                             --------------------------------

                                        THE LENDER:
                                        BIG BEAVER INVESTMENTS LLC, a
                                        Delaware limited liability company

                                        By:   /s/ O. B. Marx, III
                                            ---------------------------------
                                        Name:  Oscar B. Marx, III
                                             --------------------------------
                                        Title: President
                                              -------------------------------

                                        Address:
                                        801 W. Big Beaver Road, Suite 201
                                        Troy, Michigan 48084
                                        Attn: President
                                             --------------------------------
                                        Fax:  (248) 362-3033
                                             --------------------------------<PAGE>

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

                              SECURITY AGREEMENT

     THIS SECURITY AGREEMENT (this "Agreement"), dated as of September 20, 2001,
is made between Amerigon Incorporated, a California corporation (the
"Borrower"), and Big Beaver Investments LLC, a Delaware limited liability
company (the "Lender").

     The Borrower and the Lender are parties to a Credit Agreement dated as of
September 20, 2001 (as amended, modified, renewed or extended from time to time,
the "Credit Agreement"). It is a condition precedent to the borrowings under the
Credit Agreement that the Borrower enter into this Agreement and grant to the
Lender the security interests hereinafter provided to secure the obligations of
the Borrower described below.

     Accordingly, the parties hereto agree as follows:

     SECTION 1.  DEFINITIONS; INTERPRETATION.

     (a)  TERMS DEFINED IN CREDIT AGREEMENT. All capitalized terms used in this
Agreement and not otherwise defined herein shall have the meanings assigned to
them in the Credit Agreement.

     (b)  CERTAIN DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:

     "ACCOUNT CONTROL AGREEMENT" means any account control agreement or other
agreement with any securities intermediary granting control with respect to any
Investment Property.

     "ACCOUNTS" means any and all rights to payment or obligations owed to the
Borrower, whether or not earned by performance, whether now existing or
hereafter acquired or arising, and in any event includes all accounts
receivable, contract rights, rights to payment, and other obligations of any
kind owed to the Borrower, including obligations for property that has been or
is to be sold, leased, licensed, assigned, or otherwise disposed of, for
services rendered or to be rendered, for policies of insurance issued or to be
issued, for a secondary obligation incurred or to be incurred, for energy
provided or to be provided, for the use or hire of a vessel under a charter or
other contract, arising out of the use of a credit or charge card or information
contained on or for use with the card, as winnings in a lottery or other game of
chance, or arising from any other transaction, however evidenced, and all
guaranties, indemnities and security with respect to the foregoing, and all
letters of credit relating thereto, in each case whether now existing or
hereafter acquired or arising.

     "BOOKS" means any and all books, records and other written, electronic or
other documentation in whatever form maintained now or hereafter by or for the
Borrower in connection with the ownership of its assets or the conduct of its
business or evidencing or containing information relating to the Collateral,
including: (i) ledgers; (ii) records indicating,
<PAGE>

summarizing, or evidencing the Borrower's assets (including Inventory and Rights
to Payment), business operations or financial condition; (iii) computer programs
and software; (iv) computer discs, tapes, files, manuals, spreadsheets; (v)
computer printouts and output of whatever kind; (vi) any other computer prepared
or electronically stored, collected or reported information and equipment of any
kind; and (vii) any and all other rights now or hereafter arising out of any
contract or agreement between the Borrower and any service bureau, computer or
data processing company or other Person charged with preparing or maintaining
any of the Borrower's books or records or with credit reporting, including with
regard to the Borrower's Accounts.

     "CHATTEL PAPER" means any and all records and other written, electronic or
other documentation in whatever form which evidence a monetary obligation and a
security interest in, lease of, or license of specific goods and/or software
used in the goods, whether now existing or hereafter arising.

     "COLLATERAL" has the meaning set forth at UCC Section 9102 and in any event
includes the meaning set forth in Section 2.

     "DEPOSIT ACCOUNT" means any and all demand, time, savings, passbook or like
account now or hereafter maintained by or for the benefit of the Borrower with a
bank, savings and loan association, credit union or like organization, and all
funds and amounts therein, whether or not restricted or designated for a
particular purpose.

     "DOCUMENTS" means any and all documents of title, bills of lading, dock
warrants, dock receipts, warehouse receipts and other documents of the Borrower,
whether or not negotiable, and includes all records and other written,
electronic or other documentation in whatever form which purport to be issued by
a bailee or agent and purport to cover goods in any bailee's or agent's
possession which are either identified or are fungible portions of an identified
mass, including such documents of title made available to the Borrower for the
purpose of ultimate sale or exchange of goods or for the purpose of loading,
unloading, storing, shipping, transshipping, manufacturing, processing or
otherwise dealing with goods in a manner preliminary to their sale or exchange,
in each case whether now existing or hereafter acquired or arising.

     "EQUIPMENT" means any and all now existing or hereafter acquired goods and
tangible personal property (other than Inventory) of the Borrower in all of its
forms, wherever located, and in any event includes any and all machinery,
furniture, equipment, furnishings and fixtures in which the Borrower now or
hereafter acquires any right, and all other goods and tangible personal property
(other than Inventory), including tools, parts and supplies, automobiles,
trucks, tractors and other vehicles, computer and other electronic data
processing equipment and other office equipment, computer programs and related
data processing software, and all additions, substitutions, replacements, parts,
accessories, and accessions to and for the foregoing, now owned or hereafter
acquired, and including any of the foregoing which are or are to become fixtures
on real property.

     "FINANCING STATEMENTS" has the meaning set forth in Section 3.

                                       2
<PAGE>

     "GENERAL INTANGIBLES" means any and all now existing or hereafter acquired
or arising intangible goods and personal property of the Borrower in all of its
forms, wherever located, and in any event includes: (i) all tax and other
refunds, rebates or credits of every kind and nature to which the Borrower is
now or hereafter may become entitled; (ii) all good will, choses in action and
causes of action, whether legal or equitable, whether in contract or tort and
however arising, including "commercial tort claims" (as defined at UCC Section
9102); (iii) all Intellectual Property Collateral; (iv) all interests in limited
and general partnerships and limited liability companies, including all of
Borrower's interests as a member of BSST LLC, a Delaware limited liability
company; (v) all rights of stoppage in transit, replevin and reclamation; (vi)
all licenses, permits, consents, indulgences and rights of whatever kind issued
in favor of or otherwise recognized as belonging to the Borrower by any
governmental authority; and (vii) all indemnity agreements, guaranties,
insurance policies and other contractual, equitable and legal rights of whatever
kind or nature; in each case whether now existing or hereafter acquired or
arising.

     "INSTRUMENTS" means any and all negotiable instruments and all records and
other written, electronic or other documentation in whatever form which evidence
a right to the payment of money, wherever located and whether now existing or
hereafter acquired.

     "INTELLECTUAL PROPERTY COLLATERAL" means the following properties and
assets owned or held by the Borrower or in which the Borrower otherwise has any
interest, now existing or hereafter acquired or arising:

     (1)  all foreign and domestic patents and patent applications, all licenses
relating to any of the foregoing and all income and royalties with respect to
any licenses, including such patents, patent applications and patent licenses as
described in Schedule 1, all rights to sue for past, present and future
             ----------
infringement thereof, all rights arising therefrom and pertaining thereto, and
all reissues, divisions, continuations, renewals, extensions and continuations-
in-part thereof;

     (2)  all foreign and domestic copyrights and applications for copyright,
together with the underlying works of authorship (including titles), all
licenses relating to any of the foregoing and all income and royalties with
respect to any licenses, including such copyrights, copyright applications and
copyright licenses as described in Schedule 1, whether such works have been
                                   ----------
published, or whether the rights in such works are statutory or arise under the
common law, all other rights, works of authorship and derivative works in
connection therewith, all rights, claims and demands in any way relating to any
such copyrights or works, including royalties and rights to sue for past,
present and future infringement, and all rights of renewal and extension
thereof;

     (3)  all state (including common law), federal and foreign trademarks,
service marks and trade names, and applications for registration of such
trademarks, service marks and trade names, all licenses relating to any of the
foregoing and all income and royalties with respect to any licenses, including
such marks, names, applications and licenses as described in Schedule 1, whether
                                                             ----------
registered or unregistered and wherever registered, whether rights to such marks
arise under statutory or common law, all rights to sue for past, present and
future

                                       3
<PAGE>

infringement, all rights arising therefrom and pertaining thereto and all
reissues, extensions and renewals thereof;

     (4)  all trade secrets, trade dress, trade styles, logos, other source of
business identifiers, mask-works, mask-work registrations, mask-work
applications, software, confidential information, customer lists, license
rights, advertising materials, operating manuals, methods, processes, know-how,
algorithms, formulae, databases, quality control procedures, product, service
and technical specifications, operating, production and quality control manuals,
sales literature, drawings, specifications, blue prints, descriptions,
inventions, name plates and catalogs; and

     (5)  the entire goodwill of or associated with the businesses now or
hereafter conducted by the Borrower connected with or symbolized by any of the
aforementioned properties and assets.

     "INVENTORY" means any and all now existing or hereafter acquired goods and
tangible personal property (other than Equipment) in all of its forms, wherever
located, and in any event includes all goods (including goods in transit) and
tangible personal property (other than Equipment) which are held for sale, lease
or other disposition, including those held for display or demonstration or out
on lease or consignment or to be furnished under contract of service, or which
are raw materials, work in process, finished goods or materials used or consumed
in the Borrower's business, and the resulting product or mass, and all
repossessed, returned, rejected, reclaimed and replevied goods, together with
all parts, components, supplies, packing and other materials used or usable in
connection with the manufacture, production, packing, shipping, advertising,
selling or furnishing of such goods; and all other items hereafter acquired by
the Borrower by way of substitution, replacement, return, repossession or
otherwise, and all additions and accessions thereto, and any Document
representing or relating to any of the foregoing at any time.

     "INVESTMENT PROPERTY" means any and all investment property of the
Borrower, including all securities, whether certificated or uncertificated,
security entitlements, securities accounts, commodity contracts and commodity
accounts, and all financial assets held in any securities account or otherwise,
wherever located, and whether now existing or hereafter acquired or arising.

     "LETTER OF CREDIT PROCEEDS" means any and all Proceeds of letters of credit
evidenced by records or other written, electronic or other documentation.

     "PROCEEDS" means whatever is receivable or received from or upon the sale,
lease, license, collection, use, exchange or other disposition, whether
voluntary or involuntary, of any Collateral or other assets of the Borrower,
including "proceeds" as defined at UCC Section 9102, any and all proceeds of any
insurance, indemnity, warranty or guaranty payable to or for the account of the
Borrower from time to time with respect to any of the Collateral, any and all
payments (in any form whatsoever) made or due and payable to the Borrower from
time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any governmental
authority (or any Person acting under color of governmental authority), any and
all other amounts from time to time paid or payable under or in

                                       4
<PAGE>

connection with any of the Collateral or for or on account of any damage or
injury to or conversion of any Collateral by any Person, any and all other
tangible or intangible property received upon the sale or disposition of
Collateral, and any and all proceeds from the foregoing.

     "RIGHTS TO PAYMENT" means any and all Accounts, and any and all rights and
claims to the payment or receipt of money or other forms of consideration of any
kind in, to and under all Chattel Paper, Documents, General Intangibles,
Instruments, Investment Property, and Proceeds.

     "SECURED OBLIGATIONS" means the indebtedness, liabilities and other
obligations of the Borrower to the Lender under or in connection with any of the
Credit Agreement, the Note and the other Loan Documents (other than the Bridge
Loan Warrant), including all unpaid principal of the Loan, all interest accrued
thereon, all fees due under the Credit Agreement and all other amounts payable
by the Borrower to the Lender thereunder or in connection therewith, whether now
existing or hereafter arising, and whether due or to become due, absolute or
contingent, liquidated or unliquidated, determined or undetermined.

     "UCC" means the Uniform Commercial Code as the same may, from time to time,
be in effect in the State of California; provided, however, in the event that,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of the security interest in any Collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the State
of California, the term "UCC" shall mean the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection or priority and for purposes of definitions
related to such provisions.

     (c)  TERMS DEFINED IN UCC. Where applicable and except as otherwise defined
herein or in the Credit Agreement, terms used in this Agreement shall have the
meanings assigned to them in the UCC.

     (d)  INTERPRETATION. The rules of interpretation set forth in Section 1.03
of the Credit Agreement shall be applicable to this Agreement and are
incorporated herein by this reference.

     SECTION 2.  SECURITY INTEREST.

     (a)  GRANT OF SECURITY INTEREST. As security for the payment and
performance of the Secured Obligations, the Borrower hereby pledges, assigns,
transfers, hypothecates and sets over to the Lender, and hereby grants to the
Lender a security interest in, all of the Borrower's right, title and interest
in, to and under all assets and property of the Borrower, wherever located and
whether now existing or owned or hereafter acquired or arising, including the
following assets and property (collectively, the "Collateral"): (i) all
Accounts; (ii) all Chattel Paper; (iii) all Deposit Accounts; (iv) all
Documents; (v) all Equipment; (vi) all General Intangibles; (vii) all
Instruments; (viii) all Inventory; (ix) all Investment Property; (x) all Books;
(xi) all Intellectual Property Collateral; (xii) all Letter of Credit Proceeds;
(xiii) all Rights to Payments; and (xiv) all products and Proceeds of any and
all of the foregoing.

     (b)  BORROWER REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (i) the Borrower shall remain liable under any contracts,
agreements and other

                                       5
<PAGE>

documents included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (ii) the exercise by the Lender of any of
the rights hereunder shall not release the Borrower from any of its duties or
obligations under such contracts, agreements and other documents included in the
Collateral and (iii) the Lender shall not have any obligation or liability under
any contracts, agreements and other documents included in the Collateral by
reason of this Agreement, nor shall the Lender be obligated to perform any of
the obligations or duties of the Borrower thereunder or to take any action to
collect or enforce any such contract, agreement or other document included in
the Collateral hereunder.

     (c)  CONTINUING SECURITY INTEREST. The Borrower agrees that this Agreement
shall create a continuing security interest in the Collateral which shall remain
in effect until terminated in accordance with Section 22.

     SECTION 3.  PERFECTION PROCEDURES.

     (a)  FINANCING STATEMENTS, ETC. The Borrower shall execute and deliver, as
appropriate, to the Lender concurrently with the execution of this Agreement,
and at any time and from time to time thereafter, all financing statements,
continuation financing statements, termination statements, security agreements,
chattel mortgages, assignments, patent, copyright and trademark collateral
assignments, fixture filings, warehouse receipts, documents of title,
affidavits, reports, notices, schedules of account, letters of authority and all
other documents and instruments, in form satisfactory to the Lender
(collectively, the "Financing Statements"), and take all other action, as the
Lender may request, to perfect and continue perfected, maintain the priority of
or provide notice of the Lender's security interest in the Collateral and to
accomplish the purposes of this Agreement. The Borrower shall not file or have
filed any Financing Statement, correction statement to any Financing Statement,
or other filings relative to any Financing Statement in connection with any
Collateral without the express prior written consent the Lender.

     (b)  CERTAIN AGENTS. Any third person at any time and from time to time
holding all or any portion of the Collateral, as agent of or as pledge holder
for the Lender, shall be deemed to, and shall, hold the Collateral for the
Lender. At any time and from time to time, the Lender may give notice to any
third person holding all or any portion of the Collateral that such third person
is holding the Collateral as the agent of, and as pledge holder for, the Lender.

     SECTION 4.  REPRESENTATIONS AND WARRANTIES. In addition to the
representations and warranties of the Borrower set forth in the Credit
Agreement, which are incorporated herein by this reference, the Borrower
represents and warrants to the Lender that the following statements are true and
correct on and as of the date of this Agreement and will be true and correct on
and as of the date of each Loan Advance as if made on such date(s):

     (a)  JURISDICTION OF ORGANIZATION, LOCATION OF CHIEF EXECUTIVE OFFICE AND
LOCATION COLLATERAL. The Borrower's jurisdiction of organization, chief
executive office and principal place of business is located at the address set
forth in paragraph 1(a) of Schedule 1, and all other locations where the
                           ----------
Borrower conducts business or where the Collateral is kept are set forth in
paragraph 1(b) of Schedule 1.
                  ----------

                                       6
<PAGE>

     (b)  LOCATIONS OF BOOKS. All locations where Books pertaining to the Rights
to Payment are kept, including all equipment necessary for accessing such Books
and the names and addresses of all service bureaus, computer or data processing
companies and other Persons keeping any Books or collecting Rights to Payment
for the Borrower, are set forth in paragraph 2 of Schedule 1.
                                                  ----------

     (c)  TRADE NAMES AND TRADE STYLES. All trademarks, trade names and trade
styles under which the Borrower presently conducts its business operations are
set forth in paragraph 3 of Schedule 1, and, except as set forth in paragraph 3
                            ----------
of Schedule 1, the Borrower has not, at any time in the past: (i) been known as
   ----------
or used any other trademark, trade name or trade style; (ii) changed its name;
(iii) been the surviving or resulting entity in a merger or consolidation; or
(iv) acquired through asset purchase or otherwise any business of any Person.

     (d)  OWNERSHIP OF COLLATERAL. The Borrower is, and, except as permitted by
Section 5(i), will continue to be, the sole and complete owner of the Collateral
(or, in the case of after-acquired Collateral, at the time the Borrower acquires
rights in such Collateral, will be the sole and complete owner thereof), free
from any Lien other than Permitted Liens.

     (e)  ENFORCEABILITY; PRIORITY OF SECURITY INTEREST. (i) Except as set forth
in Section 4.01(b) to the Borrower's Disclosure Letter to the Credit Agreement,
this Agreement creates a security interest against the Collateral in which the
Borrower now has rights and will create a security interest which is enforceable
against the Collateral in which the Borrower hereafter acquires rights at the
time the Borrower acquires any such rights; and (ii) the Lender has a perfected
and first priority security interest in the Collateral, in which the Borrower
now has rights, and will have a perfected and first priority security interest
in the Collateral in which the Borrower hereafter acquires rights at the time
the Borrower acquires any such rights, in each case securing the payment and
performance of the Secured Obligations except for Permitted Liens.

     (f)  OTHER FINANCING STATEMENTS. Other than (i) Financing Statements set
forth in paragraph 10 of Schedule 1 and (ii) Financing Statements in favor of
                         ----------
the Lender, no effective Financing Statement naming the Borrower as debtor,
assignor, grantor, mortgagor, pledgor or the like and covering all or any part
of the Collateral is on file in any filing or recording office in any
jurisdiction.

     (g)  RIGHTS TO PAYMENT.

          (1)  The Rights to Payment represent valid, binding and enforceable
obligations of the account debtors or other Persons obligated thereon,
representing undisputed, bona fide transactions completed in accordance with the
terms and provisions contained in any documents related thereto, and are and
will be genuine, free from Liens, and not subject to any adverse claims,
counterclaims, setoffs, defaults, disputes, defenses, discounts, retainages,
holdbacks or conditions precedent of any kind of character, except to the extent
reflected by the Borrower's reserves for uncollectible Rights to Payment or to
the extent, if any, that such account debtors or other Persons may be entitled
to normal and ordinary course trade discounts, returns, adjustments and
allowances in accordance with Section 5(m), or as otherwise disclosed to the
Lender in writing;

                                       7
<PAGE>

          (2)  to the best of the Borrower's knowledge and belief, all account
debtors and other obligors on all material Rights to Payment are solvent and
generally paying their debts as they come due;

          (3)  all Rights to Payment comply with all applicable laws in all
material respects concerning form, content and manner of preparation and
execution, including where applicable any federal and state consumer credit
laws;

          (4)  the Borrower has not assigned any of its rights under the Rights
to Payment except as provided in this Agreement or as set forth in the other
Loan Documents;

          (5)  all statements made, all unpaid balances and all other
information in the Books and other documentation relating to the Rights to
Payment are true and correct in all material respects and in all material
respects are what they purport to be; and

          (6)  the Borrower has no knowledge of any fact or circumstance which
would impair the validity or collectibility of any material Rights to Payment.

     (h)  INVENTORY. No Inventory is stored with any bailee, warehouseman or
similar Person, nor has any Inventory been consigned to the Borrower or
consigned by the Borrower to any Person or is held by the Borrower for any
Person under any "bill and hold" or other arrangement, except as set forth in
paragraph 4 of Schedule 1.
               ----------

     (i)  INTELLECTUAL PROPERTY.

          (1)  Except as set forth in paragraph 5 of Schedule 1, the Borrower
                                                     ----------
(directly or through any Affiliate) does not own, possess or use under any
licensing arrangement any material patents, copyrights, trademarks, service
marks or trade names, nor is there currently pending before any governmental
authority any application for registration of any patent, copyright, trademark,
service mark or trade name.

          (2)  All material patents, copyrights, trademarks, service marks and
trade names are subsisting and have not been adjudged invalid or unenforceable
in whole or in part.

          (3)  All maintenance fees required to be paid on account of any
material patents have been timely paid for maintaining such patents in force
and, to the best of the Borrower's knowledge, each of the material patents is
valid and enforceable and the Borrower has notified the Lender in writing of all
prior art (including public uses and sales) of which it is aware.

          (4)  To the best of the Borrower's knowledge after due inquiry, no
material infringement or unauthorized use presently is being made of any
Intellectual Property Collateral by any Person.

          (5)  Except for licensing arrangements set forth in Section 4(i)(1) of
this Agreement, the Borrower is the sole and exclusive owner of the material
Intellectual Property Collateral.

                                       8
<PAGE>

          (6)  The past, present and contemplated future use of the Intellectual
Property Collateral by the Borrower has not, does not and will not infringe or
violate any right, privilege or license agreement of or with any other Person in
any material respect.

          (7)  The Borrower owns, has material rights under, is a party to, or
an assignee of a party to all material licenses, patents, patent applications,
copyrights, service marks, trademarks, trademark applications, trade names and
all other Intellectual Property Collateral necessary to continue to conduct its
business as heretofore conducted.

     (j)  EQUIPMENT.

          (1)  None of the Equipment or other Collateral is affixed to real
property, except Collateral with respect to which the Borrower has supplied the
Lender with all information and documentation necessary to make all fixture
filings required to perfect and protect the priority of the Lender's security
interest in all such Collateral which may be fixtures as against all Persons
having an interest in the premises to which such property may be affixed; and

          (2)  none of the Equipment is leased from or to any Person, except as
set forth in paragraph 6 of Schedule 1 or as otherwise disclosed to the Lender
                            ----------
or permitted under the Loan Documents.

     (k)  DEPOSIT ACCOUNTS. The names and addresses of all financial
institutions at which the Borrower maintains its Deposit Accounts, and the
account numbers and account names of such Deposit Accounts, are set forth in
paragraph 7 of Schedule 1.
               ----------

     (l)  INVESTMENT PROPERTY; INSTRUMENTS. All securities accounts of Borrower
and other Investment Property of Borrower are set forth in paragraph 8 of
Schedule 1, and all Instruments held by Borrower are also set forth in paragraph
----------
9 of Schedule 1.  No Account Control Agreements exist with respect to any
     ----------
Investment Property other than any Account Control Agreements in favor of the
Lender.

     SECTION 5.  COVENANTS. In addition to the covenants of the Borrower set
forth in the Credit Agreement, which are incorporated herein by this reference,
so long as any of the Secured Obligations remain unsatisfied or the Lender shall
have any Commitment, the Borrower agrees that:

     (a)  DEFENSE OF COLLATERAL. The Borrower will appear in and defend any
action, suit or proceeding which may affect to a material extent its title to,
or right or interest in, or the Lender's right or interest in, the Collateral.

     (b)  PRESERVATION OF COLLATERAL. The Borrower will do and perform all
reasonable acts that may be necessary and appropriate to maintain, preserve and
protect the Collateral.

     (c)  COMPLIANCE WITH LAWS, ETC. The Borrower will comply with all material
laws, regulations and ordinances, and all policies of insurance, relating to the
possession, operation, maintenance and control of the Collateral.

                                       9
<PAGE>

     (d)  LOCATION OF BOOKS AND CHIEF EXECUTIVE OFFICE. The Borrower will: (i)
keep all Books pertaining to the Rights to Payment at the locations set forth in
paragraph 1 of Schedule 1; and (ii) give at least thirty (30) days' prior
               ----------
written notice to the Lender of (A) any changes in any such location where Books
pertaining to the Rights to Payment are kept, including any change of name or
address of any service bureau, computer or data processing company or other
Person preparing or maintaining any Books or collecting Rights to Payment for
the Borrower or (B) any changes in the location of the Borrower's chief
executive office or principal place of business.

     (e)  LOCATION OF COLLATERAL. The Borrower will: (i) keep the Collateral at
the locations set forth in Schedule 1 and not remove the Collateral from such
                           ----------
locations (other than disposals of Collateral permitted by subsection (i))
except upon at least thirty (30) days' prior written notice of any removal to
the Lender; and (ii) give the Lender at least thirty (30) days' prior written
notice of any change in the locations set forth in Schedule 1.
                                                   ----------

     (f)  CHANGE IN NAME, IDENTITY OR STRUCTURE. The Borrower will give at least
thirty (30) days' prior written notice to the Lender of (i) any change in name,
(ii) any changes in, additions to or other modifications of its trade names and
trade styles set forth in Schedule 1, and (iii) any changes in its identity or
                          ----------
structure in any manner which might make any Financing Statement filed hereunder
incorrect or misleading.

     (g)  MAINTENANCE OF RECORDS. The Borrower will keep separate, accurate and
complete Books with respect to the Collateral, disclosing the Lender's security
interest hereunder.

     (h)  INVOICING OF SALES. The Borrower will invoice all of its sales upon
forms customary in the industry and to maintain proof of delivery and customer
acceptance of goods.

     (i)  DISPOSITION OF COLLATERAL. The Borrower will not surrender or lose
possession of (other than to the Lender), sell, lease, rent, or otherwise
dispose of or transfer any of the Collateral or any right or interest therein,
except for sales of inventory in the ordinary course of business or to the
extent permitted by the Loan Documents; provided that no such disposition or
transfer of Investment Property or Instruments shall be permitted while any
Event of Default exists.

     (j)  LIENS. The Borrower will keep the Collateral free of all Liens except
Permitted Liens.

     (k)  EXPENSES. The Borrower will pay all expenses of protecting, storing,
warehousing, insuring, handling and shipping the Collateral.

     (l)  LEASED PREMISES. At the Lender's request, the Borrower will obtain
from each Person from whom the Borrower leases any premises at which any
Collateral is at any time present such subordination, waiver, consent and
estoppel agreements as the Lender may reasonably require, in form and substance
reasonably satisfactory to the Lender.

     (m)  RIGHTS TO PAYMENT. The Borrower will:

                                       10
<PAGE>

          (1)  with such frequency as the Lender may require, furnish to the
Lender full and complete reports, in form and substance reasonably satisfactory
to the Lender, with respect to the Accounts, including information as to
concentration, aging, identity of account debtors, letters of credit securing
Accounts, disputed Accounts and other matters, as the Lender shall request;

          (2)  give only normal discounts, allowances and credits as to Accounts
and other Rights to Payment, in the ordinary course of business, according to
normal trade practices utilized by the Borrower in the past, and enforce all
Accounts and other Rights to Payment strictly in accordance with their terms in
all material respects, and take all such action to such end as may from time to
time be reasonably requested by the Lender, except that the Borrower may grant
any extension of the time for payment or enter into any agreement to make a
rebate or otherwise to reduce the amount owing on or with respect to, or
compromise or settle for less than the full amount thereof, any Account or other
Right to Payment, in the ordinary course of business, according to normal trade
practices utilized by the Borrower in the past, and where the amount involved
does not exceed Ten Thousand Dollars ($10,000) or where the Account or Right to
Payment does not exceed Ten Thousand Dollars ($10,000) or would not be
materially impaired;

          (3)  if any material discount, allowance, credit, extension of time
for payment, agreement to make a rebate or otherwise to reduce the amount owing
on, or compromise or settle, an Account or other Right to Payment exists or
occurs, or if, to the knowledge of the Borrower, any such dispute, setoff,
claim, counterclaim or defense exists or has been asserted or threatened with
respect to an Account or other Right to Payment, disclose such fact fully to the
Lender in the Books relating to such Account or other Right to Payment and in
connection with any invoice or report furnished by the Borrower to the Lender
relating to such Account or other Right to Payment;

          (4)  if any Accounts arise from contracts with the United States or
any department, agency or instrumentality thereof, immediately notify the Lender
thereof and execute any documents and instruments and take any other steps
requested by the Lender in order that all monies due and to become due
thereunder shall be assigned to the Lender and notice thereof given to the
federal authorities under the Federal Assignment of Claims Act;

          (5)  in accordance with its sound business judgment perform and comply
in all material respects with its obligations in respect of the Accounts and
other Rights to Payment;

          (6)  upon the request of the Lender (A) at any time, notify all or any
designated portion of the account debtors and other obligors on the Rights to
Payment of the security interest hereunder, and (B) upon the occurrence and
during the continuance of an Event of Default, notify the account debtors and
other obligors on the Rights to Payment or any designated portion thereof that
payment shall be made directly to the Lender or to such other Person or location
as the Lender shall specify; and

          (7)  upon the occurrence and during the continuance of any Event of
Default, establish such lockbox or similar arrangements for the payment of the
Accounts and other Rights to Payment as the Lender shall require.

                                       11
<PAGE>

     (n)  INSTRUMENTS, INVESTMENT PROPERTY, ETC. Upon the request of the Lender,
the Borrower will (i) immediately deliver to the Lender, or an agent designated
by them, appropriately endorsed or accompanied by appropriate instruments of
transfer or assignment, all Instruments, Documents, Chattel Paper and
certificated securities with respect to any Investment Property, all letters of
credit, and all other Rights to Payment at any time evidenced by promissory
notes, trade acceptances or other instruments, (ii) cause any securities
intermediaries to show on their books that the Lender is the entitlement holder
with respect to any Investment Property, and/or obtain Account Control
Agreements in favor of the Lender from such securities intermediaries, in form
and substance satisfactory to the Lender, with respect to any Investment
Property, as requested by Lender, (iii) mark all Documents and Chattel Paper
with such legends as the Lender shall reasonably specify, and (iv) obtain
consents from any letter of credit issuers with respect to the assignment to the
Lender of any Letter of Credit Proceeds.

     (o)  DEPOSIT ACCOUNTS AND SECURITIES ACCOUNTS. The Borrower will give the
Lender immediate notice of the establishment of any new Deposit Account and any
new securities account with respect to any Investment Property.

     (p)  INVENTORY. The Borrower will:

          (1)  at such times as the Lender shall request, prepare and deliver to
the Lender a report of all Inventory, in form and substance reasonably
satisfactory to the Lender;

          (2)  upon the request of the Lender, take a physical listing of the
Inventory and promptly deliver a copy of such physical listing to the Lender;
and

          (3)  except for the locations set forth in Schedule 1 or without the
                                                     ----------
prior written consent of the Lender, not store any Inventory in excess of Fifty-
five Thousand Dollars ($55,000) in the aggregate with one or more bailees,
warehousemen or similar Persons or on premises leased to the Borrower, nor
dispose of any Inventory on a bill-and-hold, guaranteed sale, sale and return,
sale on approval, consignment or similar basis, nor acquire any Inventory from
any Person on any such basis.

     (q)  EQUIPMENT. The Borrower will, upon the Lender's request, deliver to
the Lender a report of each item of Equipment, in form and substance reasonably
satisfactory to the Lender.

     (r)  INTELLECTUAL PROPERTY COLLATERAL. The Borrower will:

          (1)  not enter into any agreement (including any license or royalty
agreement) pertaining to any material Intellectual Property Collateral, without
the prior written consent of the Lender, which shall not be unreasonably
withheld;

          (2)  not allow or suffer any material Intellectual Property Collateral
to become abandoned, nor any registration thereof to be terminated, forfeited,
expired or dedicated to the public;

          (3)  promptly give the Lender notice of any rights the Borrower may
obtain to any new patentable inventions, copyrightable works or other new
Intellectual Property Collateral

                                       12
<PAGE>

that are material to the Borrower, prior to the filing of any application for
registration thereof; and

          (4)  diligently prosecute all applications for patents, copyrights and
trademarks, and file and prosecute any and all continuations, continuations-in-
part, applications for reissue, applications for certificate of correction and
like matters as shall be reasonable and appropriate in accordance with prudent
business practice, and promptly and timely pay any and all maintenance, license,
registration and other fees, taxes and expenses incurred in connection with such
Intellectual Property Collateral.

     (s)  NOTICES, REPORTS AND INFORMATION. The Borrower will (i) notify the
Lender of any other modifications of or additions to the information contained
in Schedule 1; (ii) notify the Lender of any material claim made or asserted
   ----------
against the Collateral by any Person and of any change in the composition of the
Collateral or other event which could materially adversely affect the value of
the Collateral or the Lender's Lien thereon; (iii) furnish to the Lender such
statements and schedules further identifying and describing the Collateral and
such other reports and other information in connection with the Collateral as
the Lender may reasonably request, all in reasonable detail; and (iv) upon
request of the Lender make such demands and requests for information and reports
as the Borrower is entitled to make in respect of the Collateral.

     SECTION 6.  RIGHTS TO PAYMENT.

     (a)  COLLECTION OF RIGHTS TO PAYMENT. Until the Lender exercises its rights
hereunder to collect Rights to Payment, the Borrower shall endeavor in the first
instance in accordance with prudent business practice to diligently to collect
all material amounts due or to become due on or with respect to the Rights to
Payment. At the request of the Lender, upon and after the occurrence and during
the continuance of any Event of Default, all remittances received by the
Borrower shall be held in trust for the Lender to the extent permitted by
applicable law and, in accordance with the Lender's instructions, remitted to
the Lender or deposited to an account with the Lender in the form received (with
any necessary endorsements or instruments of assignment or transfer).

     (b)  INVESTMENT PROPERTY AND INSTRUMENTS. At the request of the Lender,
upon and after the occurrence and during the continuance of any Event of
Default, the Lender shall be entitled to receive all distributions and payments
of any nature with respect to any Investment Property or Instruments, and all
such distributions or payments received by the Borrower shall be held in trust
for the Lender to the extent permitted by applicable law and, in accordance with
the Lender's instructions, remitted to the Lender or deposited to an account
with the Lender in the form received (with any necessary endorsements or
instruments of assignment or transfer). Following the occurrence and during the
continuance of an Event of Default any such distributions and payments with
respect to any Investment Property held in any securities account shall be held
and retained in such securities account, in each case as part of the Collateral
hereunder. Additionally, the Lender shall have the right, upon the occurrence
and during the continuance of an Event of Default, following prior written
notice to the Borrower, to vote and to give consents, ratifications and waivers
with respect to any Investment Property and Instruments, and to exercise all
rights of conversion, exchange, subscription or any other rights,

                                       13
<PAGE>

privileges or options pertaining thereto to the extent permitted by applicable
law as if the Lender was the absolute owner thereof; provided that the Lender
shall have no duty to exercise any of the foregoing rights afforded to them and
shall not be responsible to the Borrower or any other Person for any failure to
do so or delay in doing so to the extent permitted by applicable law.

     SECTION 7.  AUTHORIZATION; LENDER APPOINTED ATTORNEY-IN-FACT. The Lender
shall have the right to, in the name of the Borrower, or in the name of the
Lender or otherwise, without notice to or assent by the Borrower, and the
Borrower hereby constitutes and appoints the Lender (and any of Lender's
officers, employees or agents designated by Lender) as the Borrower's true and
lawful attorney-in-fact, with full power and authority to:

          (1)  sign any of the Financing Statements which must be executed or
filed to perfect or continue perfected, maintain the priority of or provide
notice of the Lender's security interest in the Collateral; and

          (2)  Upon the occurrence and during the continuance of an Event of
Default:

               (A)  take possession of and endorse any notes, acceptances,
checks, drafts, money orders or other forms of payment or security and collect
any Proceeds of any Collateral;

               (B)  sign and endorse any invoice or bill of lading relating to
any of the Collateral, warehouse or storage receipts, drafts against customers
or other obligors, assignments, notices of assignment, verifications and notices
to customers or other obligors;

               (C)  send requests for verification of Rights to Payment to the
customers or other obligors of the Borrower;

               (D)  contact, or direct the Borrower to contact, all account
debtors and other obligors on the Rights to Payment and instruct such account
debtors and other obligors to make all payments directly to the Lender;

               (E)  assert, adjust, sue for, compromise or release any claims
under any policies of insurance;

               (F)  exercise dominion and control over, and refuse to permit
further withdrawals from, Deposit Accounts maintained with any financial
institution or other Person;

               (G)  notify each Person maintaining lockbox or similar
arrangements for the payment of the Rights to Payment to remit all amounts
representing collections on the Rights to Payment directly to the Lender;

               (H)  ask, demand, collect, receive and give acquittances and
receipts for any and all Rights to Payment, enforce payment or any other rights
in respect of the Rights to Payment and other Collateral, grant consents, agree
to any amendments, modifications or waivers of the agreements and documents
governing the Rights to Payment and other Collateral, and otherwise file any
claims, take any action or institute, defend, settle or adjust any actions,
suits or proceedings with respect to the Collateral, as the Lender may deem
necessary or

                                       14
<PAGE>

desirable to maintain, preserve and protect the Collateral, to collect the
Collateral or to enforce the rights of the Lender with respect to the
Collateral;

               (I)  execute any and all applications, documents, papers and
instruments necessary for the Lender to use the Intellectual Property Collateral
and grant or issue any exclusive or non-exclusive license or sublicense with
respect to any Intellectual Property Collateral;

               (J)  execute any and all endorsements, assignments or other
documents and instruments necessary to sell, lease, assign, convey or otherwise
transfer title in or dispose of the Collateral;

               (K)  execute and deliver to any securities intermediary or other
Person any entitlement order, Account Control Agreement or other notice,
document or instrument which the Lender may deem necessary of advisable to
maintain, protect, realize upon and preserve the Investment Property and the
Lender's security interest therein; and/or

               (L)  execute any and all such other documents and instruments,
and do any and all acts and things for and on behalf of the Borrower, which the
Lender may deem necessary or advisable to maintain, protect, realize upon and
preserve the Collateral and the Lender's security interest therein and to
accomplish the purposes of this Agreement.

     The foregoing power of attorney is coupled with an interest and irrevocable
so long as the Lender has any Commitment or the Secured Obligations have not
been paid and performed in full. The Borrower hereby ratifies, to the extent
permitted by law, all that the Lender shall lawfully and in good faith do or
cause to be done by virtue of and in compliance with this Section 7.

     SECTION 8.  LENDER PERFORMANCE OF BORROWER OBLIGATIONS. The Lender may
perform or pay any obligation which the Borrower has agreed to perform or pay
under or in connection with this Agreement, and the Borrower shall reimburse the
Lender on demand for any amounts paid by the Lender pursuant to this Section 8
to the extent permitted by applicable law.

     SECTION 9.  LENDER'S DUTIES. Notwithstanding any provision contained in
this Agreement, the Lender shall have no duty to exercise any of the rights,
privileges or powers afforded to them and shall not be responsible to the
Borrower or any other Person for any failure to do so or delay in doing so.
Beyond the exercise of reasonable care to assure the safe custody of Collateral
in the Lender's possession and the accounting for moneys actually received by
the Lender hereunder, the Lender shall have no duty or liability to exercise or
preserve any rights, privileges or powers pertaining to the Collateral to the
extent permitted by applicable law.

     SECTION 10. REMEDIES.

     (a)  REMEDIES. Upon the occurrence and during the continuance of any Event
of Default, the Lender shall have, in addition to all other rights and remedies
granted to them in this Agreement, the Credit Agreement or any other Loan
Document, all rights and remedies of a

                                       15
<PAGE>

secured party under the UCC and other applicable laws. Without limiting the
generality of the foregoing, the Borrower agrees that to the extent permitted by
applicable law:

          (1)  The Lender may peaceably and without notice enter any premises of
the Borrower, take possession of any the Collateral, remove or dispose of all or
part of the Collateral on any premises of the Borrower or elsewhere, or, in the
case of Equipment, render it nonfunctional, and otherwise collect, receive,
appropriate and realize upon all or any part of the Collateral, and demand, give
receipt for, settle, renew, extend, exchange, compromise, adjust, or sue for all
or any part of the Collateral, as the Lender may determine.

          (2)  The Lender may require the Borrower to assemble all or any part
of the Collateral and make it available to the Lender at any place and time
designated by the Lender.

          (3)  The Lender may use or transfer any of the Borrower's rights and
interests in any Intellectual Property Collateral, by license, by sublicense (to
the extent permitted by an applicable license) or otherwise, on such conditions
and in such manner as the Lender may determine.

          (4)  The Lender may secure the appointment of a receiver of the
Collateral or any part thereof (to the extent and in the manner provided by
applicable law).

          (5)  The Lender may withdraw (or cause to be withdrawn) any and all
funds from any Deposit Accounts or securities accounts.

          (6)  The Lender may sell, resell, lease, use, assign, transfer or
otherwise dispose of any or all of the Collateral in its then condition or
following any commercially reasonable preparation or processing (utilizing in
connection therewith any of the Borrower's assets, without charge or liability
to the Lender therefor) at public or private sale, by one or more contracts, in
one or more parcels, at the same or different times, for cash or credit, or for
future delivery without assumption of any credit risk, all as the Lender deems
advisable; provided, however, that the Borrower shall be credited with the net
proceeds of sale only when such proceeds are finally collected by the Lender.
The Lender shall have the right upon any such public sale, and, to the extent
permitted by law, upon any such private sale, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption, which
right or equity of redemption the Borrower hereby releases, to the extent
permitted by law.  The Borrower hereby agrees that the sending of notice by
ordinary mail, postage prepaid, to the address of the Borrower set forth in the
Credit Agreement, of the place and time of any public sale or of the time after
which any private sale or other intended disposition is to be made, shall be
deemed reasonable notice thereof if such notice is sent ten (10) days prior to
the date of such sale or other disposition or the date on or after which such
sale or other disposition may occur, provided that the Lender may provide the
Borrower shorter notice or no notice, to the extent permitted by the UCC or
other applicable law.  The Borrower recognizes that the Lender may be unable to
make a public sale of any or all of the Investment Property, by reason of
prohibitions contained in applicable securities laws or otherwise, and expressly
agrees that a private sale to a restricted group of purchasers for investment
and not with a view to any distribution thereof shall be considered a
commercially reasonable sale.

                                       16
<PAGE>

     (b)  LICENSE. For the purpose of enabling the Lender to exercise its rights
and remedies under this Section 10 or otherwise in connection with this
Agreement, the Borrower hereby grants to the Lender an irrevocable, non-
exclusive and assignable license (exercisable without payment or royalty or
other compensation to the Borrower) to use, license or sublicense any
Intellectual Property Collateral, except to the extent a grant of such license
would violate the terms of an existing agreement to which the Borrower is a
party.

     (c)  APPLICATION OF PROCEEDS. The cash proceeds actually received from the
sale or other disposition or collection of Collateral, and any other amounts
received in respect of the Collateral the application of which is not otherwise
provided for herein, shall be applied (i) first, to any fees, costs, expenses
and other amounts (other than principal and interest) then due to the Lender
under the Loan Documents; (ii) second, to accrued and unpaid interest due the
Lender; and (iii) third, to principal due the Lender. Any surplus thereof which
exists after payment and performance in full of the Secured Obligations shall be
promptly paid over to the Borrower or otherwise disposed of in accordance with
the UCC or other applicable law. The Borrower shall remain liable to the Lender
for any deficiency which exists after any sale or other disposition or
collection of Collateral to the extent permitted by applicable law.

     SECTION 11. CERTAIN WAIVERS. The Borrower waives, to the fullest extent
permitted by law, (i) any right of redemption with respect to the Collateral,
whether before or after sale hereunder, and all rights, if any, of marshalling
of the Collateral or other collateral or security for the Secured Obligations;
(ii) any right to require the Lender (A) to proceed against any Person, (B) to
exhaust any other collateral or security for any of the Secured Obligations, (C)
to pursue any remedy in the Lender's power, or (D) to make or give any
presentments, demands for performance, notices of nonperformance, protests,
notices of protests or notices of dishonor in connection with any of the
Collateral; and (iii) all claims, damages, and demands against the Lender
arising out of the repossession, retention, sale or application of the proceeds
of any sale of the Collateral.

     SECTION 12. NOTICES. All notices or other communications hereunder shall be
given in the manner and to the addresses specified in the Credit Agreement. All
such notices and other communications shall be effective (i) if delivered by
hand, when delivered; (ii) if sent by mail, upon the earlier of the date of
receipt or five Business Days after deposit in the mail, first class (or air
mail, with respect to communications to be sent to or from the United States);
and (iii) if sent by facsimile transmission, when sent.

     SECTION 13. NO WAIVER; CUMULATIVE REMEDIES. No failure on the part of the
Lender to exercise, and no delay in exercising, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights and remedies under this Agreement are cumulative
and not exclusive of any rights, remedies, powers and privileges that may
otherwise be available to the Lender.

     SECTION 14. COSTS AND EXPENSES; INDEMNIFICATION; OTHER CHARGES.

     (a)  COSTS AND EXPENSES. The Borrower agrees to pay on demand:

                                       17
<PAGE>

          (1)  the reasonable out-of-pocket costs and expenses of the Lender and
any of its Affiliates, and the reasonable fees and disbursements of counsel to
the Lender, in connection with the negotiation, preparation, execution, delivery
and administration of this Agreement (but, together with the costs associated
with the preparation of the Loan Documents, and any amendments, modifications or
waivers of the terms thereof, and the custody of the Collateral;

          (2)  all title, appraisal (including the allocated costs of internal
appraisal services), survey, audit, consulting, search, recording, filing and
similar costs, fees and expenses incurred or sustained by the Lender or any of
its Affiliates in connection with this Agreement or the Collateral; and

          (3)  all costs and expenses of the Lender and its Affiliates, and the
reasonable fees and disbursements of counsel, in connection with the enforcement
or attempted enforcement of, and preservation of any rights or interests under,
this Agreement, including in any out-of-court workout or other refinancing or
restructuring or in any bankruptcy case, and the protection, sale or collection
of, or other realization upon, any of the Collateral, including all expenses of
taking, collecting, holding, sorting, handling, preparing for sale, selling, or
the like, and other such expenses of sales and collections of Collateral, and
any and all losses, costs and expenses sustained by the Lender as a result of
any failure by the Borrower to perform or observe its obligations contained
herein.

     (b)  INDEMNIFICATION. The Borrower hereby agrees to indemnify the Lender,
any Affiliate thereof, and their respective directors, officers, employees,
agents, counsel and other advisors (each an "Indemnified Person") against, and
hold each of them harmless from, any and all liabilities, obligations, losses,
claims, damages, demands, penalties, actions, judgments, suits, costs, expenses
or disbursements of any kind or nature whatsoever, including the reasonable fees
and disbursements of counsel to an Indemnified Person, which may be imposed on,
incurred by, or asserted against any Indemnified Person, in any way relating to
or arising out of this Agreement or the transactions contemplated hereby or any
action taken or omitted to be taken by it hereunder (the "Indemnified
Liabilities"); provided that the Borrower shall not be liable to any Indemnified
Person for any portion of such Indemnified Liabilities to the extent they are
found by a final decision of a court of competent jurisdiction to have resulted
from such Indemnified Person's gross negligence or willful misconduct. If and to
the extent that the foregoing indemnification is for any reason held
unenforceable, the Borrower agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.

     (c)  OTHER CHARGES. The Borrower agrees to indemnify the Lender against and
hold it harmless from any and all present and future stamp, transfer,
documentary and other such taxes, levies, fees, assessments and other charges
made by any jurisdiction by reason of the execution, delivery, performance and
enforcement of this Agreement.

     (d)  INTEREST. Any amounts payable to the Lender under this Section 14 or
otherwise under this Agreement if not paid upon demand shall bear interest from
the date of such demand until paid in full, at the rate of interest set forth in
Section 2.04 of the Credit Agreement.

                                       18
<PAGE>

     SECTION 15. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by the Borrower, the Lender and
their respective permitted successors and permitted assigns. The Borrower shall
not have the right to assign its rights or obligations or any interest herein
without the prior written consent of the Lender. The Lender reserves the right
to freely sell, assign, transfer or grant participations in all or any portion
of the Lender's rights and obligations hereunder (i) to one or more Affiliates
of the Lender and/or (ii) with the prior consent of the Borrower (which consent
shall not be unreasonably withheld) to any other Person.

     SECTION 16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA, EXCEPT AS
REQUIRED BY MANDATORY PROVISIONS OF LAW AND TO THE EXTENT THE VALIDITY OR
PERFECTION OF THE SECURITY INTERESTS HEREUNDER, OR THE REMEDIES HEREUNDER, IN
RESPECT OF ANY COLLATERAL ARE GOVERNED BY THE LAW OF A JURISDICTION OTHER THAN
CALIFORNIA.

     SECTION 17. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan
Documents contain the entire agreement of the parties with respect to the
subject matter hereof and shall not be amended except by the written agreement
of the parties as provided in the Credit Agreement.

     SECTION 18. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
all applicable laws and regulations. If, however, any provision of this
Agreement shall be prohibited by or invalid under any such law or regulation in
any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
conform to the minimum requirements of such law or regulation, or, if for any
reason it is not deemed so modified, it shall be ineffective and invalid only to
the extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement, or the validity or effectiveness of such provision
in any other jurisdiction.

     SECTION 19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same agreement.

     SECTION 20. INCORPORATION OF PROVISIONS OF THE CREDIT AGREEMENT. To the
extent the Credit Agreement contains provisions of general applicability to the
Loan Documents, such provisions are incorporated herein by this reference.

     SECTION 21. NO INCONSISTENT REQUIREMENTS. The Borrower acknowledges that
this Agreement and the other Loan Documents may contain covenants and other
terms and provisions variously stated regarding the same or similar matters, and
agrees that all such covenants, terms and provisions are cumulative and all
shall be performed and satisfied in accordance with their respective terms.

     SECTION 22. TERMINATION. Upon termination of the Commitment of the Lender
and payment and performance in full of all Secured Obligations, this Agreement
shall terminate

                                       19
<PAGE>

and the Lender shall promptly execute and deliver to the Borrower such documents
and instruments reasonably requested by the Borrower as shall be necessary to
evidence termination of all security interests given by the Borrower to the
Lender hereunder; provided, however, that the obligations of the Borrower under
Section 14 shall survive such termination.

        [Remainder of page intentionally left blank; signatures follow]

                                       20
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have duly executed this Security
Agreement, as of the date first above written.

                                        THE BORROWER
                                        AMERIGON INCORPORATED, a California
                                        corporation

                                        By: /s/ Richard A. Weisbart
                                           ---------------------------------
                                           Richard A. Weisbart,
                                           President & CEO

                                        THE LENDER
                                        BIG BEAVER INVESTMENTS LLC,
                                        a Delaware limited liability company

                                        By: /s/ O. B. Marx, III
                                           ---------------------------------
                                        Name:  Oscar B. Marx, III
                                             -------------------------------
                                        Title: President
                                              ------------------------------

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