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                                                                   EXHIBIT 10.26

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[Logo of Bank of America]                                BUSINESS LOAN AGREEMENT
BANK OF AMERICA               
National Trust and Savings Association
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This Agreement dated as of August 2, 1996, is between Bank of America National 
                           --------                     
Trust and Savings Association (the "Bank") and AML COMMUNICATIONS, INC. (the 
"Borrower").

1.     FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS

1.1    LINE OF CREDIT AMOUNT.

(a)    During the availability period described below, the Bank will provide a
       line of credit to the Borrower. The amount of the line of credit (the
       "Facility No. 1 Commitment") is One Million Two Hundred Fifty Thousand
       Dollars ($1,250,000).

(b)    This is a revolving line of credit. During the availability period, the
       Borrower may repay principal amounts and reborrow them.

(c)    The Borrower agrees not to permit the outstanding principal balance of
       the line of credit, to exceed the Facility No. 1 Commitment.

1.2    AVAILABILITY PERIOD.  The line of credit is available between the date of
this Agreement and September 1, 1997 (the "Expiration Date") unless the Borrower
is in default.

1.3    INTEREST RATE.

(a)    The interest rate is the Bank's Reference Rate plus .75 percentage 
       points.

(b)    The Reference Rate is the rate of interest publicly announced from time 
       to time by the Bank in San Francisco, California, as its Reference Rate.
       The Reference Rate is set by the Bank based on various factors, including
       the Bank's costs and desired return, general economic conditions and
       other factors, and is used as a reference point for pricing some loans.
       The Bank may price loans to its customers at, above, or below the
       Reference Rate. Any change in the Reference Rate shall take effect at the
       opening of business on the day specified in the public announcement of a
       change in the Bank's Reference Rate.

1.4    REPAYMENT TERMS.

(a)    The Borrower will pay interest on September 1, 1996, and then monthly
       thereafter until payment in full of any principal outstanding under this
       line of credit.

(b)    The Borrower will repay in full all principal and any unpaid interest or 
       other charges outstanding under this line of credit no later than the
       Expiration Date.

2.     FACILITY NO. 2: LINE OF CREDIT AMOUNT AND TERMS

2.1    LINE OF CREDIT AMOUNT.

(a)    During the availability period described below, the Bank will provide a 
       line of credit to the Borrower. The amount of the line of credit (the
       "Facility No. 2 Commitment") is Five Hundred Thousand Dollars ($500,000).

(b)    This is a non-revolving line of credit with a term repayment option.  Any
       amount borrowed, even if repaid before the end of the availability
       period, permanently reduces the remaining available line of credit.

(c)    Each advance shall be used to purchase equipment for use in the 
       Borrower's business. All equipment acquired with the proceeds of such
       advances shall be free and clear of any security interests, liens,
       encumbrances or rights of others except the security interests of the
       Bank under any security agreements required under this Agreement. Each
       request for an advance shall be accompanied by a

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      copy of the purchase order or invoice for the equipment to be purchased
      with the proceeds of the advance. The amount of each advance shall not
      exceed 80% of the purchase price of such equipment, plus tax and delivery.

2.2   AVAILABILITY PERIOD.  The line of credit is available between the date of 
this Agreement and September 1, 1997 (the "Expiration Date") unless the Borrower
is in default.

2.3   INTEREST RATE.

(a)   The interest rate is the Bank's Reference Rate plus 1.00 percentage point.

2.4   REPAYMENT TERMS.

(a)   The Borrower will pay interest on September 1, 1996, and then monthly
      thereafter until payment in full of any principal outstanding under this
      line of credit.

(b)   The Borrower will repay the principal amount outstanding on the Expiration
      Date in 47 successive equal monthly installments starting October 1, 1997.
      On September 1, 2001, the Borrower will repay the remaining principal
      balance plus any interest then due.

(c)   The Borrower may prepay the loan in full or in part at any time. The
      prepayment will be applied to the most remote installment of principal due
      under this Agreement.

3.    FEES, EXPENSES

3.1   FEES.

(a)   LOAN FEE (FACILITY NO. 1). The Borrower agrees to pay a Three Thousand One
      Hundred Twenty Five Dollar ($3,125) fee due on the date of this Agreement.

(b)   LOAN FEE (FACILITY NO. 2). The Borrower agrees to pay a One Thousand Two
      Hundred Fifty Dollar ($1,250) fee due on the date of this Agreement.

3.2   EXPENSES.

(a)   The Borrower agrees to immediately repay the Bank for expenses that
      include, but are not limited to, filing, recording and search fees,
      appraisal fees, title report fees, and documentation fees.

(b)   The Borrower agrees to reimburse the Bank for any expenses it incurs in
      the preparation of this Agreement and any agreement or instrument required
      by this Agreement. Expenses include, but are not limited to, reasonable
      attorneys' fees, including any allocated costs of the Bank's in-house
      counsel.

(c)   The Borrower agrees to reimburse the Bank for the cost of periodic audits
      and appraisals of the personal property collateral securing this
      Agreement, at such intervals as the Bank may reasonably require. The
      audits and appraisals may be performed by employees of the Bank or by
      independent appraisers.

4.    COLLATERAL

4.1   PERSONAL PROPERTY.  The Borrower's obligations to the Bank under this 
Agreement will be secured by personal property the Borrower now owns or will own
in the future as listed below.  The collateral is further defined in security 
agreement(s) executed by the Borrower.  In addition, all personal property 
collateral securing this Agreement shall also secure all other present and 
future obligations of the Borrower to the Bank (excluding any consumer credit 
covered by the federal Truth in Lending law, unless the Borrower has otherwise 
agreed in writing).  All personal property collateral securing any other present
or future obligations of the Borrower to the Bank shall also secure this 
Agreement.

(a)   Machinery, equipment, and fixtures.

(b)   Inventory.

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(c) Receivables.

(d) Patents, trademarks and other general intangibles.  

5.  DISBURSEMENTS, PAYMENTS AND COSTS

5.1 REQUESTS FOR CREDIT.  Each request for an extension of credit will be made 
in writing in a manner acceptable to the Bank, or by another means acceptable to
the Bank.  

5.2 DISBURSEMENTS AND PAYMENTS.  Each disbursement by the Bank and each payment 
by the Borrower will be:

(a) made at the Bank's branch (or other location) selected by the Bank from time
    to time;

(b) made for the account of the Bank's branch selected by the Bank from time to 
    time;

(c) made in immediately available funds, or such other type of funds selected by
    the Bank;

(d) evidenced by records kept by the Bank.  In addition, the Bank may, at its 
    discretion, require the Borrower to sign one or more promissory notes.  

5.3 TELEPHONE AUTHORIZATION.

(a) The Bank may honor telephone instructions for advances or repayments given
    by any one of the individuals authorized to sign loan agreements on behalf
    of the Borrower, or any other individual designated by any one of such
    authorized signers.

(b) Advances will be deposited in and repayments will be withdrawn from the 
    Borrower's account number 14472-00850, or such other of the Borrower's
    accounts with the Bank as designated in writing by the Borrower.

(c) Bank will provide written confirmation to the Borrower of transactions 
    made based on telephone instructions. The Borrower agrees to notify the Bank
    promptly of any discrepancy between the confirmation and the telephone
    instructions.
    
(d) The Borrower indemnifies and excuses the Bank (including its officers, 
    employees, and agents) from all liability, loss, and costs in connection
    with any act resulting from telephone instructions it reasonably believes
    are made by any individual authorized by the Borrower to give such
    instructions. This indemnity and excuse will survive this Agreement.

5.4 DIRECT DEBIT (PRE-BILLING).

(a) The Borrower agrees that the Bank will debit the Borrower's deposit account 
    number 14472-00850, or such other of the Borrower's accounts with the Bank
    as designated in writing by the Borrower (the "Designated Account") on the
    date each payment of principal and interest and any fees from the Borrower
    becomes due (the "Due Date"). If the Due Date is not a banking day, the
    Designated Account will be debited on the next banking day.

(b) Approximately 10 days prior to each Due Date, the Bank will mail to the 
    Borrower a statement of the amounts that will be due on that Due Date (the
    "Billed Amount"). The calculation will be made on the assumption that no new
    extensions of credit or payments will be made between the date of the
    billing statement and the Due Date, and that there will be no changes in the
    applicable interest rate. 

(c) The Bank will debit the Designated Account for the Billed Amount, regardless
    of the actual amount due on that date (the "Accrued Amount").   

    If the Billed Amount debited to the Designated Account differs from the 
    Accrued Amount, the discrepancy will be treated as follows:

    (i)  If the Billed Amount is less than the Accrued Amount, the Billed Amount
         for the following Due Date will be increased by the amount of the
         discrepancy. The Borrower will not be in default by reason of any such
         discrepancy.

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     (ii)  If the Billed Amount is more than the Accrued Amount, the Billed
           Amount for the following Due Date will be decreased by the amount of
           the discrepancy.

     Regardless of any such discrepancy, interest will continue to accrue based
     on the actual amount of principal outstanding without compounding. The Bank
     will not pay the Borrower interest on any overpayment.

(d)  The Borrower will maintain sufficient funds in the Designated Account to
     cover each debit. If there are insufficient funds in the Designated Account
     on the date the Bank enters any debit authorized by this Agreement, the
     debit will be reversed.

5.5  BANKING DAYS. Unless otherwise provided in this Agreement, a banking day
is a day other than a Saturday or a Sunday on which the Bank is open for
business in California. All payments and disbursements which would be due on a
day which is not a banking day will be due on the next banking day. All payments
received on a day which is not a banking day will be applied to the credit on
the next banking day.

5.6  TAXES. The Borrower will not deduct any taxes from any payments it makes to
the Bank. If any government authority imposes any taxes on any payments made by
the Borrower, the Borrower will pay the taxes and will also pay to the Bank, at
the time interest is paid, any additional amount which the Bank specifies as
necessary to preserve the after-tax yield the Bank would have received if such
taxes had not been imposed. Upon request by the Bank, the Borrower will confirm
that it has paid the taxes by giving the Bank official tax receipts (or
notarized copies) within 30 days after the due date. However, the Borrower will
not pay the Bank's net income taxes.

5.7  ADDITIONAL COSTS. The Borrower will pay the Bank, on demand, for the Bank's
costs or losses arising from any statute or regulation, or any request or
requirement of a regulatory agency which is applicable to all national banks or
a class of all national banks. The costs and losses will be allocated to the
loan in a manner determined by the Bank, using any reasonable method. The costs
include the following:

(a)  any reserve or deposit requirements; and

(b)  any capital requirements relating to the Bank's assets and commitments for
     credit.

5.8  INTEREST CALCULATION. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year and
the actual number of days elapsed. This results in more interest or a higher fee
than if a 365-day year is used.

5.9  INTEREST ON LATE PAYMENTS. At the Bank's sole option in each instance, any
amount not paid when due under this Agreement (including interest) shall bear
interest from the due date at the Bank's Reference Rate plus 2.00 percentage
points. This may result in compounding of interest.

5.10 DEFAULT RATE.  Upon the occurrence and during the continuation of any 
default under this Agreement, advances under this Agreement will at the option
of the Bank bear interest at a rate per annum which is 2.00 percentage point(s)
higher than the rate of interest otherwise provided under this Agreement. This
will not constitute a waiver of any default.

6.   CONDITIONS

The Bank must receive the following items, in form and content acceptable to the
Bank, before it is required to extend any credit to the Borrower under this 
Agreement.

6.1  AUTHORIZATIONS.  Evidence that the execution, delivery and performance by 
the Borrower (and any guarantor) of this Agreement and any instrument or 
agreement required under this Agreement have been duly authorized.

6.2  SECURITY AGREEMENTS. Signed original security agreements, assignments, 
financing statements and fixture filings (together with collateral in which the 
Bank requires a possessory security interest), and deeds of trust which the Bank
requires.

6.3  EVIDENCE OF PRIORITY. Evidence that security interests and liens in favor
of the Bank are valid, enforceable, and prior to all others' rights and
interests, except those the Bank consents to in writing. The Bank

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must receive acceptable beneficiary's statements from the holders of any prior 
liens on the real property collateral. All title documents for motor vehicles 
must show the Bank's interest.

6.4   CONSENT TO REMOVAL.  For any personal property collateral located on real 
property which is subject to a mortgage or deed of trust or which is not owned 
by the Borrower, grantor of the security interest, a Consent to Removal from the
owner of the real property and the holder of any mortgage or deed of trust.

6.5   INSURANCE.  Evidence of insurance coverage, as required in the "Covenants"
section of this Agreement.

6.6   OTHER ITEMS.  Any other items that the Bank reasonably requires.

7.    REPRESENTATIONS AND WARRANTIES

When the Borrower signs this Agreement, and until the Bank is repaid in full, 
the Borrower makes the following representations and warranties.  Each request 
for an extension of credit constitutes a renewed representation.

7.1   ORGANIZATION OF BORROWER.  The Borrower is a corporation duly formed and 
existing under the laws of the state where organized.

7.2   AUTHORIZATION.  This Agreement, and any instrument or agreement required 
hereunder, are within the Borrower's powers, have been duly authorized, and do 
not conflict with any of its organizational papers.

7.3   ENFORCEABLE AGREEMENT.  This Agreement is a legal, valid and binding 
agreement of the Borrower, enforceable against the Borrower in accordance 
with its terms, and any instrument or agreement required hereunder, when
executed and delivered, will be similarly legal, valid, binding and enforceable.

7.4   GOOD STANDING.  In each state in which the Borrower does business, it is 
properly licensed, in good standing, and, where required, in compliance with 
fictitious name statutes.

7.5   NO CONFLICTS.  This Agreement does not conflict with any law, agreement, 
or obligation by which the Borrower is bound.

7.6   FINANCIAL INFORMATION.  All financial and other information that has 
been or will be supplied to the Bank is:

(a)   sufficiently complete to give the Bank accurate knowledge of the 
      Borrower's (and any guarantor's) financial condition.

(b)   in form and content required by the Bank.

(c)   in compliance with all government regulations that apply.

7.7   LAWSUITS.  There is no lawsuit, tax claim or other dispute pending or 
threatened against the Borrower, which, if lost, would impair the Borrower's 
financial condition or ability to repay the loan, except as have been disclosed 
in writing to the Bank.

7.8   COLLATERAL.  All collateral required in this Agreement is owned by the 
grantor of the security interest free of any title defects or any liens or 
interests of others.

7.9   PERMITS, FRANCHISES.  The Borrower possesses all permits, memberships, 
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights and fictitious name rights necessary to enable it to 
conduct the business in which it is now engaged.

7.10  OTHER OBLIGATIONS.  The Borrower is not in default on any obligation for 
borrowed money, any purchase money obligation or any other material lease, 
commitment, contract, instrument or obligation.

7.11  INCOME TAX RETURNS.  The Borrower has no knowledge of any pending 
assessments or adjustments of its income tax for any year.

7.12  NO EVENT OF DEFAULT.  There is no event which is, or with notice or lapse 
of time or both would be, a default under this Agreement.

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7.13  LOCATION OF BORROWER.  The Borrower's place of business (or, if the 
Borrower has more than one place of business, its chief executive office) is 
located at the address listed under the Borrower's signature on this Agreement.

8.    COVENANTS

The Borrower agrees, so long as credit is available under this Agreement and 
until the Bank is repaid in full:

8.1   USE OF PROCEEDS (FACILITY NO. 1).  To use the proceeds of the credit only 
for working capital.

8.2   USE OF PROCEEDS (FACILITY NO. 2).  To use the proceeds of the credit only 
for capital expenditures.

8.3   FINANCIAL INFORMATION.  To provide the following financial information and
statements and such additional information as requested by the Bank from time to
time:

(a)   Within 120 days of the Borrower's fiscal year end, the Borrower's annual
      financial statements. These financial statements must be audited (with an
      unqualified opinion) by a Certified Public Accountant ("CPA") acceptable
      to the Bank.

(b)   Within 45 days of the period's end, the Borrower's quarterly financial
      statements. These financial statements may be Borrower prepared.

(c)   A statement showing an aging of the Borrower's receivables within 45 days 
      after the end of each quarter.

8.4   QUICK RATIO.  To maintain on a consolidated basis a ratio of quick assets 
to current liabilities of at least 2.0:1.0.

"Quick assets" means cash, short-term cash investments, net trade receivables 
and marketable securities not classified as long-term investments.

8.5   TANGIBLE NET WORTH.  To maintain on a consolidated basis tangible net 
worth equal to at least Nine Million Dollars ($9,000,000).

"Tangible net worth" means the gross book value of the Borrower's assets 
(excluding goodwill, patents, trademarks, trade names, organization expense, 
treasury stock , unamortized debt discount and expense, deferred research and 
development costs, deferred marketing expenses, and other like intangibles, and 
monies due from affiliates, officers, directors or shareholders of the Borrower)
less total liabilities, including but not limited to accrued and deferred income
taxes, and any reserves against assets.

8.6   TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO.  To maintain on a 
consolidated basis a ratio of total liabilities to tangible net worth not 
exceeding 0.75:1.0.

"Total liabilities" means the sum of current liabilities, excluding debt 
subordinated to the Borrower's obligations to the Bank in a manner acceptable to
the Bank, using the Bank's standard form.

8.7   PROFITABILITY.  To maintain on a consolidated basis a positive net income 
before taxes and extraordinary items for each annual accounting period.

8.8   OTHER DEBTS.  Not to have outstanding or incur any direct or contingent 
debts or lease obligations (other than those to the Bank), or become liable for 
the debts of others without the Bank's written consent.  This does not prohibit:

(a)   Acquiring goods, supplies, or merchandise on normal trade credit.

(b)   Endorsing negotiable instruments received in the usual course of business.

(c)   Obtaining surety bonds in the usual course of business.

(d)   Additional debts and lease obligations for business purposes which do not
      exceed a total principal amount of Seven Hundred Fifty Thousand Dollars
      ($750,000) outstanding at any one time.

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8.9    OTHER LIENS.  Not to create, assume, or allow any security interest or 
lien (including judicial liens) on property the Borrower now or later owns,
except:

(a)    Deeds of trust and security agreements in favor of the Bank.

(b)    Liens for taxes not yet due.

(c)    Additional liens which secure obligations in a total principal amount not
       exceeding Seven Hundred Fifty Thousand Dollars ($750,000).

8.10   LOANS TO OFFICERS.  Not to make any loans, advances or other extensions 
of credit to any of the Borrower's executives, officers, or directors or
shareholders (or any relatives of any of the foregoing).

8.11   CHANGE OF OWNERSHIP.  Not to cause, permit, or suffer any change, direct 
or indirect, in the Borrower's capital ownership in excess of 55%.

8.12   OUT OF DEBT PERIOD (FACILITY NO. 1).  To repay any advances in full, and 
not to draw any additional advances on its revolving line of credit, for a
period of at least 30 consecutive days in each line-year. "Line-year" means the
period between the date of this Agreement and September 1, 1997, and each
subsequent one-year period (if any).

8.13   NOTICES TO BANK.  To promptly notify the Bank in writing of:

(a)    any lawsuit over Fifty Thousand Dollars ($50,000) against the Borrower 
       (or any guarantor).

(b)    any substantial dispute between the Borrower (or any guarantor) and any 
       government authority.

(c)    any failure to comply with this Agreement.

(d)    any material adverse change in the Borrower's (or any guarantor's) 
       financial condition or operations.

(e)    any change in the Borrower's name, legal structure, place of business, or
       chief executive office if the Borrower has more than one place of 
       business.

8.14   BOOKS AND RECORDS.  To maintain adequate books and records.

8.15   AUDITS.  To allow the Bank and its agents to inspect the Borrower's 
properties and examine, audit and make copies of books and records at any
reasonable time. If any of the Borrower's properties, books or records are in
the possession of a third party, the Borrower authorizes that third party to
permit the Bank or its agents to have access to perform inspections or audits
and to respond to the Bank's requests for information concerning such
properties, books and records.

8.16   COMPLIANCE WITH LAWS.  To comply with the laws (including any fictitious 
name statute), regulations, and orders of any government body with authority 
over the Borrower's business.

8.17   PRESERVATION OF RIGHTS.  To maintain and preserve all rights, privileges,
and franchises the Borrower now has.

8.18   MAINTENANCE OF PROPERTIES.  To make any repairs, renewals, or 
replacements to keep the Borrower's properties in good working condition.

8.19   PROTECTION OR LIENS.  To help the Bank perfect and protect its security 
interests and liens, and reimburse it for related costs it incurs to protect its
security interests and liens.

8.20   COOPERATION.  To take any action requested by the Bank to carry out the 
intent of this Agreement.

8.21   INSURANCE.

(a)    INSURANCE COVERING COLLATERAL.  To maintain all risk property damage 
       insurance policies covering the tangible property comprising the
       collateral. Each insurance policy must be in an amount acceptable to the
       Bank for the full replacement cost of the collateral and include a
       replacement cost endorsement.
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     The insurance must be issued by an insurance company acceptable to the Bank
     and must include a lender's loss payable endorsement in favor of the Bank
     in a form acceptable to the Bank.

(b)  GENERAL BUSINESS INSURANCE. To maintain insurance satisfactory to the Bank
     as to amount, nature and carrier covering property damage (including loss
     of use and occupancy) to any of the Borrower's properties, public
     liability insurance including coverage for contractual liability, product
     liability and workers' compensation, and any other insurance which is usual
     for the Borrower's business.

(c)  EVIDENCE OF INSURANCE. Upon the request of the Bank, to deliver to the Bank
     a copy of each insurance policy, or, if permitted by the Bank, a
     certificate of insurance listing all insurance in force.

8.22 ADDITIONAL NEGATIVE COVENANTS.  Not to, without the Bank's written consent:

(a)  engage in any business activities substantially different from the
     Borrower's present business.

(b)  liquidate or dissolve the Borrower's business.

(c)  enter into any consolidation, merger, pool, joint venture, syndicate, or
     other combination.

(d)  lease, or dispose of all or a substantial part of the Borrower's business 
     or the Borrower's assets.

(e)  acquire or purchase a business or its assets.

(f)  sell or otherwise dispose of any assets for less than fair market value, or
     enter into any sale and leaseback agreement covering any of its fixed or
     capital assets.

9.   HAZARDOUS WASTE INDEMNIFICATION

The Borrower will indemnify and hold harmless the Bank from any loss or
liability directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply whether
the hazardous substance is on, under or about the Borrower's property or
operations or property leased to the Borrower. The indemnity includes but is not
limited to attorneys' fees (including the reasonable estimate of the allocated
cost of in-house counsel and staff). The indemnity extends to the Bank, its
parent, subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys and assigns. For these purposes, the term "hazardous
substances" means any substance which is or becomes designated as "hazardous" or
"toxic" under any federal, state or local law. This indemnity will survive
repayment of the Borrower's obligations to the Bank.

10.  DEFAULT

If any of the following events occur, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice. If an event of default occurs under the
paragraph entitled "Bankruptcy," below, with respect to the Borrower, then the
entire debt outstanding under this Agreement will automatically be due
immediately.

10.1 FAILURE TO PAY.  The Borrower fails to make a payment under this Agreement 
when due.

10.2 LIEN PRIORITY.  The Bank fails to have an enforceable first lien (except 
for any prior liens to which the Bank has consented in writing) on or security 
interest in any property given as security for this loan.

10.3 FALSE INFORMATION. The Borrower has given the Bank false or misleading 
information or representations.

10.4 DEATH.  If the Borrower is a corporation, any principal officer or majority
stockholder dies.

10.5 BANKRUPTCY. The Borrower (or any guarantor) files a bankruptcy petition, a
bankruptcy petition is filed against the Borrower (or any guarantor), or the
Borrower (or any guarantor) makes general assignment for the benefit of
creditors.

10.6 RECEIVERS.  A receiver or similar official is appointed for the Borrower's 
(or any guarantor's) business, or the business is terminated.

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10.7  LAWSUITS.  Any lawsuit or lawsuits are filed on behalf of one or more
trade creditors against the Borrower in an aggregate amount of Fifty Thousand
Dollars ($50,000) or more in excess of any insurance coverage.

10.8  JUDGMENTS. Any judgments or arbitration awards are entered against the 
Borrower (or any guarantor), or the Borrower (or any guarantor) enters into any 
settlement agreements with respect to any litigation or arbitration, in an 
aggregate amount of Fifty Thousand Dollars ($50,000) or more in excess of 
any insurance coverage.

10.9  GOVERNMENT ACTION.  Any government authority takes action that the Bank 
believes materially adversely affects the Borrower's (or any guarantor's) 
financial condition or ability to repay.

10.10 MATERIAL ADVERSE CHANGE.  A material adverse change occurs in the 
Borrower's (or any guarantor's) financial condition, properties or prospects, or
ability to repay the loan.  

10.11 CROSS-DEFAULT.  Any default occurs under any agreement in connection with 
any credit the Borrower (or any guarantor) has obtained from anyone else or 
which the Borrower (or any guarantor) has guaranteed.

10.12 DEFAULT UNDER RELATED DOCUMENTS.  Any guaranty, subordination agreement, 
security agreement, deed of trust, or other document required by this Agreement 
is violated or no longer in effect.

10.13 OTHER BANK AGREEMENTS.  The Borrower (or any guarantor) fails to meet the 
conditions of, or fails to perform any obligation under any other agreement the 
Borrower (or any guarantor) has with the Bank or any affiliate of the Bank.

10.14 OTHER BREACH UNDER AGREEMENT.  The Borrower fails to meet the conditions 
of, or fails to perform any obligation under, any term of this Agreement not 
specifically referred to in this Article.

11.   ENFORCING THIS AGREEMENT; MISCELLANEOUS

11.1  GAAP.  Except as otherwise stated in this Agreement, all financial 
information provided to the Bank and all financial covenants will be made under 
generally accepted accounting principles, consistently applied.

11.2  CALIFORNIA LAW.  This Agreement is governed by California law.

11.3  SUCCESSORS AND ASSIGNS.  This Agreement is binding on the Borrower's and 
the Bank's successors and assignees. The Borrower agrees that it may not assign 
this Agreement without the Bank's prior consent.  The Bank may sell 
participations in or assign this loan, and may exchange financial information 
about the Borrower with actual or potential participants or assignees.  If a 
participation is sold or the loan is assigned, the purchaser will have the right
of set-off against the Borrower.

11.4  ARBITRATION.

(a)   This paragraph concerns the resolution of any controversies or claims
      between the Borrower and the Bank, including but not limited to those that
      arise from:

      (i)   This Agreement (including any renewals, extensions or modifications
            of this Agreement);

      (ii)  Any document, agreement or procedure related to or delivered in 
            connection with this Agreement;

      (iii) Any violation of this Agreement; or

      (iv)  Any claims for damages resulting from any business conducted between
            the Borrower and the Bank, including claims for injury to persons,
            property or business interests (torts).

(b)   At the request of the Borrower or the Bank, any such controversies or 
      claims will be settled by arbitration in accordance with the United States
      Arbitration Act. The United States Arbitration Act will apply even though
      this Agreement provides that it is governed by California law.

                                      -9-
<PAGE>
 
(c)    Arbitration proceedings will be administered by the American Arbitration
       Association and will be subject to its commercial rules of arbitration.

(d)    For purposes of the application of the statute of limitations, the filing
       of an arbitration pursuant to this paragraph is the equivalent of the
       filing of a lawsuit, and any claim or controversy which may be
       arbitrated under this paragraph is subject to any applicable statute of
       limitations. The arbitrators will have the authority to decide whether
       any such claim or controversy is barred by the statute of limitations
       and, if so, to dismiss the arbitration on that basis.

(e)    If there is a dispute as to whether an issue is arbitrable, the 
       arbitrators will have the authority to resolve any such dispute.  

(f)    The decision that results from an arbitration proceeding may be submitted
       to any authorized court of law to be confirmed and enforced.  

(g)    The procedure described above will not apply if the controversy or claim,
       at the time of the proposed submission to arbitration, arises from or
       relates to an obligation to the Bank secured by real property located in
       California. In this case, both the Borrower and the Bank must consent to
       submission of the claim or controversy to arbitration. If both parties do
       not consent to arbitration, the controversy or claim will be settled as
       follows:

       (i)    The Borrower and the Bank will designate a referee (or a panel of 
              referees) selected under the auspices of the American Arbitration
              Association in the same manner as arbitrators are selected in
              Association-sponsored proceedings.

       (ii)   The designated referee (or the panel of referees) will be 
              appointed by a court as provided in California Code of Civil
              Procedure Section 638 and the following related sections;

       (iii)  The referee (or the presiding referee of the panel) will be an 
              active attorney or a retired judge; and

       (iv)   The award that results from the decision of the referee (or the 
              panel) will be entered as a judgment in the court that appointed
              the referee, in accordance with the provisions of California Code
              of Civil Procedure Sections 644 and 645.

(h)    This provision does not limit the right of the Borrower or the Bank to:

       (i)    exercise self-help remedies such as setoff;

       (ii)   foreclose against or sell any real or personal property 
              collateral; or

       (iii)  act in a court of law, before, during or after the arbitration 
              proceeding to obtain:

              (A)    an interim remedy; and/or

              (B)    additional or supplementary remedies.

(i)    The pursuit of or a successful action for interim, additional or 
       supplementary remedies, or the filing of a court action, does not
       constitute a waiver of the right of the Borrower or the Bank, including
       the suing party, to submit the controversy or claim to arbitration if the
       other party contests the lawsuit. However, if the controversy or claim
       arises from or relates to an obligation to the Bank which is secured by
       real property located in California at the time of the proposed
       submission to arbitration, this right is limited according to the
       provision above requiring the consent of both the Borrower and the Bank
       to seek resolution through arbitration.

(j)    If the Bank forecloses against any real property securing this Agreement,
       the Bank has the option to exercise the power of sale under the deed of
       trust or mortgage, or to proceed by judicial foreclosure.

11.5   SEVERABILITY; WAIVERS.  If any part of this Agreement is not enforceable,
       the rest of the Agreement may be enforced. The Bank retains all rights,
       even if it makes a loan after default. If the Bank waives a default, it
       may enforce a later default. Any consent or waiver under this Agreement
       must be in writing.

                                     -10-

<PAGE>
 
11.6   ADMINISTRATION COSTS.  The Borrower shall pay the Bank for all reasonable
costs incurred by the Bank in connection with administering this Agreement.

11.7   ATTORNEY'S FEES.  The Borrower shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and including
any amendment, waiver, "workout" or restructuring under this Agreement. In the
event of a lawsuit or arbitration proceeding, the prevailing party is entitled
to recover costs and reasonable attorney's fees incurred in connection with the
lawsuit or arbitration proceeding, as determined by the court or arbitrator. As
used in this paragraph, "attorneys' fees" includes the allocated costs of in-
house counsel.

11.8   ONE AGREEMENT.  This Agreement and any related security or other 
agreements required by this Agreement, collectively:

(a)    represent the sum of the understandings and agreements between the Bank 
       and the Borrower concerning this credit; and

(b)    replace any prior oral or written agreements between the Bank and the    
       Borrower concerning this credit; and

(c)    are intended by the Bank and the Borrower as the final, complete and     
       exclusive statement of the terms agreed to by them.

In the event of any conflict between this Agreement and any other agreements 
required by this Agreement, this Agreement will prevail.

11.9   NOTICES.  All notices required under this Agreement shall be personally 
delivered or sent by first class mail, postage prepaid, to the addresses on the 
signature page of this Agreement, or to such other addresses as the Bank and the
Borrower may specify from time to time in writing.

11.10  HEADINGS.  Article and paragraph headings are for reference only and 
shall not affect the interpretation or meaning of any provisions of this 
Agreement.

11.11  COUNTERPARTS.  This Agreement may be executed in as many counterparts as 
necessary or convenient, and by the different parties on separate counterparts 
each of which, when so executed, shall be deemed an original but all such 
counterparts shall constitute but one and the same agreement.

11.12  PRIOR AGREEMENT SUPERSEDED.  This Agreement supersedes the Business Loan 
Agreement entered into as of October 26, 1995, between the Bank and the 
Borrower, and any credit outstanding thereunder shall be deemed to be 
outstanding under this Agreement.
                                     -11-
<PAGE>
 
This Agreement is executed as of the date stated at the top of the first page.

[LOGO OF BANK OF AMERICA]
BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION           AML COMMUNICATIONS, INC.



/s/ Derek C. Hansen                              /s/ William E. Sheridan
--------------------------------------           -------------------------------
By:    Derek C. Hansen                           By:    William E. Sheridan
Title: Assistant Vice President                  Title: Chief Financial Officer



/s/ Edward W. Summers
--------------------------------------
By:    Edward W. Summers
Title: Vice President



ADDRESS WHERE NOTICES TO THE BANK                ADDRESS WHERE NOTICES TO THE 
ARE TO BE SENT:                                  BORROWER ARE TO BE SENT:

Ventura Regional Commercial Banking Office
Office #1447
1130 S. Victoria Avenue                          1000 Avenida Acaso
Ventura, CA 93003                                Camarillo, CA 93012


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