LOAN AGREEMENT

THIS AGREEMENT (as the same may be amended, restated or otherwise modified, the
“Agreement”) is made this 31st day of July, 2008, between ANAREN, INC., a New
York with offices at 6635 Kirkville Road, East Syracuse, NY 13057 (“Borrower”)
and KEYBANK NATIONAL ASSOCIATION, a national banking association, with offices
at 201 South Warren Street, Syracuse, NY 13202, and its successors and assigns
(“Lender”).

In consideration of the covenants and agreements contained herein, the Borrower
and the Lender hereby mutually agree as follows:

1. DEFINITIONS

1.1.  General. Any accounting term used but not specifically defined herein
shall be construed in accordance with GAAP (as defined below). The definition of
each agreement, document, and instrument set forth in Section 1.2 hereof shall
be deemed to mean and include such agreement, document, or instrument as
amended, restated, or modified from time to time.

1.2.  Defined Terms. As used in this Agreement:

“Affiliate” of any specified entity means any other entity directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified entity and “control”, when used with respect to any
specified entity, means the power to direct the management and policies of such
entity, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms “controlling” and
“controlled” have meanings correlative to the foregoing.

“Business Day” means a day of the year on which banks are not required or
authorized to close in Cleveland, Ohio.

“Code” shall mean the Internal Revenue Code of 1986, as amended, together with
the rules and regulations promulgated thereunder.

“Collateral” means the collateral in which Borrower has given the Lender a
security interest pursuant to the N/A, and any other instrument given to Lender
to secure the Indebtedness and/or this Agreement.

“Controlled Group” shall mean Borrower and each Person required to be aggregated
with Borrower under Code Sections 414(b), (c), (m) or (o).

“Environmental Law” means any federal, state or local statute, law, ordinance,
code, rule, regulation, order or decree regulating, relating to, or imposing
liability upon a Person in connection with the use, release or disposal of any
hazardous, toxic or dangerous substance, waste or material.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated pursuant thereto.

“ERISA Event” shall mean (a) the existence of a condition or event with respect
to an ERISA Plan that presents a risk of the imposition of an excise tax or any
other liability on the Borrower or of the imposition of a Lien on the assets of
Borrower; (b) the engagement by a Controlled Group member in a non-exempt
“prohibited transaction” (as defined under ERISA Section 406 or Code Section
4975) or a breach of a fiduciary duty under ERISA that could result in liability
to Borrower; (c) the application by a Controlled Group member for a waiver from
the minimum funding requirements of Code Section 412 or ERISA Section 302 or a
Controlled Group member is required to provide security under Code Section
401(a)(29) or ERISA Section 307; (d) the occurrence of a Reportable Event with
respect to any Pension Plan as to which notice is required to be provided to the
PBGC; (e) the withdrawal by a Controlled Group member from a Multiemployer Plan
in a “complete withdrawal” or a “partial withdrawal” (as such terms are defined
in ERISA Sections 4203 and 4205, respectively); (f) the involvement of, or
occurrence or existence of any event or condition that makes likely the
involvement of, a Multiemployer Plan in any reorganization under ERISA Section
4241; (g) the failure of an ERISA Plan (and any related trust) that is intended
to be qualified under Code Sections 401 and 501 to be so qualified or any “cash
or deferred arrangement” under any such ERISA Plan to meet the requirements of
Code Section 401(k); (h) the taking by the PBGC of any steps to terminate a
Pension Plan or appoint a trustee to administer a Pension Plan, or the taking by
a Controlled Group member of any steps to terminate a Pension Plan; (i) the
failure by a Controlled Group member or an ERISA Plan to satisfy any
requirements of law applicable to an ERISA Plan; (j) the commencement, existence
or threatening of the incurrence by a Controlled Group member of a claim,
action, suit, audit or investigation with respect to an ERISA Plan, other than a
routine claim for benefits; or (k) any occurrence by or any expectation of the
incurrence by a Controlled Group member of any liability for post-retirement
benefits under any Welfare Plan, other than as required by ERISA Section 601,
et. seq. or Code Section 4980B.

 
 

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“ERISA Plan” shall mean an “employee benefit plan” (within the meaning of ERISA
Section 3(3)) that a Controlled Group member at any time sponsors, maintains,
contributes to, has liability with respect to or has an obligation to contribute
to such plan.

“ERISA Affiliate” means each Person (whether or not incorporated) which together
with Borrower would be treated as a single employer under ERISA.

“Event of Default” means any one or more of the occurrences described in Section
6 hereof.

“GAAP” means generally accepted accounting principles as in effect, which shall
include the official interpretations thereof by the Financial Accounting
Standards Board, consistently applied.

“Guarantor” means each Person that now or hereafter guarantees any portion of
the Borrower’s Indebtedness payable to the Lender, and such Person’s heirs,
administrators, successors and assigns, including, without limitation, Anaren
Microwave, Inc., Anaren Ceramics, Inc., and Anaren Properties, LLC.

“Guaranty” means the guaranty agreement executed by Guarantor and delivered to
Lender.

“Indebtedness” shall mean, for any Person (excluding in all cases trade payables
payable in the ordinary course of business by such Person), (a) all obligations
to repay borrowed money, direct or indirect, incurred, assumed, or guaranteed,
(b) all obligations for the deferred purchase price of capital assets, (c) all
obligations under conditional sales or other title retention agreements, (d) all
obligations (contingent or otherwise) under any letter of credit, banker’s
acceptance, currency swap agreement, or Interest Rate Agreement, (e) all
synthetic leases, (f) all lease obligations that have been or should be
capitalized on the books of such Person in accordance with GAAP, (g) all
obligations of such Person with respect to asset securitization financing
programs to the extent that there is recourse against such Person or such Person
is liable (contingent or otherwise) under any such program, (h) all obligations
to advance funds to, or to purchase assets, property or services from, any other
Person in order to maintain the financial condition of such Person, and (i) any
other transaction (including forward sale or purchase agreements) having the
commercial effect of a borrowing of money entered into by such Person to finance
its operations or capital requirements.

“Interest Rate Agreement” means any agreement for a derivative or hedging
product, including, without limitation, interest rate or equity swaps, futures,
options, caps, floors, collars, or forwards now or hereafter executed by and
between Borrower and Lender or any Lender Affiliate.

"Lender Affiliate" means any one or more bank or non-bank subsidiaries (other
than the Lender) of KeyCorp and its successors.

“Lien” means any mortgage, security interest, lien, charge, encumbrance on,
pledge or deposit of, or conditional sale or other title retention agreement
with respect to any property or asset.

“Loan” or “Loans” means the credit to the Borrower extended by the Lender in
accordance with Section 2 hereof.

“Loan Documents” means the collective reference to this Agreement and all other
instruments, agreements and documents entered into from time to time, evidencing
or securing the Loan or any obligation of payment thereof or performance of
Borrower’s or Guarantor’s obligations in connection with the transaction
contemplated hereunder, each as amended.

 
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“Margin Stock” shall have the meaning given to it under Regulation U of the
Board of Governors of the Federal Reserve System, as amended from time to time.

“Material Adverse Change” means any condition or event that Lender determines
has or is reasonably likely to have a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) or
prospects of Borrower, (b) the business, operations, property, condition
(financial or otherwise) or prospects of Borrower and its Subsidiaries, if any,
taken as a whole, or (c) the validity or enforceability of this Agreement or any
of the other Loan Documents or the rights and remedies of Lender hereunder or
thereunder.

“Multiemployer Plan” shall mean a Pension Plan that is subject to the
requirements of Subtitle E of Title IV of ERISA.

“Note” or “Notes” means, as the case may be, the promissory note(s) signed and
delivered by the Borrower to evidence its Indebtedness to the Lender pursuant to
Section 2 hereof .

“Obligation” or “Obligations” means, collectively, (a) all Indebtedness and
other obligations incurred by Borrower to Lender pursuant to this Agreement and
includes the principal of and interest on all Notes; (b) each extension, renewal
or refinancing thereof in whole or in part; (c) the commitment and other fees,
and any prepayment fees payable under this Agreement or any other Loan Document;
(d) every other liability, now or hereafter owing to Lender or any Lender
Affiliate by Borrower, and includes, without limitation, any Interest Rate
Agreement entered into by Borrower with Lender or any Lender Affiliate and every
other liability, whether owing by only Borrower or by Borrower with one or more
others in a several, joint or joint and several capacity, whether owing
absolutely or contingently, whether created by note, overdraft, guaranty of
payment or other contract or by quasi-contract, tort, statute or other operation
of law, whether incurred directly to Lender or any Lender Affiliate or acquired
by Lender or any Lender Affiliate by purchase, pledge or otherwise and whether
participated to or from Lender or any Lender Affiliate in whole or in part; and
(e) all Related Expenses.

“Obligor” shall mean (a) a Person whose credit or any of whose property is
pledged to the payment of the Obligations and includes, without limitation, any
Guarantor, and (b) any signatory to a Loan Document.

"Organization" means a corporation, government or government subdivision or
agency, business trust, estate, trust, partnership, association, two or more
Persons having a joint or common interest, and any other legal or commercial
entity.

“PBGC” shall mean the Pension Benefit Guaranty Corporation, or its successor.

“Pension Plan” shall mean an ERISA Plan that is a “pension plan” within the
meaning of ERISA Section 3(2).

“Permitted Distributions” means distributions to Borrower’s shareholders in an
amount equal to the amount of tax required to be paid by such shareholder as a
result of the Borrower’s taxable income passing through and being taxable to
such shareholder.

“Permitted Encumbrances” means, as of any particular time, (a) liens for ad
valorem taxes and special assessments not then delinquent, (b) this Agreement,
and any security interest or other lien created thereby, (c) any Permitted
Encumbrances defined in any of the Loan Documents, including, without
limitation, as defined in any Security Instrument, (d) any liens permitted by
Section 5.15 hereof, and (e) such minor defects, irregularities, encumbrances
and clouds on title as normally exist with respect to property similar in
character to the Collateral and as do not materially interfere with or impair
the use or value of the property affected thereby.

“Person” means an individual or an Organization.

 
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“Plan” means any plan (other than a Multiemployer Plan) defined in ERISA in
which the Borrower or any Subsidiary is, or has been at any time during the
preceding two (2) years, an “employer” or a “substantial employer” as such terms
are defined in ERISA.

“Potential Default” means any condition, action, or failure to act which, with
the passage of time, service of notice, or both, will constitute an Event of
Default under this Agreement.

“Quarters” or “Quarterly” means calendar quarters, being each of the three (3)
calendar month periods ending 3/31, 6/30, 9/30 and 12/31 of each calendar year.

“Related Expenses” means any and all costs, liabilities, and expenses
(including, without limitation, losses, damages, penalties, claims, actions,
reasonable attorney’s fees, legal expenses, judgments, suits and disbursements)
reasonably incurred by, or imposed upon, or asserted against, Lender in any
attempt by Lender:

(a) to obtain, preserve, perfect, or enforce any security interest evidenced by
(i) this Agreement, or (ii) any other pledge agreement, mortgage, deed of trust,
hypothecation agreement, guaranty, security agreement, assignment, or security
instrument executed or given by Borrower to or in favor of Lender;

(b) to obtain payment, performance, and observance of any and all of the
Obligations;

(c) to maintain, insure, audit, inspect, collect, preserve, repossess, and
dispose of any of the Collateral, including, without limitation, costs and
expenses for appraisals, assessments, and audits of Borrower or the Collateral;
or

(d) incidental or related to (a) through (c) above, including, without
limitation, interest thereupon from the date incurred, imposed, or asserted
until paid at the rate payable as set forth in the Note, but in no event greater
than the highest rate permitted by law.

“Related Person” means any Person who (i) now or hereafter owns an equity
interest in Borrower or Guarantor or (ii) has warrants, debentures, or similar
rights to own any equity interest in Borrower or Guarantor, whether or not the
same has vested or been delivered or (iii) is owned, in whole or in part, by
Borrower or Guarantor.

“Reportable Event” shall mean a reportable event as that term is defined in
Title IV of ERISA, except actions of general applicability by the Secretary of
Labor under Section 110 of such Act.

“Revolving Credit” means the Revolving Credit Facility described in Section 2.2
hereof, which Revolving Credit shall be payable in accordance with the terms of
such Revolving Credit Facility and this Agreement.

“Security Instrument(s)” means the written document(s) listed in Exhibit A
attached hereto, signed and delivered from time to time to the Lender in
connection with Indebtedness owed by Borrower to the Lender.

“Subsidiary” means any Person of which more than fifty percent (50%) of the
following is, at the time, owned or controlled, directly or indirectly, by
Borrower or one or more other Subsidiaries: (i) the voting stock or units
entitling the holders thereof to elect a majority of the board of directors,
managers, or trustees thereof, or (ii) the interest in the capital or profits of
such Person.

“Term Loan” or “Term Loans” means the amounts advanced by the Lender to the
Borrower pursuant to the provisions, terms and conditions of Section 2.1 hereof.

The foregoing definitions shall be applicable to the singulars and plurals of
the foregoing defined terms.

 
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2. CREDIT FACILITIES

2.1.  Term Loan Facility. The Lender hereby agrees to extend a Term Loan on the
date of this Agreement to Borrower, subject to the terms and conditions of this
Agreement and the Term Note of even date herewith in the principal amount of
$__N/A____.

2.2.  Revolving Credit Facility. The Lender hereby agrees to extend a Revolving
Credit to Borrower, subject to the terms and conditions of this Agreement and
the Revolving Credit Note of even date herewith in the initial principal amount
of $ 50,000,000.00. On August 1, 2009 and on each August 1 thereafter through
July 31, 2013 the principal amount of the Revolving Credit shall be reduced by
$10,000,000.00. As used herein, the term “Available Credit” shall mean the
principal amount of Revolving Credit then in effect.

2.3. Fees. The Borrower shall pay the Lender the following fees: a non-usage fee
for each calendar quarter based upon the average daily unused Available Credit
during such quarter. The amount of the non-usage fee shall be the average daily
unused Available Credit multiplied by the applicable basis points from the chart
set forth below under the column headed “Non-Usage Fee”. For purposes hereof,
“EBITDA” means the net earnings of the Borrower plus the aggregate amounts
deducted in determining such net income in respect of interest expenses, taxes,
depreciation, amortization, and other non-cash charges (including non-cash
expenses related to equity based compensation); but not, however, giving effect
to extraordinary losses or gains in calculating net income, calculated on a
trailing twelve month basis. Any outstanding principal balance in excess of the
Available Credit then in effect on the testing date shall be included in Current
Portion of Long Term Debt (“CPLTD”), which shall otherwise be determined in
accordance with GAAP.

EBITDA/CPLTD + Interest
Margin for Revolver Balances
Non-Usage Fee
>2.0 to 1
N/A
20 bps
>1.75 to 2.0
N/A
25 bps
>1.50 to 1.75
N/A
35 bps
1.50 or less (default)
N/A
NA

 
3. WARRANTIES.

Borrower represents and warrants to the Lender (which representations and
warranties will survive the delivery of the Notes and the making of the Loans)
that:

3.1.  Existence and Legal Authority. Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
and has all requisite power and authority to own its property and to carry on
its business as now being conducted, to enter into the Loan Documents to which
it is a party and the other agreements referred to herein and transactions
contemplated thereby, and to carry out the provisions and conditions of such
Loan Documents to which it is a party. Borrower is duly qualified to do business
and is in good standing in every jurisdiction where the failure to so qualify
would have a material adverse effect.

3.2.  Due Execution and Delivery. Borrower has full power, authority and legal
right to incur the obligations provided for in, and to execute and deliver and
to perform and observe the terms and provisions of, the Loan Documents to which
it is a party, and each of them has been duly executed and delivered by Borrower
and has been authorized by all required action, and Borrower has obtained all
requisite consents to the transactions contemplated thereby under any instrument
to which it is a party, and the Loan Documents constitute the legal, valid and
binding obligations of Borrower enforceable against Borrower in accordance with
their respective terms, except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency or other similar laws affecting creditors'
rights generally.

3.3.  No Breach of Other Instruments. Neither the execution and delivery of the
Loan Documents, nor the compliance by Borrower with the terms and conditions of
the Loan Documents, nor the consummation of the transactions contemplated
thereby, will conflict with or result in a breach of the Articles of
Incorporation or Code of Regulations, as applicable, or other governing
documents of Borrower, or any of the terms, conditions or provisions of any
agreement or instrument or any charter or other corporate restriction or law,
regulation, rule or order of any governmental body or agency to which Borrower
is now a party or is subject, or imposition of a lien, charge or encumbrance of
any nature whatsoever upon any of the property or assets of Borrower pursuant to
the terms of any such agreement or instrument.

 
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3.4.  Government Authorization. No consent, approval, authorization or order of
any court or governmental agency or body is required for the consummation by
Borrower of the transactions contemplated by the Loan Documents.

3.5.  Ownership of Property. Except for Permitted Encumbrances or as otherwise
permitted in the Security Instruments or this Agreement, Borrower has and will
have good and marketable fee title to, or valid leasehold interests in, its real
properties in accordance with the laws of the jurisdiction where located, and
good and marketable title to substantially all its other property and assets,
subject, however, in the case of real property, to title defects and
restrictions which do not materially interfere with the operations conducted
thereon by Borrower. Except for Permitted Encumbrances, the real property and
all other property and assets of the Borrower is free from any liens or
encumbrance securing Indebtedness and from any other liens, encumbrances,
charges or security interests of any kind. Each lease, if any, to which Borrower
is a party is in full force and effect, and no material default on the part of
Borrower or, to its knowledge, any other party thereto exists.

3.6.  Absence of Defaults, etc. The Borrower is not (i) in material default
under any indenture or contract or agreement to which it is a party or by which
it is bound, (ii) in violation of its articles of incorporation or code of
regulations, as applicable, or any other governing document, (iii) in default
with respect to any order, writ, injunction or decree of any court, or (iv) in
default under any order or license of any federal or state governmental
department. There exists no condition, event or act which constitutes, or after
notice or lapse of time or both would constitute, an Event of Default.

3.7.  Indebtedness of Borrower. Borrower does not have outstanding on the date
hereof, any Indebtedness for borrowed money, except for such Indebtedness
identified in the financial assumptions referred to in Section 3.8 hereof.

3.8.  Financial Condition. The Borrower has furnished to the Lender financial
assumptions which, in the opinion of Borrower, fairly and accurately reflect the
financial assumptions for the operations of Borrower, and there has been no
material adverse change in the Borrower’s financial prospects since that date
which would require revision of the same.

3.9.  No Adverse Change. Subsequent to the date of the financial assumptions
referred to in Section 3.8 hereof, Borrower has not incurred or agreed to incur
any material liabilities or obligations, direct or contingent, and there has not
been any material increase in the anticipated aggregate amount of debt of
Borrower, or any Material Adverse Change in the business, properties, prospects
or condition, financial or otherwise, of Borrower.

3.10.  Taxes. Borrower has filed all tax returns which are to be filed and has
paid, or has made adequate provision for the payment of, all taxes which have or
may become due pursuant to said returns or to assessments received by them. The
provisions for taxes reflected in the financial projections referred to in
Section 3.8 are believed adequate to cover any and all accrued and unpaid taxes
for which Borrower is liable for the period ended on the date of such balance
sheet and all prior periods. Borrower knows of no deficiency assessment or
proposed deficiency assessment of taxes for which Borrower may be liable, except
as may be otherwise disclosed in writing to the Lender prior to the date hereof.

3.11.  Litigation. Prior to the date hereof, there are no actions, suits or
proceedings pending, or to the actual knowledge of Borrower, threatened against
or affecting Borrower or its respective property in any court, or before or by
any federal, state or municipal or other governmental department, commission,
board, bureau, agency or other instrumentality, domestic or foreign, except for
actions, suits or proceedings of a character normally incident to the kind of
business conducted by Borrower, none of which, either individually or in the
aggregate, if adversely determined, would reasonably be expected to result in a
Material Adverse Change.

 
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3.12.  Environmental Matters. Borrower is in compliance with all Environmental
Laws and all applicable federal, state and local health and safety laws,
regulations, ordinances or rules.

3.13.  Subsidiaries and Affiliates. Borrower does not have any Subsidiaries
other than those listed on Exhibit B attached hereto. If Borrower has any
Subsidiary or any other Affiliate at any time subsequent to the date of
execution hereof, the term “Borrower” as used in Sections 5 and 6 shall include
in its meaning Borrower and its Subsidiaries, for such period or periods that
Borrower has any Subsidiaries, unless the context clearly requires otherwise.
For any period during which Borrower has any Subsidiaries, all financial
statements, accounts and reports submitted by the Borrower and all calculations
hereunder based on same shall be consolidated and/or on a consolidating basis or
combined and/or on a combining basis with such Subsidiaries, as the context
required.

3.14.  ERISA. No Reportable Event or Prohibited Transaction which could create a
liability in excess of One Hundred Thousand Dollars ($100,000.00) or cause a
material adverse change has occurred and is continuing with respect to any Plan
of Borrower, and Borrower has not incurred an “accumulated funding deficiency”
(as that term is defined by ERISA) since the effective date of ERISA.

3.15.  Solvency. The Borrower is not insolvent as defined in any applicable
state or federal statute, nor will Borrower be rendered insolvent by the
execution and delivery of this Agreement or any of the Loan Documents to Lender.
The Borrower is not engaged or about to engage in any business or transaction
for which the assets retained by it shall constitute an unreasonably small
capital, taking into consideration the obligations to Lender incurred hereunder.
Borrower does not intend to, nor does it believe that it will, incur debts
beyond its ability to pay them as they mature.

3.16.  No Burdensome Restrictions. Borrower is not a party to any instrument or
agreement or subject to any charter or other corporate restriction which would
cause a Material Adverse Change.

3.17.  Federal Reserve Regulations; Use of Loan Proceeds. Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin Stock. No
part of the proceeds of the Loans will be used, directly or indirectly, for a
purpose which violates any law, rule or regulation of any governmental body,
including without limitation the provisions of Regulations G, U, or X of the
Board of Governors of the Federal Reserve System, as amended. No part of the
proceeds of the Loans will be used, directly or indirectly, to purchase or carry
any Margin Stock or to extend credit to others for the purpose of purchasing or
carrying any Margin Stock.

3.18. OFAC/USA PATRIOT Act Restrictions. Neither Borrower nor any Guarantor is
(or will be) a person with whom Lender is restricted from doing business under
regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of
the Treasury of the United States of America (“Treasury”) or under any list of
known or suspected terrorists or terrorist organizations issued by any federal
government agency and designated as such by Treasury in consultation with the
federal functional regulators, or under any statute, executive order, or other
governmental action, and neither Borrower nor any Guarantor is engaging, or
shall engage, in any dealings or transactions or shall otherwise be associated
with such persons. In addition, Borrower hereby agrees to provide to the Lender
with any additional information that the Lender deems necessary from to time in
order to ensure compliance with all applicable laws concerning money laundering
and similar activities.

4. CONDITIONS OF LENDING

4.1.  Loan Funding. The obligation of the Lender to close the transactions
contemplated by this Agreement shall be subject to satisfaction of the following
conditions, unless waived in writing by the Lender: (a) all legal matters and
Loan Documents incident to the transactions contemplated hereby shall be
reasonably satisfactory, in form and substance, to Lender's counsel; (b) the
Lender shall have received (i) certificates by an authorized officer or
representative of Borrower upon which the Lender may conclusively rely until
superseded by similar certificates delivered to the Lender, certifying that (1)
all requisite action taken in connection with the transactions contemplated
hereby has been duly authorized and (2) the names, signatures, and authority of
Borrower’s authorized signers executing the Loan Documents, and (ii) such other
documents as the Lender may reasonably require to be executed by, or delivered
on behalf of, Borrower; (c) the Lender shall have received the Notes with all
blanks appropriately completed, executed by an authorized signer for Borrower;
(d) the Borrower shall have paid to the Lender the fee(s) then due and payable
under this Agreement and the other Loan Documents; (e) Borrower and Guarantor
shall each have maintained their respective financial condition in a manner
satisfactory to the Lender, and no material adverse change shall have occurred
in Borrower’s or Guarantor’s financial condition or prospects; (f) the Lender
shall have received the written opinion(s) of legal counsel for the Borrower
selected by the Borrower and satisfactory to the Lender, dated the date of this
Agreement and covering the Loan Documents and such other matter(s) as the Lender
may reasonably require; (g) the Lender shall have received written instructions
by the Borrower with respect to disbursement of the proceeds of the Loan; and
(h) the Lender shall have received all Security Instruments duly executed by all
parties thereto.

 
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4.2.  Security. No Loan shall be made hereunder unless and until Borrower shall
have supplied to Lender: (a) Uniform Commercial Code searches from each
applicable filing office on Borrower and each Guarantor showing no effective
UCC-1 filings, and (b) as security for repayment of any and all Loans made
hereunder the Security Instruments listed on Exhibit A hereto, in form and
substance reasonably acceptable to Lender.

4.3.  Each Loan. The obligation of the Lender to make any Loan shall be subject
to initial compliance with Sections 4.1 and 4.2 herein and also subject to
satisfaction of the following conditions that at the date of making such Loan,
and after giving effect thereto: (a) no Event of Default shall have occurred and
continue to exist, and (b) each representation and warranty set forth in Section
3 above is true and correct as if then made.

5. COVENANTS

As long as credit is available hereunder or until all principal of and interest
on the Notes have been paid, the Borrower covenants and agrees that it will
comply with the following provisions:

5.1.  Accounting; Financial Statements and Other Information. Borrower shall
maintain a standard system of accounting, established and administered in
accordance with GAAP consistently followed throughout the periods involved, and
will set aside on its books for each fiscal quarter and fiscal year, the proper
amounts or accruals for depreciation, obsolescence, amortization, bad debts,
current and deferred taxes, prepaid expenses, and for other purposes as shall be
required by GAAP. Borrower will deliver or cause to be delivered to the Lender:

(a) As soon as practicable after the end of each fiscal quarter in each fiscal
year, and in any event within 45 days thereafter, internally prepared
consolidated and consolidating financial statements, including income statement,
balance sheet, statement of condition of the Borrower as of the end of such
fiscal quarter, and statements of cash flow, changes in financial position, and
common shareholder’s equity for such fiscal quarter, certified as complete and
correct by the principal financial officer of Borrower, subject to changes
resulting from year-end adjustments;

(b) As soon as practicable after the end of each fiscal year, and in any event
within 120 days thereafter, financial statements, including income statement,
balance sheet, statement of condition of the Borrower as of the end of such
year, and statement of cash flow and changes in financial position of the
Borrower for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and prepared by
an independent certified public accountant, accompanied by a report and
unqualified opinion of an independent certified public accountant of recognized
standing, selected by Borrower and satisfactory to the Lender, and prepared in
accordance with generally accepted audit standards;

(c) Together with each set of financial statements required by subparagraphs (a)
and (b) above, a certificate by the chief financial officer or other authorized
officer of Borrower stating that the representations and warranties contained in
this Agreement are true and correct as of the date of the certificate, and
whether or not there exists any Event of Default or Potential Default,
specifying the nature and period of existence thereof and what action, if any,
the Borrower is taking or proposes to take with respect thereto;

(d) Promptly and in any event within ten (10) days after the occurrence of a
Reportable Event with respect to a Plan, a copy of any materials required to be
filed with the PBGC with respect to such Reportable Event or those that would
have been required to be filed if the thirty (30) day notice requirement to PBGC
were not waived;

 
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(e) Promptly upon receipt, and in no event more than two (2) Business Days after
receipt, of a notice by Borrower or any ERISA Affiliate or any administrator of
any Plan or Multiemployer Plan that the PBGC has instituted proceedings to
terminate such Plan or to appoint a trustee to administer such Plan, a copy of
such notice; and

(f) Promptly upon receipt thereof, copies of all written reports submitted to
the Borrower by independent accountants in connection with any annual or interim
compilation and/or review the books of Borrower.

5.2.  Additional Financial Reports. Borrower shall, upon request of Lender,
deliver to the Lender its annual federal, state and local tax returns and such
other financial information as Lender may reasonably request.

5.3.  Insurance; Maintenance of Properties. Borrower shall: (a) maintain with
financially sound and reputable insurers, insurance with coverage and limits as
may be required by law and of such character and amounts as are usually
maintained by companies engaged in like business, including without limitation
products liability insurance; (b) furnish to Lender upon the execution of this
Agreement and at the beginning of each fiscal year, copies of policies and a
statement of the insurance coverage; and (c) obtain other or additional
insurance promptly, upon the reasonable request of Lender, to the extent that
such insurance may be available. The policies shall provide that no cancellation
shall occur without thirty (30) days prior written notice to Lender. Borrower
shall provide to Lender notice that such policies have been renewed and are paid
in accordance with the terms of such policies at least fifteen (15) days prior
to the date of expiration. Borrower will at least annually and upon any change,
or more often upon the occurrence of an Event of Default, upon request of
Lender, furnish to the Lender a schedule of all insurance carried by Borrower,
setting forth in detail the amount and type of such insurance. Except as
otherwise permitted in this Agreement, Borrower will maintain, in good repair,
working order, and condition, all properties used in the business of the
Borrower, subject to ordinary wear and tear.

5.4.  Existence; Business. Borrower shall cause to be done all things necessary
to preserve and keep in full force and effect its existence and rights, to
conduct its business in a prudent manner, to maintain in full force and effect,
and renew from time to time, its franchises, permits, licenses, patents, and
trademarks that are necessary to operate its business. Borrower will comply in
all material respects with all valid laws and regulations now in effect or
hereafter promulgated by any properly constituted governmental authority having
jurisdiction; provided, however, that Borrower shall not be required to comply
with any law or regulation which it is contesting in good faith by appropriate
proceedings as long as either the effect of such law or regulation is stayed
pending the resolution of such proceedings or the effect of not complying with
such law or regulation would not reasonably be expected to result in a Material
Adverse Change.

5.5.  Payment of Taxes. Borrower shall pay all taxes, assessments, and other
governmental charges levied upon any of its properties or assets or in respect
of its franchises, business, income, or profits before the same become
delinquent, except that no such taxes, assessments, or other charges need be
paid if contested in good faith and by appropriate proceedings promptly
initiated and diligently conducted and if proper amounts, determined in
accordance with GAAP, have been set aside for the payment of all such taxes,
charges, and assessments.

5.6.  Adverse Changes. Borrower shall promptly notify the Lender in writing of
(a) the occurrence of any event which, if it had existed on the date of this
Agreement, would have required qualification of the representations and
warranties set forth in Section 3 hereof and (b) any Material Adverse Change.

5.7.  Notice of Default. Borrower shall promptly notify (but in no event more
than five (5) days after the occurrence thereof) the Lender of any Event of
Default or Potential Default hereunder and any demands made upon the Borrower by
any Person for the acceleration and immediate payment of any Indebtedness owed
to such Person, if the amount of such Indebtedness exceeds $250,000.

5.8.  Inspection. Borrower shall make available for inspection by duly
authorized representatives of the Lender, or its designated agent, Borrower’s
books, records, and properties when reasonably requested to do so, and will
furnish the Lender such information regarding its business affairs and financial
condition within a reasonable time after written request therefor.

5.9.  Environmental Matters. Borrower:

 
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(a) Shall comply in all respects with all Environmental Laws where a failure to
comply could result in a Material Adverse Change;

(b) Shall deliver promptly to Lender (i) copies of any significant documents
received from the United States Environmental Protection Agency or any state,
county, foreign, provincial or municipal environmental or health agency, and
(ii) copies of any significant documents submitted by Borrower or any of its
Subsidiaries to the United States Environmental Protection Agency or any state,
county, foreign, provincial or municipal environmental or health agency
concerning its operations; and

(c) Shall promptly undertake and diligently pursue to completion all action
recommended by any environmental audit report(s) issued and all action(s)
necessary to correct any environmental problem or defect identified in any
environmental audit report(s).

5.10.  Health and Safety. Borrower shall be in compliance with all requirements
of applicable federal, state, foreign, provincial and local environmental,
health and safety laws, regulations, ordinances or rules which would, in the
aggregate, if not complied with, result in a Material Adverse Change.

5.11.  Extraordinary Services. In the event extraordinary services are required
by Lender for inspections, appraisals, or for securing estimates of costs which,
in the Lender’s reasonable judgment are not regular or routine, Lender may
deduct the reasonable expense of such extraordinary services from any moneys due
to Borrower hereunder or from any account maintained by Borrower with Lender or
any Lender Affiliate.

5.12.  Commercial Operating Account. So long as credit is available hereunder or
until all principal of and interest on the Notes have been paid in full, the
Borrower shall maintain with Lender and/or a Lender Affiliate, as its primary
financial institution, corporate deposit, cash management and loan accounts,
where applicable. At the option of Lender, all Loan payments and fees will
automatically be debited from the Borrower’s primary operating account and all
disbursements of Loan proceeds shall be made by the Lender’s or Lender
Affiliate’s crediting of such disbursements directly into the appropriate
Borrower’s account.

5.13.  Additional Assurance. Borrower shall upon request of Lender promptly take
such action and promptly make, execute, and deliver all such additional and
further items, deeds, assurances, and instruments as Lender may reasonably
require, so as to completely vest in and ensure to Lender its rights hereunder
and in or to the Collateral, including, but not limited to, additional
subordination agreements for all future shareholder loans and/or undistributed
earnings.

5.14.   Sale, Purchase of Assets. Borrower shall not, directly or indirectly,
(a) purchase, lease, or otherwise acquire any assets except: (i) in the ordinary
course of business; (ii) Borrower may purchase or acquire more than a 50% equity
interest in or all or substantially all of the assets of operating businesses;
or (iii) as otherwise expressly permitted under this Agreement), or (b) sell,
lease, transfer, or otherwise dispose of any assets except for (i) assets sold,
leased, transferred or subject to other disposition for full and adequate
consideration in the reasonable judgment of Borrower which Borrower has
determined to be worn out or obsolete or not useful in the ordinary course of
its business, and (ii) assets sold, leased, transferred or subject to other
disposition in the ordinary course of business provided that Borrower receives
full and adequate consideration in the reasonable judgment of Borrower in
exchange for such assets sold, leased, transferred or otherwise subject to
disposition.

5.15.  Mortgages, Security Interests, and Liens. Borrower shall not, directly or
indirectly, create, incur, assume, or permit to exist any Lien with respect to
non-real estate assets of Borrower or any Subsidiary, whether now owned or
hereafter acquired other than:
 
(a) Liens for taxes, assessments, or governmental charges or levies the payment
of which is not at the time required by Section 5.5 hereof;
 
(b) Liens imposed by law, such as Liens of landlords, carriers, warehousemen,
mechanics, and materialmen arising in the ordinary course of business for sums
not yet due or being contested by appropriate proceedings promptly initiated and
diligently conducted, provided other appropriate provision, if any, as shall be
required by GAAP shall have been made therefor;
 
 
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(c) Liens incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance, and other types
of social security, or to secure the performance of tenders, statutory
obligations, and surety and appeal bonds, or to secure the performance and
return of money bonds and other similar obligations, excluding obligations for
the payment of borrowed money;
 
(d) Any judgment Lien, provided that the judgment it secures shall, within
thirty (30) days after the entry thereof, have been discharged or execution
therefor stayed pending appeal, or shall have been discharged within thirty (30)
days after the expiration of any such stay;
 
(e) Liens that secure the repayment of Indebtedness of Borrower to the Lender or
any Lender Affiliate; or
 
(f) Liens evidenced by or permitted under the terms of Security Instruments
only, and any other Permitted Encumbrances.
 
5.16.  Negative Pledge. Borrower shall not (a) enter into any agreement,
promissory note, or document of any kind relating to a loan to Borrower by a
lender other than Lender which contains a provision that Borrower will not
mortgage, assign, pledge, grant a security interest in, or encumber any of
Borrower’s non-real estate assets, (b) except as allowed as a Permitted
Encumbrance, sell, transfer, mortgage, assign, pledge, lease, grant a security
interest in, or encumber any of Borrower’s non-real estate assets, or (c) sell
with recourse any of Borrower’s accounts, except to Lender.

5.17.  Assumptions; Guaranties. Borrower shall not assume, guarantee, endorse,
or otherwise become directly or contingently liable for (including, without
limitation, liable by way of agreement, contingent or otherwise, to purchase, to
provide funds for payment, to supply funds to, or otherwise invest in any debtor
or otherwise to assure the creditor against loss) any obligation or Indebtedness
of any other Person, except (i) guaranties by endorsement of negotiable
instruments for deposit, collection, or similar transactions in the ordinary
course of business, and (ii) Indebtedness of Borrower to the Lender or any
Lender Affiliate.
 
5.18.  Mergers; Consolidation; Sale of Borrower. Borrower shall not merge or
consolidate with any Person, dissolve, wind up its affairs, or sell, assign,
lease, or otherwise dispose of (whether in one transaction or in a series of
transactions), all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person, except where such Person is or becomes a
Borrower hereunder as of the date of such transaction and such further
assurances with respect to any such transaction satisfactory to the Lender are
delivered on or before the effective date of such transaction. Borrower will not
permit a transfer or sale, directly or indirectly, whether in one transaction or
in a series of transactions, of any of its shares of stock, other than between
and among current owners of such shares.
 
5.19.  Investments; Loans. Borrower shall not, directly or indirectly, (a)
purchase or otherwise acquire or own any stock or other securities of any other
Person (other than as permitted under this Agreement) or (b) make or permit to
be outstanding any loan or advance (other than trade advances in the ordinary
course of business or as otherwise permitted under this Agreement) or enter into
any arrangement to provide funds or credit, to any other Person, except that (i)
it may purchase or otherwise acquire and own marketable U.S. Treasury and Agency
obligations, and certificates of deposit and bankers acceptances issued or
created by any domestic commercial bank, and the stock of any Subsidiaries
identified in Section 3.13, and (ii) it may make loans or advances as permitted
pursuant to Section 5.15 above.

5.20.  Payment of Subordinated Debt. Borrower shall not make any payment upon
any outstanding indebtedness which is subordinated to the Lender.

5.21.  Financial Covenants.

(a) Debt Service Coverage Ratio. Borrower shall maintain a Debt Service Coverage
Ratio greater than 1.50:1 tested as of the end of each fiscal quarter on a
trailing twelve month basis. For purposes hereof, “Debt Service Coverage Ratio”
is defined as EBITDA divided by the Current Portion of Long Term Debt and the
current portion of Capital Leases due during the 12-month period plus Interest
Expense for the same period. “EBITDA” means the net earnings of the Borrower
plus the aggregate amounts deducted in determining such net income in respect of
interest expenses, taxes, depreciation, amortization, and other non-cash charges
(including non-cash expenses related to equity based compensation); but not,
however, giving effect to extraordinary losses or gains in calculating net
income. Any outstanding principal balance in excess of the Available Credit then
in effect on the testing date shall be included in Current Portion of Long Term
Debt, which shall otherwise be determined in accordance with GAAP.
 
 
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(b) Liquid Assets. Borrower shall maintain a minimum of $20,000,000.00 in cash
plus marketable securities as of the end of each fiscal quarter.
 
(c) Total Funded Debt to EBITDA Ratio. Borrower shall maintain a ratio of Total
Funded Debt to EBITDA of less than 2.5:1 tested as of the end of each fiscal
quarter on a trailing twelve month basis. “Total Funded Debt” means the sum
without duplication for a Borrower and/or any of its Subsidiaries of (1) all
indebtedness for borrowed money, whether maturing in less than or more than one
year, plus (2) all bonds, notes, debentures or similar debt instruments plus (3)
all capitalized lease obligations plus (4) the present value of all basic rental
obligations under any synthetic lease. “EBITDA” has the meaning set forth in
Section 5.21(a) above.
 
(d) Other Loan Agreements. Borrower shall not, without Lender’s prior written
consent, enter into any agreement, promissory note, or document of any kind
relating to a loan to Borrower containing a term similar to 5.21(a), (b), or (c)
above which is more restrictive than such term herein.
 
(e) Special Provision: Frimley, England Sublease. Borrower’s lease expense under
its present sublease of a building located in Frimley, England shall be excluded
solely for the calculations relating to compliance with Sections 5.21(a), (c),
and (d) above. For purposes of clarity, but without changing a broad application
of the specific exclusion contained in the immediately preceding sentence, such
exclusion shall not apply to the calculation of the interest payable on Loans
made pursuant to this Agreement.
 
(f) Assets of China Subsidiary. Except with Lender’s prior written consent,
which consent shall not be unreasonably withheld, Borrower shall not, directly
or indirectly, permit the assets of its China Subsidiary, Anaren Communications
Suzhou Company, Ltd., to be more than 15% of the consolidated assets of Borrower
and all its Subsidiaries.

6. EVENTS OF DEFAULT

The occurrence of any one or more of the following events shall constitute an
Event of Default under this Agreement:

6.1.  Payments. If (a) the interest on any Note or any commitment or other fee
shall not be paid in full punctually when due and payable, or (b) the principal
of any Note shall not be paid in full punctually when due and payable.

6.2. Covenants. If Borrower or any Obligor fails to perform or observe any
covenant or agreement (other than as referred to in Section 6.1 hereof)
contained in this Agreement or in any other of the Loan Documents, and such
failure remains unremedied for thirty (30) days after the Lender gives notice
thereof to such Borrower or Obligor.

6.3. Representations and Warranties. If any representation, warranty or
statement made in or pursuant to this Agreement or any Loan Document or any
other material information furnished by Borrower or any Obligor to Lender or any
other holder of any Note, shall be false or erroneous.

6.4. Validity Of Loan Documents. If (a) any material provision, in the sole
opinion of Lender, of any Loan Document shall at any time for any reason cease
to be valid, binding and enforceable against Borrower or any Obligor; (b) the
validity, binding effect or enforceability of any Loan Document against Borrower
or any Obligor shall be contested by Borrower or any Obligor; (c) Borrower or
any Obligor shall deny that it has any or further liability or obligation
thereunder; or (d) any Loan Document shall be terminated, invalidated or set
aside, or be declared ineffective or inoperative or in any way cease to give or
provide to Lender the benefits purported to be created thereby.

 
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6.5. Loan Document Default. If any event of default or default shall occur under
any other Loan Document, or if under any Loan Document any payment is required
to be made by Borrower or any Obligor on demand of Lender, and such demand is
made.

6.6. Cross Default. If Borrower shall default in the payment of principal or
interest due and owing upon any other obligation for borrowed money, beyond any
period of grace provided with respect thereto or in the performance or
observance of any other agreement, term or condition contained in any agreement
under which such obligation is created, if the effect of such default is to
allow the acceleration of the maturity of such Indebtedness or to permit the
holder thereof to cause such Indebtedness to become due prior to its stated
maturity.

6.7. ERISA Default. The occurrence of one or more ERISA Events that (a) Lender
determines could have a material adverse effect, or (b) results in a Lien on any
of the assets of Borrower.

6.8. Money Judgment. A final judgment or order for the payment of money in an
amount in excess of $250,000.00 shall be rendered against Borrower or any
Obligor by a court of competent jurisdiction, that remains unpaid or unstayed
and undischarged for a period (during which execution shall not be effectively
stayed) of thirty (30) days after the date on which the right to appeal has
expired.

6.9.  Material Adverse Change. There shall have occurred any Material Adverse
Change.

6.10 Insecurity. If Lender, for any reason in good faith and supported with
reasonable documentation, deems itself insecure with respect to repayment of any
Obligation.

6.11  Solvency. If Borrower or any Obligor shall (a)  die or discontinue
business, (b) generally not pay its debts as such debts become due, (c) make a
general assignment for the benefit of creditors, (d) apply for or consent to the
appointment of a receiver, a custodian, a trustee, an interim trustee or
liquidator of all or a substantial part of its assets, (e) be adjudicated a
debtor or have entered against it an order for relief under Title 11 of the
United States Code, as the same may be amended from time to time, (f) file a
voluntary petition in bankruptcy or file a petition or an answer seeking
reorganization or an arrangement with creditors or seeking to take advantage of
any other law (whether federal or state) relating to relief of debtors, or admit
(by answer, by default or otherwise) the material allegations of a petition
filed against it in any bankruptcy, reorganization, insolvency or other
proceeding (whether federal or state) relating to relief of debtors, (g) suffer
or permit to continue unstayed and in effect for thirty (30) consecutive days
any judgment, decree or order entered by a court of competent jurisdiction, that
approves a petition seeking its reorganization or appoints a receiver,
custodian, trustee, interim trustee or liquidator of all or a substantial part
of its assets, or (h) take any action in order thereby to effect any of the
foregoing, or omit to take, any action in order to prevent any of the foregoing.

7. REMEDIES UPON DEFAULT

7.1.  Rights of Lender. If any Event of Default shall occur, Lender may, at its
election, and without demand or notice of any kind, do any one or more of the
following:

(a)  Declare all of the Borrower’s Obligations to Lender to be immediately due
and payable, whereupon all unpaid principal, interest and fees in respect of
such Obligations, together with all of Lender’s costs, expenses and attorneys’
fees related thereto, under the terms of the Loan Documents or otherwise, shall
be immediately due and payable;

(b) Terminate any commitment to make any additional advances under any Loan;

(c) Exercise any and all rights and remedies available to Lender under any
applicable law;

 
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(d) Exercise any and all rights and remedies granted to Lender under the terms
of this Agreement or any of the other Loan Documents; and/or

(e) Set off the unpaid balance of the Obligations against any debt owing to
Borrower by the Lender or by any Lender Affiliate, including, without
limitation, any obligation under a repurchase agreement or any funds held at any
time by the Lender or any Lender Affiliate, whether collected or in the process
of collection, or in any time or demand deposit account maintained by Borrower
at, or evidenced by any certificate of deposit issued by, the Lender or any
Lender Affiliate. Borrower agrees, to the fullest extent it may effectively do
so under applicable law, that any holder of a participation in the Notes may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of Borrower pursuant to this Agreement in the amount of such
participation.

7.2.  No Waiver. The remedies in this Section 7 are in addition to, not in
limitation of, any other right, power, privilege, or remedy, either in law, in
equity, or otherwise, to which the Lender may be entitled. No failure or delay
on the part of the Lender in exercising any right, power, or remedy will operate
as a waiver thereof, nor will any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right
hereunder. The remedies in this Agreement are in addition to, not in limitation
of, any other right, power, privilege, or remedy, either in law, in equity, or
otherwise, to which the Lender may be entitled. All Lender’s rights and
remedies, whether evidenced by this Agreement or by any other agreement,
instrument or document shall be cumulative and may be exercised singularly or
concurrently.

8. MISCELLANEOUS

8.1.  Remedies; Waiver; Amendments. No waiver of any provision of this Agreement
or the Notes, or consent to departure therefrom, is effective unless in writing
and signed by the Lender. No such consent or waiver extends beyond the
particular case and purpose involved. No amendment to this Agreement is
effective unless in writing and signed by the Borrower and the Lender. If at any
time or times, by assignment or otherwise, Lender transfers any of the
Obligations or any part of the Collateral to another person, such transfer shall
carry with it Lender’s powers and rights under this Agreement with respect to
the Obligation or Collateral so transferred and the transferee shall have said
powers and rights, whether or not they are specifically referred to in the
transfer. To the extent that Lender retains any other of the Obligations or any
part of the Collateral, Lender will continue to have the rights and powers with
respect to the Obligations and the Collateral as set forth in this Agreement.

8.2. Expenses, Costs and Taxes. The Borrower shall pay on demand all reasonable
costs and expenses of Lender, and all Related Expenses, including but not
limited to, (a) administration, travel and out-of-pocket expenses, including but
not limited to reasonable attorneys’ fees and expenses, of Lender in connection
with the preparation, negotiation and closing of the Loan Documents and the
administration of the Loan Documents, the collection and disbursement of all
funds hereunder and the other instruments and documents to be delivered
hereunder, (b) reasonable extraordinary expenses of Lender in connection with
the administration of this Agreement, the Notes and the other instruments and
documents to be delivered hereunder, (c) the reasonable fees and out-of-pocket
expenses of special counsel for Lender, with respect to the foregoing, and of
local counsel, if any, who may be retained by said special counsel with respect
thereto, (d) all fees due hereunder or in any other Loan Documents, and (e) all
costs and expenses, including reasonable attorneys’ fees, in connection with the
determination of Lender’s lien priority in any collateral securing the Note, or
the restructuring or enforcement of the Note or any other Loan Document. In
addition, Borrower shall pay any and all stamp and other taxes and fees payable
or determined to be payable in connection with the execution and delivery of any
Loan Document, and the other instruments and documents to be delivered
hereunder, and agrees to hold Lender harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes or fees. Borrower authorizes Lender to debit such expenses, costs
and taxes directly to Borrower’s Loan accounts or any account Borrower maintains
with Lender or Lender Affiliate.

8.3.  Indemnification. The Borrower shall indemnify and hold the Lender harmless
against any and all liabilities, losses, damages, costs, and expenses of any
kind (including, without limitation, the reasonable fees and disbursements of
counsel in connection with any investigative, administrative or judicial
proceeding, whether or not the Lender shall be designated a party thereto) which
may be incurred by the Lender relating to or arising out of this Agreement or
any actual or proposed use of proceeds of any Loan hereunder; provided, that the
Lender shall have no right to be indemnified hereunder for its own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction. A certificate as to any such loss or expense shall be promptly
submitted by the Lender to the Borrower and shall, in the absence of manifest
error, be conclusive and binding as to the amount thereof.

 
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8.4.  Construction. The provisions of this Agreement and the respective rights
and duties of Borrower and Lender hereunder shall be governed by and construed
in accordance with New York law and any applicable federal laws. Borrower hereby
irrevocably submits to the non-exclusive jurisdiction of any New York state or
federal court sitting in Onondaga County, over any action or proceeding arising
out of or relating to this Agreement, or any document related to the
Obligations, and Borrower hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in such New York state
or federal court. The Borrower hereby waives any objection that it may now or
hereafter have to the venue of any such suit or any such court or that such suit
is brought in an inconvenient court. The several captions to different Sections
of this Agreement are inserted for convenience only and shall be ignored in
interpreting the provisions hereof. Time is of the essence in the performance of
the obligations under this Agreement. All grace periods in this Agreement and
all other Loan Documents shall run concurrently.

8.5.  Extension of Time. If any payment comes due on a day that is not a
Business Day, Borrower may make the payment on the first Business Day following
the payment date and pay the additional interest accrued to the date of payment.

8.6.  Notices. All notices, requests, demands or other communications provided
for hereunder shall be in writing and, if to Borrower, mailed or delivered to
it, addressed to it at the address specified on the signature pages of this
Agreement, or if to Lender, mailed or delivered to it, addressed to the address
of Lender specified on the signature pages of this Agreement. All notices,
statements, requests, demands and other communications provided for hereunder
shall be deemed to be given or made when delivered or forty-eight (48) hours
after being deposited in the mails with postage prepaid by registered or
certified mail, addressed as aforesaid, or sent by facsimile with telephonic
confirmation of receipt, except that notices from Borrower to Lender pursuant to
any of the provisions hereof shall not be effective until received by Lender.

8.7. Capital Adequacy. If Lender shall have determined, after the closing of the
Loans, that the adoption of any applicable law, rule, regulation or guideline
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by Lender (or its lending office) with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on Lender’s capital (or the capital of its
holding company) as a consequence of its obligations hereunder to a level below
that which Lender (or its holding company) could have achieved but for such
adoption, change or compliance (taking into consideration Lender’s policies or
the policies of its holding company with respect to capital adequacy) by an
amount deemed by Lender to be material, then from time to time, within fifteen
(15) days after demand by Lender, Borrower shall pay to Lender such additional
amount or amounts as will compensate Lender (or its holding company) for such
reduction. Lender shall designate a different lending office if such designation
will avoid the need for, or reduce the amount of, such compensation and will
not, in the judgment of Lender, be otherwise disadvantageous to Lender. A
certificate of Lender claiming compensation under this Section and setting forth
the additional amount or amounts to be paid to it hereunder shall be conclusive
in the absence of manifest error. In determining such amount, Lender may use any
reasonable averaging and attribution methods. Failure on the part of Lender to
demand compensation for any reduction in return on capital with respect to any
period shall not constitute a waiver of Lender’s rights to demand compensation
for any reduction in return on capital in such period or in any other period.
The protection of this Section shall be available to Lender regardless of any
possible contention of the invalidity or inapplicability of the law, regulation
or other condition that shall have been imposed.

8.8 Survival of Agreements; Relationship. All agreements, representations, and
warranties made in this Agreement will survive the making of the extension of
credit hereunder, and will bind and inure to the benefit of the Borrower and the
Lender, and their respective successors and assigns; provided, that no
subsequent holder of the Notes shall by reason of acquiring that Note or Notes
become obligated to make any Loan hereunder and no successor to or assignee of
the Borrower may borrow hereunder without the Lender’s written assent. The
Lender may transfer and assign this Agreement, and the Loans hereunder, and
deliver the Collateral to the assignee, who shall thereupon have all of the
rights of the Lender. Borrower may not assign this Agreement or the right to
receive any disbursements hereunder or any interest herein. The rights and
powers given in this Agreement to the Lender are in addition to those otherwise
created or existing in the same Collateral by virtue of other agreements or
writings. The relationship between the Borrower and the Lender with respect to
this Agreement, the Notes and any other Loan Document is and shall be solely
that of debtor and creditor, respectively, and the Lender has no fiduciary
obligation toward the Borrower with respect to any such document or the
transactions contemplated thereby.

 
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8.9. Severability. If any provision of this Agreement or the Notes, or any
action taken hereunder, or any application thereof, is for any reason held to be
illegal or invalid, such illegality or invalidity shall not affect any other
provision of this Agreement or the Notes, each of which shall be construed and
enforced without reference to such illegal or invalid portion and shall be
deemed to be effective or taken in the manner and to the full extent permitted
by law.

8.10. Entire Agreement. This Agreement, the Notes, the Security Instruments and
any other Loan Document executed in connection herewith integrate all the terms
and conditions mentioned herein or incidental hereto and supersede all oral
representations and negotiations and supersede, amend and restate prior writings
with respect to the subject matter hereof. In this Agreement unless the context
otherwise requires, words in the singular number include the plural, and in the
plural number include the singular.

8.11. Participation/Syndication. Borrower acknowledges that the Lender reserves
the right to syndicate and/or participate its interest in the Loans and Borrower
agrees to, at Lender’s request, execute such additional promissory notes and
other instruments as may be appropriate to evidence its obligation under the
Loans to such syndicate Lenders as may commit, in the future, to fund a portion
of the Loans according to the terms of this Agreement.

8.12.   JURY TRIAL WAIVER. BORROWER AND LENDER EACH WAIVE ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, BETWEEN LENDER AND BORROWER ARISING OUT OF, IN CONNECTION WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED THERETO.
 
 
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IN WITNESS WHEREOF, the Borrower and the Lender have each caused this Agreement
to be executed by their duly authorized officers on the date first set forth
above.
 

      Address: Borrower: 6635 Kirkville Road ANAREN, INC. E. Syracuse, NY 13057
   
   
    By:   s/s Lawrence A. Sala   Name:  Lawrence A. Sala   Title: President, CEO
& Chairman 

 
   

      Address: Lender: Mailcode: NY3421-0440 KEYBANK NATIONAL ASSOCIATION 201 S.
Warren Street
Syracuse, NY 13202  
   
    By:   s/s Stephen Markley   Name: Stephen Markley   Title: Vice President -
Relationship Manager

 
 
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Exhibit A
Security Instruments

Security Agreement dated on even date herewith between
Anaren, Inc. and KeyBank National Association

 
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Exhibit B
Subsidiaries

Anaren Microwave, Inc.
Anaren Ceramics, Inc.
Anaren Properties, LLC
Anaren Communications Suzhou Company, Ltd.

 
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