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                                                                  EXHIBIT 10.30a

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                               SECURITY AGREEMENT

                                    Between

                                  XIRCOM, INC.
                                   as Debtor

                                      and
                           NATIONSBANK OF TEXAS, N.A.
                            as Administrative Agent

                               December 30, 1996





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                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                              Page
                                                                                                              ----
                                                             I.  GRANT
<S>     <C>                                                                                                    <C>
1.01.   Assignment and Grant of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     1
1.02.   Description of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     3
1.03.   Debtor Remains Liable  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     4
1.04.   Delivery of Security and Instrument Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . .     4

                                              II.  REPRESENTATIONS AND WARRANTIES
                                                   ------------------------------

2.01.   Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     4

                                                        III.  COVENANTS
                                                              ---------

3.01.   Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     6
3.02.   Inventory  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     7
3.03.   Insurance  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     8
3.04.   Place of Perfection; Records; Collection of Receivables, chattel paper and Instruments . . . . . . .     8
3.05.   Transfers and Other Liens  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     9
3.06.   Rights to Dividends and Distributions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     9
3.07.   Right of Administrative Agent to Notify Issuers  . . . . . . . . . . . . . . . . . . . . . . . . . .    10
3.08.   Administrative Agent Appointed Attorney-in-Fact  . . . . . . . . . . . . . . . . . . . . . . . . . .    10


                                        IV.  RIGHTS AND POWERS OF Administrative Agent
                                             -----------------------------------------

4.01.   Administrative Agent May Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    11
4.02.   Administrative Agent's Duties  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    11
4.03.   Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    12
4.04.   Further Approvals Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    14
4.05.   Indemnity and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    14

                                                       V.  MISCELLANEOUS
                                                           -------------

5.01.   Cumulative Rights  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    15
5.02.   Modifications; Amendments; Etc.  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    15
5.03.   Continuing Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    15
5.04.   GOVERNING LAW; TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    15
5.05.   WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    16
5.06.   Administrative Agent's Right to Use Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    16
5.07.   No Interference, Compensation or Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    16
</TABLE>
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<TABLE>
<S>     <C>                                                                                             <C>
5.08.   Waivers of Rights Inhibiting Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . .    16
5.09.   Notices and Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    16
        (a)      Manner of Delivery  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    16
        (b)      Addresses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    17
        (c)      Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    17
5.10.   Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    17
5.11.   Loan Document  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    17
5.12.   Definitions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    18
5.13.   Consent to Jurisdiction; Waiver of Immunities  . . . . . . . . . . . . . . . . . . . . . . .    18
5.14.   Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    18
5.15.   Obligations Not Affected 18
5.16.   Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    19
5.17.   ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    19
</TABLE>


                                     - ii -
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SCHEDULES:

         Schedule 1       - Inventory Locations
         Schedule 2       - Trade Names
         Schedule 3       - Restricted Accounts
         Schedule 4       - Securities Collateral


                                    - iii -
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                               SECURITY AGREEMENT


         SECURITY AGREEMENT (this "Agreement"), dated as of December 30, 1996,
made by Xircom, Inc., a California corporation ("Debtor"), in favor of
NationsBank of Texas, N.A., a national banking association, as Administrative
Agent ("Administrative Agent") for itself and each other lender a party to the
Credit Agreement described below (singly, a "Secured Party", and collectively,
the "Secured Parties").


                                  BACKGROUND:

         (1)     Debtor, Administrative Agent and Secured Parties entered into
the Credit Agreement dated as of December 30, 1996 (as the same has been and
may hereafter be supplemented, amended and modified from time to time, being
the "Credit Agreement").

         (2)     It is the intention of the parties hereto that this Agreement
create a first priority security interest securing the payment of the
obligations set forth in Section 1.02 hereof.

         (3)     It is a condition precedent to the obligation of the Secured
Parties to make the Advances, and issue, or participate in the issuance of,
Letters of Credit under the Credit Agreement that Debtor shall have executed
and delivered this Agreement.


                                   AGREEMENT.

         NOW, THEREFORE, in consideration of the premises set forth herein and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, and in order to induce Secured Parties to make the
Advances and issue, or participate in the issuance of, Letters of Credit under
the Credit Agreement, Debtor hereby agrees with Administrative Agent for its
benefit and the ratable benefit of Secured Parties, as hereinafter set forth.


                                   I.  GRANT

         1.01.   Assignment and Grant of Security.  Debtor hereby assigns,
pledges, hypothecates and transfers to Administrative Agent, for its benefit
and the ratable benefit of Secured Parties, and hereby grants to Administrative
Agent, for its benefit and the ratable benefit of Secured Parties, a security
interest in, the entire right, title and interest of Debtor, in and to the
following assets of Debtor, whether now owned or hereafter acquired
("Collateral"):

         (a)     all trade secrets, inventions, processes, production methods,
proprietary information and know-how; and all licenses or other agreements
granted to Debtor with respect
<PAGE>   6
to any of the foregoing (except to the extent the agreements granting such
licenses prohibit the grant of security interests therein); all information,
advertising lists, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, telephone numbers and telephone listings,
catalogs, books, records, computer and automatic machinery software and
programs, and the like pertaining to operations by or the business of Debtor;
all field accounting information and all media in which or on which any of the
information or knowledge or data or records may be recorded or stored and all
computer programs used for the compilation or printout of such information,
knowledge, records or data; all licenses, consents, permits, variances,
certifications and approvals of all Tribunals now or hereafter held by Debtor
pertaining to operations or business now or hereafter conducted; all rights to
receive return of deposits and trust payments; all rights to payment under
letters of credit and similar agreements; and all causes of action, rights,
claims and warranties now or hereafter owned or acquired by Debtor ("General
Intangibles");

         (b)     all inventory in all of its forms, wherever located, now or
hereafter existing, including, but not limited to, (i) all raw materials and
work in process therefor, finished goods thereof, and materials used or
consumed in the manufacture or production thereof, (ii) goods in which Debtor
has an interest in mass or a joint or other interest or right of any kind
(including, without limitation, goods in which Debtor has an interest or right
as consignee but only to the extent of Debtor's interest therein and then only
to the extent the grant of a security interest therein is not prohibited by the
agreement granting such interest or right), and (iii) goods which are returned
to or repossessed by Debtor, and all accessions thereto and products thereof
and documents therefor (any and all such inventory, accessions, products and
documents being the "Inventory");

         (c)     all accounts, contract rights, chattel paper, documents,
instruments, deposit accounts, general intangibles, tax refunds (including,
without limitation, all federal and state income tax refunds and benefits of
net operating loss carry forwards) and other obligations of any kind owing to
Debtor, now or hereafter existing, arising out of or in connection with the
sale or lease of goods or the rendering of services, and all rights now or
hereafter existing in and to all security agreements, leases, and other
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper, documents, instruments, deposit accounts, general intangibles or
obligations (any and all such accounts, contract rights, chattel paper,
documents, instruments, deposit accounts, general intangibles and obligations
being the "Receivables");

         (d)     all agreements with each manufacturer, vendor, sales agent,
sales representative and each other Person pursuant to which Debtor receives,
maintains, sells, leases or otherwise disposes of Inventory, including all
agreements permitting the use of each such Person's name, logo, trademarks,
tradenames and advertising and then only to the extent the grant of a security
interest therein is not prohibited by the agreement granting such interest or
right ("Vendor Agreements");





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         (e)     all right, title and interest of Debtor in, to and under each
contract and other agreement relating to the lease, sale or other disposition
of Collateral;

         (f)     all rights, claims and benefits of Debtor against any Person
arising out of, relating to or in connection with Collateral purchased by
Debtor, including, without limitation, any such rights, claims or benefits
against any Person storing or transporting such Collateral;

         (g)     the balance of every deposit account of Debtor under control
of Administrative Agent and each other Secured Party and each of their
respective Affiliates and any other claim of Debtor against Administrative
Agent and each other Secured Party, now or hereafter existing, liquidated or
unliquidated, and all money, instruments, securities, documents, chattel paper,
credits, claims, demands, income, and any other property, rights and interests
of Debtor which at any time shall come into the possession or custody or under
the control of Administrative Agent or any Secured Party or any of its agents,
affiliates or correspondents, for any purpose, and the proceeds of any thereof
(Administrative Agent and each other Secured Party shall be deemed to have
possession of any of the Collateral in transit to or set apart for it or any of
its agents, affiliates or correspondents).

         (h)     100% of the issued and outstanding capital stock of each
Domestic Subsidiary of the Pledgor, together with all Dividends, cash,
proceeds, profits, instruments, distributions and other property from time to
time distributed in respect thereof, and any subscription rights or warrants to
acquire any interest in such Subsidiary;

         (i)     65% of the issued and outstanding capital stock of each
Foreign Subsidiary of the Pledgor, together with all Dividends, cash, proceeds,
profits, instruments, distributions and other property from time to time
distributed in respect thereof and any subscription rights or warrants to
acquire any interest in such Subsidiary;

         (j)     all insurance policies and bonds and claims and payments 
under any Collateral; and

         (k)     all accessions to, substitutions for and replacements,
proceeds and products of any and all of the foregoing Collateral (including,
without limitation, proceeds which constitute property of the types described
in this Section 1.01) and, to the extent not otherwise included, all (i)
payments under insurance (whether or not Administrative Agent is the loss payee
thereof), or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral and (ii)
cash.

         1.02.   Description of Obligations.  This Agreement creates a first
priority security interest in the Collateral to secure the payment and
performance of any and all obligations now or hereafter existing of Debtor,
each Obligor and any other Person under the Credit Agreement and the other Loan
Documents, including any extensions, modifications, substitutions, amendments
and renewals thereof, whether for principal, interest, fees, premium, expenses,
reimbursement obligations, indemnification or otherwise (all such obligations
of Debtor, each





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Obligor and each other Person being the "Obligations").  Without limiting the
generality of the foregoing, this Agreement secures the payment of all amounts
which constitute part of the Obligations and would be owed by Debtor, each
other Obligor and any other Person to Administrative Agent or any Secured Party
under any Loan Document, but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding under any Debtor Relief Law involving Debtor, any Obligor or any
other Person (including all such amounts which would become due or would be
secured but for the filing of any petition in bankruptcy, or the commencement
of any insolvency, reorganization or like proceeding of Debtor, any other
Obligor or any other Person under any Debtor Relief Law).

         1.03.   Debtor Remains Liable.  Anything herein to the contrary
notwithstanding, (a) Debtor shall remain liable under the contracts and
agreements 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, (b) the exercise by Administrative Agent
of any of the rights hereunder shall not release Debtor from any of its duties
or obligations under the contracts and agreements included in the Collateral,
and (c) neither Administrative Agent nor any Secured Party shall have any
obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Administrative Agent or any
Secured Party be obligated to perform any of the obligations or duties of
Debtor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.

         1.04.   Delivery of Security and Instrument Collateral.  All
certificates or instruments representing or evidencing the Collateral shall be
delivered to and held by or on behalf of Administrative Agent pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form
and substance satisfactory to Administrative Agent.  Administrative Agent shall
have the right, as provided in Section 3.06, after the occurrence of an Event
of Default and acceleration of the Obligations, and with prior written notice
to Debtor, to transfer to or to register in the name of Administrative Agent or
any of its nominees any or all of such Collateral.  In addition, Administrative
Agent shall have the right at any time after the occurrence of an Event of
Default to exchange certificates or instruments representing or evidencing
Collateral for certificates or instruments of smaller or larger denominations.
Except as provided in Section 3.08(d), Debtor maintains the voting rights in
the Securities Collateral (as defined below) which was granted in the
Securities Collateral pursuant to Section 1.01(h) and (i).


                      II.  REPRESENTATIONS AND WARRANTIES

         2.01.   Representations and Warranties.  Debtor represents and
warrants to Administrative Agent and each Secured Party, with respect to itself
and the Collateral, as follows:

         (a)     As of the date hereof, all of the Inventory pledged by Debtor
hereunder is located at the places specified on Schedule 1 hereto (as
supplemented from time to time by Debtor by written notice to Administrative
Agent) or in transit to a place specified on Schedule 1 hereto





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(as supplemented from time to time by Debtor by written notice to
Administrative Agent) (other than Inventory used for demonstration purposes) or
in transit for sale to a third-party purchaser that upon such sale will become
the obligor under a Receivable.  The chief place of business and chief
executive office of Debtor and the office where Debtor keeps all of its records
concerning the Receivables, are located at the place specified on Schedule 1
hereto.  As of the date hereof, Schedule 1 is a complete and correct list of,
as to any leased property on which any Collateral is located, the lease or
other agreement (and all amendments thereto) pursuant to which Debtor has use
of such property (complete and correct copies of which have been provided to
Administrative Agent), the lessor pursuant to such agreement, the recording
information for such agreement, the description of such property sufficient for
recording and the name of the record owner of such property.  All chattel
paper, promissory notes or other instruments evidencing the Receivables
(excluding checks) have been delivered and pledged to Administrative Agent duly
endorsed and accompanied by such duly executed instruments of transfer or
assignment as are necessary for such pledge, to be held as pledged collateral.

         (b)     Debtor is the legal and beneficial owner of the Collateral
pledged by it free and clear of any Lien, security interest, option or other
charge or encumbrance except for the security interest created by this
Agreement and permitted pursuant to Section 7.2 of the Credit Agreement and any
other Lien permitted by the Credit Agreement.  No effective financing statement
or other similar document used to perfect and preserve a security interest
under the laws of any jurisdiction covering all or any part of the Collateral
is on file in any recording office, except such as may have been filed in favor
of Administrative Agent relating to this Agreement and with respect to any Lien
permitted by the Credit Agreement.  As of the date hereof, Debtor has the trade
names set forth on Schedule 2 (and no others).  To the best of Debtor's
knowledge, Debtor (including any corporate or partnership predecessor) has not
existed or operated under any name other than as stated on Schedule 2 since the
date three years preceding the date of this Agreement.

         (c)     This Agreement and the pledge of the Collateral pursuant
hereto, together with the filing of financing statements containing the
description of the Collateral with the Secretary of the State of California and
New Hampshire, which will be made immediately following the date of closing,
creates a valid and perfected first priority security interest in the
Collateral in which a security interest can be perfected by filing a UCC
financing statement, securing the payment of the Obligations; provided that
additional actions may be required with respect to the perfection of proceeds
of the Collateral; further provided that Secured Party retains physical
possession of any Collateral, the possession of which is required for
perfection.

         (d)     No consent of any Person and no authorization, approval or
other action by, and no notice to or filing with, any Tribunal is required (i)
for the pledge by Debtor of the Collateral pledged by it hereunder, for the
grant by Debtor of the security interest granted hereby or for the execution,
delivery or performance of this Agreement by Debtor, (ii) for the perfection or
maintenance of the pledge, assignment and security interest created hereby
(including the first priority nature of such pledge, assignment and security
interest) or (iii) for the exercise by





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<PAGE>   10
Administrative Agent of the rights provided for in this Agreement or the
remedies in respect of the Collateral pursuant to this Agreement.

         (e)     Debtor possesses all licenses and permits required for the
operations of its business, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.

         (f)     None of the Collateral described in Sections 1.01(h) and
1.01(i) ("Securities Collateral") is subject to any unpaid capital call or
dispute, any buy-sell, voting trust, transfer restriction, preferential right
to purchase or similar agreement or any option, warrant, put or call or similar
agreement.  All of the Securities Collateral (i) are duly authorized, validly
issued and non-assessable and were not issued in violation of the Rights of any
Person and (ii) existing as of the date hereof are described on Schedule 4
hereto.

         (g)     All Inventory produced in the United States of America has
been produced in substantial compliance with the Fair Labor Standards Act.


                                III.  COVENANTS

         3.01.   Further Assurances.  (a) Debtor agrees that where any
agreement existing as of the date hereof or hereafter to which Debtor is a
party contains any restriction that could reasonably be expected to prohibit
Debtor from granting any security interest under this Agreement, Debtor will
use its best efforts to obtain the necessary consent to or waiver of such
restriction from any Person so as to enable Debtor to effectively grant to
Administrative Agent such security interest under this Agreement.

         (b)     Debtor agrees that from time to time, at the expense of
Debtor, Debtor will promptly execute and deliver all further instruments and
documents (including supplements to all schedules), and take all further
action, that may be necessary or desirable, or that Administrative Agent may
reasonably request, in order to perfect and protect any pledge, assignment or
security interest granted or purported to be granted hereby, and the priority
thereof, or to enable Administrative Agent to exercise and enforce its rights
and remedies hereunder with respect to any Collateral.  Without limiting the
generality of the foregoing, upon reasonable written request by Administrative
Agent, Debtor will:  (i) mark conspicuously each chattel paper or instrument
included in Receivables, and, at the reasonable request of Administrative
Agent, each of its records pertaining to the Collateral with the following
legend:

         THIS INSTRUMENT IS SUBJECT TO A SECURITY INTEREST AND LIEN PURSUANT TO
         A SECURITY AGREEMENT DATED DECEMBER 30, 1996 (AS THE SAME HAS BEEN AND
         MAY HEREAFTER BE AMENDED, MODIFIED OR RESTATED) MADE BY XIRCOM, INC.
         IN FAVOR OF NATIONSBANK OF TEXAS, N.A., AS ADMINISTRATIVE AGENT FOR
         CERTAIN LENDERS, AND PURSUANT





                                     - 6 -
<PAGE>   11
         TO A CREDIT AGREEMENT DATED AS OF DECEMBER 30, 1996 (AS THE SAME HAS
         BEEN AND MAY HEREAFTER BE AMENDED, MODIFIED OR RESTATED)

or such other legend, in form and substance reasonably satisfactory to and as
specified by Administrative Agent, indicating that such chattel paper,
instrument or Collateral is subject to the pledge, assignment and security
interest granted hereby; (ii) if any Collateral shall be evidenced by a
promissory note or other instrument or be chattel paper, deliver and pledge to
Administrative Agent hereunder such note, instrument or chattel paper duly
indorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance reasonably satisfactory to Administrative
Agent; and (iii) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as Administrative Agent may reasonably request, in order to
perfect and preserve the pledge, assignment and security interest granted or
purported to be granted hereby.

         (c)     In addition to such other information as shall be specifically
provided for herein, Debtor will furnish to Secured Party from time to time
statements and schedules further identifying and describing the Collateral and
such other lists, documents, reports, and product, service and sales documents
in connection with the Collateral as Secured Party may reasonably request, all
in reasonable detail.  In connection with its enforcement of the security
interest, Administrative Agent may use such information or transfer it to any
assignee or sublicensee permitted hereunder for such assignee's or
sublicensee's use.

         (d)     Debtor hereby authorizes Administrative Agent to file one or
more financing or continuation statements relating to all or any part of the
Collateral without the signature of Debtor where permitted by law provided
Administrative Agent shall give reasonably prompt notice of any such filings to
Debtor.  A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.

         (e)     Debtor will not, and will not permit any Person to, materially
revise, modify, amend or restate the articles of incorporation of any
corporation the stock or other interest in which is Collateral or the
partnership, joint venture or other organizational document of any partnership
or joint venture any interest in which is Collateral or terminate, cancel or
dissolve any such Person, except as permitted under the Credit Agreement.

         3.02.   Inventory.

         (a)     Debtor shall not keep the Inventory pledged by it hereunder
(other than Inventory sold in the ordinary course of business) in any location
unless the Debtor has delivered to Administrative Agent a financing statement
for such Inventory kept by Debtor at such location.





                                     - 7 -
<PAGE>   12
         (b)     Debtor shall pay promptly when due all material property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor, materials and supplies) against, the
Collateral pledged by it hereunder, except such taxes and claims as are being
contested in good faith by appropriate proceedings for which adequate reserves
have been established in accordance with GAAP, except where the failure to file
such returns, pay such taxes or establish such reserves does not involve unpaid
or allegedly unpaid amounts, in aggregate, in excess of $100,000 for any fiscal
year.  Debtor shall comply with all requirements of the Fair Labor Standards
Act.

         3.03.   Insurance.  Debtor shall, at its own expense, maintain
insurance with respect to the Collateral in accordance with the terms set forth
in Section 5.5 of the Credit Agreement.  Debtor further covenants and agrees to
keep the Collateral which is Inventory insured in such amounts, against such
risks and with such insurers as is consistent with customary industry practice,
provided that none of such insurance shall be in amounts less than the greater
of (i) the replacement value and (ii) the original cost of the covered property
(less any deduction standard in the industry for such type of property),
subject in the case of any property damage insurance to normal and customary
rights granted in the ordinary course of business to any landlord (with respect
to the property covered by any lease).  All such policies of insurance shall be
written for the benefit of Administrative Agent and Debtor, as their interests
may appear, and shall provide for at least thirty Business Days' prior written
notice of cancellation to Administrative Agent.  Debtor shall promptly furnish
to Administrative Agent evidence of such insurance in form and content
satisfactory to Administrative Agent.  If Debtor fails to perform or observe
any applicable covenants as to insurance on any of such Collateral,
Administrative Agent may at its own option obtain insurance on only
Administrative Agent's interest in such Collateral, any premium thereby paid by
Administrative Agent to become part of the Obligations, bear interest prior to
the existence of an Event of Default, at the then applicable Base Rate Basis,
and during the existence of an Event of Default, at the Default Rate.  In the
event Administrative Agent maintains such substitute insurance, the additional
premium for such insurance shall be due on demand and payable by Debtor to
Administrative Agent in accordance with any notice delivered to Debtor by
Administrative Agent.  Debtor hereby grants Administrative Agent a security
interest in any refunds of unearned premiums in connection with any
cancellation, adjustment or termination of any policy of insurance required by
Administrative Agent and in all proceeds of such insurance and hereby appoints
Administrative Agent its attorney-in-fact (exercisable from and after the
occurrence of an Event of Default which is continuing) to endorse any check or
draft that may be payable to Debtor in order to collect such refunds or
proceeds.  Any such sums collected by Administrative Agent shall be credited,
except to the extent applied to the purchase by Administrative Agent of similar
insurance, to any amounts then owing on the Obligations in accordance with the
Credit Agreement.

         3.04.   Place of Perfection; Records; Collection of Receivables,
chattel paper and Instruments.

         (a)     Debtor shall keep its chief place of business and chief
executive office and the office where it keeps its records concerning the
Receivables, and the originals of all chattel





                                     - 8 -
<PAGE>   13
paper and instruments included in Receivables, at the location therefor
specified in Section 2.01(a).  Debtor will hold and preserve such records and
chattel paper and instruments and will permit representatives of Administrative
Agent at any time during normal business hours and after reasonable notice to
inspect and make abstracts from and copies of such records and chattel paper
and instruments.

         (b)     Except as otherwise provided in this Section 3.04(b), Debtor
shall continue to collect, at its own expense, all amounts due or to become due
Debtor under the Receivables.  In connection with such collections, Debtor may
take (and, upon the occurrence and during the continuance of an Event of
Default at Administrative Agent's direction, shall take) such action as Debtor
may deem necessary or advisable or, after the occurrence and during the
continuance of an Event of Default, Administrative Agent, may reasonably deem
necessary or advisable to enforce collection of the Receivables; provided,
however, that Administrative Agent shall have the right (upon an Event of
Default which is continuing) to notify the account debtors or obligors under
any Receivables of the assignment of such Receivables to Administrative Agent
and to direct such account debtors or obligors to make payment of all amounts
due or to become due to Debtor thereunder directly to Administrative Agent and,
upon such notification at the expense of Debtor, to enforce collection of any
such Receivables and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as Debtor might have done or
as Administrative Agent deems appropriate.  Upon the occurrence and during the
continuance of an Event of Default, all amounts and proceeds (including
Instruments) received by Debtor in respect of the Receivables shall be received
in trust for the benefit of Administrative Agent hereunder, shall be segregated
from other funds of Debtor and, after receipt of notice from Administrative
Agent, shall be forthwith paid over to Administrative Agent in the same form as
so received (with any necessary indorsement) to be applied as provided in the
Credit Agreement.  Debtor shall not adjust, settle or compromise the amount or
payment of any Receivable, release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon other than those made
in the ordinary course of business.

         3.05.   Transfers and Other Liens.  Debtor shall not (i) sell,
transfer, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Collateral, except as permitted
under the Credit Agreement or (ii) create or permit to exist any Lien, security
interest, option or other charge or encumbrance upon or with respect to any of
the Collateral, except for the security interest under this Agreement (and
except as provided for in the Credit Agreement).

         3.06.   Rights to Dividends and Distributions.  With respect to any
certificates, bonds, or other instruments or securities constituting a part of
the Collateral, Administrative Agent shall have authority during the
continuance of an Event of Default, upon written notice to Debtor of its
intention to do so, either to have the same registered in Administrative
Agent's name or in the name of a nominee, and, with or without such
registration, upon such notification to demand of the issuer thereof, and to
receive and receipt for, any and all Dividends (including any stock or similar
dividend or distribution) payable in respect thereof, whether they be ordinary
or extraordinary.  If Debtor shall become entitled to receive or shall receive
any interest in or





                                     - 9 -
<PAGE>   14
certificate (including, without limitation, any interest in or certificate
representing a Dividend or a distribution in connection with any
reclassification, increase, or reduction of capital, or issued in connection
with any reorganization), or any option or rights arising from or relating to
any of the Collateral, whether as an addition to, in substitution of, as a
conversion of, or in exchange for any of the Collateral, or otherwise, Debtor
agrees after receipt by Debtor of the notice referred to above, to accept the
same as Administrative Agent's agent and to hold the same in trust on behalf of
and for the benefit of Administrative Agent, and to deliver the same
immediately to Administrative Agent in the exact form received, with
appropriate undated stock or similar powers, duly executed in blank, to be held
by Administrative Agent, subject to the terms hereof, as Collateral.  Unless an
Event of Default is in existence, Debtor shall be entitled to receive all cash
Dividends paid in respect of any of the Collateral (subject to the restrictions
of any other Loan Document).  Upon the occurrence and continuance of an Event
of Default, Administrative Agent shall receive all cash Dividends paid in
respect of any Collateral.  Administrative Agent shall be entitled to all
Dividends, and to any sums paid upon or in respect of any Collateral, upon the
liquidation, dissolution, or reorganization of the issuer thereof which shall
be paid to Administrative Agent to be held by it as additional collateral
security for the Obligations and application to the Obligations at the
discretion of Administrative Agent.  All Dividends paid or distributed in
respect of the Collateral which are received by Debtor in violation of this
Agreement shall, until paid or delivered to Administrative Agent, be held by
Debtor in trust as additional Collateral for the Obligations.

         3.07.   Right of Administrative Agent to Notify Issuers.  At any time
during the continuance of an Event of Default and at such other times as
Administrative Agent is entitled to receive Dividends and other property in
respect of the Securities Collateral, Administrative Agent may notify issuers
of the Securities Collateral to make payments of all Dividends directly to
Administrative Agent and Administrative Agent may take control of all proceeds
of any Securities Collateral.  Until Administrative Agent elects to exercise
such rights, during the continuance of an Event of Default, Debtor, as agent of
Administrative Agent, shall collect and segregate all Dividends and other
amounts paid or distributed with respect to the Securities Collateral.

         3.08.   Administrative Agent Appointed Attorney-in-Fact.  Debtor
hereby irrevocably appoints Administrative Agent Debtor's attorney-in-fact
(exercisable from and after the occurrence of an Event of Default which is
continuing), with full authority in the place and stead of Debtor and in the
name of Debtor or otherwise to take any action and to execute any instrument
which Administrative Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation:

         (a)     to obtain and adjust insurance required to be paid to
Administrative Agent in accordance with Section 3.03,

         (b)     to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under or in
connection with the Collateral,





                                     - 10 -
<PAGE>   15
         (c)     to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper included in Receivables, in connection
therewith, and

         (d)     to file any claims or take any action or institute any
proceedings which Administrative Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce compliance with the
terms and conditions of any Collateral or the rights of Administrative Agent
with respect to any of the Collateral.  DEBTOR HEREBY IRREVOCABLY GRANTS TO
ADMINISTRATIVE AGENT DEBTOR'S PROXY TO VOTE ANY SECURITIES COLLATERAL AND
APPOINTS ADMINISTRATIVE AGENT DEBTOR'S ATTORNEY-IN-FACT TO PERFORM ALL
OBLIGATIONS OF DEBTOR UNDER THIS AGREEMENT AND TO EXERCISE ALL OF
ADMINISTRATIVE AGENT'S RIGHTS HEREUNDER, IN EACH CASE EXERCISABLE ONLY UPON THE
OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT.  THE PROXY AND
EACH POWER OF ATTORNEY HEREIN GRANTED ARE COUPLED WITH AN INTEREST AND ARE
IRREVOCABLE PRIOR TO FINAL PAYMENT IN FULL OF THE OBLIGATIONS.

         Secured Party shall not exercise any powers granted pursuant to this
appointment as attorney-in-fact at any time that Debtor is fully performing its
obligations hereunder.  This appointment as attorney-in-fact shall terminate
upon the termination of this Agreement pursuant to Section 5.03 hereof.

         IV.  RIGHTS AND POWERS OF Administrative Agent

         4.01.   Administrative Agent May Perform.  If Debtor fails to perform
any agreement contained herein, Administrative Agent may itself perform, or
cause performance of, such agreement, and the reasonable expenses of
Administrative Agent incurred in connection therewith shall be payable by
Debtor under Section 4.05.

         4.02.   Administrative Agent's Duties.  The powers conferred on
Administrative Agent hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Administrative Agent
shall have no duty as to any Collateral, as to ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Collateral, whether or not Administrative Agent has or
is deemed to have knowledge of such matters, or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded treatment
substantially equal to that which Administrative Agent accords its own
property, except to the extent of any gross negligence or willful misconduct of
the Administrative Agent.  Except as provided in this Section 4.02,
Administrative Agent shall not have any duty or liability to protect or
preserve any Collateral or to preserve rights pertaining thereto.  Nothing
contained in this Agreement shall be construed





                                     - 11 -
<PAGE>   16
as requiring or obligating Administrative Agent, and Administrative Agent shall
not be required or obligated, to (i) present or file any claim or notice or
take any action, with respect to any Collateral or in connection therewith or
(ii) notify Debtor of any decline in the value of any Collateral.

         4.03.   Remedies.  If any Event of Default shall be continuing and,
with respect to subparagraphs (a), (b) and (d) below, the Obligations shall
have been accelerated:

         (a)     Administrative Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code in effect in the State of Texas at
that time (the "UCC") (whether or not the Uniform Commercial Code applies to
the affected Collateral), and also may (i) require Debtor to, and Debtor hereby
agrees that it will at its expense and upon request of Administrative Agent
forthwith, assemble all or part of the Collateral which is capable of being
assembled as directed by Administrative Agent and make it available to
Administrative Agent at a place to be designated by Administrative Agent which
is reasonably convenient to both parties or (ii) without notice, except as
specified below, sell the Collateral or any portion thereof in one or more
parcels at public or private sale, at any of Administrative Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as Administrative Agent may deem commercially reasonable.  Debtor agrees
that, to the extent notice of sale shall be required by law, ten days' written
notice to Debtor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
Administrative Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given.  Administrative Agent may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.

         (b)     All cash proceeds received by Administrative Agent upon any
sale of, collection of, or other realization upon, all or any part of the
Collateral shall be applied as follows:

         First:  To the payment of all reasonable out-of-pocket costs and
         expenses incurred in connection with the sale of, collection of or
         other realization upon Collateral, including reasonable attorneys'
         fees and disbursements;

         Second:  To the payment of the Obligations as provided in the Credit
         Agreement and in such order and in such manner consistent with
         Applicable Laws as Administrative Agent in its discretion shall decide
         (with Debtor remaining liable for any deficiency); and

         Third:  To the extent of the balance (if any) of such proceeds, to
Debtor or other Person legally entitled thereto.

         (c)     All payments received by Debtor under or in connection with
any Collateral shall be received in trust for the benefit of Administrative
Agent, shall be segregated from other funds





                                     - 12 -
<PAGE>   17
of Debtor and shall be forthwith paid over to Administrative Agent in the same
form as so received (with any necessary indorsement).

         (d)     Because of the Securities Act of 1933, as amended ("Securities
Act"), and other laws, including without limitation state "blue sky" laws, or
contractual restrictions or agreements, there may be legal restrictions or
limitations affecting Administrative Agent in any attempts to dispose of the
Collateral and the enforcement of its rights hereunder.  For these reasons,
Administrative Agent is hereby authorized by Debtor, but not obligated, during
the continuance of any Event of Default, to sell or otherwise dispose of any of
the Collateral at private sale, subject to an investment letter, or in any
other manner which will not require the Collateral, or any part thereof, to be
registered in accordance with the Securities Act, or the rules and regulations
promulgated thereunder, or any other law.  Debtor clearly understands that
Administrative Agent may in its discretion approach a restricted number of
potential purchasers and that a sale under such circumstances may yield a lower
price for the Collateral than would otherwise be obtainable if same were
registered and sold in the open market.  No sale so made in good faith by
Administrative Agent shall be deemed to be not "commercially reasonable"
because so made.  Debtor agrees that in the event Administrative Agent shall,
during the continuance of an Event of Default, sell the Collateral or any
portion thereof at any private sale or sales, Administrative Agent shall have
the right to rely upon the advice and opinion of appraisers and other Persons,
which appraisers and other Persons are reasonably acceptable to Administrative
Agent, as to the best price reasonably obtainable upon such a private sale
thereof.  In the absence of actual fraud, such reasonable reliance shall be
conclusive evidence that Administrative Agent handled such matter in a
commercially reasonable manner under Applicable Law.

         (e)          (i)         Debtor will maintain the accounts listed as
         restricted and blocked accounts on Schedule 3 (the "Restricted
         Accounts") with Administrative Agent, in the name of Debtor, but such
         Restricted Accounts shall be under the sole control and dominion of
         Administrative Agent.

                      (ii)        It shall be a term and condition of each
         Restricted Account, notwithstanding any term or condition to the
         contrary in any other agreement relating to such Restricted Account,
         that no amount (including interest and other proceeds of the cash and
         other property in the Restricted Account) shall be paid or released to
         or for the account of, or withdrawn by or for the account of, Debtor
         or any other Person from such Restricted Account.

                    (iii)         During the continuance of an Event of
         Default, upon notice from Administrative Agent, Debtor will promptly
         instruct each account debtor in respect of Receivables arising from
         any sale of Inventory in the ordinary course of business to make
         payment to the Restricted Accounts.





                                     - 13 -
<PAGE>   18
Debtor understands and acknowledges that Administrative Agent may and permits
Administrative Agent, during the continuance of an Event of Default, to remove
amounts from the Restricted Accounts from time to time and use the amounts to
reduce the Obligations.

         4.04.   Further Approvals Required.

         (a)     In connection with the exercise by Administrative Agent of its
rights hereunder that effects the disposition of or use of any Collateral, it
may be necessary to obtain the prior consent or approval of Tribunals and other
Persons to a transfer or assignment of Collateral.

         (b)     Debtor hereby agrees to execute, deliver, and file, and hereby
appoints Administrative Agent as its attorney-in-fact to execute, deliver, and
file on Debtor's behalf and in Debtor's name, all applications, certificates,
filings, instruments, and other documents (including without limitation any
application for an assignment or transfer of control or ownership) that may be
reasonably necessary or appropriate, in Administrative Agent's opinion, to
obtain such consents, waivers, or approvals.  Upon request of Administrative
Agent, Debtor further agrees to use reasonable efforts to obtain the foregoing
consents, waivers, and approvals, including receipt of consents, waivers, and
approvals under applicable agreements prior to a Default or Event of Default.
Debtor acknowledges that there is no adequate remedy at law for failure by it
to comply with the provisions of this Section 4.04 and that such failure would
not be adequately compensable in damages, and therefore agrees that this
Section 4.04 may be specifically enforced.  Secured Party shall not exercise
any powers granted pursuant to this appointment as attorney-in-fact at any time
that Debtor is fully performing its obligations hereunder.  This appointment as
attorney-in-fact shall terminate upon the termination of this Agreement
pursuant to Section 5.03 hereof.

         4.05.   Indemnity and Expenses.  (a) Debtor agrees to indemnify
Administrative Agent and each Secured Party from and against any and all
claims, losses and liabilities (including reasonable attorneys' fees) growing
out of or resulting from this Agreement (including, without limitation,
enforcement of this Agreement), expressly including such claims, losses or
liabilities arising out of mere negligence of Administrative Agent or any
Secured Party, except claims, losses or liabilities resulting from
Administrative Agent's or any Secured Party's gross negligence or willful
misconduct.

         (b)     Debtor will upon demand pay to Administrative Agent and each
Secured Party the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts and agents,
which Administrative Agent and each Secured Party may incur in connection with
(i) the administration of this Agreement, (ii) the custody, preservation, use
or operation of, or the sale of, collection from, or other realization upon,
any of the Collateral, (iii) the exercise or enforcement of any of the rights
of Administrative Agent or any Secured Party hereunder or (iv) the failure by
Debtor to perform or observe any of the provisions hereof.





                                     - 14 -
<PAGE>   19
                               V.  MISCELLANEOUS

         5.01.   Cumulative Rights.  All rights of Administrative Agent and
each other Secured Party under the Loan Documents are cumulative of each other
and of every other right which Administrative Agent and each other Secured
Party may otherwise have at law or in equity or under any other contract or
other writing for the enforcement of the security interest herein or the
collection of the Obligations.  The exercise of one or more rights shall not
prejudice or impair the concurrent or subsequent exercise of other rights.

         5.02.   Modifications; Amendments; Etc.  No amendment or waiver of any
provision of this Agreement, and no consent to any departure by Debtor here
from, shall in any event be effective unless the same shall be in writing and
signed by Administrative Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.

         5.03.   Continuing Security Interest.  This Agreement shall create a
continuing security interest in the Collateral and shall (a) remain in full
force and effect until the later of (i) the final payment in full of the
Obligations and all amounts payable under this Agreement (other than
Obligations which are contingent and unliquidated and not due and owing on such
date and which pursuant to the provisions of the Credit Agreement, the Letters
of Credit or the Collateral Documents survive the termination of the Credit
Agreement, the termination of the Commitments, or the expiration or
cancellation of the Letters of Credit) and (ii) the expiration or termination
of the obligation of all Secured Parties to extend credit to Debtor and the
expiration of all Letters of Credit, (b) be binding upon Debtor, its successors
and assigns, and (c) inure to the benefit of, and be enforceable by,
Administrative Agent and its successors, transferees and assigns.  Upon any
such termination, Administrative Agent will, at Debtor's expense, execute and
deliver to Debtor such documents as Debtor shall reasonably request to evidence
such termination.  Debtor agrees that to the extent that Administrative Agent
or any Secured Party receives any payment or benefit and such payment or
benefit, or any part thereof, is subsequently invalidated, declared to be
fraudulent or preferential, set aside or is required to be repaid to a trustee,
receiver, or any other party under any Debtor Relief Law, common law or
equitable cause, then to the extent of such payment or benefit, the Obligations
or part thereof intended to be satisfied shall be revived and continued in full
force and effect as if such payment or benefit had not been made and, further,
any such repayment by Administrative Agent or any Secured Party, to the extent
that Administrative Agent or any Secured Party did not directly receive a
corresponding cash payment, shall be added to and be additional Obligations
payable upon demand by Administrative Agent or any Secured Party and secured
hereby, and, if the lien and security interest hereof shall have been released,
such lien and security interest shall be reinstated with the same effect and
priority as on the date of execution hereof all as if no release of such lien
or security interest had ever occurred.

         5.04.   GOVERNING LAW; TERMS.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW) AND THE





                                     - 15 -
<PAGE>   20
UNITED STATES OF AMERICA, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION
OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF TEXAS.  UNLESS OTHERWISE DEFINED HEREIN OR IN THE CREDIT AGREEMENT,
TERMS USED IN ARTICLE 9 OF THE UCC ARE USED HEREIN AS THEREIN DEFINED.

         5.05.   WAIVER OF JURY TRIAL.  ADMINISTRATIVE AGENT AND DEBTOR HEREBY
WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDINGS INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.

         5.06.   Administrative Agent's Right to Use Agents.  Administrative
Agent may exercise its rights under this Agreement through an agent or other
designee.

         5.07.   No Interference, Compensation or Expense.  Administrative
Agent may exercise its rights under this Agreement (a) without resistance or
interference by Debtor and (b) without payment of any rent, license fee or
compensation of any kind to Debtor.

         5.08.   Waivers of Rights Inhibiting Enforcement.  Debtor waives (a)
any claim that, as to any part of the Collateral, a public sale, should
Administrative Agent elect so to proceed, is, in and of itself, not a
commercially reasonable method of sale for such Collateral, (b) except as
otherwise provided in this Agreement, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION WITH ADMINISTRATIVE AGENT'S
DISPOSITION OF ANY OF THE COLLATERAL INCLUDING ANY AND ALL PRIOR NOTICE AND
HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT THAT DEBTOR
WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY STATE, AND ALL OTHER REQUIREMENTS AS TO THE TIME, PLACE AND TERMS OF
SALE OR OTHER REQUIREMENTS WITH RESPECT TO THE ENFORCEMENT OF ADMINISTRATIVE
AGENT'S RIGHTS HEREUNDER and (c) all rights of redemption, appraisal, valuation
or to the marshalling of assets.

         5.09.   Notices and Deliveries.

         (a)     Manner of Delivery.  All notices and other communications
provided for hereunder shall be in writing and mailed, telecopied or delivered
by reputable overnight delivery service or by hand, if to the Debtor, addressed
to it at its address specified on the signature pages hereof, if to the
Administrative Agent, addressed to it at its address specified in the Credit
Agreement, or, as to each party, at such other address as shall be designated
by such party in a written notice to each other party complying as to delivery
with the terms of this Section 5.09.





                                     - 16 -
<PAGE>   21
         (b)     Addresses.  All notices, communications and materials to be
given or delivered pursuant to this Agreement shall be given or delivered at
the following respective addresses and telecopier and telephone numbers and to
the attention of the following individuals or departments:

         (i)     if to Debtor, to it at:

                 Xircom, Inc.
                 2300 Corporate Center Drive
                 Thousand Oaks, California 91320
                 Telecopier No.:  (805) 376-9120
                 Telephone No.:   (805) 376-9300

                 Attention:       Chief Financial Officer

         (ii)    if to Administrative Agent, to it at:

                 NationsBank of Texas, N.A.
                 901 Main Street, 67th Floor
                 Dallas, Texas   75202
                 Telecopier No.:  (214) 508-0980
                 Telephone No.:   (214) 508-3399

                 Attention:       Stan W. Reynolds

or at such other address or, telecopier or telephone number or to the attention
of such other individual or department as the party to which such information
pertains may hereafter specify for the purpose in a notice to the other
specifically captioned "Notice of Change of Address".

         (c)     Effectiveness.  All notices and other communications under
this Agreement shall be deemed to have been given on the date personally
delivered or sent by telecopy (answerback received), or three days after
deposit in the mail, designated as certified mail, return receipt requested,
postage-prepaid, or one day after being entrusted to a reputable commercial
overnight delivery service, addressed to the party to which such notice is
directed at its address determined as provided in this Section 5.09.

         5.10.   Successors and Assigns.  All of the provisions of this
Agreement shall be binding and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.

         5.11.   Loan Document.  This Agreement is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly
indicated herein) be construed, administered and applied in accordance with the
terms and provisions thereof.





                                     - 17 -
<PAGE>   22
         5.12.   Definitions.  Capitalized terms not otherwise defined herein
have the meaning specified in the Credit Agreement and, to the extent of any
conflict, terms as defined in the Credit Agreement shall control (provided,
that a more expansive or explanatory definition shall not be deemed a
conflict).

         5.13.   Consent to Jurisdiction; Waiver of Immunities.

         (a)     Debtor hereby irrevocably submits to the non-exclusive
jurisdiction of any United States Federal or Texas State courts sitting in
Dallas, Texas in any action or proceeding arising out of or relating to this
Agreement, and Debtor hereby irrevocably waives any objection it may now or
hereafter have as to the venue of any such suit, action or proceeding brought
in such court or that such court is an inconvenient forum.

         (b)     Nothing in this section shall limit the right of
Administrative Agent or any Secured Party to bring any action or proceeding
against Debtor or its property in the courts of any other jurisdictions.

         (c)     Any judicial proceeding by Debtor against Administrative Agent
or any Secured Party involving, directly or indirectly, any matter in any way
arising out of, related to, or connected with this Agreement shall be brought
only in a court in Dallas, Texas to the extent that jurisdiction may be
effected against such Person in Dallas, Texas.

         5.14.   Severability.  If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws during the
term thereof, such provision shall be fully severable, this Agreement shall be
construed and enforced as if such illegal, invalid, or unenforceable provision
had never comprised a part hereof, and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom.  Furthermore,
in lieu of such illegal, invalid, or unenforceable provision there shall be
added automatically as a part of this Agreement a legal, valid, and enforceable
provision as similar in terms to the illegal, invalid, or unenforceable
provision as may be possible.

         5.15.   Obligations Not Affected.  To the fullest extent permitted by
Applicable Law, the obligations of Debtor under this Agreement shall remain in
full force and effect without regard to, and shall not be impaired or affected
by:

         (a)     any amendment or modification or addition or supplement to any
Loan Document, any instrument delivered in connection therewith or any
assignment or transfer thereof;

         (b)     any exercise, non-exercise, or waiver by Administrative Agent
or any Secured Party  of any right, remedy, power or privilege under or in
respect of, or any release of any guaranty, any collateral or the Collateral or
any part thereof provided pursuant to, this Agreement or any other Loan
Document;





                                     - 18 -
<PAGE>   23
         (c)     any waiver, consent, extension, indulgence or other action or
inaction in respect of this Agreement or any other Loan Document or any
assignment or transfer of any thereof; or

         (d)     any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Debtor, any Obligor or
any other Person, whether or not Debtor shall have notice or knowledge of any
of the foregoing.

         5.16.   Counterparts.  This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.

         5.17.   ENTIRE AGREEMENT.  THIS WRITTEN AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES.



                   REMAINDER OF PAGE LEFT INTENTIONALLY BLANK





                                     - 19 -
<PAGE>   24
         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their respective duly authorized officers or members
as of the date first above written.

                                        DEBTOR:

                                        XIRCOM, INC.


                                        By:  [SIG]
                                             -------------------------------
                                             Name:  Randall H. Holliday
                                                    ------------------------
                                             Title: Secretary
                                                    ------------------------


                                        ADMINISTRATIVE AGENT:

                                        NATIONSBANK OF TEXAS, N.A.


                                        By:   [SIG]
                                              ------------------------------
                                              Name:  William C. Collins
                                              Title: Sr. Vice President






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