Document:

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                                                                    EXHIBIT 10.6

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

WELLS FARGO BANK, NATIONAL
ASSOCIATION
Real Estate Group (AU #2034)
555 Montgomery Street 16th Floor
San Francisco, CA 94111

Attn:  Robin L. Dixon
Loan No. 1440

With a Copy To:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071

Attn:  Jesse Sharf

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                                  DEED OF TRUST
                  WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
                      SECURITY AGREEMENT AND FIXTURE FILING

THE PARTIES TO THIS DEED OF TRUST WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING ("Deed of Trust"), made as of December __,
2000, are COMMUNICATIONS & POWER INDUSTRIES HOLDING CORPORATION, a Delaware
corporation ("Trustor"), AMERICAN SECURITIES COMPANY, a California corporation
("Trustee"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Beneficiary").

                            ARTICLE 1. GRANT IN TRUST

        1.1     GRANT. For the purposes of and upon the terms and conditions in
                this Deed of Trust, Trustor irrevocably grants, conveys and
                assigns to Trustee, in trust for the benefit of Beneficiary,
                with power of sale and right of entry and possession, all of
                that real property located in the City of San Carlos, County of
                San Mateo, State of California, described on Exhibit A attached
                hereto, together with all right, title, interest, and privileges
                of Trustor in and to all streets, ways, roads, and alleys used
                in connection with or pertaining to such real property, all
                development rights or credits, air rights, water, water rights
                and water stock related to the real property, and all minerals,
                oil and gas, and other hydrocarbon substances in, on or under
                the real property, and all appurtenances, easements, rights and
                rights of way appurtenant or related thereto; all buildings,
                other improvements and fixtures now or hereafter located on the
                real property, including, but not limited to, all apparatus,
                equipment, and appliances used in the operation or occupancy of
                the real property, it being intended by the parties that all
                such items shall be conclusively considered to be a part of the
                real property, whether or not attached or affixed to the real
                property (the "Improvements"); to the extent assignable (if at
                all), all rights of Trustor under Section 10.2 of that certain
                Stock Sale Agreement dated June 9, 1995, by and between Trustor
                and Varian Associates, Inc., as amended, that relate to the
                Subject Property; deposits, security deposits, letters of
                credit, lease bonds and other deposit substitutes, credit
                enhancements and other like items under or with respect to any
                Lease of any portion of the Property; all interest or estate
                which Trustor may hereafter acquire in the property described
                above, and all additions and accretions thereto, and

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                the proceeds of any of the foregoing; (all of the foregoing
                being collectively referred to as the "Subject Property"). The
                listing of specific rights or property shall not be interpreted
                as a limit of general terms.

        1.2     ADDRESS. The address of the Subject Property is: 301 Industrial
                Road. However, neither the failure to designate an address nor
                any inaccuracy in the address designated shall affect the
                validity or priority of the lien of this Deed of Trust on the
                Subject Property as described on Exhibit A.

                         ARTICLE 2. OBLIGATIONS SECURED

        2.1     OBLIGATIONS SECURED. Trustor makes this Deed of Trust for the
                purpose of securing the following obligations ("Secured
                Obligations"):

                (a)     Payment to Beneficiary of all sums at any time owing
                        under that certain Promissory Note ("Note") of even date
                        herewith, in the principal amount of EIGHTEEN MILLION
                        AND NO/100THS DOLLARS ($18,000,000.00) executed by
                        Trustor, as borrower, and payable to the order of
                        Beneficiary, as lender; and

                (b)     Payment and performance of all covenants and obligations
                        of Trustor under this Deed of Trust; and

                (c)     Payment and performance of all covenants and obligations
                        on the part of Borrower under that certain Loan
                        Agreement ("Loan Agreement") of even date herewith by
                        and between Borrower and Beneficiary, as lender; and

                (d)     Payment and performance of all covenants and
                        obligations, if any, of any rider attached as an Exhibit
                        to this Deed of Trust; and

                (e)     Payment and performance of all future advances and other
                        obligations that the then record owner of all or part of
                        the Subject Property may agree to pay and/or perform
                        (whether as principal, surety or guarantor) for the
                        benefit of Beneficiary, when such future advance or
                        obligation is evidenced by a writing which recites that
                        it is secured by this Deed of Trust; and

                (f)     Intentionally omitted.

                (g)     Intentionally omitted.

                (h)     All modifications, extensions and renewals of any of the
                        obligations secured hereby, however evidenced,
                        including, without limitation: (i) modifications of the
                        required principal payment dates or interest payment
                        dates or both, as the case may be, deferring or
                        accelerating payment dates wholly or partly; or (ii)
                        modifications, extensions or renewals at a different
                        rate of interest whether or not in the case of a note,
                        the modification, extension or renewal is evidenced by a
                        new or additional promissory note or notes.

        2.2     OBLIGATIONS. The term "obligations" is used herein in its
                broadest and most comprehensive sense and shall be deemed to
                include, without limitation, all interest and charges,
                prepayment charges (if any), late charges and loan fees at any
                time accruing or assessed on any of the Secured Obligations.

        2.3     INCORPORATION. All terms of the Secured Obligations and the
                documents evidencing such obligations are incorporated herein by
                this reference. All persons who may have or acquire an interest
                in the Subject Property shall be deemed to have notice of the
                terms of the Secured Obligations and to have notice, if provided
                therein, that: (a) the Note or the Loan Agreement may permit
                borrowing, repayment and re-borrowing so that repayments shall
                not reduce the amounts of the Secured Obligations; and (b) the
                rate of interest on one or more Secured Obligations may vary
                from time to time.

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                    ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS

        3.1     ASSIGNMENT. Trustor hereby irrevocably assigns to Beneficiary
                all of Trustor's right, title and interest in, to and under: (a)
                all leases of the Subject Property or any portion thereof, and
                all other agreements of any kind relating to the use or
                occupancy of the Subject Property or any portion thereof,
                whether now existing or entered into after the date hereof
                ("Leases"); and (b) the rents, revenue, income, issues,
                deposits, security deposits, letters of credit, lease bonds and
                other deposit substitutes or credit enhancements and profits of
                the Subject Property, including, without limitation, all amounts
                payable and all rights and benefits accruing to Trustor under
                the Leases, and all deposits, security deposits, letters of
                credit, lease bonds and other deposit substitutes, or credit
                enhancements ("Payments"). The term "Leases" shall also include
                all guarantees of and security for the lessees' performance
                thereunder, and all amendments, extensions, renewals or
                modifications thereto which are permitted hereunder. This is a
                present and absolute assignment, not an assignment for security
                purposes only, and Beneficiary's right to the Leases and
                Payments is not contingent upon, and may be exercised without
                possession of, the Subject Property.

        3.2     GRANT OF LICENSE. Beneficiary confers upon Trustor a license
                ("License") to collect and retain the Payments as they become
                due and payable, until the occurrence of and during the
                continuance of a Default (as hereinafter defined). Upon a
                Default and during the continuance thereof, the License shall be
                automatically revoked and Beneficiary may collect and apply the
                Payments pursuant to Section 6.4 without notice and without
                taking possession of the Subject Property. Trustor hereby
                irrevocably authorizes and directs the lessees under the Leases
                to rely upon and comply with any notice or demand by Beneficiary
                for the payment to Beneficiary of any rental or other sums which
                may at any time become due under the Leases, or for the
                performance of any of the lessees' undertakings under the
                Leases, and the lessees shall have no right or duty to inquire
                as to whether any Default has actually occurred or is then
                existing hereunder. Trustor hereby relieves the lessees from any
                liability to Trustor by reason of relying upon and complying
                with any such notice or demand by Beneficiary.

        3.3     EFFECT OF ASSIGNMENT. The foregoing irrevocable assignment shall
                not cause Beneficiary to be: (a) a mortgagee in possession; (b)
                responsible or liable for the control, care, management or
                repair of the Subject Property or for performing any of the
                terms, agreements, undertakings, obligations, representations,
                warranties, covenants and conditions of the Leases; or (c)
                responsible or liable for any waste committed on the Subject
                Property by the lessees under any of the Leases or any other
                parties; for any dangerous or defective condition of the Subject
                Property; or for any negligence in the management, upkeep,
                repair or control of the Subject Property resulting in loss or
                injury or death to any lessee, licensee, employee, invitee or
                other person. Beneficiary and Trustee shall not directly or
                indirectly be liable to Trustor or any other person as a
                consequence of: (i) the exercise or failure to exercise by
                Beneficiary or Trustee, or any of their respective employees,
                agents, contractors or subcontractors, any of the rights,
                remedies or powers granted to Beneficiary or Trustee hereunder;
                or (ii) the failure or refusal of Beneficiary to perform or
                discharge any obligation, duty or liability of Trustor arising
                under the Leases.

        3.4     REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants
                that: (a) the Schedule of Leases attached hereto as Schedule 1
                is, as of the date hereof, a true, accurate and complete list of
                all Leases; (b) all existing Leases are in full force and effect
                and are enforceable in accordance with their respective terms,
                and no breach or default, or event which would constitute a
                breach or default after notice or the passage of time, or both,
                exists under any existing Leases on the part of any party; (c)
                no rent or other payment under any existing Lease has been paid
                by any lessee for more than one (1) month in advance; and (d)
                none of the lessor's interests under any of the Leases has been
                transferred or assigned.

        3.5     COVENANTS. Trustor covenants and agrees at Trustor's sole cost
                and expense to: (a) perform the obligations of lessor contained
                in the Leases and enforce by all available remedies performance
                by the lessees of the obligations of the lessees contained in
                the Leases; (b) give Beneficiary prompt written notice of any
                default which occurs with respect to any of the Leases, whether
                the default be that of the lessee or of the lessor; (c) exercise
                Trustor's best efforts to keep all portions of the Subject
                Property that are capable of being leased at rental rates
                pursuant to the terms of the Loan Agreement; (d) deliver to
                Beneficiary fully executed, counterpart original(s) of each and
                every Lease if requested to do so; and (e) execute and record

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                such additional assignments of any Lease or specific
                subordinations (or subordination, attornment and non-disturbance
                agreements executed by the lessor and lessee) of any Lease to
                the Deed of Trust, in form and substance acceptable to
                Beneficiary, as Beneficiary may request. Trustor shall not,
                without Beneficiary's prior written consent or as otherwise
                permitted by any provision of the Loan Agreement: (i) enter into
                any Leases after the date thereof; (ii) execute any other
                assignment relating to any of the Leases; (iii) discount any
                rent or other sums due under the Leases or collect the same in
                advance, other than to collect rentals one (1) month in advance
                of the time when it becomes due; (iv) terminate, modify or amend
                any of the terms of the Leases or in any manner release or
                discharge the lessees from any obligations thereunder; (v)
                unreasonably consent to any assignment or subletting by any
                lessee; or (vi) subordinate or agree to subordinate any of the
                Leases to any other deed of trust or encumbrance. Any such
                attempted action in violation of the provisions of this Section
                3.5 shall be null and void. Without in any way limiting the
                requirement of Beneficiary's consent hereunder, any sums
                received by Trustor in consideration of any termination (or the
                release or discharge of any lessee) modification or amendment of
                any Lease shall be applied to reduce the outstanding Secured
                Obligations and any such sums received by Trustor shall be held
                in trust by Trustor for such purpose.

        3.6     ESTOPPEL CERTIFICATES. Within thirty (30) days after written
                request by Beneficiary, Trustor shall deliver to Beneficiary and
                to any party designated by Beneficiary estoppel certificates
                executed by Trustor and by each of the lessees, in recordable
                form, certifying (if such be the case): (a) that the foregoing
                assignment and the Leases are in full force and effect; (b) the
                date of each lessee's most recent payment of rent; (c) that
                there are no defenses or offsets outstanding, or stating those
                claimed by Trustor or lessees under the foregoing assignment or
                the Leases, as the case may be; and (d) any other information
                reasonably requested by Beneficiary.

                ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING

        4.1     SECURITY INTEREST. Trustor hereby grants and assigns to
                Beneficiary as of the "Effective Date" (defined in the Loan
                Agreement) a security interest, to secure payment and
                performance of all of the Secured Obligations, in all of the
                following described personal property in which Trustor now or at
                any time hereafter has any interest (collectively, the
                "Collateral"):

                        All goods, building and other materials, supplies, work
                        in process, equipment, machinery, fixtures, furniture,
                        furnishings, signs and other personal property, wherever
                        situated, which are or are to be incorporated into, used
                        in connection with, or appropriated for use on (i) the
                        real property described on Exhibit A attached hereto and
                        incorporated by reference herein (to the extent the same
                        are not effectively made a part of the real property
                        pursuant to Section 1.1 above) or (ii) the Improvements
                        (which real property and Improvements are collectively
                        referred to herein as the Subject Property); together
                        with all rents (to the extent, if any, they are not
                        subject to Article 3); all inventory, accounts, cash
                        receipts, deposit accounts, accounts receivable,
                        contract rights, licenses, agreements, general
                        intangibles, chattel paper, instruments, documents,
                        notes, drafts, letters of credit, insurance policies,
                        insurance and condemnation awards and proceeds, any
                        other rights to the payment of money, trade names,
                        trademarks and service marks, in every case, arising
                        from or related to the ownership, management, leasing or
                        operation of the Subject Property or any business now or
                        hereafter conducted thereon by Trustor; all permits
                        consents, approvals, licenses, authorizations and other
                        rights granted by, given by or obtained from, any
                        governmental entity with respect to the Subject
                        Property; all deposits or other security now or
                        hereafter made with or given to utility companies by
                        Trustor with respect to the Subject Property; all
                        advance payments of insurance premiums made by Trustor
                        with respect to the Subject Property; all plans,
                        drawings and specifications relating to the Subject
                        Property; all loan funds held by Beneficiary, whether or
                        not disbursed; all funds deposited with Beneficiary
                        pursuant to any loan agreement; all reserves, deferred
                        payments, deposits, security deposits, letters of
                        credit, lease bonds and other deposit substitutes,
                        credit enhancements, other like items, accounts,
                        refunds, cost savings and payments of any kind related
                        to the Subject Property or any portion thereof; together
                        with all replacements and proceeds of, and additions and
                        accessions to, any of the foregoing; together with all
                        books, records and files relating to any of the
                        foregoing.

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                        As to all of the above described personal property which
                        is or which hereafter becomes a "fixture" under
                        applicable law, this Deed of Trust constitutes a fixture
                        filing under Sections 9313 and 9402(6) of the California
                        Uniform Commercial Code, as amended or recodified from
                        time to time, and is acknowledged and agreed to be a
                        "construction mortgage" under such Sections.

        4.2     REPRESENTATIONS AND WARRANTIES. Trustor represents and warrants
                that: (a) Trustor has, or will have, good title to the
                Collateral; (b) Trustor has not previously assigned or
                encumbered the Collateral, and no financing statement covering
                any of the Collateral has been delivered to any other person or
                entity; and (c) Trustor's principal place of business is located
                at the address shown in Section 7.11.

        4.3     RIGHTS OF BENEFICIARY. In addition to Beneficiary's rights as a
                "Secured Party" under the California Uniform Commercial Code, as
                amended or recodified from time to time ("UCC"), Beneficiary
                may, but shall not be obligated to, at any time without notice
                and, after the occurrence and during the continuation of a
                Default, at the expense of Trustor: (a) give notice to any
                person of Beneficiary's rights hereunder and enforce such rights
                at law or in equity; (b) insure, protect, defend and preserve
                the Collateral or any rights or interests of Beneficiary
                therein; (c) inspect the Collateral; and (d) endorse, collect
                and receive any right to payment of money owing to Trustor under
                or from the Collateral. Notwithstanding the above, in no event
                shall Beneficiary be deemed to have accepted any property other
                than cash in satisfaction of any obligation of Trustor to
                Beneficiary unless Beneficiary shall make an express written
                election of said remedy under UCC Section 9505, or other
                applicable law.

        4.4     RIGHTS OF BENEFICIARY ON DEFAULT. Upon the occurrence of and
                during the continuation of a Default (hereinafter defined) under
                this Deed of Trust, then in addition to all of Beneficiary's
                rights as a "Secured Party" under the UCC or otherwise at law:

                (a)     Beneficiary may (i) upon written notice, require Trustor
                        to assemble any or all of the Collateral and make it
                        available to Beneficiary at a place designated by
                        Beneficiary; (ii) without prior notice, enter upon the
                        Subject Property or other place where any of the
                        Collateral may be located and take possession of,
                        collect, sell, and dispose of any or all of the
                        Collateral, and store the same at locations acceptable
                        to Beneficiary at Trustor's expense; (iii) sell, assign
                        and deliver at any place or in any lawful manner all or
                        any part of the Collateral and bid and become the
                        purchaser at any such sales; and

                (b)     Beneficiary may, for the account of Trustor and at
                        Trustor's expense: (i) operate, use, consume, sell or
                        dispose of the Collateral as Beneficiary deems
                        appropriate for the purpose of performing any or all of
                        the Secured Obligations; (ii) enter into any agreement,
                        compromise, or settlement, including insurance claims,
                        which Beneficiary may deem desirable or proper with
                        respect to any of the Collateral; and (iii) endorse and
                        deliver evidences of title for, and receive, enforce and
                        collect by legal action or otherwise, all indebtedness
                        and obligations now or hereafter owing to Trustor in
                        connection with or on account of any or all of the
                        Collateral.

                        Notwithstanding any other provision hereof, Beneficiary
                        shall not be deemed to have accepted any property other
                        than cash in satisfaction of any obligation of Trustor
                        to Beneficiary unless Trustor shall make an express
                        written election of said remedy under UCC Section 9505,
                        or other applicable law.

        4.5     POWER OF ATTORNEY. Trustor hereby irrevocably appoints
                Beneficiary as Trustor's attorney-in-fact (such agency being
                coupled with an interest), and as such attorney-in-fact
                Beneficiary may, without the obligation to do so, in
                Beneficiary's name, or in the name of Trustor, prepare, execute
                and file or record financing statements, continuation
                statements, applications for registration and like papers
                necessary to create, perfect or preserve any of Beneficiary's
                security interests and rights in or to any of the Collateral,
                and, upon a Default or during the continuance of a Default
                hereunder, take any other action required of Trustor; provided,
                however, that Beneficiary as such attorney-in-fact shall be
                accountable only for such funds as are actually received by
                Beneficiary.

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        4.6     POSSESSION AND USE OF COLLATERAL. Except as otherwise provided
                in this Section or the other Loan Documents (as defined in the
                Loan Agreement), so long as no Default exists under this Deed of
                Trust or any of the Loan Documents, Trustor may possess, use,
                move, transfer or dispose of any of the Collateral in the
                ordinary course of Trustor's business and in accordance with the
                Loan Agreement.

                   ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES

        5.1     TITLE. Trustor represents and warrants that, except as disclosed
                to Beneficiary in a writing which refers to this warranty,
                Trustor lawfully holds and possesses fee simple title to the
                Subject Property without limitation on the right to encumber,
                and that this Deed of Trust is a first and prior lien on the
                Subject Property.

        5.2     TAXES AND ASSESSMENTS. Subject to Trustor's rights to contest
                payment of taxes as may be provided in the Loan Agreement,
                Trustor shall pay prior to delinquency all taxes, assessments,
                levies and charges imposed by any public or quasi-public
                authority or utility company which are or which may become a
                lien upon or cause a loss in value of the Subject Property or
                any interest therein. Trustor shall also pay prior to
                delinquency all taxes, assessments, levies and charges imposed
                by any public authority upon Beneficiary by reason of its
                interest in any Secured Obligation or in the Subject Property,
                or by reason of any payment made to Beneficiary pursuant to any
                Secured Obligation; provided, however, Trustor shall have no
                obligation to pay taxes which may be imposed from time to time
                upon Beneficiary and which are measured by and imposed upon
                Beneficiary's net income.

        5.3     TAX AND INSURANCE IMPOUNDS. At any time following the occurrence
                of a Default and during the continuance thereof, at
                Beneficiary's option and upon its demand, Trustor, shall, until
                all Secured Obligations have been paid in full, pay to
                Beneficiary monthly, annually or as otherwise directed by
                Beneficiary an amount estimated by Beneficiary to be equal to:
                (a) all taxes, assessments, levies and charges imposed by any
                public or quasi-public authority or utility company which are or
                may become a lien upon the Subject Property or Collateral and
                will become due for the tax year during which such payment is so
                directed; and (b) premiums for fire, hazard and insurance
                required or requested pursuant to the Loan Documents when same
                are next due. If Beneficiary determines that any amounts paid by
                Trustor are insufficient for the payment in full of such taxes,
                assessments, levies, charges and/or insurance premiums,
                Beneficiary shall notify Trustor of the increased amounts
                required to pay all amounts when due, whereupon Trustor shall
                pay to Beneficiary within thirty (30) days thereafter the
                additional amount as stated in Beneficiary's notice. All sums so
                paid shall not bear interest, except to the extent and in any
                minimum amount required by law; and Beneficiary shall, unless
                Trustor is otherwise in Default hereunder or under any Loan
                Document, apply said funds to the payment of, or at the sole
                option of Beneficiary release said funds to Trustor for the
                application to and payment of, such sums, taxes, assessments,
                levies, charges, and insurance premiums. Upon Default by Trustor
                hereunder or under any Secured Obligation, Beneficiary may apply
                all or any part of said sums to any Secured Obligation and/or to
                cure such Default, in which event Trustor shall be required to
                restore all amounts so applied, as well as to cure any other
                events or conditions of Default not cured by such application.
                Upon assignment of this Deed of Trust, Beneficiary shall have
                the right to assign all amounts collected and in its possession
                to its assignee whereupon Beneficiary and the Trustee shall be
                released from all liability with respect thereto. Within
                ninety-five (95) days following full repayment of the Secured
                Obligations (other than full repayment of the Secured
                Obligations as a consequence of a foreclosure or conveyance in
                lieu of foreclosure of the liens and security interests securing
                the Secured Obligations) or at such earlier time as Beneficiary
                may elect, the balance of all amounts collected and in
                Beneficiary's possession shall be paid to Trustor and no other
                party shall have any right or claim thereto.

        5.4     PERFORMANCE OF SECURED OBLIGATIONS. Trustor shall promptly pay
                and perform each Secured Obligation when due.

        5.5     LIENS, ENCUMBRANCES AND CHARGES. Trustor shall immediately
                discharge any lien not approved by Beneficiary in writing that
                has or may attain priority over this Deed of Trust. Subject to
                the provisions of the Loan Agreement regarding mechanics' liens,
                Trustor shall pay when due all obligations secured by or which
                may become liens and encumbrances which shall now or hereafter
                encumber or appear to encumber all or any part of the Subject
                Property or Collateral, or any interest therein, whether senior
                or subordinate hereto.

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        5.6     DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS.

                (a)     The following (whether now existing or hereafter
                        arising) are all absolutely and irrevocably assigned by
                        Trustor to Beneficiary and, at the request of
                        Beneficiary, shall be paid directly to Beneficiary: (i)
                        all awards of damages and all other compensation payable
                        directly or indirectly by reason of a condemnation or
                        proposed condemnation for public or private use
                        affecting all or any part of, or any interest in, the
                        Subject Property or Collateral; (ii) all other claims
                        and awards for damages to, or decrease in value of, all
                        or any part of, or any interest in, the Subject Property
                        or Collateral; (iii) all proceeds of any insurance
                        policies payable by reason of loss sustained to all or
                        any part of the Subject Property or Collateral; and (iv)
                        all interest which may accrue on any of the foregoing.
                        Subject to applicable law and Section 5.6(b),
                        Beneficiary may at its discretion apply all or any of
                        the proceeds it receives to its expenses in settling,
                        prosecuting or defending any claim and may apply the
                        balance to the Secured Obligations in any order
                        acceptable to Beneficiary, and/or Beneficiary may
                        release all or any part of the proceeds to Trustor upon
                        any reasonable conditions Beneficiary may impose.
                        Beneficiary may commence, appear in, defend or prosecute
                        any assigned claim or action and may adjust, compromise,
                        settle and collect all claims and awards assigned to
                        Beneficiary; provided, however, in no event shall
                        Beneficiary be responsible for any failure to collect
                        any claim or award, regardless of the cause of the
                        failure, except for any malfeasance by Beneficiary or
                        its employees or agents.

                (b)     In the event of a casualty, so long as there is not then
                        in existence a Default which remains uncured, the amount
                        of repair or restoration does not exceed fifty percent
                        (50%) of the then outstanding unpaid balance of the
                        Loan, and Beneficiary reasonably determines that its
                        security is not impaired by the casualty, Beneficiary
                        shall permit insurance proceeds held by Beneficiary to
                        be used for repair or restoration; otherwise,
                        Beneficiary may, but shall not be obligated to, permit
                        insurance proceeds held by Beneficiary to be used for
                        repair or restoration. In the event of a condemnation,
                        so long as there is not then in existence a Default
                        which remains uncured, the amount of repair or
                        restoration does not exceed ten percent (10%) of the
                        then outstanding unpaid balance of the Loan, Beneficiary
                        reasonably determines that its security is not impaired
                        by the condemnation, and restoration is reasonably
                        feasible, Beneficiary shall permit insurance proceeds
                        held by Beneficiary to be used for repair or
                        restoration; otherwise, Beneficiary may, but shall not
                        be obligated to, permit condemnation proceeds held by
                        Beneficiary to be used for repair or restoration In the
                        event of any of the foregoing, Beneficiary may condition
                        such application upon reasonable conditions, including,
                        without limitation: (i) the deposit with Beneficiary of
                        such additional funds which Beneficiary reasonably
                        determines are needed to pay all costs of the repair or
                        restoration, (including, without limitation, taxes,
                        financing charges, insurance and rent during the repair
                        period); (ii) the establishment of an arrangement for
                        lien releases and disbursement of funds acceptable to
                        Beneficiary (the arrangement contained in the Loan
                        Agreement for obtaining lien releases and disbursing
                        loan funds shall be deemed reasonable with respect to
                        disbursement of insurance or condemnation proceeds);
                        (iii) the delivery to Beneficiary of plans and
                        specifications for the work, a contract for the work
                        signed by a contractor acceptable to Beneficiary, a cost
                        breakdown for the work and a payment and performance
                        bond for the work, all of which shall be acceptable to
                        Beneficiary; and (iv) the delivery to Beneficiary of
                        evidence acceptable to Beneficiary (aa) that after
                        completion of the work the income from the Subject
                        Property will be sufficient to pay all expenses and debt
                        service for the Subject Property; (bb) of the
                        continuation of Leases acceptable to and required by
                        Beneficiary; (cc) that upon completion of the work, the
                        size, capacity and total value of the Subject Property
                        will be at least as great as it was before the damage or
                        condemnation occurred; (dd) that there has been no
                        material adverse change in the financial condition or
                        credit of Trustor since the date of this Deed of Trust;
                        and (ee) of the satisfaction of any additional
                        conditions that Beneficiary may reasonably establish to
                        protect its security. Trustor hereby acknowledges that
                        the conditions described above are reasonable, and, if
                        such conditions have not been satisfied within one
                        hundred fifty (150) days of receipt by Beneficiary of
                        such insurance or condemnation proceeds, then
                        Beneficiary may apply such insurance or condemnation
                        proceeds to pay the Secured Obligations in such order
                        and amounts as Beneficiary in its sole discretion may
                        choose.

                                     Page 7
<PAGE>   8

        5.7     MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY. Subject to
                the provisions of the Loan Agreement, Trustor covenants: (a) to
                insure the Subject Property and Collateral against such risks as
                Beneficiary may require and, at Beneficiary's request, to
                provide evidence of such insurance to Beneficiary, and to comply
                with the requirements of any insurance companies providing such
                insurance; (b) to keep the Subject Property and Collateral in
                good condition and repair; (c) not to remove or demolish the
                Subject Property or Collateral or any part thereof, not to
                alter, restore or add to the Subject Property or Collateral and
                not to initiate or acquiesce in any change in any zoning or
                other land classification which affects the Subject Property
                without Beneficiary's prior written consent, which consent shall
                not be unreasonably withheld, or as provided in the Loan
                Agreement; (d) to the extent that insurance and condemnation
                proceeds are made available to it by Beneficiary, to complete or
                restore promptly and in good and workmanlike manner the Subject
                Property and Collateral, or any part thereof which may be
                damaged or destroyed; (e) to comply with all laws, ordinances,
                regulations and standards, and all covenants, conditions,
                restrictions and equitable servitudes, whether public or
                private, of every kind and character which affect the Subject
                Property or Collateral and pertain to acts committed or
                conditions existing thereon, including, without limitation, any
                work, alteration, improvement or demolition mandated by such
                laws, covenants or requirements; (f) not to commit or permit
                waste of the Subject Property or Collateral; and (g) to do all
                other acts which from the character or use of the Subject
                Property or Collateral may be reasonably necessary to maintain
                and preserve its value.

        5.8     DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS. At Trustor's
                sole expense, Trustor shall protect, preserve and defend the
                Subject Property and Collateral and title to and right of
                possession of the Subject Property and Collateral, the security
                hereof and the rights and powers of Beneficiary and Trustee
                hereunder against all adverse claims. Trustor shall give
                Beneficiary and Trustee prompt notice in writing of the
                assertion of any claim, of the filing of any action or
                proceeding, of the occurrence of any damage to the Subject
                Property or Collateral and of any condemnation offer or action.

        5.9     ACCEPTANCE OF TRUST; POWERS AND DUTIES OF TRUSTEE.

                (a)     Trustee accepts this trust when this Deed of Trust is
                        recorded. Except as may be required by applicable law,
                        Trustee or Beneficiary may from time to time apply to
                        any court of competent jurisdiction for aid and
                        direction in the execution of the trust hereunder and
                        the enforcement of the rights and remedies available
                        hereunder, and may obtain orders or decrees directing or
                        confirming or approving acts in the execution of said
                        trust and the enforcement of said remedies.

                (b)     Trustee shall not be required to take any action toward
                        the execution and enforcement of the trust hereby
                        created or to institute, appear in, or defend any
                        action, suit, or other proceeding in connection
                        therewith where, in his opinion, such action would be
                        likely to involve him in expense or liability, unless
                        requested so to do by a written instrument signed by
                        Beneficiary and, if Trustee so requests, unless Trustee
                        is tendered security and indemnity satisfactory to
                        Trustee against any and all cost, expense, and liability
                        arising therefrom. Trustee shall not be responsible for
                        the execution, acknowledgment, or validity of the Loan
                        Documents, or for the proper authorization thereof, or
                        for the sufficiency of the lien and security interest
                        purported to be created hereby, and Trustee makes no
                        representation in respect thereof or in respect of the
                        rights, remedies, and recourses of Beneficiary.

                (c)     With the approval of Beneficiary, Trustee shall have the
                        right to take any and all of the following actions: (i)
                        to select, employ, and advise with counsel (who may be,
                        but need not be, counsel for Beneficiary) upon any
                        matters arising hereunder, including the preparation,
                        execution, and interpretation of the Loan Documents, and
                        shall be fully protected in relying as to legal matters
                        on the advice of counsel, (ii) to execute any of the
                        trusts and powers hereof and to perform any duty
                        hereunder either directly or through his agents or
                        attorneys, (iii) to select and employ, in and about the
                        execution of his duties hereunder, suitable accountants,
                        engineers and other experts, agents and
                        attorneys-in-fact, either corporate or individual, not
                        regularly in the employ of Trustee, and Trustee shall
                        not be answerable for any act, default, negligence, or
                        misconduct of any such accountant, engineer or other
                        expert, agent or attorney-in-fact, if selected with
                        reasonable care, or for any error of judgment or act
                        done by Trustee in good faith, or be otherwise
                        responsible or accountable under any circumstances
                        whatsoever, except for Trustee's gross negligence or bad
                        faith, and (iv) any and all other lawful action as
                        Beneficiary may instruct Trustee to take to protect or
                        enforce Beneficiary's

                                     Page 8
<PAGE>   9

                        rights hereunder. Trustee shall not be personally liable
                        in case of entry by Trustee, or anyone entering by
                        virtue of the powers herein granted to Trustee, upon the
                        Subject Property for debts contracted for or liability
                        or damages incurred in the management or operation of
                        the Subject Property. Trustee shall have the right to
                        rely on any instrument, document, or signature
                        authorizing or supporting any action taken or proposed
                        to be taken by Trustee hereunder, believed by Trustee in
                        good faith to be genuine. Trustee shall be entitled to
                        reimbursement for expenses incurred by Trustee in the
                        performance of Trustee's duties hereunder and to
                        reasonable compensation for such of Trustee's services
                        hereunder as shall be rendered. TRUSTOR WILL, FROM TIME
                        TO TIME, PAY THE COMPENSATION DUE TO TRUSTEE HEREUNDER
                        AND REIMBURSE TRUSTEE FOR, AND INDEMNIFY AND HOLD
                        HARMLESS TRUSTEE AGAINST, ANY AND ALL LIABILITY AND
                        REASONABLE OUT-OF-POCKET EXPENSES WHICH MAY BE INCURRED
                        BY TRUSTEE IN THE PERFORMANCE OF TRUSTEE'S DUTIES.

                (d)     All moneys received by Trustee shall, until used or
                        applied as herein provided, be held in trust for the
                        purposes for which they were received, but need not be
                        segregated in any manner from any other moneys (except
                        to the extent required by applicable law) and Trustee
                        shall be under no liability for interest on any moneys
                        received by Trustee hereunder.

                (e)     Should any deed, conveyance, or instrument of any nature
                        be required from Trustor by any Trustee or substitute
                        Trustee to more fully and certainly vest in and confirm
                        to the Trustee or substitute Trustee such estates,
                        rights, powers, and duties, then, upon request by the
                        Trustee or substitute Trustee, any and all such deeds,
                        conveyances and instruments shall be made, executed,
                        acknowledged, and delivered and shall be caused to be
                        recorded and/or filed by Trustor.

                (f)     By accepting or approving anything required to be
                        observed, performed, or fulfilled or to be given to
                        Trustee pursuant to the Loan Documents, including
                        without limitation, any deed, conveyance, instrument,
                        officer's certificate, balance sheet, statement of
                        profit and loss or other financial statement, survey,
                        appraisal, or insurance policy, Trustee shall not be
                        deemed to have warranted, consented to, or affirmed the
                        sufficiency, legality, effectiveness, or legal effect of
                        the same, or of any term, provision, or condition
                        thereof, and such acceptance or approval thereof shall
                        not be or constitute any warranty or affirmation with
                        respect thereto by Trustee.

        5.10    COMPENSATION; EXCULPATION; INDEMNIFICATION.

                (a)     Trustor shall pay Trustee's fees and reimburse Trustee
                        for reasonable out-of-pocket expenses in the
                        administration of this trust, including reasonable
                        out-of-pocket attorneys' fees. Trustor shall pay to
                        Beneficiary reasonable compensation for services
                        rendered concerning this Deed of Trust, including
                        without limit any statement of amounts owing under any
                        Secured Obligation. Beneficiary shall not directly or
                        indirectly be liable to Trustor or any other person as a
                        consequence of (i) the exercise of the rights, remedies
                        or powers granted to Beneficiary in this Deed of Trust;
                        (ii) the failure or refusal of Beneficiary to perform or
                        discharge any obligation or liability of Trustor under
                        any agreement related to the Subject Property or
                        Collateral or under this Deed of Trust; or (iii) any
                        loss sustained by Trustor or any third party resulting
                        from Beneficiary's failure (except by Beneficiary's
                        gross negligence or willful misconduct) to lease the
                        Subject Property after a Default (hereinafter defined)
                        or from any other act or omission (except for
                        Beneficiary's gross negligence or willful misconduct) of
                        Beneficiary in managing the Subject Property after a
                        Default unless the loss is caused by the gross
                        negligence or willful misconduct of Beneficiary and no
                        such liability shall be asserted against or imposed upon
                        Beneficiary, and all such liability is hereby expressly
                        waived and released by Trustor.

                (b)     SUBJECT TO THE PROVISIONS OF SECTION 2.10 OF THE LOAN
                        AGREEMENT, TRUSTOR INDEMNIFIES TRUSTEE AND BENEFICIARY
                        AGAINST, AND HOLDS TRUSTEE AND BENEFICIARY HARMLESS
                        FROM, ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS, CAUSES
                        OF ACTION, JUDGMENTS, COURT COSTS, ATTORNEYS' FEES AND
                        OTHER LEGAL EXPENSES, COST OF EVIDENCE OF TITLE, COST OF
                        EVIDENCE OF VALUE, AND OTHER EXPENSES WHICH EITHER MAY
                        SUFFER OR INCUR: (i) BY REASON OF THIS DEED OF TRUST;
                        (ii) BY REASON OF THE EXECUTION OF THIS TRUST OR IN
                        PERFORMANCE OF ANY

                                     Page 9
<PAGE>   10

                        ACT REQUIRED OR PERMITTED HEREUNDER OR BY LAW; (iii) AS
                        A RESULT OF ANY FAILURE OF TRUSTOR TO PERFORM TRUSTOR'S
                        OBLIGATIONS; OR (iv) BY REASON OF ANY ALLEGED OBLIGATION
                        OR UNDERTAKING ON BENEFICIARY'S PART TO PERFORM OR
                        DISCHARGE ANY OF THE REPRESENTATIONS, WARRANTIES,
                        CONDITIONS, COVENANTS OR OTHER OBLIGATIONS CONTAINED IN
                        ANY OTHER DOCUMENT RELATED TO THE SUBJECT PROPERTY.

                (c)     Trustor shall pay all amounts and indebtedness arising
                        under this Section 5.10 immediately upon demand by
                        Trustee or Beneficiary together with interest thereon
                        from the date the indebtedness arises at the rate of
                        interest then applicable to the principal balance of the
                        Note as specified therein.

        5.11    SUBSTITUTION OF TRUSTEES. From time to time, by a writing,
                signed and acknowledged by Beneficiary and recorded in the
                Office of the Recorder of the County in which the Subject
                Property is situated, Beneficiary may appoint another trustee to
                act in the place and stead of Trustee or any successor. Such
                writing shall set forth any information required by law. The
                recordation of such instrument of substitution shall discharge
                Trustee herein named and shall appoint the new trustee as the
                trustee hereunder with the same effect as if originally named
                Trustee herein. A writing recorded pursuant to the provisions of
                this Section 5.11 shall be conclusive proof of the proper
                substitution of such new Trustee.

        5.12    DUE ON SALE OR ENCUMBRANCE. If the Subject Property or any
                interest therein shall be sold, transferred (including, without
                limitation, through sale or transfer of a majority or
                controlling interest of the corporate stock of Trustor, other
                than as results from issuances of publicly traded stock duly
                registered with the Securities and Exchange Commission),
                mortgaged, assigned, further encumbered or leased, whether
                directly or indirectly, whether voluntarily, involuntarily or by
                operation of law, without the prior written consent of
                Beneficiary, THEN Beneficiary, in its sole discretion, may
                declare all Secured Obligations immediately due and payable.

        5.13    RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY.
                Without notice to or the consent, approval or agreement of any
                persons or entities having any interest at any time in the
                Subject Property and Collateral or in any manner obligated under
                the Secured Obligations ("Interested Parties"), Beneficiary may,
                from time to time, release any person or entity from liability
                for the payment or performance of any Secured Obligation, take
                any action or make any agreement extending the maturity or
                otherwise altering the terms or increasing the amount of any
                Secured Obligation, or accept additional security or release all
                or a portion of the Subject Property and Collateral and other
                security for the Secured Obligations. None of the foregoing
                actions shall release or reduce the personal liability of any of
                said Interested Parties, or release or impair the priority of
                the lien of and security interests created by this Deed of Trust
                upon the Subject Property and Collateral.

        5.14    RECONVEYANCE. Upon Beneficiary's written request, and upon
                surrender to Trustee for cancellation of this Deed of Trust or a
                certified copy thereof and any note, instrument, or instruments
                setting forth all obligations secured hereby, Trustee shall
                reconvey, without warranty, the Subject Property or that portion
                thereof then held hereunder. To the extent permitted by law, the
                reconveyance may describe the grantee as "the person or persons
                legally entitled thereto" and the recitals of any matters or
                facts in any reconveyance executed hereunder shall be conclusive
                proof of the truthfulness thereof. Neither Beneficiary nor
                Trustee shall have any duty to determine the rights of persons
                claiming to be rightful grantees of any reconveyance. When the
                Subject Property has been fully reconveyed, the last such
                reconveyance shall operate as a reassignment of all future
                rents, issues and profits of the Subject Property to the person
                or persons legally entitled thereto.

        5.15    SUBROGATION. Beneficiary shall be subrogated to the lien of all
                encumbrances, whether released of record or not, paid in whole
                or in part by Beneficiary pursuant to the Loan Documents or by
                the proceeds of any loan secured by this Deed of Trust.

        5.16    RIGHT OF INSPECTION. Beneficiary, its agents and employees, may
                enter the Subject Property at any reasonable time for the
                purpose of inspecting the Subject Property and Collateral and
                ascertaining Trustor's compliance with the terms hereof.

                                    Page 10
<PAGE>   11

                          ARTICLE 6. DEFAULT PROVISIONS

        6.1     DEFAULT. For all purposes hereof, the term "Default" shall mean
                (a) at Beneficiary's option, the failure of Trustor to make any
                payment of principal or interest on the Note or to pay any other
                amount due hereunder or under the Note when the same is due and
                payable, whether at maturity, by acceleration or otherwise; (b)
                the failure of Trustor to perform any material non-monetary
                obligation hereunder, or the failure to be true in any material
                respects of any representation or warranty of Trustor contained
                herein and the continuance of such failure for ten (10) days
                after notice, or within any longer grace period, if any, allowed
                in the Loan Agreement for such failure, or (c) the existence of
                any Default as defined in the Loan Agreement.

        6.2     RIGHTS AND REMEDIES. Subject to the provisions of Section 2.10
                of the Loan Agreement, at any time after Default, Beneficiary
                and Trustee shall each have all the following rights and
                remedies:

                (a)     With or without notice, to declare all Secured
                        Obligations immediately due and payable;

                (b)     With or without notice, and without releasing Trustor
                        from any Secured Obligation, and without becoming a
                        mortgagee in possession, to cure any breach or Default
                        of Trustor and, in connection therewith, to enter upon
                        the Subject Property and do such acts and things as
                        Beneficiary or Trustee deem necessary or desirable to
                        protect the security hereof, including, without
                        limitation: (i) to appear in and defend any action or
                        proceeding purporting to affect the security of this
                        Deed of Trust or the rights or powers of Beneficiary or
                        Trustee under this Deed of Trust; (ii) to pay, purchase,
                        contest or compromise any encumbrance, charge, lien or
                        claim of lien which, in the sole judgment of either
                        Beneficiary or Trustee, is or may be senior in priority
                        to this Deed of Trust, the judgment of Beneficiary or
                        Trustee being conclusive as between the parties hereto;
                        (iii) to obtain insurance; (iv) to pay any premiums or
                        charges with respect to insurance required to be carried
                        under this Deed of Trust; or (v) to employ counsel,
                        accountants, contractors and other appropriate persons.

                (c)     To commence and maintain an action or actions in any
                        court of competent jurisdiction to foreclose this
                        instrument as a mortgage or to obtain specific
                        enforcement of the covenants of Trustor hereunder, and
                        Trustor agrees that such covenants shall be specifically
                        enforceable by injunction or any other appropriate
                        equitable remedy and that for the purposes of any suit
                        brought under this subparagraph, Trustor waives the
                        defense of laches and any applicable statute of
                        limitations;

                (d)     To apply to a court of competent jurisdiction for and
                        obtain appointment of a receiver of the Subject Property
                        as a matter of strict right and without regard to the
                        adequacy of the security for the repayment of the
                        Secured Obligations, the existence of a declaration that
                        the Secured Obligations are immediately due and payable,
                        or the filing of a notice of default, and Trustor hereby
                        consents to such appointment;

                (e)     To enter upon, possess, manage and operate the Subject
                        Property or any part thereof, to take and possess all
                        documents, books, records, papers and accounts of
                        Trustor or the then owner of the Subject Property, to
                        make, terminate, enforce or modify Leases of the Subject
                        Property upon such terms and conditions as Beneficiary
                        deems proper, to make repairs, alterations and
                        improvements to the Subject Property as necessary, in
                        Trustee's or Beneficiary's sole judgment, to protect or
                        enhance the security hereof;

                (f)     To execute a written notice of such Default and of its
                        election to cause the Subject Property to be sold to
                        satisfy the Secured Obligations. As a condition
                        precedent to any such sale, Trustee shall give and
                        record such notice as the law then requires. When the
                        minimum period of time required by law after such notice
                        has elapsed, Trustee, without notice to or demand upon
                        Trustor except as required by law, shall sell the
                        Subject Property at the time and place of sale fixed by
                        it in the notice of sale, at one or several sales,
                        either as a whole or in separate parcels and in such
                        manner and order, all as Beneficiary in its sole
                        discretion may determine, at public auction to the
                        highest bidder for cash, in lawful money of the United
                        States, payable at time of sale. Neither Trustor nor any
                        other person or

                                    Page 11
<PAGE>   12

                        entity other than Beneficiary shall have the right to
                        direct the order in which the Subject Property is sold.
                        Subject to requirements and limits imposed by law,
                        Trustee may from time to time postpone sale of all or
                        any portion of the Subject Property by public
                        announcement at such time and place of sale. Trustee
                        shall deliver to the purchaser at such sale a deed
                        conveying the Subject Property or portion thereof so
                        sold, but without any covenant or warranty, express or
                        implied. The recitals in the deed of any matters or
                        facts shall be conclusive proof of the truthfulness
                        thereof. Any person, including Trustee, Trustor or
                        Beneficiary may purchase at the sale;

                (g)     To resort to and realize upon the security hereunder and
                        any other security now or later held by Beneficiary
                        concurrently or successively and in one or several
                        consolidated or independent judicial actions or lawfully
                        taken non-judicial proceedings, or both, and to apply
                        the proceeds received upon the Secured Obligations all
                        in such order and manner as Trustee and Beneficiary, or
                        either of them, determine in their sole discretion.

                (h)     Upon sale of the Subject Property at any judicial or
                        non-judicial foreclosure, Beneficiary may credit bid (as
                        determined by Beneficiary in its sole and absolute
                        discretion) all or any portion of the Secured
                        Obligations. In determining such credit bid, Beneficiary
                        may, but is not obligated to, take into account all or
                        any of the following: (i) appraisals of the Subject
                        Property as such appraisals may be discounted or
                        adjusted by Beneficiary in its sole and absolute
                        underwriting discretion; (ii) expenses and costs
                        incurred by Beneficiary with respect to the Subject
                        Property prior to foreclosure; (iii) expenses and costs
                        which Beneficiary anticipates will be incurred with
                        respect to the Subject Property after foreclosure, but
                        prior to resale, including, without limitation, costs of
                        structural reports and other due diligence, costs to
                        carry the Subject Property prior to resale, costs of
                        resale (e.g. commissions, attorneys' fees, and taxes),
                        costs of any hazardous materials clean-up and
                        monitoring, costs of deferred maintenance, repair,
                        refurbishment and retrofit, costs of defending or
                        settling litigation affecting the Subject Property, and
                        lost opportunity costs (if any), including the time
                        value of money during any anticipated holding period by
                        Beneficiary; (iv) declining trends in real property
                        values generally and with respect to properties similar
                        to the Subject Property; (v) anticipated discounts upon
                        resale of the Subject Property as a distressed or
                        foreclosed property; (vi) the fact of additional
                        collateral (if any), for the Secured Obligations; and
                        --- (vii) such other factors or matters that Beneficiary
                        (in its sole and absolute discretion) deems appropriate.
                        In regard to the above, Trustor acknowledges and agrees
                        that: (w) Beneficiary is not required to use any or all
                        of the foregoing factors to determine the amount of its
                        credit bid; (x) this Section does not impose upon
                        Beneficiary any additional obligations that are not
                        imposed by law at the time the credit bid is made; (y)
                        the amount of Beneficiary's credit bid need not have any
                        relation to any loan-to-value ratios specified in the
                        Loan Documents or previously discussed between Trustor
                        and Beneficiary; and (z) Beneficiary's --- credit bid
                        may be (at Beneficiary's sole and absolute discretion)
                        higher or lower than any appraised value of the Subject
                        Property.

        6.3     APPLICATION OF FORECLOSURE SALE PROCEEDS. After deducting all
                reasonable out-of-pocket costs, fees and expenses of Trustee,
                and of this trust, including, without limitation, cost of
                evidence of title and attorneys' fees in connection with sale
                and costs and expenses of sale and of any judicial proceeding
                wherein such sale may be made, Trustee shall apply all proceeds
                of any foreclosure sale: (a) to payment of all sums expended by
                Beneficiary under the terms hereof and not then repaid, with
                accrued interest at the rate of interest specified in the Note
                to be applicable on or after maturity or acceleration of the
                Note; (b) to payment of all other Secured Obligations; and (c)
                the remainder, if any, to the person or persons legally entitled
                thereto.

        6.4     APPLICATION OF OTHER SUMS. All sums received by Beneficiary
                under Section 6.2 or Section 3.2, less all costs and expenses
                incurred by Beneficiary or any receiver under Section 6.2 or
                Section 3.2, including, without limitation, attorneys' fees,
                shall be applied in payment of the Secured Obligations in such
                order as Beneficiary shall determine in its sole discretion;
                provided, however, Beneficiary shall have no liability for funds
                not actually received by Beneficiary.

        6.5     NO CURE OR WAIVER. Neither Beneficiary's nor Trustee's nor any
                receiver's entry upon and taking possession of all or any part
                of the Subject Property and Collateral, nor any collection of
                rents, issues,

                                    Page 12
<PAGE>   13

                profits, insurance proceeds, condemnation proceeds or damages,
                other security or proceeds of other security, or other sums, nor
                the application of any collected sum to any Secured Obligation,
                nor the exercise or failure to exercise of any other right or
                remedy by Beneficiary or Trustee or any receiver shall cure or
                waive any breach, Default or notice of default under this Deed
                of Trust, or nullify the effect of any notice of default or sale
                (unless all Secured Obligations then due have been paid and
                performed and Trustor has cured all other defaults), or impair
                the status of the security, or prejudice Beneficiary or Trustee
                in the exercise of any right or remedy, or be construed as an
                affirmation by Beneficiary of any tenancy, lease or option or a
                subordination of the lien of or security interests created by
                this Deed of Trust.

        6.6     PAYMENT OF COSTS, EXPENSES AND ATTORNEYS' FEES. Trustor agrees
                to pay to Beneficiary immediately and without demand all
                reasonable out-of-pocket costs and expenses incurred by Trustee
                and Beneficiary pursuant to Section 6.2 (including, without
                limitation, reasonable out-of-pocket court costs and attorneys'
                fees, whether incurred in litigation or not) with interest from
                the date of expenditure until said sums have been paid at the
                rate of interest then applicable to the principal balance of the
                Note as specified therein. In addition, Trustor shall pay to
                Trustee all Trustee's reasonable out-of-pocket fees hereunder
                and shall reimburse Trustee for all reasonable out-of-pocket
                expenses incurred in the administration of this trust,
                including, without limitation, any attorneys' fees.

        6.7     POWER TO FILE NOTICES AND CURE DEFAULTS. Trustor hereby
                irrevocably appoints Beneficiary and its successors and assigns,
                as its attorney-in-fact, which agency is coupled with an
                interest, (a) to execute and/or record any notices of
                completion, cessation of labor, or any other notices that
                Beneficiary deems appropriate to protect Beneficiary's interest,
                (b) upon the issuance of a deed pursuant to the foreclosure of
                the lien of this Deed of Trust or the delivery of a deed in lieu
                of foreclosure, to execute all instruments of assignment or
                further assurance with respect to the Subject Property and
                Collateral, Leases and Payments in favor of the grantee of any
                such deed, as may be necessary or desirable for such purpose,
                (c) to prepare, execute and file or record financing statements,
                continuation statements, applications for registration and like
                papers necessary to create, perfect or preserve Beneficiary's
                security interests and rights in or to any of the Subject
                Property and Collateral, and (d) upon the occurrence of an
                event, act or omission which, with notice or passage of time or
                both, would constitute a Default, Beneficiary may perform any
                obligation of Trustor hereunder; provided, however, that: (i)
                Beneficiary as such attorney-in-fact shall only be accountable
                for such funds as are actually received by Beneficiary; and (ii)
                Beneficiary shall not be liable to Trustor or any other person
                or entity for any failure to act (whether such failure
                constitutes negligence) by Beneficiary under this Section.

                       ARTICLE 7. MISCELLANEOUS PROVISIONS

        7.1     ADDITIONAL PROVISIONS. The Loan Documents contain or incorporate
                by reference the entire agreement of the parties with respect to
                matters contemplated herein and supersede all prior
                negotiations. The Loan Documents grant further rights to
                Beneficiary and contain further agreements and affirmative and
                negative covenants by Trustor which apply to this Deed of Trust
                and to the Subject Property and Collateral and such further
                rights and agreements are incorporated herein by this reference.

        7.2     MERGER. No merger shall occur as a result of Beneficiary's
                acquiring any other estate in, or any other lien on, the Subject
                Property unless Beneficiary consents to a merger in writing.

        7.3     INTENTIONALLY OMITTED.

        7.4     INTENTIONALLY OMITTED.

        7.5     WAIVER OF MARSHALLING RIGHTS. Trustor, for itself and for all
                parties claiming through or under Trustor, and for all parties
                who may acquire a lien on or interest in the Subject Property
                and Collateral, hereby waives all rights to have the Subject
                Property and Collateral and/or any other property, which is now
                or later may be security for any Secured Obligation ("Other
                Property") marshalled upon any foreclosure of the lien of this
                Deed of Trust or on a foreclosure of any other lien or security
                interest against any security for any of the Secured
                Obligations. Beneficiary shall have the right to sell, and any
                court in which foreclosure

                                    Page 13
<PAGE>   14

                proceedings may be brought shall have the right to order a sale
                of, the Subject Property and any or all of the Collateral or
                Other Property as a whole or in separate parcels, in any order
                that Beneficiary may designate.

        7.6     RULES OF CONSTRUCTION. When the identity of the parties or other
                circumstances make it appropriate the masculine gender includes
                the feminine and/or neuter, and the singular number includes the
                plural. The term "Subject Property" and "Collateral" means all
                and any part of the Subject Property and Collateral,
                respectively, and any interest in the Subject Property and
                Collateral, respectively.

        7.7     SUCCESSORS IN INTEREST. The terms, covenants, and conditions
                herein contained shall be binding upon and inure to the benefit
                of the heirs, successors and assigns of the parties hereto;
                provided, however, that this Section 7.7 does not waive or
                modify the provisions of Section 5.12.

        7.8     EXECUTION IN COUNTERPARTS. To facilitate execution, this
                document may be executed in as many counterparts as may be
                convenient or required. It shall not be necessary that the
                signature or acknowledgment of, or on behalf of, each party, or
                that the signature of all persons required to bind any party, or
                the acknowledgment of such party, appear on each counterpart.
                All counterparts shall collectively constitute a single
                document. It shall not be necessary in making proof of this
                document to produce or account for more than a single
                counterpart containing the respective signatures of, or on
                behalf of, and the respective acknowledgments of, each of the
                parties hereto. Any signature or acknowledgment page to any
                counterpart may be detached from such counterpart without
                impairing the legal effect of the signatures or acknowledgments
                thereon and thereafter attached to another counterpart identical
                thereto except having attached to it additional signature or
                acknowledgment pages.

        7.9     CALIFORNIA LAW. This Deed of Trust shall be construed in
                accordance with the laws of the State of California, except to
                the extent that federal laws preempt the laws of the State of
                California.

        7.10    INCORPORATION. Exhibit A and Schedule 1, as attached, are
                incorporated into this Deed of Trust by this reference.

        7.11    NOTICES. All notices, demands or other communications required
                or permitted to be given pursuant to the provisions of this Deed
                of Trust shall be in writing and shall be considered as properly
                given if delivered personally or sent by first class United
                States Postal Service mail, postage prepaid, except that notice
                of Default may be sent by certified mail, return receipt
                requested, or by Overnight Express Mail or by overnight
                commercial courier service, charges prepaid. Notices so sent
                shall be effective three (3) days after mailing, if mailed by
                first class mail, and otherwise upon receipt at the address set
                forth below; provided, however, that non-receipt of any
                communication as the result of any change of address of which
                the sending party was not notified or as the result of a refusal
                to accept delivery shall be deemed receipt of such
                communication. For purposes of notice, the address of the
                parties shall be:

                                    Page 14
<PAGE>   15

<TABLE>
<S>                      <C>
Trustor:                 Communications & Power Industries Holding Corporation
                         607 Hansen Way
                         Palo Alto, CA  94303-1110
                         Attn: Lynn E. Harvey

With a copy to:          Leonard Green & Partners, L.P.
                         11111 Santa Monica Boulevard, Suite 2000
                         Los Angeles, CA 90025
                         Attn:  Greg Annick

With a copy to:          Irell & Manella LLP
                         1800 Avenue of the Stars, Suite 900
                         Los Angeles, CA 90067-4276
                         Attn: Chris Kennedy

Trustee:                 American Securities Company, a California corporation
                         Legal Department
                         633 Folsom, 7th floor
                         San Francisco, CA  94107
                         MAC 0149-075
                         Attn: Real Estate Group Counsel
                         (w/ reference to Loan #1440 and Beneficiary AU #2034)

Beneficiary:             WELLS FARGO BANK, NATIONAL ASSOCIATION
                         Real Estate Group (AU #2034)
                         555 Montgomery Street
                         16th Floor
                         San Francisco, CA 94111
                         Attn:  Robin L. Dixon

                         Loan #: 1440

With a copy to:          Wells Fargo Bank, National Association
                         Disbursement and Operations Center
                         2120 East Park Place, Suite 100
                         El Segundo, CA  90245
                         Attention:  Marissa Santos
</TABLE>

Any party shall have the right to change its address for notice hereunder to any
other location within the continental United States by the giving of ten (10)
days notice to the other party in the manner set forth hereinabove. Trustor
shall forward to Beneficiary, without delay, any notices, letters or other
communications delivered to the Subject Property or to Trustor naming
Beneficiary, "Lender" or any similar designation as addressee, or which could
reasonably be deemed to affect the ability of Trustor to perform its obligations
to Beneficiary under the Note or the Loan Agreement.

                                    Page 15
<PAGE>   16

IN WITNESS WHEREOF, Trustor has executed this Deed of Trust as of the day and
year set forth above.

                                       COMMUNICATIONS & POWER INDUSTRIES HOLDING
                                       CORPORATION, a Delaware corporation

                                       By:
                                           -------------------------------------
                                       Name:
                                             -----------------------------------
                                       Its:
                                            ------------------------------------

                      (ALL SIGNATURES MUST BE ACKNOWLEDGED)

                                    Page 16
<PAGE>   17
                                                                    EXHIBIT A
                                                                Loan No. 1440

                         DESCRIPTION OF SUBJECT PROPERTY

Exhibit A to Deed of Trust with Absolute Assignment of Leases and Rents,
Security Agreement and Fixture Filing executed by COMMUNICATIONS & POWER
INDUSTRIES HOLDING CORPORATION, as Trustor, to AMERICAN SECURITIES COMPANY, as
Trustee, for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as
Beneficiary, dated as of December __, 2000.

The land referred to herein is situated in the County of San Mateo, State of
California, and is described as follows:

All the real property located in the City of San Carlos, County of San Mateo,
State of California, all of Parcel 1 as shown on the Parcel Map recorded in
Volume 20 of Parcel Maps at page 23 in the Records of said County, described in
metes as follows:

Beginning at Northerly corner of said Parcel; thence through the following
numbered courses:

<TABLE>
<S>     <C>
1)      South 37(0)56' 04" East 739.82 feet to a curve to the right with a
        radius of 447.00 feet

2)      along said curve through a central angle of 33(0)54' 48" an arc distance
        of 264.58 feet

3)      South 04(0)01' 16" East 182.93 feet to a curve to the left with a radius
        of 553.00 feet

4)      along said curve through a central angle of 02(0)38' 43" an arc distance
        of 25.53 feet

5)      South 46(0)51' 36" West 476.39 feet

6)      North 42(0)08' 24" West 1153.65 feet

7)      North 47(0)51' 36" East 752.91 feet to the point of beginning.
</TABLE>

<TABLE>
<S>                                                         <C>
A.P. No.:     046-051-020                                   JPN 046 005 051 02 A
              046-051-070                                       046 005 051 07 A
</TABLE>

                                    Page 17
<PAGE>   18
                                                                   SCHEDULE 1
                                                                Loan No. 1440

                               SCHEDULE OF LEASES

Schedule 1 to Deed of Trust with Absolute Assignment of Leases and Rents,
Security Agreement and Fixture Filing executed by COMMUNICATIONS & POWER
INDUSTRIES HOLDING CORPORATION, as Trustor, to AMERICAN SECURITIES COMPANY, as
Trustee, for the benefit of WELLS FARGO BANK, NATIONAL ASSOCIATION, as
Beneficiary, dated as of December __, 2000.

1.      That certain Standard Industrial/Commercial Single-Tenant Lease between
        Communications & Power Industries Holding Corporation, as "Lessor", and
        Communications & Power Industries, Inc., as "Lessee", dated December 1,
        2000 for the Subject Property, including those certain 320,000 square
        foot (approximately) premises located at the Subject Property, together
        with all exhibits and addenda attached thereto.

                                    Page 18
<PAGE>   19
                                                                    SCHEDULE 1
                                                                 Loan No. 1440

STATE OF CALIFORNIA
COUNTY OF                                      SS.
          ------------------------------------

On this day of December, 2000, before me, a Notary Public in and for the State
of California, personally appeared personally known to me (or proved 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 entity upon
behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal

Signature
          -----------------------------

My commission expires                    .
                      -------------------

                                    Page 19<PAGE>   1

                                                                    EXHIBIT 10.7

                         GUARANTY AND SECURITY AGREEMENT

      This Guaranty and Security Agreement (this "Agreement"), dated as of
December 15, 2000, is made by each of the undersigned (herein collectively
called "Guarantor") in favor of Foothill Capital Corporation, a California
corporation, as Agent for itself and Lenders, and the other Lenders
("Foothill"), pursuant to that certain Loan and Security Agreement (the "Loan
Agreement"), dated as of December 15, 2000, by and among Communication & Power
Industries, Inc., a Delaware corporation ("Debtor"), the other Obligors
(including the undersigned) named therein, Foothill and the other Lenders named
herein (Foothill and the other Lenders are collectively referred to herein as
"Lender"). Capitalized terms, which are used herein but not defined herein,
shall have the meanings ascribed to them in the Loan Agreement.

      Guarantor, at the solicitation of Debtor, requests that Lender extend
Credit to Debtor and in consideration of Credit heretofore, now or hereafter
granted to Debtor by Lender, Guarantor agrees as follows:

      1.    The term "Credit" is used throughout this Agreement in its most
comprehensive sense and means and includes, without limitation, any and all
loans, advances, debts, obligations and liabilities of any kind or nature owed
by Debtor to Lender (including, without, limitation, the Obligations) and any
and all future Obligations owing by Debtor to Lender and all other financial
accommodations extended by Lender to Debtor, heretofore, now, or hereafter made,
incurred or created, whether voluntary or involuntary and however arising,
whether owed directly to Lender or acquired by Lender by assignment,
subrogation, or succession (including, without limitation, Lender participations
and interests of Lender in the obligations of Debtor to others), whether due or
not due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, secured or unsecured, whether on original, renewed, extended or
revised terms (including, without limitation, those evidenced by new or
additional instruments or agreements or those changing the applicable rate of
interest or which release any obligor with respect thereto), whether principal,
interest (including any interest that, but for the provisions of the U.S.
Bankruptcy Code would have accrued) or fees, whether Debtor may be liable
individually or jointly with others, whether recovery upon such indebtedness may
be or hereafter become barred by any statute of limitations, and whether such
indebtedness may be or hereafter become invalid or otherwise unenforceable. In
the event a petition under the U.S. Bankruptcy Code is filed by or against
Debtor, the term "Debtor" shall also mean and include Debtor in its status as a
debtor, debtor-in-possession and/or reorganized debtor under the U.S. Bankruptcy
Code.

      2.    If there is more than a single person included in the terms
"Guarantor" or "Debtor," respectively, (a) each reference herein to such terms
shall mean all and any one or more of such entities and persons both jointly and
severally, and (b) if more than one entity executes this Agreement, the
obligations and liabilities hereunder of Guarantors are and shall be both joint
and several. If Debtor is a partnership or association, each reference herein to
the term "Debtor" shall

                                      -1-
<PAGE>   2

include any successor entity to Debtor. As used in this Agreement, neuter terms
include the masculine and feminine, and vice versa.

      3.    Guarantor's liability hereunder shall be unlimited. Without limiting
the foregoing and in addition thereto, Guarantor agrees to bear and be liable to
Lender for the interest and expenses enumerated in paragraph 17 hereof.

      4.    Guarantor unconditionally guarantees and agrees to pay Lender or its
order, on demand, in lawful money of the United States of America, an amount
equal to the amount of the Credit, and to otherwise perform any obligation of
Debtor undertaken pursuant to any Credit. This Agreement is a guaranty of
payment and not of collection.

      5.    Either before or after revocation hereof, Guarantor authorizes
Lender at its sole discretion, with or without notice, and without affecting
Guarantor's continuing liability hereunder, from time to time to (a) change the
time or manner of payment of any Credit by renewal, extension, acceleration or
otherwise, (b) alter or change any other provision of any Credit including the
rate of interest thereon, (c) accept partial payment on any Credit, (d) accept
new or additional instruments, agreements or documents relative to any Credit,
(e) release, substitute or add one or more endorsers, cosigners or guarantors
for any Credit, (f) amend or modify the terms of any guaranty executed by a
co-guarantor, including the maximum liability thereunder, (g) obtain collateral
for the payment of any Credit and/or any guaranty thereof, (h) waive, release,
exchange, substitute, release or modify, in whole or in part, existing or
after-acquired collateral securing payment of the Credit or any guaranty
therefor on such terms as Lender in its sole discretion shall determine, (i)
subordinate payment of all or any part of the Credit to other creditors of
Debtor or other persons on such terms as Lender deems appropriate, (j) apply any
sums received from Debtor, any other guarantor, endorser or cosigner or from the
sale or collection of collateral or its proceeds to any indebtedness whatsoever
in any order and regardless of whether or not such indebtedness is guaranteed
hereby, is secured by collateral or is due and payable, (k) apply any sums
received from Guarantor or from the sale of collateral granted by Guarantor to
any, all, or any portion of the Credit in any order regardless of whether the
Credit is secured by collateral, but only so long as such Credit is due and
payable, and (l) exercise any right or remedy it may have with respect to any
Credit or any collateral securing any Credit, this Agreement or any other
guaranty, including bidding and purchasing at any sale of any such collateral,
and compromising, collecting or otherwise liquidating any collateral or any
Credit.

      6.    (a)   Guarantor acknowledges that Guarantor may have certain rights
under applicable law which, if not waived by Guarantor, might provide Guarantor
with defenses against Guarantor's liability under this Agreement. Among those
rights, are certain rights of subrogation, reimbursement, indemnification and
contribution, and rights provided in sections 2787 to 2855, inclusive, of the
California Civil Code (or any comparable provision of applicable state law). To
the maximum extent permitted by law, Guarantor waives all of Guarantor's rights
of subrogation, reimbursement, indemnification, and contribution, and any other
rights and defenses that are or may become available to Guarantor, whether such
rights arise by reason of any or all of California

                                      -2-
<PAGE>   3

Civil Code Sections 2787 to 2855, inclusive (or any comparable provision of
applicable state law), or otherwise, and including, without limitation,
Guarantor's rights:

                  (i)    To require Lender to notify Guarantor of any default by
Debtor, provide Guarantor with notice of any sale or other disposition of
security for any Credit, or disclose information with respect to the Credit, the
Debtor, or any other guarantor, co-signer or endorser, or with respect to any
collateral;

                  (ii)   That Guarantor's obligation under this Agreement must
be commensurate with that of Debtor;

                  (iii)  To be discharged based upon the absence of any
liability of the Debtor, at any time, by virtue of operation of law, or
otherwise, or due to any other disability or defense of Debtor or any other
guarantor, endorser or co-signer;

                  (iv)   To be discharged if any of the terms, conditions or
provisions of the Credit are altered in any respect;

                  (v)    To be discharged upon acceptance by Lender of anything
in partial satisfaction of the Credit, and/or if Lender designates portion of
the Credit to be satisfied;

                  (vi)   To be discharged upon any modification of the Credit or
the release by Lender of Debtor or any other guarantor, endorser or co-signer,
or if any remedies against any such person are suspended or impaired;

                  (vii)  To require Lender to proceed against Debtor, or any
other guarantor, endorser, co-signer, or other person, or to pursue or refrain
from pursuing any other remedy in Lender's power;

                  (viii) To receive the benefit of or participate in any and all
security for repayment and/or performance of the Credit;

                  (ix)   To have any security for the Credit first applied to
satisfy or discharge the Credit;

                  (x)    That any arbitration award rendered against Debtor not
constitute an award against Guarantor;

                  (xi)   To be discharged based upon any failure by Lender to
perfect or continue perfection of any lien, use due diligence to collect all or
any Credit, or if recovery against Debtor becomes barred by any statute of
limitations, or if Debtor is not liable for any deficiency after Lender realizes
upon any collateral; and

                                      -3-
<PAGE>   4

                  (xii) To be discharged due to the release or discharge of any
collateral for any Credit or guaranty, or relating to the validity, value or
enforceability of any collateral.

            (b)   Without in any way limiting the foregoing, and in addition
thereto, to the maximum extent permitted by law, Guarantor waives: (i) any
defense based upon or arising out of any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, liquidation or dissolution proceeding
commenced by or against Debtor or any other guarantor or any endorser, co-maker
or other person, including without limitation any discharge of, or bar against
collecting, any of the Credit (including without limitation any interest
thereon), in or as a result of any such proceeding; (ii) any defense arising by
reason of any disability or other defense of Debtor or any other guarantor or
any endorser, co-maker or other person or by reason of the cessation from any
cause whatsoever of the liability of Debtor or any other guarantor or any
endorser, co-maker or other person with respect to all or any part of the
Credit; (iii) any defense arising as a result of any election by Lender under
Section 1111(b) of Title 11 of the U.S. Code; or (iv) any defense based on any
borrowing or grant of a security interest under Section 364 of Title 11 of the
U.S. Code.

            (c)   Guarantor also waives all rights and defenses that Guarantor
may have because the Debtor's debt is secured by real property. This means,
among other things: (1) Lender may collect from Guarantor without first
foreclosing on any real or personal property collateral pledged by Debtor; and
(2) if Lender forecloses on any real property collateral pledged by the Debtor:
(A) the amount of the debt may be reduced only by the price for which that
collateral is sold at the foreclosure sale, even if the collateral is worth more
than the sale price, and (B) Lender may collect from Guarantor even if Lender,
by foreclosing on the real property collateral, has destroyed any right
Guarantor may have to collect from Debtor. This is an unconditional and
irrevocable waiver of any rights and defenses Guarantor may have because
Debtor's debt is secured by real property. These rights and defenses include,
but are not limited to, any rights or defenses directly or indirectly based upon
Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure (or
any comparable provision of applicable state law).

            (d)   Guarantor also waives all rights and defenses arising out of
an election of remedies by Lender, even though that election of remedies, such
as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed Guarantor's rights of subrogation and reimbursement
against the principal by the operation of Section 580d of the California Code of
Civil Procedure (or any comparable provision of applicable state law) or
otherwise.

            (e)   To the maximum extent permitted by law, Guarantor further
waives any and all rights to receive any notice of judicial or nonjudicial sale
or foreclosure of any real or personal property that may be the subject of any
security instruments or that may secure obligations of any other guarantor to
Lender, and Guarantor's failure to receive any such notice shall not impair or
affect Guarantor's liability. Notwithstanding any foreclosure of the lien of any
security instrument given with respect to the Credit or any other guaranty,
whether by the exercise of the power of sale contained therein, by any action
for judicial foreclosure, or by any acceptance of a deed or other transfer in
lieu of foreclosure, whether or not such method of foreclosure or transfer in
lieu of foreclosure was for a consideration equal to or greater than the fair
market value of the security

                                      -4-
<PAGE>   5

property, Guarantor shall remain bound under this Agreement for the Credit and
shall be liable to Lender for any and all of the Credit remaining unpaid after
any such foreclosure.

            (f)   If for any reason Debtor is under no legal obligation to
discharge any of the Credit, or if any of the Credit have become irrecoverable
from Debtor for any reason, this Agreement shall nevertheless be binding on
Guarantor to the same extent as if the Guarantor at all times had been the
primary obligor on all such Credit.

            (g)   In the event (i) Debtor defaults in the payment of any of the
Credit or (ii) acceleration of the time for payment of any of the Credit is
stayed upon the insolvency, bankruptcy or reorganization of the Debtor, or for
any other reason, all such amounts otherwise subject to acceleration under the
agreement evidencing such Credit, shall be immediately due and payable by
Guarantor. Guarantor waives all presentments, demands for performance, notices
of nonperformance, protests, notices of protest, dishonor and acceptance of this
Agreement.

      7.    (a)   Guarantor hereby grants to Foothill, for the benefit of
Lender, a continuing security interest in all of its right, title, and interest
in all currently existing and hereafter acquired or arising Personal Property
Collateral in order to secure prompt payment and performance of any and all of
Guarantor's obligations to Lender under this Agreement. Foothill's Liens in and
to the Personal Property Collateral shall attach to all Personal Property
Collateral without further act on the part of Lender or any Guarantor. Anything
contained in this Agreement or any other Loan Document to the contrary
notwithstanding, except for Permitted Dispositions, Guarantor has no authority,
express or implied, to dispose of any item or portion of the Personal Property
Collateral.

            (b)   In the event that any Personal Property Collateral of
Guarantor, including proceeds, is evidenced by or consists of Negotiable
Collateral, and if and to the extent that perfection or priority of Foothill's
security interest is dependent on or enhanced by possession, Guarantor,
immediately upon the request of Foothill, shall endorse and deliver physical
possession of such Negotiable Collateral to Foothill, together with any
endorsement thereof or thereon as Foothill determines to be necessary or
appropriate in order to perfect and enforce its Liens.

            (c)   At any time after the occurrence and during the continuation
of an Event of Default, Foothill or Foothill's designee may (a) notify Account
Debtors of Guarantor that the Accounts, chattel paper, or General Intangibles of
Guarantor have been assigned to Foothill or that Foothill has a security
interest therein, or (b) collect such Accounts, chattel paper, or General
Intangibles directly and charge the collection costs and expenses to the Loan
Account. Guarantor agrees that at any time after and during the continuation of
an Event of Default, that it will hold in trust for Lender, as Lender's trustee,
any and all Collections that it receives and immediately will deliver said
Collections to Foothill in their original form as received by such Guarantor.

            (d)   At any time upon the request of Foothill, Guarantor shall
execute and deliver to Foothill, any and all financing statements, original
financing statements in lieu of continuation statements, fixture filings,
security agreements, pledges, assignments, endorsements

                                      -5-
<PAGE>   6

of certificates of title, and all other documents (the "Additional Documents")
that Foothill may request in its Permitted Discretion, in form and substance
reasonably satisfactory to Foothill, to perfect and continue perfected or better
perfect the Foothill's Liens in the Personal Property Collateral (whether now
owned or hereafter arising or acquired), to create and perfect Liens in favor of
Foothill in any Real Property acquired after the Closing Date, and in order to
fully consummate all of the transactions contemplated hereby and under the other
Loan Documents. To the maximum extent permitted by applicable law, Guarantor
authorizes Foothill to execute any such Additional Documents in Guarantor's name
and authorizes Foothill to file such executed Additional Documents in any
appropriate filing office. In addition, but subject to Guarantor's rights not to
pursue or to abandon certain patents and trademarks as provided in subsections
1(b) and 1(c) of the Intellectual Property Security Agreement, on such periodic
basis as Foothill shall require, Guarantor shall (i) provide Foothill with a
report of all new patentable, copyrightable, or trademarkable materials acquired
or generated by Guarantor during the prior period, (ii) cause all patents,
copyrights, and trademarks acquired or generated by Guarantor that are not
already the subject of a registration with the appropriate filing office (or an
application therefor diligently prosecuted) to be registered with such
appropriate filing office in a manner sufficient to impart constructive notice
of Guarantor's ownership thereof, and (iii) cause to be prepared, executed, and
delivered to Foothill supplemental amendments and schedules to the applicable
Loan Documents to identify such patents, copyrights, and trademarks as being
subject to the security interests created thereunder.

            (e)   Guarantor hereby irrevocably makes, constitutes, and appoints
Foothill (and any of Foothill's officers, employees, or agents designated by
Foothill) as Guarantor's true and lawful attorney, with power to (i) if
Guarantor refuses to, or fails timely to execute and deliver any of the
documents described in paragraph 7(d), sign the name of Guarantor on any of the
documents described in paragraph 7(d), (ii) at any time that an Event of Default
has occurred and is continuing, sign Guarantor's name on any invoice or bill of
lading relating to Guarantor's Personal Property Collateral, drafts against
Account Debtors, or notices to Account Debtors, (iii) at any time that an Event
of Default has occurred and is continuing, send requests for verification of
Guarantor's Accounts, (iv) endorse Guarantor's name on any Collection item that
may come into Lender's possession, (v) at any time that an Event of Default has
occurred and is continuing, make, settle, and adjust all claims under
Guarantor's policies of insurance and make all determinations and decisions with
respect to such policies of insurance, and (vi) at any time that an Event of
Default has occurred and is continuing, settle and adjust disputes and claims
respecting Guarantor's Accounts, chattel paper, or General Intangibles directly
with Account Debtors, for amounts and upon terms that Foothill determines to be
reasonable, and Foothill may cause to be executed and delivered any documents
and releases that Foothill determines to be necessary. The appointment of
Foothill as Guarantor's attorney, and each and every one of its rights and
powers, being coupled with an interest, is irrevocable until all of the Credit
has been fully and finally repaid and performed and Lender's obligations to
extend credit to Debtor are terminated.

            (f)   Subject to such limitations as are set forth in the Loan
Agreement, Lender (through any of their respective officers, employees, or
agents) shall have the right, from time to time hereafter to inspect Guarantor's
Books and to check, test, and appraise the Personal Property

                                      -6-
<PAGE>   7

Collateral in order to verify Guarantor's financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Personal
Property Collateral.

            (g)   Guarantor agrees that it will not transfer assets out of any
Securities Accounts of Guarantor other than as permitted under Section 7.19 of
the Loan Agreement and, if to another securities intermediary, unless the
applicable Guarantor, Foothill, and the substitute securities intermediary have
entered into a Control Agreement. No arrangement contemplated hereby or by any
Control Agreement in respect of any Securities Accounts or other Investment
Property of Guarantor shall be modified by any Guarantor without the prior
written consent of Foothill. Upon the occurrence and during the continuance of a
Default or Event of Default, Foothill may notify any securities intermediary to
liquidate the applicable Securities Account or any related Investment Property
maintained or held thereby and remit the proceeds thereof to Agent's Account.

      8.    (a)   Guarantor waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of documents,
instruments, chattel paper, and guarantees at any time held by Lender on which
Guarantor may in any way be liable.

            (b)   Guarantor hereby agrees that: (i) so long as Foothill complies
with its obligations, if any, under the Code, Lender shall not in any way or
manner be liable or responsible for: (A) the safekeeping of the Personal
Property Collateral, (B) any loss or damage thereto occurring or arising in any
manner or fashion from any cause, (C) any diminution in the value thereof, or
(D) any act or default of any carrier, warehouseman, bailee, forwarding agency,
or other Person, and (ii) all risk of loss, damage, or destruction of the
Personal Property Collateral shall be borne by Guarantor.

      9.    Guarantor represents and warrants to Lender that: (a) Lender has
made no representation to Guarantor in regard to Debtor, the Credit or any
matters pertaining thereto, upon which Guarantor is relying in giving this
Agreement; and (b) Guarantor has established adequate means and assumes the
responsibility for being and keeping informed of the financial condition of the
Debtor and of all other circumstances bearing upon the risk of nonpayment of the
debt which diligent inquiry would reveal and Lender shall have no duty to advise
Guarantor of information known to it regarding such condition or any such
circumstance.

      10.   In addition to all liens upon and rights of setoff against the
money, securities or other property of Guarantor given to Lender by law or
otherwise as security for this Agreement, Guarantor hereby pledges to Lender and
grants Lender a security interest in, and Lender shall have a right of setoff
against, all money, securities and other property of Guarantor now or hereafter
in the possession of or on deposit with Lender, whether held in general or
special account or deposit or for safekeeping or otherwise; and each such
security interest or right of setoff may be exercised without demand upon, or
notice to, Guarantor. No action or lack of action by Lender with respect to any
security interest or right of setoff or otherwise shall be deemed a waiver
thereof, and every right of setoff or security interest or otherwise shall
continue

                                      -7-
<PAGE>   8

in full force and effect until specifically released by Lender in writing. The
security interests created hereby shall secure all Guarantor's obligations to
Lender under this Agreement, any subsequent guaranty executed by Guarantor and
any other Loan Documents to which Guarantor is a party.

      11.   Any and all indebtedness of Debtor now or hereafter owed to
Guarantor and all claims whenever arising of Guarantor against Debtor are hereby
subordinated to the Credit and assigned to Lender as additional collateral. If
Lender so requests, any note or other instrument evidencing such indebtedness
and all claims of Guarantor against Debtor shall be delivered to Lender, and
such indebtedness and all claims of Guarantor against Debtor shall be collected,
enforced and received by Guarantor as trustee for Lender and be paid over to
Lender on account of the Credit but without reducing or affecting in any manner
the liability of Guarantor hereunder. Should Guarantor fail to collect proceeds
of debt owed to it by Debtor and pay the proceeds to Lender, Lender as
Guarantor's attorney-in-fact may do such acts and sign such documents in
Guarantor's name as Lender considers necessary, at its discretion, to effect
such collection, and Guarantor hereby irrevocably appoints Lender as Guarantor's
attorney-in-fact for such purposes. If Debtor is a corporation, partnership, or
limited liability company, Guarantor will not withdraw or accept without
Lender's prior written consent any return of any capital invested or equity
interest in Debtor.

      12.   Guarantor agrees that to the extent Debtor makes a payment or
payments or is credited for any payment or payments made for the account of or
on behalf of Debtor to Lender, which payment or payments, or any part thereof,
is subsequently invalidated, determined to be fraudulent or preferential,
voided, set aside and/or required to be repaid to any trustee, receiver,
assignee or any other party whether under any bankruptcy, state or federal law,
common law or equitable cause or otherwise, then to the extent thereof, the
obligation or part thereof intended to be satisfied thereby, together with the
guaranty thereof hereunder, shall be revived, reinstated and continued in full
force and effect as if said payment or payments had not originally been made by
or for the account of or on behalf of Debtor.

      13.   Guarantor agrees that to the extent Guarantor makes a payment or
payments or is credited for any payment or payments made for the account of or
on behalf of Guarantor to Lender, which payment or payments, or any part
thereof, is subsequently invalidated, determined to be fraudulent or
preferential, voided, set aside and/or required to be repaid to any trustee,
receiver, assignee or any other party whether under any bankruptcy, state or
federal law, common law or equitable cause or otherwise, then to the extent
thereof, the obligation or part thereof intended to be satisfied thereby, shall
be revived, reinstated and continued in full force and effect as if said payment
or payments had not originally been made by or for the account of or on behalf
of Guarantor.

      14.   Guarantor's obligations hereunder are not contingent upon and are
independent of the obligations of Debtor, or any other guarantor or surety of
the Credit. This Agreement is not made in consideration of the liability of any
other guarantor or surety of the Credit. The release or death of any guarantor
of the Credit or the revocation of this Agreement or any other guaranty

                                      -8-
<PAGE>   9

shall not release or otherwise affect the liability of any other non-revoking
guarantor. A separate action or actions may be brought and prosecuted against
Guarantor whether action is brought against Debtor or any other guarantor or
whether Debtor or any other guarantor be joined in any such action or actions.
To the maximum extent permitted by law, Guarantor specifically waives the
benefit of the statute of limitations affecting its liability hereunder or the
enforcement hereof, or the collection of any Credit. Any partial payment by
Debtor which operates to toll any statute of limitation as to Debtor shall
likewise toll the statute of limitations as to Guarantor.

      15.   Should any one or more provisions of this Agreement be determined to
be illegal or unenforceable, all other provisions shall remain effective. In the
event of any inconsistency between the terms of this Agreement and those of the
Loan Agreement, the terms of the Loan Agreement shall control.

      16.   Lender may, with or without notice, assign this Agreement in whole
or in part, provided, however, that any such assignment shall be in connection
with a permitted assignment of Lender's respective rights and obligations under
the Loan Agreement. This Agreement shall inure to the benefit of Lender, its
successors and assigns, and shall bind Guarantor and Guarantor's successors and
assigns; provided, however, that nothing herein shall be understood to mean that
Guarantor may assign this Agreement or any rights or duties hereunder without
Foothill's prior written consent.

      17.   Guarantor agrees to pay Lender on demand reasonable and documented
out-of-pocket attorneys' fees and all other reasonable and documented
out-of-pocket costs and expenses which may be incurred in the collection or
attempted collection from Debtor of any Credit and in the enforcement or
attempted enforcement by Lender of this Agreement or any collateral therefor,
whether or not legal proceedings or suit are instituted, together with interest
thereon at the rate applicable to the Credit and including, without limitation,
all reasonable and documented out-of-pocket attorneys' fees and related costs of
enforcement of any and all judgments and awards and upon any appeal relating
thereto.

      18.   Guarantor warrants and represents to Lender that:

            (a)   All financial statements and other financial information
furnished or to be furnished to Lender are or will be true and correct and do
and will fairly represent the financial condition of Guarantor (including all
contingent liabilities) as of the dates thereof; and

            (b)   There has been no material adverse change in Guarantor's
financial condition since the dates of the financial statements and other
information furnished to Lender, except as previously disclosed to Lender in
writing.

      19.   (a)   Upon the occurrence, and during the continuation, of an Event
of Default, the Required Lenders (at their election but without notice of their
election and without demand) may authorize and instruct Foothill to do any one
or more of the following on behalf of Lender

                                      -9-
<PAGE>   10

(and Foothill, acting upon the instructions of the Required Lenders, shall do
the same on behalf of Lender), all of which are authorized by Guarantor:

                  (i)   Declare the Credit (including, without limitation any
unreimbursed contingent obligations under the L/C's and L/C Undertakings)
immediately due and payable;

                  (ii)  Cease advancing money or extending credit to or for the
benefit of Debtor under any of the Loan Documents, or under any other agreement
between Debtor and Lender;

                  (iii) Terminate the Loan Agreement and any of the other Loan
Documents as to any future liability or obligation of Lender. but without
affecting any of the Agent's Liens in the Collateral and without affecting the
Credit;

                  (iv)  Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Foothill considers advisable,
and in such cases, Foothill will credit Debtor's Loan Account with only the net
amounts received by Foothill in payment of such disputed Accounts after
deducting all Lender Group Expenses incurred or expended in connection
therewith;

                  (v)   Cause Guarantor to hold all returned Inventory in trust
for the Lender Group, segregate all returned Inventory from all other assets of
Guarantor or in Guarantor's possession and conspicuously label said returned
Inventory as the property of the Lender Group;

                  (vi)  Without notice to or demand upon Debtor or Guarantor,
make such payments and do such acts as Foothill considers necessary or
reasonable to protect its security interests in the Personal Property
Collateral. Guarantor agrees to assemble the Personal Property Collateral if
Foothill so requires, and to make the Personal Property Collateral available to
Foothill at a place that Foothill may designate which is reasonably convenient
to all parties. Guarantor authorizes Foothill to enter the premises where the
Personal Property Collateral is located, to take and maintain possession of the
Personal Property Collateral, or any part of it, and to pay, purchase, contest,
or compromise any Lien that in Foothill's determination appears to conflict with
the Agent's Liens and to pay all expenses incurred in connection therewith and
to charge Debtor's Loan Account therefor. With respect to Guarantor's owned or
leased premises, Guarantor hereby grants Foothill a license to enter into
possession of such premises and to occupy the same, without charge, in order to
exercise any of Lender's rights or remedies provided herein, at law, in equity,
or otherwise;

                  (vii) Without notice to Debtor or Guarantor (such notice being
expressly waived), and without constituting a retention of any collateral in
satisfaction of an obligation (within the meaning of the Code), set off and
apply to the Credit any and all (i) balances and deposits of Guarantor held by
Lender (including any amounts received in the Cash Management

                                      -10-
<PAGE>   11

Accounts), or (ii) Indebtedness at any time owing to or for the credit or the
account of Guarantor held by Lender;

                  (viii) Hold, as cash collateral, any and all balances and
deposits of Guarantor held by Lender, and any amounts received in the Cash
Management Accounts, to secure the full and final repayment of the Credit;

                  (ix)   Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Personal Property Collateral. Guarantor hereby grants to
Foothill a license or other right to use, without charge, Guarantor's labels,
patents, copyrights, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Personal Property Collateral, in completing production of, advertising for sale,
and selling any Personal Property Collateral and Guarantor's rights under all
licenses and all franchise agreements shall inure to Lender's benefit;

                  (x)    Sell the Personal Property Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
Guarantor's premises) as Foothill determines is commercially reasonable. It is
not necessary that the Personal Property Collateral be present at any such sale;

                  (xi)   Foothill shall give notice of the disposition of the
Personal Property Collateral as follows:

                         (A)   Foothill shall give Guarantor a notice in writing
of the time and place of public sale, or, if the sale is a private sale or some
other disposition other than a public sale is to be made of the Personal
Property Collateral, the time on or after which the private sale or other
disposition is to be made; and

                         (B)   The notice shall be personally delivered or
mailed, postage prepaid, to Guarantor as provided in Section 12 of the Loan
Agreement, at least 10 days before the earliest time of disposition set forth in
the notice; no notice needs to be given prior to the disposition of any portion
of the Personal Property Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a recognized market;

                  (xii)  Foothill, on behalf of Lender, may credit bid and
purchase at any public sale;

                  (xiii) Foothill may seek the appointment of a receiver or
keeper to take possession of all or any portion of the Personal Property
Collateral or to operate same and, to the maximum extent permitted by law, may
seek the appointment of such a receiver without the requirement of prior notice
or a hearing;

                                      -11-
<PAGE>   12

                  (xiv) Lender shall have all other rights and remedies
available at law or in equity or pursuant to any other Loan Document; and

                  (xv)  Any deficiency that exists after disposition of the
Personal Property Collateral as provided above will be paid immediately by
Obligors in accordance with their respective obligations under the Loan
Document. Any excess will be returned, without interest and subject to the
rights of third Persons, by Foothill to the applicable Guarantor.

      20.   Lender shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity.

      21.   If Debtor is a corporation, partnership, or limited liability
company, Lender need not inquire into the power of Debtor or the authority of
its officers, directors, partners, members, managers, or agents acting or
purporting to act in its behalf, and any Credit granted in reliance upon the
purported exercise of such power or authority is guaranteed hereunder.

      22.   Receipt of a true copy of this Agreement is hereby acknowledged by
each Guarantor. Guarantor understands and agrees that Lender's acceptance of
this Agreement shall not constitute a commitment of any nature whatsoever by
Lender to extend, renew or hereafter extend Credit to Debtor. Guarantor agrees
that this Agreement shall be effective with or without notice from Lender of its
acceptance of the Agreement.

      23.   If Guarantor has executed more than one guaranty of the indebtedness
of Debtor owed to Lender, any limits of liability thereunder and hereunder shall
be cumulative, and a subsequent guaranty executed by Guarantor shall not
supersede or replace this Agreement.

      24.   GUARANTOR WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING INSTITUTED BY LENDER OR GUARANTOR WHICH PERTAINS DIRECTLY OR
INDIRECTLY TO THIS AGREEMENT, THE CREDIT, THE COLLATERAL THEREFOR OR ANY MATTER
ARISING THEREFROM OR RELATING HERETO OR THERETO.

      25.   Guarantor waives all rights to interpose any setoffs or
counterclaims of any nature in any action or proceeding instituted by Lender
with respect to this Agreement, the collateral therefor, or any matter arising
therefrom or relating thereto and the posting of any bond which may otherwise be
required, and waives any and all benefits of cross-demands pursuant to section
431.70 of the California Code of Civil Procedure (or similar state law).

      26.   Guarantor hereby irrevocably submits and consents to the
jurisdiction of any competent federal or state court within the County of New
York, State of New York in connection with any action or proceeding arising out
of or relating to this Agreement. In any such litigation, Guarantor consents to
service of process by any means authorized by New York or federal law or as
otherwise agreed in writing between Lender and Guarantor.

                                      -12-
<PAGE>   13

      27.   All rights, remedies, powers and benefits granted to Lender under
this Agreement, the Credit, any oral or other written agreement or applicable
law whether expressly granted or implied in law or otherwise, are cumulative and
not exclusive, and are enforceable alternatively, successively, or concurrently
on any one or more occasions at Lender's discretion.

      28.   Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any security interest granted to Lender
hereunder or Lender's rights, powers and/or remedies hereunder (including any
right of setoff) unless such waiver shall be in writing and signed by an
authorized officer of Lender. Any such waiver shall be enforceable only to the
extent specifically set forth therein. A waiver by Lender of any default, right,
power and/or remedy on any one occasion shall not be construed as a bar to or
waiver of any such default, right, power and/or remedy which Lender would
otherwise have on any future occasion whether similar in kind or otherwise. Any
failure by Lender to file or enforce a claim against the estate (whether in
administration, bankruptcy, probate or other proceeding) of Debtor or of any
others, shall not affect Guarantor's liability hereunder.

      29.   This Agreement, together with the other Loan Documents to which
Guarantor is a party, constitutes the entire agreement between the parties with
respect to the subject matter of the Agreement and supersedes any and all
previous or contemporaneous correspondence, statements, or agreements by or
between the parties hereto with respect to the subject matter. This Agreement
may be modified only by a written instrument signed by the parties hereto.
Neither this Agreement or any related agreement, document or instrument nor any
provision hereof or thereof shall be amended, modified or discharged orally or
by course of conduct, but only by a written agreement signed by an authorized
officer of Lender expressly referring to this Agreement and to the provisions so
amended, modified or discharged.

      30.   Lender's books and records showing the account(s) between Lender and
Debtor shall be admissible in evidence in any action or proceeding as prima
facie proof of the items set forth therein. Lender's statements rendered to
Debtor, to the extent to which no objection is made within thirty (30) days
after date thereof, shall be deemed conclusively correct and constitute an
account stated, which shall be binding on Guarantor whether or not Guarantor
receives a copy of any such statement or notice thereof.

      31.   This is a continuing guaranty of the Credit, including those arising
after any repayment and reborrowing and under any successive and future
transactions which may increase, renew or continue the original Credit. To the
maximum extent permitted by law, Guarantor waives all rights to revoke this
Agreement, whether under California Civil Code Section 2815 (or similar state
law) or otherwise. If at any time under applicable law, the foregoing waiver by
Guarantor is not valid or enforceable to any extent, then the remaining portion
of this paragraph is applicable. Revocation of this Agreement, if required to be
permitted by applicable law, shall be effective only after written notice
thereof is received by an officer of Lender by certified or registered mail,
return receipt requested at its address set forth in Section 12 of the Loan
Agreement, or at any other office of Lender designated in a written notice
mailed by Lender to Guarantor at its address set forth below. Any such
revocation shall be effective only as to the

                                      -13-
<PAGE>   14

revoking party and shall not affect that party's obligations with respect to
Credit existing before the revocation becomes effective or as to any renewals,
extensions or modifications of any such Credit, whether such renewal, extension
or modification is made prior to or after revocation, including those evidenced
by a new or additional instrument or agreement or which change the rate of
interest on any Credit, or for post-revocation interest and collection expenses
accruing or incurred by Lender with respect thereto. Notwithstanding any
revocation hereof, this Agreement shall not be terminated until Lender has
received indefeasible payment in full of all Credit which is guaranteed hereby.
Credit existing before revocation becomes effective shall be deemed to include,
without limitation, all Credit or advances which Lender has committed to make to
Debtor in reliance upon this Agreement, even though the amount of such Credit or
advances has not been advanced as of the effective date of revocation, and even
though Lender may have defenses or defaults which would relieve it of such
commitment, if asserted.

      32.   The provisions of this Agreement shall be construed and interpreted
and all rights and obligations hereunder determined in accordance with the laws
of the State of New York.

      33.   GUARANTOR ACKNOWLEDGES THAT LENDER HAS OR MAY IN THE FUTURE EXTEND
CREDIT TO THE DEBTOR IN RELIANCE ON GUARANTOR'S UNCONDITIONAL PROMISE TO REPAY
ANY AND ALL CREDIT AND LENDER IS RELYING ON THE WAIVERS, WARRANTIES AND PROMISES
MADE BY GUARANTOR IN THIS AGREEMENT. GUARANTOR AGREES THAT EACH OF THE WAIVERS,
WARRANTIES AND PROMISES SET FORTH IN THIS AGREEMENT ARE MADE WITH GUARANTOR'S
UNDERSTANDING OF THEIR SIGNIFICANCE AND CONSEQUENCES AND THAT THEY ARE
REASONABLE. IF ANY WAIVERS, WARRANTIES AND PROMISES ARE DETERMINED TO BE
CONTRARY TO ANY APPLICABLE LAW OR PUBLIC POLICY, SUCH WAIVERS, WARRANTIES AND
PROMISES SHALL BE EFFECTIVE TO THE MAXIMUM EXTENT PERMITTED BY LAW. BEFORE
SIGNING THE AGREEMENT, GUARANTOR HAS EITHER SOUGHT THE ADVICE OF COUNSEL TO
EXPLAIN THE WAIVERS OF ITS RIGHTS AND DEFENSES AS STATED HEREIN AND THE EFFECT
THEREOF, OR HAS HAD THE OPPORTUNITY TO SEEK SUCH COUNSEL, AND IN ANY EVENT,
INTENDS THIS AGREEMENT TO BE AS UNRESTRICTED AS POSSIBLE. GUARANTOR HAS
THEREFORE CONSCIOUSLY AND INTENTIONALLY WAIVED ALL DEFENSES OF GUARANTOR AND
RIGHTS WHICH COULD EXONERATE GUARANTOR HEREUNDER TO THE FULL EXTENT PERMITTED BY
THE LAW OF THE STATE OF NEW YORK, WHETHER OR NOT EACH AND EVERY DEFENSE, RIGHT
OR WAIVER IS EXPLAINED OR DESCRIBED IN DETAIL IN THIS AGREEMENT.

      34.   GUARANTOR ACKNOWLEDGES THAT NEITHER LENDER NOR ANY OF LENDER'S
OFFICERS OR EMPLOYEES HAS MADE ANY PROMISE OR REPRESENTATION, NOT INCORPORATED
HEREIN, WHETHER ORAL, WRITTEN OR IMPLIED, TO CAUSE GUARANTOR TO SIGN THIS
AGREEMENT. GUARANTOR IS NOT SIGNING THIS AGREEMENT IN RELIANCE ON ANY PROMISE,
CONDITION OR THE OCCURRENCE OF ANY EVENT, AND THERE ARE NO ORAL UNDERSTANDINGS,
STATEMENTS OR AGREEMENTS WHICH HAVE NOT BEEN INCLUDED IN THIS

                                      -14-
<PAGE>   15

AGREEMENT. GUARANTOR UNDERSTANDS THAT LENDER HAS THE RIGHT TO ENFORCE PAYMENT OF
THE CREDIT AGAINST DEBTOR OR GUARANTOR IN ANY ORDER AND LENDER IS NOT OBLIGATED
TO OBTAIN ANY OTHER OR ADDITIONAL GUARANTORS OF THE CREDIT OR TO TAKE ANY OTHER
COURSE OF ACTION.

"Guarantor":

COMMUNICATIONS & POWER INDUSTRIES         CPI SUBSIDIARY HOLDINGS INC.
HOLDING CORPORATION

By: __________________________________    By: _________________________________
Name: ________________________________    Name: _______________________________
Title: _______________________________    Title: ______________________________
EIN No.: 77-0407395                       EIN No.: 77-0407397

COMMUNICATIONS & POWER INDUSTRIES         COMMUNICATIONS & POWER INDUSTRIES
INTERNATIONAL INC.                        ASIA INC.

By: __________________________________    By: _________________________________
Name: ________________________________    Name: _______________________________
Title: _______________________________    Title: ______________________________
EIN No.: 77-0407398                       EIN No.: 77-0407400

                                      -15-

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