Unassociated Document


    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.

    


    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    “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.

    


    
      
         

      

      
        2

        
          

        

      

      
         

      

       

    

    “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.

    


    
      
         

      

      
        3

        
          

        

      

      
         

      

       

    

    “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.

    


    
      
         

      

      
        4

        
          

        

      

      
         

      

    


    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.

    


    
      
         

      

      
        5

        
          

        

      

      
         

      

       

    

    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.

    


    
      
         

      

      
        6

        
          

        

      

      
         

      

       

    

    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;

    


    
      
         

      

      
        8

        
          

        

      

      
         

      

       

    

    (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:

    


    
      
         

      

      
        9

        
          

        

      

      
         

      

       

    

    (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;

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

       

    

    (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.

    


    
      
         

      

      
        14

        
          

        

      

      
         

      

       

    

    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.

    


    
      
         

      

      
        15

        
          

        

      

      
         

      

       

    

    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. 

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    


    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


    

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

    Exhibit
      A

    Security
      Instruments

    


    Security
      Agreement dated on even date herewith between

    Anaren,
      Inc. and KeyBank National Association

    


    
      
         

      

      
        18

        
          

        

      

      
         

      

    


    Exhibit
      B

    Subsidiaries

    


    Anaren
      Microwave, Inc.

    Anaren
      Ceramics, Inc.

    Anaren
      Properties, LLC

    Anaren
      Communications Suzhou Company, Ltd.

    


    
      
         

      

      
        19