EXHIBIT 10.11

                                 LOAN AGREEMENT




     THIS LOAN AGREEMENT  ("Agreement") is made and entered into as of March 25,
1996 by and  between  ILC  Technology,  Inc.,  ("Borrower")  and UNION  BANK,  a
California banking corporation ("Bank").
 
SECTION 1.  THE LOAN 

1.1.1 THE  REVOLVING  LOAN.

     Bank will loan to  Borrower an amount not to exceed  Four  Million  Dollars
($4,000,000)  outstanding  in the  aggregate  at any one  time  (the  "Revolving
Loan").  Borrower may borrow,  repay and  reborrow all or part of the  Revolving
Loan in accordance  with the terms of the Revolving  Note. All borrowings of the
Revolving  Loan must be made  before  March 31,  1998 at which  time all  unpaid
principal  and  interest of the  Revolving  Loan shall be due and  payable.  The
Revolving Loan shall be evidenced by a promissory note (the "Revolving Note") on
the  standard  form used by Bank for  commercial  loans.  Bank shall  enter each
amount borrowed and repaid in Bank's records and such entries shall be deemed to
be the amount of the Revolving  Loan  outstanding.  Omission of Bank to make any
such entries  shall not  discharge  Borrower of its  obligation to repay in full
with interest all amounts borrowed.

1.1.2 NON-REVOLVING  EQUIPMENT LOAN.

     Bank will loan to  Borrower an amount not to exceed Two Million Two Hundred
Thousand Dollars ($2,2000,000) outstanding in the aggregate at any one time (the
"Non-Revolving  Loan").  All borrowings of the  Non-Revolving  Loan must be made
before March 31, 1997 at which time all unpaid principal under the Non-Revolving
Loan shall be converted to a fully  amortizing  loan as set forth in  subsection
1.1.3.  In the event of a prepayment  of  principal  after such  conversion  and
payment  of any  resulting  fees,  any  repaid  amounts  shall be applied to the
scheduled  principal  payments  in the  reverse  order  of their  maturity.  The
Non-Revolving  Loan shall be evidenced by a promissory note (the  "Non-Revolving
Note") on the standard form used by Bank for commercial  loans. Bank shall enter
each amount  borrowed  and repaid in Bank's  records and such  entries  shall be
deemed to be the amount of the Non-Revolving Loan outstanding.  Omission of Bank
to make any such entries shall not discharge Borrower of its obligation to repay
in full with interest all amounts borrowed.

1.1.3 THE TERM LOAN.

     Solely to repay the Non-Revolving  Loan, Bank will loan to Borrower the sum
outstanding at the maturity of the Non-Revolving  Loan in one disbursement on or
before  March 31,  1997 (the  "Term  Loan").  In the  event of a  prepayment  of
principal  and  payment of any  resulting  fees,  any prepaid  amounts  shall be
applied  to the  scheduled  principal  payments  in the  reverse  order of their
maturity.  The Term Loan  shall be  evidenced  by a  promissory  note (the "Term
Note") on the standard form used by Bank for commerical loans.


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1.1.4 OTHER LOANS.

     Bank has extended and will continue to extend, subject to the terms of this
Agreement and the terms of the respective Note,  certain  additional  facilities
each evidenced by a Note described as follows:

     A.   Obligation  #008000001 dated 2/2/96 in the orignal principal amount of
          $1,252,800 with a present unpaid principal balance of $1,200,600.

     B.   Obligation #00270003 dated 8/23/93 in the original principal amount of
          $5,000,000 with a present unpaid principal balance of $3,562,000.

     C.   Obligation  #0000000003 dated 6/24/94 in the original principal amount
          of $360,000 with a present unpaid principal balance of $45,000.

     D.   Obligation  #0001000001 dated 1/6/95 in the original  principal amount
          of $1,464,000 with a present unpaid principal balance of $610,000.
    
1.2 TERMINOLOGY.

     As used herein the word "Loan"  shall  mean,  collectively,  all the credit
facilities described above.

     As used herein the word "Note" shall mean, collectively, all the promissory
notes described above.

     As used  herein,  the  words  "Loan  Documents"  shall  mean all  documents
executed in connection with this Agreement. 

1.3 BORROWING BASE.

     Notwithstanding  any other provisions of this Agreement,  Bank shall not be
obligated  to  advance  funds  under  the  Revolving  Loan,  if at any  time the
aggregate of Borrower's  obligations to Bank thereunder  shall exceed the sum of
seventy-five  percent  (75%) of  Borrower's  Eligible  Accounts.  If at any time
Borrower's  obligations  to Bank  under the above  facilities  exceed the sum so
permitted, Borrower shall immediately repay to Bank such excess.

1.3.1 ELIGIBLE ACCOUNTS.

     The term  "Accounts"  means all presently  existing and  hereafter  arising
accounts  receivable,  contract  rights,  chattel paper,  and all other forms of
obligations owing to Borrower,  payable in United States Dollars, arising out of
the sale or lease of goods, or the rendition of services by Borrower, whether or
not earned by  performance,  and any and all credit  insurance,  guaranties  and
other security therefor,  as well as all merchandise returned to or reclaimed by
Borrower and Borrower's books and records relating to any of the foregoing.  The
term "Eligible Accounts" means those Accounts, net of finance charges, which are
due and payable within Ninety (90) days, or less,  from the date of the invoice,
have been validly  assigned to Bank and strictly  comply with all of  Borrower's
warranties and  representations to Bank, but Eligible Accounts shall not include
the following:

     (a)  Any Account  with  respect to which the account  debtor is an officer,
          shareholder, director, employee or agent of Borrower;

     (b)  Any Account with  respect to which the account  debtor is a subsidiary
          of, related to, or affiliated or has common officers or directors with
          Borrower;


     (c)  Any Account  relating to goods placed on consignment,  guaranteed sale
          or other terms by reason of which the  payment by the  account  debtor
          may be conditional;


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     (d)  Any Account with respect to which the account debtor is not a resident
          of the United States or Canada;

     (e)  Any Account  with  respect to which the  account  debtor is the United
          States or any  department,  agency or  instrumentality  of the  United
          States;

     (f)  Any Account with respect to which  Borrower is or may become liable to
          the account debtor for goods sold or services  rendered by the account
          debtor to Borrower;

     (g)  Any  Account  with  respect  to which  there is  asserted  a  defense,
          counterclaim,  discount or setoff,  whether well-founded or otherwise,
          except for those  discounts,  allowances  and  returns  arising in the
          ordinary course of Borrower's business;

     (h)  Any  Account  with  respect  to  which  the  account   debtor  becomes
          insolvent,  fails  to pay its  debts  as they  mature  or goes  out of
          business or is owed by an account  debtor which has become the subject
          of a proceeding  under any provision of the Untied  States  Bankruptcy
          Code, as amended,  or under any other  bankruptcy  or insolvency  law,
          including,  but  not  limited  to,  assignments  for  the  benefit  of
          creditors, formal or informal moratoriums,  compositions or extensions
          with all or substantially all of its creditors;

     (i)  Any  Account  owed  by  any  account  debtor  with  respect  to  which
          twenty-five  percent (25%) or more of the  aggregate  dollar amount of
          its Accounts are not paid within ninety (90) days from the due date of
          the invoice;

     (j)  That portion of the Accounts owed by any single  account  debtor which
          exceeds twenty percent (20%) of all of the Accounts; and

1.4 PURPOSE OF LOAN. 

     The  proceeds  of the  Revolving  Loan  shall be used for  general  working
capital purposes and the proceeds of the  Non-Revolving  Loan shall be used only
for Borrower's Capital Equipment Requirements, and the proceeds of the Term Loan
shall be used only for the repayment of the Non-Revolving Loan.

1.5 INTEREST.

     (A)  Interest on the usage of the Revolving  Loan shall be payable  monthly
          to  March  31,  1998 at  which  time  the  principal  shall be due and
          payable.  Interest  on this loan shall be payable at Bank's  Reference
          Rate or at the Borrower's  option a fixed rate of libor plus 200 basis
          points.  Twenty  four hour  notice  shall be given if the  fixed  rate
          option is taken.

     (B)  Interest on the usage of the Revolving Equipment Loan shall be payable
          monthly to March 31,  1998 at which  time the  principal  amount  then
          outstanding will equally amortize over a 24 month period.  Interest on
          this  loan  shall  be  payable  at  Bank's  Reference  Rate  or at the
          Borrower's option a fixed rate of libor plus 200 basis points.  Twenty
          four hour notice shall be given if the fixed rate option is taken.



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1.6 BALANCES. 

     Borrower shall maintain its major  depository  accounts with Bank until the
Note and all sums payable pursuant to this Agreement have been paid in full.

1.7 DISBURSEMENT. 

     Upon  execution  hereof,  Bank shall  disburse  the proceeds of the Loan as
provided in Bank's standard form Authorization executed by Borrower.

1.8 SECURITY. 

Prior to any disbursement of the Loan, Borrower, ILC
Technology, Inc. and Guarantors, Converter Power, Inc. and Precision Lamp, Inc.,
shall  have  executed a  security  agreement,  on Bank's  standard  form,  and a
financing statement, suitable for filing in the office of the Secretary of State
of the State of California and any other state  designated by Bank,  granting to
Bank a first  priority  security  interest in such of Borrower's  property as is
described in said security  agreement.  Exceptions to Bank's first priority,  if
any, are permitted only as otherwise provided in this Agreement.

1.9 CONTROLLING DOCUMENT. 

     In the event of any  inconsistency  between the terms of this Agreement and
any Note or any of the  other  Loan  Documents,  the terms of such Note or other
Loan Documents will prevail over the terms of this Agreement.


SECTION 2. CONDITIONS PRECEDENT

     Bank shall not be  obligated to disburse all or any portion of the proceeds
of the Loan unless at or prior to the time for the making of such  disbursement,
the following conditions have been fulfilled to Bank's satisfaction.

2.1 COMPLIANCE.

     Borrower  shall have  performed  and complied  with all terms and condition
required by this Agreement to be performed or complied with by it prior to or at
the  date of the  making  of such  disbursement  and  shall  have  executed  and
delivered to Bank the Note and other documents deemed necessary by Bank.

2.2 GUARANTIES.

     Converter   Power,   Inc.,   Precision   Lamp,   Inc.  and  Q-ARC   Limited
("Guarantors")  shall have  executed  and  delivered  to Bank  their  respective
continuing  guaranties in form and amount  satisfactory to Bank.  Borrower shall
cause each Guarantor to submit to Bank not later than Ninety (90) days after the
end  of  each  fiscal  year  such  Guarantor's   financial   statement  in  form
satisfactory to Bank.

2.3 BORROWING RESOLUTION. 

     Borrower shall have provided Bank with certified copies of resolutions duly
adopted by the Board of Directors of Borrower,  authorizing  this  Agreement and
the Loan Documents.  Such  resolutions  shall also designate the persons who are
authorized to act on Borrower's  behalf in connection with this Agreement and to
do the things required of Borrower pursuant to this Agreement.

2.4 CONTINUING COMPLIANCE. 

     At the time any  disbursement  is to be made,  there  shall  not  exist any
event,  condition or act which  constitutes  an event of default under Section 6
hereof or any event,  condition or act which with notice,  lapse of time or both
would  constitute  such event of  default;  nor shall  there be any such  event,
condition, or act immediately after the disbursement were it to be made.




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SECTION 3.  REPRESENTATIONS AND WARRANTIES

Borrower  represents and warrants that: 

3.1 BUSINESS ACTIVITY. 

     The  principal  business  of  Borrower  is  Manufacturer  of  Light  Source
Products.

3.2 AFFILIATES AND SUBSIDIARIES.

     Borrower's  affiliates and  subsidiaries  (those entities in which Borrower
has either a controlling  interest or at least 25% ownership interest) and their
addresses,  and the names of Borrower's principal shareholders,  are as provided
on a schedule delivered to Bank on or before the date of this Agreement.

3.3 AUTHORITY TO BORROW. 

     The execution, delivery and performance of this Agreement, the Note and all
other  agreements and  instruments  required by Bank in connection with the Loan
are not in  contravention  of any of the terms of any  indenture,  agreement  or
undertaking  to which  Borrower is a party or by which it or any of its property
is bound or affected.

3.4 FINANCIAL STATEMENTS. 

     The  financial  statements of Borrower,  including  both a balance sheet at
September 30, 1995, together with supporting schedules,  and an income statement
for the Twelve (12) months  ended  September  30,  1995,  have  heretofore  been
furnished to Bank, and are true and complete and fairly  represent the financial
condition of Borrower  during the period covered  thereby.  Since  September 30,
1995,  there has been no material  adverse change in the financial  condition or
operations of Borrower.

3.5 TITLE. 

     Except for assets which may have been disposed of in the ordinary course of
business,  Borrower  has  good  and  marketable  title  to all  of the  property
reflected  in its  financial  statements  delivered  to Bank and to all property
acquired by Borrower since the date of said financial statements, free and clear
of all liens,  encumbrances,  security interests and adverse claims except those
specifically referred to in said financial statements.

3.6 LITIGATION. 

     There is no litigation or proceeding pending or threatened against Borrower
or any of its  property  which is  reasonably  likely  to affect  the  financial
condition,  property or business of Borrower in a materially  adverse  manner or
result in liability in excess of Borrower's insurance coverage.

3.7 DEFAULT. 

     Borrower  is not  now in  default  in the  payment  of any of its  material
obligations,  and there exists no event,  condition or act which  constitutes an
event of default  under  Section 6 hereof and no  condition,  event or act which
with notice or lapse of time, or both, would constitute an event of default.



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3.8 COMPLIANCE WITH LAWS. 

     Borrower is not in violation  with respect to any applicable  laws,  rules,
ordinances or regulations  which  materially  affect the operations or financial
condition of Borrower.

3.9 CONTINUING REPRESENTATIONS. 

     These representations shall be considered to have been made again at and as
of the date of each disbursement of the Loan and shall be true and correct as of
such date or dates.


SECTION  4.  AFFIRMATIVE COVENANTS

     Until the Note and all sums payable pursuant to this Agreement or any other
of the Loan Documents have been paid in full,  unless Bank waives  compliance in
writing, Borrower agrees that:

4.1 USE OF PROCEEDS. 

     Borrower  will use the proceeds of the Loan only as provided in  subsection
1.4 above.

4.2 PAYMENT OF OBLIGATIONS. 

     Borrower will pay and discharge  promptly all taxes,  assessments and other
governmental  charges and claims levied or imposed upon it or its  property,  or
any part thereof, provided,  however, that Borrower shall have the right in good
faith to contest any such taxes, assessments, charges or claims and, pending the
outcome  of such  contest,  to delay or refuse  payment  thereof  provided  that
adequately  funded  reserves are established by it to pay and discharge any such
taxes, assessments, charges and claims.

4.3 MAINTENANCE OF EXISTENCE. 

     Borrower  will  maintain  and  preserve  its  existence  and assets and all
rights,  franchises,  licenses and other authority  necessary for the conduct of
its  business  and will  maintain  and  preserve  its  property,  equipment  and
facilities in good order,  condition and repair.  Bank may, at reasonable times,
visit and inspect any of the properties of Borrower.

4.4 RECORDS. 

     Borrower will keep and maintain  full and accurate  accounts and records of
its operations  according to generally accepted  accounting  principles and will
permit Bank to have access thereto, to make examination and photocopies thereof,
and to make audits during regular business hours. Costs for such audits shall be
paid by Borrower.


4.5 INFORMATION FURNISHED.  

Borrower will furnish to Bank: 

     (a)  Within  Forty-Five  (45) days after the close of each fiscal  quarter,
          except  for the final  quarter  of each  fiscal  year,  its  unaudited
          balance  sheet as of the close of such fiscal  quarter,  its unaudited
          income and expense  statement with supportive  schedules and statement
          of retained  earnings for that fiscal quarter,  prepared in accordance
          with generally accepted accounting principles:

     (b)  Within Ninety (90) days after the close of each fiscal year, a copy of
          its  statement of financial  condition  including at least its balance
          


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          sheet as of the close of such  fiscal  year,  its income  and  expense
          statement  and  retained  earnings  statement  for such  fiscal  year,
          examined and  prepared on an audited  basis by  independent  certified
          public accountants selected by Borrower and reasonably satisfactory to
          Bank, in accordance  with  generally  accepted  accounting  principles
          applied on a basis  consistent  with that of the previous year; 

     (c)  As soon as  available,  but in any event within Ninety (90) days after
          the close of each fiscal year of  Borrower,  projections  for the next
          succeeding  fiscal  year  of  corresponding  cash  flow  statement  by
          Borrower and acceptable to Bank;

     (d)  Such other  financialstatements and information as Bank may reasonably
          request from time to time;

     (e)  In connection  with each financial  statement  provided  hereunder,  a
          statement executed by Chief Financial Officer of Borrower,  certifying
          that no default has  occurred and no event exists which with notice or
          the lapse of time, or both, would result in a default hereunder;

     (f)  In connection with each fiscal year-end statement required  hereunder,
          any management letter of Borrower's certified public accountants;

     (g)  Within Forty-Five (45) days after each fiscal quarter, a certification
          of compliance  with all covenants  under this  Agreement,  executed by
          Borrower's chief financial officer or other duly authorized officer of
          Borrower, in form acceptable to Bank;

     (h)  Prompt  written  notice to Bank of all events of default  under any of
          the terms or provisions of this  Agreement or of any other  agreement,
          contract,  document or instrument  entered, or to be entered into with
          Bank; and of any litigation  which, if decided  adversely to Borrower,
          would  have  a  material   adverse  effect  on  Borrower's   financial
          condition; and of any other matter which has resulted in, or is likely
          to result in, a material adverse change in its financial  condition or
          operations; and

     (i)  Prior written notice to Bank of any changes in Borrower's officers and
          other senior  management;  Borrower's name; and location of Borrower's
          assets, principal place of business or chief executive office; and

     (j)  Within  Forty-Five  (45) days after  each  fiscal  quarter,  a copy of
          Borrower's accounts receivable aging.

     (k)  Within  Thirty  (30)  days  after  each  calendar  month end a copy of
          Borrower's  certificate  of compliance  with  borrowing base described
          above,  executed by Borrower's  Chief Financial  Officer or other duly
          authorized  officer of Borrower,  in form  acceptable  to Bank,  which
          certificate shall accurately report Borrower's  account receivable and
          eligible accounts.

4.6 CURRENT RATIO. 

     Borrower  will at all times  maintain a ratio of current  assets to current
liabilities  of at least  1.50 : 1.0,  as such terms are  defined  by  generally
accepted accounting principles.




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4.7 TANGIBLE NET WORTH. 

     Maintain a Tangible Net Worth of not less than Twenty Seven Million Dollars
($27,000,000) plus 75% of quarterly net profits after taxes (calculated  without
giving effect to net losses and inclusive of extraordinary gains) beginning with
the quarter to end March 31, 1996 plus the  proceeds of all sales by Borrower of
its stock.  "Tangible Net Worth" means the difference between (a) the gross book
value  of the  assets  of  Borrower,  and (b) the sum of (i) the  amount  of all
intangibles  such  as  goodwill,  patents,  trademarks,  organization  expenses,
treasury stock, unamortized debt discount and expense and deferred charges, (ii)
the amount of  reserves  established  by  Borrower  for  anticipated  losses and
expenses,  and (iii) the amount of all liabilities and indebtedness of Borrower,
including accrued but deferred income taxes.

4.8 DEBT TO TANGIBLE NET WORTH. 

     Borrower  will at all  times  maintain  a ratio  of  total  liabilities  to
tangible  net worth of not greater  than 1:5 : 1.0.  "Tangible  Net Worth" shall
mean net worth decreased by patents, licenses, trademarks, trade names, goodwill
and other similar intangible assets, organizational expenses, security deposits,
prepaid costs and expenses and monies due from affiliates  (including  officers,
shareholders and directors).

4.9 PROFITABILITY. 

     Borrower will maintain a net profit,  after  provision for income taxes, of
any positive amount for any two consecutive fiscal quarters,  as reported at the
end of each such fiscal quarter,  and maintain a net profit, after provision for
income taxes for its fiscal year end.

4.10 CASH FLOW COVERAGE. 

     Maintain for each Measurement  Period,  Cash Flow Coverage of not less than
One Hundred Seventy Five Percent  (175%),  as measured at the end of each fiscal
quarter (each such date being a "Measurement date").  "Measurement Period" means
the  immediately  preceding  twelve month period  ending on a given  Measurement
Date.  "Cash Flow  Coverage" is a fraction  stated as percentage and computed as
the quotient of (i)  Borrower's  net profit after taxes for a given  Measurement
Period,  exclusive of  nonrecurring  income and  increased by  depreciation  and
amortization  and other non-cash  expenditures  (taken in accordance  with GAAP)
divided  by (ii) the  aggregate  amount  of all  principal,  interest  (and also
including  amounts coming due in respect of leases)  payable by Borrower in such
Measurement Period.

4.11 INSURANCE. 

     Borrower will keep all of its insurable property,  real, personal or mixed,
insured by companies and in amounts approved by Bank against fire and such other
risks, and in such amounts, as is customarily  obtained by companies  conducting
similar business with respect to like properties.  Borrower will furnish to Bank
statements of its insurance coverage,  will promptly furnish other or additional
insurance  deemed  necessary by and upon request of Bank to the extent that such
insurance  may be  available  and  hereby  assigns  to  Bank,  as  security  for
Borrower's obligations to Bank, the proceeds of any such insurance. Prior to any
disbursement of the Loan, Bank will be named loss payee on all policies insuring
collateral. Borrower will maintain adequate worker's







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compensation  insurance and adequate  insurance  against liability for damage to
persons or property.  All policies  shall require at least ten (10 days' written
notice to Bank before any policy may be altered or cancelled.

4.12 ADDITIONAL REQUIREMENTS. 

     Borrower will promptly,  upon demand by Bank,  take such further action and
execute all such  additional  documents and  instruments in connection with this
Agreement as Bank in its reasonable  discretion  deems  necessary,  and promptly
supply  Bank with such  other  information  concerning  its  affairs as Bank may
request from time to time.

4.13 LITIGATION AND ATTORNEYS' FEES. 

     Borrower will pay promptly to Bank upon demand,  reasonable attorneys' fees
(including but not limited to the reasonable estimate of the allocated costs and
expenses of  in-house  legal  counsel  and legal  staff) and all costs and other
expenses paid or incurred by Bank in collecting,  modifying or compromising  the
Loan or in enforcing or exercising its rights or remedies  created by, connected
with or provided for in this Agreement or any of the Loan Documents,  whether or
not an arbitration,  judicial action or other  proceeding is commenced.  If such
proceeding  is  commenced,  only  the  prevailing  party  shall be  entitled  to
attorneys' fees and court costs.


4.14 BANK EXPENSES. 

     Borrower  will pay or  reimburse  Bank  for all  costs,  expenses  and fees
incurred by Bank in preparing and  documenting  this Agreement and the Loan, and
all amendment and modifications thereof, including but not limited to all filing
and  recording  fees,  costs  of  appraisals,  insurance  and  attorneys'  fees,
including  the  reasonable  estimate  of the  allocated  costs and  expenses  of
in-house legal counsel and legal staff.

4.15 REPORTS UNDER PENSION PLANS. 

     Borrower  will furnish to Bank, as soon as possible and in any event within
15 days after  Borrower  knows or has reason to know that any event or condition
with  respect to any defined  benefit  pension  plans of Borrower  described  in
Section 3 above has occurred,  a statement of an authorized  officer of Borrower
describing  such event or  condition  and the  action,  if any,  which  Borrower
proposes to take with respect thereto.


SECTION 5.  NEGATIVE COVENANTS

     Until the Note and all other sums payable pursuant to this Agreement or any
other  of the  Loan  Documents  have  been  paid in  full,  unless  Bank  waives
compliance in writing, Borrower agrees that:

5.1 ENCUMBRANCES AND LIENS. 

     Except for those already disclosed on its fiscal year end 10/1/94 financial
statement,  Borrower  will not create,  assume or suffer to exist any  mortgage,
pledge,  security  interest,  encumbrance,  or lien  (other  than for  taxes not
delinquent  and for taxes and other  items  being  contested  in good  faith) on
property of any kind,  whether real,  personal or mixed,  now owned or hereafter
acquired,  or upon the income or profits thereof,  except to Bank and except for
minor encumbrances and easements on real property which do not affect its market
value, and except for existing liens on Borrower's  personal property and future
purchase  money  security  interests  encumbering  only  the  personal  property
purchased.




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5.2 BORROWINGS. 

     Borrower  will  not  sell,  discount  or  otherwise  transfer  any  account
receivable or any note, draft or other evidence of indebtedness,  except to Bank
or except to a financial  institution  at face value for  deposit or  collection
purposes  only and  without  any fee other  than fees  normally  charged  by the
financial  institution  for deposit or  collection  services.  Borrower will not
borrow any money,  become  contingently  liable to borrow  money,  nor enter any
agreement to directly or indirectly  obtain borrowed  money,  except pursuant to
agreements made with Bank.

5.3 SALE OF ASSETS, LIQUIDATION OR MERGER. 

     Borrower   will  neither   liquidate   nor  dissolve  nor  enter  into  any
consolidation,  merger, partnership or other combinations, nor convey, nor sell,
nor lease all or the greater  part of its assets or  business,  nor  purchase or
lease all or the greater  part of the assets or  business  of  another,  without
prior written consent from Bank.

5.4 LOANS, ADVANCES AND GUARANTIES. 

     Borrower will not,  except in the ordinary  course of business as currently
conducted,  make any loans or advances, become a guarantor or surety, pledge its
credit or properties in any manner or extend credit.

5.5 INVESTMENTS. 

     Borrower  will not purchase the debt or equity of another  person or entity
except for savings  accounts and  certificates  of deposit of Bank,  direct U.S.
Government  obligations and commercial paper issued by corporations with the top
ratings of Moody's or Standard & Poor's, provided all such permitted investments
shall mature within one year of purchase.

5.6 PAYMENT OF DIVIDENDS. 

     Borrower  will not  declare  or pay any  dividends,  other  than a dividend
payable in its own common  Stock,  or authorize  or make any other  distribution
with respect to any of its stock now or hereafter outstanding.

5.7 RETIREMENT OF STOCK. 

     Borrower  will not  acquire  or retire any share of its  capital  stock for
value.


SECTION 6.  EVENTS OF DEFAULT

     The occurrence of any of the following  events  ("Events of Default") shall
terminate  any  obligation  on the part of Bank to make or continue the Loan and
automatically,  unless otherwise provided under the Note, shall make all sums of
interest and principal  and any other  amounts owing under the Loan  immediately
due and payable,  without notice of default,  presentment or demand for payment,
protest or notice of nonpayment or dishonor, or any other notices or demands:

6.1  Borrower shall default in the due and punctual  payment of the principal of
     or the interest on the Note or any of the other Loan Documents;  or 6.2 Any
     default shall occur under the Note; or

6.2  Any default shall occur under the Note; or




                                  -10-


<PAGE>



6.3  Borrower shall default in the due performance or observance of any covenant
     or condition of the Loan Documents;

6.4  Any guaranty or  subordination  agreementrequired  hereunder is breached or
     becomes  ineffective,  or any  Guarantor or  subordinating  creditor  dies,
     disavows or attempts to revoke or terminate such guaranty or  subordination
     agreement; or

6.5  There is a change in ownership  or control of ten percent  (10%) or more of
     the issued and outstanding stock of Borrower or any Guarantor.


SECTION 7. MISCELLANEOUS PROVISIONS

7.1 ADDITIONAL REMEDIES.

     The rights,  power and remedies given to Bank hereunder shall be cumulative
and not alternative and shall be in addition to all rights,  powers and remedies
given to Bank by law against  Borrower or any other  person,  including  but not
limited to Bank's rights of setoff or banker's lien.


7.2 NONWAIVER. 

     Any forebearance or failure or delay by Bank in exercising any right, power
or  remedy  hereunder  shall not be deemed a waiver  thereof  and any  single or
partial  exercise of any right,  power or remedy  shall not preclude the further
exercise  thereof.  No waiver  shall be  effective  unless it is in writing  and
signed by an officer of Bank.


7.3 INUREMENT. 

     The benefits of this Agreement  shall inure to the successor and assigns of
Bank and the permitted successors and assignees of Borrower,  and any assignment
of Borrower without Bank's consent shall be null and void.


7.4 APPLICABLE LAW. 

     This Agreement and all other agreements and instruments required by Bank in
connection therewith shall be governed by and construed according to the laws of
the State of California.

7.5 SEVERABILITY. 

     Should any one or more  provisions  of this  Agreement be  determined to be
illegal or unenforceable, all other provisions nevertheless shall be effective.

7.6 INTEGRATION CLAUSE. 

     Except for documents and instruments  specifically  referenced herein, this
Agreement  constitutes the entire agreement between Bank and Borrower  regarding
the Loan and all prior  communications  verbal or written  between  Borrower and
Bank shall be of no further effect or evidentiary value.

7.7 CONSTRUCTION. 

     The section and subsection headings herein are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

7.8 AMENDMENTS. 

     This Agreement may be amended only in writing signed by all parties hereto.




                                      -11-

<PAGE>


7.9 COUNTERPARTS. 

     Borrower and Bank may execute one or more  counterparts  to this Agreement,
each of which shall be deemed an original.

SECTION 8. SERVICE OF NOTICES

8.1  Any notices or other communications provided for or allowed hereunder shall
     be effective only when given by one of the following  methods and addressed
     to the respective party at its address given with the signatures at the end
     of this Agreement and shall be considered to have been validly  given:  (a)
     upon delivery, if delivered personally;  (b) upon receipt, if mailed, first
     class postage  prepaid,  with the United States Postal Service;  (c) on the
     next  business  day, if sent by  overnight  courier  service of  recognized
     standing; and (d) upon telephoned confirmation of receipt, if telecopied.

8.2  The  addresses  to which  notices or demands are to be given may be changed
     from time to time by notice delivered as provided above.



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                                      -12-
<PAGE>


         THIS AGREEMENT is executed on behalf of the parties by duly  authorized
officers as of the date first above written.

UNION BANK

By:

Title:


By:

Title:


Address:



Attention:
Telecopier:
Telephone:


BORROWER:   ILC TECHNOLOGY, INC.   GUARANTORS:

                                   Converter Power, Inc.

By:                                By:

Title:                             Title:


                                   Q-ARC Limited

By:                                By:

Title:                             Title

                                   Precision Lamp, Inc.
Address:
                                   By:

                                   Title:
Attention:
Telecopier:
Telephone:

                                                      

                                      -13-