Document:

<PAGE>   1
                                                                     EXHIBIT 4.4

                             DAZZLE MULTIMEDIA, INC.
                             2000 STOCK OPTION PLAN

        1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

            1.1 ESTABLISHMENT. The Dazzle Multimedia, Inc. 2000 Stock Option
Plan (the "PLAN") is hereby established effective as of January 12, 2000.

            1.2 PURPOSE. The purpose of the Plan is to advance the interests of
the Participating Company Group and its shareholders by providing an incentive
to attract and retain persons performing services for the Participating Company
Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.

            1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed. However, all Options
shall be granted, if at all, within ten (10) years from the earlier of the date
the Plan is adopted by the Board or the date the Plan is duly approved by the
shareholders of the Company.

        2. DEFINITIONS AND CONSTRUCTION.

            2.1 DEFINITIONS. Whenever used herein, the following terms shall
have their respective meanings set forth below:

                (a) "BOARD" means the Board of Directors of the Company. If one
or more Committees have been appointed by the Board to administer the Plan,
"BOARD" also means such Committee(s).

                (b) "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.

                (c) "COMMITTEE" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. Unless the powers of the Committee
have been specifically limited, the Committee shall have all of the powers of
the Board granted herein, including, without limitation, the power to amend or
terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.

                (d) "COMPANY" means Dazzle Multimedia, Inc., a California
corporation, or any successor corporation thereto.

                (e) "CONSULTANT" means a person engaged to provide consulting or
advisory services (other than as an Employee or a Director) to a Participating
Company, provided that the identity of such person, the nature of such services
or the entity to which such

                                       1
<PAGE>   2

services are provided would not preclude the Company from offering or selling
securities to such person pursuant to the Plan in reliance on either the
exemption from registration provided by Rule 701 under the Securities Act or, if
the Company is required to file reports pursuant to Section 13 or 15(d) of the
Exchange Act, registration on a Form S-8 Registration Statement under the
Securities Act.

                (f) "DIRECTOR" means a member of the Board or of the board of
directors of any other Participating Company.

                (g) "DISABILITY" means the inability of the Optionee, in the
opinion of a qualified physician acceptable to the Company, to perform the major
duties of the Optionee's position with the Participating Company Group because
of the sickness or injury of the Optionee.

                (h) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company and, with respect to any Incentive Stock
Option granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan.

                (i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

                (j) "FAIR MARKET VALUE" means, as of any date, the value of a
share of Stock or other property as determined by the Board, in its discretion,
or by the Company, in its discretion, if such determination is expressly
allocated to the Company herein, subject to the following:

                    (i) If, on such date, the Stock is listed on a national or
regional securities exchange or market system, the Fair Market Value of a share
of Stock shall be the closing price of a share of Stock (or the mean of the
closing bid and asked prices of a share of Stock if the Stock is so quoted
instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap Market or
such other national or regional securities exchange or market system
constituting the primary market for the Stock, as reported in The Wall Street
Journal or such other source as the Company deems reliable. If the relevant date
does not fall on a day on which the Stock has traded on such securities exchange
or market system, the date on which the Fair Market Value shall be established
shall be the last day on which the Stock was so traded prior to the relevant
date, or such other appropriate day as shall be determined by the Board, in its
discretion.

                    (ii) If, on such date, the Stock is not listed on a national
or regional securities exchange or market system, the Fair Market Value of a
share of Stock shall be as determined by the Board in good faith without regard
to any restriction other than a restriction which, by its terms, will never
lapse.

                                       2
<PAGE>   3

                (k) "INCENTIVE STOCK OPTION" means an Option intended to be (as
set forth in the Option Agreement) and which qualifies as an incentive stock
option within the meaning of Section 422(b) of the Code.

                (l) "INSIDER" means an officer or a Director of the Company or
any other person whose transactions in Stock are subject to Section 16 of the
Exchange Act.

                (m) "NONSTATUTORY STOCK OPTION" means an Option not intended to
be (as set forth in the Option Agreement) or which does not qualify as an
Incentive Stock Option.

                (n) "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions of
the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
Stock Option.

                (o) "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee setting forth the terms, conditions and restrictions of
the Option granted to the Optionee and any shares acquired upon the exercise
thereof. An Option Agreement may consist of a form of "Notice of Grant of Stock
Option" and a form of "Stock Option Agreement" incorporated therein by
reference, or such other form or forms as the Board may approve from time to
time.

                (p) "OPTIONEE" means a person who has been granted one or more
Options.

                (q) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

                (r) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.

                (s) "PARTICIPATING COMPANY GROUP" means, at any point in time,
all corporations collectively which are then Participating Companies.

                (t) "RULE 16b-3" means Rule 16b-3 under the Exchange Act, as
amended from time to time, or any successor rule or regulation.

                (u) "SECURITIES ACT" means the Securities Act of 1933, as
amended.

                (v) "SERVICE" means an Optionee's employment or service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant. An Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee's Service. Furthermore, an Optionee's Service
with the Participating Company Group shall not be deemed to have terminated if
the Optionee takes any military leave, sick leave, or other bona fide leave of

                                       3
<PAGE>   4

absence approved by the Company; provided, however, that if any such leave
exceeds ninety (90) days, on the ninety-first (91st) day of such leave the
Optionee's Service shall be deemed to have terminated unless the Optionee's
right to return to Service with the Participating Company Group is guaranteed by
statute or contract. Notwithstanding the foregoing, unless otherwise designated
by the Company or required by law, a leave of absence shall not be treated as
Service for purposes of determining vesting under the Optionee's Option
Agreement. The Optionee's Service shall be deemed to have terminated either upon
an actual termination of Service or upon the corporation for which the Optionee
performs Service ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its discretion, shall determine whether the
Optionee's Service has terminated and the effective date of such termination.

                (w) "STOCK" means the common stock of the Company, as adjusted
from time to time in accordance with Section 4.2.

                (x) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.

                (y) "TEN PERCENT OWNER OPTIONEE" means an Optionee who, at the
time an Option is granted to the Optionee, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of Section 422(b)(6) of the Code.

            2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.

        3. ADMINISTRATION.

            3.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by
the Board. All questions of interpretation of the Plan or of any Option shall be
determined by the Board, and such determinations shall be final and binding upon
all persons having an interest in the Plan or such Option.

            3.2 AUTHORITY OF OFFICERS. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, determination or election which is the responsibility
of or which is allocated to the Company herein, provided the officer has
apparent authority with respect to such matter, right, obligation, determination
or election.

            3.3 POWERS OF THE BOARD. In addition to any other powers set forth
in the Plan and subject to the provisions of the Plan, the Board shall have the
full and final power and authority, in its discretion:

                                       4
<PAGE>   5

                (a) to determine the persons to whom, and the time or times at
which, Options shall be granted and the number of shares of Stock to be subject
to each Option;

                (b) to designate Options as Incentive Stock Options or
Nonstatutory Stock Options;

                (c) to determine the Fair Market Value of shares of Stock or
other property;

                (d) to determine the terms, conditions and restrictions
applicable to each Option (which need not be identical) and any shares acquired
upon the exercise thereof, including, without limitation, (i) the exercise price
of the Option, (ii) the method of payment for shares purchased upon the exercise
of the Option, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with the Option or such shares, including by
the withholding or delivery of shares of stock, (iv) the timing, terms and
conditions of the exercisability of the Option or the vesting of any shares
acquired upon the exercise thereof, (v) the time of the expiration of the
Option, (vi) the effect of the Optionee's termination of Service with the
Participating Company Group on any of the foregoing, and (vii) all other terms,
conditions and restrictions applicable to the Option or such shares not
inconsistent with the terms of the Plan;

                (e) to approve one or more forms of Option Agreement;

                (f) to amend, modify, extend, cancel or renew any Option or to
waive any restrictions or conditions applicable to any Option or any shares
acquired upon the exercise thereof;

                (g) to accelerate, continue, extend or defer the exercisability
of any Option or the vesting of any shares acquired upon the exercise thereof,
including with respect to the period following an Optionee's termination of
Service with the Participating Company Group;

                (h) to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and

                (i) to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option Agreement and to make all other
determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.

            3.4 ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered

                                       5
<PAGE>   6

pursuant to Section 12 of the Exchange Act, the Plan shall be administered in
compliance with the requirements, if any, of Rule 16b-3.

            3.5 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.

        4. SHARES SUBJECT TO PLAN.

            4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be six million (6,000,000) and shall consist
of authorized but unissued or reacquired shares of Stock or any combination
thereof. If an outstanding Option for any reason expires or is terminated or
canceled or if shares of Stock are acquired upon the exercise of an Option
subject to a Company repurchase option and are repurchased by the Company at the
Optionee's exercise price, the shares of Stock allocable to the unexercised
portion of such Option or such repurchased shares of Stock shall again be
available for issuance under the Plan. Notwithstanding the foregoing, at any
such time as the offer and sale of securities pursuant to the Plan is subject to
compliance with Section 260.140.45 of Title 10 of the California Code of
Regulations ("SECTION 260.140.45"), the total number of shares of Stock issuable
upon the exercise of all outstanding Options (together with options outstanding
under any other stock option plan of the Company) and the total number of shares
provided for under any stock bonus or similar plan of the Company shall not
exceed thirty percent (30%) (or such other higher percentage limitation as may
be approved by the shareholders of the Company pursuant to Section 260.140.45)
of the then outstanding shares of the Company as calculated in accordance with
the conditions and exclusions of Section 260.140.45.

            4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of
any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan and to any outstanding Options and in the exercise price per
share of any outstanding Options. If a majority of the shares which are of the
same class as the shares that are subject to outstanding Options are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change Event, as defined in

                                       6
<PAGE>   7

Section 8.1) shares of another corporation (the "NEW SHARES"), the Board may
unilaterally amend the outstanding Options to provide that such Options are
exercisable for New Shares. In the event of any such amendment, the number of
shares subject to, and the exercise price per share of, the outstanding Options
shall be adjusted in a fair and equitable manner as determined by the Board, in
its discretion. Notwithstanding the foregoing, any fractional share resulting
from an adjustment pursuant to this Section 4.2 shall be rounded down to the
nearest whole number, and in no event may the exercise price of any Option be
decreased to an amount less than the par value, if any, of the stock subject to
the Option. The adjustments determined by the Board pursuant to this Section 4.2
shall be final, binding and conclusive.

        5. ELIGIBILITY AND OPTION LIMITATIONS.

            5.1 PERSONS ELIGIBLE FOR OPTIONS. Options may be granted only to
Employees, Consultants, and Directors. For purposes of the foregoing sentence,
"Employees," "Consultants" and "Directors" shall include prospective Employees,
prospective Consultants and prospective Directors to whom Options are granted in
connection with written offers of an employment or other service relationship
with the Participating Company Group. Eligible persons may be granted more than
one (1) Option.

            5.2 OPTION GRANT RESTRICTIONS. Any person who is not an Employee on
the effective date of the grant of an Option to such person may be granted only
a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee shall be deemed
granted effective on the date such person commences Service with a Participating
Company, with an exercise price determined as of such date in accordance with
Section 6.1.

            5.3 FAIR MARKET VALUE LIMITATION. To the extent that options
designated as Incentive Stock Options (granted under all stock option plans of
the Participating Company Group, including the Plan) become exercisable by an
Optionee for the first time during any calendar year for stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portions
of such options which exceed such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5.3, options designated as Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of stock shall be determined as of the time the option
with respect to such stock is granted. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.3, such different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such amendment to the Code.
If an Option is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section 5.3, the Optionee may designate which portion of such Option the
Optionee is exercising. In the absence of such designation, the Optionee shall
be deemed to have exercised the Incentive Stock Option portion of the Option
first. Separate certificates representing each such portion shall be issued upon
the exercise of the Option.

                                       7
<PAGE>   8

        6. TERMS AND CONDITIONS OF OPTIONS.

            Options shall be evidenced by Option Agreements specifying the
number of shares of Stock covered thereby, in such form as the Board shall from
time to time establish. No Option or purported Option shall be a valid and
binding obligation of the Company unless evidenced by a fully executed Option
Agreement. Option Agreements may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the following terms and
conditions:

            6.1 EXERCISE PRICE. The exercise price for each Option shall be
established in the discretion of the Board; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share
of Stock on the effective date of grant of the Option, and (c) no Option granted
to a Ten Percent Owner Optionee shall have an exercise price per share less than
one hundred ten percent (110%) of the Fair Market Value of a share of Stock on
the effective date of grant of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner qualifying under the provisions of Section 424(a) of
the Code.

            6.2 EXERCISABILITY AND TERM OF OPTIONS. Options shall be exercisable
at such time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Board and set forth in the Option Agreement evidencing such Option; provided,
however, that (a) no Option shall be exercisable after the expiration of ten
(10) years after the effective date of grant of such Option, (b) no Incentive
Stock Option granted to a Ten Percent Owner Optionee shall be exercisable after
the expiration of five (5) years after the effective date of grant of such
Option, (c) no Option granted to a prospective Employee, prospective Consultant
or prospective Director may become exercisable prior to the date on which such
person commences Service with a Participating Company, and (d) with the
exception of an Option granted to an officer, Director or Consultant, no Option
shall become exercisable at a rate less than twenty percent (20%) per year over
a period of five (5) years from the effective date of grant of such Option,
subject to the Optionee's continued Service. Subject to the foregoing, unless
otherwise specified by the Board in the grant of an Option, any Option granted
hereunder shall terminate ten (10) years after the effective date of grant of
the Option, unless earlier terminated in accordance with its provisions.

            6.3 PAYMENT OF EXERCISE PRICE.

                (a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check or
cash equivalent, (ii) by tender to the Company, or attestation to the ownership,
of shares of Stock owned by the Optionee having a Fair Market Value (as
determined by the Company without regard to any restrictions on transferability
applicable to such stock by reason of federal or state securities laws or
agreements

                                       8
<PAGE>   9

with an underwriter for the Company) not less than the exercise price, (iii) by
delivery of a properly executed notice together with irrevocable instructions to
a broker providing for the assignment to the Company of the proceeds of a sale
or loan with respect to some or all of the shares being acquired upon the
exercise of the Option (including, without limitation, through an exercise
complying with the provisions of Regulation T as promulgated from time to time
by the Board of Governors of the Federal Reserve System) (a "CASHLESS
EXERCISE"), (iv) in the Company's sole discretion at the time the Option is
exercised, by delivery of the Optionee's promissory note in a form approved by
the Company for the aggregate exercise price, provided that, if the Company is
incorporated in the State of Delaware, the Optionee shall pay in cash that
portion of the aggregate exercise price not less than the par value of the
shares being acquired, (v) by such other consideration as may be approved by the
Board from time to time to the extent permitted by applicable law, or (vi) by
any combination thereof. The Board may at any time or from time to time, by
approval of or by amendment to the standard forms of Option Agreement described
in Section 7, or by other means, grant Options which do not permit all of the
foregoing forms of consideration to be used in payment of the exercise price or
which otherwise restrict one or more forms of consideration.

                (b) LIMITATIONS ON FORMS OF CONSIDERATION.

                    (i) TENDER OF STOCK. Notwithstanding the foregoing, an
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock to the extent such tender or attestation would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company's stock. Unless otherwise provided by
the Board, an Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock unless such shares either have
been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.

                    (ii) CASHLESS EXERCISE. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise.

                    (iii) PAYMENT BY PROMISSORY NOTE. No promissory note shall
be permitted if the exercise of an Option using a promissory note would be a
violation of any law, regulation or rule, including, without limitation, any
rule promulgated by the Board of Governors of the Federal Reserve System. Any
permitted promissory note shall be on such terms as the Board shall determine at
the time the Option is granted. The Board shall have the authority to permit or
require the Optionee to secure any promissory note used to exercise an Option
with the shares of Stock acquired upon the exercise of the Option or with other
collateral acceptable to the Company. Unless otherwise provided by the Board, if
the Company at any time is subject to the regulations promulgated by the Board
of Governors of the Federal Reserve System or any other governmental entity
affecting the extension of credit in connection with the Company's securities,
any promissory note shall comply with such applicable regulations, and the
Optionee shall pay the unpaid principal and accrued interest, if any, to the
extent necessary to comply with such applicable regulations.

                                       9
<PAGE>   10

            6.4 TAX WITHHOLDING. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company, equal to all
or any part of the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to such
Option or the shares acquired upon the exercise thereof. Alternatively or in
addition, in its discretion, the Company shall have the right to require the
Optionee, through payroll withholding, cash payment or otherwise, including by
means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof. The Fair
Market Value of any shares of Stock withheld or tendered to satisfy any such tax
withholding obligations shall not exceed the amount determined by the applicable
minimum statutory withholding rates. The Company shall have no obligation to
deliver shares of Stock or to release shares of Stock from an escrow established
pursuant to the Option Agreement until the Participating Company Group's tax
withholding obligations have been satisfied by the Optionee.

            6.5 REPURCHASE RIGHTS. Shares issued under the Plan may be subject
to a right of first refusal, one or more repurchase options, or other conditions
and restrictions as determined by the Board in its discretion at the time the
Option is granted. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to
one or more persons as may be selected by the Company. Upon request by the
Company, each Optionee shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall
promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.

            6.6 EFFECT OF TERMINATION OF SERVICE.

                (a) OPTION EXERCISABILITY. Subject to earlier termination of the
Option as otherwise provided herein and unless otherwise provided by the Board
in the grant of an Option and set forth in the Option Agreement, an Option shall
be exercisable after an Optionee's termination of Service only during the
applicable time period determined in accordance with this Section 6.6 and
thereafter shall terminate:

                    (i) DISABILITY. If the Optionee's Service with the
Participating Company Group terminates because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of twelve (12) months (or such longer period of time as determined by
the Board, in its discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the date of expiration of the
Option's term as set forth in the Option Agreement evidencing such Option (the
"OPTION EXPIRATION DATE").

                    (ii) DEATH. If the Optionee's Service with the Participating
Company Group terminates because of the death of the Optionee, the Option, to
the extent

                                       10
<PAGE>   11

unexercised and exercisable on the date on which the Optionee's Service
terminated, may be exercised by the Optionee's legal representative or other
person who acquired the right to exercise the Option by reason of the Optionee's
death at any time prior to the expiration of twelve (12) months (or such longer
period of time as determined by the Board, in its discretion) after the date on
which the Optionee's Service terminated, but in any event no later than the
Option Expiration Date. The Optionee's Service shall be deemed to have
terminated on account of death if the Optionee dies within three (3) months (or
such longer period of time as determined by the Board, in its discretion) after
the Optionee's termination of Service.

                    (iii) OTHER TERMINATION OF SERVICE. If the Optionee's
Service with the Participating Company Group terminates for any reason, except
Disability or death, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee's Service terminated, may be
exercised by the Optionee at any time prior to the expiration of three (3)
months (or such longer period of time as determined by the Board, in its
discretion) after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date.

                (b) EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of an Option within the applicable time periods set
forth in Section 6.6(a) is prevented by the provisions of Section 10 below, the
Option shall remain exercisable until three (3) months (or such longer period of
time as determined by the Board, in its discretion) after the date the Optionee
is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

                (c) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods set
forth in Section 6.6(a) of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.

            6.7 TRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or the Optionee's guardian
or legal representative. No Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Board, in its
discretion, and set forth in the Option Agreement evidencing such Option, a
Nonstatutory Stock Option shall be assignable or transferable subject to the
applicable limitations, if any, described in Section 260.140.41 of Title 10 of
the California Code of Regulations, Rule 701 under the Securities Act, and the
General Instructions to Form S-8 Registration Statement under the Securities
Act.

        7. STANDARD FORMS OF OPTION AGREEMENT.

            7.1 OPTION AGREEMENT. Unless otherwise provided by the Board at the
time the Option is granted, an Option shall comply with and be subject to the
terms and conditions set

                                       11
<PAGE>   12

forth in the form of Option Agreement approved by the Board concurrently with
its adoption of the Plan and as amended from time to time.

            7.2 AUTHORITY TO VARY TERMS. The Board shall have the authority from
time to time to vary the terms of any standard form of Option Agreement
described in this Section 7 either in connection with the grant or amendment of
an individual Option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Option Agreement are not
inconsistent with the terms of the Plan.

        8. CHANGE IN CONTROL.

            8.1 DEFINITIONS.

                (a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred
if any of the following occurs with respect to the Company: (i) the direct or
indirect sale or exchange in a single or series of related transactions by the
shareholders of the Company of more than fifty percent (50%) of the voting stock
of the Company; (ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or transfer of all or substantially all of the assets
of the Company; or (iv) a liquidation or dissolution of the Company.

                (b) A "CHANGE IN CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, a "TRANSACTION")
wherein the shareholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.

            8.2 EFFECT OF CHANGE IN CONTROL ON OPTIONS. In the event of a Change
in Control, the surviving, continuing, successor, or purchasing corporation or
parent corporation thereof, as the case may be (the "ACQUIRING CORPORATION"),
may either assume the Company's rights and obligations under outstanding Options
or substitute for outstanding Options substantially equivalent options for the
Acquiring Corporation's stock. Any Options which are neither assumed or
substituted for by the Acquiring Corporation in connection with the Change in
Control nor exercised as of the date of the Change in Control shall terminate
and cease to be outstanding effective as of the date of the Change in Control.
Notwithstanding the foregoing, shares acquired upon exercise of an Option prior
to the Change in Control and any consideration

                                       12
<PAGE>   13

received pursuant to the Change in Control with respect to such shares shall
continue to be subject to all applicable provisions of the Option Agreement
evidencing such Option except as otherwise provided in such Option Agreement.
Furthermore, notwithstanding the foregoing, if the corporation the stock of
which is subject to the outstanding Options immediately prior to an Ownership
Change Event described in Section 8.1(a)(i) constituting a Change in Control is
the surviving or continuing corporation and immediately after such Ownership
Change Event less than fifty percent (50%) of the total combined voting power of
its voting stock is held by another corporation or by other corporations that
are members of an affiliated group within the meaning of Section 1504(a) of the
Code without regard to the provisions of Section 1504(b) of the Code, the
outstanding Options shall not terminate unless the Board otherwise provides in
its discretion.

        9. PROVISION OF INFORMATION.

            At least annually, copies of the Company's balance sheet and income
statement for the just completed fiscal year shall be made available to each
Optionee and purchaser of shares of Stock upon the exercise of an Option. The
Company shall not be required to provide such information to key employees whose
duties in connection with the Company assure them access to equivalent
information.

        10. COMPLIANCE WITH SECURITIES LAW.

            The grant of Options and the issuance of shares of Stock upon
exercise of Options shall be subject to compliance with all applicable
requirements of federal, state and foreign law with respect to such securities.
Options may not be exercised if the issuance of shares of Stock upon exercise
would constitute a violation of any applicable federal, state or foreign
securities laws or other law or regulations or the requirements of any stock
exchange or market system upon which the Stock may then be listed. In addition,
no Option may be exercised unless (a) a registration statement under the
Securities Act shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (b) in the opinion
of legal counsel to the Company, the shares issuable upon exercise of the Option
may be issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of any
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.

        11. TERMINATION OR AMENDMENT OF PLAN.

            The Board may terminate or amend the Plan at any time. However,
subject to changes in applicable law, regulations or rules that would permit
otherwise, without the approval of the Company's shareholders, there shall be
(a) no increase in the maximum aggregate number of shares of Stock that may be
issued under the Plan (except by operation of the provisions of

                                       13
<PAGE>   14

Section 4.2), (b) no change in the class of persons eligible to receive
Incentive Stock Options, and (c) no other amendment of the Plan that would
require approval of the Company's shareholders under any applicable law,
regulation or rule. No termination or amendment of the Plan shall affect any
then outstanding Option unless expressly provided by the Board. In any event, no
termination or amendment of the Plan may adversely affect any then outstanding
Option without the consent of the Optionee, unless such termination or amendment
is required to enable an Option designated as an Incentive Stock Option to
qualify as an Incentive Stock Option or is necessary to comply with any
applicable law, regulation or rule.

        12. SHAREHOLDER APPROVAL.

            The Plan or any increase in the maximum aggregate number of shares
of Stock issuable thereunder as provided in Section 4.1 (the "AUTHORIZED
SHARES") shall be approved by the shareholders of the Company within twelve (12)
months of the date of adoption thereof by the Board. Options granted prior to
shareholder approval of the Plan or in excess of the Authorized Shares
previously approved by the shareholders shall become exercisable no earlier than
the date of shareholder approval of the Plan or such increase in the Authorized
Shares, as the case may be.

                                       14<PAGE>

                                                                   Exhibit 10.53

                                                                  Execution Copy

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

                               Credit Agreement

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

                                    between

                           Hawker Pacific Aerospace

                                                                 - as Borrower -

                                      and

                   Landesbank Hessen-Thuringen Girozentrale
              - as Mandated Arranger, Agent and Security Agent -

                                      and

                        Kreditanstalt fur Wiederaufbau

                              - as Co-Arranger -

                                                                  - as Lenders -

                    Baker & McKenzie/Doser Amereller Noack
                                   Frankfurt
<PAGE>

                                     INDEX

<TABLE>
<CAPTION>
                                                                                                    Page
<S>                                                                                                 <C>
1.   Definitions................................................................................     4
2.   Facilities.................................................................................     6
3.   Purpose....................................................................................     6
4.   Interest...................................................................................     7
5.   Payments...................................................................................     7
6.   Term.......................................................................................     8
7.   Drawdowns, Cancellation....................................................................     8
8.   Conditions for Drawdown....................................................................     9
9.   Repayment..................................................................................    10
10.  Security...................................................................................    11
11.  Illegality.................................................................................    12
12.  Market Disruption; Alternative Method of Calculation.......................................    13
13.  Increased Costs............................................................................    14
14.  No Deductions or Withholding...............................................................    15
15.  Representations and Warranties.............................................................    16
16.  Reporting and Information..................................................................    18
17.  Covenants..................................................................................    19
18.  Termination................................................................................    21
19.  Expenses...................................................................................    23
20.  Assignments................................................................................    23
21.  Fees.......................................................................................    24
22.  Notices....................................................................................    24
23.  Miscellaneous Provisions...................................................................    25
24.  Governing Law, Jurisdiction................................................................    25
25.  Agency Agreement...........................................................................    25
</TABLE>

                                       2
<PAGE>

                                   SCHEDULES

Schedule 1               Commitments of Banks
----------

Schedule 2               Drawdown Notice
----------

Schedule 3               Repayment Schedule
----------

Schedule 4               [blank]
----------

Schedule 5               Lien Hawker Corp. Assets
----------

Schedule 6               Share Pledge Hawker UK
----------

Schedule 7               Fixed and Floating Charges Hawker UK Assets
----------

Schedule 8               [blank]
----------

Schedule 9               Disclosure of Shareholdings
----------

Schedule 10              Disclosure of Encumbrances
-----------

Schedule 11              Disclosure of Financial Indebtedness
-----------

Schedule 12              Financial Covenants
-----------

Schedule 13              [blank]
-----------

Schedule 14              Agency Agreement
-----------

                                       3
<PAGE>

                               Credit Agreement

between

1.   Hawker Pacific Aerospace, 11240 Sherman Way, Sun Valley, Ca. 91352-4942,
     USA

                                   - hereinafter referred to as the "Borrower" -

2.   Landesbank Hessen-Thuringen Girozentrale, Main Tower, Neue Mainzer Str. 52-
     58, 60311 Frankfurt am Main, Germany

                                   - hereinafter referred to in its respective
                                   capacities as the "Mandated Arranger", the
                                   "Agent" and the "Security Agent" -

3.   Kreditanstalt fur Wiederaufbau, Palmengartenstr. 5-9, 60325 Frankfurt am
     Main, Germany

                                   - hereinafter referred to as the "Co-
                                   Arranger" -

                                   - the parties at 2. and 3. together with any
                                   assignee pursuant to Sec. 20.2 the "Banks",
                                   and each a "Bank" -

WHEREAS,

The Borrower is a California corporation whose shares are listed at NASDAQ. Its
registered offices are located in Sun Valley, California. Hawker Pacific
Aerospace Ltd., ("Hawker UK"), a limited company with its registered office in
Hayes, Middlesex, United Kingdom, is a wholly-owned subsidiary of the Borrower.

The Banks have agreed with the Borrower and Hawker UK to provide to the Borrower
and Hawker UK credit facilities in an amount of USD 45,000,000 and GBP
14,000,000, respectively, subject to the terms and conditions set out in this
Credit Agreement and a Facility Agreement of even date (the "Facility
Agreement") made among Hawker UK and the Banks.

NOW, THEREFORE, it is agreed as follows:

1.   Definitions
----------------

1.1  Definitions of terms not defined elsewhere in this Agreement are as
     follows:

                                       4
<PAGE>

"Advance":               A disbursement made in respect of a drawdown pursuant
                         to Sec. 7;

"Banking Day":           Each day on which banks are generally open for business
                         in each of Frankfurt am Main, London and New York;

"Facilities":            Collectively, the credit facilities referred to in the
                         second subparagraph of the WHEREAS clause set out
                         hereinabove;

"Facility":              The credit facility referred to in Sec. 2.1;

"Financial Covenants":   The financial covenants referred to in Sec. 17.4 of
                         this Credit Agreement as set out in Schedule 12 hereto;
                                                             -----------

"Financing Documents":   Collectively, this Credit Agreement and the Security
                         Documents;

"Interest Period":       An interest period in respect of individual Advances
                         made in respect of the Facility, as determined in
                         accordance with Secs. 4.2 and 4.3;

"LIBID" Rate             The LIBOR Rate, less 0.125 per cent per annum;

"LIBOR Rate":            The USD interest rate per annum, for a period
                         comparable to the relevant Interest Period, which in
                         accordance with Bridge Telerate Page 3750, or such
                         other page as may be substituted for such page for the
                         purpose of displaying offered rates for USD deposits,
                         is quoted as the offered rate at 11 a.m. London time
                         for USD deposits on the second Banking Day prior to the
                         commencement of such Interest Period or, if no such
                         interest rate is displayed on the relevant Bridge
                         Telerate Page at the relevant time on the relevant date
                         for the determination of an interest rate, the rate
                         determined by the Agent as the arithmetic mean (rounded
                         upwards to the fourth decimal place) quoted by the
                         Reference Banks as the interest rate per annum at which
                         the Reference Banks offer USD deposits to prime banks
                         in the Frankfurt am Main interbank market on the
                         relevant date at 11 a.m. London time, in an amount
                         substantially equivalent to the relevant outstanding
                         amounts of the relevant Advance;

"Reference Banks":       The Mandated Arranger and the Co-Arranger;

"Reports":               Collectively,  the reports referred to in Sec. 8.2.2;

                                       5
<PAGE>

"Security Documents":    The agreements and documents referred to in Sec. 10.1,
                         and any other agreements made with the Security Agent
                         or any of the Banks for the purpose of providing or
                         holding security in respect of the Facility;

"Subsidiaries":          Any company or enterprise in which the Borrower, or any
                         other company in respect of which the term is used
                         herein, owns twenty-five or more per cent of the share
                         capital or voting rights;

1.2  The terms defined herein shall, except where the context requires
     otherwise, always have the meanings ascribed to such terms herein. Unless
     the context requires otherwise, such terms shall also have such meanings
     when used in agreements, written notifications, confirmations and other
     documents which are issued pursuant to the terms of this Credit Agreement.

2.   Facilities
---------------

2.1  The Banks hereby agree to make available to the Borrower a long-term
     facility in a total amount of USD 45,000,000 (in words: US Dollars fourty-
     five million);

2.2  The Facility will be disbursed to the Borrower by the Agent. Each Bank
     shall participate in the rights and obligations under the Facility in the
     amount of its respective commitment as set out in Schedule 1, separately
                                                       ----------
     and independently from all other Banks. In particular, any joint and
     several liability of the Banks is excluded. The Banks shall participate in
     any drawdowns only in the proportion of the relevant Banks' respective
     commitments. For the avoidance of doubt, any creation of a joint ownership
     (Gesamthandsvermogen) is hereby expressly excluded. No Bank shall be
     responsible for the performance of the obligations of any of the other
     Banks. The Agent shall be required to disburse to the Borrower any Advances
     to be made by other Banks only when such Advances have unconditionally been
     made available to the Agent by the relevant Banks.

2.3  The failure by any Bank to comply with its obligations under this Credit
     Agreement shall not affect the obligations of the Borrower or any other
     Bank hereunder. In any such event, the Borrower shall be entitled to
     enforce its rights solely against the relevant Bank.

3.   Purpose
------------

3.1  The Facility shall be used exclusively for the purpose of financing the
     capital requirements of the Borrower and to refinance the Borrower's
     indebtedness towards Heller Financial, Inc. and NMB-Heller Limited.

                                       6
<PAGE>

3.2  At the request of the Agent, the Borrower shall provide the Agent with
     conclusive evidence as to how proceeds from the Facility have been used and
     applied.

4.   Interest
-------------

4.1  Interest on outstanding Advances under the Facility shall accrue from the
     relevant date of drawdown at the rate of interest applicable to the
     outstanding amount of Advances under the Facility for the relevant Interest
     Period, such rate being the sum of (i) the applicable LIBOR Rate and (ii) a
     margin of 2.70 per cent per annum.

4.2  Subject to Sec. 4.3, interest periods shall have a duration of three
     months, or any longer duration agreed with the Banks.

4.3  The first interest period will in respect of any amounts drawn under the
     Facility commence on the date of drawing and will end on the last Banking
     Day of the calendar quarter in which the drawing is made. Each succeeding
     interest period will commence following expiry of the immediately preceding
     interest period.

4.4  Interest shall be calculated on the basis of the actual number of days
     elapsed and a 360 days year.

4.5  Interest shall be due and payable on the last day of an Interest Period.

4.6  The Borrower shall be in default, without any requirement for notice, if it
     has failed to make payments which are due hereunder on the relevant due
     date or if the Borrower does not make such payments in full. For the
     duration of a default, the Borrower shall

     4.6.1  pay in the event of a default with regard to payments other than
            interest, default interest on the outstanding amount of the overdue
            payment at a rate reflecting an increase of the margin by two per
            cent per annum, for the period from the due date until receipt by
            the Agent of the relevant overdue amounts, and

     4.6.2  in case of a default in the payment of interest, liquidated damages;
            the amount of liquidated damages shall in such case be equal to a
            rate of interest corresponding to the interest rate applicable to
            the Facility and increased by two per cent per annum in respect of
            the relevant amount, for the period from the due date until receipt
            by the Agent of the relevant overdue amounts.

5.   Payments
-------------

5.1  All payments to be made by the Borrower hereunder shall be made to the
     Agent by payment in the respective currency in immediately available and
     freely trans-

                                       7
<PAGE>

     ferable funds to such accounts as the Agent may from time to time specify
     in writing. If the due date for the payment of any amounts hereunder is not
     a Banking Day, the payment shall be made on the next following Banking Day,
     provided however, that where such next following Banking Day would
     otherwise fall in the next calendar month, payment shall be made on the
     last Banking Day of the preceding calendar month, and the relevant amounts
     shall be calculated by reference to the date of actual payment.

5.2  The Borrower shall be entitled to assert any rights of set off or of
     retention against the claims of any Bank for payment under or in connection
     with this Credit Agreement only to the extent that the relevant
     counterclaims are not the subject of a dispute between the Borrower and
     such Bank, or have been the subject of a final judgement.

6.   Term
---------

The Facility shall expire on October 30, 2005.

7.   Drawdowns, Cancellation
----------------------------

7.1  The Facility can be drawn upon satisfaction of all conditions for drawdown.
     In addition, the Facility can be drawn only upon satisfaction of the
     following:

     7.1.1  receipt by the Agent of a drawdown notice in the form set out in
            Schedule 2 not later than on the third Banking Day before the
            ----------
            proposed drawdown date;

     7.1.2  drawdowns are permitted in one amount only;

     7.1.3  drawdown shall be requested as soon as the Borrower is able to
            comply with the conditions for drawdown, and in no event after
            January 31, 2001.

7.2  Any drawdown notice submitted by the Borrower shall be irrevocable.

7.3  A drawdown of the Facility shall not be permitted when any of the events or
     circumstances referred to in Sec. 18 has occurred and is continuing.

7.4  Drawdowns may be requested by the Borrower only. The Banks shall be
     entitled to reject a drawdown request by the Borrower if the Borrower has
     without the consent of the Banks assigned or pledged its claims and rights
     under this Credit Agreement, or if such claims and rights have been
     attached by third parties, or if a condition to drawdown is not or no
     longer satisfied at the time of drawdown.

7.5  Amounts drawn and subsequently repaid or prepaid may not be reborrowed.

                                       8
<PAGE>

8.   Conditions for Drawdown
----------------------------

The Borrower may not, save as the Agent may otherwise agree in writing, deliver
a notice of drawdown pursuant to Sec. 7.1 unless the following conditions have
been satisfied:

8.1  The Agent has been furnished with the following documents which accurately
     describe the up-to-date-position of the information and statements
     contained therein, and which have not been changed by any amendments or
     supplements thereto:

     8.1.1  Certificate and/or Articles of Incorporation and bylaws of the
            Borrower, certified by the Secretary or Assistant Secretary of the
            Borrower dated not earlier thanseven days prior to the date of the
            drawdown notice, and a good standing certificate for the Borrower of
            most recent date, issued by the state of incorporation;

     8.1.2  the Security Documents;

     8.1.3  documentation evidencing to the satisfaction of the Banks that the
            proceeds of the first drawdown under the Facility will be used for a
            repayment in full of all financial indebtedness towards Heller
            Financial, Inc. and NMB-Heller Limited;

     8.1.4  copies of a resolution of the board of directors of the Borrower
            authorizing the transactions contemplated by the Finance Documents,
            certified by the Secretary or Assistant Secretary of the Borrower of
            most recent date;

     8.1.5  certificates of the Secretary or Assistant Secretary of the Borrower
            certifying the names and true signatures of the officers of the
            Borrower authorised to execute, deliver and perform the Financing
            Documents to which the Borrower is a party.

8.2  Receipt by the Agent of the following documents which are in form and
     substance satisfactory to the Banks:

     8.2.1  list of shareholders of the Borrower to the extent known to the
            Borrower, confirmed by an authorised representative of the Borrower;

     8.2.2  letter issued by Lufthansa Technik AG in form and substance
            satisfactory to the Banks, confirming that a legal due diligence
            investigation was conducted by its external counsel prior to its
            acquisition of shares of the Borrower, with a result satisfactory to
            Lufthansa Technik AG, and a financial due diligence report dated
            July 31, 2000 prepared by PricewaterhouseCoopers;

     8.2.3  legal opinion prepared by Troy & Gould, Los Angeles, counsel to the
            Borrower, confirming that the Financing Documents have been duly

                                       9
<PAGE>

            executed on behalf of, and create legal, valid and binding
            obligations for, the Borrower, and that the Borrower is duly
            organized and validly existing, dated not earlier than seven Banking
            Days prior to the proposed first drawdown under the Facility, and
            otherwise in form and substance satisfactory to the Banks;

     8.2.4  legal opinion prepared by Baker & McKenzie Frankfurt am Main,
            counsel to the Banks, confirming that the Credit Agreement creates
            legal, valid and binding obligations for each of the parties thereto
            other than the Borrower or affiliates of the Borrower, dated not
            earlier than seven Banking Days prior to the proposed first
            drawdown;

     8.2.5  legal opinion prepared by Baker & McKenzie San Francisco, counsel to
            the Banks, confirming that the Security Documents which are governed
            by California law create legal, valid and binding obligations for
            each of the parties thereto, dated not earlier than seven Banking
            Days prior to the proposed first drawdown;

     8.2.6  legal opinion prepared by Baker & McKenzie London, counsel to the
            Banks, confirming that the Security Documents which are governed by
            English law create legal, valid and binding obligations for each of
            the parties thereto, and that Hawker UK is duly organized and
            validly existing, dated not earlier than seven Banking Days prior to
            the proposed first drawdown;

     8.2.7  consolidated audited annual financial statements for the Borrower
            for the fiscal years ending December 31, 1998 and 1999, together
            with the auditors' reports for such fiscal years, and consolidated
            unaudited interim financial statements for the Borrower for the
            fiscal quarters ending March 31 and June 30, 2000;

     8.2.8  projected consolidated annual financial statements for Hawker Corp.
            and business plan for at least the fiscal years ending December 31,
            2001, 2002 and 2003.

8.3  None of the events or circumstances referred to in Sec. 18 exists, and the
     representations and warranties contained in the Financing Documents are
     true and accurate in all material respects at the time of each drawdown
     notice and at the time of drawdown.

9.   Repayment
--------------

9.1  The Facility shall be repaid in accordance with the repayment schedule set
     out in Schedule 3.
            ----------

9.2  The Borrower shall immediately prepay all amounts drawn under the Facility
     if Lufthansa Technik AG, alone or together with affiliates,  does not own
     or control more than fifty per cent of the share capital and voting rights
     of the

                                       10
<PAGE>

     Borrower on or after December 30, 2000, or when the credit facility made
     available to Hawker UK pursuant to the Facility Agreement has been repaid
     in full. In addition, the Borrower shall make the following mandatory
     prepayments in the amounts referred to in the following subparagraphs:

     9.2.1  promptly after receipt thereof, all net cash proceeds from a sale of
            any assets of the Borrower or any of its Subsidiaries other than in
            the ordinary course of business if the relevant amounts exceed USD
            50,000 in the aggregate in any fiscal year of the Borrower, it being
            understood that net cash proceeds which have been or will be
            reinvested in replacement assets for substantially the same use
            shall not be taken into account;

     9.2.2  if any payments are received by the Borrower or any of its
            Subsidiaries under insurance contracts relating to the Borrower's
            business in excess of USD 50,000 in the aggregate in any fiscal year
            of the Borrower, any such amounts promptly after receipt of same
            unless such insurance proceeds are applied without delay in the
            acquisition of replacement assets or in the compensation for losses
            which have been actually suffered.

9.3  The Borrower is entitled to prepay the total outstanding amounts under the
     Facility, in accordance with and subject to Sec. 9.4. Unless otherwise
     agreed with the Banks, partial prepayments are not permitted.

9.4  A prepayment shall be notified to the Banks in writing via the Agent not
     later than fifteen Banking Days prior to the proposed prepayment date. If a
     prepayment is not made on the last day of an Interest Period, the Borrower
     shall compensate the Banks for any resulting reinvestment loss. The Banks
     shall in such case be entitled to an amount equal to the difference between
     the amount which would have been payable by the Borrower for the relevant
     remaining term of the Interest Period on the basis of the applicable
     interest rates and the amount of interest determined by the Banks for such
     period applying the reinvestment rate. For this purpose, the reinvestment
     rate for the remaining term of the Interest Period is the then applicable
     LIBID Rate for such term. The Borrower shall in each such case be entitled
     to demonstrate that no loss has actually been incurred or has been incurred
     in a lower amount than the amount claimed by the Banks, and the Banks shall
     have the right to demonstrate that the amount of their loss is actually
     higher, and to claim for such higher amount. Each prepayment shall include
     interest up to the date of prepayment.

9.5  All notices by the Borrower in relation to a prepayment proposed to be made
     by the Borrower shall be irrevocable.

10.  Security
-------------

10.1 The following security will be provided as security for all claims of the
     Banks against the Borrower, in accordance with the agreements identified
     below:

                                       11
<PAGE>

      10.1.1  blanket lien over all assets of the Borrower, in the form set out
              in Schedule 5;
                 ----------

      10.1.2  pledge of all shares in Hawker UK, in the form set out in Schedule
                                                                        --------
              6.
              -

      10.1.3  fixed and floating charge over all assets of Hawker UK, in the
              form set out in Schedule 7.
                              ----------

10.2  The security referred to in Sec. 10.1 shall be provided, pursuant to the
      terms and conditions more particularly set out in the individual Security
      Documents, as security for all existing, future and contingent claims
      which the Banks and any of their domestic and overseas branches may have,
      either individually or collectively, against the Borrower under and in
      connection with the Facilities. If the value of the security provided
      diminishes or threatens to diminish materially, or if the financial
      situation of the Borrower deteriorates, the Banks may request additional
      security in their reasonable discretion, and the Borrower will in such
      case ensure that any such security is provided without unreasonable delay
      (unverzuglich).

10.3  If the Borrower is of the opinion that the realizable value of the
      security provided to the Banks exceeds as a whole at any time by a
      material amount the total outstanding claims of the Banks against the
      Borrower other than temporarily, the Borrower may by notice to the Agent
      require that security is released. Any such request by the Borrower shall
      be accompanied by adequate supporting information. The Banks will release
      individual assets at their option to the extent that a material
      overcollateralization has been adequatly demonstrated to exist. The Banks
      shall be obliged to agree to a release of security at their option if and
      to the extent the realizable value of all security provided by the
      Borrower exceeds an amount corresponding to 110 per cent of the secured
      claims of the Banks other than temporarily.

10.4  All reasonable costs and expenses arising in connection with the granting
      of security, or in connection with any enforcement of security and the
      realization of the Banks' security interests in accordance with the terms
      of the Security Documents, shall be borne by the Borrower.

11.   Illegality
----------------

If it becomes illegal pursuant to domestic or foreign legislation or if it
becomes impermissible under any requirement of any domestic or foreign authority
or public body for any Bank to comply with its outstanding obligations, in whole
or in part, under this Agreement, such Bank may immediately after it has become
aware thereof inform the Borrower through the Agent. In such event, the affected
Bank will endeavour to perform its obligations through another lending office or
branch or to transfer the same to an affiliate of it if the illegality or
impermissibility can thereby be reme-

                                       12
<PAGE>

died or avoided without substantial costs for the affected Bank. If this is not
possible, it will notify the Borrower thereof; in such event, after receipt of
such notification, the portion of the Facility made available by the relevant
Bank affected by the illegality or impermissibility shall be cancelled without
notice or on such reasonable notice as may be determined by the relevant
affected Bank and specified in such notification, as the case may be. In such
case, the Borrower shall repay to the Agent for distribution to the relevant
affected Bank all outstanding amounts under the Facility made available by such
Bank at a date not later than five Banking Days after the date of such notice
(unless prior payment is required under any applicable mandatory laws), together
with any accrued interest and all other amounts due at the date of such notice.

12.   Market Disruption; Alternative Method of Calculation
----------------------------------------------------------

12.1  The Agent shall immediately notify the Borrower and the Banks if, in
      relation to any Interest Period, it determines, after consultation with
      the other Banks, that (i) due to circumstances affecting the relevant
      interbank market, the LIBOR Rate cannot be adequately and reasonably
      determined, or (ii) no LIBOR Rate for the relevant Interest Period appears
      on the relevant screen for the relevant Interest Period, and less than two
      Reference Banks provide the Agent with a replacement rate therefor in
      accordance with the terms of this Agreement, or (iii) Banks representing
      at least one third of the amounts committed hereunder inform the Agent
      that in respect of the relevant Interest Period no funds in the required
      amounts are available in the relevant interbank market or that the average
      of the respective LIBOR Rate appearing on the relevant screen do not
      adequately reflect the cost to such Banks of making or maintaining their
      respective participations in the relevant advance for such Interest
      Period. No drawings may be made following receipt of such notification
      until an alternative method of calculation pursuant to Sec. 12.2 has been
      agreed upon.

12.2  As soon as the notification pursuant to Sec. 12.1 has been made, the
      Borrower and the Agent, in consultation with the other Banks, will
      negotiate in good faith for a maximum period of thirty Banking Days with a
      view to establishing an alternative method of refinancing the outstanding
      advances or an alternative determination of the applicable interest rate,
      the Interest Period and the payment dates. If agreement is reached, the
      alternative calculation method agreed shall apply. If no agreement is
      reached within thirty Banking Days and agreed upon in writing, the
      following shall apply:

      (i)  If the Facility has not been drawn, a drawing is definitely no longer
           possible. The Borrower shall in such case be obliged to pay to the
           Agent without delay all amounts due pursuant to the terms of this
           Agreement for distribution to the Banks;

      (ii) to the extent that the relevant Facility has been drawn, either the
           Borrower or the Agent may determine a prepayment date for the entire
           outstanding amount of the relevant Facility of not less than thirty
           Banking Days. Prepayment shall be made to the Agent for distribution

                                       13
<PAGE>

           to the Banks on such day together with an amount equivalent to the
           costs of the Banks of making or maintaining their respective
           participations in the relevant advance together with the applicable
           margin, and any other amounts due hereunder. In the event that the
           costs of the Banks cannot be determined, the applicable rate shall be
           determined by the Banks in accordance with Section 315 Civil Code
           (BGB).

13.  Increased Costs
--------------------

13.1  If a Bank determines that the introduction of or a change of any law or
      regulation applicable to it or change in interpretation of any such law or
      regulation or the application or compliance with any regulation of any
      public body results or will result in (i) the affected Bank or any holding
      company of such Bank being obliged to pay any tax or other payment
      relating to any advance made by it or in any payment to be made by the
      Borrower to it or (ii) the affected Bank or any holding company of such
      Bank being subject to any other measure which leads to an increase in the
      costs of that Bank or any holding company of such Bank in funding advances
      or that the amount or the effective return in relation to any payment
      which the affected Bank receives pursuant to this Agreement is reduced, or
      (iii) the affected Bank or holding company being subject to additional
      costs which arise from the Bank's commitment under the respective
      Facility, the affected Bank shall be entitled to inform the Borrower and
      the Agent thereof by providing a notice specifying such development in
      reasonable detail. The Borrower shall then be obliged on request and
      irrespective of whether Advances made are repaid to the affected Bank to
      pay such amount to the Agent for the account of the affected Bank or its
      holding company as is necessary to compensate the affected Bank for the
      relevant increase in costs or reduction of payment.

13.2  An increase in costs or reduction of payment referred to in Sec. 13.1 does
      not include:

      (i)   any tax on overall net income, profit or gains of any Bank or
            holding company of such Bank;

      (ii)  any tax required to be deducted or withheld from amounts payable by
            the Borrower to the extent the Borrower has already made
            corresponding payments in accordance with Sec. 13;

      (iii) any amount relating to any minimum reserve, or other deposit,
            equity, cost ratio, liquidity or capital adequacy requirements or
            any other form of bank regulatory or exchange control requirement
            resulting from any law or regulation in effect at the date of this
            Agreement.

13.3  For as long as the circumstances referred to in Sec. 13.1 continue, the
      Borrower shall be entitled by written notice to the Agent to prepay,
      pursuant to Sec. 9.3 and at no additional costs to the Borrower, all
      outstanding Advances made available by the affected Bank on thirty Banking
      Days' notice expiring at

                                       14
<PAGE>

      the end of an Interest Period and to terminate the respective Facility
      only with respect to the affected Bank.

14.   No Deductions or Withholding
----------------------------------

14.1  All sums payable by the Borrower under this Agreement shall be paid in
      full without set-off or withholding in respect of tax or other public law
      deductions imposed in the Federal Republic of Germany or in any other
      jurisdiction from or through which payments of the Borrower are effected
      (collectively, "Deductions"). To the extent that the Borrower or a third
      party is obliged to make Deductions or to retain money for tax or other
      reasons, the Borrower shall be obliged to make a payment, together with
      the relevant amount, in such additional amount (the "Additional Amount")
      as will ensure that the relevant Bank or the Agent (as applicable)
      receives the full amount which would otherwise have been received by it if
      the relevant Deductions had not been made. The Borrower shall be obliged
      to furnish the Agent immediately with copies of all the relevant documents
      confirming that the amount deducted or withheld has been paid to the
      relevant tax or other authority in the full amount.

14.2  If the Borrower becomes aware that Deductions are required, the Borrower
      shall notify the Agent specifying details and information relating to the
      relevant regulations.

14.3  If any Bank receives the benefit of a tax credit or a relief or remission
      of tax resulting from the receipt of any Additional Amount, such Bank
      shall promptly reimburse to the Borrower such part of that benefit as will
      leave such Bank after such payment in no more and no less favourable a
      position than would have applied if no such benefit or relief had been
      received. The Bank shall be obliged to take all reasonable steps to claim
      such credit, relief or remission from or against its tax liabilities even
      if this results in an obligation to make a reimbursement to the Borrower.
      The Borrower shall bear any costs thereby incurred. The Banks shall not,
      however, be obliged to permit the Borrower to inspect their books in
      connection with the obligation referred to above nor to take any
      particular steps in relation to their tax affairs nor shall any Bank be
      liable for any breach by any other Bank.

14.4  No Additional Amount will be payable to a Bank under Sec. 14.1 to the
      extent that such Additional Amount becomes payable as a result only of a
      change in the lending office of the relevant Bank, unless (i) such change
      is requested by the Borrower, or (ii) under the relevant laws,
      regulations, treaties or rules in effect at the time of the change in
      lending office, such additional amount would not have been payable. In
      case an Additional Amount would otherwise be payable by the Borrower
      pursuant to the terms hereof, and if it is reasonably possible for a Bank
      to transfer and assign its rights and obligations under this Credit
      Agreement to another branch as lending office with the effect that no such
      Additional Amount would then be due by the Borrower, the affected Bank
      shall so transfer and assign its rights and obligations hereunder,
      provided

                                       15
<PAGE>

      that any additional costs to such Bank which are thereby caused shall be
      borne by the Borrower.

14.5  If the Borrower is obliged to pay an additional amount under Sec. 14.1,
      the Borrower may prepay in whole (but not in part) the amount made
      available under this Agreement by the affected Bank by giving not less
      than ten Banking Days' prior written notice to the Agent and the affected
      Bank, provided that such notice is given within thirty Banking Days of the
      Borrower becoming aware that it would be obliged to pay such amount;
      prepayments under this Sec. 14.5 shall not be permitted after the expiry
      of such period. The obligation of such Bank to make any further advances
      available to the Borrower shall terminate on the giving of such notice.

15.   Representations and Warranties
------------------------------------

The Borrower makes the following representations and warranties with the Banks
which shall be deemed repeated in their entirety by the Borrower on the day of
each drawdown notice and on the last day of each Interest Period with respect to
the factual circumstances then existing, save to the extent the Agent has
received written notification from the Borrower to the contrary pursuant to Sec.
16.4.

15.1  The Borrower has taken all necessary steps and obtained all necessary
      consents to enter into legally binding obligations under the Financing
      Documents. The information contained in the documents referred to in Sec.
      8.1.1, and in any other documents relating to the corporate structure or
      existence of the Borrower furnished to the Banks, reflect in all material
      respects the actual position of the Borrower, and no proceedings are
      pending or have been threatened for the winding-up, dissolution or any
      similar process against or affecting the Borrower or any Subsidiary of the
      Borrower. The share capital of the Borrower and of its Subsidiaries is
      fully paid up, and there have been no repayments of share capital;

15.2  the balance sheets and annual and interim financial statements of the
      Borrower provided to the Banks have been prepared in accordance with U.S.
      generally accepted accounting principles, and such accounting principles
      have been consistently applied over the entire period of the relevant
      fiscal years or fiscal quarters; in accordance with such generally
      accepted accounting principles, the balance sheets and annual and interim
      financial statements provided fairly represent the financial position of
      the Borrower and its Subsidiaries, consolidated where applicable, without
      material qualification, and make provision at the relevant date for all
      material indebtedness and other liabilities, actual or contingent. Since
      the date of the most recent interim financial statements provided to the
      Banks, there has been no material adverse change in the business or
      financial position of the Borrower or its Subsidiaries, save to the extent
      disclosed to the Banks prior to the date hereof;

15.3  other than a pending arbitration proceeding involving the Borrower and
      First

                                       16
<PAGE>

      Union National Bank which has been disclosed to the Banks, there are
      presently no actions, suits, proceedings, claims or disputes or
      administrative proceedings pending or, to the Borrower's knowledge,
      threatened against the Borrower or any of its Subsidiaries, or the assets
      or other sources of income of the Borrower or one of its Subsidiaries
      which, if adversely determined, would result in an obligation to make
      payments in excess of USD 200,000 in the aggregate, or which could
      reasonably be expected to have a material adverse effect in any other
      manner on the financial position of the Borrower;

15.4  the Borrower does not have any interest in the capital of or any similar
      interest in, any company or enterprise other than the interests identified
      in Schedule 9;
         ----------

15.5  the assets and rights of the Borrower and its Subsidiaries are not subject
      to rights in favour of third parties, save for customary retention of
      title or similar arrangements in favour of suppliers or customers which
      have been agreed in the ordinary course of the Borrower's business and
      security interests arising by operation of law other than as a result of a
      default or breach of contract by the Borrower or a Subsidiary of the
      Borrower, and those security interests which are identified in Schedule
                                                                     --------
      10;
      --

15.6  with the exception of the 1998 tax return to be filed for Hawker UK which
      will be filed with the competent tax authority not later than by December
      30, 2000, the Borrower and its Subsidiaries have submitted all necessary
      tax filings within the requisite time limits; they are not in default in
      relation to the payment of any tax claims or any other claims raised by
      any administrative authority. There is not expected to be any tax
      assessment which might have a material adverse effect on the financial
      position of the Borrower or any of its Subsidiaries;

15.7  the Borrower and its Subsidiaries are in possession of all material
      governmental or public law approvals, permits and licenses necessary for
      the unrestricted conduct of their business, and are not in breach of any
      material environmental or other statutory or administrative legal
      requirements. The business of the Borrower and its Subsidiaries is not
      subject to any limitations of a material or unusual nature which might
      adversely affect the performance by them of their obligations under the
      Financing Documents;

15.8  the Borrower and its Subsidiaries do not have any credit lines or
      obligations arising out of credit facilities or borrowings or any other
      financial indebtedness other than the financial indebtedness identified in
      Schedule 11, and the borrowings and other financing identified in Schedule
      -----------                                                       --------
      11 has been used exclusively for the purpose of financing the working
      --
      capital requirements and capital expenditures of the Borrower and its
      Subsidiaries;

15.9  the Borrower and its Subsidiaries are unrestricted owners in respect of
      all landing gear shipsets and related equipment which are recorded on
      their respective balance sheets;

15.10 none of the events referred to in Sec. 18 relating to the Borrower or its
      Sub-

                                       17
<PAGE>

       sidiaries has occurred and is continuing;

15.12  the factual information furnished to the Agent and to the Banks in
       connection with the preparation and execution of this Credit Agreement,
       and the information set out in the Reports, is complete, true and
       accurate in all material respects.

At the reasonable request of the Banks, the Borrower undertakes to furnish
relevant documentation to the Banks for the purpose of verifying the accuracy of
the respresentations and warranties set out herein.

16.    Reporting and Information
--------------------------------

16.1   The Borrower shall keep the Banks regularly informed about its financial
       situation and legal position and that of its Subsidiaries, and will in
       particular provide the Agent with the information and documents
       identified in Sec. 16.2.

16.2   The Borrower will furnish to the Agent:

       16.2.1  Within 120 days after the end of the fiscal year of the Borrower,
               unqualified audited consolidated annual financial statements, and
               audited non-consolidated annual financial statements, for the
               Borrower for the relevant fiscal year, together with the
               auditors' report issued by an auditing firm of international
               repute and a compliance certificate executed by authorised
               representatives of the Borrower;

       16.2.2  within fifty days after the end of each fiscal quarter of the
               Borrower, unaudited non-consolidated interim financial statements
               and consolidated financial statements for the Borrower for such
               fiscal quarter, in each case together with a report and
               confirmation signed by authorized representatives of the relevant
               Borrower confirming that the Financial Covenants have been
               complied with in the relevant fiscal quarter; such reports shall
               also contain a comparison of the Borrower's actual performance
               against projected performance pursuant to the projected financial
               statements to be provided to the Banks in accordance with the
               terms hereof, a comparison with the corresponding fiscal quarter
               in the previous fiscal year, and within ten days after the end of
               each calendar quarter, a list of orders in hand and orders
               received, and a list of assets and receivables subject to the
               Security Documents referred to in Sec. 10.1.1;

       16.2.3  not later than thirty days prior to the beginning of each fiscal
               year of the Borrower, projected annual financial statements
               (including a balance sheet, profit and loss statement, cash flow
               statement and projections for capital expenditures) and an
               updated business plan for the next following three years.

                                       18
<PAGE>

      16.2.4   within 120 days after the end of each fiscal year of the
               Borrower, written confirmation signed by authorized
               representatives of the Borrower that none of the events or
               circumstances referred to in Sec. 18 has occurred, that the
               representations and warranties set out in Sec. 15 or in the
               Security Documents are accurate and that the Borrower and its
               Subsidiaries have complied with the covenants set out in Sec. 17,
               subject to any notification to the contrary made by the Borrower
               pursuant to the terms hereof.

16.3  The Borrower will notify the Agent without delay if any governmental or
      other public-law permits, licenses or approvals which are necessary for
      the unrestricted conduct of the Borrower's business cannot be complied
      with.

16.4  The Borrower will inform the Agent in writing as soon as possible and in
      any event no later than within five Banking Days after becoming aware
      thereof if any of the events or circumstances referred to in Sec. 18
      occurs or if any circumstances occur or are expected to occur which might
      result in the inaccuracy of any of the representations and warranties set
      out in Sec. 15 or in the Security Documents, or in the non-compliance with
      the covenants set out in this Sec. 17. In any such notification, the
      Borrower shall specify in detail which steps have been or will be taken in
      relation to the relevant circumstances.

16.5  During the term of this Credit Agreement, the Borrower shall take any
      action which may or will result in any change to circumstances relevant
      for the information referred to in Sec. 8.1.1 and Sec. 8.2.3 only after
      having notified the Agent thereof;

16.6  The Borrower will inform the Banks in reasonable detail and by way of
      providing the Agent with relevant documents about all circumstances which
      are of material importance to their business, and about any matters
      affecting the financial and economic situation of the Borrower or its
      Subsidiaries more than immaterially, if and to the extent this is
      reasonably required by the Banks.

17.   Covenants
---------------

The Borrower undertakes towards the Banks as follows:

17.1  The Borrower shall apply the proceeds of the Facility solely for the
      purposes set out in Sec. 3.1 and in accordance with Sec. 8.1.3;

17.2  The Borrower shall comply with all requirements of governmental
      authorities and all other relevant environmental or other legal
      requirements, and to take all action that is necessary or desirable for
      maintaining their business and for the continued validity and
      enforceability of the Financing Documents.

17.3  The Borrower shall ensure maintenance of any of its equipment and other
      fixed assets in accordance with the principles of diligent business and
      opera-

                                       19
<PAGE>

      tions management, and shall ensure that it and its Subsidiaries have sole
      and unrestricted title to all landing gear shipsets and related equipment
      which are recorded on their respective balance sheets.

17.4  The Borrower shall procure that the Financial Covenants, to be measured by
      reference to the quarterly financial statements referred to in Sec. 16.2.2
      and the audited financial statements referred to in Sec. 16.2.1, are
      complied with at all times.

17.5  The Borrower undertakes that, until discharge in full of all obligations
      owing by the Borrower to the Banks under and in connection with this
      Credit Agreement, it will not without the consent of the Banks

      17.5.1  enter into any agreements or take any action which would conflict
              with the obligations of the Borrower or Hawker UK under the
              Financing Documents;

      17.5.2  grant security in favour of third parties for its own indebtedness
              or the indebtedness of any third party, with the exception of
              customary retention of title agreements in favour of suppliers and
              liens and security interests arising by operation of law other
              than as a result of a default or breach of contract by the
              Borrower or by a Subsidiary of the Borrower;

      17.5.3  incur indebtedness for borrowed money or other liabilities arising
              out of borrowings, contracts of guarantee or as surety or other
              assumptions of liability for the indebtedness of any third party,
              to the extent the aggregate amount of such indebtedness and
              contingent or actual liability is in excess of USD 100,000, or
              incur obligations under leasing agreements (other than in respect
              of exchange assets) providing for aggregate leasing payments of
              more than USD 250,000 in any calendar year;

      17.5.4  make any loans or otherwise provide funds to a third party which
              are meant to be ultimately repaid, except in respect of assets
              held in bank accounts which are pledged to the Banks or funds made
              available to employees in accordance with customary employee
              loans;

      17.5.5  sell and/or transfer any assets to a third party pursuant to
              factoring or similar agreements made with third parties, or
              otherwise other than (i) in the ordinary course of business
              (including the sale and transfer of obsolete assets or assets
              which are no longer used or useful for the business of the
              Borrower, except howeverexchange assets), (ii) for the purpose of
              replacing such assets by replacement assets in the ordinary course
              of business or meeting new customer requirements, provided however
              that exchange assets may be sold and transferred unless such sale
              and transfer would cause a violation of Sec. 17.6;

      17.5.6  change, or permit to be changed, the accounting principles
              applicable to the Borrower or any of its Subsidiaries without
              having made a writ-

                                       20
<PAGE>

              ten agreement with the Banks prior thereto regarding the requisite
              amendments to the Financial Covenants;

       17.5.7 acquire any direct or indirect interest in other companies and
              businesses, or establish subsidiaries or operative branches in
              other locations;

       17.5.8 make, or allow to be made, any material changes in the business or
              product lines of the Borrower or any of the Borrower's
              Subsidiaries.

17.6   The Borrower shall ensure that, on a consolidated basis, as per December
       31 of each year the aggregate net purchase prices paid in respect of
       exchange assets during the preceding one-year period exceed the aggregate
       sales prices in respect of such exchange assets during that same period
       (the "Excess") by an amount equivalent to at least one third of the
       amount of depreciation of all exchange assets during such period,
       provided however that the Excess may in any given year be lower than
       required pursuant to this rule if as per December 31 of any given year
       the average Excess for the entire period since December 31, 2000 does not
       fall below an amount corresponding to one third of the depreciation of
       all exchange assets over the entire period.

18.    Termination
------------------

18.1   The Banks shall be entitled to terminate the Facility, in whole or in
       part, if there is good cause (wichtiger Grund) for such termination, and
       to require the immediate payment to the Banks of all amounts due by the
       Borrower under and in connection with the Financing Documents, including
       in particular accrued interest and any other fees and amounts payable by
       the Borrower pursuant to the terms hereof, to require compensation for
       any loss sustained by the Banks between the time of termination and the
       expiration of the relevant Interest Period, and to enforce the Banks'
       interest in the security granted in accordance with the terms hereof.

18.2   There shall be good cause for a termination within the meaning of Sec.
       18.1, in particular, if

       18.2.1 the Borrower is in default in any payment of principal, interest
              or any other payments to be made pursuant to the terms of this
              Credit Agreement;

       18.2.2 the Borrower or any of its Subsidiaries is in default in any
              payment obligations for borrowed money or under finance leases
              towards a third party in a total amount of more than USD 50,000 or
              equivalent, or is in default in any other payment obligations
              towards a third party (except where such obligations towards trade
              creditors have been contested in good faith), in an aggregate
              amount of more than USD 250,000 or equivalent, or Hawker UK is in
              default with its payment obligations towards any of the Banks;

                                       21
<PAGE>

     18.2.3  the financial position of the Borrower or any of its Subsidiaries
             deteriorates materially, or the Borrower or any of its Subsidiaries
             becomes insolvent or generally fails to pay, or admits in writing
             its inability to pay, its debts as they become due, or voluntarily
             commences any proceeding or files any petition under any
             bankruptcy, insolvency or similar law or seeking dissolution or
             reorganization or the appointment of a receiver, trustee, custodian
             or liquidator for it or a substantial portion of its property,
             assets or business, or to effect a plan or other arrangement with
             its creditors, or files any answer admitting the jurisdiction of
             the court and the material allegations of an involuntary petition
             filed against it in any bankruptcy, insolvency or similar
             proceeding, or is adjudicated bankrupt, or makes a general
             assignment for the benefit of creditors, or consents to, or
             acquiesces in the appointment of, a receiver, trustee, custodian or
             liquidator for a substantial portion of its property, assets or
             business;

     18.2.4  any action of the Borrower requiring prior information of the Banks
             or prior consent of the Banks is undertaken without such prior
             information or such prior consent having been obtained by the
             Borrower;

     18.2.5  any of the Security Documents is not executed or constituted in
             accordance with the terms agreed with the Banks, or is or becomes
             invalid, in whole or in part, or the security provided pursuant to
             the terms of the Financing Documents is no longer fully available
             to the Banks, or security is not provided without reasonable delay
             (unverzuglich) after a request by the Banks to be provided with
             such security pursuant to Sec. 10.2;

     18.2.6  Advances are not used in accordance with the provisions of Sec. 3.1
             and Sec. 8.1.3;

     18.2.7  the Financial Covenants are not complied with;

     18.2.8  any assets or revenues of the Borrower or any of its Subsidiaries
             are subject to seizure, attachment or similar process of compulsory
             enforcement or execution, unless such enforcement or execution does
             not in any way affect the Borrower's ability to comply with its
             payment obligations or other material obligations hereunder;

     18.2.9  any governmental authority or court takes an action which has a
             material adverse effect on the financial or business situation of
             the Borrower, or its ability to discharge any of its obligations
             under the Financing Documents;

     18.2.10 the Borrower sells or otherwise disposes of all or a substantial
             part of its assets, or ceases to conduct all or a substantial part
             of its business as

                                       22
<PAGE>

             now conducted, or merges, or consolidates with any other company
             unless the entity surviving such merger or consolidation is a
             Borrower;

     18.2.11 any of the covenants pursuant to Sec. 17 is breached, any of the
             representations and warranties pursuant to Sec. 15 or contained in
             the Security Documents is inaccurate, or any other obligation of
             the Borrower or any other party under the Financing Documents is
             breached, and such breach or inaccuracy is due to circumstances
             which affect the Banks' position adversely and more than
             immaterially;

     18.2.12 any of the reporting and information requirements pursuant to Sec.
             16 is not satisfied, or any of the other obligations of the
             Borrower under this Credit Agreement is breached, and such breach
             is not remedied within fifteen Banking Days after the date of a
             written reminder in respect thereof sent to the Borrower by the
             Agent;

     18.2.13 the interest rates agreed in this Credit Agreement become unlawful
             or unenforceable in any jurisdiction in which the Borrower has its
             registered office or principal place of business.

19.  Expenses
-------------

The Borrower shall bear all reasonable expenses, fees and other costs incurred
by the Banks, the Agent, the Mandated Arranger, the Co-Arranger and the Security
Agent in connection with the preparation, amendment and implementation of this
Credit Agreement, the Security Documents and the other agreements and documents
referred to herein, and in connection with the granting and/or realization of
security, including the reasonable fees, costs and expenses of external legal,
auditing and other professional advisors.

20.  Assignments
----------------

20.1 The Borrower shall not be entitled to assign or transfer its rights and
     obligations under this Credit Agreement, in whole or in part, to any third
     party without the prior written consent of the Banks.

20.2 The Banks shall be entitled to assign and transfer their rights and
     obligations under this Credit Agreement, in whole or in part, to other
     financial institutions or, after any termination pursuant to Sec. 18, to
     any third party, provided that during the term of this Credit Agreement the
     relevant assignees simultaneously enter into appropriate security trust
     agreements and an agency agreement with the Banks.

                                       23
<PAGE>

21.   Fees
----------

21.1  The Borrower shall pay to the Banks, having committed funds under the
      Facility a commitment fee in an amount of 1.00 per cent per annum which
      shall be calculated on the undrawn amounts of the Banks' respective
      commitments from the date of this Credit Agreement to the last day of
      availability hereunder pursuant to Sec. 7.1.3, and which shall be due and
      payable on the last Banking Day of each calendar quarter.

21.2  The Borrower and the Arranger have entered into a separate agreement
      relating to other fees and costs payable by the Borrower in connection
      with this Credit Agreement.

22.   Notices
-------------

All correspondence and notifications under or in connection with this Credit
Agreement shall be delivered in person either in written form at the following
addresses (or such other address notified in writing by the recipient to the
other party), or by registered letter, courier or telefax:

To the Mandated Arranger/
Agent/Security Agent:              Landesbank Hessen-Thuringen Girozentrale
                                   Attn: Martin Rohmann,
                                   Corporate Finance
                                   Main Tower
                                   Neue Mainzer Str. 52-58
                                   60311 Frankfurt am Main
                                   Tel.: [49]-0-69-91324202
                                   Fax:  [49]-0-69-91324350

To the Co-Arranger:                Kreditanstalt fur Wiederaufbau
                                   Attn: Head of Export and Project Aerospace
                                   Palmengartenstrasse 5-9
                                   60325 Frankfurt am Main
                                   Tel.: [49]-0-69-7431-0
                                   Fax:  [49]-0-69-7431-2944

To the Borrower.:                  Hawker Pacific Aerospace
                                   Attn: Phil Panzera
                                   11240 Sherman Way, Sun Valley, Ca 91352-4942
                                   USA
                                   Tel.: [1]-818 765 6201
                                   Fax:  [1]-818 765 8587

                                       24
<PAGE>

23.   Miscellaneous Provisions
------------------------------

23.1  The failure by any of the Banks to exercise any of their rights hereunder,
      in whole or in part, in particular any failure to exercise their right to
      terminate this Credit Agreement, shall not constitute a waiver by the
      Banks of such right unless the Borrower has received written confirmation
      from the Banks that they have waived such rights. All rights pursuant to
      this Credit Agreement shall have effect individually and without prejudice
      to any other statutory or contractual rights at law or under contract in
      favour of the Banks.

23.2  All amendments and supplements to this Credit Agreement, and all
      declarations of consent made in accordance with this Credit Agreement,
      must be in writing. This requirement shall also apply to any amendment,
      release, or waiver of the requirement for such written form. In the case
      of declarations of consent or any other declarations to be made in
      connection with this Credit Agreement and the agreements referred to
      herein to which the Banks are parties, the Agent shall be deemed to be
      authorized to make such declarations towards the Borrower.

23.3  The invalidity or unenforceability of one or more provisions of this
      Credit Agreement shall not affect the remaining provisions of this Credit
      Agreement. Any invalid or unenforceable provision shall be substituted by
      a provision which approximates most closely the economic purpose of the
      void or unenforceable provision. The same shall apply accordingly in case
      of any omissions.

23.4  The Agent shall be authorized, and be exempted from the restrictions
      imposed by Sec. 181 Civil Code (BGB) in this respect, to represent the
      other Banks in connection with this Credit Agreement, and to make or
      receive all declarations and undertake all actions in the name also of the
      other Banks which it deems necessary in this context.

24.   Governing Law, Jurisdiction
---------------------------------

24.1  This Credit Agreement shall be governed by the laws of the Federal
      Republic of Germany.

24.2  The courts of Frankfurt am Main shall have exclusive jurisdiction in
      respect of the resolution of all disputes under or in connection with this
      Credit Agreement. The Banks shall be entitled, however, to also bring
      legal action against the Borrower before all other courts of competent
      jurisdiction. The Borrower hereby irrevocably designates, appoints and
      authorizes Lufthansa Technik AG, attn.: HAM TV/J, Weg beim Jager 193,
      22235 Hamburg to receive for it and on its behalf service of process
      issued out of the German courts.

25.   Agency Agreement
----------------------

                                       25
<PAGE>

The Banks will enter into an Agency Agreement in the form set out in Schedule
                                                                     --------
14.
--

Sun Valley, CA, October 30, 2000             Frankfurt am Main,
----------------------------------           -----------------------------------
Place, date                                   Place, date

/s/ Philip M. Panzera                        /s/ Martin Rohmann
----------------------------------           -----------------------------------
Hawker Pacific Aerospace, Inc.                Landesbank Hessen-Thuringen
                                              Girozentrale

                                             Frankfurt am Main,
                                             -----------------------------------
                                              Place, date

                                              /s/ Christian Bevc
                                             -----------------------------------
                                              Kreditanstalt fur Wiederaufbau

                                       26
<PAGE>

Sun Valley, CA, October 30, 2000             Frankfurt am Main, October 30,2000
-----------------------------------          -----------------------------------
Place, date                                   Place, date

/s/ David L. Lokken                           /s/ Frank Dohl
-----------------------------------          -----------------------------------
Hawker Pacific Aerospace, Inc.                Landesbank Hessen-Thuringen
                                              Girozentrale

                                             Frankfurt am Main, October 30,2000
                                             -----------------------------------
                                              Place, date

                                              /s/ Wolfgang Behler
                                             -----------------------------------
                                              Kreditanstalt fur Wiederaufbau

                                       27
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 1
----------

                             COMMITMENTS OF BANKS

                                      -1-
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 1
----------

                             COMMITMENTS OF BANKS

          -------------------------------------------------------------------
          Banks                                       Facility
          -------------------------------------------------------------------
          Landesbank Hessen-Thuringen Girozentrale    USD 22,500,000
          -------------------------------------------------------------------
          Kreditanstalt fur Wiederaufbau              USD 22,500,000
          -------------------------------------------------------------------

                                      -2-
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 2
----------

                                DRAWDOWN NOTICE
                                ---------------

                                      -1-
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 2
----------

                            FORM OF DRAWDOWN NOTICE
                            -----------------------

FROM:          Hawker Pacific Aerospace, Sun Valley, California

TO:            Landesbank Hessen-Thuringen Girozentrale, Frankfurt am Main
               as Agent for the  financial institutions identified herein

Credit Agreement dated [...] (the "Credit Agreement") between (1) Hawker
Pacific Aerospace, Inc. Sun Valley, California, (2) Landesbank Hessen-Thuringen
Girozentrale, Frankfurt am Main and (3) Kreditanstalt fur Wiederaufbau,
Frankfurt am Main.

We refer to the Credit Agreement and hereby give you notice that we wish to make
the following drawing:

          Amount: USD 45,000,000
          Drawdown Date: [...]

We hereby request you to make the above amount available by way of transfer to
the following account:

          Account Holder:
          Account no.:
          Account Bank:

We confirm that as of the date hereof:

(i)   each condition specified in Sec. 8 (Conditions for Drawdown) of the Credit
      Agreement is satisfied;

(ii)  the representations and warranties given by us pursuant to Sec. 15
      (Representations and Warranties) of the Credit Agreement are true and
      accurate in all material respects at the date of this notice and will be
      true and accurate in all material respects as at the Drawdown Date; and

(iii) none of the events referred to in Sec. 18 (Termination) of the Credit
      Agreement has occurred and is continuing.

Date:

For and on behalf of

Hawker Pacific Aerospace Inc., Sun Valley, California

                                      -2-
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 3
----------

                              REPAYMENT SCHEDULE

                                      -1-
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 3
----------

                              REPAYMENT SCHEDULE

                           Hawker Pacific Aerospace
                              Term Loan Repayment
                                  (USD 000's)

<TABLE>
<CAPTION>
---------------------------------------------------------      ---------------------------------------
     Repayment           Repayment            Principal                                    Principal
       Date               Amount               Balance                   Period            Repayment
---------------------------------------------------------      ---------------------------------------
     <S>                 <C>                  <C>                   <C>                        <C>
     31-Dec-00                                    45,000            Year 1                          0
     31-Mar-01                                    45,000            Year 2                      1,500
     30-Jun-01                                    45,000            Year 3                      2,750
     30-Sep-01                                    45,000            Year 4                      3,000
     31-Dec-01                                    45,000            Year 5                      2,750
     31-Mar-02                                    45,000           + Balloon                   35,000
                                                               ---------------------------------------
     30-Jun-02                      500           44,500                                       45,000
                                                               ---------------------------------------
     30-Sep-02                      500           44,000
     31-Dec-02                      500           43,500
     31-Mar-03                      500           43,000
     30-Jun-03                      750           42,250
     30-Sep-03                      750           41,500
     31-Dec-03                      750           40,750
     31-Mar-04                      750           40,000
     30-Jun-04                      750           39,250
     30-Sep-04                      750           38,500
     31-Dec-04                      750           37,750
     31-Mar-05                      750           37,000
     30-Jun-05                    1,000           36,000
     30-Sep-05                    1,000           35,000
     31-Oct-05                   35,000                0
---------------------------------------------------------
</TABLE>

                                      -2-
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 4
----------

                                    [BLANK]
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 5
----------

                           LIEN HAWKER CORP. ASSETS
                           ------------------------
<PAGE>

                              SECURITY AGREEMENT
                              ------------------

     THIS security AGREEMENT ("Agreement") is made and entered into as of the
30th day of October, 2000, by and between Hawker Pacific Aerospace, a California
corporation, and Hawker Pacific Aerospace, Ltd., a United Kingdom corporation
(collectively, the "Borrower"), and Landesbank Hessen-Thuringen Girozentrale, a
bank organized and existing under the banking laws of Germany, and Kreditanstalt
fur Wiederaufbau, a public institution organized and existing under the laws of
Germany (collectively, the "Lender").

                                R E C I T A L S

     A.  On October 30, 2000, for valuable consideration, Borrower entered into
a Credit Agreement and a Facility Agreement (together or separately as the
context may require, the "Facility") with Lender, which evidences, inter alia,
an obligation of Borrower to Lender.

     B.  As security for the payment and performance of all debts, liabilities,
obligations, covenants, and duties owing to Lender by Borrower and all claims of
the Lender against the Borrower, however evidenced, under the Facility, as the
same may be amended, supplemented, modified, renewed, or extended from time to
time, Borrower desires to grant to Lender a security interest in all of
Borrower's assets.

     NOW, THEREFORE, in consideration of the foregoing Recitals, and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Lender and Borrower agree as follows:

     1.  DEFINITIONS.  In addition to any terms defined elsewhere in this
         ------------
Agreement, the following terms have the following meanings ascribed to them for
purposes of this Agreement:

         "Account" means all "accounts" (as defined in the UCC) now owned or
hereafter created or acquired by Borrower including, without limitation, all of
the following now owned or hereafter created or acquired by Borrower: (a)
accounts receivable, contract rights, book debts, notes, drafts, and other
obligations or indebtedness owing to Borrower arising from the sale, lease, or
exchange of goods or other property and/or the performance of services; (b)
Borrower's rights in, to and under all purchase orders for goods, services, or
other property; (c) Borrower's rights to any goods, services or other property
represented by any of the foregoing (including returned or repossessed goods and
unpaid sellers' rights of rescission, replevin, reclamation, and rights to
stoppage in transit); (d) moneys due to or to become due to Borrower under all
contracts for the sale, lease, or exchange of goods or other property and/or the
performance of Borrower); and (e) Proceeds of all of the foregoing, and all
collateral security and guarantees of any kind given by any person with respect
to any of the foregoing.

         "Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such Person.

         "Agreement" means this Security Agreement, as amended from time to
time.

         "Assigned Agreements" means all significant agreements of Borrower.

         "Borrower" means Hawker Pacific Aerospace, a California corporation,
and Hawker Pacific Aerospace, Ltd., a United Kingdom corporation, jointly and
severally.

         "Business" means all business activities engaged in by Borrower.

                                       1
<PAGE>

          "Chattel Paper" means any writing which evidences both a monetary
obligation and a security interest in or a lease of specific goods.

          "Collateral" means all of the following: (a) all of Borrower's
Inventory, Equipment and Fixtures now owned or hereafter acquired; (b) all of
Borrower's Documents of Title now owned or hereafter acquired; (c) all of
Borrower's Accounts now existing or hereafter arising; (d) all of Borrower's
Contract Rights now existing or hereafter arising; (e) all of Borrower's General
Intangibles, Chattel Paper, and Instruments, now existing or hereafter acquired
or arising; (f) all suretyships and guarantees of Borrower's existing and future
Accounts, Contract Rights, and General Intangibles, and all security for the
payment or satisfaction of such suretyships and guarantees; (g) the goods or the
services the sale or lease or performance of which gave rise to any Account,
Contract Right or General Intangible of Borrower including any returned goods;
(h) any balance or share belonging to Borrower of any deposit, agency, or other
account with any bank and any other amounts which may be owing from time to time
by any bank to Borrower; (i) all property of any nature whatsoever of Borrower
now or hereafter in the possession of or assigned or hypothecated to the Lender
for any purpose; and (j) all Products and Proceeds of all of the foregoing,
including all Proceeds of other Proceeds.

          "Contract Right" means any right to payment under a contract
(including but not limited to contracts for the sale or leasing of goods or for
the rendering of services) not yet earned by performance and not evidenced by an
Instrument or Chattel Paper.

          "Contingent Obligation," as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person: (a) with respect to
any indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss with respect thereto; (b) with
respect to any letter of credit issued for the account of that Person or as to
which that Person is otherwise liable for reimbursement of any drawing
thereunder; or (c) under any foreign exchange contract, currency swap agreement,
interest rate swap or cap agreement or other similar agreement or arrangement
designed to protect that Person against fluctuations in currency values or
interest rates. Contingent Obligations will include, without limitation, (1) the
direct or indirect guaranty, endorsement (other than for collection or deposit
in the ordinary course of business), co-making, discounting with recourse or
sale with recourse by such person of the obligation of another, (2) the
obligation to make take-or-pay or similar payments if required regardless of
nonperformance by any other party or parties to an agreement, and (3) any
liability of such Person for the obligations of another through any agreement to
purchase, repurchase or otherwise acquire such obligation, to provide funds for
the payment or discharge of such obligation or to maintain the solvency,
financial condition or any balance sheet item or level of income of another. The
amount of any Contingent Obligation will be equal to the amount of the
obligation so guaranteed or otherwise supported or, if a fixed and determined
amount, the maximum amount so guaranteed.

          "Copyright" means all of the following: (a) all copyrights, rights,
and interests in copyrights, copyright registrations, and copyright applications
now owned or hereafter created or acquired by Borrower; (b) all renewals of any
of the foregoing; (c) all income, royalties, damages and payments now or
hereafter due and/or payable under any of the foregoing, including, without
limitation, damages or payments for past or future infringements

                                       2
<PAGE>

of any of the foregoing; (d) the right to sue for past, present, and future
infringements of any of the foregoing; and (e) all rights corresponding to any
of the foregoing throughout the world.

          "Copyright License" means any written agreement now or hereafter in
existence granting to Borrower any right to use any Copyright.

          "Document of Title" has the meaning ascribed to it in the UCC.

          "Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by Borrower including, without limitation, all machinery,
computers, computer equipment, motor vehicles, trucks, trailers, vessels,
aircraft, and rolling stock, and all parts thereof and all additions and
accessions thereto and replacements therefor.

          "Event of Default" has the meaning set forth in section 5 of this
Agreement.

          "Financing Statement" means the form of financing statement that will
be necessary to perfect, upon filing, a security interest in the Collateral in
each jurisdiction in which such Collateral is located or in which a filing is
required under the UCC to perfect such security interest.

          "Fixtures" means all of the following now owned or here after acquired
by Borrower: plant fixtures; business fixtures; other fixtures and storage
office facilities, wherever located; and all additions and accessions thereto
and replacements therefor.

          "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.

          "General Intangibles" means all "general intangibles" (as defined in
the UCC) now owned or hereafter acquired by Borrower including, without
limitation, all right, title, and interest of Borrower in and to: (a) the
Assigned Agreements and all other agreements, leases, licenses, and contracts to
which Borrower is or may become a party; (b) all obligations or indebtedness
owing to Borrower (other than accounts) from whatever source arising; (c) all
tax refunds; (d) all Intellectual Property; and (e) all trade secrets, know how
and common law intellectual property rights including, without limitation,
rights in computer software developed by or for Borrower and other confidential
information relating to the business of the Borrower, including by way of
illustration and not limitation: the names and addresses of, and credit and
other business information concerning, Borrower's past, present, or future
customers; the prices that Borrower obtains for its services or at which it
sells merchandise; estimating and costs procedures; profit margins; policies and
procedures pertaining to the sale and design of equipment, components, devices,
and services furnished by Borrower; information concerning suppliers of Borrower
and information concerning the manner of operation, business plans, pledges,
projections, and all other information of any kind or character, whether or not
reduced to writing, with respect to the conduct by Borrower of its business not
generally known by the public.

          "Governmental Approvals" means any consent, right, exemption,
concession, permit, license, authorization, certificate, order, franchise,
determination, or approval of any federal, state, provincial, municipal, or
governmental department, commission, board, bureau, agency, or instrumentality
required for the ownership of properties by or activities of Borrower.

                                       3
<PAGE>

          "Governmental Authority" means any nation or government, any state,
province or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

          "Governmental Requirements" means all legal requirements in effect
from time to time including all laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, certificates, orders, franchises, determinations, approvals,
consents, notices, demand letters, directions, and requirements of all
governments, departments, commissions, boards, courts, authorities, agencies,
officials, and officers, foreseen or unforeseen, ordinary or extraordinary,
including but not limited to any change in any law or regulation, or the
interpretation thereof, by any foreign or domestic governmental or other
authority (whether or not having the force of law), relating now or at any time
heretofore or hereafter to the business or operations of Borrower or to any of
the property owned, leased, or used by Borrower, including, without limitation,
the development, design, construction, acquisition, start-up, ownership, and
operation and maintenance of property.

          "Incipient Default" means an event which, upon the lapse of time or
the giving of notice, or both, would constitute an Event of Default.

          "Indebtedness" of any Person means all liabilities, obligations and
reserves, contingent or otherwise, of such Person.

          "Instrument" means a negotiable instrument or a security or any other
writing which evidences a right to the payment of money and is not itself a
security agreement or lease, and is of a type which is in the ordinary course of
business transferred by delivery with any necessary endorsement or assignment.

          "Intellectual Property" means all of the following: Copyrights,
Copyright Licenses, Patents, Patent Licenses, Trademarks, and Trademark
Licenses.

          "Inventory" means all "goods" (as defined in the UCC) now owned or
hereafter acquired and held by Borrower for sale or lease or to be furnished
under contracts of service, tangible personal property which Borrower has so
leased or furnished including, without limitation, tangible personal property,
raw materials, work in process, and materials used, produced or consumed in
Borrower's business, and will include tangible personal property held by others
for sale on consignment from Borrower, tangible personal property sold by
Borrower on a sale or return basis, tangible personal property returned to
Borrower by the purchaser following a sale thereof by Borrower, and tangible
personal property represented by Documents of Title. All equipment, accessories,
and parts at any time attached or added to items of Inventory or used in
connection therewith will be deemed to be part of the Inventory.

          "Lender" means Landesbank Hessen-Thuringen Girozentrale, a bank
organized and existing under the banking laws of Germany, and Kreditanstalt fur
Wiederaufbau, a public institution organized and existing under the banking laws
of Germany, jointly and severally, and their respective successors and assigns.

          "Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement to give any
security interest).

                                       4
<PAGE>

          "Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations or financial condition of Borrower, (b) the ability
of Borrower to pay the Obligations in accordance with their terms, or (c) the
perfection or priority of Lender's first lien on and security interest in the
Collateral (as defined in this Agreement) or the value of such Collateral.

          "Obligations" means all debts, liabilities, obligations, covenants,
and duties owing to Lender by Borrower, however evidenced, under the Facility,
this Agreement, or otherwise, as the same may be amended, supplemented,
modified, renewed, or extended from time to time.

          "Patent License" means any written agreement now or hereafter in
existence granting to Borrower any right to use any invention on which a
subsisting Patent exists.

          "Patents" means all of the following: (a) all patents and patent
applications now owned or hereafter created or acquired by Borrower and the
inventions and improvements described and claimed therein, and all patentable
inventions; (b) the reissues, divisions, continuations, renewals, extensions,
and continuations-in-part of any of the foregoing; (c) all income, royalties,
damages, or payments now and hereafter due and/or payable under any of the
foregoing or with respect to any of the foregoing including, without limitation,
damages or payments for past or future infringements of any of the foregoing;
(d) the right to sue for past, present, and future infringements of any of the
foregoing; and (e) all rights corresponding to any of the foregoing throughout
the world.

          "Person" means any individual, corporation, partnership, trust,
association or other entity or organization, including any government, political
subdivision, agency or instrumentality thereof.

          "Proceeds" means all proceeds of, and all other profits, rentals, or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing, or other disposition of, or realization upon, any
Collateral including, without limitation, all claims of Borrower against third
parties for loss of, damage to, or destruction of, or for proceeds payable for
loss of, damage to, or destruction of, or for proceeds payable under, or
unearned premiums with respect to, policies of insurance with respect to any
Collateral, and any condemnation or requisition payments with respect to any
Collateral, in each case whether now existing or hereafter arising.

          "Trademark" means all of the following now owned or hereafter created
or acquired by Borrower: (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos, other business identifiers, prints and labels on which any of the
foregoing have appeared or appear, all registrations and recordings thereof, and
all applications in connection therewith, including registrations, recordings,
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof, and in any
other country or any political subdivision thereof; (b) all reissues,
extensions, or renewals thereof; (c) all income, payable under any of the
foregoing or with respect to any of the foregoing, including damages or payments
for past or future infringements of any of the foregoing; (d) the right to sue
for past, present, and future infringements of any of the foregoing; (e) all
rights corresponding to any of the foregoing throughout the world; and (f) all
goodwill associated with or symbolized by any of the foregoing.

          "Trademark License" means any written agreement now or hereafter in
existence granting to Borrower any right to use any Trademark.

                                       5
<PAGE>

          "UCC" means the California Uniform Commercial Code, as amended from
time to time, and any successor statute; provided, however, that if by reason of
mandatory provisions of law, the perfection or the effect of perfection or non-
perfection of the security interest in any Collateral is governed by the Uniform
Commercial Code, or other applicable statute, law, or provision relating to the
perfection or the effect of perfection or non-perfection of any such security
interest, as in effect on or after the date hereof in any other jurisdiction,
then "UCC" will mean the Uniform Commercial Code or such other statute, law, or
provision as in effect in such other jurisdiction for purposes of the provision
hereof relating to such perfection or the effect of perfection or non-
perfection.

          Any accounting term not defined in this Agreement will have the
meaning given to it under GAAP.

     2.   SECURITY INTEREST.
          ------------------

          2.1  Grant of Security Interest.  Borrower hereby grants to Lender a
               ---------------------------
continuing security interest in and to all right, title, and interest of
Borrower in the Collateral, whether now owned or existing or hereafter acquired
or arising, regardless of where located, to secure payment and performance of
the Obligations.  Notwithstanding any other provision of this Agreement: (a)
Borrower will remain liable under the contracts and agreements included in the
Collateral to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed; and (b) Lender will not have any obligation or liability under the
contracts and agreements included in the Collateral by reason of this Agreement,
nor will Lender be obligated to perform any of the obligations or duties of
Borrower thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.  The security interest granted hereby secures the
payment and performance of the indebtedness of every nature of Borrower to
Lender now or hereafter existing and however evidenced, under the Facility, this
Agreement or otherwise, and all renewals, extensions, restructurings, and
refinancings of the same.

          2.2  Affirmative Covenants of Borrower. Borrower will: (a) do all acts
               ----------------------------------
that may be necessary to maintain, preserve, and protect the Collateral; (b) pay
promptly when due all taxes, assessments, charges, encumbrances, and liens now
or hereafter imposed upon or affecting the Collateral; (c) procure, execute, and
deliver from time to time any endorsements, assignments, financing statements,
and other writings necessary or appropriate to perfect, maintain, and protect
Lender's security interest hereunder and the priority thereof, and to deliver
promptly to Lender all records of (1) Collateral or (2) insurance proceeds; (d)
appear in and defend any action or proceeding which may affect its title to or
Lender's interest in the Collateral; (e) keep separate, accurate, and complete
records of the Collateral and provide Lender with such books, records, and such
other reports and information relating to the Collateral as Lender may
reasonably request from time to time; (f) when an Event of Default under this
Agreement has occurred and after demand, account fully for and immediately
deliver to Lender in the form received, all Collateral and all Proceeds,
endorsed to Lender as appropriate, and unless so delivered all Collateral and
all such Proceeds will be held by Borrower in trust for Lender, separate from
all other property of Borrower and identified as the property of Lender; (g)
keep the Collateral in good condition and repair; (h) at any reasonable time,
upon demand by Lender, exhibit to and allow inspection by Lender (or persons
designated by Lender) of all Collateral embodying Intellectual Property rights,
so long as (1) a representative of Borrower accompanies Lender or Lender's
designee on such inspection and (2) Lender or Lender's designee makes no copies
of any such Collateral; (i) at any reasonable time, upon demand by Lender,
exhibit to and allow inspection by Lender (or persons designated by Lender) of
all Collateral not embodying Intellectual Property; (j) keep the Collateral (and

                                       6
<PAGE>

books and records concerning the Collateral) at Borrower's principal place of
business and not remove the Collateral from such location without (1) the prior
written consent of Lender or (2) creating a similar security interest at the new
location of the Collateral; (k) give thirty (30) days' prior written notice of
any change in Borrower's chief place of business or trade name(s) or style(s)
set forth therein; (l) comply with all laws, regulations, and ordinances
relating to the possession, operation, maintenance, and control of the
Collateral; (m) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices as may be necessary or
desirable, or as Lender may reasonably request, in order to perfect and preserve
the security interest granted or intended to be granted hereby under the laws of
any applicable jurisdiction; and (n) upon Lender's request, appear in and defend
any action or proceeding that may affect Borrower's title to or Lender's
security interest in the Collateral.

          2.3  Negative Covenants of Borrower. Borrower will not, without the
               -------------------------------
prior written consent of Lender: (a) use or permit the Collateral to be used
unlawfully or in violation of any provision of this Agreement, or any applicable
statute, regulation, or ordinance or any policy of insurance covering the
Collateral; (b) cause any waste or unusual or unreasonable depreciation of the
Collateral; or (c) after default under this Agreement and upon demand, modify,
waive or release any provisions of any Account, Contract Right, item of Chattel
Paper, Instrument or other right to the payment of money constituting
Collateral.

          2.4  Insurance. Upon execution of this Agreement, Borrower will insure
               ----------
the Collateral, with Lender named as a loss payee, in reasonable form and
amounts, with companies reasonably acceptable to Lender, and against normal
risks and liabilities. Borrower will deliver copies of such policies to Lender
at Lender's request. In the event of loss of insured Collateral, Lender may make
any claim thereunder, and until the Collateral is promptly replaced by Borrower
from the segregated proceeds of the insurance, Lender may collect and receive
payment of and endorse any instrument in payment of loss, and apply such amounts
received, at Lender's election, to replacement of Collateral or to the
Obligations. Lender will not by the fact of approving, disapproving, accepting,
preventing, obtaining or failing to obtain any insurance, incur any liability
for or with respect to the amount of insurance carried, the form or legal
sufficiency of insurance contracts, solvency of insurance companies, or payment
or defense of lawsuits. Borrower hereby expressly assumes full responsibility
therefor and all liability, if any, with respect thereto.

          2.5  Perfection.  Borrower represents and warrants to Lender that this
               -----------
Agreement creates a valid, perfected, and first priority lien against and
security interest in the Collateral, securing the payment of the Obligations,
and all filings and other actions necessary or desirable to perfect and protect
such interest have been duly taken.  Borrower further represents and warrants to
Lender that neither the Collateral nor any portion thereof is subject to (or
will be subject to) any lien, encumbrance, or security interest in favor of any
third party other than Lender.  Borrower covenants and agrees that until all of
the Obligations are irrevocably paid in full, Borrower will not, except as
permitted under the Credit Agreement, borrow any monies, or purchase any goods,
or obtain any services from (and Borrower covenants and agrees that none of
Borrower's affiliates will borrow any monies, or purchase any goods, or obtain
any services from) anyone that will increase the outstanding Indebtedness owing
to anyone by Borrower (or any of Borrower's affiliates), the repayment of which
is secured by a lien on or security interest in any of the Collateral that is
senior in priority to the lien on and security interest in the Collateral that
Borrower has granted to Lender in this Agreement.  Borrower further represents
and warrants to Lender that it will not open, establish, or maintain a deposit
account (as that term is defined in the UCC) without (a) providing at least five
(5) days' prior written notice to Lender of its intention to open such deposit
account (including the name and address of the branch of the financial
institution and the name of the

                                       7
<PAGE>

account officer or branch manager); and (2) thereafter, simultaneously
delivering to the financial institution where such deposit account is being
opened or established or maintained a written notice, duly executed by
Borrower's duly authorized officer, and in a form reasonably satisfactory to
Lender and its attorneys, informing such financial institution of Lender's first
lien and security interest in such deposit account(s); and (2) simultaneously
taking such other actions as are necessary to perfect Lender's first lien
against and security interest in such deposit account(s). Borrower further
represents and warrants to Lender that it has provided to Lender a complete and
accurate written list of all of the deposit accounts that it maintains as of the
date of this Agreement, including the name and address of each financial
institution where it maintains each of its deposit accounts; the name of the
relevant account officer or branch manager; and the account number of each of
its deposit accounts.

          2.6  Expenses. Lender may incur expenses in connection with the
               ---------
retaking, holding or preparing for sale of the Collateral including, with
limitation, reasonable attorneys' fees, appraisal fees, auction fees and
advertising costs, and in connection with protecting or enforcing its rights
under this Agreement, including but not limited to reasonable attorneys' fees
and actual out-of-pocket costs, which expenses Borrower will pay and are
Obligations secured hereby.

          2.7  Waivers.  Borrower waives every right it may have to require
               --------
Lender to proceed against any person or to exhaust any Collateral or to pursue
any remedy available to Lender. Borrower waives every defense it may have
arising from Lender's failure to perfect or maintain a perfected security
interest in the Collateral.

          2.8  Termination of Security Interests; Release of Collateral. Upon
               ---------------------------------------------------------
payment in full of all Obligations, the security interest created hereby will
terminate. Upon such termination of the security interest or release of any
Collateral, Lender will execute and deliver to Borrower such documents as
Borrower reasonably requests to evidence the termination of the security
interest or the release of such Collateral.

          2.9  Cumulative Rights.  All rights and remedies of Lender under this
               ------------------
Agreement are in addition to all rights and remedies given to Lender contained
in any other agreement, instrument or document or available to Lender at law or
in equity.  All such rights and remedies are cumulative and not exclusive and
may be exercised successively or concurrently.  No exercise of any right or
remedy will be deemed an election of remedies and preclude exercise of any other
right or remedy.

     3.   COVENANTS.  Borrower covenants and agrees that it will comply with the
          ----------
following provisions so long as the Obligations are outstanding:

          3.1  Accounting Records.  Borrower will maintain adequate books and
               -------------------
accounts in accordance with GAAP consistently applied. Borrower will deliver to
Lender any financial information regarding the Business or the finances of
Borrower as Lender may reasonably request.

          3.2  Corporate Existence.  Borrower will preserve and maintain its
               --------------------
existence as a corporation in good standing in the jurisdiction of its formation
and all of its licenses, privileges, and franchises and other rights necessary
or desirable in the ordinary course of its business, except to the extent that
the failure to do so would not have a Material Adverse Effect.

          3.3  Qualification to Do Business.  Borrower is qualified to do
               -----------------------------
business and is and will remain in good standing in each jurisdiction in which
the nature of its business

                                       8
<PAGE>

requires it to be so qualified, except to the extent that the failure to be so
qualified and in good standing would not have a Material Adverse Effect.

          3.4  Compliance with Laws.  Borrower will observe and comply in all
               ---------------------
material respects with all laws, ordinances, orders, judgments, rules,
regulations, certifications, franchises, permits, licenses, directions and
requirements of all Governmental Authorities, which now or at any time may be
applicable to Borrower, a violation of which could be reasonably expected to
have a Material Adverse Effect.

          3.5  Taxes and Other Liabilities. Borrower will pay and discharge
               ----------------------------
prior to the date on which penalties attach thereto all taxes, assessments and
governmental charges, license fees and levies upon or with respect to Borrower,
and upon the income, profits and property of Borrower, unless and to the extent
that such taxes, assessments, charges, license fees and levies are being
contested in good faith and by appropriate proceedings diligently conducted by
Borrower, and provided that such reserve or other appropriate provisions as are
required in accordance with GAAP will have been made therefor.

          3.6  Insurance.  Borrower will maintain insurance with insurance
               ----------
carriers which Borrower reasonably believes are financially sound on such
property, against such risks, and in such amounts as is customarily maintained
by similar businesses, and file with Lender within five (5) days after Lender's
written request therefor a detailed list of such insurance then in effect,
stating the names of the carriers, the policy numbers, the insureds thereunder,
the amounts of insurance, the dates of expiration thereof, and the property and
risks covered thereby.

          3.7  Maintenance of Collateral.  Borrower will (a) maintain, keep and
               --------------------------
preserve all of the Collateral in good repair, working order and condition and
from time to time make all necessary and proper repairs, renewals, replacements,
and improvements thereto, and (b) maintain, preserve and protect all franchises,
licenses, copyrights, patents and trademarks material to its Business, so that
the Business carried on in connection therewith may be properly and
advantageously conducted at all times.

          3.8  Conduct of Business.  Borrower will (a) engage in the Business as
               --------------------
its principal business, and (b) comply with all Governmental Requirements.

          3.9  Authorizations.  Borrower will obtain, make and keep in full
               ---------------
force and effect all authorizations from and registrations with Governmental
Authorities that may be required for the validity and enforceability of this
Agreement, the Facility, and all other documents and instruments executed in
connection therewith against Borrower.

          3.10 Notification of Events of Default and Adverse Developments.
               -----------------------------------------------------------
Borrower will promptly notify Lender of the occurrence of (a) any Incipient
Default or Event of Default hereunder; (b) any event, development or
circumstance whereby any financial statements most recently furnished to Lender
fail in any material respect to present fairly, in accordance with GAAP, the
financial condition and operating results of Borrower as of the date of such
financial statements; (c) any material litigation or proceedings that are
instituted or threatened (to the knowledge of Borrower) against Borrower, or any
of its respective assets; and (d) each and every event which would be an Event
of Default under any Indebtedness of Borrower, such notice to include the names
and addresses of the holders of such indebtedness and the amount thereof.

          3.11 Further Assurances.  Borrower will execute, acknowledge and
deliver any and all such further assurances and other agreements or instruments,
and take or cause to

                                       9
<PAGE>

be taken all such other action, as may be reasonably requested by Lender from
time to time in order to give full effect to this Agreement and the Facility and
to maintain, preserve, safeguard, and continue at all times all of the rights,
remedies, powers, and privileges of Lender under this Agreement and the
Facility.

          3.12  Further Identification of Collateral.  If so requested by
                -------------------------------------
Lender, Borrower will furnish to Lender, as often as Lender reasonably requests,
statements and schedules further identifying and describing the Collateral, all
in reasonable detail.

     4.   NEGATIVE COVENANTS.  Borrower covenants and agrees that unless it
          -------------------
obtains Lender's prior written consent (which consent will not be unreasonably
withheld), so long as any of the Obligations remain outstanding, Borrower will
not:

          4.1  Merger or Acquisition.  Consolidate or merge into or with any
               ----------------------
Person or acquire all or substantially all of the stock, property or assets of
any Person.

          4.2  Sale and Exchange of Assets.  Sell, lease, assign, or transfer to
               ----------------------------
any Person, exchange with any Person, or otherwise dispose of any material asset
(except in the ordinary course of business or to the extent such asset is
obsolete or is no longer used or useful in the business of Borrower), or sell,
exchange, lease, assign, transfer, or otherwise dispose of all or substantially
all of its assets, except as is permitted under the Credit Agreement.

          4.3  Restricted Payments.  Make any distributions to its shareholders,
               --------------------
declare or pay any dividends, or apply any of its property to the voluntary
purchase, redemption or other retirement of, or set apart any sum for the
voluntary payment of any dividends on, or make any other distribution by
reduction of capital or otherwise in respect of, any shares of its present or
future issues of stock (each, a "Restricted Payment").

          4.4  Transactions with Affiliates.  Directly or indirectly enter into
               -----------------------------
or permit to exist any material transaction (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of Borrower, except for transactions in the ordinary
course of and pursuant to the reasonable requirements of the business of
Borrower and upon fair and reasonable terms which are fairly disclosed to
Lender.

     5.   DEFAULT.
          --------

          5.1  Events of Default.  Each of the following will constitute an
               ------------------
Event of Default under this Agreement:

               (a) Termination under Section 18 of the Facility.

               (b) Borrower fails to comply with any agreement contained in
section 4 of this Agreement, and with respect to any failure which by its nature
can be cured, such failure continues without cure for fifteen (15) calendar days
after Lender notifies Borrower in writing of the occurrence thereof.

               (c) Borrower defaults in the performance of any of its material
obligations under any provision of this Agreement, and with respect to any
failure which by its nature can be cured, such failure continues without cure
for fifteen (15) calendar days after Lender notifies Borrower in writing of the
occurrence thereof.

                                      10
<PAGE>

               (d)  Any warranty or representation made by Borrower in this
Agreement or in the Facility is untrue in any material respect, in any case on
any date as of which the facts set forth are stated or certified.

               (e)  Borrower institutes a voluntary case seeking liquidation or
reorganization under chapter 7 or chapter 11, respectively, of the United States
Bankruptcy Code (the "Code"), or under any other applicable insolvency,
bankruptcy, reorganization, composition, arrangement, moratorium or liquidation
laws of any state or country (collectively with the Code, the "Insolvency
Laws"), or consents to the institution of an involuntary case against it under
any of the Insolvency Laws; or Borrower files a petition initiating or otherwise
institutes any similar proceeding under any of the Insolvency Laws, or consents
thereto; or Borrower applies for, or by consent or acquiescence there is an
appointment of or order entered by a court of competent jurisdiction appointing
a receiver, liquidator, sequestrator, trustee or other officer with similar
powers; or Borrower makes an assignment for the benefit of creditors; or
Borrower admits in writing its inability to pay its debts generally as they
become due; or, if an involuntary case is commenced seeking the liquidation or
reorganization of Borrower under chapter 7 or chapter 11, respectively, of the
Code, or any similar proceeding is commenced against Borrower under any of the
Insolvency Laws, and (1) the petition commencing such case is not timely
controverted; or (2) the petition commencing such case is not dismissed within
thirty (30) days of its filing; or (3) a trustee (interim or otherwise) is
appointed to take possession of all or a portion of the Borrower's assets, or to
operate all or any part of the business of Borrower; or (4) an order for relief
is issued or entered therein.

               (f)  One or more judgments against Borrower or attachments
against its property, which in the aggregate exceed $10,000, or the operation or
result of which could be to interfere materially and adversely with the conduct
of the Business, remain unpaid, unstayed on appeal, undischarged, unbonded, and
undismissed for a period of thirty (30) days.

               (g)  The Lender or any of its subsidiaries is in default in any
payment obligations for borrowed money or under finance leases towards a third
party in a total amount of more than $50,000 or equivalent, or is in default in
any other payment obligations towards a third party (except where such
obligations towards trade creditors have been contested in good faith), in an
aggregate amount of more than $250,000 or equivalent, or Hawker Pacific
Aerospace, Ltd. is in default with its payment obligations towards the Lender.

               (h)  Any of Borrower's representations and warranties set forth
above in section 2.5 of this Agreement ceases to be true, or Borrower otherwise
fails to comply with the provisions of section 2.5.

          5.2  Termination of Obligations and Acceleration.  If any Event of
               --------------------------------------------
Default described above in section 5.1 occurs, all Obligations will become due
and payable immediately, without any further notice to Borrower.

          5.3  Other Remedies.  If any Event of Default occurs:
               ---------------

               (a)  Lender may exercise in respect of the Collateral, in
addition to all other rights and remedies provided for in this Agreement or
otherwise available to it, all the rights and remedies of a secured party upon
default under the UCC (whether or not the UCC applies to the affected
Collateral) and may also: (1) require Borrower to, and Borrower hereby agrees
that it will, at its expense and upon Lender's request, immediately assemble all
or part of the Collateral as directed by Lender and make it available to Lender
at a place to be designated by Lender which is reasonably convenient to the
parties; (2) with five (5) days written notice, enter upon any premises of
Borrower and take possession of the Collateral; and

                                      11
<PAGE>

(3) without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of Lender's
offices or elsewhere, at such time or times, for cash, on credit, or for future
delivery, and at such price or prices and upon such other terms as Lender may
deem commercially reasonable. Borrower agrees that, to the extent notice of sale
will be required by law, at least ten days' notice to Borrower of the time and
place of any public sale or the time after which any private sale is to be made
will constitute reasonable notification. At any sale of the Collateral, if
permitted by law, Lender may bid (which bid may be, in whole or in part, in the
form of cancellation of indebtedness) for the purchase of the Collateral or any
portion thereof for the account of Lender. Lender will not be obligated to make
any sale of Collateral regardless of notice of sale having been given. Lender
may adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. To the extent permitted
by law, Borrower hereby specifically waives all rights of redemption, stay, or
appraisal which it has or may have under any law now existing or hereafter
enacted.

               (b)  Borrower hereby irrevocably authorizes and empowers Lender
to assert, either directly or on behalf of Borrower, any claims Borrower may
have, from time to time, against any other party to the Assigned Agreements or
to otherwise exercise any right or remedy of Borrower under the Assigned
Agreements (including, without limitation, the right to enforce directly against
any party to an Assigned Agreement all of Borrower's rights thereunder, to make
all demands and give all notices and to make all requests required or permitted
to be made by Borrower under the Assigned Agreements).

               (c)  For the purposes of this Agreement, Borrower acknowledges
and agrees that after an Event of Default, it will be liable to Lender for all
reasonable attorneys' fees, consultant's fees, accountants' fees, expert witness
fees, and all actual out-of-pocket expenses incurred by Lender in connection
with any and all of the following: (1) any action taken by Lender to (A) enforce
any of its rights under this Agreement, (B) protect, preserve, collect,
assemble, lease, sell, take possession of, or liquidate any of the Collateral,
or (C) enforce or foreclose upon its security interest in any of the Collateral;
(2) any negotiation and/or documentation of a work out, refinancing,
restructuring, or settlement agreement with Borrower; and (3) the commencement
or defense of, or appearance or intervention in, any litigation, arbitration
proceeding, administrative proceeding, or bankruptcy case (including but not
limited to any adversary proceeding in such case) in or to which Borrower is a
party or party in interest.

Beyond the safe custody thereof, Lender will have no duty with respect to any
Collateral in its possession or control (or in the possession or control of any
agent or bailee) or with respect to any income thereon or the preservation of
rights against prior parties or any other rights pertaining thereto.  Lender
will be deemed to have exercised reasonable care in the custody and preservation
of the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which it accords its own property.  Lender will not
be liable or responsible for any loss or damage to any of the Collateral, or for
any diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected in good faith by Lender.

          5.4  Application of Proceeds.  Upon the occurrence and during the
               ------------------------
continuance of an Event of Default, the proceeds of any sale of, or other
realization upon, all or any part of the Collateral by Lender will be applied:
first, to all fees, costs, and expenses incurred by Lender with respect to this
Agreement; second, to accrued and unpaid interest on the Obligations; and third,
to the principal amount of the Obligations outstanding. Lender

                                      12
<PAGE>

acknowledges and agrees that it will not retain any proceeds in excess of the
amounts necessary to pay in full all of the items described in the preceding
sentence.

     6.   MISCELLANEOUS.
          --------------

          6.1  Successors and Assigns.  This Agreement inures to the benefit of
               -----------------------
and binds the parties to this Agreement and their respective successors,
assigns, agents, representatives, and all persons claiming by or through them,
including without limitation any chapter 7 or chapter 11 trustee in bankruptcy,
and the words "Lender" and "Borrower," whenever occurring in this Agreement,
will be deemed to include such respective successors, assigns, agents,
representatives, and all persons claiming by or through them.

          6.2  Time.  The parties to this Agreement agree that time is of the
               -----
essence with respect to all of the provisions of this Agreement.

          6.3  Counterpart Originals.  This Agreement may be executed in two
               ----------------------
counterparts, each of which will be deemed to be an original as against the
party whose "ink original" or facsimile signature appears thereon, and both of
such counterparts will together constitute one and the same instrument.  Each
party to this Agreement who delivers a facsimile signature will promptly
thereafter deliver to each of the other parties to this Agreement a counterpart
original of this Agreement bearing an "ink original" signature.

          6.4  Captions.  The captions or headings of the sections of this
               ---------
Agreement are for convenience only and will not control or affect the meaning or
construction of any of the terms or provisions of this Agreement.

          6.5  Gender; Number.  Words used in this Agreement, regardless of the
               ---------------
number or gender specifically used, will be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context requires.

          6.6  Additional Actions.  Each of the parties to this Agreement
               -------------------
covenants and agrees that it will take promptly such additional actions and will
execute such additional documents and instruments as are reasonably necessary to
effectuate the transactions contemplated by this Agreement.

          6.7  No Third Party Beneficiaries.  The rights and benefits of this
               -----------------------------
Agreement will not inure to the benefit of any party that is not a party to this
Agreement. Nothing contained in this Agreement will be construed to create any
rights, claims, or causes of action in favor of any third party against any
party to this Agreement.

          6.8  Notices.  All notices and communications under this Agreement
               --------
will be in writing and will be: (a) delivered in person; or (b) sent by fax; or
(c) mailed, postage prepaid, either by certified mail, return receipt requested,
or by overnight express carrier, addressed in each case as follows:

          To Borrower: Hawker Pacific Aerospace
                       Attn: Phil Panzera
                       11240 Sherman Way
                       Sun Valley, Ca 91352 USA
                       Fax: 1 (818) 765-8587

                       and

                                      13
<PAGE>

                       Hawker Pacific Aerospace, Ltd.
                       c/o Hawker Pacific Aerospace
                       Attn: Phil Panzera
                       11240 Sherman Way
                       Sun Valley, Ca 91352 USA
                       Fax: 1 (818) 765-8587

                       A courtesy copy of any notice under this Agreement that
                       is sent to Borrower must be sent to:

                       Troy & Gould
                       Attn: Dale Short
                       1801 Century Park East, 16/th/ Floor
                       Los Angeles, CA 90067-2367 USA
                       Fax: 1 (310) 201-4746

          To Lender:   Landesbank Hessen-Thuringen Girozentrale
                       Attn: Martin Rohmann
                       Corporate Finance
                       Main Tower
                       Neue Mainzer Str. 52-58
                       60311 Frankfurt
                       Germany
                       Fax: (49-69) 91324350

                       and to:

                       Kreditanstalt fur Wiederaufbau
                       Attn: Head of Export and Project Finance Aerospace
                       Palmengartenstr. 5-9
                       60325 Frankfurt
                       Germany
                       Fax: (49-69) 74312944

All notices sent pursuant to the terms of this section 6.8 will be deemed
received upon actual receipt. A copy of any notice sent by fax must be sent by
regular mail as well on the same day that such fax is sent. Lender and Borrower
may change the name of its representative to whom (and/or the address to which)
notices (and/or courtesy copies of such notices) should be directed, provided
that such party complies with the provisions of this section 6.8 regarding the
methods for providing such notice.

          6.9  Interpretation.  Each of the parties to this Agreement has been
               ---------------
represented by independent counsel in the preparation and negotiation of this
Agreement, and this Agreement will be construed according to the fair meaning of
its language.  The rule of construction to the effect that ambiguities are to be
resolved against the drafting party will not be employed in interpreting this
Agreement.

          6.10 Representations and Warranties.  Each of the parties to this
               -------------------------------
Agreement represents and warrants to the other party to this Agreement that it
has full power, authority, and legal right to execute, deliver, and comply with
this Agreement and any other document or instrument relating to this Agreement
to be executed by it. All individual, corporate, or other appropriate actions of
each of the parties to this Agreement that are necessary or appropriate for the
execution and delivery of and compliance with this Agreement

                                      14
<PAGE>

and such other documents and instruments have been taken. Upon its execution and
delivery, this Agreement will constitute the valid and legally binding
obligation of each of the parties to this Agreement, enforceable against each of
them in accordance with its terms, subject only to bankruptcy, insolvency,
reorganization, moratorium and other laws applicable to creditors' rights or the
collection of debtors' obligations generally. Borrower acknowledges that Lender
has entered into this Agreement in reliance upon each of the representations and
warranties made by Borrower which are contained in this Agreement.

          6.11 Integration Clause.  This Agreement constitutes the entire
               -------------------
agreement between the parties to this Agreement with respect to the subject
matter of this Agreement, and there are no other terms, obligations, covenants,
representations, statements or conditions except as set forth in this Agreement.
No change or amendment to this Agreement will be effective unless it is
contained in a document entitled "Amendment to Security Agreement," and is
executed by each of the parties to this Agreement. Failure to insist upon strict
compliance with any term or provision of this Agreement will not be deemed to be
a waiver of any rights under a subsequent act or failure to act. Each of the
parties to this Agreement acknowledges and agrees that in the event of any
subsequent litigation, arbitration proceeding, controversy or dispute concerning
this Agreement, neither of them will be permitted to offer or introduce into
evidence any oral testimony concerning any oral promises or oral agreements
between them that relate to the subject matter of this Agreement that are not
included or referred to in this Agreement and that are not evidenced by a
writing entitled "Amendment to Security Agreement" which is signed by each of
the parties to this Agreement.

          6.12 Governing Law; Arbitration; Venue; Equitable Relief.
               ----------------------------------------------------

               (a)  Governing Law.  This Agreement will be governed by and
                    --------------
construed and enforced in accordance with the laws of the State of California,
without regard to principles of conflicts of laws. Each party to this Agreement
agrees that all disputes, claims and controversies among the parties to this
Agreement concerning the interpretation or enforcement of this Agreement, or any
other matter arising out of or relating to this Agreement, will be arbitrated
pursuant to the provisions of this section 6.12.

               (b)  Initiation of arbitration proceeding.  Either party to this
                    -------------------------------------
Agreement may initiate an arbitration proceeding by making a written demand for
arbitration and serving a notice of said demand upon the adverse party in the
manner provided in this Agreement, and upon the Los Angeles regional office of
JAMS. A written response to the demand must be served upon the initiating party
and JAMS within ten (10) days of the adverse party's receipt of the demand.

               (c)  Selection of arbitrator.  The arbitration will be conducted
                    ------------------------
by a single arbitrator who is a retired judge associated with the Los Angeles
regional office of JAMS. The arbitrator will be selected in accordance with the
JAMS Financial Services Arbitration Rules & Procedures then in effect (the "JAMS
Rules") within fourteen (14) days of the service of the written demand for
arbitration. If the parties to this Agreement cannot so agree upon the selection
of the arbitrator within the fourteen (14) day period, then the arbitration will
be conducted by a single arbitrator who will be a retired judge associated with
the Los Angeles regional office of JAMS, and who will be selected by JAMS within
five (5) days of the service of a written request that JAMS select the
arbitrator.

               (d)  Venue.  Each party to this Agreement covenants and agrees
                    ------
that any arbitration proceeding instituted under the provisions of this
Agreement will be conducted in Los Angeles through the Los Angeles regional
office of JAMS. Lender and Borrower acknowledge to each other that the agreement
to abide by the specific provisions of

                                      15
<PAGE>

this section 6.12 is a material inducement to it to enter into this Agreement,
and each party is reasonably relying upon the other party's representation to do
so.

          (e)  Arbitration hearing and award.  The arbitration hearing will be
               ------------------------------
conducted within thirty (30) days of the appointment of the arbitrator. The
arbitration will be conducted in accordance with the JAMS Rules. The
arbitrator's award will be conclusive and binding on each of the parties to this
Agreement. The arbitrator's award will provide, among other things, that the
prevailing party in the arbitration is entitled to recover from the adverse
party its costs and expenses incurred in connection therewith including, without
limitation, attorneys' fees as determined by the arbitrator, the costs of the
arbitration, and actual out-of-pocket expenses including, without limitation,
expert witness and consultants' fees. Judgment upon the arbitrator's award may
be entered in any court of competent jurisdiction.

          (f)  Equitable Relief.  The Arbitrator has the authority to grant
               -----------------
either party to this Agreement equitable relief on such terms and conditions as
     it deems reasonably necessary or appropriate.

     6.13 Benefit of Counsel; Informed Review.  Each party to this Agreement
          ------------------------------------
acknowledges and represents to the other party to this Agreement that: (a) the
provisions of this Agreement and their legal effect have been fully explained to
it by its own counsel; (b) it has received independent legal advice from counsel
of its own selection; (c) it fully understands the facts and has been fully
informed as to its legal rights and obligations under this Agreement; (d) this
Agreement is being entered into and signed by it knowingly, freely, and
voluntarily, after having received such legal advice and with such knowledge;
and (e) its execution and delivery of this Agreement is not the result of any
duress or undue influence.  BY EXECUTING THIS AGREEMENT, EACH PARTY TO THIS
AGREEMENT ACKNOWLEDGES AND REPRESENTS TO THE OTHER PARTY TO THIS AGREEMENT THAT
IT HAS  READ THE ENTIRE AGREEMENT.

     IN WITNESS WHEREOF, the parties to this Agreement have executed and
delivered this Agreement as of the date and year first above written.

HAWKER PACIFIC AEROSPACE                     LANDESBANK HESSEN-THURINGEN
                                             GIROZENTRALE

                                             By:/s/ Frank Dohl
                                                -----------------------------
By:/s/ David L. Lokken                          Name:________________________
   -----------------------------
   Name:David L. Lokken                         Title:_______________________
        ------------------------
   Title:Chief Executive Officer
         -----------------------

HAWKER PACIFIC AEROSPACE, LTD.               KREDITANSTALT FUR WIEDERAUFBAU

By:/s/ Philip M. Panzera                     By:/s/ Wolfgang Behler
   -----------------------------                 ----------------------------
   Name:Philip M. Panzera                        Name:_______________________
        ------------------------
   Title:Director                                Title:______________________
         -----------------------

                                      16
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 5
----------

         Lien in Assets of Hawker Pacific Aerospace

                                                                     As of
                                                               September 30,2000
                                                               -----------------

            Cash                                                  $  1,567,222
            Trade accounts receivable, net                           7,479,241
            Other receivables                                           93,067
            Inventory                                               19,971,250
            Prepaid expenses                                           520,266
            NBV of machinery and equipment                           4,361,429
            NBV of exchange assets                                  13,727,364
            Investment in subsidiary                                 9,230,030
            Deposits, other assets                                   1,098,718
                                                                  -------------
              Total                                               $ 58,048,586
                                                                  =============

                                      -1-
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6
----------

                            SHARE PLEDGE HAWKER UK
                            ----------------------
<PAGE>

                                                                  EXECUTION COPY

                             DATED 30 OCTOBER 2000
                             ---------------------

                           HAWKER PACIFIC AEROSPACE
                                  as Chargor

                                      and

                  LANDESBANK HESSEN - THURINGEN GIROZENTRALE
                               as Security Agent
                    on its own behalf and as Security Agent
                  for the Finance Parties referred to herein

                      ___________________________________

                                 SHARE CHARGE
                  over shares in Hawker Pacific Aerospace Ltd

                      ___________________________________

                                      AB
                             100 New Bridge Street
                                    London
                                   EC4V 6JA
                             Tel: (020) 7919 1000
                             Fax: (020) 7919 1999
                                Ref: BES / CXI
<PAGE>

                                   CONTENTS
                                   --------
<TABLE>
<CAPTION>

Number                        Clause Heading                               Page
------                        --------------                               ----
<S>       <C>                                                              <C>
1.        INTERPRETATION..................................................   1
2.        COVENANT TO PAY.................................................   4
3.        CHARGE..........................................................   4
4.        DEPOSIT OF DOCUMENTS AND REGISTRATION...........................   4
5.        CONTINUING SECURITY.............................................   5
6.        DIVIDENDS AND VOTING RIGHTS.....................................   5
7.        CHARGOR'S LIABILITY FOR CALLS AND OTHER OBLIGATIONS.............   6
8.        REPRESENTATIONS AND WARRANTIES..................................   6
9.        UNDERTAKINGS....................................................   7
10.       ENFORCEMENT OF SECURITY.........................................   9
11.       SET-OFF.........................................................  11
12.       RECEIPT AND APPLICATION OF MONIES...............................  11
13.       PAYMENTS........................................................  12
14.       COSTS, CHARGES AND EXPENSES.....................................  13
15.       INDEMNITIES AND CURRENCIES......................................  14
16.       EVIDENCE OF DEBT................................................  15
17.       FURTHER ASSURANCE...............................................  15
18.       POWER OF ATTORNEY...............................................  15
19.       OTHER ENCUMBRANCES..............................................  16
20.       SECURITY TRUST..................................................  17
21.       AMENDMENT, WAIVER AND SEVERABILITY..............................  17
22.       MISCELLANEOUS...................................................  18
23.       ASSIGNMENT......................................................  18
24.       NOTICES.........................................................  19
25.       GOVERNING LAW AND JURISDICTION..................................  20
</TABLE>

Schedules
---------

Schedule Securities....................................................... 22

<PAGE>

THIS DEED is made on the 30th day of October 2000

BETWEEN

(1)  HAWKER PACIFIC AEROSPACE, a company incorporated in California, U.S.A. with
     its principal office at 11240 Sherman Way, Sun Valley, CA 91352 - 4942,
     U.S.A. (the "Chargor"); and

(2)  LANDESBANK HESSEN - THURINGEN GIROZENTRALE of Main Tower, Neue Mainzer Str.
     52 - 58, 60311 Frankfurt am Main, Germany on its own behalf and as trustee
     for the Finance Parties from time to time (in such capacity, the "Security
     Agent").

WHEREAS:

(A)  By a Credit Agreement dated on or about the date of this Deed (the "Credit
     Agreement") made between (1) the Chargor as Borrower, (2) Landesbank
     Hessen-Thuringen Girozentrale as mandated arranger, security agent and
     lender and (3) Kreditanstalt fur Wiederaufbau as co-arranger and lender,
     the Banks (as defined in the Credit Agreement), have agreed to make
     available to the Chargor loan facilities on the terms set out in the Credit
     Agreement.

(B)  By a further Facility Agreement dated on or about the date of this Deed
     (the "Facility Agreement" and together with the Credit Agreement, the
     "Credit Documents") made between (1) Hawker Pacific Aerospace Ltd as
     borrower, (2) the Chargor as additional obligor, (3) Landesbank Hessen-
     Thuringen Girozentrale, as mandated arranger, agent, security agent and
     lender, and (4) Kreditanstalt fur Wiederaufbau as co-arranger and lender,
     the Banks (as defined in the Facility Agreement) have agreed to make
     available to Hawker Pacific Aerospace Ltd loan facilities, in respect of
     which the Chargor will be jointly and severally liable with Hawker Pacific
     Aerospace Ltd, on the terms set out in the Facility Agreement.

(C)  The Security Agent is acting as trustee for the Finance Parties pursuant to
     this Deed.

(D)  It is a condition precedent to the Banks making the above facilities
     available that the Chargor enters into this Deed.

IT IS AGREED as follows:

1.   INTERPRETATION
     --------------

1.1  Definitions and Construction.  In this Deed, unless the context requires
     ----------------------------
     otherwise, terms and expressions defined in or construed for the purposes
     of the Credit Agreement and not defined below shall have the same meanings
     or be construed in the same manner when used in this Deed, and the
     following terms shall have the following meanings:

     "Charged Assets" means:

     (a)  the Shares; and

     (b)  the Rights;

                                       1
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

     "Company" means Hawker Pacific Aerospace Ltd, a company incorporated in
     England (registered number 03459428) with its registered office at Unit 3,
     Dawley Park, Kestrel Way, Hayes, Middlesex UB3 1HP;

     "Credit Documents" has the meaning given in Recital (B);

     "Encumbrance" means:

     (a)  any mortgage, charge, pledge, hypothecation, lien, encumbrance or
          other security interest or any other arrangement having the effect if
          conferring security, including a conditional sale, hire purchase or
          lease agreement or other title retention arrangement; and

     (b)  any arrangement whereby rights are subordinated to the rights of a
          third party;

     "Event of Default" means any event or occurrence which entitles the Banks
     to terminate the Facilities, including without limitation any of the events
     or circumstances specified in Clause 18.2 of the Credit Documents;

     "Finance Party" means each person which is from time to time a Bank,
     Mandated Arranger, Agent, Security Agent, or Co-Arranger under either
     Credit Document;

     "Financing Documents" means each document which is a "Financing Document"
     for the purposes of either Credit Document;

     "Obligor" means each of the Chargor and the Company;

     "Receiver" means each and any receiver, manager, receiver and manager or
     other similar officer appointed by the Security Agent in respect of the
     security created by or pursuant to this Deed;

     "Rights" means:

     (a)  all rights, benefits and advantages now or at any time in the future
          deriving from or incidental to any of the Shares; and

     (b)  all dividends, interest and other income paid or payable in relation
          to any Shares after the date of this Deed; and

     (c)  all shares, securities, rights, monies or other property accruing,
          offered or issued at any time by way of redemption, conversion,
          exchange, substitution, bonus, preference, option or otherwise in
          respect of any of the Shares (including but not limited to proceeds of
          sale);

     "Secured Indebtedness" means all monies, obligations and liabilities of any
     kind now or at any time in the future due, owing, incurred or payable
     (whether actually or contingently) by the Chargor to a Finance Party under
     or pursuant to a Credit Document or any other Financing Document (whether
     on account of principal, interest, fees, indemnity payments, losses,
     damages or otherwise) and all other monies hereby agreed to be paid.

                                       2
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

     "Security Agent" means the Security Agent acting on its own behalf and as
     trustee for the Finance Parties.

     "Security Documents" means each document which is a "Security Document" for
     the purpose of either Credit Document;

     "Shares" means:

     (a)  the securities specified in Schedule 1 (Securities);

     (b)  all other stocks, shares, debentures, bonds, notes, warrants and other
          securities of any kind (including loan capital) of the Company now or
          at any time in the future beneficially owned by the Chargor or in
          which the Chargor has an interest (including any equity of
          redemption);  and

     and all rights of any kind which the Chargor now has or at any time in the
     future acquires against any clearance or settlement system or any custodian
     in respect of any such securities;

     "Trust Property" means the undertaking of the contained in Clause 2
     (Covenant to Pay) and all or any part of the assets, rights, interests and
     benefits which may now or at any time in the future be mortgaged, charged,
     assigned or granted or the subject of an Encumbrance in favour of the
     Security Agent pursuant to any Financing Document  and, for the avoidance
     of doubt, the proceeds of any of the foregoing.

1.2  Successors and Assigns.  The expressions "Chargor", "Security Agent",
     ----------------------
     "Agent" and "Finance Parties" shall, where the context permits, include
     their respective successors and permitted assigns and any persons deriving
     title under them.

1.3  Miscellaneous.  In this Deed, unless the context requires otherwise:
     -------------

     (a)   Statutes:  references to provisions of any law or regulation shall be
           --------
           construed as references to those provisions as amended, modified, re-
           enacted or replaced from time to time;

     (b)   Construction:  words importing the singular include the plural and
           ------------
           vice versa; words importing a gender include the other gender;

     (c)   Financing Documents:  references to this Deed, the Credit Documents
           -------------------
           or any other Security Document shall be construed as references to
           this deed or such document as the same may be amended, supplemented,
           restated or novated from time to time;

     (d)   Clauses, Etc:  references to Clauses and Schedules are to clauses of
           ------------
           and schedules to this Deed and references to this Deed include its
           Schedules; and

     (e)   Headings:  clause headings are inserted for reference only and shall
           --------
           be ignored in construing this Deed.

1.4  Deed. It is intended by the parties that this document shall take effect as
     ----
     a deed notwithstanding the fact that a party may only execute this document
     under hand.

                                       3
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

1.5  Third Party Rights.  The Contracts (Rights of Third Parties) Act 1999 shall
     ------------------
     not apply to this Deed and no person not party to this Deed shall have or
     acquire any right to enforce any term of it pursuant to that Act. This
     Clause shall not affect any right or remedy of any third party which exists
     or is available otherwise than by reason of that Act and shall prevail over
     any other provision of this Deed which is inconsistent with it.

2.   COVENANT TO PAY
     ---------------

     Without prejudice to its respective obligations to the Finance Parties
     under the Financing Documents, the Chargor undertakes to the Security Agent
     to pay to the Security Agent on behalf of the Finance Parties the Secured
     Indebtedness whenever the same is due in accordance with, and in the manner
     required by, the Financing Documents and duly and punctually to observe and
     perform all its obligations contained in each Financing Document.

3.   CHARGE
     ------

3.1  Grant of Charge.  In consideration of the Finance Parties agreeing to make
     ---------------
     the facilities available to the Chargor and the Company respectively on the
     terms and conditions of the Credit Documents, the Chargor with full title
     guarantee and without the benefit of section 6(2) of the Law of Property
     (Miscellaneous Provisions) Act 1994 charges and agrees to charge to the
     Security Agent by way of first ranking fixed charge all its rights, title,
     interest and benefit in and to:

     (a)  Shares:  the Shares; and
          ------

     (b)  Rights:  the Rights,
          ------

     as a continuing security for the due and punctual payment and discharge of
     the Secured Indebtedness and the due and punctual observance and
     performance by the Chargor of all other obligations of the Chargor
     contained in the Financing Documents.

3.2  Discharge. When the Security Agent is satisfied that the trusts constituted
     ---------
     by this Deed have come to an end, the Security Agent shall, at the request
     and cost of the Chargor, and in such form as the Security Agent shall
     approve, discharge the security created by this Deed, without recourse or
     warranty and subject to Clause 17.5 (Release of Charge Conditional).

4.   DEPOSIT OF DOCUMENTS AND REGISTRATION
     -------------------------------------

4.1  Registration in Name of Security Agent. The Chargor agrees that at any
     --------------------------------------
     time after an Event of Default has occurred, the Security Agent may, at the
     cost of the Chargor, register the Shares in the name of the Security Agent
     or its nominee.

4.2  Deposit of Documents and Notice to Nominee. The Chargor undertakes
     ------------------------------------------
     (without limiting its general obligations under Clause 17 (Further
     Assurance)):

     (a)  Deposit of Documents: to deposit (or ensure that its nominees deposit)
          --------------------
          with the Security Agent:

          (i)  immediately upon the execution of this Deed and upon any later
               date upon which it acquires (beneficially or otherwise) any
               Shares:

                                       4
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

               (1)  all certificates in respect of the Charged Assets or, as the
                    case may be, those Shares; and

               (2)  an instrument of transfer or an assignment of the relevant
                    Shares stamped and duly executed by each person in whose
                    name such Shares are registered and otherwise completed as
                    the Security Agent may require with the name of the
                    transferee left blank; and

          (ii) upon the execution of this Deed, and upon any later date on which
               a new director of the Company is appointed, signed undated
               letters of resignation from each director of the Company (or, as
               the case may be, such new director);

     (b)  Nominee Undertaking:  upon execution of this Deed and upon any later
          -------------------
          date on which it acquires (beneficially or otherwise) any Shares, to
          give notice of this Deed to each person holding any of the Shares as
          the Chargor's nominee and to procure that each such person executes
          and delivers to the Security Agent an acknowledgement in such other
          form as the Security Agent may specify.

5.   CONTINUING SECURITY
     -------------------

5.1  Continuing Security.  This Deed shall be a continuing security and shall
     -------------------
     remain in full force and effect until the Secured Indebtedness has been
     paid in full and none of the Finance Parties has any obligation or
     liability (actual or contingent) under the Credit Agreement or any Security
     Document, notwithstanding the insolvency or liquidation or any incapacity
     or change in the constitution or status of the Chargor or any other person
     or any intermediate settlement of account or other matter whatsoever.

5.2  Independent Security.  This Deed is in addition to, and independent of, any
     --------------------
     Encumbrance, guarantee or other security or right or remedy now or at any
     time in the future held by or available to the Security Agent or any other
     Finance Party.

6.   DIVIDENDS AND VOTING RIGHTS
     ---------------------------

6.1  Before Default. Until an Event of Default occurs, the Chargor may:
     --------------

     (a)  Dividends: retain and apply for its own use all dividends, interest
          ---------
          and other income paid in respect of any Shares; and

     (b)  Voting Rights:  exercise or direct the exercise of any voting or other
          -------------
          rights attached to any of the Shares, provided that those voting
          rights shall not be exercised:

          (i)  in any manner which in the opinion of the Security Agent, could
               prejudice to the security intended to be conferred by this Deed,
               or is in breach of this Deed or the Credit Agreement or any
               Security Document to which it is a party; or

          (ii) so as to permit any variation of the rights attaching to or
               conferred by any Shares.

                                       5
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

6.2  After Default.  Unless the Security Agent otherwise agrees in writing,
     -------------
     immediately after an Event of Default occurs, all the rights and
     entitlements of the Chargor under Clause 6.1 (Before Default) shall cease
     and:

     (i)  Dividends:  any payments which the Chargor would have been entitled to
          ---------
          receive and retain shall be paid to and retained by the Security Agent
          (to be applied as if they were proceeds of sale under this Deed) and
          any such payments which may be received by the Chargor shall be
          promptly paid to the Security Agent and, pending such payment, shall
          be held on trust for the Security Agent;

     (ii) Voting Rights:  only the Security Agent or its nominee shall be
          -------------
          entitled to exercise the voting and other rights attached to the
          Charged Assets.

6.3  Authority to Sign Proxies.  If an Event of Default occurs, the Chargor
     -------------------------
     irrevocably authorises the Security Agent to sign on its behalf and on
     behalf of each person holding any of the Shares as the nominee of the
     Chargor any proxies or other documents which the Security Agent to exercise
     such voting and other rights and powers attaching to the Shares.

7.   CHARGOR'S LIABILITY FOR CALLS AND OTHER OBLIGATIONS
     ---------------------------------------------------

7.1  No Liability. Nothing in this Deed shall be construed as placing on the
     ------------
     Security Agent or any Finance Party any liability whatsoever in respect of
     any calls, instalments or other payments relating to any of the Charged
     Assets.

7.2  Indemnity. Without limiting Clause 15.1 (General Indemnity), the Chargor
     ---------
     will indemnify the Security Agent and each other Finance Party in respect
     of all calls, instalments or other payments relating to any of the Charged
     Assets.

8.   REPRESENTATIONS AND WARRANTIES
     ------------------------------

8.1  Memorandum and Articles.  The Chargor certifies that neither the execution
     -----------------------
     of this Deed nor the creation of the security hereby constituted
     contravenes any of the provisions of the Articles of Incorporation or By-
     laws of the Chargor.

8.2  Representations and Warranties.  The Chargor represents and warrants to the
     ------------------------------
     Security Agent and each of the other Finance Parties that:

     (a)  Accuracy of Particulars:
          -----------------------

          (i)   the particulars of the Shares set out in Schedule 1 (Securities)
                are accurate;

          (ii)  the Shares described therein constitute the entire issued share
                capital of the Company at the date of this Deed; and

          (iii) all the Shares have been validly issued and are fully paid up;

                                       6
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

     (b)   No Encumbrances:
           ---------------

          (i)   the Charged Assets are (or when acquired will be) beneficially
                owned by the Chargor free from any Encumbrance (except as
                created under or pursuant to this Deed); and

          (ii)  the Chargor has good and marketable title thereto;

     (c)  No Option: the Chargor has not granted in favour of any other person
          ---------
          any interest in or any option or other rights in respect of any of the
          Charged Assets;

     (d)  No Dilution: the Company has not issued or granted (or resolved or
          -----------
          agreed to issue or grant) any option or other right to acquire any
          additional shares to any person;

     (e)  Share Certificates: there are no duplicate copies of the certificates
          ------------------
          in respect of the Shares or other certificates representing the
          Charged Assets; and

     (f)  No Litigation: no litigation, arbitration or administrative
          -------------
          proceeding is currently taking place or pending or threatened in
          relation to any of the Charged Assets.

8.3  Continuing Representation and Warranty.  The Chargor also represents and
     --------------------------------------
     warrants to and undertakes with the Security Agent and each of the other
     Finance Parties that the foregoing representations and warranties will be
     true and accurate throughout the continuance of this Deed with reference to
     the facts and circumstances subsisting from time to time.

9.   UNDERTAKINGS
     ------------

     The Chargor undertakes to the Security Agent that, throughout the
     continuation of the Facility and so long as any Secured Indebtedness is or
     may become payable, the Chargor will, unless the Security Agent otherwise
     agrees in writing:

     (a)  Encumbrances: not create or attempt or agree to create or permit to
          ------------
          arise or exist in favour of any person other than the Security Agent
          or the Agent any Encumbrance on or affecting the Charged Assets or any
          part of them;

     (b)  Disposals: not sell, assign, transfer, lease, deal with or dispose of
          ---------
          the Charged Assets or any part thereof or attempt or agree to do so
          (except under or pursuant to this Deed) and at all times remain the
          beneficial owner of the Charged Assets (subject to this Deed);

     (c)  Options: not grant or agree to grant in favour of any other person any
          -------
          interest in or any option or other rights in respect of any of the
          Charged Assets;

     (d)  Control Nominees: ensure that no person holding any of the Shares as
          ----------------
          its nominee for the time being does any of the acts prohibited by
          paragraphs (a) (Encumbrances), (b) (Disposals) and (c) (Options)
          above;

     (e)  Notification of Events:
          ----------------------

                                       7
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

     (i)   immediately inform the Security Agent of any litigation, arbitration
           or administrative proceeding as referred to in Clause 8.2(f) (No
           Litigation); and

     (ii)  immediately upon receipt provide the Security Agent with copies of
           all notices received by it from the Company in respect of any of the
           Charged Assets;

(f)  Calls:  promptly pay all calls and other payments due in respect of the
     -----
     Charged Assets;

(g)  Rights:
     ------

     (i)   immediately upon the acquisition by the Chargor of any Rights or
           receipt by the Chargor of notification of any entitlement to any
           Rights (whichever is earlier), provide the Security Agent with full
           particulars thereof and deliver or procure the delivery to the
           Security Agent of all such Rights and all documents and certificates
           representing them;

     (ii)  if requested by the Security Agent, acquire (by payment or otherwise)
           any Rights if failure to take up such Rights might, in the Security
           Agent's opinion, result in the Security Agent's or all or any of the
           other Finance Parties' security being materially lessened in value;

     (iii) subject to Clause 6 (Dividends and Voting Rights), pay to the
           Security Agent any monies received by the Chargor or any nominee of
           the Chargor under or in respect of any Rights;

(h)  Registered Holder: not permit any person other than the Chargor or its
     -----------------
     nominee or the Security Agent or its nominee to be registered as the holder
     of any of the Charged Assets;

(i)  Transfer Restrictions:  ensure that all of the Shares are and at all times
     ---------------------
     remain free from any restrictions on transfer and that the board of
     directors of the Company approves any transfer of the Charged Assets which
     the Security Agent wishes to make pursuant to this Deed;

(j)  Articles of Association: procure that the articles of association of the
     -----------------------
     Company contain the following clause:

     "The directors may in their absolute discretion and without giving any
     reason, refuse to register the transfer of a share to a person of whom they
     do not approve. NOTWITHSTANDING the foregoing, the directors may not refuse
     to register any transfer which arises by virtue of the taking of or
     enforcement of any security.";

(k)  No Dilution:  ensure that the Company does not issue or grant (or resolve
     -----------
     or agree to issue or grant) any option or other right to acquire shares to
     any person other than the Chargor (and subject always to this Deed);

(l)  Constitutive Documents:  ensure that no amendment or supplement is made to
     ----------------------
     the memorandum or articles of association of the Company;

                                       8
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

      (m)  No Stock Lending:  not lend any Shares to any person;
           ----------------

      (n)  Protection of Charged Assets: upon demand by the Security Agent take
           ----------------------------
          or defend all such legal proceedings, and take all such other steps,
          as the Security Agent may require for the protection of any Charged
          Assets;

      (o)  Not Prejudice: not do, omit to do, cause or permit to occur, any act,
           --------------
          omission or anything which would or might result in any Charged Assets
          being surrendered, forfeited, cancelled or prejudiced in any manner
          whatsoever or reduced in value, or this Deed or any rights, powers or
          remedies of the Security Agent under this Deed being prejudiced or
          adversely affected.

10.   ENFORCEMENT OF SECURITY
      -----------------------

10.1  Enforceability.  Immediately upon the occurrence of an Event of Default
      --------------
      the security created by or pursuant to this Deed shall become enforceable
      in accordance with the provisions of this Deed.

10.2  Security Agent's Right to Remedy Default.  If an Event of Default occurs,
      ----------------------------------------
      the Security Agent shall, at the Chargor's cost, and without prejudice to
      any other rights it may have, be entitled (but not bound) to do anything
      which it considers appropriate to remedy any failure by the Chargor to
      perform its obligations under this Deed. The Security Agent shall not
      thereby become liable to account as a mortgagee in possession.

10.3  Powers of Security Agent. At any time after the security created by or
      ------------------------
      pursuant to this Deed has become enforceable, the Security Agent or its
      nominee may without further notice or authority:

      (a) LPA Powers: exercise all the powers and remedies conferred on a
          ----------
          mortgagee by the Law of Property Act 1925;

     (b)  General Powers: do all acts and things and exercise all rights, powers
          --------------
          and remedies which the registered holder or bearer of any of the
          Charged Assets could do or exercise including, without limitation, the
          power to do all or any of the following:

          (i)    Power of Sale: sell or dispose of all or any part of the
                 -------------
                 Charged Assets and apply the proceeds of any such sale or
                 disposition in accordance with this Deed;

          (ii)   Grant Options: grant to any person any option to purchase or
                 -------------
                 other rights over any Charged Assets upon such terms as the
                 Security Agent thinks fit;

          (iii)  Transfers: if not already so registered or transferred,
                 ---------
                 register or transfer all or any of the Shares in or into the
                 name of the Security Agent or its nominees;

          (iv)   Rights: take up or renounce any Rights and demand, sue for,
                 ------
                 recover, receive and give discharges for all or any of the
                 Rights, enforce the Rights (by legal proceedings in the name of
                 the Chargor or otherwise as may seem expedient or by other
                 lawful act or procedure) and make any

                                       9
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

                 arrangement or compromise in relation thereto as the Security
                 Agent may think fit;

          (v)    Letters of Resignation: complete the letters of resignation
                 ----------------------
                 referred to in Clause 4.2(a)(ii) by dating the same and to
                 appoint directors and managers of the Company,

      and take any other action required to facilitate the realisation and
      disposal of any of the Charged Assets.

10.4  Sale of Shares.  The Security Agent shall be entitled to exercise the
      --------------
      power of sale in the manner and at the time or times and for the
      consideration (whether payable immediately or by instalments) which in its
      absolute discretion it thinks fit (whether by private sale, public auction
      or otherwise). The Charged Assets may be sold:

      (a)  Conditions: subject to any conditions which the Security Agent may
           ----------
           think fit;

      (b)  Identity of Purchaser: to any person (including any person connected
           ---------------------
           with the Chargor, the Company or any Finance Party); and

      (c)  Price: at any price which the Security Agent, in its absolute
           -----
           discretion, considers to be the best obtainable in the circumstances
           taking into account the nature of the Company as a private company.

      Without limiting Clause 10.9 (Exclusion of Liability), the Chargor shall
      not have any claim against the Security Agent or its nominee or any
      Finance Party in respect of any loss arising out of any such sale or any
      postponement thereof however caused and whether or not a better price
      could or might have been obtained upon the sale of the Charged Assets or
      any of them by deferring or advancing the date of such sale or by any
      other means.

10.5  Property Acquired.  All property of any kind acquired in exercise of any
      -----------------
      of the powers conferred by this Deed shall be subject to the security
      created by this Deed and to all the powers contained in this Deed.

10.6  Extension and Variation of the Law of Property Act 1925.  The foregoing
      -------------------------------------------------------
      powers conferred on the Security Agent shall be in addition to and not to
      the prejudice of all statutory and other powers of the Security Agent
      under the Law of Property Act 1925 or otherwise. Section 103 of that Act
      shall not restrict the exercise by the Security Agent of the power of sale
      conferred by section 101 of that Act, which power shall arise and may be
      exercised at any time after the happening of an Event of Default.

10.7  Waiver of Notice.  Any notice, period of time or other condition precedent
      ----------------
      prescribed by law to the exercise of any rights, powers or remedies of the
      Security Agent is dispensed with except to the extent (if any) that the
      relevant law does not afford the opportunity to dispense by agreement with
      its requirements, in which event the relevant right, power or remedy may
      be exercised by the Security Agent at the time and in the circumstances
      prescribed by law.

10.8  Not Mortgagee in Possession.  Where any liability or duty might otherwise
      ---------------------------
      attach to the Security Agent as mortgagee in possession for the purposes
      of the Law of Property Act 1925 the Security Agent shall not by reason of
      its entering into possession of any of the Charged

                                      10
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

       Assets be liable to account as mortgagee in possession or for anything
       except actual receipts or be liable for any loss upon realisation or for
       any default or omission for which a mortgagee in possession might
       otherwise be liable.

10.9   Exclusion of Liability.  Neither the Security Agent nor any other Finance
       ----------------------
       Party shall be responsible for any losses of any kind whatsoever
       (including, without limitation, negligence, default or dishonesty of any
       servant, agent or auctioneer employed by the Security Agent or any
       attorney of the Security Agent) which may occur in or about the exercise,
       or attempted or purported exercise or non-exercise of any of the rights,
       powers or remedies of the Security Agent unless directly caused by the
       gross negligence or wilful default of the Security Agent. The Security
       Agent shall be entitled to all the privileges and immunities conferred on
       mortgagees and receivers appointed thereunder by the Law of Property Act
       1925.

10.10  Protection of Third Parties.  No person dealing with the Security Agent
       ---------------------------
       or any attorney of the Security Agent in connection with the exercise of
       any of the rights, powers or remedies of the Security Agent shall be
       bound to inquire whether any Event of Default has occurred or any power
       has become exercisable, as to the due appointment of any receiver or
       otherwise as to the propriety or regularity of any such dealing or to see
       to the application of any money paid to the Security Agent and shall not
       be affected by express notice that any such dealing is unnecessary or
       improper, and notwithstanding any irregularity or impropriety in any such
       dealing the same shall, as regards the protection of that person, be
       deemed to be valid and effective.

10.11  Acceptance of Payments.  This Deed may be enforced notwithstanding that
       ----------------------
       the Security Agent or any other Finance Party may have accepted payment
       of any Secured Indebtedness after the occurrence of an Event of Default.

11.    SET-OFF
       -------

       If an Event of Default has occurred the Security Agent and each other
       Finance Party shall have the right (but not the obligation), without
       notice to the Chargor or any other person, to set-off and apply any
       credit balance on any account of the Chargor with the Security Agent or
       such Finance Party (as the case may be) and any other indebtedness owing
       by the Security Agent or such Bank to the Chargor (in each case, whether
       or not subject to notice, matured or owing to a different branch or
       office and in whatever currency) against such of the Secured Indebtedness
       which is due and payable. Each Finance Party may convert any such credit
       balance or other indebtedness at the prevailing rate of exchange into
       such other currencies as may be necessary for this purpose.

12.    RECEIPT AND APPLICATION OF MONIES
       ---------------------------------

12.1   Order of Application.  All monies from time to time actually received or
       --------------------
       recovered by the Security Agent from the Chargor under this Deed or
       arising from the enforcement of this Deed shall (subject to Clause 12.3
       (Suspense Account) be applied in the following order of priority:

       (a)  first, in payment of the costs, charges, expenses and other monies
            -----
            payable by the Chargor under Clauses 14 (Costs, Charges and
            Expenses) and 15 (Indemnities and Currencies) or liabilities
            otherwise incurred in the exercise or attempted exercise of the
            rights, powers or remedies of the Security Agent;

                                      11
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

       (b)  secondly, in payment of the remaining Secured Indebtedness;
            --------

       (c)  thirdly, in payment of amounts due under subsequent Encumbrances of
            -------
            which the Security Agent has notice, in the order of their
            priorities; and

       (d)  fourthly, in payment to the Chargor.
            --------

12.2   Credit Actual Receipts. In applying any monies toward satisfaction of the
       ----------------------
       Secured Indebtedness, the Security Agent shall credit the Chargor with
       only those monies actually received by the Security Agent in cleared
       funds, and such credit shall date from the time of actual receipt.

12.3   Suspense Account  The Security Agent may place and keep any monies
       ----------------
       received by virtue of this Deed (whether before or after the insolvency
       or liquidation of the Chargor) to the credit of a suspense account for so
       long as the Security Agent may think fit in order to preserve the rights
       of the Security Agent or any other Finance Party to sue or prove for the
       whole amount of its claims against the Chargor or any other person.

12.4   Amounts Contingently Due.  If the Security Agent enforces the security
       ------------------------
       constituted by this Deed at a time when no amounts are due to it (but at
       a time when amounts may become so due), the Security Agent may pay the
       proceeds of any recoveries effected by it into an interest-bearing
       suspense account with any person (including the Security Agent) selected
       by the Security Agent and on terms selected by the Security Agent until
       the relevant amounts become actually due and payable or the Security
       Agent determines that they will never become actually due and payable. At
       that time the amount actually owing may be paid to the Security Agent and
       the balance distributed in accordance with Clause 12.1 (Order of
       Application). Until such time the Security Agent may (subject to the
       payment of any claims having priority to this security) withdraw amounts
       standing to the credit of any such suspense account in order to pay the
       amounts referred to in paragraphs (a) and (b) of Clause 12.1 (Order of
       Application). The Chargor will not be entitled to withdraw any monies
       (including interest) standing to the credit of any such suspense account
       until all the Secured Indebtedness has been irrevocably paid and
       discharged in full.

12.5   Appropriation.  The Chargor irrevocably authorises the Security Agent to
       -------------
       appropriate any monies received by the Security Agent or any attorney of
       the Security Agent towards such of the Secured Indebtedness as the
       Security Agent in its absolute discretion thinks fit.

12.6   Surplus Monies.  If at any time after satisfaction of the Secured
       --------------
       Indebtedness the Security Agent holds any surplus monies payable to the
       Chargor, those monies shall not carry interest and may be placed to the
       credit of an account in the name of the Chargor with a bank and the
       Security Agent shall thereupon be under no further liability in respect
       thereof.

13.    PAYMENTS
       --------

13.1   No Deductions.  All sums payable by the Chargor under this Deed shall be
       -------------
       paid in full without set-off or counterclaim or any restriction or
       condition and, except to the extent required by any law or regulation,
       free and clear of any deduction or withholding on account of tax or
       otherwise. If the Chargor or any other person is required by any law or
       regulation to make any such deduction or withholding the Chargor shall,
       together with the relevant payment, pay such additional amount as will
       ensure that the Security Agent or, as the case may be, any other relevant
       Finance Party actually receives and is entitled to

                                      12
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

       retain, free and clear of any such deduction or withholding, the full
       amount which it would have received if no such deduction or withholding
       had been required. The Chargor shall within the required time period, pay
       or cause to be paid over to the relevant taxation or other authority the
       full amount of any such deduction or withholding and shall promptly
       forward to the Security Agent copies of official receipts or other
       evidence satisfactory to the Security Agent showing that such payment has
       been made.

13.2   Security Agent May Debit Account of Chargor.  The Security Agent may,
       -------------------------------------------
       without prejudice to any other right, power or remedy of the Security
       Agent, at any time and from time to time, without further authority or
       notice to the Chargor, debit and charge any account of the Chargor with
       the Security Agent with any of the monies payable to the Security Agent
       under the Credit Agreement or this Deed or any other Financing Document
       to which the Chargor is a party.

14.    COSTS, CHARGES AND EXPENSES
       ---------------------------

14.1   Expenses.  The Chargor shall forthwith on demand pay or reimburse to the
       --------
       Security Agent and the other Finance Parties:

       (a)  Execution: all costs, charges and expenses (including legal fees on
            ---------
            a full indemnity basis and all other out-of pocket expenses and any
            applicable value added tax or similar tax) incurred by the Security
            Agent or any other Finance Party in connection with the preparation,
            execution and registration of this Deed and any other documentation
            required in connection herewith and any amendment to or extension
            of, or any inspection, calculation, approval, consent or waiver to
            be made or given in connection with, this Deed;

       (b)  Rights and Remedies: all costs, charges and expenses (including
            -------------------
            legal fees on a full indemnity basis and all other out-of pocket
            expenses and any applicable value added tax or similar tax) incurred
            by the Security Agent or any other Finance Party in exercising any
            of its or their rights or powers under this Deed or in suing for or
            seeking to recover any sums due or otherwise preserving or enforcing
            its or their rights, powers and remedies under this Deed or in
            connection with the preservation or attempted preservation of the
            Charged Assets or in defending any claims brought against any of
            them in respect of this Deed or the Chargor's interest in the
            Charged Assets or in releasing or re-assigning this Deed upon
            payment of all monies hereby secured,

       and, until payment of the same in full, all such costs, charges and
       expenses shall be secured by this Deed.

14.2   Taxes and Registration Fees.  The Chargor shall pay when due all present
       ---------------------------
       and future stamp and other similar duties and taxes and all notarial,
       registration, recording and other similar fees which may be payable in
       respect of this Deed and any documentation required in connection with
       this Deed and shall indemnify the Security Agent and the other Finance
       Parties against all liabilities, costs and expenses which may result from
       any delay or default in paying such duties, taxes or fees (unless caused
       by the relevant person's negligence or wilful default in paying such
       fees).

                                      13
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

15.   INDEMNITIES AND CURRENCIES
      --------------------------

15.1  General Indemnity.  The Chargor shall indemnify the Security Agent and the
      -----------------
      other Finance Parties (and any attorney, delegate or other person
      appointed under this Deed by the Security Agent) from and against all
      claims, actions, losses, liabilities, damages, costs and expenses incurred
      by it or them as a result of or arising out of or in connection with:

      (a)  Performance: the occurrence of any Event of Default, or any failure
           -----------
           by the Chargor to make a payment or perform any obligation in
           accordance with this Deed; or

      (b)  Charged Assets: the Charged Assets or the use or occupation thereof
           --------------
           by any person; or

      (c)  Powers: the execution or purported execution of any powers,
           ------
           authorities and discretions conferred on it pursuant to this Deed or
           in respect of any matter or thing done or omitted in relation to the
           Charged Assets (unless directly resulting from the gross negligence
           or wilful default of the indemnified person).

15.2  Conversion of Currencies.  All monies received or held by the Security
      ------------------------
      Agent under this Deed at any time on or after enforcement in a currency
      other than a currency in which the Secured Indebtedness (or any part of
      it) is denominated or in an amount exceeding the amount in the relevant
      currency in which any Secured Indebtedness is denominated may from time to
      time be sold for one or more of the currencies in which the Secured
      Indebtedness is denominated as the Security Agent considers necessary or
      desirable and the Chargor shall indemnify the Security Agent against all
      costs, charges and expenses incurred in relation to such sale. The
      Security Agent shall not have any liability to the Chargor in respect of
      any loss resulting from any fluctuation in exchange rates after any such
      sale.

15.3  Currency Indemnity.  If any amount is received by the Security Agent or
      ------------------
      any other Finance Party in a currency other than that in which the
      relevant obligation or liability of the Chargor was payable (the "Required
      Currency") pursuant to any law, regulation or order or in the winding up,
      insolvency or bankruptcy of the Chargor or otherwise, such obligation or
      liability shall be discharged only to the extent that the Security Agent
      or that Finance Party may purchase the Required Currency with such other
      currency in accordance with normal banking procedures of the Security
      Agent or, as the case may be, that Finance Party upon receipt of such
      amount. If the amount in the Required Currency which may be so purchased,
      after deducting any costs of exchange and any other related costs, is less
      than the amount of the relevant obligation or liability, the Chargor shall
      indemnify the Security Agent or such other Finance Party against the
      shortfall. This indemnity shall be an obligation of the Chargor
      independent of and in addition to its other obligations under this Deed,
      notwithstanding any time or other concession may have been granted to the
      Chargor or any other act, matter or thing.

15.4  Payment and Security.  The Security Agent may retain and pay out of any
      --------------------
      money in the Security Agent's hands all sums necessary to effect the
      payments, obligations and indemnities contained in Clause 14 (Costs,
      Charges and Expenses) and Clause 15 (Indemnities and Currencies) and all
      sums payable by the Chargor under Clause 14 and Clause 15 shall form part
      of the monies hereby secured.

                                      14
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

16.   EVIDENCE OF DEBT
      ----------------

      Any statement of account purporting to show an amount due from the Chargor
      for the purposes of this Deed and signed as correct by an authorised
      officer of the Security Agent or the Agent shall, in the absence of
      manifest error, be conclusive evidence of the amount so due.

17.   FURTHER ASSURANCE
      -----------------

17.1  Further Assurance.  The Chargor shall at any time and from time to time
      -----------------
      (whether before or after the security hereby created shall have become
      enforceable):

      (a)  Execute Documents: execute such further legal or other mortgages,
           -----------------
           charges or assignments in favour of the Security Agent or the Finance
           Parties; and

      (b)  Other Action: do all such transfers, assurances, acts and things and,
           ------------
           without limiting the generality of the foregoing, give all notices,
           orders and directions in respect of Charged Assets,

      as the Security Agent may require to secure the Secured Indebtedness or to
      facilitate the realisation of the Charged Assets or the exercise of any
      powers conferred on the Security Agent or for the purposes of perfecting
      and completing any assignment of the Security Agent's rights, benefits or
      obligations under this Deed.

17.2  Enforcement of Security Agent's Rights.  The Chargor will do or permit to
      --------------------------------------
      be done everything which the Security Agent may from time to time require
      to be done for the purpose of perfecting or enforcing the Security Agent's
      rights under this Deed and will allow the name of the Chargor to be used
      as and when required by the Security Agent for that purpose.

17.3  Form of Documents.  Any instrument which the Chargor is required to
      -----------------
      execute, or of which the Chargor is required to procure the execution,
      shall be prepared by or on behalf of the Security Agent at the cost of the
      Chargor and shall contain such clauses as the Security Agent shall
      reasonably require, including, but not limited to clauses containing an
      immediate power of sale without notice and excluding section 93, and the
      restrictions contained in section 103, of the Law of Property Act 1925.

17.4  Other Provisions.  This Clause shall be in addition to and not in
      ----------------
      substitution for the covenants for further assurance deemed to be included
      in this Deed by virtue of the Law of Property (Miscellaneous Provisions)
      Act 1994.

18.   POWER OF ATTORNEY
      -----------------

18.1  Power of Attorney.  The Chargor by way of security hereby irrevocably
      -----------------
      appoints the Security Agent and each authorised officer of the Security
      Agent to whom the Security Agent shall from time to time have delegated
      the exercise of the power of attorney conferred by this Clause, jointly
      and also severally, to be the attorney or attorneys of the Chargor to do
      (either in the name of the Chargor or the attorney) all acts and things
      which:

      (a)  Chargor's Obligations: the Chargor is obliged to do under this Deed;
           ---------------------
           or

                                      15
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 6

      (b)  Other Acts and Things: in the opinion of the Security Agent, are
           ---------------------
           necessary or desirable in connection with the Charged Assets or the
           protection or perfection of the Security Agent's interest in the
           Charged Assets or the exercise of the rights, powers and remedies of
           the Security Agent or the realisation, getting in or disposition of
           any Charged Assets,

      and, without limiting the generality of the foregoing, to execute all
      deeds and documents of whatever nature, but without rendering the Security
      Agent liable as a mortgagee in possession, and with full power for all or
      any of such purposes from time to time to appoint a substitute or sub-
      attorney and to revoke any such appointment.

18.2  Ratification.  The Chargor hereby ratifies and confirms, and agrees to
      ------------
      ratify and confirm, whatever any such attorney as is mentioned in Clause
      15.1 (Power of Attorney) shall do or purport to do, and all transactions
      entered into and documents executed, in the exercise or purported exercise
      of all or any of the powers, authorities and discretions referred to in
      such Clause.

18.3  Powers of Attorney Act.  The power of attorney granted by Clause 18 (Power
      ----------------------
      of Attorney) is, as regards the Security Agent and its delegates (as the
      Chargor hereby acknowledges), granted irrevocably and for value as part of
      the security constituted by this Deed to secure proprietary interests of,
      and the performance of obligations owed to, the respective donees within
      the meaning of the Powers of Attorney Act 1971.

18.4  Completion of Blanks.  The Security Agent is irrevocably authorised to
      --------------------
      fill in any blanks and otherwise complete and to deliver any instruments
      executed by the Chargor and deposited with the Security Agent in
      connection with this Deed.

19.   OTHER ENCUMBRANCES
      ------------------

19.1  Priority of Further Advances.  All monies which are expressed to be
      ----------------------------
      secured by this Deed and which are advanced, paid or otherwise provided
      after the Security Agent or any other Finance Party receives notice of the
      creation of any other Encumbrance shall be secured by this Deed in
      priority to any monies secured by that other Encumbrance, unless the
      Security Agent specifically agrees in writing.

19.2  Opening of New Account.  If the Security Agent or any other Finance Party
      ----------------------
      receives or is deemed to be affected by actual or constructive notice, of
      any subsequent Encumbrance or other instrument affecting any part of the
      Charged Assets and/or the proceeds of realisation thereof, the Security
      Agent and the other Finance Parties may open a new account for the
      Chargor. If the Security Agent or any other Finance Party does not open a
      new account it shall nevertheless be treated as if it had done so at the
      time when the Security Agent or, if earlier, such other Finance Party
      received or was deemed to have received notice, and as from that time all
      payments made to the Security Agent or such other Finance Party shall be
      credited or be treated as having been credited to the new account and
      shall not operate to reduce the amount for which this Deed is security.

19.3  Rights Regarding prior Encumbrances.  The Security Agent may (but is not
      -----------------------------------
      obliged to) pay any monies, obligations or liabilities secured by any
      Encumbrance having priority to this Deed and (at the expense of the
      Chargor) take a transfer of such Encumbrance for the benefit of the
      Finance Parties. All principal monies, interest, costs, charges and
      expenses of and incidental to such redemption and transfer shall be paid
      by the Chargor to the Security Agent on demand.

                                      16
<PAGE>

20.   SECURITY TRUST
      --------------

20.1  Declaration of Trust.  The Security Agent hereby declares that it shall
      --------------------
      hold the Trust Property upon trust for the Finance Parties from time to
      time in accordance with the Financing Documents. The trusts of the Trust
      Property shall remain in full force and effect until the earlier of:

     (a)  Specified Date: such date as the Security Agent shall specify on
          --------------
          which:

          (i)  all the obligations which are secured by the Security Documents
               have been fully and finally discharged; and

          (ii) no Finance Party is under any commitment, obligation or liability
               (whether actual or contingent) to make advances or provide any
               other financial accommodation to either Obligor under any
               Financing Document; and

      (b)  Perpetuities: the last day of the period of 80 years from the date of
           ------------
           this Deed which period (and no other) shall be the applicable
           perpetuity period,

      after which the trusts set out in this Deed shall be wound up and the
      Security Agent shall release, without recourse or warranty, all of the
      security created by the Security Documents.

20.2  Powers and Discretions.  To the extent not inconsistent with this Deed,
      ----------------------
      the Security Agent shall have all the powers and discretions conferred
      upon trustees by the Trustee Act 1925.

20.3  Investment.  Unless provided otherwise in any Security Document, monies
      ----------
      which are received by the Security Agent and held by it as trustee in
      relation to any of the Security Documents may be invested in the name of
      or under the control of the Security Agent in any investment authorised by
      English law for the investment of trust money by trustees or in any other
      investments which may be selected by the Security Agent, and if not
      otherwise invested such monies may be placed on deposit in the name of or
      under the control of the Security Agent at such bank or institution
      (including the Security Agent) and upon such terms as the Security Agent
      may think fit.

20.4  Appointment.  The Security Agent may appoint any person established or
      -----------
      resident in any jurisdiction (whether a trust corporation or not) to act
      as a trustee or agent, either separately or jointly with the Security
      Agent, in relation to any of the Security Documents if the Security Agent
      considers that such an appointment is necessary or desirable for the
      purpose of conforming with any legal requirement in any relevant
      jurisdiction or otherwise for the purpose of holding, administering,
      protecting or enforcing any of the Security Documents, and any such
      trustee or agent shall have such powers and discretions (not exceeding
      those conferred on the Security Agent) and such obligations as shall be
      conferred or imposed on it by the Security Agent.

21.   AMENDMENT, WAIVER AND SEVERABILITY
      ----------------------------------

21.1  Amendment.  Any amendment or waiver of any provision of this Deed and any
      ---------
      waiver of any default under this Deed shall only be effective if made in
      writing and signed by the Security Agent.

                                      17
<PAGE>

21.2  Waiver.  No failure or delay by the Security Agent or any other Finance
      ------
      Party in exercising any right, power or remedy under this Deed shall
      impair such right, power or remedy or operate as a waiver thereof, nor
      shall any single or partial exercise of any right, power or remedy
      preclude any further exercise thereof or of any other right, power or
      remedy. The rights, powers and remedies provided in this Deed are
      cumulative and do not exclude any other rights, powers or remedies
      provided by law.

21.3  Severability.  If at any time any provision of this Deed is or becomes
      ------------
      illegal, invalid or unenforceable in any respect under the law of any
      jurisdiction, the legality, validity and enforceability of such provision
      under the law of any other jurisdiction, and of the remaining provisions
      of this Deed, shall not be affected or impaired thereby.

22.   MISCELLANEOUS
      -------------

22.1  Counterparts.  This Deed may be executed in any number of counterparts and
      ------------
      by the different parties to this Deed on separate counterparts which when
      taken together shall constitute one and the same instrument.

22.2  Survival of Indemnities.  The indemnities contained in this Deed are
      -----------------------
      continuing obligations of the Chargor and are separate and independent
      from the other obligations of the Chargor and shall survive the
      termination of this Deed.

22.3  Moratorium Legislation.  To the fullest extent permitted by law, the
      ----------------------
      provisions of all existing and future laws which operate or may operate
      directly or indirectly to lessen or otherwise vary the Chargor's
      obligations under this Deed or to delay, curtail or otherwise prevent or
      prejudicially affect the exercise by the Security Agent or any other
      Finance Party of any of its rights, powers and remedies under this Deed
      are expressly negatived and excluded.

22.4  Judgments.  Notwithstanding any judgment which the Security Agent or any
      ---------
      other Finance Party may recover against the Chargor in respect of any
      Secured Indebtedness, the Security Agent or such other Finance Party shall
      hold the judgment collaterally with this Deed as security for the due
      payment and satisfaction of Secured Indebtedness and this Deed shall not
      merge in any judgment.

22.5  Notice and Enforcement.  The Security Agent need not give any notice of
      ----------------------
      this Deed to any person, enforce payment of any Secured Indebtedness,
      enforce or realise any other Security Document or take any steps or
      proceedings for any purpose unless the Security Agent thinks fit.

22.6  Consent by Security Agent.  Any consent required of the Security Agent
      -------------------------
      under this Deed may (unless this Deed specifically provides otherwise) be
      given or withheld by the Security Agent in its absolute discretion and
      either conditionally or unconditionally.

23.   ASSIGNMENT
      ----------

23.1  Successors and Assigns.  This Deed shall be binding upon and inure to the
      ----------------------
      benefit of the parties to this Deed and their respective successors and
      permitted assigns.

23.2  Assignment by Chargor.  The Chargor shall not assign or otherwise transfer
      ---------------------
      the benefit of this Deed or any of its rights, duties or obligations under
      this Deed without the prior written consent of the Security Agent.

                                      18
<PAGE>

23.3  Assignment by Finance Parties.  The Finance Parties may assign or grant
      -----------------------------
      participations in all or any part of their rights under this Deed in
      accordance with the provisions of Clause 20.2 of the Credit Agreement.

23.4  Change of Security Agent.  The Security Agent may assign and transfer all
      ------------------------
      of its rights to the Charged Assets and all of its rights and obligations
      under this Deed to a replacement Security Agent appointed in accordance
      with this Deed and, when such assignment and transfer takes effect, the
      replacement Security Agent shall be for all purposes acting as agent and
      trustee in accordance with the trusts in this Deed.

24.   NOTICES
      -------

24.1  Delivery.  Each notice, demand or other communication to be given or made
      --------
      under this Deed shall be in writing and delivered or sent to the relevant
      party at its address or telex number or fax number set out below (or such
      other address or telex number or fax number as the addressee has by not
      less than 7 days' prior written notice specified to the other party):

      To the Chargor:        Hawker Pacific Aerospace
      --------------
                             11240 Sherman Way
                             Sun Valley, CA 91352 - 4942
                             USA

                             Telephone Number    : (1)-818 765 6201
                             Fax Number          : (1)-818 765 8587

                             Attention           : Phil Panzera

     To the Security Agent:  Landesbank Hessen - Thuringen Girozentrale
     ---------------------
                             Main Tower
                             Neue Mainzer Str. 52 - 58
                             60311 Frankfurt am Main
                             Germany

                             Telephone Number    : (49)-0-69-91324202
                             Fax Number          : (49)-0-69-91324350

                             Attention           : Martin Rohmann

24.2  Deemed Delivery.  Any notice, demand or other communication
      ---------------
      addressed to any relevant party in accordance with Clause 24.1 (Delivery)
      shall be deemed to have been delivered:

      (a)  Letter:  if given or made by letter, when actually delivered to the
           ------
           relevant address;

      (b)  Telex:  if given or made by telex, when despatched with confirmed
           -----
           answerback; and

      (c)  Fax:  if given or made by fax, when despatched with a fax
           ---
           transmission report showing that the entire communication was
           received,

                                      19
<PAGE>

     provided that a communication which is received after 5:00 p.m. on a
     working day, or on a day which is not a full working day, in the place of
     receipt shall be deemed to be delivered on the next full working day in
     that place.

24.3 Language.  Each notice or other communication under this Deed shall be in
     --------
     English. Any other documents required to be delivered under this Deed shall
     be either in English or be accompanied by a certified translation into
     English.

25.  GOVERNING LAW AND JURISDICTION
     ------------------------------

25.1 Law.  This Deed and the rights and obligations of the parties hereunder
     ---
     shall be governed by and construed in accordance with the laws of England.

25.2 Jurisdiction.  The Chargor irrevocably agrees for the benefit of the
     ------------
     Security Agent and the other Finance Parties that any legal action arising
     out of or relating to this Deed may be brought in the courts of England and
     irrevocably submits to the exclusive jurisdiction of such courts.

25.3 No Limitation on Right of Action.  Nothing in this Deed shall limit the
     --------------------------------
     right of the Security Agent or any other Finance Party to commence any
     legal action against the Chargor and/or its assets in any other
     jurisdiction or to serve process in any manner permitted by law, and the
     taking of proceedings in any jurisdiction shall not preclude the Security
     Agent or any other Finance Party from taking proceedings in any other
     jurisdiction whether concurrently or not.

25.4 Waiver; Final Judgment Conclusive.  The Chargor irrevocably and
     ---------------------------------
     unconditionally waives any objection which it may now or hereafter have to
     the choice of England as the venue of any legal action arising out of or
     relating to this Deed and agrees not to claim that any court in that venue
     is not a convenient or proper forum. The Chargor also agrees that a final
     judgment against it in any such legal action shall be final and conclusive
     and may be enforced in any other jurisdiction, and that a certified or
     otherwise duly authenticated copy of the judgment shall be conclusive
     evidence of the fact and amount of its indebtedness.

25.5 Waiver of Immunity.  The Chargor irrevocably and unconditionally waives
     ------------------
     any immunity to which it or its assets may at any time be or become
     entitled, whether characterised as sovereign immunity or otherwise, from
     any set-off or legal action in England or elsewhere, including immunity
     from service of process, immunity from jurisdiction of any court or
     tribunal, and immunity of any of its assets from attachment prior to
     judgment or from execution of a judgment.

25.6 Process Agent.  Without prejudice to any other mode of service allowed
     -------------
     under any relevant law, the Chargor:

     (a)  irrevocably appoints Messrs Paris Smith and Randall of Number One
          London Road, Southampton SO15 2AE, England (Ref. AEH) as its agent for
          service of process in relation to any proceedings before the English
          courts in connection with any Financing Document; and

     (b)  agrees that failure by such process agent to notify the Chargor of the
          process will not invalidate the proceedings concerned.

                                      20
<PAGE>

THIS DEED has been executed as a Deed by the parties hereto and is intended to
be and is hereby delivered on the date stated at the beginning of this Deed.

                                      21
<PAGE>

                                    Schedule

                                   Securities

<TABLE>
<CAPTION>

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

                                                  No of         Share
                                                  -----         -----
Company                        Class of Shares    Shares        Certificate Nos
-------                        ----------------   ------        ---------------
--------------------------------------------------------------------------------
<S>                            <C>              <C>             <C>

Hawker Pacific Aerospace Ltd   Ordinary              5,637,049         Number 1
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
</TABLE>

                                      22
<PAGE>

THE CHARGOR
-----------

SIGNED AND DELIVERED as a Deed  )
for and on behalf of            )
HAWKER PACIFIC AEROSPACE        )
by                              )         /s/ David L. Lokken
                                          --------------------------------
                                )         Authorised signatory
                                )
David L. Lokken CEO             )
--------------------------      )
Name / Title                    )
                                )
                                )
Philip M. Panzere EVP           )
--------------------------      )
Name / Title                    )         /s/ Philip M. Panzera
                                          --------------------------------
                                )         Authorised signatory
                                )

THE SECURITY AGENT
------------------

SIGNED AND DELIVERED as a Deed  )
for and on behalf of            )
LANDESBANK HESSEN - THURINGEN   )
GIROZENTRALE                    )        /s/ Frank Dohl
by                              )        ---------------------------------
                                )        Authorised signatory
                                )
Frank Dohl V.P.                 )
--------------------------      )
Name / Title                    )
                                )
                                )
Martin Rohmann                  )
--------------------------      )        /s/ Martin Rohmann
Name / Title                    )        ---------------------------------
                                )        Authorised signatory
                                )
                                )

                                      23
<PAGE>

THE BANKS
---------

SIGNED AND DELIVERED as a Deed  )
for and behalf of               )
LANDESBANK HESSEN - THURINGEN   )
GIROZENTRALE                    )         /s/ Frank Dohl
by                              )         ---------------------------
                                )         Authorised signatory
                                )
Frank Dohl V.P.                 )
--------------------------      )
Name / Title                    )
                                )
                                )
Martin Rohmann                  )
--------------------------      )         /s/ Martin Rohmann
Name / Title                    )         ---------------------------
                                )         Authorised signatory
                                )

                                      24
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7
----------

                  FIXED AND FLOATING CHARGES HAWKER UK ASSETS
                  -------------------------------------------

<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

                                                                  EXECUTION COPY

                             DATED 30 OCTOBER 2000
                             ---------------------

                         HAWKER PACIFIC AEROSPACE LTD.

                                as the Company

                                      and

                  LANDESBANK HESSEN - THURINGEN GIROZENTRALE
                               as Security Agent
           on its own behalf and as trustee for the Finance Parties

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

                                   DEBENTURE
                   incorporating Fixed and Floating Charges

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

                                      AB
                             100 New Bridge Street
                                    London
                                   EC4V 6JA
                              Tel: (020) 79191000
                              Fax: (020) 79191999
                                 Ref: BES/CXI
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

                                   CONTENTS
                                   --------

<TABLE>
<CAPTION>
Number                        Clause Heading                          Page
------                        --------------                          ----
<S>                                                                   <C>
1.   INTERPRETATION................................................      1
2.   COVENANT TO PAY...............................................      5
3.   CHARGE........................................................      6
4.   CONTINUING SECURITY...........................................      8
5.   ACCOUNTS WITH SECURITY AGENT..................................      8
6.   SECURITIES....................................................      9
7.   REPRESENTATIONS AND WARRANTIES................................     10
8.   UNDERTAKINGS..................................................     10
9.   ENFORCEMENT OF SECURITY.......................................     18
10.  SET-OFF.......................................................     23
11.  RECEIPT AND APPLICATION OF MONIES.............................     23
12.  PAYMENTS......................................................     24
13.  COSTS, CHARGES AND EXPENSES...................................     25
14.  INDEMNITIES AND CURRENCIES....................................     26
15.  EVIDENCE OF DEBT..............................................     27
16.  FURTHER ASSURANCE.............................................     27
17.  POWER OF ATTORNEY.............................................     27
18.  OTHER ENCUMBRANCES............................................     28
19.  PROTECTIVE CLAUSES............................................     28
20.  SECURITY TRUST................................................     30
21.  AMENDMENT, WAIVER AND SEVERABILITY............................     31
22.  MISCELLANEOUS.................................................     31
23.  ASSIGNMENT....................................................     32
24.  NOTICES.......................................................     32
25.  GOVERNING LAW AND JURISDICTION................................     33

Schedules
---------

Schedule 1 Real Property...........................................     36
Schedule 2 Equipment...............................................     36
Schedule 3 Securities..............................................     36
Schedule 4 Intellectual Property...................................     36
</TABLE>
<PAGE>

THIS DEED is made on the ______ day of October 2000

BETWEEN

(1)  HAWKER PACIFIC AEROSPACE LTD., a company incorporated in England with its
     registered office at Unit 3, Dawley Park, Kestrel Way, Hayes, Middlesex UB3
     1HP (the "Company"); and

(2)  LANDESBANK HESSEN - THURINGEN GIROZENTRALE of Main Tower, Neue Mainzer Str.
     52 - 58, 60311 Frankfurt am Main, Germany on its own behalf and as trustee
     for the Finance Parties from time to time (in such capacity, the "Security
     Agent").

WHEREAS:

(A)  By a Facility Agreement dated on or about the date of this Deed (the
     "Facility Agreement") made between (1) the Company, as Borrower, (2) Hawker
     Pacific Aerospace as Additional Obligor, (3) Landesbank Hessen-Thuringen
     Girozentrale, as agent, arranger, security agent and lender and (4)
     Kreditanstalt fur Wiederaufbau as co-arranger and lender, the Banks (as
     defined in the Facility Agreement), have agreed to make available to the
     Company loan facilities on the terms set out in the Facility Agreement.

(B)  By a Credit Agreement dated on or about the date of this Deed (the "Credit
     Agreement" and together with the Facility Agreement, the "Credit
     Documents") made between (1) Hawker Pacific Aerospace, as Borrower, (2)
     Landesbank Hessen-Thuringen Girozentrale, as mandated arranger, agent,
     security agent and lender and (3) Kreditanstalt fur Wiederaufbau as co-
     arranger and lender, the Banks (as defined in the Credit Agreement) have
     agreed to make available to the Hawker Pacific Aerospace loan facilities on
     the terms set out in the Credit Agreement.

(C)  The Security Agent is acting as trustee for the Finance Parties pursuant to
     this Deed.

(D)  It is a condition precedent to the Banks (as defined herein) making the
     above facilities available to the Obligors (as defined herein) that the
     Company enters into this Deed.

IT IS AGREED as follows:

1.   INTERPRETATION
     --------------

1.1  Definitions and Construction.  In this Deed, terms and expressions defined
     ----------------------------
     in or construed for the purposes of the Facility Agreement and not defined
     below shall have the same meanings or be construed in the same manner when
     used in this Deed, and the following terms shall have the following
     meanings:

     "Additional Obligor" means Hawker Pacific Aerospace;

     "Chattels" means:

     (a)  the equipment and/or goods specified in Schedule 2 (Equipment); and

     (b)  all other chattels, plant, machinery, goods and other equipment now or
          at any time in the future owned by the Company and its interest in any
          chattels, plant, machinery, goods and other equipment in its
          possession, together with all its
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

          rights in respect thereof and the benefit of all warranties and
          maintenance contracts, and including any chattels, plant, machinery,
          goods or other equipment which is hired, leased or rented by the
          Company to any other person together in such cases with the benefit of
          the related hiring, leasing or rental contract and any guarantee,
          indemnity or other security for the performance of the obligations of
          any person under or in respect of such contract,

     but excluding:

     (i)  chattels, plant, machinery, goods and other equipment for the time
          being forming part of the Company's stock-in-trade or work-in-progress
          or within the definition of Real Property; and

     (ii) Rotable Assets;

     "Credit Documents" has the meaning given in Recital (B);

     "Debtor" means any person who is liable (whether as principal debtor or as
     surety and whether actually or contingently) to pay or discharge a Debt;

     "Debts" means all book and other debts and monetary claims including bank
     deposits and credit balances (whatever called) with any bank or financial
     institution (including, without limitation, any Finance Party), whether
     arising under contract or in any other manner and whether originally owing
     to the Company or purchased or otherwise acquired by it, and all choses in
     action now or at any time in the future due or owing to the Company
     together with the full benefit of all rights and remedies relating thereto
     (including, without limitation, any negotiable or non-negotiable
     instruments, guarantees, indemnities, debentures, liens, legal and
     equitable charges, reservations of title, rights of tracing and all other
     rights or remedies of any kind in respect of any of the foregoing);

     "Encumbrance" means:

     (a)  any mortgage, charge, pledge, hypothecation, lien, encumbrance or
          other security interest or any other arrangement having the effect if
          conferring security, including a conditional sale, hire purchase or
          lease agreement or other title retention arrangement; and

     (b)  any arrangement whereby rights are subordinated to the rights of a
          third party;

     "Environment"  means all or any of the following media, namely the air,
     water and land; and the medium of air includes the air within buildings and
     the air within other natural or man-made structures above or below ground;

     "Environmental Law"  means all and any laws, common law, statutes,
     directives, regulations, notices, standards having force of law, codes of
     practice, guidance notes, bye-laws, judgments, decrees or orders, whether
     of the European Community, the United Kingdom or any other relevant
     jurisdiction, relating to pollution, contamination or protection of the
     Environment or the storage, labelling, handling, release, treatment,
     manufacture, processing, deposit, transportation or disposal of Hazardous
     Substances;

     "Environmental Licence" means any permit, licence, authorisation, consent
     or other approval required by or under any Environmental Law;

                                       2
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     "Event of Default" means any event or occurrence which entitles the Banks
     to terminate the Facilities, including without limitation any of the events
     or circumstances specified in Clause 18.2 of the Facility Agreement;

     "Facilities" means the facilities made available to the Obligors under the
     Credit Documents;

     "Finance Party" means each person which is from time to time a Bank,
     Mandated Arranger, Agent, Security Agent or Co - Arranger under either of
     the Credit Documents;

     "Financing Documents" means each document which is a "Financing Document"
     for the purposes of either Credit Document;

     "Hazardous Substance"  means any substance of whatever description which
     may cause or have a harmful effect on the Environment or the health of man
     or any other living organism (whether alone or in combination with any
     other substance) including (without limitation) all poisonous, toxic,
     noxious, dangerous and offensive substances;

     "Insurances" means all contracts and policies of insurance of any kind
     which are from time to time taken out by or on behalf of the Company or (to
     the extent of such interest) in which the Company has an interest;

     "Intellectual Property" means:

     (a)  the intellectual property rights specified in Schedule 4 (Intellectual
          Property); and

     (b)  all other rights in any intellectual property or similar rights now or
          at any time in the future belonging to the Company including (without
          limitation) patents, trade marks, service marks, designs, utility
          models, copyrights, design rights, topographical rights, computer
          programs, applications for registration of and the right to apply for,
          any of the foregoing in any part of the world, improvements,
          prolongations and extensions of any of the foregoing, moral rights,
          inventions, confidential information, trade secrets, know-how and
          rights of a similar nature arising or subsisting anywhere in the
          world, whether registered or unregistered,

     and the benefit of all licences of any of the foregoing granted to or by
     the Company together with all fees, royalties or other rights derived from
     any of the foregoing;

     "Obligor" means each of the Company and the Additional Obligor;

     "Permitted Encumbrance" means:

     (a)  the Deed of Legal Charge dated on or about the date of this Deed made
          between the Chargor, the Company and the Security Agent; and

     (b)  any Encumbrance executed by the UK Obligor in favour of the US Obligor
          in respect of which a deed of priorities in form and substance
          satisfactory to the Security Agent has been executed;

     "Real Property" means:

     (a)  the land specified in Schedule 1 (Real Property); and

                                       3
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     (b)  all other freehold, leasehold and other immovable property now or at
          any time in the future belonging to the Company,

     and all buildings, fixtures (including trade and tenant's fixtures), fixed
     plant and machinery from time to time on any such property, all proceeds of
     sale thereof and the benefit of any covenants for title in respect thereof
     and all Encumbrances, options, contractual rights, estates and interests
     over land both present and future;

     "Receiver" means each and any receiver, manager, receiver and manager or
     other similar officer appointed by the Security Agent in respect of the
     security created by or pursuant to this Deed;

     "Related Rights" means:

     (a)  all rights, benefits and advantages of any kind deriving from or
          incidental to any Securities and all dividends and interest paid or
          payable in relation thereto;

     (b)  all shares, securities, rights, monies or other property accruing,
          offered or issued at any time by way of redemption, conversion,
          exchange, substitution, bonus, preference, option or otherwise in
          respect thereof; and

     (c)  the certificates representing any of the foregoing;

     "Rotable Assets" means landing gears, flap tracks, flap carriages and
     other related items (including sub-assemblies) which can be economically
     restored to a condition ready for fitment to an aircraft and, in the normal
     course of operations, can be repeatedly rehabilitated to such condition;

     "Secured Indebtedness" means all monies, obligations and liabilities of any
     kind now or at any time in the future due, owing, incurred or payable
     (whether actually or contingently) by an Obligor to a Finance Party under
     or pursuant to the Credit Documents or any other Financing Document
     (whether on account of principal, interest, fees, indemnity payments,
     losses, damages or otherwise) and all other monies hereby agreed to be
     paid;

     "Securities" means:

     (a)  the securities specified in Schedule 3 (Securities); and

     (b)  all other stocks, shares, debentures, bonds, notes, warrants and other
          securities of any kind (including loan capital) of any person now or
          at any time in the future beneficially owned by the Company or in
          which the Company has an interest,

     and all rights of any kind which the Company now has or at any time in the
     future acquires as against any clearance or settlement system or any
     custodian in respect of any such securities; and

     "Security Agent" means the Security Agent acting on its own behalf and as
     trustee for the Finance Parties;

                                       4
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     "Security Assets" means all of the property, assets and undertaking of the
     Company, present and future, expressed to be assigned or charged to the
     Security Agent by or pursuant to this Deed;

     "Security Documents" means each document which is a "Security Document" for
     the purposes of either Credit Document;

     "Trust Property" means the undertaking of the contained in Clause 2
     (Covenant to Pay Security Agent) and all or any part of the assets, rights,
     interests and benefits which may now or at any time in the future be
     mortgaged, charged, assigned or granted or the subject of an Encumbrance in
     favour of the Security Agent pursuant to any Financing Document  and, for
     the avoidance of doubt, the proceeds of any of the foregoing.

1.2  Successors and Assigns.  The expressions "Company", "Security Agent",
     ----------------------
     "Banks" and "Finance Parties" shall, where the context permits, include
     their respective successors and permitted assigns and any persons deriving
     title under them.

1.3  Miscellaneous.  In this Deed, unless the context requires otherwise:
     -------------

     (a)  Statutes:  references to provisions of any law or regulation shall be
          --------
          construed as references to those provisions as amended, modified, re-
          enacted or replaced from time to time;

     (b)  Construction: words importing the singular include the plural and vice
          ------------
          versa; words importing a gender include the other gender;

     (c)  Financing Documents: references to this Deed, the Credit Documents or
          -------------------
          any other Financing Document shall be construed as references to this
          deed or such document as the same may be amended, supplemented,
          restated or novated from time to time;

     (d)  Clauses, Etc: references to Clauses and Schedules are to clauses of
          -------
          and schedules to this Deed and references to this Deed include its
          Schedules; and

     (e)  Headings: clause headings are inserted for reference only and shall be
          --------
          ignored in construing this Deed.

1.4  Deed.  It is intended by the parties that this document shall take
     ----
     effect as a deed notwithstanding the fact that a party may only execute
     this document under hand.

1.5  Third Party Rights. The Contracts (Rights of Third Parties) Act 1999 shall
     ------------------
     not apply to this Deed and no person not party to this Deed shall have or
     acquire any right to enforce any term of it pursuant to that Act. This
     Clause shall not affect any right or remedy of any third party which exists
     or is available otherwise than by reason of that Act and shall prevail over
     any other provision of this Deed which is inconsistent with it.

2.   COVENANT TO PAY
     ---------------

     Without prejudice to its respective obligations to the Finance Parties
     under the Financing Documents, the Company undertakes to the Security Agent
     to pay to the Security Agent on behalf of the Finance Parties the Secured
     Indebtedness whenever the same is due in accordance with, and in the manner
     required by, the Financing Documents and duly and

                                       5
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     punctually to observe and perform all its obligations contained in each
     Financing Document to which it is a party.

3.   CHARGE
     ------

3.1  Grant of Charge.  The Company with full title guarantee and without the
     ---------------
     benefit of section 6(2) of the Law of Property (Miscellaneous Provisions)
     Act 1994 charges and agrees to charge to the Security Agent:

     (a)  Fixed Charge: the Security Assets specified in Clause 3.2 (Fixed
          ------------
          Charge) by way of first fixed charge; and

     (b)  Floating Charge: the Security Assets specified in Clause 3.3 (Floating
          ---------------
          Charge) by way of first floating charge,

     as continuing security for the due and punctual payment and discharge of
     the Secured Indebtedness and the due and punctual observance and
     performance by the Obligors of all other obligations of the Obligors
     contained in the Financing Documents.

3.2  Fixed Charge.  The property charged by way of first fixed charge is the
     ------------
     following:

     (a)  Real Property: the Real Property (which, in so far as it consists of
          -------------
          land vested in the Company at the date of this Deed, shall be charged
          by way of legal mortgage);

     (b)  Chattels: the Chattels;
          --------

     (c)  Debts: the Debts;
          -----

     (d)  Securities: the Securities and Related Rights;
          ----------

     (e)  Intellectual Property: the Intellectual Property (which, to the extent
          ---------------------
          that it consists of copyrights and patents, shall be assigned by way
          of mortgage);

     (f)  Insurances: all monies from time to time payable to the Company under
          ----------
          or pursuant to the Insurances and all benefits in respect thereof,
          including all claims and returns of premiums, and any monies for the
          time being standing to the credit of the account referred to in Clause
          8.4(j) (Application of Monies);

     (g)  Licences: the benefit of all present and future licences, consents and
          --------
          authorisations (statutory or otherwise) held in connection with the
          Company's business or the use of any of its assets, and the right to
          all compensation which may at any time become payable to it in respect
          thereof;

     (h)  Agreements: (to the extent that they do not fall within any other
          ----------
          paragraph of this Clause 3.2) all of the Company's rights and benefits
          under any distributorship, agency, partnership, joint venture or
          similar agreements, any letters of credit issued in its favour and all
          bills of exchange and other negotiable instruments held by it;

     (i)  Pension Fund: any beneficial interest, claim or entitlement of the
          ------------
          Company in any pension or similar fund;

                                       6
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     (j)  Records: all books of account, registers, records, vouchers, computer
          -------
          software, computer printouts and other documents relating in any way
          to the business of the Company; and

     (k)  Goodwill: the goodwill of the Company and its uncalled and called but
          --------
          unpaid capital and premiums now or at any time hereafter in existence
          and future calls (whether made by the directors of the Company or by a
          receiver, administrator or liquidator).

3.3  Floating Charge.  The property charged by way of first floating charge is
     ---------------
     the whole of the Company's undertaking and all its present and future
     property and assets (wherever situated), other than any property or assets
     from time to time or for the time being effectively charged by way of first
     fixed charge to the Security Agent by Clauses 3.1 (Grant of Charge) and 3.2
     (Fixed Charge) but including (whether or not so effectively charged) any of
     the Company's property and assets situated in Scotland.

3.4  Crystallisation by Notice.  The Security Agent may at any time immediately
     -------------------------
     upon or at any time after the occurrence of an Event of Default by notice
     in writing to the Company and notwithstanding any delay or waiver of any
     previous default, convert any charge created under this Deed which then
     operates as a floating charge to a fixed charge in respect of any of the
     Security Assets specified in the notice.

3.5  Automatic Crystallisation.  The floating charge hereby created shall,
     -------------------------
     without the need for any act by the Security Agent, automatically and
     immediately crystallise and the charge shall operate as a fixed charge:

     (a)  All Assets: in respect of all Security Assets which are not for the
          ----------
          time being effectively charged to the Security Agent by way of fixed
          charge if:

          (i)   an application is made, a petition is presented or any
                proceeding is commenced for an order, or a meeting is convened
                to consider a resolution or a resolution is passed, or an order
                is made, for the winding up, insolvency, administration,
                reorganisation, reconstruction, dissolution or bankruptcy of any
                Obligor;

          (ii)  a liquidator, administrator, administrative receiver, receiver,
                receiver and manager, trustee or similar officer is appointed in
                respect of any Obligor or of all or any part of the business,
                assets or revenues of any Obligor;

          (iii) any person levies or attempts, purports or proposes to levy
                execution, distress or any other similar process upon or against
                all or any part of the business, assets or revenues of any
                Obligor in respect of a debt exceeding GBP 35,000;

          (iv)  any Obligor stops or suspends payments to its creditors
                generally or is unable, is deemed by law to be unable, or admits
                its inability, to pay its debts as they fall due or ceases to
                carry on its business;

          (v)   any Obligor enters into or seeks to enter into any scheme of
                arrangement, composition, assignment for the benefit of, or
                other arrangement with, its creditors or any class of creditors;
                or

                                       7
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

          (vi)    any Obligor reduces or takes any steps to reduce its capital
                  or in any way limits or restricts calls in respect of its
                  issued but uncalled capital; or

     (b)  Specific Assets: in respect of any asset forming part of the Security
          ---------------
          Assets which is not for the time being effectively charged to the
          Security Agent by way of fixed charge if:

          (i)     the Company deals, or attempts, purports or proposes to deal,
                  with that asset otherwise than in accordance with this Deed;

          (ii)    any person levies or attempts, purports or proposes to levy,
                  execution, distress or any other similar process in respect of
                  that asset;

          (iii)   any Encumbrance over that asset becomes capable of being
                  enforced or any person enforces, or attempts, purports or
                  proposes to enforce, any Encumbrance over that asset.

3.6  De-crystallisation.  If the floating charge over any Security Assets
     ------------------
     becomes fixed in accordance with Clause 3.4 (Crystallisation by Notice) or
     3.5 (Automatic Crystallisation) it shall again become a floating charge
     over those Security Assets if the Security Agent gives the Company a notice
     in writing to that effect.

3.7  Discharge. When the Security Agent is satisfied that the trusts constituted
     ---------
     by this Deed have come to an end, the Security Agent shall, at the request
     and cost of the Company, and in such form as the Security Agent shall
     approve, discharge the security created by this Deed, without recourse or
     warranty.

4.   CONTINUING SECURITY
     -------------------

4.1  Continuing Security.  This Deed shall be a continuing security and shall
     -------------------
     remain in full force and effect until the Secured Indebtedness has been
     paid in full and none of the Finance Parties has any obligation or
     liability (actual or contingent) under either Credit Document or any other
     Financing Document, notwithstanding the insolvency or liquidation or any
     incapacity or change in the constitution or status of the Company or any
     other person or any intermediate settlement of account or other matter
     whatsoever.

4.2  Independent Security.  This Deed is in addition to, and independent of, any
     --------------------
     Encumbrance, guarantee or other security or right or remedy now or at any
     time in the future held by or available to the Security Agent or any other
     Finance Party.

5.   ACCOUNTS WITH SECURITY AGENT
     ----------------------------

     Notwithstanding any terms on which monies may have been deposited in any
     account with the Security Agent, the Company agrees with the Security Agent
     that:

     (a)  No Debt:  following the occurrence of an Event of Default, no deposit
          -------
          made by the Company with the Security Agent and no other amount owing
          by the Security Agent to the Company (each referred to collectively in
          this Clause as a "deposit") shall constitute a debt owed by the
          Security Agent to the Company (and the Security Agent shall not
          (except as provided in this Clause), be under any obligation or
          liability to repay the same or any part of it to the Company and the

                                       8
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

          Company shall not (unless the Security Agent otherwise agrees in
          writing) be entitled to make any withdrawals of any deposit or receive
          any deposit);

     (b)  No Alienation: no deposit made by the Company with the Security Agent
          -------------
          and no other amount owing by the Security Agent to the Company (each
          referred to collectively in this Clause as a "deposit") shall be
          capable of being assigned, transferred, charged or the subject of a
          declaration of trust;

     in each case until:

     (i)  Full Payment: the trusts constituted by this Deed have come to an end;
          ------------
          or

     (ii) Release:  the Security Agent has released the security constituted by
          -------
          this Deed.

6.   SECURITIES
     ----------

     (a)  Before Default: The Company may, until an Event of Default occurs or
          the relevant Securities become registered in the name of the Security
          Agent or its nominee (whichever is earlier):

          (i)   exercise or cause to be exercised in such manner as the Company
                may direct any voting or other rights attached to any of the
                Securities, provided that such voting rights shall not be
                exercised in any manner which is, in the opinion of the Security
                Agent, prejudicial to the security intended to be conferred on
                the Security Agent and the other Finance Parties by this Deed or
                is in breach of the provisions of this Deed or any other
                Financing Document to which it is a party or so as to permit any
                variation of the rights attaching to or conferred by any
                Securities; and

          (ii)  retain and apply for its own use all dividends, interest and
                other monies paid in respect of any Securities; and

     (b)  After Default: Immediately after an Event of Default occurs or the
          -------------
          relevant Securities become registered in the name of the Security
          Agent or its nominee or the Company receives written notice from the
          Security Agent to that effect (whichever is earliest), all the rights
          and entitlements of the Company under Clause 6 (a) (Before Default)
          shall cease and:

          (i)   only the Security Agent (or its nominee) shall be entitled to
                exercise the voting and other rights attached to the Securities;

          (ii)  any payments which the Company would have been entitled to
                receive and retain shall instead be paid to and retained by the
                Security Agent (to be applied in accordance with the terms of
                this Deed), and any such payments which may be received by the
                Company shall be promptly paid over to the Security Agent and,
                pending such payment, shall be held in trust for the Security
                Agent; and

          (iii) the Security Agent and its nominees may in the name of the
                Company or otherwise and without any consent or authority on the
                part of the Company exercise or cause to be exercised in respect
                of the Securities or any part thereof in addition to the rights
                and powers referred to above all those

                                       9
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

                powers given to trustees by section 10(3) and 10(4) of the
                Trustee Act 1925 in respect of securities or property subject to
                a trust.

7.   REPRESENTATIONS AND WARRANTIES
     ------------------------------

7.1  Memorandum and Articles.  The Company hereby certifies that neither the
     -----------------------
     execution of this Deed nor the creation of the security hereby constituted
     contravenes any of the provisions of the Memorandum and Articles of
     Association of the Company.

7.2  Representations and Warranties. The Company represents and warrants to the
     ------------------------------
     Security Agent and each of the other Finance Parties that:

     (a)  the Security Assets are or when acquired will be beneficially owned by
          the Company free from any Encumbrance except as created under or
          pursuant to this Deed or any Permitted Encumbrance and no person other
          than the Company has the use, occupation or possession of the Security
          Assets or any part thereof;

     (b)  the respective particulars of the Security Assets set out in the
          Schedules are accurate and the Company has good and marketable title
          thereto;

7.3  Continuing Representation and Warranty.  The Company also represents and
     --------------------------------------
     warrants to and undertakes with the Security Agent and each of the other
     Finance Parties that the foregoing representations and warranties will be
     true and accurate throughout the continuance of this Deed with reference to
     the facts and circumstances subsisting from time to time.

8.   UNDERTAKINGS

8.1  Undertakings Relating to Security Assets Generally.  The Company undertakes
     --------------------------------------------------
     to the Security Agent that, throughout the continuation of the Facility and
     so long as any Secured Indebtedness is or may become payable, the Company
     will, unless the Security Agent otherwise agrees in writing:

          General Negative Pledge
          -----------------------

     (a)  Encumbrances: not (except under or pursuant to this Deed or the
          ------------
          Facility Agreement):

          (i)  create or attempt or agree to create or permit to arise or exist
               any Encumbrance, other than a Permitted Encumbrance, on or
               affecting the Security Assets or any part of them (except a lien
               arising solely by operation of law in the ordinary course of
               business which does not secure indebtedness for borrowed money
               and is discharged when due); or

          (ii) (without limiting the generality of the foregoing) deal in any
               manner with, create any security or Encumbrance over or allow any
               other third party rights to arise over or against any bank
               account of the Company or in which the Company has an interest
               (whether with the Security Agent or any other person) or any part
               thereof (whether by way of assignment, trust or otherwise);

     (b)  Disposals: not sell, assign, transfer, lease, deal with or dispose of
          ---------
          the Security Assets or any part thereof or attempt or agree to do so
          except in the case of:

                                      10
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     (i)  stock-in-trade or Rotable Assets (which may, subject to the other
          provisions of this Deed, be sold in the usual course of trading as now
          conducted by the Company and for the purpose of carrying on the
          Company's business); and

     (ii) other assets for the time being subject to the floating charge created
          by Clauses 3.1 (Grant of Charge) and 3.3 (Floating Charge) (which may,
          subject to the other provisions of this Deed, be disposed of in the
          ordinary course of business); or

     Perfection
     ----------

(c)  Deposit of Documents:  deposit with the Security Agent or to its order all
     --------------------
     deeds, certificates and documents (including original policies of
     insurance) which constitute or evidence title to any Security Assets (such
     deposit to be made immediately upon the execution of this Deed or, if
     later, when the Company obtains possession of such deeds, certificates or
     documents);

(d)  Notices:  if and when required by the Security Agent, and at the Company's
     -------
     cost, affix to such items of the Security Assets or endorse or cause to be
     endorsed upon such of the documents referred to in paragraph (c) (Deposit
     of Documents) above labels, markings or memoranda in such form as the
     Security Agent may require drawing attention to the security constituted by
     or pursuant to this Deed;

(e)  Overseas Property:  in respect of any part of the Security Assets situated
     -----------------
     outside England and Wales or subject to the laws of any jurisdiction other
     than England and Wales, execute, or procure that there are executed, such
     documents and take or procure such steps as are in the opinion of the
     Security Agent necessary, desirable or appropriate to create security over
     such Security Assets in or under the laws of such jurisdiction equivalent
     or analogous in effect to the security constituted by or pursuant to this
     Deed (for which purpose the Security Agent shall be entitled to appoint
     such advisers (legal and otherwise) as it considers appropriate to prepare
     any necessary documentation and advise on any necessary procedures to
     constitute such security in any such jurisdiction and the Company shall be
     responsible for the costs thereof).

     Protection of Security
     ----------------------

(f)  Protection of Security Assets:  upon demand by the Security Agent take or
     -----------------------------
     defend all such legal proceedings, and take all such other steps, as the
     Security Agent may require for the protection of any Security Assets;

(g)  Not Prejudice:  not do, omit to do, cause or permit to occur, any act,
     -------------
     omission or thing which would or might result in any Security Assets being
     surrendered, forfeited, cancelled or prejudiced in any way or reduced in
     value, or this Deed or any rights, powers or remedies of the Security Agent
     under this Deed being prejudiced or adversely affected;

     Ongoing Obligations
     -------------------

(h)  Maintenance and Repair: maintain and repair and keep all buildings, other
     ----------------------
     structures, trade and other fixtures, fixed and other plant and machinery
     and all

                                      11
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

          chattels and other equipment forming part of the Security Assets in
          good and substantial repair and in good working order and condition;

     (i)  Access: provide to the Security Agent, and procure that all other
          ------
          persons having possession or control of any Security Assets or any
          land or buildings on which any Security Assets are for the time being
          located provide to the Security Agent, full and unfettered access to
          the Security Assets for the purpose of inspecting any Security Assets
          or exercising any rights, powers or remedies of the Security Agent;

     (j)  Notification of Inventory: upon demand by the Security Agent provide
          -------------------------
          to the Security Agent a full and complete inventory of the Security
          Assets including the value and location of each item of the Security
          Assets;

     (k)  Notification of Events:  immediately inform the Security Agent of:
          ----------------------

          (i)  any litigation, arbitration or administrative proceeding taking
               place, pending or threatened in relation to any of the Security
               Assets;

          (ii) any damage, loss, theft, arrest, confiscation, seizure or any
               other event which affects or might affect the rights of the
               Security Agent or any other Finance Party under this Deed or
               involves any loss or reduction in value of any Security Assets;

     (l)  Registration of Share Transfers: not register any transfer of any
          -------------------------------
          partly paid shares in the capital of the Company without the prior
          written consent of the Security Agent;

     (m)  Subsidiaries: not form or acquire any subsidiary (as defined in
          ------------
          section 736 of the Companies Act 1985) or transfer, sell, lease or
          otherwise dispose of any Security Assets to any connected person (as
          defined in section 249 of the Insolvency Act 1986);

     (n)  Notification of Receipt of Notices: within 14 days after the receipt
          ----------------------------------
          by the Company of any application, requirement, order or notice served
          or given by any public, local or any other authority with respect to
          all or any part of the Security Assets, give written notice thereof to
          the Security Agent and also (within 7 days after demand) produce the
          same or a copy thereof to the Security Agent and inform it of the
          steps taken or proposed to be taken to comply with any such
          requirement thereby made or implicit therein; and

     (o)  Statutes: duly and punctually perform and observe all its obligations
          --------
          in connection with the Security Assets under any present or future
          statute or any regulation, order or notice made or given thereunder.

8.2  Undertakings Relating to Real Property.  The Company undertakes to the
     --------------------------------------
     Security Agent that, throughout the continuation of the Facility and so
     long as any Secured Indebtedness is or may become payable, the Company
     will, unless the Security Agent otherwise agrees in writing:

     (a)  Registered Land: in the case of any Real Property which is registrable
          ---------------
          or becomes registrable after its acquisition under the Land
          Registration Acts 1925 to 1986:

                                      12
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     (i)     promptly notify the Security Agent of the title numbers of such
             property upon its acquisition or as soon as each respective title
             number is allotted by H.M. Land Registry;

     (ii)    upon the making of any application to H.M. Land Registry for the
             registration of the Company or such other persons as the Security
             Agent may permit as the Registered Proprietor thereof, request the
             Chief Land Registrar to enter upon the Charges Register of such
             property a note of this Deed in any form which the Security Agent
             requires; and

     (iii)   in relation to any Real Property which is the subject of an
             application for registration of title at H.M. Land Registry, use
             its best endeavours to answer any requisitions from H.M. Land
             Registry;

(b)  Notification of Acquisitions:  notify the Security Agent in writing
     ----------------------------
     promptly upon the acquisition by the Company from time to time of any
     freehold, leasehold or other immovable property;

(c)  Compliance with Obligations:  duly and punctually comply with and observe
     ---------------------------
     all terms and conditions contained in all conveyances, transfers, leases,
     tenancies, licences and Encumbrances and all covenants and restrictions
     affecting any Real Property and not do or suffer to be done any act or
     thing whereby any such lease or licence is surrendered or is likely to
     become liable to forfeiture or otherwise be unilaterally determined by the
     landlord or other party;

(d)  No Alterations:  not pull down, alter, extend or remove any building,
     --------------
     structure or other improvements forming part of the Real Property;

(e)  Registered Land:  not permit any person to become registered as proprietor
     ---------------
     under the Land Registration Acts of any Real Property;

(f)  Overriding Interests:  not create or permit to arise any overriding
     --------------------
     interest as defined in section 70 of the Land Registration Act 1925;

(g)  Taxes and Outgoings:  pay as and when the same must be paid all taxes,
     -------------------
     rates, duties, charges, assessments and outgoings whatsoever (whether
     parliamentary, parochial, local or of any other description) which shall be
     assessed, charged or imposed upon or payable in respect of the Real
     Property or any part thereof (save to the extent that payment of the same
     is being contested in good faith);

(h)  User:  use the Real Property only for such purpose or purposes as may for
     ----
     the time being be authorised as the permitted use or user thereof under or
     by virtue of the Town and Country Planning Acts;

(i)  Development:  not make any application under the Town and Country Planning
     -----------
     Acts or any other enactment to change the authorised use or to carry out
     any other development of the Real Property;

(j)  Statutes:  comply with the provisions of all statutes for the time being in
     --------
     force and every notice, order, direction, licence, consent or permission
     given thereunder and the requirements of any competent authority so far as
     they relate to the Real Property or its use;

                                      13
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     (k)  Leases: not grant or agree to grant (whether in exercise or
          ------
          independently of any statutory power) any lease or tenancy of the Real
          Property or any part thereof or accept or agree to accept surrenders
          thereof or permit any person to become entitled to any proprietary
          right or interest which might affect the value of any Real Property;
          and

     (l)  Investigation of Title: promptly deliver to the Security Agent a copy
          ----------------------
          of each report on title or certificate of title prepared on behalf of
          the Company in respect of any Real Property acquired by the Company
          after the date hereof.

8.3  Undertakings Relating to Intellectual Property.  The Company undertakes to
     ----------------------------------------------
     the Security Agent that, throughout the continuation of the Facility and so
     long as any Secured Indebtedness is or may become payable, the Company
     will, unless the Security Agent otherwise agrees in writing:

     (a)  No Grant of Exclusive Rights: not grant any exclusive rights in
          ----------------------------
          relation to any of its Intellectual Property;

     (b)  Maintenance in Force:  make such registrations and pay such fees,
          --------------------
          registration taxes and similar amounts as are necessary to keep its
          Intellectual Property in force;

     (c)  Preservation of Rights: take such steps as are necessary to maintain
          ----------------------
          and preserve its interests in its Intellectual Property;

     (d)  No Licence: not sell, transfer, license or otherwise dispose of all of
          ----------
          such Intellectual Property or any part thereof which is material to
          the conduct of the Company's business; and

     (e)  No Abandonment: not permit such Intellectual Property which is
          --------------
          registered, or any part thereof which is material to the conduct of
          the Company's business, to be abandoned or cancelled, to lapse or to
          be liable to any claim of abandonment or cancellation for non-use or
          otherwise.

8.4  Undertakings Relating to Insurance. The Company undertakes to the Security
     ----------------------------------
Agent that throughout the continuation of the Facility and so long as any
Secured Indebtedness is or may become payable, the Company will, unless the
Security Agent otherwise agrees in writing:

     (a)  All Risks:  insure all of the Security Assets which are of an
          ---------
          insurable nature against such risks as would usually be insured
          against by a reasonably prudent person owning property similar to the
          Security Assets or carrying on a business similar to the Company's
          business to the full replacement value or reinstatement cost thereof
          from time to time;

     (b)  Other Insurances:  effect and maintain such product and third party
          ----------------
          liability, workers' compensation, public risk, loss of rent and
          business interruption insurance and such other insurances as would
          usually be effected by a reasonably prudent person carrying on a
          business similar to the Company's business or as may be reasonably
          required by the Security Agent from time to time;

                                      14
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     (c)  Insurers:  ensure that all policies of insurance are issued by an
          --------
          insurer reasonably acceptable to the Security Agent;

     (d)  Contents of Policy:  ensure that all policies of insurance are for an
          ------------------
          amount and on terms reasonably acceptable to the Security Agent and
          without limiting the generality of the foregoing:

          (i)    are taken out in the names of the Company and Security Agent
                 for the full value of their respective interests;

          (ii)   name the Security Agent as first loss payee; and

          (iii)  contain a provision that the policy will not be cancelled or
                 terminated unless the Security Agent has received from the
                 insurer 30 days' prior written notice of the proposed
                 cancellation or termination;

     (e)  Premiums:  punctually pay all monies necessary for effecting and
          --------
          maintaining all insurance and deliver to the Security Agent every
          policy (including, without limitation, every alteration or addition
          to, and every substitution for, such policy), certificate of currency
          and receipt relating thereto and comply in all other respects with the
          terms of the relevant policies, including any stipulations or
          restrictions as to the use or operation of any asset;

     (f)  No Variation:  not vary, amend or terminate any insurance policy;
          ------------

     (g)  No Prejudice:  not do, permit or allow any act, omission or thing to
          ------------
          be done or occur (including without limitation, any alteration or
          addition to any buildings, fixtures or other improvements forming part
          of the Security Assets) whereby:

          (i)   any insurance policy may be or become liable to be vitiated or
                cancelled;

          (ii)  the premium may be increased;

          (iii) any insurance is or becomes insufficient; or

          (iv)  any claim may be prejudiced in any way;

     (h)  Notification to Security Agent:  promptly notify the Security Agent
          ------------------------------
          of, and, if required by the Security Agent, obtain an undertaking from
          the insurer of any insurance policy addressed to the Security Agent
          that such insurer shall notify the Security Agent of:

          (i)  any act, omission, matter or thing which gives or might give rise
               to a right to claim under any policy immediately after the same
               occurs, giving full particulars thereof and from time to time
               thereafter provide to the Security Agent such further information
               as comes into the possession of the Company relating to that
               claim; and

          (ii) any cancellation or proposed cancellation of any policy of
               insurance;

                                      15
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     (i)  Settlement of Claims: not, and shall permit the Security Agent alone
          --------------------
          to, make, enforce, settle and compromise any claims in respect of
          insurance or for compensation, and to sue and give discharges for all
          insurance monies;

     (j)  Application of Monies: deposit, or procure that there are deposited,
          ---------------------
          in an account in the name of the Company (but which may only be
          operated by one or more authorised officers of the Security Agent)
          with a bank approved by the Security Agent any monies received or
          recovered in respect of an insurance policy and apply those monies, at
          the option of the Security Agent, either:

          (i)  towards satisfaction of the Secured Indebtedness in accordance
               with Clause 11 (Receipt and Application of Monies); or

          (ii) to repair, replace or reinstate any lost or damaged Security
               Assets or otherwise for the purpose for which the relevant
               insurance policy was effected; and

     (k)  Insurance of Leasehold Property: in the case of any leasehold property
          -------------------------------
          where the landlord (or other third party) is obliged by the terms of
          the relevant lease to insure the relevant property, procure (where it
          is empowered to do so), or otherwise use all reasonable endeavours to
          ensure that the landlord (or other third party) procures, insurance in
          accordance with the terms of the relevant lease.

8.5  Undertakings Relating to Debts.  The Company undertakes to the Security
     ------------------------------
     Agent that, throughout the continuation of the Facility and so long as any
     Secured Indebtedness is or may become payable the Company will, unless the
     Security Agent otherwise agrees in writing:

     (a)  Debts: (without limiting the generality of Clauses 8.1(a)
          -----
          (Encumbrances) and 8.1(b) (Disposals)), not sell, discount, factor,
          charge, pledge or assign to any third person any of the Debts or deal
          with any of the Debts in any way except by getting in and realising
          the same (for which purpose the Company shall be the agent of the
          Security Agent);

     (b)  Recovery: use its best endeavours to recover the full amount of each
          --------
          Debt, subject to any written consent given by the Security Agent
          pursuant to paragraph (e) below;

     (c)  Payment into Account: pay into its current account with the Security
          --------------------
          Agent (or such other account as the Security Agent may from time to
          time direct) all monies which it may receive in respect of the Debts;

     (d)  Non-payment: inform the Security Agent immediately upon learning of
          -----------
          the same if any Debtor goes or threatens to go into liquidation,
          administration or receivership or otherwise ceases or threatens to
          cease to pay its debts as they fall due;

     (e)  Legal Assignment: upon request by the Security Agent, execute a legal
          ----------------
          assignment of the Debts (or any, or any part of them) to the Security
          Agent and give notice thereof in writing to the respective Debtors;
          and

     (f)  No Release: not release any of the Debts save upon a full discharge
          ----------
          thereof or otherwise commute the liability of any Debtor (whether by
          reducing the amount due, extending the time for payment or otherwise)
          save in the ordinary course of business.

                                      16
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

8.6  Undertakings Relating to Securities.  The Company undertakes to the
     -----------------------------------
     Security Agent that, throughout the continuation of the Facility and so
     long as any Secured Indebtedness is or may become payable, the Company
     will, unless the Security Agent otherwise agrees in writing:

     (a)  Securities: deliver and procure that its nominees deliver to the
          ----------
          Security Agent upon the execution of this Deed and upon any subsequent
          date upon which it acquires (beneficially or otherwise any Securities:

          (i)       all certificates in respect of those Securities;

          (ii)      an instrument of transfer or an assignment of the relevant
                    Securities executed by each person in whose name such
                    Securities are registered and otherwise completed as the
                    Security Agent may require; and

          (iii)     in respect of any Securities which are not in the sole name
                    of the Security Agent, a declaration of trust in respect of
                    those Securities executed by each person in whose name those
                    Securities are registered and in favour of the Security
                    Agent or such other person as the Security Agent shall
                    require or otherwise completed as the Security Agent may
                    direct;

     (b)  Calls: promptly pay all calls and other payments due in respect of any
          -----
          Securities;

     (c)  Transfer Restrictions: ensure that all of the Securities are and at
          ---------------------
          all times remain free from any restrictions on transfer;

     (d)  Notification of Related Rights: upon the acquisition by the Company of
          ------------------------------
          any Related Rights or receipt by the Company of notification of any
          entitlement to any Related Rights (whichever is earlier), provide the
          Security Agent with full particulars thereof;

     (e)  Acquisition of Related Rights: at the request of the Security Agent,
          -----------------------------
          acquire any Related Rights if failure to take up such Related Rights
          might, in the Security Agent's opinion, result in the Security Agent's
          or all or any of the other Finance Parties' security being materially
          lessened in value;

     (f)  Payments in Respect of Related Rights: subject to Clause 6
          -------------------------------------
          (Securities), pay to the Security Agent any monies received by the
          Company under or in respect of any Related Rights;

     (g)  Registered Holder: except pursuant to paragraph (h) (Transfer to
          -----------------
          Security Agent) below, not permit any person other than the Company or
          its nominee, or a clearance or settlement system or custodian
          acceptable to the Security Agent, to be registered as the holder of
          any Securities;

     (h)  Transfer to Security Agent:  upon request by the Security Agent at any
          --------------------------
          time, permit all or any of the Securities to be registered in or
          transferred into the name of, or held or registered as held in an
          account of, the Security Agent or its nominee; and

     (i)  No Securities Lending:  not lend any Securities to any person.
          ---------------------

                                      17
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

8.7  Undertakings Relating to Environmental Matters.  The Company undertakes to
     ----------------------------------------------
     the Security Agent that, throughout the continuation of the Facility and so
     long as any Secured Indebtedness is or may become payable, the Company
     will, unless the Security Agent otherwise agrees in writing:

     (a)  Compliance:  comply in all respects with the terms and conditions of
          ----------
          all Environmental Licences and Environmental Laws applicable to it and
          to any of the Security Assets;

     (b)  Notification of Claims:  promptly upon receipt of the same, notify the
          ----------------------
          Security Agent of any claim, notice or other communication served on
          it in respect of any alleged breach of any Environmental Law or
          Environmental Licence which might, if substantiated, have a material
          adverse effect on its financial condition or on its ability to perform
          its obligations under the Facility Agreement or this Deed or any other
          Financing Document to which it is a party; and

     (c)  Indemnity:  indemnify the Security Agent, each other Finance Party
          ---------
          and any Receiver and their respective officers, employees, agents and
          delegates (together the "Indemnified Parties") against all actions,
          suits, claims, demands, losses, liabilities, damages, costs and
          expenses which may be made or brought against or suffered or incurred
          by them (except if caused by the negligence or wilful misconduct of
          the relevant Indemnified Party) in connection with the Security Assets
          and which:

          (i)   arises by virtue of any actual or alleged breach of any
                Environmental Law or Environmental Licence (whether by the
                Company, the relevant Indemnified Party or any other Indemnified
                Party); and

          (ii)  would not have arisen if this Deed had not been executed.

9.   ENFORCEMENT OF SECURITY
     -----------------------

9.1  Enforceability.  Immediately upon the occurrence of an Event of Default the
     --------------
     security created by or pursuant to this Deed shall become enforceable in
     accordance with the provisions of this Deed.

9.2  Security Agent's Right to Remedy Default.  If an Event of Default occurs,
     ----------------------------------------
     the Security Agent shall, at the Company's cost, and without prejudice to
     any other rights it may have, be entitled (but not bound) to do anything
     which it considers appropriate to remedy any failure by the Company to
     perform its obligations under this Deed. The Security Agent shall not
     thereby become liable to account as a mortgagee in possession.

9.3  Powers of Security Agent.  At any time after the security created by or
     ------------------------
     pursuant to this Deed becomes enforceable, the Security Agent may exercise,
     without further notice and whether or not it shall have appointed a
     Receiver, all or any of the powers, authorities and discretions which are
     conferred by this Deed (whether expressly or by reference) upon a Receiver
     in relation to all or any part of the Security Assets without first
     appointing a Receiver or notwithstanding the appointment of a Receiver in
     relation to the relevant Security Assets.

9.4  Appointment of Receiver.  At any time after this security becomes
     -----------------------
     enforceable, or if the Company so requests, and notwithstanding that an
     order may have been made or a resolution passed for the winding-up of the
     Company, the Security Agent may appoint in writing any

                                      18
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     duly qualified person or persons to be a receiver or receiver and manager
     or administrative receiver of all or any part of the Security Assets and:

     (a)  Terms:  the Receiver may be appointed by the Security Agent on such
          -----
          terms as the Security Agent thinks fit;

     (b)  Joint Receivers:  if two or more persons are appointed as Receiver
          ---------------
          they may be appointed in respect of different parts of the Security
          Assets and each joint Receiver shall have power to act severally and
          independently of any other joint Receiver, except to the extent
          specified to the contrary in the appointment; and

     (c)  Removal:  the Security Agent may remove a Receiver and, in the case of
          -------
          removal, retirement or death of the Receiver, may appoint another in
          his place, provided that any Receiver appointed by the Security Agent
          as an administrative receiver shall only be removed from office or
          vacate office in accordance with the provisions of section 45 of the
          Insolvency Act 1986.

9.5  Agent of Company.  Unless and until the Security Agent by notice in writing
     ----------------
     to the Company and to the Receiver requires that the Receiver act as agent
     of the Security Agent, or until an order is made or a resolution is passed
     for the winding-up of the Company, the Receiver shall be the agent of the
     Company, and the Company alone shall (subject, in the case of an
     administrative receiver, to section 44 of the Insolvency Act 1986) be
     responsible for the acts and defaults of the Receiver and for his
     remuneration and shall be liable on any contracts and agreements made or
     entered into by him and for any losses incurred by him, but in exercising
     any powers of the Security Agent the Receiver shall have the authority of
     both the Company and the Security Agent. After an order is made or a
     resolution is passed for the winding up of the Company, the Receiver shall
     act as a principal and shall not become the agent of the Security Agent.
     Where the Receiver is not an administrative receiver the Receiver shall be
     in the same position as a receiver appointed by a mortgagee under the Law
     of Property Act 1925.

9.6  Powers of Receiver.  Subject to any specific limitations placed upon him by
     ------------------
     the terms of his appointment, the Receiver (whether or not an
     administrative receiver) shall have all the rights, powers and remedies
     conferred on an administrative receiver by the Insolvency Act 1986, all the
     rights, powers and remedies conferred on a receiver appointed under the Law
     of Property Act 1925 and all rights, powers and remedies conferred on a
     mortgagee (including a mortgagee in possession) by that Act and shall also
     have the power to do all acts and things and exercise all rights, powers
     and remedies that the Company could do or exercise in relation to the
     Security Assets as if the Receiver were the absolute beneficial owner of
     the same including, without limitation, the power to do all or any of the
     following:

     (a)  Possession:  enter, take possession, assume control of, get in and
          ----------
          collect the Security Assets;

     (b)  Receive Rents:  receive the rents and profits of the Security Assets;
          -------------

     (c)  Manage:  manage the Security Assets;
          ------

     (d)  Carry on Business:  carry on, manage, develop, reconstruct,
          -----------------
          amalgamate or diversify the business of the Company or any part
          thereof or concur in so doing;

                                      19
<PAGE>

     (e)  Rebuild, Maintain and Develop: pull down, rebuild, repair, alter, add
          -----------------------------
          to, complete, maintain and insure the Security Assets and lease or
          otherwise acquire and develop or improve properties or other assets
          without being responsible for loss or damage;

     (f)  Make Calls: make calls on capital and premiums of the Company and
          ----------
          enforce payment of calls;

     (g)  Power of Sale: sell or agree to sell or otherwise dispose of or deal
          -------------
          with any Security Assets (whether or not the Receiver or Security
          Agent has taken possession) on such terms as the Receiver thinks fit
          and:

          (i)   whether by public auction, private treaty or by tender;

          (ii)  for cash or property or other valuable consideration and on
                terms that payment of all or any part of the purchase price is
                deferred (whether at interest or not and whether with or without
                security);

          (iii) in one lot or in parcels;

          (iv)  whether or not in conjunction with the sale of other property by
                the Receiver or the Security Agent or any other person; and

          (v)   whether with or without special provisions as to title or time
                or otherwise;

     (h)  Lease: lease or license the Security Assets, renew, terminate,
          -----
          surrender or accept the surrender of leases or licences, in each case
          on such terms as the Receiver thinks fit, whether at a premium or
          otherwise;

     (i)  Grant Options: grant to any person an option to purchase or other
          -------------
          rights over any Security Assets upon such terms as the Receiver thinks
          fit;

     (j)  Fixtures: add or sever fixtures and sell or otherwise dispose of or
          --------
          deal with them separately from the premises to which they were
          affixed;

     (k)  Surrender: surrender or transfer the Security Assets to any
          ---------
          governmental agency (whether or not for fair compensation);

     (l)  Exchange: exchange (whether or not for fair value) with any person any
          --------
          Security Assets for an interest in property of any tenure and the
          property so acquired may be dealt with by the Receiver as if it were
          part of the Security Assets and, for that purpose, the Receiver may
          create an Encumbrance over that property in favour of the Security
          Agent;

     (m)  Subsidiaries: promote the formation of any company with a view to it
          ------------
          becoming a subsidiary of the Company and purchasing, leasing,
          licensing or otherwise acquiring interests in all or any of the
          Security Assets or otherwise, arrange for any such company to trade or
          cease to trade and to purchase, lease, license or otherwise acquire
          all or any of the Security Assets on such terms and conditions,
          whether or not including payment by instalments, secured or unsecured,
          as the Receiver thinks fit;

                                      20
<PAGE>

     (n)  Insurances: maintain, renew, take out or increase insurances in such
          ----------
          amounts and on such terms as the Receiver thinks fit;

     (o)  Employees: employ managers, solicitors, officers, agents, accountants,
          ---------
          auctioneers, consultants, workmen and employees on such terms as the
          Receiver thinks fit;

     (p)  Delegation: delegate to any person for such time as the Receiver
          ----------
          approves any or all of the powers of the Receiver on such terms as the
          Receiver thinks fit;

     (q)  Give Receipts: receive all payments (including but not limited to
          -------------
          Debts) and give receipts for all monies and other assets which may
          come into the hands of the Receiver, which receipts shall exonerate
          any person paying or handing over such monies or other assets from all
          liability to see to the application thereof and from all liability to
          enquire whether the Secured Indebtedness has become due or payable or
          otherwise as to the propriety or regularity of the appointment of any
          Receiver;

     (r)  Performance and Enforcement: carry out and enforce, or refrain from
          ---------------------------
          carrying out or enforcing, rights and obligations of the Company
          forming part of the Security Assets or obtained or incurred in the
          exercise of the rights, powers and remedies of the Receiver;

     (s)  Compromises: make any arrangements or compromise or enter into or
          -----------
          cancel any contracts which the Receiver considers expedient;

     (t)  Take Proceedings: institute, conduct, defend, settle, arrange or
          ----------------
          compromise any proceedings and submit to any court or arbitrator any
          claims, questions or disputes whatsoever which may arise in connection
          with the business of the Company (including, without limitation, for
          the recovery of debts or other monies due to the Company) or in
          respect of the Security Assets or in any way relating to this Deed,
          and to execute releases or other discharges in relation thereto;

     (u)  Borrowings: advance monies or otherwise provide financial
          ----------
          accommodation for the account of the Company or borrow any money or
          obtain other financial accommodation from any person which may be
          required for any of the purposes mentioned in this Clause 9.6, and in
          the name of the Company or otherwise, and secure any borrowings or
          other financial accommodation by an Encumbrance over the Security
          Assets ranking in priority to, pari passu with or after the security
          created by this Deed, in each case on such terms as the Receiver
          thinks fit;

     (v)  Securities: exercise any voting or other rights attached to any
          ----------
          Securities and take up or renounce any Related Rights;

     (w)  Bank Accounts: operate any bank account forming part of the Security
          -------------
          Assets; and

     (x)  Other Acts and Documents: execute deeds and documents on behalf of the
          ------------------------
          Company and do all such other acts and things as may be considered by
          the Receiver to be incidental or conducive to any of the matters or
          powers aforesaid or to the realisation of the security created by this
          Deed and to use the name of the Company for all the purposes
          aforesaid.

9.7  Remuneration of Receiver. Each Receiver shall be entitled to remuneration
     ------------------------
for his services at a rate to be fixed by agreement between him and the Security
Agent (or, failing such

                                      21
<PAGE>

     agreement, to be fixed by the Security Agent) appropriate to the work and
     responsibilities involved upon the basis of charging from time to time
     adopted in accordance with his current practice or the current practice of
     his firm and without being limited to the maximum rate specified in section
     109(6) of the Law of Property Act 1925.

9.8  Give up Possession. The Security Agent may give up possession of any
     ------------------
     Security Assets at any time and may discontinue any receivership.

9.9  Property Acquired. All property of any kind acquired in exercise of any of
     -----------------
     the powers conferred by this Deed shall be subject to the security created
     by this Deed and to all the powers conferred by this Deed.

9.10 Waiver of Notice. Any notice, period of time or other condition precedent
     ----------------
     prescribed by law to the exercise of any rights, powers or remedies of the
     Security Agent or a Receiver is dispensed with except to the extent (if
     any) that the relevant law does not afford the opportunity to dispense by
     agreement with its requirements, in which event the relevant right, power
     or remedy may be exercised by the Security Agent or a Receiver at the time
     and in the circumstances prescribed by law.

9.11 Exclusion of Statute.
     --------------------

     (a)  Statutory Powers Unaffected: The foregoing powers conferred on the
          ---------------------------
          Security Agent and a Receiver shall be in addition to and not to the
          prejudice of all statutory and other powers of the Security Agent or a
          Receiver under the Law of Property Act 1925 or otherwise.

     (b)  Rights Unfettered: Section 103 of that Act shall not restrict the
          -----------------
          exercise by the Security Agent or a Receiver of the power of sale or
          power to appoint a receiver conferred by section 101 of that Act,
          which power shall arise and may be exercised at any time after the
          happening of an Event of Default.

     (c)  Leasing: The powers of leasing, letting, entering into agreements for
          -------
          leases or lettings and accepting and agreeing to accept surrenders of
          leases conferred by sections 99 and 100 of that Act shall be
          exercisable at any time after the happening of an Event of Default,
          and whether or not the Security Agent shall then be in possession of
          the premises in question, so as to authorise the Security Agent or a
          Receiver to make a lease or agreement for lease at a premium and for
          any length of term and generally without any restriction on the kind
          of leases and agreements for lease or the necessity to comply with any
          restrictions imposed by, or the other provisions of, sections 99 and
          100 of that Act.

9.12 Not Mortgagee in Possession. Where any liability or duty might otherwise
     ---------------------------
     attach to the Security Agent or a Receiver as mortgagee in possession for
     the purposes of the Law of Property Act 1925 neither the Security Agent nor
     any Receiver shall by reason of its entering into possession of any of the
     Security Assets be liable to account as mortgagee in possession or for
     anything except actual receipts or be liable for any loss upon realisation
     or for any default or omission for which a mortgagee in possession might
     otherwise be liable.

9.13 Exclusion of Liability.
     ----------------------

     (a)  No Liability: Neither the Security Agent, any other Finance Party nor
          ------------
          any Receiver shall be responsible for any losses of any kind
          whatsoever (including,

                                      22
<PAGE>

          without limitation, negligence, default or dishonesty of any servant,
          agent or auctioneer employed by the Security Agent or any Receiver or
          any attorney of the Security Agent or any Receiver) which may occur in
          or about the exercise, or attempted or purported exercise or non-
          exercise of any of the rights, powers or remedies of the Security
          Agent or any Receiver unless directly caused by the gross negligence
          or wilful default of the Security Agent or any Receiver.

     (b)  LPA Protections: The Security Agent and every Receiver shall be
          ---------------
          entitled to all the privileges and immunities conferred on mortgagees
          and receivers appointed thereunder by the Law of Property Act 1925.

9.14 Protection of Third Parties. No person dealing with the Security Agent or
     ---------------------------
     any attorney of the Security Agent or any Receiver in connection with the
     exercise of any of the rights, powers or remedies of the Security Agent
     shall be bound to inquire whether any Event of Default has occurred or any
     power has become exercisable, as to the due appointment of any Receiver or
     otherwise as to the propriety or regularity of any such dealing or to see
     to the application of any money paid to the Security Agent or any Receiver
     and shall not be affected by express notice that any such dealing is
     unnecessary or improper, and notwithstanding any irregularity or
     impropriety in any such dealing the same shall, as regards the protection
     of that person, be deemed to be valid and effective.

9.15 Acceptance of Payments. This Deed may be enforced notwithstanding that the
     ----------------------
     Security Agent or any other Finance Party may have accepted payment of any
     Secured Indebtedness after the occurrence of an Event of Default.

10.  SET-OFF
     -------

     If an Event of Default has occurred the Security Agent and each other
     Finance Party shall have the right (but not the obligation), without notice
     to the Company or any other person, to set-off and apply any credit balance
     on any account of the Company with the Security Agent or such Finance Party
     (as the case may be) and any other indebtedness owing by the Security Agent
     or such Finance Party to the Company (in each case, whether or not subject
     to notice, matured or owing to a different branch or office and in whatever
     currency) against such of the Secured Indebtedness which is due and
     payable. Each Finance Party may convert any such credit balance or other
     indebtedness at the prevailing rate of exchange into such other currencies
     as may be necessary for this purpose.

11.  RECEIPT AND APPLICATION OF MONIES
     ---------------------------------

11.1 Order of Application. The net profits of the carrying on of the business of
     --------------------
     the Company following enforcement of any of the charges created under or
     pursuant to this Deed and the net proceeds of any sale, assignment, lease
     or other disposal by the Security Agent or the Receiver shall be applied
     (subject to the provisions of section 40 of the Insolvency Act 1986 and, in
     the case of an administrative receiver, the provisions of section 43 of
     such Act where an order has been obtained by such administrative receiver
     to enable him to sell or dispose of any of the Security Assets subject to
     any security in favour of a third party) in the following order of
     priority:

     (a)  first, in payment of the costs, charges, expenses and other monies
          -----
          payable by the Company under Clauses 13 (Costs, Charges and Expenses)
          and 14 (Indemnities and Currencies) or liabilities otherwise incurred
          in the exercise or attempted exercise of the rights, powers or
          remedies of the Security Agent or a Receiver;

                                      23
<PAGE>

     (b)  secondly, in payment of the Receiver's remuneration;
          --------

     (c)  thirdly, in payment of the remaining Secured Indebtedness;
          -------

     (d)  fourthly, in payment of amounts due under subsequent Encumbrances of
          --------
          which the Security Agent has notice, in the order of their priorities;
          and

     (e)  fifthly, in payment to the Company.
          -------

11.2 Credit Actual Receipts. In applying any monies toward satisfaction of the
     ----------------------
     Secured Indebtedness, the Security Agent shall credit the Company with only
     those monies actually received by the Security Agent in cleared funds, and
     such credit shall date from the time of actual receipt.

11.3 Suspense Account The Security Agent may place and keep any monies received
     ----------------
     by virtue of this Deed (whether before or after the insolvency or
     liquidation of the Company) to the credit of a suspense account for so long
     as the Security Agent may think fit in order to preserve the rights of the
     Security Agent or any other Finance Party to sue or prove for the whole
     amount of its claims against the Company or any other person.

11.4 Amounts Contingently Due. If the Security Agent enforces the security
     ------------------------
     constituted by this Deed (whether by the appointment of a Receiver or
     otherwise) at a time when no amounts are due to it (but at a time when
     amounts may become so due), the Security Agent (or such Receiver) may pay
     the proceeds of any recoveries effected by it into an interest-bearing
     suspense account with any person (including the Security Agent) selected by
     the Security Agent and on terms selected by the Security Agent until the
     relevant amounts become actually due and payable or the Security Agent
     determines that they will never become actually due and payable. At that
     time the amount actually owing may be paid to the Security Agent and the
     balance distributed in accordance with Clause 11.1 (Order of Application).
     Until such time the Security Agent (or such Receiver) may (subject to the
     payment of any claims having priority to this security) withdraw amounts
     standing to the credit of any such suspense account in order to pay the
     amounts referred to in paragraphs (a) and (b) of Clause 11.1 (Order of
     Application). The Company will not be entitled to withdraw any monies
     (including interest) standing to the credit of any such suspense account
     until all the Secured Indebtedness has been irrevocably paid and discharged
     in full.

11.5 Appropriation. The Company irrevocably authorises the Security Agent to
     -------------
     appropriate any monies received by the Security Agent or any attorney of
     the Security Agent or any Receiver towards such of the Secured Indebtedness
     as the Security Agent in its absolute discretion thinks fit.

11.6 Surplus Monies. If at any time after satisfaction of the Secured
     --------------
     Indebtedness the Security Agent holds any surplus money payable to the
     Company, those monies shall not carry interest and may be placed to the
     credit of an account in the name of the Company with a bank and the
     Security Agent shall thereupon be under no further liability in respect
     thereof.

12.  PAYMENTS
     --------

12.1 No Deductions. All sums payable by the Company under this Deed shall be
     -------------
     paid in full without set-off or counterclaim or any restriction or
     condition and, except to the extent

                                      24
<PAGE>

     required by any law or regulation, free and clear of any deduction or
     withholding on account of tax or otherwise. If the Company or any other
     person is required by any law or regulation to make any such deduction or
     withholding the Company shall, together with the relevant payment, pay such
     additional amount as will ensure that the Security Agent or, as the case
     may be, any other relevant Finance Party actually receives and is entitled
     to retain, free and clear of any such deduction or withholding, the full
     amount which it would have received if no such deduction or withholding had
     been required. The Company shall within the required time period, pay or
     cause to be paid over to the relevant taxation or other authority the full
     amount of any such deduction or withholding and shall promptly forward to
     the Security Agent copies of official receipts or other evidence
     satisfactory to the Security Agent showing that such payment has been made.

12.2 Security Agent May Debit Account of Company. The Security Agent may,
     -------------------------------------------
     without prejudice to any other right, power or remedy of the Security
     Agent, at any time and from time to time, without further authority or
     notice to the Company, debit and charge any account of the Company with the
     Security Agent with any of the monies payable to the Security Agent under
     the Facility Agreement or this Deed or any other Financing Document to
     which the Company is a party.

13.  COSTS, CHARGES AND EXPENSES
     ---------------------------

13.1 Expenses. The Company shall immediately on demand pay or reimburse to the
     --------
     Security Agent and the other Finance Parties (or as the case may be) the
     Receiver:

     (a)  Execution: all costs, charges and expenses (including legal fees on a
          ---------
          full indemnity basis and all other out-of pocket expenses and any
          applicable value added tax or similar tax) incurred by the Security
          Agent or any other Finance Party or the Receiver in connection with
          the preparation, execution and registration of this Deed and any other
          documentation required in connection with this Deed and any amendment
          to or extension of, or any inspection, calculation, approval, consent
          or waiver to be made or given in connection with, this Deed;

     (b)  Rights and Remedies: all costs, charges and expenses (including legal
          -------------------
          fees on a full indemnity basis and all other out-of pocket expenses
          and any applicable value added tax or similar tax) incurred by the
          Security Agent or any other Finance Party or the Receiver in
          exercising any of its or their rights or powers under this Deed or in
          suing for or seeking to recover any sums due or otherwise preserving
          or enforcing its or their rights, powers and remedies under this Deed
          or in connection with the preservation or attempted preservation of
          the Security Assets or in defending any claims brought against any of
          them in respect of this Deed or the Company's interest in the Security
          Assets or in releasing or re-assigning this Deed upon payment of all
          monies secured by this Deed; and

     (c)  Receiver: all remuneration payable to the Receiver,
          --------

     and, until payment of the same in full, all such costs, charges and
     expenses and remuneration shall be secured by this Deed.

13.2 Taxes and Registration Fees. The Company shall pay when due all present and
     ---------------------------
     future stamp and other similar duties and taxes and all notarial,
     registration, recording and other similar fees which may be payable in
     respect of this Deed and any documentation required in connection with this
     Deed and shall indemnify the Security Agent and the other Finance

                                      25
<PAGE>

     Parties against all liabilities, costs and expenses which may result from
     any delay or default in paying such duties, taxes or fees (unless caused by
     the relevant person's negligence or wilful default in paying such fees).

14.  INDEMNITIES AND CURRENCIES
     --------------------------

14.1 General Indemnity. The Company shall indemnify the Security Agent and the
     -----------------
     other Finance Parties and any Receiver (and any attorney, delegate or other
     person appointed under this Deed by either of them) from and against all
     claims, actions, losses, liabilities, damages, costs and expenses incurred
     by it or them as a result of or arising out of or in connection with:

     (a)  Performance: the occurrence of any Event of Default, or any failure by
          -----------
          the Company to make a payment or perform any obligation in accordance
          with this Deed; or

     (b)  Security Assets: the Security Assets or the use or occupation thereof
          ---------------
          by any person; or

     (c)  Powers: the execution or purported execution of any powers,
          ------
          authorities and discretions conferred on it pursuant to this Deed or
          in respect of any matter or thing done or omitted in relation to the
          Security Assets (unless directly resulting from the gross negligence
          or wilful default of the indemnified person).

14.2 Conversion of Currencies. All monies received or held by the Security Agent
     ------------------------
     or by a Receiver under this Deed at any time on or after enforcement in a
     currency other than a currency in which the Secured Indebtedness (or any
     part of it) is denominated or in an amount exceeding the amount in the
     relevant currency in which any Secured Indebtedness is denominated may from
     time to time be sold for one or more of the currencies in which the Secured
     Indebtedness is denominated as the Security Agent or Receiver considers
     necessary or desirable and the Company shall indemnify the Security Agent
     against all costs, charges and expenses incurred in relation to such sale.
     Neither the Security Agent nor any Receiver shall have any liability to the
     Company in respect of any loss resulting from any fluctuation in exchange
     rates after any such sale.

14.3 Currency Indemnity. If any amount is received by the Security Agent or any
     ------------------
     other Finance Party in a currency other than that in which the relevant
     obligation or liability of the Company was payable (the "Required
     Currency") pursuant to any law, regulation or order or in the winding up,
     insolvency or bankruptcy of the Company or otherwise, such obligation or
     liability shall be discharged only to the extent that the Security Agent or
     that Finance Party may purchase the Required Currency with such other
     currency in accordance with normal banking procedures of the Security Agent
     or, as the case may be, that Finance Party upon receipt of such amount. If
     the amount in the Required Currency which may be so purchased, after
     deducting any costs of exchange and any other related costs, is less than
     the amount of the relevant obligation or liability, the Company shall
     indemnify the Security Agent or such other Finance Party against the
     shortfall. This indemnity shall be an obligation of the Company independent
     of and in addition to its other obligations under this Deed,
     notwithstanding any time or other concession may have been granted to the
     Company or any other act, matter or thing.

14.4 Payment and Security. The Security Agent and any Receiver may retain and
     --------------------
     pay out of any money in the Security Agent's or (as the case may be) such
     Receiver's hands all sums necessary to effect the payments, obligations and
     indemnities contained in Clause 13 (Costs,

                                      26
<PAGE>

     Charges and Expenses) and Clause 14 (Indemnities and Currencies) and all
     sums payable by the Company under Clause 13 (Costs, Charges and Expenses)
     and Clause 14 (Indemnities and Currencies) shall form part of the monies
     hereby secured.

15.  EVIDENCE OF DEBT
     ----------------

     Any statement of account purporting to show an amount due from the Company
     for the purposes of this Deed and signed as correct by an authorised
     officer of the Security Agent shall, in the absence of manifest error, be
     conclusive evidence of the amount so due.

16.  FURTHER ASSURANCE
     -----------------

16.1 Further Assurance. The Company shall at any time and from time to time
     -----------------
     (whether before or after the security created by or pursuant to this Deed
     shall have become enforceable):

     (a)  Execute Documents: execute all further legal or other mortgages,
          -----------------
          charges or assignments in favour of the Security Agent or the Finance
          Parties; and

     (b)  Other Action: do all such transfers, assurances, acts and things (and,
          ------------
          without limiting the generality of the foregoing, give all notices,
          orders and directions) in respect of all or any of the undertaking,
          property, assets and rights both present and future of the Company,

     which the Security Agent may require to secure the Secured Indebtedness or
     to facilitate the realisation of the Security Assets or the exercise of any
     powers conferred on the Security Agent or a Receiver or for the purposes of
     perfecting and completing any assignment of the Security Agent's rights,
     benefits or obligations under this Deed.

16.2 Enforcement of Security Agent's Rights. The Company will do or permit to be
     --------------------------------------
     done everything which the Security Agent may from time to time require to
     be done for the purpose of perfecting and enforcing the Security Agent's
     rights under this Deed and will allow the name of the Company to be used as
     and when required by the Security Agent for that purpose.

16.3 Form of Documents. Any instrument which the Company is required to execute,
     -----------------
     or of which the Company is required to procure the execution, shall be
     prepared by or on behalf of the Security Agent at the cost of the Company
     and shall contain such clauses as the Security Agent shall reasonably
     require, including, but not limited to clauses containing an immediate
     power of sale without notice and excluding section 93, and the restrictions
     contained in section 103, of the Law of Property Act 1925.

16.4 Other Provisions. This Clause shall be in addition to and not in
     ----------------
     substitution for the covenants for further assurance deemed to be included
     in this deed by virtue of the Law of Property (Miscellaneous Provisions)
     Act 1994.

17.  POWER OF ATTORNEY
     -----------------

17.1 Power of Attorney. The Company by way of security hereby irrevocably
     -----------------
     appoints the Security Agent, each Receiver for the time being and each
     authorised officer of the Security Agent to whom the Security Agent shall
     from time to time have delegated the exercise of the power of attorney
     conferred by this Clause, jointly and also severally, to be the attorney or
     attorneys of the Company to do (either in the name of the Company or the
     attorney) all acts

                                      27
<PAGE>

     and things that the Company is obliged to do under this Deed or which, in
     the opinion of the Security Agent, are necessary or desirable in connection
     with the Security Assets or the protection or perfection of the Security
     Agent's interest in the Security Assets or the exercise of the rights,
     powers and remedies of the Security Agent or the realisation, getting in or
     disposition of any Security Assets (and, without limiting the generality of
     the foregoing, to execute all deeds and documents of any kind) but without
     rendering the Security Agent liable as a mortgagee in possession, and with
     full power for all or any of such purposes from time to time to appoint a
     substitute or sub-attorney and to revoke any such appointment.

17.2 Ratification. The Company hereby ratifies and confirms, and agrees to
     ------------
     ratify and confirm, whatever any such attorney as is mentioned in Clause
     17.1 (Power of Attorney) shall do or purport to do, and all transactions
     entered into and documents executed, in the exercise or purported exercise
     of all or any of the powers, authorities and discretions referred to in
     such Clause.

17.3 Completion of Blanks. The Security Agent is irrevocably authorised to fill
     --------------------
     in any blanks and otherwise complete and to deliver any instruments
     executed by the Company and deposited with the Security Agent in connection
     with this Deed.

18.  OTHER ENCUMBRANCES
     ------------------

18.1 Priority of Further Advances. All monies which are expressed to be secured
     ----------------------------
     by this Deed and which are advanced, paid or otherwise provided after the
     Security Agent or any other Finance Party receives notice of the creation
     of any other Encumbrance shall be secured by this Deed in priority to any
     monies secured by that other Encumbrance, unless the Security Agent
     specifically agrees in writing.

18.2 Opening of New Account. If the Security Agent or any other Finance Party
     ----------------------
     receives or is deemed to be affected by actual or constructive notice, of
     any subsequent Encumbrance or other instrument affecting any part of the
     Security Assets and/or the proceeds of realisation thereof, the Security
     Agent and the other Finance Parties may open a new account for the Company.
     If the Security Agent or any other Finance Party does not open a new
     account it shall nevertheless be treated as if it had done so at the time
     when the Security Agent or, if earlier, such other Finance Party received
     or was deemed to have received notice, and as from that time all payments
     made to the Security Agent or such other Finance Party shall be credited or
     be treated as having been credited to the new account and shall not operate
     to reduce the amount for which this Deed is security.

18.3 Rights Regarding prior Encumbrances. The Security Agent may (but is not
     -----------------------------------
     obliged to) pay any monies, obligations or liabilities secured by any
     Encumbrance having priority to this Deed and (at the expense of the
     Company) take a transfer of such Encumbrance for the benefit of the Finance
     Parties. All principal monies, interest, costs, charges and expenses of and
     incidental to such redemption and transfer shall be paid by the Company to
     the Security Agent on demand.

19.  PROTECTIVE CLAUSES
     ------------------

19.1 Protective Clauses. Without limiting Clause 4 (Continuing Security) neither
     ------------------
     the liability of the Company nor the validity or enforceability of this
     Deed shall be prejudiced, affected or discharged by:

                                      28
<PAGE>

     (a)  Other Encumbrances: any other Encumbrance, guarantee or other
          ------------------
          security or right or remedy being or becoming held by or available to
          the Security Agent or any other Finance Party or by any of the same
          being or becoming wholly or partly void, voidable, unenforceable or
          impaired or by the Security Agent or any other Finance Party at any
          time releasing, refraining from perfecting or enforcing, varying or in
          any other way dealing with any of the same or any power, right or
          remedy the Security Agent or any other Finance Party may now or
          hereafter have from or against the Company or any other person;

     (b)  Time: the granting of any time or indulgence to the Company or any
          ----
          other person;

     (c)  Variation: any variation or modification (however fundamental) of
          ---------
          either Credit Document, any other Financing Document or any other
          document referred to therein;

     (d)  Invalidity: the invalidity or unenforceability of any obligation or
          ----------
          liability of any Obligor under either Credit Document or any of the
          Financing Documents;

     (e)  Defective Execution: any invalidity or irregularity in the execution
          -------------------
          of this Deed, the Credit Documents or any other Financing Document;

     (f)  Defective Capacity: any deficiency in the powers of any Obligor to
          ------------------
          enter into or perform any of its obligations under this Deed, the
          Credit Documents or under any other Financing Document to which it is
          a party;

     (g)  Change in Constitution: any change in the constitution of any
          ----------------------
          Obligor or any Finance Party or (in relation to any of them) its
          absorption in or amalgamation with, or the acquisition of all or a
          part of its undertaking by, any other person;

     (h)  Other: any act, omission, event or circumstance which would or may
          -----
          but for this provision operate to prejudice, affect or discharge this
          Deed or the liability of the Company under this Deed.

19.2 Unrestricted Right of Enforcement. This Deed may be enforced without the
     ---------------------------------
     Security Agent or any other Finance Party first having recourse to any
     other security or rights or taking any other steps or proceedings against
     the Company or any other person or may be enforced for any balance due
     after resorting to any one or more other means of obtaining payment or
     discharge of the monies, obligations and liabilities hereby secured.

19.3 Release. The Security Agent may release any Security Assets from the
     -------
     security hereby created at any time and any such release shall not in any
     way affect, prejudice or invalidate the security hereby created over any
     other Security Assets, any other Financing Document or the obligations of
     the Company under this Deed or any other Financing Document to which it is
     a party.

19.4 Release of Charge Conditional. Any release, settlement or discharge given
     -----------------------------
     or made by the Security Agent in consideration for any assurance, security,
     disposition or payment made by the Company or any other person shall be
     conditional upon such assurance, security, disposition or payment not being
     void, voidable, set aside or ordered to be refunded for any reason
     whatsoever under any law (including, without limitation, under any law

                                      29
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     relating to preferences, bankruptcy, insolvency, administration or winding
     up). If such condition is not fulfilled:

     (a)  Enforcement: the Security Agent shall be entitled to enforce the
          -----------
          security created by or pursuant to this Deed subsequently to the same
          extent as if no such assurance, security, disposition or payment had
          been made and any such release, settlement or discharge had not
          occurred;

     (b)  Further Assurance: the Company shall, at its own expense, promptly do,
          -----------------
          execute and deliver, and cause any relevant third person to do,
          execute and deliver, all acts and documents which the Security Agent
          requires to reinstate the security expressed to be constituted by this
          Deed; and

     (c)  Retention of Security: the Security Agent may retain this Deed, any
          ---------------------
          security hereby created and any document deposited with it hereunder
          until it is satisfied that such condition has been or will be
          fulfilled;

     and this Clause 19.4 shall survive the discharge of this Deed unless the
     Security Agent expressly agrees otherwise in writing.

20.  SECURITY TRUST
     --------------

20.1 Declaration of Trust. The Security Agent hereby declares that it shall hold
     --------------------
     the Trust Property upon trust for the Finance Parties from time to time in
     accordance with the Financing Documents. The trusts of the Trust Property
     shall remain in full force and effect until the earlier of:

     (a)  Specified Date: such date as the Security Agent shall specify on
          --------------
          which:

          (i)  all the obligations which are secured by the Security Documents
               have been fully and finally discharged; and

          (ii) no Finance Party is under any commitment, obligation or liability
               (whether actual or contingent) to make advances or provide any
               other financial accommodation to either Obligor under any
               Financing Document; and

     (b)  Perpetuities: the last day of the period of 80 years from the date of
          ------------
          this Deed which period (and no other) shall be the applicable
          perpetuity period,

     after which the trusts set out in this Deed shall be wound up and the
     Security Agent shall release, without recourse or warranty, all of the
     security created by the Security Documents.

20.2 Powers and Discretions. To the extent not inconsistent with this Deed, the
     ----------------------
     Security Agent shall have the powers and discretions conferred upon
     trustees by the Trustee Act 1925.

20.3 Investment. Unless provided otherwise in any Financing Document, monies
     ----------
     which are received by the Security Agent and held by it as trustee in
     relation to any of the Security Documents may be invested in the name of or
     under the control of the Security Agent in any investment authorised by
     English law for the investment of trust money by trustees or in any other
     investments which may be selected by the Security Agent, and if not

                                      30
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     otherwise invested such monies may be placed on deposit in the name of or
     under the control of the Security Agent at such bank or institution
     (including the Security Agent) and upon such terms as the Security Agent
     may think fit.

20.4 Appointment.  The Security Agent may appoint any person established or
     -----------
     President in any jurisdiction (whether a trust corporation or not) to act
     as a trustee or agent, either separately or jointly with the Security
     Agent, in relation to any of the Security Documents if the Security Agent
     considers that such an appointment is necessary or desirable for the
     purpose of conforming with any legal requirement in any relevant
     jurisdiction or otherwise for the purpose of holding, administering,
     protecting or enforcing any of the Security Documents, and any such trustee
     or agent shall have such powers and discretions (not exceeding those
     conferred on the Security Agent) and such obligations as shall be conferred
     or imposed on it by the Security Agent.

21.  AMENDMENT, WAIVER AND SEVERABILITY
     ----------------------------------

21.1 Amendment. Any amendment or waiver of any provision of this Deed and any
     ---------
     waiver of any default under this Deed shall only be effective if made in
     writing and signed by the Security Agent.

21.2 Waiver. No failure or delay by the Security Agent or any other Finance
     ------
     Party in exercising any right, power or remedy under this Deed shall impair
     such right, power or remedy or operate as a waiver thereof, nor shall any
     single or partial exercise of any right, power or remedy preclude any
     further exercise thereof or of any other right, power or remedy. The
     rights, powers and remedies provided in this Deed are cumulative and do not
     exclude any other rights, powers or remedies provided by law.

21.3 Severability. If at any time any provision of this Deed is or becomes
     ------------
     illegal, invalid or unenforceable in any respect under the law of any
     jurisdiction, the legality, validity and enforceability of such provision
     under the law of any other jurisdiction, and of the remaining provisions of
     this Deed, shall not be affected or impaired thereby.

22.  MISCELLANEOUS
     -------------

22.1 Counterparts. This Deed may be executed in any number of counterparts and
     ------------
     by the different parties to this Deed on separate counterparts which when
     taken together shall constitute one and the same instrument.

22.2 Judgments. Notwithstanding any judgment which the Security Agent or any
     ---------
     other Finance Party may recover against the Company in respect of any
     Secured Indebtedness, the Security Agent or such other Finance Party shall
     hold the judgment collaterally with this Deed as security for the due
     payment and satisfaction of Secured Indebtedness and this Deed shall not
     merge in any judgment.

22.3 Notice and Enforcement. The Security Agent need not give any notice of
     ----------------------
     this Deed to any person, enforce payment of any Secured Indebtedness,
     enforce or realise any other Financing Document or take any steps or
     proceedings for any purpose unless the Security Agent thinks fit.

22.4 Survival of Indemnities. The indemnities contained in this Deed are
     -----------------------
     continuing obligations of the Company and are separate and independent from
     the other obligations of the Company and shall survive the termination of
     this Deed.

                                      31
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

22.5 Moratorium Legislation. To the fullest extent permitted by law, the
     ----------------------
     provisions of all existing and future laws which operate or may operate
     directly or indirectly to lessen or otherwise vary the Company's
     obligations under this Deed or to delay, curtail or otherwise prevent or
     prejudicially affect the exercise by the Security Agent or any other
     Finance Party of any of its rights, powers and remedies under this Deed are
     expressly negatived and excluded.

22.6 Consent by Security Agent. Any consent required of the Security Agent
     -------------------------
     under this Deed may (unless this Deed specifically provides otherwise) be
     given or withheld by the Security Agent in its absolute discretion and
     either conditionally or unconditionally.

22.7 Law of Property (Miscellaneous Provisions) Act 1989. For the purposes of
     ---------------------------------------------------
     the Law of Property (Miscellaneous Provisions) Act 1989 any provisions of
     the Credit Documents and each other Financing Document to which the Company
     is a party relating to any disposition of an interest in land shall be
     deemed to be incorporated into this Deed.

22.8 Restriction. The Company applies to the Chief Land Registrar for the
     -----------
     registration against the registered titles (if any) specified in Schedule 1
     (Real Property) (and any unregistered properties subject to first
     registration at the date of this Deed) of the following restriction:

     "Except under an Order of the Registrar no disposition, dealing, charge or
     other security interest is to be registered or noted without the consent of
     the proprietor for the time being of [Charge No [      ]] / [a charge dated
     [   ] 2000 and made between (1) Hawker Pacific Aerospace Ltd and (2)
     Landesbank Hessen - Thuringen Girozentrale."

23.  ASSIGNMENT
     ----------

23.1 Successors and Assigns. This Deed shall be binding upon and inure to the
     ----------------------
     benefit of the parties to this Deed and their respective successors and
     permitted assigns.

23.2 Assignment by Company. The Company shall not assign or otherwise transfer
     ---------------------
     the benefit of this Deed or any of its rights, duties or obligations under
     this Deed without the prior written consent of the Security Agent.

23.3 Assignment by Finance Parties. The Finance Parties may assign or grant
     -----------------------------
     participations in all or any part of their rights under this Deed in
     accordance with the provisions of either Credit Document.

23.4 Change of Security Agent. The Security Agent may assign and transfer all
     ------------------------
     of its rights to the Security Assets and all of its rights and obligations
     under this Deed to a replacement Security Agent appointed in accordance
     with this Deed and, when such assignment and transfer takes effect, the
     replacement Security Agent shall be for all purposes acting as agent and
     trustee in accordance with the trusts in this Deed.

24.  NOTICES
     -------

24.1 Delivery. Each notice, demand or other communication to be given or made
     --------
     under this Deed shall be in writing and delivered or sent to the relevant
     party at its address or telex number or fax number set out below (or such
     other address or telex number or fax number as the addressee has by not
     less than 7 days' prior written notice specified to the other party):

                                      32
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     To the Company:              Hawker Pacific Aerospace Ltd.
     --------------
                                  Unit 3 Dorley Park
                                  Kestrel Way
                                  Hayes, Middlesex UB3 1HP

                                  Telephone Number: 0208 589 100
                                  Fax Number      : 0208 589 1903

                                  Attention       : Managing Director

     To the Security Agent:       Landesbank Hessen - Thuringen Girozentrale
     ---------------------
                                  Main Tower
                                  Neue Mainzer Str. 52 - 58
                                  60311 Frankfurt am Main
                                  Germany

                                  Telephone Number: (49)-0-69-91324202
                                  Fax Number      : (49)-0-69-91324350

                                  Attention       : Martin Rohmann

24.2 Deemed Delivery. Any notice, demand or other communication addressed to any
     ---------------
     relevant party in accordance with Clause 24.1 (Delivery) shall be deemed to
     have been delivered:

     (a)  Letter: if given or made by letter, when actually delivered to the
          ------
          relevant address;

     (b)  Telex: if given or made by telex, when despatched with confirmed
          -----
          answerback; and

     (c)  Fax: if given or made by fax, when despatched with a fax transmission
          ---
          report showing that the entire communication was received,

     provided that a communication which is received after 5:00 p.m. on a
     working day, or on a day which is not a full working day, in the place of
     receipt shall be deemed to be delivered on the next full working day in
     that place.

24.3 Language. Each notice or other communication under this Deed shall be in
     --------
     English. Any other documents required to be delivered under this Deed shall
     be either in English or be accompanied by a certified translation into
     English.

25.  GOVERNING LAW AND JURISDICTION
     ------------------------------

25.1 Law. This Deed and the rights and obligations of the parties hereunder
     ------
     shall be governed by and construed in accordance with the laws of England.

25.2 Jurisdiction.  Without prejudice to the submission to jurisdiction
     ------------
     contained in the Facility Agreement, the Company irrevocably agrees for the
     benefit of the Security Agent and the other Finance Parties that any legal
     action arising out of or relating to this Deed may be brought in the courts
     of England and irrevocably submits to the exclusive jurisdiction of such
     courts.

                                      33
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

25.3 No Limitation on Right of Action. Nothing in this Deed shall limit the
     --------------------------------
     right of the Security Agent or any other Finance Party to commence any
     legal action against the Company and/or its assets in any other
     jurisdiction or to serve process in any manner permitted by law, and the
     taking of proceedings in any jurisdiction shall not preclude the Security
     Agent or any other Finance Party from taking proceedings in any other
     jurisdiction whether concurrently or not.

25.4 Waiver; Final Judgment Conclusive. The Company irrevocably and
     ---------------------------------
     unconditionally waives any objection which it may now or hereafter have to
     the choice of England as the venue of any legal action arising out of or
     relating to this Deed and agrees not to claim that any court in that venue
     is not a convenient or proper forum. The Company also agrees that a final
     judgment against it in any such legal action shall be final and conclusive
     and may be enforced in any other jurisdiction, and that a certified or
     otherwise duly authenticated copy of the judgment shall be conclusive
     evidence of the fact and amount of its indebtedness.

25.5 Waiver of Immunity. The Company irrevocably and unconditionally waives
     ------------------
     any immunity to which it or its assets may at any time be or become
     entitled, whether characterised as sovereign immunity or otherwise, from
     any set-off or legal action in England or elsewhere, including immunity
     from service of process, immunity from jurisdiction of any court or
     tribunal, and immunity of any of its assets from attachment prior to
     judgment or from execution of a judgment.

THIS DEED has been executed as a Deed by the parties hereto and is intended to
be and is hereby delivered on the date stated at the beginning of this Deed.

THE COMPANY
-----------

SIGNED AND DELIVERED as a Deed  )
for and on behalf of            )
HAWKER PACIFIC AEROSPACE LTD    )
by                              )
                                )   /s/ David L. Lokken
                                )   -------------------------
                                    Director

                                    /s/ Philip M. Panzera
                                    -------------------------
                                    Director/Secretary

                                      34
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

THE SECURITY AGENT
------------------

SIGNED AND DELIVERED as a Deed  )
for and on behalf of            )
LANDESBANK HESSEN - THURINGEN   )
GIROZENTRALE                    )
by                              )
                                )
                                )
Frank Dohl  V.P.                ) /s/ Frank Dohl
-------------------------       ) -------------------------
Name / Title                    ) Authorised signatory
                                )
                                )
Martin Rohmann                  )
-------------------------       ) /s/ Martin Rohmann
Name / Title                    ) -------------------------
                                ) Authorised signatory
                                )

THE BANKS
---------

SIGNED AND DELIVERED as a Deed  )
for and behalf of               )
LANDESBANK HESSEN - THURINGEN   )
GIROZENTRALE                    )
by                              )
                                )
                                )
Frank Dohl  V.P.                ) /s/ Frank Dohl  V.P
--------------------------      ) ------------------------
Name / Title                    ) Authorised signatory
                                )
                                )
                                )
Martin Rohmann                  ) /s/ Martin Rohmann
-------------------------       ) -------------------------
Name / Title                    ) Authorised signatory
                                )

                                      35
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

                                  Schedule 1
                                 Real Property

                                Registered Land

----------------------------------------------------------------------------
County and District/
--------------------
London Borough                 Title Numbers    Description of Property
--------------                 -------------    -----------------------
----------------------------------------------------------------------------
London Borough of Hillingdon   AGL 70229        Unit 3, Dawley Park, Dawley
                                                Road, Hayes
----------------------------------------------------------------------------

                               Unregistered Land

                         None specifically identified.

                                  Schedule 2
                                   Equipment

                         None specifically identified.

                                  Schedule 3
                                  Securities

                         None specifically identified.

                                  Schedule 4
                             Intellectual Property

                         None specifically identified.

                                      36
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

                                                                  EXECUTION COPY

                             DATED 30 OCTOBER 2000
                             ---------------------

                           HAWKER PACIFIC AEROSPACE

                         HAWKER PACIFIC AEROSPACE LTD.

                                  as Obligors

                                      and

                  LANDESBANK HESSEN - THURINGEN GIROZENTRALE
                               as Security Agent
                    on its own behalf and as Security Agent
                  for the Finance Parties referred to herein

                          __________________________

                             DEED OF LEGAL CHARGE

                          __________________________

                                      AB
                             100 New Bridge Street
                                    London
                                   EC4V 6JA
                             Tel: (020) 7919 1000
                             Fax: (020) 7919 1999
                                Ref: BES / FCO
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

                                   CONTENTS
                                   --------

<TABLE>
<CAPTION>
 Number                        Clause Heading                            Page
 ------                        --------------                            ----
<S>                                                                      <C>
1.        INTERPRETATION................................................    1
2.        COVENANT TO PAY...............................................    3
3.        CHARGE........................................................    4
4.        CONTINUING SECURITY...........................................    4
5.        REPRESENTATIONS AND WARRANTIES................................    4
6.        UNDERTAKINGS..................................................    5
7.        ENFORCEMENT OF SECURITY.......................................    7
8.        SET-OFF.......................................................   12
9.        RECEIPT AND APPLICATION OF MONIES.............................   12
10.       PAYMENTS......................................................   13
11.       COSTS, CHARGES AND EXPENSES...................................   14
12.       INDEMNITIES AND CURRENCIES....................................   15
13.       EVIDENCE OF DEBT..............................................   16
14.       FURTHER ASSURANCE.............................................   16
15.       POWER OF ATTORNEY.............................................   16
16.       OTHER ENCUMBRANCES............................................   17
17.       SECURITY TRUST................................................   18
18.       AMENDMENT, WAIVER AND SEVERABILITY............................   19
19.       MISCELLANEOUS.................................................   19
20.       ASSIGNMENT....................................................   20
21.       NOTICES.......................................................   20
22.       PROTECTIVE CLAUSES............................................   21
23.       GOVERNING LAW AND JURISDICTION................................   23

Schedule
--------

Schedule Real Property..................................................   25
</TABLE>
<PAGE>

THIS DEED is made on the 30th day of October 2000

BETWEEN

(1)  HAWKER PACIFIC AEROSPACE, a company incorporated in California, U.S.A. with
     its principal office at 11240 Sherman Way, Sun Valley, CA 91352 - 4942,
     U.S.A. (the "US Obligor");

(2)  HAWKER PACIFIC AEROSPACE LTD., a company incorporated in England with its
     registered office at Unit 3, Dawley Park, Kestrel Way, Hayes, Middlesex UB3
     1HP (the "UK Obligor" and together with the US Obligor, the "Obligors");
     and

(3)  LANDESBANK HESSEN - THURINGEN GIROZENTRALE of Main Tower, Neue Mainzer Str.
     52 - 58, 60311 Frankfurt am Main, Germany on its own behalf and as trustee
     for the Finance Parties from time to time (in such capacity, the "Security
     Agent").

WHEREAS:

(A)  By a Credit Agreement dated on or about 30 October 2000 (the "Credit
     Agreement") made between (1) the US Obligor as borrower, (2) Landesbank
     Hessen - Thuringen Girozentrale as mandated arranger, security agent and
     lender and (3) Kreditanstalt fur Wiederaufbau as co-arranger and lender,
     the Banks (as defined in the Credit Agreement), have agreed to make
     available to the US Obligor loan facilities on the terms set out in the
     Credit Agreement.

(B)  By a Facility Agreement dated on or about 30 October 2000 (the "Facility
     Agreement" and together with the Credit Agreement, the "Credit Documents")
     made between (1) the UK Obligor, as borrower, (2) the US Obligor, as
     additional obligor, (3) Landesbank Hessen-Thuringen Girozentrale, as
     mandated arranger, agent, security agent and lender, and (4) Kreditanstalt
     fur Wiederaufbau, as co-arranger and lender, the Banks (as defined in the
     Facility Agreement) have agreed to make available to the UK Obligor loan
     facilities, in respect of which the US Obligor will be jointly and
     severally liable with the UK Obligor, on the terms set out in the Facility
     Agreement.

(C)  The Security Agent is acting as trustee for the Finance Parties pursuant to
     this Deed.

(D)  By the terms of the Credit Documents, the Obligors undertook to enter into
     this Deed.

IT IS AGREED as follows:

1.   INTERPRETATION
     --------------

1.1  Definitions and Construction.  In this Deed, unless the context requires
     ----------------------------
     otherwise, terms and expressions defined in or construed for the purposes
     of the Facility Agreement and not defined below shall have the same
            ------------------
     meanings or be construed in the same manner when used in this Deed, and the
     following terms shall have the following meanings:

     "Credit Documents" has the meaning given in Recital (B);

                                       1
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     "Encumbrance" means:

     (a)  any mortgage, charge, pledge, hypothecation, lien, encumbrance or
          other security interest or any other arrangement having the effect of
          conferring security, including a conditional sale, hire purchase or
          lease agreement or other title retention arrangement; and

     (b)  any arrangement whereby rights are subordinated to the rights of a
          third party;

     "Event of Default" means any event or occurrence which entitles the Banks
     to terminate the Facilities, including without limitation any of the events
     or circumstances specified in Clause 18.2 of either of the Credit
     Documents;

     "Finance Party" means each person which is from time to time a Bank,
     Mandated Arranger, Agent, Security Agent or Co-Arranger under either Credit
     Document;

     "Financing Documents" means each document which is a "Financing Document"
     for the purposes of either Credit Document;

     "Obligor" means each of the UK Obligor and the US Obligor;

     "Permitted Encumbrance" means:

     (a)  the Debenture dated on or about the date of this Deed made between the
          UK Obligor and the Security Agent; and

     (b)  any Encumbrance executed by the UK Obligor in favour of the US Obligor
          in respect of which a deed of priorities in form and substance
          satisfactory to the Security Agent has been entered into.

     "Real Property" means the land specified in the Schedule (Real Property)
     and all buildings, fixtures (including trade and tenant's fixtures), fixed
     plant and machinery from time to time on any such property, all proceeds of
     sale thereof and the benefit of any covenants for title in respect thereof
     and all Encumbrances, options, contractual rights, estates and interests
     over any such property both present and future;

     "Receiver" means each and any receiver, manager, receiver and manager or
     other similar officer appointed by the Security Agent in respect of the
     security created by or pursuant to this Deed;

     "Secured Indebtedness" means all monies, obligations and liabilities of any
     kind now or at any time in the future due, owing, incurred or payable
     (whether actually or contingently) by an Obligor to a Finance Party under
     or pursuant to the Credit Documents or any other Financing Document
     (whether on account of principal, interest, fees, indemnity payments,
     losses, damages or otherwise) and all other monies hereby agreed to be
     paid;

     "Security Agent" means the Security Agent acting on its own behalf and as
     trustee for the Finance Parties;

                                       2
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     "Security Assets" means the Real Property;

     "Security Documents" means each document which is a "Security Document" for
     the purpose of either Credit Document;

     "Trust Property" means the undertaking of the Obligors contained in Clause
     2 (Covenant to Pay) and all or any part of the assets, rights, interests
     and benefits which may now or at any time in the future be mortgaged,
     charged, assigned or granted or the subject of an Encumbrance in favour of
     the Security Agent pursuant to any Financing Document and, for the
     avoidance of doubt, the proceeds of any of the foregoing.

1.2  Successors and Assigns.  The expressions "US Obligor", "UK Obligor",
     ----------------------
     "Obligor", "Security Agent", "Agent" and "Finance Parties" shall, where the
     context permits, include their respective successors and permitted assigns
     and any persons deriving title under them.

1.3  Miscellaneous.  In this Deed, unless the context requires otherwise:
     -------------

     (a)  Statutes:  references to provisions of any law or regulation shall be
          --------
          construed as references to those provisions as amended, modified, re-
          enacted or replaced from time to time;

     (b)  Construction: words importing the singular include the plural and vice
          ------------
          versa; words importing a gender include the other gender;

     (c)  Financing Documents: references to this Deed, the Credit Documents or
          -------------------
          any other Security Document shall be construed as references to this
          deed or such document as the same may be amended, supplemented,
          restated or novated from time to time;

     (d)  Clauses, Etc: references to Clauses and the Schedule are to clauses of
          ------------
          and the schedule to this Deed and references to this Deed include its
          Schedule; and

     (e)  Headings: clause headings are inserted for reference only and shall be
          --------
          ignored in construing this Deed.

1.4  Deed. It is intended by the parties that this document shall take effect as
     ----
     a deed notwithstanding the fact that a party may only execute this document
     under hand.

1.5  Third Party Rights.  The Contracts (Rights of Third Parties) Act 1999 shall
     ------------------
     not apply to this Deed and no person not party to this Deed shall have or
     acquire any right to enforce any term of it pursuant to that Act. This
     Clause shall not affect any right or remedy of any third party which exists
     or is available otherwise than by reason of that Act and this Clause shall
     prevail over any other provision of this Deed which is inconsistent with
     it.

2.   COVENANT TO PAY
     ---------------

     Without prejudice to its respective obligations to the Finance Parties
     under the Financing Documents, each Obligor undertakes to the Security
     Agent to pay to the Security Agent on behalf of the Finance Parties the
     Secured Indebtedness whenever the same is due in accordance with, and in
     the manner required by, the Financing Documents and duly and punctually to
     observe and perform all its obligations contained in each Financing
     Document to which it is a party.

                                       3
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

3.   CHARGE
     ------

3.1  Grant of Charge.  In consideration of the Finance Parties agreeing to make
     ---------------
     the facilities available to the UK Obligor and the US Obligor respectively
     on the terms and conditions of the Credit Documents, each Obligor with full
     title guarantee and without the benefit of section 6(2) of the Law of
     Property (Miscellaneous Provisions) Act 1994 charges and agrees to charge
     to the Security Agent by way of first ranking fixed charge all its rights,
     title, interest and benefit in and to the Real Property (which, in so far
     as it consists of land vested in an Obligor at the date of this Deed, shall
     be charged by way of legal mortgage), as a continuing security for the due
     and punctual payment and discharge of the Secured Indebtedness and the due
     and punctual observance and performance by the Obligors of all other
     obligations of the Obligors contained in the Financing Documents.

3.2  Discharge. When the Security Agent is satisfied that the trusts constituted
     ---------
     by this Deed have come to an end, the Security Agent shall, at the request
     and cost of the Obligors, and in such form as the Security Agent shall
     approve, discharge the security created by this Deed, without recourse or
     warranty and subject to Clause 22.4 (Release of Charge Conditional).

4.   CONTINUING SECURITY
     -------------------

4.1  Continuing Security.  This Deed shall be a continuing security and shall
     -------------------
     remain in full force and effect until the Secured Indebtedness has been
     paid in full and none of the Finance Parties has any obligation or
     liability (actual or contingent) under any Financing Document,
     notwithstanding the insolvency or liquidation or any incapacity or change
     in the constitution or status of any Obligor or any other person or any
     intermediate settlement of account or other matter whatsoever.

4.2  Independent Security.  This Deed is in addition to, and independent of, any
     --------------------
     Encumbrance, guarantee or other security or right or remedy now or at any
     time in the future held by or available to the Security Agent or any other
     Finance Party.

5.   REPRESENTATIONS AND WARRANTIES
     ------------------------------

5.1  Constitutional Documents.  Each Obligor certifies that neither the
     ------------------------
     execution of this Deed nor the creation of the security hereby constituted
     contravenes any of the provisions of the constitutional documents of such
     Obligor.

5.2  Representations and Warranties.  Each Obligor represents and warrants to
     ------------------------------
     the Security Agent and each of the other Finance Parties that:

     (a)  the Security Assets are or when acquired will be beneficially owned by
          it free from any Encumbrance except as created under or pursuant to
          this Deed and any Permitted Encumbrance and no person other than it
          has the use, occupation or possession of the Security Assets or any
          part thereof;

     (b)  the respective particulars of the Security Assets set out in the
          Schedule are accurate and it has good and marketable title thereto;
          and

     (c)  no litigation, arbitration or administrative proceeding is currently
          taking place or pending or threatened in relation to any of the
          Security Assets.

                                       4
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

5.3  Continuing Representation and Warranty.  Each Obligor also represents and
     --------------------------------------
     warrants to and undertakes with the Security Agent and each of the other
     Finance Parties that the foregoing representations and warranties will be
     true and accurate throughout the continuance of this Deed with reference to
     the facts and circumstances subsisting from time to time.

6.   UNDERTAKINGS
     ------------

6.1  Each Obligor undertakes to the Security Agent that, throughout the
     continuation of the Facilities and so long as any Secured Indebtedness is
     or may become payable, such Obligor will, unless the Security Agent
     otherwise agrees in writing:

          General Negative Pledge
          -----------------------

     (a)  Encumbrances: not (except under or pursuant to this Deed or the Credit
          ------------
          Documents):

          (i)    create or attempt or agree to create or permit to arise or
                 exist any Encumbrance, other than Permitted Encumbrances, on or
                 affecting the Security Assets or any part of them (except a
                 lien arising solely by operation of law in the ordinary course
                 of business which does not secure indebtedness for borrowed
                 money and is discharged when due); or

          (ii)   (without limiting the generality of the foregoing) deal in any
                 manner with, create any security or Encumbrance over or allow
                 any other third party rights to arise over or against any bank
                 account of such Obligor or in which such Obligor has an
                 interest (whether with the Security Agent or any other person)
                 or any part thereof (whether by way of assignment, trust or
                 otherwise);

          (iii)  sell, assign, transfer, lease, deal with or dispose of the
                 Security Assets or any part thereof or attempt or agree to do
                 so;

          Perfection
          ----------

     (b)  Deposit of Documents: deposit with the Security Agent or to its order
          --------------------
          all deeds, certificates and documents (including original policies of
          insurance) which constitute or evidence title to any Security Assets
          (such deposit to be made immediately upon the execution of this Deed
          or, if later, when an Obligor obtains possession of such deeds,
          certificates or documents);

     (c)  Notices: if and when required by the Security Agent, and at an
          -------
          Obligor's cost, affix to such items of the Security Assets or endorse
          or cause to be endorsed upon such of the documents referred to in
          paragraph (c) (Deposit of Documents) above labels, markings or
          memoranda in such form as the Security Agent may require drawing
          attention to the security constituted by or pursuant to this Deed;

          Protection of Security
          ----------------------

     (d)  Protection of Security Assets: upon demand by the Security Agent take
          -----------------------------
          or defend all such legal proceedings, and take all such other steps,
          as the Security Agent may require for the protection of any Security
          Assets;

                                       5
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     (e)  Not Prejudice: not do, omit to do, cause or permit to occur, any act,
          -------------
          omission or thing which would or might result in any Security Assets
          being surrendered, forfeited, cancelled or prejudiced in any way or
          reduced in value, or this Deed or any rights, powers or remedies of
          the Security Agent under this Deed being prejudiced or adversely
          affected;

     (f)  Maintenance and Repair: maintain and repair and keep all buildings,
          ----------------------
          other structures, trade and other fixtures, fixed and other plant and
          machinery and all chattels and other equipment forming part of the
          Security Assets in good and substantial repair and in good working
          order and condition;

     (g)  Access: provide to the Security Agent, and procure that all other
          ------
          persons having possession or control of any Security Assets or any
          land or buildings on which any Security Assets are for the time being
          located provide to the Security Agent, full and unfettered access to
          the Security Assets for the purpose of inspecting any Security Assets
          or exercising any rights, powers or remedies of the Security Agent;

     (h)  Notification of Receipt of Notices: within 14 days after the receipt
          ----------------------------------
          by any Obligor of any application, requirement, order or notice served
          or given by any public, local or any other authority with respect to
          all or any part of the Security Assets, give written notice thereof to
          the Security Agent and also (within 7 days after demand) produce the
          same or a copy thereof to the Security Agent and inform it of the
          steps taken or proposed to be taken to comply with any such
          requirement thereby made or implicit therein; and

     (i)  Statutes: duly and punctually perform and observe all its obligations
          --------
          in connection with the Security Assets under any present or future
          statute or any regulation, order or notice made or given thereunder.

6.2  Undertakings Relating to Real Property.  Each Obligor undertakes to the
     --------------------------------------
     Security Agent that, throughout the continuation of the Facilities and so
     long as any Secured Indebtedness is or may become payable, such Obligor
     will, unless the Security Agent otherwise agrees in writing:

     (a)  Registered Land: in the case of any Real Property which is
          ---------------
          registrable, or becomes registrable, after its acquisition, under the
          Land Registration Acts 1925 to 1986:

          (i)   promptly notify the Security Agent of the title numbers of such
                property upon its acquisition or as soon as each respective
                title number is allotted by H.M. Land Registry;

          (ii)  upon the making of any application to H.M. Land Registry for the
                registration of such Obligor (or such other persons as the
                Security Agent may permit as the Registered Proprietor thereof)
                request the Chief Land Registrar to enter upon the Charges
                Register of such property a note of this Deed in any form which
                the Security Agent requires; and

          (iii) in relation to any Real Property which is the subject of an
                application for registration of title at H.M. Land Registry, use
                its best endeavours to answer any requisitions from H.M. Land
                Registry;

                                       6
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     (b)  Compliance with Obligations: duly and punctually comply with and
          ---------------------------
          observe all terms and conditions contained in all conveyances,
          transfers, leases, tenancies, licences and Encumbrances and all
          covenants and restrictions affecting any Real Property and not do or
          suffer to be done any act or thing whereby any such lease or licence
          is surrendered or is likely to become liable to forfeiture or
          otherwise be unilaterally determined by the landlord or other party;

     (c)  No Alterations:  not pull down, alter, extend or remove any building,
          --------------
          structure or other improvements forming part of the Real Property;

     (d)  Registered Land: not permit any person to become registered as
          ---------------
          proprietor under the Land Registration Acts of any Real Property;

     (e)  Overriding Interests:  not create or permit to arise any overriding
          --------------------
          interest as defined in section 70 of the Land Registration Act 1925;

     (f)  Taxes and Outgoings:  pay as and when the same must be paid all taxes,
          -------------------
          rates, duties, charges, assessments and outgoings whatsoever (whether
          parliamentary, parochial, local or of any other description) which
          shall be assessed, charged or imposed upon or payable in respect of
          the Real Property or any part thereof (save to the extent that payment
          of the same is being contested in good faith);

     (g)  User: use the Real Property only for such purpose or purposes as may
          ----
          for the time being be authorised as the permitted use or user thereof
          under or by virtue of the Town and Country Planning Acts;

     (h)  Development: not make any application under the Town and Country
          -----------
          Planning Acts or any other enactment to change the authorised use or
          to carry out any other development of the Real Property;

     (i)  Statutes: comply with the provisions of all statutes for the time
          --------
          being in force and every notice, order, direction, licence, consent or
          permission given thereunder and the requirements of any competent
          authority so far as they relate to the Real Property or its use;

     (j)  Leases: not grant or agree to grant (whether in exercise or
          ------
          independently of any statutory power) any lease or tenancy of the Real
          Property or any part thereof or accept or agree to accept surrenders
          thereof or permit any person to become entitled to any proprietary
          right or interest which might affect the value of any Real Property.

7.   ENFORCEMENT OF SECURITY
     -----------------------

7.1  Enforceability.  Immediately upon the occurrence of an Event of Default the
     --------------
     security created by or pursuant to this Deed shall become enforceable in
     accordance with the provisions of this Deed.

7.2  Security Agent's Right to Remedy Default.  If an Event of Default occurs,
     ----------------------------------------
     the Security Agent shall, at the Obligors' cost, and without prejudice to
     any other rights it may have, be entitled (but not bound) to do anything
     which it considers appropriate to remedy any failure by any Obligor to
     perform its obligations under this Deed. The Security Agent shall not
     thereby become liable to account as a mortgagee in possession.

                                       7
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

7.3  Powers of Security Agent.  At any time after the security created by or
     ------------------------
     pursuant to this Deed becomes enforceable, the Security Agent may exercise,
     without further notice and whether or not it shall have appointed a
     Receiver, all or any of the powers, authorities and discretions which are
     conferred by this Deed (whether expressly or by reference) upon a Receiver
     in relation to all or any part of the Security Assets without first
     appointing a Receiver or notwithstanding the appointment of a Receiver in
     relation to the relevant Security Assets.

7.4  Appointment of Receiver.  At any time after this security becomes
     -----------------------
     enforceable, or if an Obligor so requests, and notwithstanding that an
     order may have been made or a resolution passed for the winding-up of any
     Obligor, the Security Agent may appoint in writing any duly qualified
     person or persons to be a receiver or receiver and manager or
     administrative receiver of all or any part of the Security Assets and:

     (a)  Terms: the Receiver may be appointed by the Security Agent on such
          -----
          terms as the Security Agent thinks fit;

     (b)  Joint Receivers: if two or more persons are appointed as Receiver they
          ---------------
          may be appointed in respect of different parts of the Security Assets
          and each joint Receiver shall have power to act severally and
          independently of any other joint Receiver, except to the extent
          specified to the contrary in the appointment; and

     (c)  Removal:  the Security Agent may remove a Receiver and, in the case of
          -------
          removal, retirement or death of the Receiver, may appoint another in
          his place, provided that any Receiver appointed by the Security Agent
          as an administrative receiver shall only be removed from office or
          vacate office in accordance with the provisions of section 45 of the
          Insolvency Act 1986.

7.5  Agent of Obligors.  Unless and until the Security Agent by notice in
     -----------------
     writing to an Obligor and to the Receiver requires that the Receiver act as
     agent of the Security Agent, or until an order is made or a resolution is
     passed for the winding-up of an Obligor, the Receiver shall be the agent of
     an Obligor, and such Obligor shall (subject, in the case of an
     administrative receiver, to section 44 of the Insolvency Act 1986) be
     responsible for the acts and defaults of the Receiver and for his
     remuneration and shall be liable on any contracts and agreements made or
     entered into by him and for any losses incurred by him, but in exercising
     any powers of the Security Agent the Receiver shall have the authority of
     such Obligor and the Security Agent. After an order is made or a resolution
     is passed for the winding up of an Obligor, the Receiver shall act as a
     principal and shall not become the agent of the Security Agent. Where the
     Receiver is not an administrative receiver the Receiver shall be in the
     same position as a receiver appointed by a mortgagee under the Law of
     Property Act 1925.

7.6  Powers of Receiver.  Subject to any specific limitations placed upon him by
     ------------------
     the terms of his appointment, the Receiver (whether or not an
     administrative receiver) shall have all the rights, powers and remedies
     conferred on an administrative receiver by the Insolvency Act 1986, all the
     rights, powers and remedies conferred on a receiver appointed under the Law
     of Property Act 1925 and all rights, powers and remedies conferred on a
     mortgagee (including a mortgagee in possession) by that Act and shall also
     have the power to do all acts and things and exercise all rights, powers
     and remedies that an Obligor could do or exercise in relation to the
     Security Assets as if the Receiver were the absolute beneficial owner of
     the same including, without limitation, the power to do all or any of the
     following:

                                       8
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     (a)  Possession: enter, take possession, assume control of, get in and
          ----------
          collect the Security Assets;

     (b)  Receive Rents:  receive the rents and profits of the Security Assets;
          -------------

     (c)  Manage:  manage the Security Assets;
          ------

     (d)  Carry on Business: carry on, manage, develop, reconstruct, amalgamate
          -----------------
          or diversify the business of any Obligor or any part thereof or concur
          in so doing;

     (e)  Rebuild, Maintain and Develop: pull down, rebuild, repair, alter, add
          -----------------------------
          to, complete, maintain and insure the Security Assets and lease or
          otherwise acquire and develop or improve properties or other assets
          without being responsible for loss or damage;

     (f)  Power of Sale: sell or agree to sell or otherwise dispose of or deal
          -------------
          with any Security Assets (whether or not the Receiver or Security
          Agent has taken possession) on such terms as the Receiver thinks fit
          and:

          (i)   whether by public auction, private treaty or by tender;

          (ii)  for cash or property or other valuable consideration and on
                terms that payment of all or any part of the purchase price is
                deferred (whether at interest or not and whether with or without
                security);

          (iii) in one lot or in parcels;

          (iv)  whether or not in conjunction with the sale of other property by
                the Receiver or the Security Agent or any other person; and

          (v)   whether with or without special provisions as to title or time
                or otherwise;

     (g)  Lease: lease or license the Security Assets, renew, terminate,
          -----
          surrender or accept the surrender of leases or licences, in each case
          on such terms as the Receiver thinks fit, whether at a premium or
          otherwise;

     (h)  Grant Options: grant to any person an option to purchase or other
          -------------
          rights over any Security Assets upon such terms as the Receiver thinks
          fit;

     (i)  Fixtures: add or sever fixtures and sell or otherwise dispose of or
          --------
          deal with them separately from the premises to which they were
          affixed;

     (j)  Surrender: surrender or transfer the Security Assets to any
          ---------
          governmental agency (whether or not for fair compensation);

     (k)  Exchange: exchange (whether or not for fair value) with any person any
          --------
          Security Assets for an interest in property of any tenure and the
          property so acquired may be dealt with by the Receiver as if it were
          part of the Security Assets and, for that purpose, the Receiver may
          create an Encumbrance over that property in favour of the Security
          Agent;

                                       9
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

     (l)  Subsidiaries:  promote the formation of any company with a view to it
          ------------
          becoming a subsidiary of an Obligor and purchasing, leasing, licensing
          or otherwise acquiring interests in all or any of the Security Assets
          or otherwise, arrange for any such company to trade or cease to trade
          and to purchase, lease, license or otherwise acquire all or any of the
          Security Assets on such terms and conditions, whether or not including
          payment by instalments, secured or unsecured, as the Receiver thinks
          fit;

     (m)  Insurances: maintain, renew, take out or increase insurances in such
          ----------
          amounts and on such terms as the Receiver thinks fit;

     (n)  Employees: employ managers, solicitors, officers, agents, accountants,
          ---------
          auctioneers, consultants, workmen and employees on such terms as the
          Receiver thinks fit;

     (o)  Delegation: delegate to any person for such time as the Receiver
          ----------
          approves any or all of the powers of the Receiver on such terms as the
          Receiver thinks fit;

     (p)  Give Receipts: receive all payments and give receipts for all monies
          -------------
          and other assets which may come into the hands of the Receiver, which
          receipts shall exonerate any person paying or handing over such monies
          or other assets from all liability to see to the application thereof
          and from all liability to enquire whether the Secured Indebtedness has
          become due or payable or otherwise as to the propriety or regularity
          of the appointment of any Receiver;

     (q)  Performance and Enforcement:  carry out and enforce, or refrain from
          ---------------------------
          carrying out or enforcing, rights and obligations of an Obligor
          forming part of the Security Assets or obtained or incurred in the
          exercise of the rights, powers and remedies of the Receiver;

     (r)  Compromises:  make any arrangements or compromise or enter into or
          -----------
          cancel any contracts which the Receiver considers expedient;

     (s)  Take Proceedings:  institute, conduct, defend, settle, arrange or
          ----------------
          compromise any proceedings and submit to any court or arbitrator any
          claims, questions or disputes whatsoever which may arise in connection
          with the business of an Obligor (including, without limitation, for
          the recovery of debts or other monies due to an Obligor) or in respect
          of the Security Assets or in any way relating to this Deed, and to
          execute releases or other discharges in relation thereto;

     (t)  Borrowings: advance monies or otherwise provide financial
          ----------
          accommodation for the account of an Obligor or borrow any money or
          obtain other financial accommodation from any person which may be
          required for any of the purposes mentioned in this Clause 7.6, and in
          the name of such Obligor or otherwise, and secure any borrowings or
          other financial accommodation by an Encumbrance over the Security
          Assets ranking in priority to, pari passu with or after the security
          created by this Deed, in each case on such terms as the Receiver
          thinks fit;

     (u)  Other Acts and Documents:  execute deeds and documents on behalf of an
          ------------------------
          Obligor and do all such other acts and things as may be considered by
          the Receiver to be incidental or conducive to any of the matters or
          powers aforesaid or to the realisation of the security created by this
          Deed and to use the name of an Obligor for all the purposes aforesaid.

                                      10
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

7.7   Remuneration of Receiver.  Each Receiver shall be entitled to remuneration
      ------------------------
      for his services at a rate to be fixed by agreement between him and the
      Security Agent (or, failing such agreement, to be fixed by the Security
      Agent) appropriate to the work and responsibilities involved upon the
      basis of charging from time to time adopted in accordance with his current
      practice or the current practice of his firm and without being limited to
      the maximum rate specified in section 109(6) of the Law of Property Act
      1925.

7.8   Give Up Possession.  The Security Agent may give up possession of any
      ------------------
      Security Assets at any time and may discontinue any receivership.

7.9   Property Acquired.  All property of any kind acquired in exercise of any
      -----------------
      of the powers conferred by this Deed shall be subject to the security
      created by this Deed and to all the powers contained in this Deed.

7.10  Exclusion of Statute.
      --------------------

      (a)  Statutory Power Unaffected: The foregoing powers conferred on the
           --------------------------
           Security Agent shall be in addition to and not to the prejudice of
           all statutory and other powers of the Security Agent under the Law of
           Property Act 1925 or otherwise.

      (b)  Rights Unfettered: Section 103 of that Act shall not restrict the
           -----------------
           exercise by the Security Agent of the power of sale conferred by
           section 101 of that Act, which power shall arise and may be exercised
           at any time after the happening of an Event of Default.

      (c)  Leasing: The powers of leasing, letting, entering into agreements for
           -------
           leases and lettings and accepting and agreeing to accept surrenders
           of leases conferred by sections 99 and 100 of that Act shall be
           exercisable at any time after the happening of an Event of Default,
           and whether or not the Security Agent shall then be in possession of
           the premises in question, so as to authorise the Security Agent or a
           Receiver to make a lease or agreement for lease at a premium and for
           any length of term and generally without any restriction on the kind
           of leases and agreements for lease or the necessity to comply with
           any restrictions imposed by, or the other provisions of, sections 99
           and 100 of that Act.

7.11  Waiver of Notice.  Any notice, period of time or other condition precedent
      ----------------
      prescribed by law to the exercise of any rights, powers or remedies of the
      Security Agent or a Receiver is dispensed with except to the extent (if
      any) that the relevant law does not afford the opportunity to dispense by
      agreement with its requirements, in which event the relevant right, power
      or remedy may be exercised by the Security Agent or a Receiver at the time
      and in the circumstances prescribed by law.

7.12  Not Mortgagee in Possession.  Where any liability or duty might otherwise
      ---------------------------
      attach to the Security Agent or a Receiver as mortgagee in possession for
      the purposes of the Law of Property Act 1925 neither Security Agent or any
      Receiver shall by reason of its entering into possession of any of the
      Security Assets be liable to account as mortgagee in possession or for
      anything except actual receipts or be liable for any loss upon realisation
      or for any default or omission for which a mortgagee in possession might
      otherwise be liable.

7.13  Exclusion of Liability.  Neither the Security Agent nor any other Finance
      ----------------------
      Party or any Receiver shall be responsible for any losses of any kind
      whatsoever (including, without

                                      11
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

      limitation, negligence, default or dishonesty of any servant, agent or
      auctioneer employed by the Security Agent or any Finance Party or any
      Receiver or any attorney of the Security Agent or any Finance Party or any
      Receiver) which may occur in or about the exercise, or attempted or
      purported exercise or non-exercise of any of the rights, powers or
      remedies of the Security Agent or any Finance Party or any Receiver unless
      directly caused by the gross negligence or wilful default of the Security
      Agent or any Finance Party or any Receiver. The Security Agent, any
      Finance Party or Receiver shall be entitled to all the privileges and
      immunities conferred on mortgagees and receivers appointed thereunder by
      the Law of Property Act 1925.

7.14  Protection of Third Parties.  No person dealing with the Security Agent or
      ---------------------------
      any attorney of the Security Agent or any Receiver in connection with the
      exercise of any of the rights, powers or remedies of the Security Agent
      shall be bound to inquire whether any Event of Default has occurred or any
      power has become exercisable, as to the due appointment of any Receiver or
      otherwise as to the propriety or regularity of any such dealing or to see
      to the application of any money paid to the Security Agent or any Receiver
      and shall not be affected by express notice that any such dealing is
      unnecessary or improper, and notwithstanding any irregularity or
      impropriety in any such dealing the same shall, as regards the protection
      of that person, be deemed to be valid and effective.

7.15  Acceptance of Payments.  This Deed may be enforced notwithstanding that
      ----------------------
      the Security Agent or any other Finance Party may have accepted payment of
      any Secured Indebtedness after the occurrence of an Event of Default.

8.    SET-OFF
      -------

      If an Event of Default has occurred the Security Agent and each other
      Finance Party shall have the right (but not the obligation), without
      notice to any Obligor or any other person, to set-off and apply any credit
      balance on any account of an Obligor with the Security Agent or such
      Finance Party (as the case may be) and any other indebtedness owing by the
      Security Agent or such Finance Party to an Obligor (in each case, whether
      or not subject to notice, matured or owing to a different branch or office
      and in whatever currency) against such of the Secured Indebtedness which
      is due and payable. Each Finance Party may convert any such credit balance
      or other indebtedness at the prevailing rate of exchange into such other
      currencies as may be necessary for this purpose.

9.    RECEIPT AND APPLICATION OF MONIES
      ---------------------------------

9.1   Order of Application.  All monies from time to time actually received or
      --------------------
      recovered by the Security Agent or a Receiver from an Obligor under this
      Deed or arising from the enforcement of this Deed shall (subject to Clause
      9.3 (Suspense Account) be applied in the following order of priority:

      (a)  first, in payment of the costs, charges, expenses and other monies
           -----
           payable by each Obligor under Clauses 14 (Costs, Charges and
           Expenses) and 15 (Indemnities and Currencies) or liabilities
           otherwise incurred in the exercise or attempted exercise of the
           rights, powers or remedies of the Security Agent or a Receiver;

      (b)  secondly, in payment of the remaining Secured Indebtedness;
           --------

                                      12
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

      (c)  thirdly, in payment of amounts due under subsequent Encumbrances of
           -------
           which the Security Agent has notice, in the order of their
           priorities; and

      (d)  fourthly, in payment to the Obligors.
           --------

9.2   Credit Actual Receipts.  In applying any monies toward satisfaction of the
      ----------------------
      Secured Indebtedness, the Security Agent shall credit each Obligor with
      only those monies actually received by the Security Agent in cleared
      funds, and such credit shall date from the time of actual receipt.

9.3   Suspense Account  The Security Agent may place and keep any monies
      ----------------
      received by virtue of this Deed (whether before or after the insolvency or
      liquidation of any Obligor) to the credit of a suspense account for so
      long as the Security Agent may think fit in order to preserve the rights
      of the Security Agent or any other Finance Party to sue or prove for the
      whole amount of its claims against an Obligor or any other person.

9.4   Amounts Contingently Due.  If the Security Agent enforces the security
      ------------------------
      constituted by this Deed (whether by the appointment of a Receiver or
      otherwise) at a time when no amounts are due to it (but at a time when
      amounts may become so due), the Security Agent (or such Receiver) may pay
      the proceeds of any recoveries effected by it into an interest-bearing
      suspense account with any person (including the Security Agent) selected
      by the Security Agent and on terms selected by the Security Agent until
      the relevant amounts become actually due and payable or the Security Agent
      determines that they will never become actually due and payable. At that
      time the amount actually owing may be paid to the Security Agent and the
      balance distributed in accordance with Clause 9.1 (Order of Application).
      Until such time the Security Agent (or such Receiver) may (subject to the
      payment of any claims having priority to this security) withdraw amounts
      standing to the credit of any such suspense account in order to pay the
      amounts referred to in paragraphs (a) and (b) of Clause 9.1 (Order of
      Application). The Obligors will not be entitled to withdraw any monies
      (including interest) standing to the credit of any such suspense account
      until all the Secured Indebtedness has been irrevocably paid and
      discharged in full.

9.5   Appropriation.  Each Obligor irrevocably authorises the Security Agent to
      -------------
      appropriate any monies received by the Security Agent, any attorney of the
      Security Agent or the Receiver towards such of the Secured Indebtedness as
      the Security Agent in its absolute discretion thinks fit.

9.6   Surplus Monies.  If at any time after satisfaction of the Secured
      --------------
      Indebtedness the Security Agent holds any surplus monies payable to an
      Obligor, those monies shall not carry interest and may be placed to the
      credit of an account in the name of such Obligor with a bank and the
      Security Agent shall thereupon be under no further liability in respect
      thereof.

10.   PAYMENTS
      --------

10.1  No Deductions.  All sums payable by any Obligor under this Deed shall be
      -------------
      paid in full without set-off or counterclaim or any restriction or
      condition and, except to the extent required by any law or regulation,
      free and clear of any deduction or withholding on account of tax or
      otherwise. If an Obligor or any other person is required by any law or
      regulation to make any such deduction or withholding such Obligor shall,
      together with the relevant payment, pay such additional amount as will
      ensure that the Security Agent

                                      13
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

      or, as the case may be, any other relevant Finance Party actually receives
      and is entitled to retain, free and clear of any such deduction or
      withholding, the full amount which it would have received if no such
      deduction or withholding had been required. Each Obligor shall within the
      required time period, pay or cause to be paid over to the relevant
      taxation or other authority the full amount of any such deduction or
      withholding and shall promptly forward to the Security Agent copies of
      official receipts or other evidence satisfactory to the Security Agent
      showing that such payment has been made.

10.2  Security Agent May Debit Account of Obligor.  The Security Agent may,
      -------------------------------------------
      without prejudice to any other right, power or remedy of the Security
      Agent, at any time and from time to time, without further authority or
      notice to any Obligor, debit and charge any account of an Obligor with the
      Security Agent with any of the monies payable to the Security Agent under
      the Credit Documents or this Deed or any other Financing Document to which
      such Obligor is a party.

11.   COSTS, CHARGES AND EXPENSES
      ---------------------------

11.1  Expenses.  Each Obligor shall forthwith on demand pay or reimburse to the
      --------
      Security Agent, the other Finance Parties or any Receiver (as the case may
      be):

      (a)  Execution: all costs, charges and expenses (including legal fees on a
           ---------
           full indemnity basis and all other out-of pocket expenses and any
           applicable value added tax or similar tax) incurred by the Security
           Agent or any other Finance Party or any Receiver in connection with
           the preparation, execution and registration of this Deed and any
           other documentation required in connection herewith and any amendment
           to or extension of, or any inspection, calculation, approval, consent
           or waiver to be made or given in connection with, this Deed;

      (b)  Rights and Remedies: all costs, charges and expenses (including legal
           -------------------
           fees on a full indemnity basis and all other out-of pocket expenses
           and any applicable value added tax or similar tax) incurred by the
           Security Agent or any other Finance Party or any Receiver in
           exercising any of its or their rights or powers under this Deed or in
           suing for or seeking to recover any sums due or otherwise preserving
           or enforcing its or their rights, powers and remedies under this Deed
           or in connection with the preservation or attempted preservation of
           the Security Assets or in defending any claims brought against any of
           them in respect of this Deed or any Obligor's interest in the
           Security Assets or in releasing or re-assigning this Deed upon
           payment of all monies hereby secured;

      (c)  Receiver:  all remuneration payable to the Receiver,
           --------

      and, until payment of the same in full, all such costs, charges and
      expenses shall be secured by this Deed.

11.2  Taxes and Registration Fees.  Each Obligor shall pay when due all present
      ---------------------------
      and future stamp and other similar duties and taxes and all notarial,
      registration, recording and other similar fees which may be payable in
      respect of this Deed and any documentation required in connection with
      this Deed and shall indemnify the Security Agent and the other Finance
      Parties against all liabilities, costs and expenses which may result from
      any delay or default in paying such duties, taxes or fees (unless caused
      by the relevant person's negligence or wilful default in paying such
      fees).

                                      14
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

12.   INDEMNITIES AND CURRENCIES
      --------------------------

12.1  General Indemnity.  Each Obligor shall indemnify the Security Agent, the
      -----------------
      other Finance Parties and any Receiver (and any attorney, delegate or
      other person appointed under this Deed by any of them) from and against
      all claims, actions, losses, liabilities, damages, costs and expenses
      incurred by it or them as a result of or arising out of or in connection
      with:

      (a)  Performance: the occurrence of any Event of Default, or any failure
           -----------
           by an Obligor to make a payment or perform any obligation in
           accordance with this Deed; or

      (b)  Security Assets: the Security Assets or the use or occupation thereof
           ---------------
           by any person; or

      (c)  Powers: the execution or purported execution of any powers,
           ------
           authorities and discretions conferred on it pursuant to this Deed or
           in respect of any matter or thing done or omitted in relation to the
           Security Assets (unless directly resulting from the gross negligence
           or wilful default of the indemnified person).

12.2  Conversion of Currencies.  All monies received or held by the Security
      ------------------------
      Agent or by a Receiver under this Deed at any time on or after enforcement
      in a currency other than a currency in which the Secured Indebtedness (or
      any part of it) is denominated or in an amount exceeding the amount in the
      relevant currency in which any Secured Indebtedness is denominated may
      from time to time be sold for one or more of the currencies in which the
      Secured Indebtedness is denominated as the Security Agent or any Receiver
      considers necessary or desirable and each Obligor shall indemnify the
      Security Agent against all costs, charges and expenses incurred in
      relation to such sale. Neither, the Security Agent nor any Receiver shall
      have any liability to any Obligor in respect of any loss resulting from
      any fluctuation in exchange rates after any such sale.

12.3  Currency Indemnity.  If any amount is received by the Security Agent or
      ------------------
      any other Finance Party in a currency other than that in which the
      relevant obligation or liability of an Obligor was payable (the "Required
      Currency") pursuant to any law, regulation or order or in the winding up,
      insolvency or bankruptcy of such Obligor or otherwise, such obligation or
      liability shall be discharged only to the extent that the Security Agent
      or that Finance Party may purchase the Required Currency with such other
      currency in accordance with normal banking procedures of the Security
      Agent or, as the case may be, that Finance Party upon receipt of such
      amount. If the amount in the Required Currency which may be so purchased,
      after deducting any costs of exchange and any other related costs, is less
      than the amount of the relevant obligation or liability, such Obligor
      shall indemnify the Security Agent or such other Finance Party against the
      shortfall. This indemnity shall be an obligation of each Obligor
      independent of and in addition to its other obligations under this Deed,
      notwithstanding any time or other concession may have been granted to such
      Obligor or any other act, matter or thing.

12.4  Payment and Security.  The Security Agent and any Receiver may retain and
      --------------------
      pay out of any money in the Security Agent's or (as the case may be)
      Receiver's hands all sums necessary to effect the payments, obligations
      and indemnities contained in Clause 11 (Costs, Charges and Expenses) and
      Clause 12 (Indemnities and Currencies) and all sums payable by any Obligor
      under Clause 11 and Clause 12 shall form part of the monies hereby
      secured.

                                      15
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

13.   EVIDENCE OF DEBT
      ----------------

      Any statement of account purporting to show an amount due from any Obligor
      for the purposes of this Deed and signed as correct by an authorised
      officer of the Security Agent or the Agent shall, in the absence of
      manifest error, be conclusive evidence of the amount so due.

14.   FURTHER ASSURANCE
      -----------------

14.1  Further Assurance.  Each Obligor shall at any time and from time to time
      -----------------
      (whether before or after the security hereby created shall have become
      enforceable):

      (a)  Execute Documents: execute such further legal or other mortgages,
           -----------------
           charges or assignments in favour of the Security Agent or the Finance
           Parties; and

      (b)  Other Action: do all such transfers, assurances, acts and things and,
           ------------
           without limiting the generality of the foregoing, give all notices,
           orders and directions in respect of Security Assets,

      as the Security Agent may require to secure the Secured Indebtedness or to
      facilitate the realisation of the Security Assets or the exercise of any
      powers conferred on the Security Agent or a Receiver or for the purposes
      of perfecting and completing any assignment of the Security Agent's
      rights, benefits or obligations under this Deed.

14.2  Enforcement of Security Agent's Rights.  Each Obligor will do or permit to
      --------------------------------------
      be done everything which the Security Agent may from time to time require
      to be done for the purpose of perfecting or enforcing the Security Agent's
      rights under this Deed and will allow the name of such Obligor to be used
      as and when required by the Security Agent for that purpose.

14.3  Form of Documents.  Any instrument which an Obligor is required to
      -----------------
      execute, or of which an Obligor is required to procure the execution,
      shall be prepared by or on behalf of the Security Agent at the cost of
      such Obligor and shall contain such clauses as the Security Agent shall
      reasonably require, including, but not limited to clauses containing an
      immediate power of sale without notice and excluding section 93, and the
      restrictions contained in section 103, of the Law of Property Act 1925.

14.4  Other Provisions.  This Clause shall be in addition to and not in
      ----------------
      substitution for the covenants for further assurance deemed to be included
      in this Deed by virtue of the Law of Property (Miscellaneous Provisions)
      Act 1994.

15.   POWER OF ATTORNEY
      -----------------

15.1  Power of Attorney.  Each Obligor by way of security hereby irrevocably
      -----------------
      appoints the Security Agent, each Receiver for the time being and each
      authorised officer of the Security Agent to whom the Security Agent shall
      from time to time have delegated the exercise of the power of attorney
      conferred by this Clause, jointly and also severally, to be the attorney
      or attorneys of such Obligor to do (either in the name of such Obligor or
      the attorney) all acts and things which:

      (a)  Obligors' Obligations: such Obligor is obliged to do under this Deed;
           ---------------------
           or

                                      16
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

      (b)  Other Acts and Things: in the opinion of the Security Agent, are
           ---------------------
           necessary or desirable in connection with the Security Assets or the
           protection or perfection of the Security Agent's interest in the
           Security Assets or the exercise of the rights, powers and remedies of
           the Security Agent or the realisation, getting in or disposition of
           any Security Assets,

      and, without limiting the generality of the foregoing, to execute all
      deeds and documents of whatever nature, but without rendering the Security
      Agent liable as a mortgagee in possession, and with full power for all or
      any of such purposes from time to time to appoint a substitute or sub-
      attorney and to revoke any such appointment.

15.2  Ratification. Each Obligor hereby ratifies and confirms, and agrees to
      ------------
      ratify and confirm, whatever any such attorney as is mentioned in Clause
      15.1 (Power of Attorney) shall do or purport to do, and all transactions
      entered into and documents executed, in the exercise or purported exercise
      of all or any of the powers, authorities and discretions referred to in
      such Clause.

15.3  Powers of Attorney Act.  The power of attorney granted by Clause 15 (Power
      ----------------------
      of Attorney) is, as regards the Security Agent and its delegates and each
      Receiver (as each Obligor hereby acknowledges), granted irrevocably and
      for value as part of the security constituted by this Deed to secure
      proprietary interests of, and the performance of obligations owed to, the
      respective donees within the meaning of the Powers of Attorney Act 1971.

15.4  Completion of Blanks.  The Security Agent is irrevocably authorised to
      --------------------
      fill in any blanks and otherwise complete and to deliver any instruments
      executed any Obligor and deposited with the Security Agent in connection
      with this Deed.

16.   OTHER ENCUMBRANCES
      ------------------

16.1  Priority of Further Advances.  All monies which are expressed to be
      ----------------------------
      secured by this Deed and which are advanced, paid or otherwise provided
      after the Security Agent or any other Finance Party receives notice of the
      creation of any other Encumbrance shall be secured by this Deed in
      priority to any monies secured by that other Encumbrance, unless the
      Security Agent specifically agrees in writing.

16.2  Opening of New Account.  If the Security Agent or any other Finance Party
      ----------------------
      receives or is deemed to be affected by actual or constructive notice, of
      any subsequent Encumbrance or other instrument affecting any part of the
      Security Assets and/or the proceeds of realisation thereof, the Security
      Agent and the other Finance Parties may open a new account for an Obligor.
      If the Security Agent or any other Finance Party does not open a new
      account it shall nevertheless be treated as if it had done so at the time
      when the Security Agent or, if earlier, such other Finance Party received
      or was deemed to have received notice, and as from that time all payments
      made to the Security Agent or such other Finance Party shall be credited
      or be treated as having been credited to the new account and shall not
      operate to reduce the amount for which this Deed is security.

16.3  Rights Regarding prior Encumbrances.  The Security Agent may (but is not
      -----------------------------------
      obliged to) pay any monies, obligations or liabilities secured by any
      Encumbrance having priority to this Deed and (at the expense of the
      Obligors) take a transfer of such Encumbrance for the benefit of the
      Finance Parties. All principal monies, interest, costs, charges and
      expenses of and incidental to such redemption and transfer shall be paid
      by the Obligors to the Security Agent on demand.

                                      17
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

17.   SECURITY TRUST
      --------------

17.1  Declaration of Trust.  The Security Agent hereby declares that it shall
      --------------------
      hold the Trust Property upon trust for the Finance Parties from time to
      time in accordance with the Financing Documents. The trusts of the Trust
      Property shall remain in full force and effect until the earlier of:

      (a)  Specified Date: such date as the Security Agent shall specify on
           --------------
           which:

           (i)  all the obligations which are secured by the Security Documents
                have been fully and finally discharged; and

           (ii) no Finance Party is under any commitment, obligation or
                liability (whether actual or contingent) to make advances or
                provide any other financial accommodation to either Obligor
                under any Financing Document; and

      (b)  Perpetuities: the last day of the period of 80 years from the date of
           ------------
           this Deed which period (and no other) shall be the applicable
           perpetuity period,

      after which the trusts set out in this Deed shall be wound up and the
      Security Agent shall release, without recourse or warranty, all of the
      security created by the Security Documents.

17.2  Powers and Discretions.  To the extent not inconsistent with this Deed,
      ----------------------
      the Security Agent shall have all the powers and discretions conferred
      upon trustees by the Trustee Act 1925.

17.3  Investment.  Unless provided otherwise in any Security Document, monies
      ----------
      which are received by the Security Agent and held by it as trustee in
      relation to any of the Security Documents may be invested in the name of
      or under the control of the Security Agent in any investment authorised by
      English law for the investment of trust money by trustees or in any other
      investments which may be selected by the Security Agent, and if not
      otherwise invested such monies may be placed on deposit in the name of or
      under the control of the Security Agent at such bank or institution
      (including the Security Agent) and upon such terms as the Security Agent
      may think fit.

17.4  Appointment.  The Security Agent may appoint any person established or
      -----------
      resident in any jurisdiction (whether a trust corporation or not) to act
      as a trustee or agent, either separately or jointly with the Security
      Agent, in relation to any of the Security Documents if the Security Agent
      considers that such an appointment is necessary or desirable for the
      purpose of conforming with any legal requirement in any relevant
      jurisdiction or otherwise for the purpose of holding, administering,
      protecting or enforcing any of the Security Documents, and any such
      trustee or agent shall have such powers and discretions (not exceeding
      those conferred on the Security Agent) and such obligations as shall be
      conferred or imposed on it by the Security Agent.

                                      18
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

18.   AMENDMENT, WAIVER AND SEVERABILITY
      ----------------------------------

18.1  Amendment.  Any amendment or waiver of any provision of this Deed and any
      ---------
      waiver of any default under this Deed shall only be effective if made in
      writing and signed by the Security Agent.

18.2  Waiver.  No failure or delay by the Security Agent or any other Finance
      ------
      Party in exercising any right, power or remedy under this Deed shall
      impair such right, power or remedy or operate as a waiver thereof, nor
      shall any single or partial exercise of any right, power or remedy
      preclude any further exercise thereof or of any other right, power or
      remedy. The rights, powers and remedies provided in this Deed are
      cumulative and do not exclude any other rights, powers or remedies
      provided by law.

18.3  Severability.  If at any time any provision of this Deed is or becomes
      ------------
      illegal, invalid or unenforceable in any respect under the law of any
      jurisdiction, the legality, validity and enforceability of such provision
      under the law of any other jurisdiction, and of the remaining provisions
      of this Deed, shall not be affected or impaired thereby.

19.   MISCELLANEOUS
      -------------

19.1  Counterparts.  This Deed may be executed in any number of counterparts and
      ------------
      by the different parties to this Deed on separate counterparts which when
      taken together shall constitute one and the same instrument.

19.2  Survival of Indemnities.  The indemnities contained in this Deed are
      -----------------------
      continuing obligations of each Obligor and are separate and independent
      from the other obligations of each Obligor and shall survive the
      termination of this Deed.

19.3  Moratorium Legislation.  To the fullest extent permitted by law, the
      ----------------------
      provisions of all existing and future laws which operate or may operate
      directly or indirectly to lessen or otherwise vary an Obligor's
      obligations under this Deed or to delay, curtail or otherwise prevent or
      prejudicially affect the exercise by the Security Agent or any other
      Finance Party of any of its rights, powers and remedies under this Deed
      are expressly negatived and excluded.

19.4  Judgments.  Notwithstanding any judgment which the Security Agent or any
      ---------
      other Finance Party may recover against any Obligor in respect of any
      Secured Indebtedness, the Security Agent or such other Finance Party shall
      hold the judgment collaterally with this Deed as security for the due
      payment and satisfaction of Secured Indebtedness and this Deed shall not
      merge in any judgment.

19.5  Notice and Enforcement.  The Security Agent need not give any notice of
      ----------------------
      this Deed to any person, enforce payment of any Secured Indebtedness,
      enforce or realise any other Security Document or take any steps or
      proceedings for any purpose unless the Security Agent thinks fit.

19.6  Consent by Security Agent.  Any consent required of the Security Agent
      -------------------------
      under this Deed may (unless this Deed specifically provides otherwise) be
      given or withheld by the Security Agent in its absolute discretion and
      either conditionally or unconditionally.

                                      19
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

19.7  Restriction.  Each Obligor applies to the Chief Land Registrar for the
      -----------
      registration against the registered titles (if any) specified in the
      Schedule (Real Property) (and any unregistered properties subject to first
      registration at the date of this Deed) of the following restriction:

      "Except under an Order of the Registrar no disposition, dealing, charge or
      other security interest is to be registered or noted without the consent
      of the proprietor for the time being of [Charge No  [  .  ]] / [a  charge
      dated [   .    ] 2000 and made between (1) Hawker Pacific Aerospace (2)
      Hawker Pacific Aerospace Ltd. and (3) Landesbank Hessen-Thuringen
      Girozentrale."

20.   ASSIGNMENT
      ----------

20.1  Successors and Assigns.  This Deed shall be binding upon and inure to the
      ----------------------
      benefit of the parties to this Deed and their respective successors and
      permitted assigns.

20.2  Assignment by Obligors. No Obligor shall assign or otherwise transfer the
      ----------------------
      benefit of this Deed or any of its rights, duties or obligations under
      this Deed without the prior written consent of the Security Agent.

20.3  Assignment by Finance Parties.  The Finance Parties may assign or grant
      -----------------------------
      participations in all or any part of their rights under this Deed in
      accordance with the provisions of Clause 20.2 of the Credit Agreement.

20.4  Change of Security Agent.  The Security Agent may assign and transfer all
      ------------------------
      of its rights to the Security Assets and all of its rights and obligations
      under this Deed to a replacement Security Agent appointed in accordance
      with this Deed and, when such assignment and transfer takes effect, the
      replacement Security Agent shall be for all purposes acting as agent and
      trustee in accordance with the trusts in this Deed.

21.   NOTICES
      -------

21.1  Delivery.  Each notice, demand or other communication to be given or made
      --------
      under this Deed shall be in writing and delivered or sent to the relevant
      party at its address or telex number or fax number set out below (or such
      other address or telex number or fax number as the addressee has by not
      less than 7 days' prior written notice specified to the other parties):

      To the US Obligor:      Hawker Pacific Aerospace
      -----------------
                              11240 Sherman Way
                              Sun Valley, CA 91352 - 4942
                              USA

                              Telephone Number   :    (1)-818 765 6201
                              Fax Number         :    (1)-818 765 8587

                              Attention          :    Phil Panzera

                                      20
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

      To the UK Obligor:      Hawker Pacific Aerospace Ltd.
      ------------------
                              Unit 3 Dawley Park
                              Kestrel Way
                              Hayes, Middlesex UB3 1HP

                              Telephone Number   :    0208 589 1900
                              Fax Number         :    0208 589 1903

                              Attention          :    Managing Director

      To the Security Agent:  Landesbank Hessen - Thuringen Girozentrale
      ----------------------
                              Main Tower
                              Neue Mainzer Str. 52 - 58
                              60311 Frankfurt am Main
                              Germany

                              Telephone Number   :    (49)-0-69-91324202
                              Fax Number         :    (49)-0-69-91324350

                              Attention          :    Martin Rohmann

21.2  Deemed Delivery. Any notice, demand or other communication addressed to
      ---------------
      any relevant party in accordance with Clause 21.1 (Delivery) shall be
      deemed to have been delivered:

      (a)  Letter: if given or made by letter, when actually delivered to the
           ------
           relevant address;

      (b)  Telex: if given or made by telex, when despatched with confirmed
           -----
           answerback; and

      (c)  Fax: if given or made by fax, when despatched with a fax transmission
           ---
           report showing that the entire communication was received,

      provided that a communication which is received after 5:00 p.m. on a
      working day, or on a day which is not a full working day, in the place of
      receipt shall be deemed to be delivered on the next full working day in
      that place.

21.3  Language.  Each notice or other communication under this Deed shall be in
      --------
      English. Any other documents required to be delivered under this Deed
      shall be either in English or be accompanied by a certified translation
      into English.

22.   PROTECTIVE CLAUSES
      ------------------

22.1  Protective Clauses.  Without limiting Clause 4 (Continuing Security)
      ------------------
      neither the liability of an Obligor nor the validity or enforceability of
      this Deed shall be prejudiced, affected or discharged by:

      (a)  Other Encumbrances: any other Encumbrance, guarantee or other
           ------------------
           security or right or remedy being or becoming held by or available to
           the Security Agent or any other Finance Party or by any of the same
           being or becoming wholly or partly void, voidable, unenforceable or
           impaired or by the Security Agent or any other

                                      21
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

           Finance Party at any time releasing, refraining from perfecting or
           enforcing, varying or in any other way dealing with any of the same
           or any power, right or remedy the Security Agent or any other Finance
           Party may now or hereafter have from or against an Obligor or any
           other person;

      (b)  Time: the granting of any time or indulgence to an Obligor or any
           ----
           other person;

      (c)  Variation: any variation or modification (however fundamental) of
           ---------
           either Credit Document, any other Financing Document or any other
           document referred to therein;

      (d)  Invalidity: the invalidity or unenforceability of any obligation or
           ----------
           liability of any Obligor under either Credit Document or any of the
           Financing Documents;

      (e)  Defective Execution: any invalidity or irregularity in the execution
           -------------------
           of this Deed, the Credit Documents or any other Financing Document;

      (f)  Defective Capacity: any deficiency in the powers of any Obligor to
           ------------------
           enter into or perform any of its obligations under this Deed, the
           Credit Documents or under any other Financing Document to which it is
           a party;

      (g)  Change in Constitution: any change in the constitution of any Obligor
           ----------------------
           or any Finance Party or (in relation to any of them) its absorption
           in or amalgamation with, or the acquisition of all or a part of its
           undertaking by, any other person;

      (h)  Other: any act, omission, event or circumstance which would or may
           -----
           but for this provision operate to prejudice, affect or discharge this
           Deed or the liability of an Obligor under this Deed.

22.2  Unrestricted Right of Enforcement.  This Deed may be enforced without the
      ---------------------------------
      Security Agent or any other Finance Party first having recourse to any
      other security or rights or taking any other steps or proceedings against
      an Obligor or any other person or may be enforced for any balance due
      after resorting to any one or more other means of obtaining payment or
      discharge of the monies, obligations and liabilities hereby secured.

22.3  Release.  The Security Agent may release any Security Assets from the
      -------
      security hereby created at any time and any such release shall not in any
      way affect, prejudice or invalidate the security hereby created over any
      other Security Assets, any other Financing Document or the obligations of
      an Obligor under this Deed or any other Financing Document to which it is
      a party.

22.4  Release of Charge Conditional.  Any release, settlement or discharge given
      -----------------------------
      or made by the Security Agent in consideration for any assurance,
      security, disposition or payment made by an Obligor or any other person
      shall be conditional upon such assurance, security, disposition or payment
      not being void, voidable, set aside or ordered to be refunded for any
      reason whatsoever under any law (including, without limitation, under any
      law relating to preferences, bankruptcy, insolvency, administration or
      winding up). If such condition is not fulfilled:

      (a)  Enforcement: the Security Agent shall be entitled to enforce the
           -----------
           security created by or pursuant to this Deed subsequently to the same
           extent as if no such

                                      22
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

           assurance, security, disposition or payment had been made and any
           such release, settlement or discharge had not occurred;

      (b)  Further Assurance: each Obligor shall, at its own expense, promptly
           -----------------
           do, execute and deliver, and cause any relevant third person to do,
           execute and deliver, all acts and documents which the Security Agent
           requires to reinstate the security expressed to be constituted by
           this Deed; and

      (c)  Retention of Security: the Security Agent may retain this Deed, any
           ---------------------
           security hereby created and any document deposited with it hereunder
           until it is satisfied that such condition has been or will be
           fulfilled;

      and this Clause 22.4 (Release of Charge Conditional) shall survive the
      discharge of this Deed unless the Security Agent expressly agrees
      otherwise in writing.

23.   GOVERNING LAW AND JURISDICTION
      ------------------------------

23.1  Law.  This Deed and the rights and obligations of the parties hereunder
      ---
      shall be governed by and construed in accordance with the laws of England.

23.2  Jurisdiction.  Each Obligor irrevocably agrees for the benefit of the
      ------------
      Security Agent and the other Finance Parties that any legal action arising
      out of or relating to this Deed may be brought in the courts of England
      and irrevocably submits to the exclusive jurisdiction of such courts.

23.3  No Limitation on Right of Action.  Nothing in this Deed shall limit the
      --------------------------------
      right of the Security Agent or any other Finance Party to commence any
      legal action against any Obligor and/or its assets in any other
      jurisdiction or to serve process in any manner permitted by law, and the
      taking of proceedings in any jurisdiction shall not preclude the Security
      Agent or any other Finance Party from taking proceedings in any other
      jurisdiction whether concurrently or not.

23.4  Waiver; Final Judgment Conclusive.  Each Obligor irrevocably and
      ---------------------------------
      unconditionally waives any objection which it may now or hereafter have to
      the choice of England as the venue of any legal action arising out of or
      relating to this Deed and agrees not to claim that any court in that venue
      is not a convenient or proper forum. Each Obligor also agrees that a final
      judgment against it in any such legal action shall be final and conclusive
      and may be enforced in any other jurisdiction, and that a certified or
      otherwise duly authenticated copy of the judgment shall be conclusive
      evidence of the fact and amount of its indebtedness.

23.5  Waiver of Immunity.  Each Obligor irrevocably and unconditionally waives
      ------------------
      any immunity to which it or its assets may at any time be or become
      entitled, whether characterised as sovereign immunity or otherwise, from
      any set-off or legal action in England or elsewhere, including immunity
      from service of process, immunity from jurisdiction of any court or
      tribunal, and immunity of any of its assets from attachment prior to
      judgment or from execution of a judgment.

23.6  Process Agent.  Without prejudice to any other mode of service allowed
      -------------
      under any relevant law, the US Obligor:

      (a)  irrevocably appoints Messrs Paris Smith and Randall of Number One
           London Road, Southampton SO15 2AE, England (Ref. AEH) as its agent
           for service of

                                      23
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

           process in relation to any proceedings before the English courts in
           connection with any Financing Document; and

      (b)  agrees that failure by the process agent referred to in Clause
           23.6(a) hereof to notify the US Obligor of the process will not
           invalidate the proceedings concerned.

THIS DEED has been executed as a Deed by the parties hereto and is intended to
be and is hereby delivered on the date stated at the beginning of this Deed.

                                      24
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

                                   Schedule
                                 Real Property

                                Registered Land

--------------------------------------------------------------------------------
County and District/
--------------------
London Borough                   Title Numbers           Description of Property
--------------                   -------------           -----------------------
--------------------------------------------------------------------------------
London Borough of Hillingdon       AGL 70229             Unit 3, Dawley Park,
                                                         Dawley Road, Hayes
--------------------------------------------------------------------------------

                               Unregistered Land

                         None specifically identified.

                                      25
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

THE OBLIGORS
------------

SIGNED AND DELIVERED as a Deed     )
for and on behalf of               )
HAWKER PACIFIC AEROSPACE           )
by                                 )

                                   )
                                   )
David L. Lokken   CEO              )          /s/ David L. Lokken
--------------------------         )          --------------------------
Name / Title                       )          Authorised signatory
                                   )
                                   )
Philip M. Panzera  EVP             )
--------------------------         )          /s/ Philip M. Panzera
Name / Title                                  --------------------------
                                              Authorised signatory

SIGNED AND DELIVERED as a Deed     )
for and on behalf of               )
HAWKER PACIFIC AEROSPACE LTD.      )
by                                 )
                                   )          /s/ David L. Lokken
                                   )          --------------------------
David L. Lokken                               Director
--------------------------
Name

Philip M. Panzera                             /s/ Philip M. Panzera
--------------------------                    --------------------------
Name                                          Director/Secretary

                                      26
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 7

THE SECURITY AGENT
------------------

SIGNED AND DELIVERED as a Deed     )
for and on behalf of               )
LANDESBANK HESSEN - THURINGEN      )
GIROZENTRALE                       )          /s/ Frank Dohl
by                                            ----------------------------
                                              Authorised signatory

Frank Dohl V.P.
--------------------------
Name / Title

Martin Rohmann
--------------------------                    /s/ Martin Rohman
Name / Title                                  ----------------------------
                                              Authorised signatory

THE BANKS
---------

SIGNED AND DELIVERED as a Deed     )
for and behalf of                  )
LANDESBANK HESSEN - THURINGEN      )
GIROZENTRALE                       )          /s/ Frank Dohl
by                                 )          ----------------------------
                                   )          Authorised signatory
                                   )
Frank Dohl V.P.                    )
--------------------------         )
Name / Title                       )
                                   )
                                   )
Martin Rohmann                     )
--------------------------         )          /s/ Martin Rohmann
Name / Title                       )          ----------------------------
                                   )          Authorised signatory
                                   )

                                      27
<PAGE>

          Credit Agreement dated October 30, 2000
          Schedule 7
          ----------

                 FIXED AND FLOATING CHARGES HAWKER UK ASSETS

                                         As of September 30, 2000

          Cash                             (pound)  1,416,442
          Trade accounts receivable, net            2,962,400
          Other receivables                           (23,994)
          Inventory                                 4,918,915
          Prepaid expenses                            369,006
          NBV of machinery and equipment            6,784,052
          NBV of exchange assets                   14,291,389
          Deposits, other assets                       53,789
                                           ------------------
                                           (pound) 30,771,998
                                           ==================

                                      -1-
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 8
----------

                                    [BLANK]
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 9
----------

                          DISCLOSURE OF SHAREHOLDINGS
                          ---------------------------

<PAGE>

                          Disclosure of Shareholdings

<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------
                                                          No of               Share
                                                          -----               ------
Company                            Class of Shares        Shares              Certificate Nos
-------                            ---------------        ------              ---------------
---------------------------------------------------------------------------------------------------------
<S>                                <C>                    <C>                 <C>

Hawker Pacific Aerospace Ltd       Ordinary               5,637,049           [      ] to [      ]
---------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 10
-----------

                          DISCLOSURE OF ENCUMBRANCES
                          --------------------------

<PAGE>

Credit Agreement dated October 30, 2000
Schedule 10
-----------

                          Disclosure of Encumbrances

          Heller Loan and Security Agreement dated December 22, 1998

<PAGE>

Credit Agreement dated October 30, 2000
Schedule 11
-----------

                     DISCLOSURE OF FINANCIAL INDEBTEDNESS
                     ------------------------------------

<PAGE>

Credit Agreement dated October 30, 2000
Schedule 11
-----------

                     Disclosure of Financial Indebtedness

          Heller Loan and Security Agreement dated December 22, 1998

<PAGE>

Credit Agreement dated October 30, 2000
Schedule 12
-----------

                              FINANCIAL COVENANTS
                              -------------------

<PAGE>

Credit Agreement dated October 30, 2000
Schedule 12

                       Schedule 12 - Financial Covenants
                       ---------------------------------

     1.   Senior Debt Coverage Ratio

     In relation to any Relevant Period, the ratio of Senior Debt under the
     Credit Agreement as at the last day of such period to EBITDA for such
     Relevant Period will not be more than SDCR, where SDCR has the value for
     each Relevant Period indicated in the table below. This ratio will be
     tested on the last day of each calendar quarter for the four immediately
     preceding calendar quarters on a rolling basis (the "Relevant Periods"), or
     shorter for RPs ending on or before 31 March 2002. No Relevant Period shall
     commence before 1 July 2001, with the first Relevant Period ending on or
     about 30 September 2001.

     For Relevant Periods shorter than a calendar year, EBITDA shall be measured
     as actual EBITDA in that Relevant Period, divided by the number of months
     in that Relevant Period, and multiplied by twelve.

     ----------------------------------------------
     Relevant Period                    SDCR
     Ending on or about

     ----------------------------------------------
     30 September 2001                  5,00
     ----------------------------------------------
     31 December 2001                   5,00
     ----------------------------------------------
     31 March 2002                      4,50
     ----------------------------------------------
     30 June 2002                       4,50
     ----------------------------------------------
     30 September 2002                  4,50
     ----------------------------------------------
     31 December 2002                   4,50
     ----------------------------------------------
     31 March 2003                      4,00
     ----------------------------------------------
     30 June 2003                       4,00
     ----------------------------------------------
     30 September 2003                  4,00
     ----------------------------------------------
     31 December 2003                   4,00
     ----------------------------------------------
     31 March 2004                      3,00
     ----------------------------------------------
     30 June 2004                       3,00
     ----------------------------------------------
     30 September 2004                  3,00
     ----------------------------------------------
     31 December 2004                   3,00
     ----------------------------------------------

     2.   Debt Service Coverage Ratio

     In relation to any Relevant Period, the ratio of EBITDA of such period to
     Debt Service under this Agreement for such Relevant Period will not be less
     than 1,30. This ratio will be tested on the last day of each calendar
     quarter for the four immediately preceding calendar quarters on a rolling
     basis, or less for Relevant Periods ending on or before 31 March 2002. No
     Relevant Period shall commence before 1 July 2001, with the first Relevant
     Period ending on or about 30 September 2001.

     3.   Non-compliance with Financial Covenants

     An event of default shall be deemed to have occurred if covenants as
     stipulated in sect. 1 and 2 of this schedule are not complied with for two
     consecutive calendar quarters.
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 13
-----------

                                    [BLANK]
<PAGE>

Credit Agreement dated October 30, 2000
Schedule 14
-----------

                               AGENCY AGREEMENT
                               ----------------

<PAGE>

Credit Agreement dated October 30, 2000
Schedule 14
-----------

                                                                  Execution Copy

                               AGENCY AGREEMENT

                                    between

                   Landesbank Hessen-Thuringen Girozentrale

                                      and

                        Kreditanstalt fur Wiederaufbau
<PAGE>

                                AGENCY AGREEMENT

between

1.   Landesbank Hessen-Thuringen Girozentrale, Neue Mainzer Strasse 52-58, 60311
     Frankfurt am Main

                                        - hereinafter referred to as the "Agent"
                                  or, in such capacity, as the "Security Agent"-

and

2.   Kreditanstalt fur Wiederaufbau, Palmengartenstrasse 5-9, 60325 Frankfurt am
     Main

          - the Co-Arranger, and together with the Agent, the "Banks", and each
            a "Bank" -

WHEREAS,

the Banks have agreed to make available to Hawker Pacific Aerospace, Inc., 11240
Sherman Way, Sun Valley, CA. 91352-4942, USA (the "Borrower") a credit facility
in an amount of USD 45,000,000 (the "Facility") pursuant to the terms of a
Credit Agreement dated October 30, 2000 (the "Credit Agreement");

the Agent and Kreditanstalt fur Wiederaufbau have made the facility available as
Mandated Arranger and Co-Arranger, respectively.

NOW, THEREFORE, it is agreed as follows:

1. Exclusion of Joint and Several Liability, Commitments
   -----------------------------------------------------

   The Banks shall participate in the Facility in the form of a disclosed
   syndicate (offenes Konsortium), excluding any joint and several liability,
   and further excluding the creation of any joint ownership
   (Gesamthandsvermogen). The liability of each Bank and its obligations in
   respect of the Facility is limited to its respective commitments set out in
   Schedule 1 of the Credit Agreement.

2. Availability of Commitments
   ---------------------------

   Each Bank shall make available to the Agent, on a bank account specified by
   the Agent, funds corresponding to the respective bank's proportion of its
   commitment under the Facility, without delay upon request by the Agent and at
   the time specified by the Agent. The Agent shall make timely transfers
   thereof to the Borrower.
<PAGE>

3. Transfer of Payments to Banks
   -----------------------------

   The Agent shall transfer to the Banks, and pay into accounts to be designated
   by each Bank in writing, all payments of interest and any other payments
   received at the relevant due date in the proportion of the Bank's commitments
   under the Facility. In addition, the Agent shall timely transfer to the Banks
   any repayments and other pro-rata payments to be made pursuant to the Credit
   Agreement in accordance with the foregoing, and may effect payments without
   verifying whether funds have actually been received. In case payments of the
   Borrowers are not made timely, or not in the full amount of payments due, or
   if the Agent is required to repay any such amounts, the Agent shall be
   entitled to request payment to it from the Banks by the relevant due dates of
   the amounts transferred by the Agent in accordance herewith.

4. Payment Claims
   --------------

   Each Bank shall have the payment claims against the Borrower in the
   proportion of its commitment under the Facility, and such payment claims
   shall be secured pro-rata by the security made available pursuant to the
   terms of the Credit Agreement. Unless specifically agreed otherwise, no Bank
   shall be responsible for the obligations of any other Bank under this Agency
   Agreement and under the Credit Agreement. The amount of the Banks' respective
   claims shall be determined in accordance with the Credit Agreement.

5. Terms of Credit Agreement
   -------------------------

   The terms and conditions of the Facility are set out in the Credit Agreement.
   All relevant interest rates or any changes thereof shall without delay be
   communicated by the Agent to the other Banks.

6. Agency
   ------

   The Agency shall act as agent in respect of all rights and obligations of the
   Banks under or in connection with the Credit Agreement, the Security
   Documents referred to and defined therein (the "Security Agreements") and
   this Agreement, unless specifically agreed otherwise among the Banks.

7. Representative Authority of Agent
   ---------------------------------

   The Agent shall be entitled and be obligated, and be exempt from the
   restrictions of Sec. 181 Civil Code (BGB) in this respect, to represent the
   Banks vis-a-vis the Borrower and third parties in connection with the
   Facility and the security made available pursuant to the terms of the Credit
   Agreement and the Security Agreements, in accordance with the terms of this
   Agency Agreement.

8. Responsibilities of Agent
   -------------------------

   The Agent shall convene and chair meetings of the syndicate, and shall
   execute all resolutions adopted by the Banks. In addition, the Agent shall
   verify compliance with the provisions of the Credit Agreement and the
   Security Agreements by the Banks of and to the extent the Banks instruct the
   Agent accordingly in respect of specific matters. The Agent and
<PAGE>

    each Bank shall verify compliance with the provisions of the Credit
    Agreement, the Security Agreements and any other agreements made in
    connection with the Credit Agreement, by the Borrower and any other parties
    (e.g., by way of examining and verifying documents made available to them),
    and shall inform each other without delay via the Agent, if any breach of
    the obligations of the Borrower becomes apparent to any of them. No Bank
    shall be responsible towards any other Bank in case no such notification is
    made, however.

9.  Security
    --------

    As security for the claims of the Banks under the Credit Agreement, the
    security identified in Sec. 10.1 of the Credit Agreement must be provided
    prior to a disbursement of funds thereunder, and the Agent (in such
    capacity, the "Security Agent") undertakes the administration of such
    security, and shall hold in trust and administer the security on its own
    behalf and on behalf of the Co-Arranger. The Co-Arranger hereby irrevocably
    authorizes the Security Agent to enter into, amend and supplement all
    agreements which may be necessary or beneficial for the grant of the
    security in favour of the Banks, and to exercise all rights of control,
    administration and disposal under the Security Agreements. The Security
    Agent is hereby released from the restrictions of Sec. 181 German Civil Code
    in respect of all measures taken by the Security Agent pursuant to this
    Agreement or the Security Agreements. Any realization of security shall be
    undertaken by the Security Agent in its own name, but for the account of all
    Banks which shall cooperate in such respect with the Security Agent, by way
    of providing the Security Agent with all requisite documents, information
    and certifications, or otherwise as required in this context. The Banks
    shall ensure that payments of proceeds of any realization of security are
    invariably made to the Security Agent. Any such proceeds shall be applied,
    first, in payment of all costs, taxes and other expenses incurred by the
    Security Agent and the other Banks in the course of the administration of
    the security, second, to the Banks in the proportion of their respective
    claims under the Credit Agreement until satisfaction of the claims of the
    Banks in full and, third, in satisfaction of any other claims of the Banks
    against the Borrower, in each case in the proportion of the Banks' claims;
    any excess proceeds are to be paid to the relevant grantor or grantors of
    security. The Security Agent may transfer the administration of the security
    to another security trustee which it considers to be suitable for complying
    with the obligations of the Security Agent, subject to an appropriate
    security trust agreement to be entered into between the Banks and such other
    security trustee. Notwithstanding the foregoing, the Security Agent shall be
    entitled to resign from its position as Security Agent subject to written
    notification of the Co-Arranger on sixty days' notice.

10. Information
    -----------

    The Agent shall inform the other Banks in respect of the circumstances which
    are relevant for the implementation of the Credit Agreement when and to the
    extent it has become aware, through notification by the Borrower or in
    connection with the Security Agreements, of such information, and in
    particular through the documents and notifications to be provided to it or
    made pursuant to the terms of the Credit Agreement. This shall not apply,
    however, in respect of documents and information made available to the other
    Banks by the Borrower. The Agent and the other Banks shall inform each other
    in respect of all circumstances of which they have become aware in
    connection with the performance of the Credit Agreement, provided that such
    information is materially relevant for the financing and the repayment of
<PAGE>

     the funds made available to the Borrower under the Credit Agreement.

11.  Meetings of Syndicate, Call
     ---------------------------

     Each Bank shall be entitled to request a meeting of the syndicate. Any such
     meeting shall be called by the Agent in writing (including by way of
     telefax or by electronic means, on at least seven Banking Days (as this
     term is defined in the Credit Agreement) prior to the proposed date of the
     meeting. The agenda for the meeting shall be specified in the call. In case
     of an urgency, the agent may call a meeting on short notice, if and as
     appropriate. Meetings shall be held in Frankfurt am Main, or at any other
     place mutually agreed by the Banks.

12.  Resolutions
     -----------

     The Agent shall arrange for resolutions of the Banks to be made in respect
     of all important matters. Resolutions shall be adopted by a majority of two
     thirds of the votes to be weighted in accordance with the provisions set
     out hereinbelow, unless resolutions are to be made in respect of the
     following matters which shall require unanimity:

     (i)  Changes of the provisions of the Credit Agreement relating to
          interest, term and repayment of the Facility, the release or
          realization of security, the termination of the Credit Agreement, and
          the enforcement of claims against the Borrower by way of court action;

     (ii) changes of this Agency Agreement.

     Abstentions shall not be counted. Each percentage of the commitment of each
     Bank under the Facility shall equate to one vote; in case of more than 0.5
     percentage points and less than 0.5 percentage points, the weight of votes
     shall be rounded upwards and downwards, respectively. Only Banks
     represented in a meeting shall be entitled to vote. Banks which are not
     represented by their own employees may be represented by another Bank, or
     by a member of the tax advisory profession, or an attorney-at-law, acting
     on the basis of a written power of attorney. Resolutions can only be
     adopted when more than half of the votes of the Banks are represented in a
     meeting; if no such quorum is reached, the Agent shall without delay
     convene another meeting; in accordance with Sec. 11 in which no such quorum
     is required. Resolutions can be adopted in writing (including by way of
     telefax) outside of meetings of the syndicate, provided that no Bank
     objects to such written resolution by giving written notice to the Agent
     within three Banking Days (within the meaning and as defined in the Credit
     Agreement) after receipt of any request therefor. In case of resolutions
     adopted in writing, the votes of only those Banks shall be taken into
     account which have provided a written statement within four Banking Days
     (as this term is defined in the Credit Agreement) after receipt of the
     request of the relevant written resolution. Any proposal for a written
     resolution may be sent to the Banks with a request to vote in writing. The
     notice periods referred to in this Section may in case of an urgency be
     reduced by the Agent as appropriate.

13.  Urgency
     -------

     In matters considered urgent by the Agent, the Agent may take a decision
     without prior coordination with the other Banks if the Agent considers an
     urgent decision necessary in
<PAGE>

     order to prevent the occurrence of damages or losses to the detriment of
     the Banks. Any such decision shall be taken by the Agent within its
     reasonable discretion. The Banks shall be bound by any such decision of the
     Agent. The Agent shall have no obligation to take decisions on an urgent
     basis. The Agent shall without delay inform the other Banks of any urgency
     decisions which have been taken.

14.  Liability
     ---------

     The Agent shall represent the other Banks, and the Security Agent shall
     administrate security, in accordance with the standards of customary
     diligence in business matters (Sorgfalt eines ordentlichen Kaufmanns).
     Documents and other information submitted to the Agent shall be verified by
     all Banks in respect of whether their form complies with the requirements
     of the Credit Agreement. The Agent and the Security Agent shall not be
     liable for compliance by the Borrower, or by third parties, with the
     Borrower's or such third parties' contractual obligations, nor for the
     legal validity, the completeness or the accuracy of documentation or
     information provided by the Borrower or by third parties. This shall
     similarly apply in respect of any documents made available to the Agent or
     the Security Agent by the Borrower or by third parties. The Agent and the
     Security Agent shall not be responsible for the substance, legal validity
     and enforceability of the security or the claims against, and compliance
     with the contractual obligations by, the Borrower or third parties. The
     Agent and the Security Agent shall not be required, in connection with the
     performance of its obligations pursuant to Sec. 9 of this Agency Agreement
     or otherwise, to investigate any covenants, obligations to cooperate or to
     provide documents or information, to be complied with, performed and/or
     provided by the Borrower or by third parties. This shall similarly apply to
     other Banks to the extent any such Bank holds and administrates security,
     or has obligations pursuant to the terms of this Agency Agreement.

15.  Indemnification
     ---------------

     Any exclusion of the Banks joint and several liability notwithstanding, the
     Banks shall indemnify and reimburse the Agent and the Security Agent in
     respect of all claims and obligations vis-a-vis third parties which are
     raised against the Agent or the Security Agent in connection with the
     implementation of the Credit Agreement and any other agreements relating
     thereto. The Banks obligation to indemnify the Agent or the Security Agent
     shall in respect of each Bank be determined in accordance with its pro-rata
     commitments under the Facility.

16.  Cooperation
     -----------

     The Banks shall cooperate in respect of any decisions or measures to be
     taken in connection with the Facility, in such a way so as to allow a
     smooth implementation of the terms and provisions of the Credit Agreement
     in accordance with the terms thereof. The Banks shall cooperate applying
     the standards of customary diligence in business matters (Sorgfalt eines
     ordentlichen Kaufmanns).

17.  Sharing and other Obligations
     -----------------------------

     The Banks shall permit payments under the Credit Agreement only if such
     payment are made
<PAGE>

     simultaneously in the proportion of their respective commitments under the
     Facility; otherwise, they shall put the other Banks in the same position in
     which such Banks would have been if a proportionate repayment or payment
     would have been made to the affected Bank. If and to the extent any Bank
     has received any such excess payments, and if the payor's payment
     obligations have been discharged as a consequence thereof, the other Banks
     to which the excess amounts have been distributed shall assign to the
     affected Bank their claims against the Borrower or, as the case may be, any
     other payor in the proportion in which they have received payment. In case
     of enforcement action taken in connection with any claims raised by the
     Banks against the Borrower, in relation to repayments or the payment of
     interest, commitment fees, prepayment penalties or compensation or
     penalties for the failure to make timely drawings, or other claims under
     and in connection with the Credit Agreement, the Banks shall coordinate
     with each other and shall raise such claims only in accordance with the
     terms of this Agency Agreement. This shall similarly apply in respect of
     the realization of security. The Banks shall not without the prior consent
     of all other Banks declare a setoff of their claims under other agreements
     made with the Borrower against their claims arising in connection with this
     Credit Agreement, the Security Agreements and any other agreements made in
     connection with the Credit Agreement. Any setoff resulting in a discharge
     of obligations of the Borrower under the Credit Agreement shall be deemed a
     payment within the meaning of this Sec. 17.

18.  Verification and Assessments
     ----------------------------

     Each Bank warrants and assures that it has itself examined the
     creditworthiness of the Borrower, the Credit Agreement, the Security
     Agreements and any documentation pertaining thereto, and any documents and
     notifications made available to it by the Agent, in respect of the
     completeness, legal validity, enforceability and accuracy. If a Bank
     determines that the documents and notifications made available to it are
     insufficient, it shall without delay notify the Agent thereof in order to
     come to a mutually agreeable solution. This shall also apply in respect of
     documents or notifications made available by the Agent or the Security
     Agent to the Banks in the future.

19.  Costs
     -----

     The costs of this Agency Agreement and its implementation - to the extent
     not reimbursed and paid by the Borrower - and any losses arising from or in
     connection with the non-performance of the Credit Agreement, in whole or in
     part, or of any agreements related thereto, shall be borne by the Banks in
     the proportion of their commitments under the Facility.

20.  Term
     ----

     This Agency Agreement shall have a term until satisfaction and discharge in
     full of all claims and obligations from and under the Credit Agreement and
     all agreements made in connection therewith.

21.  Miscellaneous Provisions
     ------------------------
<PAGE>

21.1  All amendments and supplements to this Agency Agreement must be in
      writing. This requirement shall also apply to any changes of this
      requirement for such written form.

21.2  The invalidity or unenforceability of one or more provisions of this
      Agency Agreement shall not affect the validity or enforceability of the
      remaining provisions hereof. Any invalid or unenforceable provision shall
      be substituted by a provision which approximates most closely the economic
      purpose of the invalid or unenforceable provision. The same shall apply
      accordingly in case of any omissions.

21.3  This Agency Agreement shall be governed by the laws of the Federal
      Republic of Germany. The courts of Frankfurt am Main shall have exclusive
      jurisdiction with respect to the resolution of all disputes under or in
      connection with this Agency Agreement. Place of performance shall be
      Frankfurt am Main.

Frankfurt am Main, October 30, 200      Frankfurt am Main, October 30, 2000
----------------------------------      -----------------------------------
Place, date                             Plate, date

Landesbank Hessen-Thuringen             Kreditanstalt fur Wiederaufbau
Girozentrale

/s/ Frank Dohl                          /s/ Wolfgang Behler
----------------------------------      -----------------------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00018-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00018-of-00352.parquet"}]]