Exhibit 10.21

AMENDMENT TO BUSINESS LOAN AGREEMENT AND MASTER REVOLVING NOTE

            This Amendment to Business Loan Agreement and Master Revolving Note
(this “Amendment”), effective as of May 31, 2002, is entered into by and between
Comerica Bank-California (“Bank”) and Taitron Components Incorporated, a
California corporation (“Borrower”).

            Bank and Borrower are parties to that certain Business Loan
Agreement dated as of May 6, 1997 (as heretofore amended, together with the
Addendum attached to and made a part thereof, the “Business Loan Agreement”). 
In connection with the Business Loan Agreement, Borrower entered into that
certain Master Revolving Note dated May 6, 1997 originally in the maximum
principal amount of $16,000,000, later reduced by amendment to $15,000,000 (the
“Revolving Note”) and that certain Addendum to Master Revolving Note dated as of
May 6, 1997 (the “Note Addendum”).

            Borrower has requested, and Bank has agreed, to make certain
amendments to the Business Loan Agreement, as set forth below.

            For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower agree as follows:

          1.          The seventh (7th) sentence of Section 1A of the Business
Loan Agreement is hereby deleted and replaced with the following two (2)
sentences:  “In no event shall the sum (without duplication) of (i) the face
amount of all outstanding L/Cs and Short Term L/Cs plus (ii) the amount of all
outstanding L/C and Short Term L/C reimbursement obligations plus (iii) the
outstanding Revolving Loan advances (clauses (i), (ii) and (iii) being referred
to collectively as the “Effective Balance”) exceed the lesser of the Borrowing
Base and the Revolving Commitment Limit (the lesser of the Borrowing Base and
the Revolving Commitment Limit being referred to as the “Total Availability”). 
To the extent that the Effective Balance at any time exceeds the Total
Availability, Borrower shall immediately repay to Bank the amount of such
excess.”

          2.          Section 1A of the Business Loan Agreement is further
amended by adding the following provisions at the end of such Section:

            “Borrowing Base” means an amount equal to the sum of (a) 30% of the
dollar value of Eligible Inventory (but in no event more than the applicable
Inventory Cap), (b) 80% of the face amount of Eligible Accounts and (c) for so
long as the real property described in Section 4 remains subject to a
first-priority deed of trust in favor of Bank as provided in Section 4, the sum
of $2,940,000.

            “Eligible Account” means each account receivable of Borrower as to
which the Bank has determined in its sole and absolute discretion:

 

(a)

 

arises out of the sale by Borrower of inventory in the ordinary course of its
business to an account debtor located within the United States of America;

 

(b)

 

is the valid, binding and legally enforceable obligation of the account debtor
obligated thereon and such account debtor is not (i) an affiliate of Borrower,
(ii) a director, officer or employee of Borrower or of any affiliate of
Borrower, (iii) the United States of America or any department, agency or
instrumentality thereof (or any state or municipality), (iv) a debtor under any
proceeding under the United States Bankruptcy Code or any other comparable
bankruptcy or insolvency law applicable under the law of any other country or
political subdivision thereof, or (v) an assignor for the benefit of creditors;

 

(c)

 

is assignable and not evidenced by an instrument or chattel paper unless the
same has been endorsed and delivered to Bank;

 

(d)

 

is subject to a perfected, first priority lien in favor of Bank, and is free and
clear of any other lien, except for such liens as may be permitted under this
Agreement;

 

(e)

 

is net of any credit or allowance given by Borrower to such account debtor;

 

(f)

 

for which Borrower is not and will not become liable to the account debtor for
goods sold or services rendered by such account debtor to Borrower;

 

(g)

 

is not subject to any asserted offset, counterclaim or other defense with
respect thereto, provided, however, that this clause (g) shall not cause an
account to fail to be an Eligible Account to the

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extent of the portion thereof, if any, that is not subject to any asserted
offset, counterclaim or other defense;

 

(h)

 

is not unpaid more than 90 days after earlier of (x) the date of the applicable
invoice and (y) the date of shipment;

 

(i)

 

is not owed by an account debtor who is obligated on accounts owed to Borrower
more than 25% of the aggregate unpaid balance of which have been past due for
longer than either of the relevant periods specified in clause (h) above;

 

(j)

 

to the extent that it would not cause the total Eligible Accounts owing from any
one account debtor or its affiliates to exceed 20% of all Eligible Accounts owed
to Borrower; and

 

(k)

 

does not arise from a sale to an account debtor on a bill-and-hold, guaranteed
sale, sale-or-return, sale-on-approval, consignment or any other repurchase or
return basis.

            “Eligible Inventory” means all finished goods and raw materials
inventory produced or procured pursuant to valid, binding and existing purchase
orders therefor and as to which Borrower has title, provided that the Bank has
determined in its sole and absolute discretion that such inventory:

 

(a)

 

is subject to a perfected, first priority lien in favor of Bank, and is free and
clear of any other lien, except for such liens as may be permitted under this
Agreement;

 

(b)

 

is located at Borrower’s address set forth in this Agreement or at such other
locations within the United States of America as may be permitted pursuant to
this Agreement;

 

(c)

 

has not been acquired by Borrower on consignment and has not been placed out on
consignment by Borrower; and

 

(d)

 

is not obsolete or slow moving inventory (including, without limitation,
inventory of a type which has not had substantial sales during the past twelve
months or, in the case of any product introduced within the past twelve months,
since its date of introduction), and is of good and merchantable quality free
from any defects which might adversely affect the market value thereof.

            “Inventory Cap” means, for purposes of each determination of the
Borrowing Base, the amount set forth below with respect to the applicable period
set forth below in which such determination of the Borrowing Base occurs:

 

Period of Determination

 

 

Applicable Inventory Cap

 

 

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All times prior to June 30, 2002

 

$

9,000,000

 

 

 

 

 

 

 

 

June 30, 2002 – December 30, 2002

 

$

7,000,000

 

 

 

 

 

 

 

 

December 31, 2002 and thereafter

 

$

5,500,000

 

          3.          Section 4 of the Business Loan Agreement is amended by
adding the following at the end of such Section:

                      In addition, Borrower shall provide to Bank (i) a first
trust deed in form and substance acceptable to Bank encumbering the real
property located at 28040 West Harrison Parkway, Valencia, California; (ii) an
environmental indemnity in form and substance acceptable to Bank with respect to
such real property; (ii) such other agreements, instruments and other documents
as the Bank shall determine is necessary or desirable to further evidence,
perfect or provide protection for its interest in such real property.  As a
condition to Bank’s acceptance of such real property, Bank shall (x) be
satisfied in its sole and absolute discretion with the value, physical
condition, environmental compliance and title of such real property and (y) have
obtained, at the cost and expense of Borrower a lender’s policy of title
insurance with respect to such real property insuring the first priority of the
lien of such deed of trust, with a policy limit acceptable to Bank and with such
endorsements and other coverages as the Bank shall require, the issuer and terms
of which shall be acceptable to Bank and which shall have as exceptions only
such matters as are acceptable to Bank.

          4.          Section 2 of the Addendum to the Business Loan Agreement
is amended and restated to read in full as follows:

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     2.     Financial Covenants.  Borrower shall maintain the following
financial ratios and covenants on a consolidated and non-consolidated basis:

 

 

 

     (a)   Tangible Effective Net Worth in an amount not less than the sum of
(i) $24,600,000 plus (ii) 100% of Borrower’s net income for each fiscal year,
commencing with the fiscal year ending December 31, 2002 (net income being
determined in accordance with GAAP, provided that in no event shall net income
be deemed to be less than zero);

 

 

     (b)    A ratio of Current Assets to Current Liabilities of not less than
2.00 : 1.00;

 

 

 

     (c)    A ratio of Total Liabilities (less Subordinated Debt, as defined
herein) to Tangible Effective Net Worth of not less than 0.75 : 1.00;

 

 

 

     (d)    A net loss of not more than $330,000 for the fiscal quarter ended
March 31, 2002, and thereafter, a net profit of not less than that set forth
below for the applicable fiscal quarter:

 

 

 

      Fiscal Quarter ended June 30, 2002: $50,000

 

 

 

      Fiscal Quarter ended September 30, 2002: $175,000

 

 

 

      Fiscal Quarter ended December 31, 2002: $175,000

 

 

 

      Fiscal Quarter ended March 31, 2003, and each Fiscal Quarter thereafter:
$250,000; and

 

 

 

     (e)    A net profit for fiscal year 2002 of not less than $150,000, and for
fiscal year 2003 of not less than $1,000,000.

 

 

 

     All financial covenants shall be computed in accordance with GAAP
consistently applied, except as may otherwise be specifically set forth in this
Agreement.  All monies due from affiliates (including officers, directors and
shareholders) shall be excluded from Borrower’s assets for all purposes
hereunder.

 

 

 

5.  The Revolving Note is amended by changing its Maturity Date to “May 15,
2004”.

 

 

 

6.  Section 2.a. of the  Note Addendum is amended and restated to read in full
as follows:

                                            a.     A rate equal to the sum of
Bank’s LIBOR plus (i) if Borrower’s quarterly net profit has exceeded $250,000
for each of the two most recently ended fiscal quarters, 200 basis points or
(ii) otherwise, 235 basis points;

               8.  Borrower and Bank hereby affirm that each of the Business
Loan Agreement, the Revolving Note and the Note Addendum remains in full force
and effect without modification except as expressly provided in this Amendment.

               IN WITNESS WHEREOF, Borrower and Bank have duly executed and
delivered this Amendment as of the date first written above.

TAITRON COMPONENTS INCORPORATED

COMERICA BANK-CALIFORNIA

 

 

By: /s/ Stewart Wang, CEO

 

By: /s/ Jason Brown, VP

 

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Recording requested by and when recorded mail to

COMERICA BANK-CALIFORNIA
Attn: Cynthia Villadiego
9920 South La Cienega, Suite 628
Inglewood, California 90301
+ +
Name
Street
Address
City
State
Zip

SPACE ABOVE THIS LINE FOR RECORDER’S USE
DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING
(WITH ASSIGNMENT OF RENTS AND LEASES)

This Deed of Trust, Security Agreement and Fixture Filing (With Assignment of
Rents and Leases) is made as of this 31st day of May, 2002, by TAITRON
COMPONENTS INCORPORATED (hereinafter called “Trustor”) whose address is 2804 W.
Harrison Parkway, Valencia, California 91355, to NORTH AMERICAN TITLE COMPANY, a
corporation (hereinafter called “Trustee”), whose address is 520 North Brand
Boulevard, Glendale, California 91203, for the benefit of COMERICA
BANK-CALIFORNIA, a California Banking Corporation (hereinafter called
“Beneficiary”), whose address is 75 East Trimble Road, San Jose, California
95131.

WITNESSETH: That Trustor IRREVOCABLY GRANTS, TRANSFERS AND ASSIGNS to Trustee,
its successors and assigns, in Trust, with POWER OF SALE TOGETHER WITH RIGHT OF
ENTRY AND POSSESSION the following property (the “Trust Estate”):

all that certain real property now or hereafter acquired, in the City of Santa
Clarita, County of Los (a) Angeles, State of California (the “Land”), more
particularly described as follows:

See Exhibit “A” attached hereto

(b) all buildings, structures and other improvements now or in the future
located or to be constructed on the Land (the “Improvements”);

(c) all tenements, hereditaments, appurtenances, privileges, franchises and
other rights and interests now or in the future benefitting or otherwise
relating to the Land or the Improvements, including easements, rightsof- way,
development rights, mineral rights, water and water rights, pumps and pumping
plants and all shares of stock evidencing the same (the “Appurtenances,” and
together with the Land and the Improvements, the “Real Property”);

(d) subject to the assignment to Beneficiary set forth in Paragraph 11 below,
all rents, issues, income, revenues, royalties and profits now or in the future
payable with respect to or otherwise derived from the Trust Estate or the
ownership, use, management, operation, leasing or occupancy of the Trust Estate,
including those past due and unpaid (the “Rents”);

(e) all present and future right, title and interest of Trustor in and to all
inventory, equipment, fixtures and other goods (as those terms are defined in
Division 9 of the California Uniform Commercial Code (the “UCC”), and whether
existing now or in the future) now or in the future located at, upon or about,
or affixed or attached to or installed in, the Real Property, or used or to be
used in connection with or otherwise relating to the Real Property or the
ownership, use, development, construction, maintenance, management, operation,
marketing, leasing or occupancy of the Real Property, including furniture,
furnishings, machinery, appliances, building materials and  supplies,
generators, boilers, furnaces, water tanks, heating, ventilating and air
conditioning equipment and all other types of tangible personal property of any
kind or nature, and all accessories, additions, attachments, parts, proceeds,
products, repairs, replacements and substitutions of or to any of such property
(the “Goods,” and together with the Real Property, the “Property”); and

(f) all present and future right, title and interest of Trustor in and to all
accounts, general intangibles, chattel paper, deposit accounts, money,
instruments and documents (as those terms are defined in the UCC) and all other
agreements, obligations, rights and written materials (in each case whether
existing now or in the future) now or in the future relating to or otherwise
arising in connection with or derived from the Property or any other part of the
Trust Estate or the ownership, use, development, construction, maintenance,
management, operation, marketing, leasing, occupancy, sale or financing of the
Property or any other part of the Trust Estate, including (to the extent

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applicable to the Property or any other portion of the Trust Estate) (i)
permits, approvals and other governmental authorizations, (ii) improvement plans
and specifications and architectural drawings, (iii) agreements with
contractors, subcontractors, suppliers, project managers, supervisors,
designers, architects, engineers, sales agents, leasing agents, consultants and
property managers, (iv) takeout, refinancing and permanent loan commitments, (v)
warranties, guaranties, indemnities and insurance policies (whether or not
required to be carried by Trustor pursuant to the terms hereof), together with
insurance payments and unearned insurance premiums, (vi) claims, demands,
awards, settlements and other payments arising or resulting from or otherwise
relating to any insurance (whether or not Beneficiary is named as a loss payee
of such insurance) or any loss or destruction of, injury or damage to, trespass
on or taking, condemnation (or conveyance in lieu of condemnation) or public use
of any of the Property, (vii) license agreements, service and maintenance
agreements, purchase and sale agreements and purchase options, together with
advance payments, security deposits and other amounts paid to or deposited with
Trustor under any such agreements, (viii) reserves, deposits, bonds, deferred
payments, refunds, rebates, discounts, cost savings, escrow proceeds, sale
proceeds and other rights to the payment of money, trade names, trademarks,
goodwill and all other types of intangible personal property of any kind or
nature, and (ix) all supplements, modifications, amendments, renewals,
extensions, proceeds, replacements and substitutions of or to any of such
property (the “Intangibles”).

Trustor further grants to Trustee and Beneficiary, pursuant to the UCC, a
security interest in all present and future right, title and interest of Trustor
in and to all Goods and Intangibles and all of the Trust Estates described above
in which a security interest may be created under the UCC (collectively, the
“Personal Property”). This Deed of Trust constitutes a security agreement under
the UCC, conveying a security interest in the Personal Property to Trustee and
Beneficiary. Trustee and Beneficiary shall have, in addition to all rights and
remedies provided herein, all the rights and remedies of a “secured party” under
the UCC and other applicable California law. Trustor covenants and agrees that
this Deed of Trust constitutes a fixture filing under 9502 of the UCC.

FOR THE PURPOSE OF SECURING, in such order of priority as Beneficiary may elect,
(1) payment of the indebtedness evidenced by that certain promissory note of
even date herewith executed by Trustor to the order of Beneficiary and any and
all modifications, extensions or renewals thereof, whether hereafter evidenced
by said note or otherwise; (2) payment of interest on said indebtedness
according to the terms of said promissory note; (3) payment of all other sums,
with interest as herein provided, becoming due or payable under the provisions
hereof to Trustee or Beneficiary; (4) due, prompt and complete observance,
performance and discharge of each and every condition, obligation, covenant and
agreement contained herein, or in said note, or in any loan agreement relative
to any indebtedness evidenced by said note or in any document or instrument
evidencing, securing or pertaining to the indebtedness evidenced by said note,
excluding, however, any guaranty or unsecured environmental indemnity (“Loan
Documents”) and all modifications, renewals or extensions of any of the
foregoing; and (5) payment of such additional sums with interest thereon as may
be hereafter borrowed from Beneficiary, its successors or assigns by Trustor or
the then record owner or owners of the Trust Estate when evidenced by another
promissory note or notes, which are by the terms thereof secured by this Deed of
Trust.

TO PROTECT AND MAINTAIN THE SECURITY OF THIS DEED OF TRUST, TRUSTOR AGREES:

To pay, perform, observe and discharge each and every condition, obligation,
covenant (1) and agreement for which this Deed of Trust has been given as
security as provided above.

(2) To keep the Property in good condition and repair; not to remove or demolish
any improvement thereon; to complete or restore promptly and in good and
workmanlike manner any improvement which may be constructed, damaged or
destroyed thereon and to pay when due all claims for labor performed and
materials furnished therefor; to comply with all laws affecting the Trust Estate
or requiring any alterations or improvements to be made thereon; not to commit
or permit waste thereof; to perform, in the event all or any portion of the
Trust Estate constitutes a leasehold estate belonging to Trustor, each and every
obligation of Trustor under the terms of the lease agreement relating to the
demise of such property; not to commit, suffer or permit any act upon the Trust
Estate in violation of law; to do all acts which from the character or use of
the Property may be reasonably necessary, the specific enumerations herein not
excluding the general.

(3) To fully insure, or cause to be insured, the Property against loss or damage
by fire, flood, and such other risks as Beneficiary shall, from time to time,
require. Trustor shall carry public liability and other insurance as Beneficiary
may require. Trustor shall maintain all required insurance in companies,
amounts, coverages, deductibles, and forms satisfactory to the Beneficiary and
at least equal to that required on the date of this Deed of Trust. Such
insurance shall be carried in amounts not less than amounts determined by the
insurance company or Beneficiary to prevent the application of co-insurance or
similar clauses, or in such greater amounts as Beneficiary may require. Neither
Beneficiary nor Trustee, by reason of accepting, rejecting, approving or
obtaining insurance, shall incur any liability for (i) the existence,
nonexistence, form or legal sufficiency thereof, (ii) the solvency or insolvency
of any insurer, or (iii) the payment of losses. All property insurance policies
shall name Beneficiary as the primary loss payee, all liability insurance
policies shall name Beneficiary as an additional insured,

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and all policies shall provide that they cannot be terminated as to Beneficiary
except upon thirty (30) days’ prior written notice to Beneficiary. Trustor shall
deliver to Beneficiary the original of all such policies, or with Beneficiary’s
consent certificates, together with receipts satisfactory to the Beneficiary,
evidencing payment of the premiums therefor. Should Trustor fail to insure or
fail to pay the premiums on any required insurance or fail to deliver the
policies or renewals of them as provided above, Beneficiary may (but is not
obligated to) have the insurance issued or renewed (and pay the premiums on it
for the account of Trustor) in amounts and with companies and at premiums as
Beneficiary deems appropriate. If Beneficiary elects to have insurance issued or
renewed to insure Beneficiary’s interest, Beneficiary shall have no obligation
to also insure Trustor’s interest or to notify Trustor of Beneficiary’s actions.
All sums advanced by Beneficiary to pay premiums on insurance policies which
Trustor is required to maintain hereunder shall be due and payable by Trustor to
Beneficiary upon demand, and failing prompt reimbursement, shall be added to the
indebtedness secured by this Deed of Trust and earn interest at the default rate
set forth in the note secured hereby until paid in full.

As of the date this Deed of Trust is recorded and continuously until this Deed
of Trust is fully reconveyed, the insurance policies shall conform to the
following requirements:

All insurance policies must be underwritten by insurers with a Best’s rating of
B+, VI or (a) better;

(b) In the event all or any portion of the Real Property secured by this Deed of
Trust constitutes rental or non-residential property, Trustor shall maintain a
Commercial General Liability insurance policy, including broad form coverages or
their equivalents, with One Million Dollars ($1,000,000) combined single limit
coverage for bodily injury and property damage; provided, however, if
improvements similar to the Improvements secured hereby are generally insured at
higher limits of coverage, such higher limits shall be obtained. In all other
cases, Trustor shall maintain such liability insurance coverages as Beneficiary
may require from time to time;

Trustor shall provide, as required by Beneficiary, additional property and
rental income (c) insurance coverages as follows:

All risk coverage in the amount of the full replacement cost of the 1.
Improvements;

A waiver of co-insurance endorsement or agreed value endorsement (relative to 2.
casualty);

A replacement cost coverage endorsement (relative to casualty); 3.

A standard mortgage clause (438BFU or CP12-18) with Beneficiary named as 4. loss
payee in the Declarations;

A waiver of subrogation clause; 5.

6. To the extent that any portion of the Real Property constitutes rental
property, loss of rents coverage in an amount equal to at least twelve (12)
months of rentals from the Real Property secured hereby and any expenses that
are payable or reimbursable by tenants;

7. Flood insurance in an amount sufficient to provide full replacement cost
coverage of the Real Property in the event the Real Property is located within
any flood hazard area; and Such other coverages as Beneficiary may request from
time to time. 8.

The amount collected under any fire or other insurance policy maintained by
Trustor with respect to the Property (whether or not required hereunder and
whether or not Beneficiary is named as loss payee) may be applied by Beneficiary
upon any indebtedness secured hereby and in such order as Beneficiary may
determine, or at option of Beneficiary the entire amount so collected or any
part thereof may be released to Trustor. Such application or release shall not
cure or waive any default or notice of default hereunder or invalidate any act
done pursuant to such notice.

(4) To appear in and defend any action or proceeding purporting to affect the
security hereof or the rights or powers of Beneficiary or Trustee; and to pay
all costs and expenses, including cost of evidence of title and attorney’s fees
in a reasonable sum, in any such action or proceeding in which Beneficiary or
Trustee may appear, and in any suit brought by Beneficiary to foreclose this
Deed of Trust.

(5) To pay and discharge, at least ten days prior to delinquency, all taxes of
every kind and nature, including real and personal property taxes and income,
franchise, withholding, profits and gross receipts taxes, all general and
special assessments, including assessments on appurtenant water stock, levies,
permits, inspection and license fees, all water and sewer rents and charges, and
all other public charges whether of a like or different nature, imposed upon or
assessed against Trustor or the Trust Estate or any part thereof or upon the
revenues, rents, issues, income and profits thereof or upon this Deed of Trust
or the indebtedness now or hereafter secured hereby; when due, all encumbrances,
charges and liens, with interest, on the Trust Estate or any part thereof, which
appear to be prior or superior hereto or subject or subordinate hereto; all
costs, fees and expenses of this Trust; or, if and as required by Beneficiary,
to pay to Beneficiary in equal installments on the day on which monthly

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payments of principal and interest are due under said note, sufficient funds (as
estimated by Beneficiary from time to time) to pay when due the next maturing
taxes, assessments and hazard insurance (including flood insurance, if required)
premiums. When so provided with sufficient funds, Beneficiary shall pay such
taxes, assessments and hazard insurance premiums before delinquency. Any excess
over the amount required for such purposes shall be held for future use, applied
to any indebtedness hereby secured or refunded to Trustor at Beneficiary’s
option. To promptly and completely observe, perform, and discharge each and
every condition, obligation, covenant and agreement affecting the Trust Estate,
whether the same is prior and superior or subject and subordinate hereto
including, if the security hereunder is or will be a condominium, community
apartment or part of a planned development, each and every provision to be
performed by Trustor under any Declaration of Covenants, Conditions and
Restrictions pertaining to the condominium, community apartment or planned
development project and, upon written request of Beneficiary, to pay maintenance
charges, if the same have not been paid or legal steps have not been initiated
to enforce such payment within ninety (90) days after such written request is
made. Should Trustor fail to make any payment or to do any act as herein
provided, then Beneficiary or Trustee, but without obligation so to do and
without notice to or demand upon Trustor and without releasing Trustor from any
obligation hereof, may: make or do the same in such manner and to such extent as
either may deem necessary to protect the security hereof, Beneficiary or Trustee
being authorized to enter upon the Real Property for such purposes; appear in
and defend any action or proceeding purporting to affect the security hereof or
the rights or powers of Beneficiary or Trustee; pay, purchase, contest or
compromise any encumbrance, charge or lien which in the judgment of either
appears to be prior or superior hereto; and, in exercising any such powers, pay
necessary expenses, employ counsel and pay reasonable attorneys’ fees and costs
in connection therewith.

(6) To pay immediately and without demand all sums so expended by Beneficiary or
Trustee, with interest from date of expenditure until paid in full by Trustor at
a rate equal to five percent (5%) per annum over and above the rate set forth in
the promissory note secured hereby, which sums shall be secured by this Deed of
Trust to the same extent and with the same priority as the principal and
interest payable under the promissory note hereby secured, and such sums shall
be deemed mandatory advances required for the preservation and protection of the
lien of this Deed of Trust and Trustee’s and Beneficiary’s rights hereunder.

(7) That any award of damages in connection with any condemnation for public use
of or injury to the Property or any part thereof is hereby assigned and shall be
paid to Beneficiary who may apply or release such moneys received by him in the
same manner and with the same effect as above provided for disposition of
proceeds of fire or other insurance. Notwithstanding the fact that the security
given hereby may not be impaired by a partial condemnation, Beneficiary, in its
sole and absolute discretion, shall have the right to apply all compensation,
award or other payments or relief therefor made on account thereof to either the
payment of accrued but unpaid interest and second to the prepayment of principal
under said promissory note or reimbursement of Trustor for expenses incurred by
it in the restoration of the Property, and in respect thereto, Trustor hereby
waives the benefit of any statute or rule of law which may be contrary thereto.

(8) That by accepting the payment, performance or observance of any condition,
obligation, covenant or agreement contained herein after the date to be paid,
performed or observed as provided hereunder, Beneficiary does not waive its
right either to require prompt payment, performance or observance when due of
all other conditions, obligations, covenants or agreements contained herein or
to declare a default for failure so to do.

(9) That at any time or from time to time, without liability therefor and
without notice, upon written request of Beneficiary and presentation of this
Deed of Trust and said note for endorsement, and without affecting the personal
liability of any person for payment of the indebtedness secured hereby, Trustee
may: reconvey any part of the Trust Estate; consent to the making of any map or
plat thereof; join in granting any easement thereon; join in the execution of or
subordination of the lien or charge hereof to any covenants, conditions or
restrictions affecting said property; or join in any extension agreement or any
agreement subordinating the lien or charge hereof.

(10) That upon written request of Beneficiary stating that all sums secured
hereby have been paid, and upon surrender of this Deed of Trust and said note to
Trustee for cancellation and retention and upon payment by Trustor of its fees,
Trustee shall reconvey, without warranty, the Trust Estate then held hereunder.
The recitals in such reconveyance of any matters or facts shall be conclusive
proof of the truthfulness thereof. The grantee in such reconveyance may be
described as “the person or persons legally entitled thereto.”

(11) That Trustor absolutely and unconditionally hereby assigns, transfers,
conveys and sets over to Beneficiary all the Rents; provided, however, prior to
any default by Trustor in the payment, observance, performance and discharge of
any condition, obligation, covenant or agreement of Trustor contained herein,
Trustor shall have the right as the agent and fiduciary representative of
Beneficiary for collection and distribution purposes only, to collect and
receive the Rents as they become due and payable to be applied by Trustor to the
payment of the principal and interest and all other sums due or payable on said
promissory note and to the payment of all other sums payable under this Deed of
Trust and, thereafter, so long as no default as aforesaid has occurred, the
balance shall be distributed to the account of Trustor. Upon any such default,
Beneficiary may at any time without notice, either in

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person, by agent or by a receiver to be appointed by a court, and without regard
to the adequacy of any security for the indebtedness hereby secured, enter upon
and take possession of the Property or any part thereof, in its own name or in
the name of Trustor, sue for or otherwise collect the Rents, including those
past due and unpaid and apply the same, less costs and expenses of operation and
collection, including reasonable attorneys’ fees and expenses, to the payment of
the principal and interest and all other sums due or payable on said promissory
note and to the payment of all other sums payable under this Deed of Trust and
in such order as Beneficiary may determine. The entering upon and taking
possession of the Property, the collection of the Rents and the application
thereof as aforesaid, shall not cure or waive any default or notice of default
hereunder or invalidate any act done pursuant to such notice.

All leases and rental agreements now or hereafter affecting the Real Property,
including all oil and gas leases and other subsurface leases and the royalties
derived therefrom, are hereby assigned and transferred to Beneficiary by the
Trustor, and Trustor hereby agrees and covenants that none of said leases or
rental agreements will be modified or terminated without the consent in writing
of Beneficiary. Trustor shall provide to Beneficiary a non-disturbance and
attornment agreement, in form acceptable to Beneficiary, executed by each tenant
under a lease or rental agreement for a portion of said Real Property executed
after the date hereof.

Trustor agrees that it will not (a) execute any further assignment of any of its
right, title and interest in the Rents without the prior written consent of
Beneficiary; (b) accept prepayments of any installments of Rents to become due
under any leases or rental agreements in excess of one (1) month except
prepayments in the nature of security which security will not exceed an amount
equal to one (1) month’s rent under the lease or rental agreement; (c) with
respect to any lease or rental agreement having a term of two (2) years or more,
Trustor will not terminate, amend or modify any such lease or rental agreement
without the prior written consent of the Beneficiary or (d) accept a surrender
of any such lease or rental agreement.

Trustor hereby represents, warrants and covenants that: (12)

(a) Neither the Real Property which is the subject of this Deed of Trust nor any
other real property occupied and/or owned by Trustor has ever been used by
Trustor or any other previous owner and/or operator in connection with the
disposal of or to refine, generate, manufacture, produce, store, handle, treat,
transfer, release, process or transport flammable explosives, radioactive
materials, asbestos, PCB, hazardous wastes, toxic substances or related
materials, including, without limitation, any substances defined as or included
in the definition of “hazardous substances,” “hazardous wastes,” “hazardous
materials,” or “toxic substances” under any Hazardous Materials Laws (defined
below) (collectively, “Hazardous Materials”), and Trustor will not at any time
use the Real Property or such other real property for the disposal, refining,
generating, manufacturing, producing, storing, handling, treating, transferring,
releasing, processing or transporting of any Hazardous Materials.

(b) After diligent investigation including, but not limited to, engineering
reports and an environmental assessment report provided to Beneficiary, Trustor
warrants and represents that the Real Property is free of Hazardous Materials
and contaminants which are or could be detrimental to the Real Property, human
health or the environment or in violation of any governmental laws or
regulations.

(c) Neither the Real Property or any other real property owned and/or occupied
by Trustor has been designated, listed or identified in any manner by the United
States Environmental Protection Agency (“EPA”) or under and pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, set forth at 42 U.S.C. 9601 et seq. (“CERCLA”), the Resource
Conservation and Recovery Act of 1986, as amended, set forth at 42 U.S.C. 6901
et seq. (“RCRA”), or any other environmental protection statute as a hazardous
waste or hazardous substance disposal or removal site, superfund or cleanup site
or candidate for removal of closure pursuant to RCRA, CERCLA or any other
environmental protection statute.

(d) Trustor has not received a notice, summons, citation, directive, letter or
other communication, written or oral (collectively, “Notice”) from the EPA or
any other federal or state governmental agency or instrumentality, authorized
pursuant to an environmental protection statute, concerning any intentional or
unintentional action or omission by Trustor resulting in the releasing,
spilling, leaking, pumping, pouring, emitting, emptying, dumping or otherwise
disposing of Hazardous Materials into the environment resulting in damage
thereto or to the fish, shellfish, wildlife, biota or other natural resources.

Trustor shall, and shall cause all tenants, employees, agents, contractors and
subcontractors of Trustor and any other persons present on or occupying the Real
Property to, keep and maintain the Real Property, including the soil and
groundwater thereof, in compliance with, and not cause or permit the Real
Property, including the soil and groundwater thereof, to be in violation of, any
federal, state or local laws, ordinances or regulations relating to industrial
hygiene or to the environmental conditions thereon, including but not limited to
any Hazardous Materials Laws. Neither Trustor nor tenants, employees, agents,
contractors and subcontractors of Trustor nor any other persons occupying or
present on the Real Property shall use, generate, manufacture, store or dispose
of on, under or about the Real Property or transport to or from the Real
Property any Hazardous Materials. The intended use of the Real Property is for
manufacture of electronic components (“Permitted Use”) and

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Trustor shall not change or alter the Permitted Use unless Trustor shall have
first notified Beneficiary thereof in writing and Beneficiary shall have
determined, in its sole and absolute discretion, that such change or
modification will not result in the presence of Hazardous Materials on the Real
Property in such a level that would increase the potential liability for
Hazardous Materials Claims.

Trustor shall immediately advise Beneficiary in writing of: (a) any Notices
(whether such Notices are received from the EPA, the Occupational Safety and
Health Agency, the Department of Health Services, the State Water Quality
Control Board, the Department of Sanitation, the Department of Public Works or
any other federal, state or local governmental agency or regional office
thereof) of violation or potential violation which are received by Trustor of
any applicable federal, state or local laws, ordinances or regulations relating
to any Hazardous Materials, including but not limited to CERCLA, RCRA, the
Hazardous Materials Transportation Act, the Hazardous Substances Account Act,
the Hazardous Substances Act, the Occupational Health and Safety Act, the
Porter-Cologne Water Quality Control Act, the Solid Waste Management Act of
1980, the Toxic Pit Cleanup Act, the Underground Tank Act of 1984, and the
California Water Quality Improvement Act (collectively, “Hazardous Materials
Laws”); (b) any and all enforcement, cleanup, removal or other governmental or
regulatory actions instituted, completed or threatened pursuant to any Hazardous
Materials Laws; (c) all claims made or threatened by any third party against
Trustor or the Trust Estate relating to damage, contribution, cost recovery
compensation, loss or injury resulting from any Hazardous Materials (the matters
set forth in clauses (a), (b) and (c) above are collectively referred to herein
as “Hazardous Materials Claims”); and (d) Trustor’s discovery of any occurrence
or condition on any real property adjoining or in the vicinity of the Real
Property that could cause the Real Property or any part thereof to be classified
as “border-zone property” under the provisions of California Health and Safety
Code, Sections 25220 et seq., or any regulation adopted in accordance therewith,
or to be otherwise subject to any restrictions on the ownership, occupancy,
transferability or use of the Real Property under any Hazardous Materials Laws.

To the extent Beneficiary has a reasonable basis to believe its security for the
Loan is or might be impaired by any Hazardous Materials Claims or in the event
of any default hereunder or under any other Loan Document, Beneficiary shall
have the right but not the obligation to join and participate in, as a party if
it so elects, any legal proceedings or actions initiated in connection with any
Hazardous Materials Claims and to have its reasonable attorneys’ and
consultants’ fees in connection therewith paid by Trustor upon demand.

Trustor shall be solely responsible for, and shall indemnify and hold harmless
Beneficiary, its directors, officers, employees, agents, successors and assigns,
from and against any loss, damage, cost, expense or liability directly or
indirectly arising out of or attributable to the use, generation, storage,
release, threatened release, discharge, disposal or presence (whether prior to
or during the term of the Loan) of Hazardous Materials on, under or about the
Real Property (whether by Trustor or a predecessor in title or any employees,
agents, contractor or subcontractors of Trustor, or any predecessor in title,
any third persons at any time occupying or present on the Real Property, or from
any other cause whatsoever), including, without limitation: (a) all foreseeable
and unforeseeable consequential damages including third party claims; (b) the
costs of any required or necessary repair, cleanup or detoxification of the Real
Property, including the soil and groundwater thereof, and the preparation and
implementation of any closure, remedial or other required plans; (c) damage to
any natural resources; and (d) all reasonable costs and expenses incurred by
Beneficiary in connection with clauses (a), (b) and (c), including but not
limited to reasonable attorneys’ and consultants’ fees.

Any costs or expenses incurred by Beneficiary for which Trustor is responsible
or for which Trustor has indemnified Beneficiary shall be paid to Beneficiary on
demand, and failing prompt reimbursement, shall be added to the indebtedness
secured by this Deed of Trust and earn interest at the default rate set forth in
the note secured hereby until paid in full.

Trustor shall not undertake any cleanup, containment, restoration, removal or
other remedial work (collectively, “Remedial Work”) in response to the presence
of any Hazardous Materials on, under or about the Real Property without prior
written notice to Beneficiary of the scope and nature of such Remedial Work;
provided, however, that prior written notice shall not be necessary in the event
that the presence of Hazardous Materials on, under or about the Real Property
either poses an immediate threat to the health, safety or welfare of any
individual or is of such a nature that an immediate remedial response is
necessary and it is not possible to notify Beneficiary before taking such
action. In such event, Trustor shall notify Beneficiary as soon as practicable
of any action so undertaken. Trustor shall not, without Beneficiary’s prior
written consent, which shall not be unreasonably withheld, enter into any
settlement agreement, consent decree or other compromise in respect to any
Hazardous Material Claims, which remedial action, settlement, consent or
compromise might, in Beneficiary’s reasonable judgment, impair the value of
Beneficiary’s security hereunder. In the event any investigation or monitoring
of conditions on the Real Property or any Remedial Work is required under any
applicable Hazardous Materials Laws, by any judicial order, by any governmental
entity, or in order to comply with any agreements affecting the Real Property
because of or in connection with any Hazardous

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Material Claims, Trustor shall perform or cause to be performed the Remedial
Work in compliance with such Hazardous Material Laws or agreement. All Remedial
Work shall be performed by one or more contractors, selected by Trustor and
approved in advance in writing by Beneficiary, and under the supervision of a
consulting engineer, selected by Trustor and approved in writing by Beneficiary.
All costs and expenses of such Remedial Work shall be paid by Trustor,
including, without limitation, the charges of such contractors and/or the
consulting engineer, and Beneficiary’s reasonable attorneys’ fees and costs
incurred in connection with monitoring or reviewing such Remedial Work. In the
event Trustor shall fail to timely commence or cause to be commenced, or fail to
diligently prosecute to completion, such Remedial Work, Beneficiary may, but
shall not be required to, cause such Remedial Work to be performed, and all
costs and expenses thereof shall be due and payable upon demand therefor by
Trustor.

If during the term of the loan secured by this Deed of Trust Beneficiary has
reasonable cause to believe that Hazardous Materials have migrated onto the Real
Property or have otherwise come onto the Real Property in violation of the terms
of this Deed of Trust or there has been a default by Trustor hereunder with
respect to Hazardous Materials, at Beneficiary’s request, Trustor shall retain,
at Trustor’s sole cost and expense, a licensed geologist, industrial hygienist
or an environmental consultant (a “Consultant”) acceptable to Beneficiary to
conduct an environmental site assessment of the Real Property for the presence
of Hazardous Materials (“Environmental Audit”). The Environmental Audit shall be
performed in a manner reasonably calculated to discover the presence of
Hazardous Materials contamination. The Consultant shall concurrently deliver the
results of its investigation in writing directly to Trustor and Beneficiary
without prior consultation with either party unless conducted in the presence of
the other party.

If Trustor fails to pay for or obtain an Environmental Audit as provided for
herein, Beneficiary may, but shall not be obligated to, obtain the Environmental
Audit, and either demand reimbursement from Trustor or add the cost thereof to
the indebtedness secured by this Deed of Trust, in which case interest shall
accrue on such sum at the default rate set forth in the note secured hereby.
Furthermore, Trustor hereby grants Beneficiary, its employees and agents the
right, exercisable at any time and at Beneficiary’s sole cost and expense, to
enter upon the Real Property for the purpose of conducting an inspection,
sampling and testing to determine whether there have been any violations of the
covenants contained in this Paragraph 12.

Trustor’s liability under this Paragraph 12 shall not terminate until the
earlier of (i) the sale of the Real Property pursuant to the enforcement of the
lien of this Deed of Trust, the proceeds of which are applied to the
indebtedness secured hereby, or (ii) the payment in full of the indebtedness.

(13) Trustor agrees to indemnify, defend and hold harmless Trustee and
Beneficiary from and against any and all losses, liabilities, suits,
obligations, fines, damages, judgments, penalties, claims, charges, costs and
expenses (including attorneys’ fees and disbursements) which may be imposed on,
incurred or paid by or asserted against Trustee and/or Beneficiary by reason or
on account of, or in connection with (a) any willful misconduct of Trustor or
any default or event of default by Trustor hereunder or under any other Loan
Document; (b) Trustee’s and/or Beneficiary’s good faith and commercially
reasonable exercise of any of their rights and remedies, or the performance of
any of their duties hereunder or under the other Loan Documents to which Trustor
is a party; (c) Trustor’s failure to perform or comply with any of the covenants
set forth in Paragraph 12 above; (d) the construction, reconstruction or
alteration of the Real Property; (e) any negligence of Trustor, or any
negligence or willful misconduct of any lessee of the Real Property or any
portion thereof, or any of their respective agents, contractors, employees,
licensees or invitees; or (f) any accidents, injury, death or damage to any
person or property occurring in, on or about the Real Property or any street,
drive, sidewalk, curb or passageway adjacent thereto, except for the willful
misconduct or gross negligence of Beneficiary or Trustee. Upon demand by Trustee
and/or Beneficiary, Trustor shall defend any action or proceeding brought
against Trustee and/or Beneficiary arising out of or alleging any claim or cause
of action covered by this indemnity, all at Trustor’s own cost and by counsel to
be approved by Beneficiary in the exercise of its reasonable judgment. In the
alternative, Trustee and/or Beneficiary may elect to conduct its own defense at
the expense of Trustor. The provisions of this Paragraph 13 shall survive the
foreclosure or the delivery of a deed in lieu of foreclosure of this Deed of
Trust or the payment in full of the indebtedness secured hereby and the
termination and reconveyance of this Deed of Trust, as the case may be. Any
amount payable to Trustee or Beneficiary under Paragraph 12 or this Paragraph 13
shall be due and payable immediately after demand therefor and receipt by
Trustor of a statement setting forth in reasonable detail the amount claimed and
the basis therefor, and such amounts shall bear interest at the rate specified
in Paragraph 6 hereof from and after the date such amounts are paid by
Beneficiary or Trustee, as the case may be, until paid in full by Trustor.

(14) That upon default by Trustor in payment of any indebtedness secured hereby
or in performance of any agreement hereunder, Beneficiary may take any action or
pursue any right or remedy permitted under applicable law specifically
including, without limiting, impairing or otherwise affecting its other rights
and remedies declare all sums secured hereby immediately due and payable by
delivery to Trustee written declaration of

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default and demand for sale and of written notice of default and of election to
cause to be sold the Real Property, which notice Trustee shall cause to be filed
for record. Beneficiary also shall deposit with Trustee this Deed of Trust, said
note and all documents evidencing expenditures secured hereby.

After the lapse of such time as may then be required by law following the
recordation of said notice of default, and notice of the sale having been given
as then required by law, Trustee, without demand on Trustor, shall sell the Real
Property at the time and place fixed by it in said notice of sale, either as a
whole or in separate parcels, and in such order as it may determine, at public
auction to the highest bidder for cash in lawful money of the United States,
payable at time of sale. Trustee may postpone sale of all or any portion of said
Real Property by public announcement at such time and place of sale, and from
time to time thereafter may postpone such sale by public announcement at the
time fixed by the preceding postponement. Trustee shall deliver to such
purchaser its deed conveying the Real Property so sold, but without any covenant
or warranty, express or implied. The recitals in such deed of any matters or
facts shall be conclusive proof of the truthfulness thereof. Any person,
including Trustor, Trustee, or Beneficiary as herein defined, may purchase at
such sale.

After deducting all costs, fees and expenses of Trustee and of this Trust,
including cost of evidence of title in connection with sale, Trustee shall apply
the proceeds of sale to payment of: all sums expended under the terms hereof,
not then repaid, with accrued interest at the rate specified in Paragraph 6
hereof; all other sums then secured hereby; and the remainder, if any, to the
person or persons legally entitled thereto.

If this Deed of Trust or any note secured hereby provides for any charge for
prepayment of any indebtedness secured hereby, Trustor agrees to pay said charge
if any of said indebtedness shall be paid prior to the date thereof stated in
said note or this Deed of Trust, even if and notwithstanding Trustor shall have
defaulted in payment thereof, or in performance of any agreement hereunder, and
Beneficiary, by reason thereof, shall have declared all sums secured hereby
immediately due and payable.

(15) Following recordation of a notice of default, Beneficiary and prospective
bidders at any foreclosure sale shall have the right to enter and inspect said
Real Property at reasonable times and upon reasonable notice to Trustor. Trustor
shall, promptly following the recordation of a notice of default, but in any
event prior to the date of sale set in the notice of sale, disclose to
Beneficiary in writing all material facts regarding said Real Property.

Trustor hereby waives any claims against Beneficiary or Trustee arising out of
or in connection with any disclosures regarding said Real Property which may be
made by Beneficiary or Trustee to prospective bidders at or prior to the
foreclosure sale. In addition, Trustor shall indemnify, defend and hold harmless
Trustee and Beneficiary from and against all losses, liabilities, suits, damages
claims or judgments which may arise out of or in connection with any disclosures
regarding said Real Property which may be made by Beneficiary or Trustee to
prospective bidders at or prior to the foreclosure sale. All costs, fees and
expenses incurred by Beneficiary or Trustee in connection with such inspections
and disclosures shall be payable by Trustor upon demand therefor, and such
amounts shall bear interest at the rate specified in Paragraph 6 hereof from the
date paid by Beneficiary until paid in full by Trustor, and if not so paid shall
be added to the amount secured hereby.

(16) That if the Trustor, or any subsequent owner of the Real Property covered
hereby, shall occupy said property, or any part thereof, after any default in
payment of any amount secured by this Deed of Trust, the Trustor, or such owner,
shall pay to the Beneficiary in advance on the first day of each month a
reasonable rental for the premises so occupied, and upon failure to pay such
reasonable rental, the Trustor, or such owner, may be removed from said premises
by summary dispossess proceedings or by any other appropriate action or
proceeding.

(17) Trustor hereby represents and warrants: (a) that it is or will be the
lawful owner of all of the Trust Estate free of all claims, liens or
encumbrances whatsoever, other than the security interests granted pursuant
hereto and such other matters as may be approved in writing by Beneficiary in
Beneficiary’s sole and absolute discretion; (b) all information, including but
not limited to financial statements furnished by Trustor to Beneficiary
heretofore or hereafter, whether oral or written, is and will be correct and
true as of the date given; and (c) if Trustor is a business entity, the
execution, delivery and performance hereof are within its powers and have been
duly authorized.

(18) With respect to the Personal Property and the security interest granted to
Beneficiary under the Deed of Trust, the following shall apply:

(a) Trustor shall: (i) execute such financing statements and other documents and
do such other acts and things, all as Beneficiary may from time to time require,
to establish and maintain a valid security interest in the Personal Property,
including payment of all costs and fees in connection with any of the foregoing
when deemed necessary by Beneficiary; (ii) keep the Personal Property separate
and identifiable and at the location described herein and permit Beneficiary and
its representatives to inspect the Personal Property and/or records pertaining
thereto from time to time during normal business hours; (iii) at Trustor’s
expense upon Beneficiary’s request remove any unauthorized lien or security
interest and defend any claim affecting the Personal Property; (iv) reimburse
Beneficiary for any expenses including but not limited to reasonable attorneys’
fees and

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legal expenses, incurred by Beneficiary in seeking to protect, collect or
enforce any rights in the Personal Property; (v) maintain the Personal Property
in good condition and not use the Personal Property for any unlawful purpose;
and (vi) at its own expense, upon request of Beneficiary, notify any parties
obligated to Trustor on any of the Personal Property to make payment to
Beneficiary, and Trustor hereby irrevocably grants Beneficiary power of attorney
to make said notifications and collections. Trustor does hereby authorize
Beneficiary to perform any and all acts which Beneficiary in good faith deems
necessary for the protection and preservation of the Personal Property or its
value or Beneficiary’s security interest therein, including transferring any of
the Personal Property into its own name and receiving the income thereon as
additional security hereunder.

(b) Whenever a default exists under this Deed of Trust, Beneficiary, at its
option may: (i) transfer any of the Personal Property into its own name or that
of its nominee; (ii) notify any parties obligated on any of the Personal
Property consisting of accounts, instruments, chattel paper, chooses in action
or the like to make payment to Beneficiary and enforce collection of any of the
Personal Property herein; (iii) require Trustor to assemble and deliver any of
the Personal Property to Beneficiary at a reasonable convenient place designated
by Beneficiary. No delay on the part of Beneficiary in the exercise of any right
or remedy shall constitute a waiver thereof and any exercise, or partial
exercise, by Beneficiary of any right or remedy under this Paragraph 18 shall
not preclude the exercise of any other right or remedy of Beneficiary under this
Paragraph 18, this Deed of Trust or at law or in equity or the further exercise
of the same remedy. This Paragraph 18 shall not be construed to derogate or
impair the lien or provisions of any other provision of the Deed of Trust with
respect to any property described in the Deed of Trust that is real property or
which the parties have agreed to treat as real property. Beneficiary’s rights,
power and remedies as to the Personal Property shall be exercisable as to any
part or all of the Personal Property as Beneficiary may elect.

(c) Trustor hereby assumes, and releases Beneficiary from, all risk of loss,
destruction or damage to all or any part of the Personal Property by reason of
any casualty or cause whatsoever except as caused by the intentional misconduct
of Beneficiary, and Trustor shall indemnify and hold Beneficiary harmless from
and against all liabilities, obligations, claims, damages, penalties, causes of
action, costs and expenses (including, reasonable attorneys’ fees and costs)
imposed upon or incurred by or asserted against Beneficiary by reason of (i) any
failure by Trustor to perform or comply with the terms of this Deed of Trust or
(ii) the exercise by Beneficiary of any rights or remedies provided hereunder or
at law or in equity, except as caused by Beneficiary’s intentional misconduct.

(d) Upon transfer by Beneficiary of any part of the obligations secured hereby,
Beneficiary shall be fully discharged from all liability with respect to the
Personal Property transferred therewith.

(e) The grant of a security interest in proceeds, replacements, substitutions or
the like does not imply any right of Trustor to sell or dispose of any Personal
Property described herein without the express written consent by Beneficiary.

(19) Beneficiary, acting alone, may from time to time, by instrument in writing,
substitute a successor or successors to any Trustee named herein or acting
hereunder, which instrument, executed and acknowledged by each and recorded in
the office of the recorder of the county or counties where said property is
situated, shall be conclusive proof of proper substitution of such successor
Trustee or Trustees, who shall, without conveying from the Trustee predecessor,
succeed to all its title, estate, rights, powers and duties. Said instrument
must contain the name of the original Trustor, Trustee and Beneficiary
hereunder, the book and page or document number where this Deed of Trust is
recorded, and the name and address of the new Trustee. If notice of default
shall have been recorded, this power of substitution cannot be exercised until
after the costs, fees and expenses of the then acting Trustee shall have been
paid to such Trustee, who shall endorse receipt thereof upon such instrument of
substitution.

(20) That any Trustor who is a married person hereby expressly agrees that
recourse may be had against his or her separate property, but without hereby
creating any lien or charge thereon, for any deficiency after sale of the
property hereunder.

(21) If requested, that Trustor shall furnish at least annually, within ninety
(90) days after the end of its fiscal year, or more frequently if requested by
Beneficiary, a full and complete financial statement concerning income,
expenses, assets and liabilities of Trustor, and/or applicable or attributable
to the Trust Estate encumbered hereby and the operations thereof, and such other
information as Beneficiary may request. Such statement shall be prepared in
accordance with generally accepted accounting principles and shall be certified
as true, complete and correct by Trustor. Trustor shall keep true and correct
records upon which annual statements are based for not less than three (3) years
after delivery of the required annual statement. Beneficiary shall have the
right, at its cost and at any time and from time to time after giving prior
written notice to Trustor, to do or cause to be done any of the following: to
audit the records; to cause an audit of the records to be made; to make
abstracts from the records; to make copies of any or all of the records; to
examine any or all leases and rental agreements (if such leases and rental
agreements exist); and to make copies of any or all leases and rental agreements
(to the extent

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such leases and rental agreements exist). Trustor shall make all records
specified in the notice available at the time specified in the notice and at the
place where the records are customarily kept, or at Beneficiary’s option at
Beneficiary’s office. Upon any default under the note described above, this Deed
of Trust or other Loan Documents, Beneficiary may perform any of the acts
authorized by this paragraph at the sole cost of Trustor.  Trustor shall
promptly reimburse Beneficiary for its costs and such costs shall be secured by
this Deed of Trust.

(22) That the pleading of any statute of limitations as a defense to any and all
obligations secured by this Deed of Trust is hereby waived to the full extent
permissible by law.

(23) That this Deed of Trust applies to, inures to the benefit of, and binds all
parties hereto, their heirs, legatees, devisees, administrators, executors,
successors and assigns. The term Beneficiary shall mean the owner and holder,
including pledgees, of the note secured hereby, whether or not named as
Beneficiary herein.  In this Deed of Trust, whenever the context so requires,
the masculine gender includes the feminine and neuter, and the singular number
includes the plural. If more than one (1) person executes this Deed of Trust as
Trustor, the obligations of such persons are joint and several.

(24) Trustor agrees that Beneficiary may provide any financial or other
information, data or material in Beneficiary’s possession relating to Trustor,
the Loan, this Deed of Trust, the Property or the Improvements, to Beneficiary’s
parent, affiliate, subsidiary, participants or service providers, without
further notice to Trustor.

(25) That Trustee accepts this Trust when this Deed of Trust, duly executed and
acknowledged, is made a public record as provided by law. Trustee is not
obligated to notify any party hereto of pending sale under any other deed of
trust or of any action or proceeding in which Trustor, Beneficiary or Trustee
shall be a party unless brought by Trustee.

(26) To pay Beneficiary for each and every beneficiary statement furnished at
Trustor’s request the maximum fee allowed by law and if there be no maximum,
then in accordance with Beneficiary’s schedule therefor. Such fee shall be
computed as of the time said statement is furnished.

(27) That should Trustor sell, convey, transfer, dispose of or further encumber
the Trust Estate or any part thereof or any interest therein or enter into a
lease covering all or any portion thereof or an undivided interest therein,
either voluntarily, involuntarily or otherwise, or enter into an agreement so to
do, without the prior written consent of Beneficiary being first had and
obtained, then Beneficiary may, at its option, declare all sums secured hereby
immediately due and payable. Consent to one such transaction shall not be deemed
to be a waiver of the right to require such consent to future or successive
transactions.

(28) If Trustor is a corporation, trust, limited or general partnership or a
joint venture, or limited liability company, should there occur (A) a sale,
conveyance, transfer, disposition or encumbrance, either voluntary or
involuntary, or should an agreement be entered into to accomplish any thereof,
with respect to (i) more than ten percent (10%) of the issued and outstanding
capital stock of Trustor if Trustor is a corporation or (ii) beneficial interest
of Trustor if Trustor is a trust or (iii) any general partnership or joint
venture interest if Trustor is a limited or general partnership or a joint
venture, (iv) any membership interest if Trustor is a limited liability company,
or (B) a change in any general partner or joint venturer if Trustor is a limited
or general partnership or a joint venture, then Beneficiary may, at its option,
declare all sums secured hereby immediately due and payable unless Beneficiary
shall have given its prior written consent thereto. Consent to one such
transaction shall not be deemed to be a waiver of the right to require such
consent to future or successive transactions.

(29) That in the event of the passage after the date hereof of any law deducting
from the value of real property, for taxation purposes, any lien thereon or
changing in any way the laws now in force for the taxation of deeds of trust or
debts whether or not secured thereby for federal, state or local purposes or the
manner of the collection of any such taxes so as to affect this Deed of Trust or
the obligations hereby secured, Trustor agrees to pay any thereof and if Trustor
fails to so do or if it would be illegal for Trustor so to do then, the whole of
the principal sum secured by this Deed of Trust, together with accrued interest
thereon shall, at the option of Beneficiary, without demand or notice,
immediately become due and payable.

(30) To the fullest extent permitted by law, Trustor hereby waives the
provisions of Section 431.70 of the California Code of Civil Procedure and all
amendments thereto.

(31) That no remedy herein conferred upon, reserved to Trustee or Beneficiary is
intended to be exclusive of any other remedy herein or by law provided, but each
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute. No
delay or omission of Trustee or Beneficiary in the exercising of any right or
power accruing upon any event of default hereunder shall impair such right or
power or any other right or power nor shall the same be construed to be a waiver
of any default or any acquiescence therein; and every power and remedy given by
this Deed of Trust to Trustee or Beneficiary may be exercised from time to time
as often as may be deemed expedient by Trustee or Beneficiary. If there exists
additional security for the obligations secured hereby, Beneficiary, at its sole
option, and without limiting or affecting any of the rights or remedies
hereunder, may exercise any of the rights or remedies to

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which it may be entitled hereunder either concurrently with whatever rights it
may have in connection with such other security or in such order and in such
manner as Beneficiary may deem fit without waiving any rights with respect to
any other security. The granting of consent by Beneficiary to any transaction as
required by the terms hereunder shall not be deemed a waiver of the right to
secure the consent of Beneficiary to future or successive transactions.

(32) That in the event any one or more of the provisions contained in this Deed
of Trust or in the promissory note hereby secured shall for any reason be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this Deed
of Trust or said promissory note, but this Deed of Trust and said promissory
note shall be construed as if such invalid, illegal or unenforceable provision
had never been contained herein or therein.

(33) TRUSTOR ACKNOWLEDGE(S) AND AGREE(S) THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT OR THE LENDING RELATIONSHIP ESTABLISHED HEREBY WOULD BE
BASED UPON DIFFICULT AND COMPLEX ISSUES, AND THEREFORE, TRUSTOR HEREBY WAIVE(S)
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING (INCLUDING ACTIONS
SOUNDING IN TORT) TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS DEED OF TRUST OR
ANY OTHER LOAN DOCUMENT OR ARISING FROM THE TRANSACTION CONTEMPLATED HEREUNDER
OR THE LENDING RELATIONSHIP ESTABLISHED HEREBY AND AGREE(S) THAT ANY SUCH ACTION
OR PROCEEDING SHALL BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE AND
NOT BY A JURY.

(34) This Deed of Trust has been executed and delivered in the State of
California and is to be construed and enforced according to and governed by the
laws thereof except that with respect to any portion of the Trust Estate covered
hereby located outside of the State of California, only to the extent required
for Trustee or Beneficiary to enforce or realize upon the rights and remedies
hereunder with respect thereto, the laws of the state in which such property is
located shall be applicable hereto. The undersigned Trustor requests that a copy
of any notice of default and of any notice of sale hereunder be mailed to him at
his address hereinbefore set forth.

TRUSTOR: TAITRON COMPONENTS INCORPORATED

By: /s/ Stewart Wang

--------------------------------------------------------------------------------

 

Its: President and CEO

STATE OF CALIFORNIA ) ss. COUNTY OF LOS ANGELES

On May 30, 2002, before me, the undersigned, a Notary Public in and for said
State,  personally appearedStwart Wang, personally known to  me (or proved to me
on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the ntity upon
behalf of which the person(s) acted, executed the instrument. WITNESS my hand
and official seal.

/s/ Susie Lawler Eggert

--------------------------------------------------------------------------------

 

NOTARY PUBLIC

Exhibit “A”

Real Property Description

 

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