Document:

Unassociated Document

    Promissory
      Note

    Revolving
      Credit

    LIBOR
      Rate

     

    
      	$50,000,000.00	
              July
                31,
                2008

            

    

     

    ANAREN,
      INC.,
      a New
      York corporation with a place of business at 6635 Kirkville Road, East Syracuse,
      NY 13057 (“Borrower”) shall pay to the order of KEYBANK
      NATIONAL ASSOCIATION,
      a
      national banking association, with offices at 201 South Warren Street, Syracuse,
      NY 13202, and its successors and assigns (“Lender”), Fifty Million Dollars
      ($50,000,000.00), or so much thereof as may have been advanced under this Note,
      on or before July 31, 2013, plus interest on the outstanding balance from this
      date until paid.

     

    Advances.
      Lender
      will, upon request from Borrower, make advances to or for the account of
      Borrower up to but not exceeding an aggregate unpaid principal amount
      outstanding at any one time equal to: (a) $50,000,000.00 through July 31, 2009;
      (b) $40,000,000.00 from August 1, 2009 through July 31, 2010; (c) $30,000,000.00
      from August 1, 2010 through July 31, 2011; (d) $20,000,000.00 from August 1,
      2011 through July 31, 2012; and (e) $10,000,000.00 from August 1, 2012 through
      July 31, 2013. Each principal amount and its corresponding effective period
      referred to in (a) through (e) hereof shall be referred to as the “Available
      Credit”.
      All
      advances shall be in a minimum amount of at least $50,000.00 or such lesser
      amount remaining under the Available Credit. Subject to the foregoing, Borrower
      may borrow, repay and reborrow up to the Available Credit.

     

    Interest
      (Prime Rate).
      Borrower
      shall pay interest on the outstanding principal balance of this Note at the
      rate
      per annum equal to the Prime Rate plus the Prime Margin ("Adjusted Prime Rate").
      “Prime
      Rate” means the
      rate
      per annum from time to time established by the Lender as Lender’s Prime Rate,
      whether or not such rate is publicly announced; the Prime Rate may not be the
      lowest interest rate charged by the Lender for commercial or other extensions
      of
      credit. In the event of any change in the Prime Rate, the rate of interest
      applicable to Borrower’s loans evidenced hereby shall be adjusted to immediately
      correspond with each such change. “Prime Margin” means: (a) from the date of
      this Note through September 30, 2008, 100 basis points (“bps”); (b) thereafter,
      the Prime Margin shall be determined from the following chart under the column
      entitled “Prime” based upon Borrower’s economic performance as of the end of
      each fiscal quarter measured by the formula: EBITDA divided by the Current
      Portion of Long Term Debt (“CPLTD”)
      plus
      Interest Expense. “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 CPLTD,
      which shall otherwise be determined in accordance with generally accepted
      accounting principles as in effect, which shall include the official
      interpretations thereof by the Financial Accounting Standards Board,
      consistently applied. All computations of interest shall be made on the basis
      of
      a 360-day year and paid for the actual number of days elapsed.

     

    
      	
              Index

            	
              LIBOR
                Option

            	 	
              Prime

            
	
              EBITDA/CPLTD
                + Interest

            	
              Margin
                for Revolver Balances

            	
              Non-Usage
                Fee

            	
              Margin
                for Revolver Balances

            
	
              >2.0
                to 1

            	
              +100
                bps

            	
              20
                bps

            	
              -100
                bps

            
	
              >1.75
                to 2.0

            	
              +110
                bps

            	
              25
                bps

            	
              -90
                bps

            
	
              >1.50
                to 1.75

            	
              +125
                bps

            	
              35
                bps

            	
              -75
                bps

            
	
              1.50
                or less (default)

            	
              +425
                bps

            	
              N/A

            	
              +
                225 bps

            

    

     

    Interest
      (LIBOR Rate). Notwithstanding
      anything contained in the Note to the contrary, Borrower may elect to have
      one
      or more advances under the Note bear interest at a fixed rate of interest equal
      to the Adjusted LIBOR Rate for the duration of a LIBOR Interest Period; provided
      that no such advance shall be in an amount of less than $100,000.00, and
      provided further that no LIBOR Interest Period may extent beyond the maturity
      date of the Note. Upon the expiration of the applicable LIBOR Interest Period,
      Borrower may elect a new Adjusted LIBOR Rate or the Adjusted Note Rate. If
      Borrower fails to make an election, the advances will bear interest at the
      LIBOR
      Rate plus the Margin for consecutive LIBOR Interest Periods until an election
      is
      made. During any LIBOR Interest Period, Borrower shall continue to make interest
      payments as required by the Note. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    1.
      For
      purposes hereof, the following definitions apply:

     

    “Adjusted
      LIBOR Rate” means for any LIBOR Interest Period, an interest rate per annum
      equal to the sum of (a) the LIBOR Rate for such LIBOR Interest Period and (b)
      the LIBOR Margin. 

     

    “Adjusted
      Note Rate” means the interest rate provided for in the Note based on the
      Lender’s Adjusted Prime Rate (as defined in the Note).

     

    “LIBOR
      Rate” means the rate per annum calculated by the Lender in good faith, which
      Lender determines with reference to the rate per annum at which deposits in
      United States dollars are offered by prime banks in the London interbank
      eurodollar market two LIBOR Business Days prior to the day on which such rate
      is
      calculated by the Lender, in an amount comparable to the amount of such advance
      and with a maturity equal to the applicable LIBOR Interest Period. For purposes
      of illustration, at the end of a fiscal quarter, an advance bearing interest
      at
      the Adjusted LIBOR Rate is subject, at borrower’s option, to bear interest
      beginning on the first day of the next fiscal quarter at the Adjusted LIBOR
      Rate
      or the Adjusted Prime Rate. If borrower elects the Adjusted LIBOR Rate or if
      such Rate becomes applicable by default as provided in paragraph 2 below, the
      Adjusted LIBOR Rate for such advance shall be calculated as of two LIBOR
      Business Days prior to the first day of such new fiscal quarter.

     

    “LIBOR
      Business Day” means a day on which dealings are carried on in the London
      interbank eurodollar market. 

     

    "LIBOR
      Interest Period" means
      the
      period commencing on the date an advance bearing interest at the Adjusted LIBOR
      Rate is made, continued, or converted (the “Commencement
      Date”)and
      continuing until the final day of the fiscal quarter in which the Commencement
      Date occurs. 

     

    “LIBOR
      Margin” means: (a) from the date of this Note through September 30, 2008, 100
      bps; (b) thereafter, the LIBOR Margin shall be determined from the following
      chart under the column entitled “LIBOR Option” based upon Borrower’s economic
      performance as of the end of each fiscal quarter measured by the formula: EBITDA
      divided by CPLTD plus Interest Expense. EBITDA and CPLTD have the meanings
      set
      forth in and shall be calculated pursuant to the paragraph above entitled
“Interest (Prime Rate)”. 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.

     

    
      	
              Index

            	
              LIBOR
                Option

            	 	
              Prime

            
	
              EBITDA/CPLTD
                + Interest

            	
              Margin
                for Revolver Balances

            	
              Non-Usage
                Fee

            	
              Margin
                for Revolver Balances

            
	
              >2.0
                to 1

            	
              +100
                bps

            	
              20
                bps

            	
              -100
                bps

            
	
              >1.75
                to 2.0

            	
              +110
                bps

            	
              25
                bps

            	
              -90
                bps

            
	
              >1.50
                to 1.75

            	
              +125
                bps

            	
              35
                bps

            	
              -75
                bps

            
	
              1.50
                or less (default)

            	
              +425
                bps

            	
              N/A

            	
              +225
                bps

            

    

     

    “LIBOR
      Reserve Requirements” means, for any advance bearing interest at the Adjusted
      LIBOR Rate, the maximum reserves (whether basic, supplemental, marginal,
      emergency, or otherwise) prescribed by the Board of Governors of the Federal
      Reserve System (or any successor) with respect to liabilities or assets
      consisting of or including “Eurocurrency liabilities” (as defined in Regulation
      D of the Board of Governors of the Federal Reserve System) having a term equal
      to the term of such advance.

     

    2.
      Borrower may exercise the LIBOR Rate Option is by giving Lender irrevocable
      written notice of such exercise on the second LIBOR Business Day prior to the
      proposed commencement of the relevant LIBOR Interest Period, which written
      notice shall specify: (i) the portion of the advances with respect to which
      Borrower is electing the LIBOR Rate Option, (ii) the LIBOR Business Day upon
      which the applicable LIBOR Interest Period is to commence and (iii) the
      duration of the applicable LIBOR Interest Period. Upon the expiration of the
      initial LIBOR Interest Period, Borrower may elect a new Adjusted LIBOR Rate
      or
      the Adjusted Prime Rate. If Borrower fails to make an election, the advances
      will bear interest at the Adjusted LIBOR Rate for consecutive LIBOR Interest
      Periods until an election is made. Lender shall be under no duty to notify
      Borrower that a LIBOR Interest Period is expiring. The LIBOR Rate Option may
      be
      exercised by Borrower only with respect to any portion of the advances equal
      to
      or in excess of $100,000. At no time may there be more than three (3) LIBOR
      Interest Periods in effect with respect to the advances. No LIBOR Interest
      Period may extend beyond the maturity date of the Note. 

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    3.
      If,
      because of the introduction of or any change in, or because of any judicial,
      administrative, or other governmental interpretation of, any law or regulation,
      there shall be any increase in the cost to Lender of making, funding,
      maintaining, or allocating capital to any advance bearing interest at the
      Adjusted LIBOR Rate, including a change in LIBOR Reserve requirements, then
      Borrower shall, from time to time upon demand by Lender, pay to Lender
      additional amounts sufficient to compensate Lender for such increased
      cost.

     

    4.
      If
      Lender determines (which determination shall be conclusive and binding upon
      Borrower, absent manifest error) (i) that dollar deposits in an amount
      approximately equal to the portion of the advances for which Borrower has
      exercised the LIBOR Rate Option for the designated LIBOR Interest Period are
      not
      generally available at such time in the London Interbank Market for deposits
      in
      dollars, (ii) that the rate at which such deposits are being offered will not
      adequately and fairly reflect the cost to Lender of maintaining an Adjusted
      LIBOR Rate on such portion of the advances or of funding the same for such
      LIBOR
      Interest Period due to circumstances affecting the London Interbank Market
      generally, (iii) that reasonable means do not exist for ascertaining an Adjusted
      LIBOR Rate, or (iv) that an Adjusted LIBOR Rate would be in excess of the
      maximum interest rate which Borrower may by law pay, then, in any such event,
      Lender shall so notify Borrower and all portions of the advances bearing
      interest at an Adjusted LIBOR Rate that are so affected shall, as of the date
      of
      such notification with respect to an event described in clause
      (ii)
      or
(iv)
      above,
      or as of the expiration of the applicable LIBOR Interest Period with respect
      to
      an event described in clause
      (i)
      or
(iii)
      above,
      bear interest at the Adjusted Prime Rate until such time as the situations
      described herein are no longer in effect or can be avoided by Borrower
      exercising a LIBOR Rate Option for a different LIBOR Interest Period.

     

    5.
      If,
      because of the introduction of or any change in, or because of any judicial,
      administrative, or other governmental interpretation of, any law or regulation,
      it becomes unlawful for Lender to make, fund, or maintain any advance at the
      Adjusted LIBOR Rate, then Lender’s obligation to make, fund, or maintain any
      such advance shall terminate and each affected outstanding advance shall be
      converted to the Adjusted Note Rate on the earlier of the termination date
      for
      each LIBOR Interest Period or the date the making, funding, or maintaining
      of
      each such advance becomes unlawful.

     

     

    6.
      If
      Borrower repays any advance bearing interest at the Adjusted LIBOR Rate prior
      to
      the end of the applicable LIBOR Interest Period, including without limitation
      a
      prepayment under paragraphs 4 and 5 immediately preceding, Borrower shall
      reimburse Lender on demand for the resulting loss or expense incurred by Lender,
      including without limitation any loss or expense incurred in obtaining,
      liquidating or reemploying deposits from third parties. A statement as to the
      amount of such loss or expense, prepared in good faith and in reasonable detail
      by Lender and submitted by Lender to the Borrower, shall be conclusive and
      binding for all purposes absent manifest error in computation (“Breakage
      Costs”). Calculation of all amounts payable to Lender under this paragraph shall
      be made as though Lender shall have actually funded the relevant advance through
      deposits or other funds acquired from third parties for such purpose; provided,
      however, that Lender may fund any advance bearing interest at the Adjusted
      LIBOR
      Rate in any manner it sees fit and the foregoing assumption shall be utilized
      only for purposes of calculation of amounts payable under this paragraph. Lender
      will be entitled to receive the reimbursement provided for herein regardless
      of
      whether the prepayment is voluntary or involuntary (including demand or
      acceleration of the Note upon Borrower's default).

     

    Payments.
      Commencing October 1, 2008, and continuing on the 1st
      day of
      each consecutive three month period thereafter to and including July 31, 2013,
      Borrower shall pay interest then accrued and unpaid on the outstanding balance
      (if any) of this Note. In addition, if the outstanding principal balance under
      this Note exceeds the Available Credit then in effect (including each time
      the
      Available Credit is reduced under the terms of this Note), Borrower shall
      immediately make a principal payment in the amount of such excess. At maturity
      or the earlier acceleration of this Note, Borrower shall pay the entire
      principal balance, plus all accrued and unpaid interest and fees. Borrower
      shall
      make all payments on this Note to Lender at its address stated above, or at
      such
      other place as the holder of this Note may designate. Borrower may make
      prepayments of principal at any time subject to Paragraph 6 under “Interest
      (LIBOR Rate)” above, and subject to any requirements and/or provisions of any
      agreement(s) for any 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 with respect to this Note. For any payment due under this Note not made
      within ten (10) days after its due date, Borrower shall pay a late fee equal
      to
      the greater of five percent (5%) of the amount of the payment not made or
      $50.00. Lender shall apply all payments received on this Note to any unpaid
      late
      charges and prepayment premiums, accrued and unpaid interest then due and owing,
      and the reduction of principal of this Note, in such order and in such amounts
      as Lender may determine from time to time. The sum or sums shown on Lender’s
      records shall be rebuttably presumptive of the correct unpaid balances of
      principal and interest on this Note. Lender is also authorized to complete
      all
      blank spaces in this Note. 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.
      “Business Day” means a day of the year on which banks are not required or
      authorized by law to close in New York State. 

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    Default
      Rate.
      At
      Lender’s election, without notice or demand, Borrower shall pay interest at the
      rate per annum equal to Three Percent (3%) plus the applicable interest rate
      under this Note (“Default Rate”) on the outstanding balance of this Note during
      the period that any Event of Default exists (as defined below), on past due
      interest on this Note, on all other amounts payable to Lender by Borrower in
      connection with this Note, and on any unsatisfied judgment on this Note. In
      no
      event, however, shall the interest rate on this Note exceed the highest rate
      permitted by law. 

     

    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”.

     

    
      	
              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

            

    

     

    EBITDA
      and CPLTD have the meanings set forth in and shall be calculated pursuant to
      the
      paragraph above entitled “Interest (Prime Rate)”

     

    Warranties.
      Borrower
      represents and warrants to the Lender (which representations and warranties
      will
      survive the delivery of the Note) that:

     

    1.
      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 execute and deliver this Note and all other instruments,
      agreements and documents entered into from time to time, evidencing or securing
      the loans 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 (collectively referred to as “Loan Documents”), and
      to carry out the provisions and conditions of the Note and Loan Documents.
      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.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

       

    

    2.
      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 this Note and the Loan Documents, 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, and this Note 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.
      Neither the execution and delivery of this Note and the Loan Documents, nor
      the
      compliance by Borrower with the terms and conditions of this Note and 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.

     

    4.
      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 this Note and the Loan Documents.

     

    5.
      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.

     

    6.
      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. 

     

    Financial
      Reporting.
      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:

     

    1.
      As
      soon as practicable after the end of each quarter in each fiscal year, and
      in
      any event within 45 days thereafter, 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, internally
      prepared and certified as complete and correct by the principal financial
      officer of Borrower, subject to changes resulting from year-end
      adjustments;

     

    2.
      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.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    Collateral/Guaranties.
      Borrower
      has secured this Note by a Security Agreement dated July 31, 2008 between
      Borrower and Lender. This Note is guaranteed by Anaren Microwave, Inc., Anaren
      Ceramics, Inc., and Anaren Properties, LLC under guaranty agreements (each
      a
“Guarantor”). “Obligor” means (i) a person whose credit or any of whose property
      is pledged to payment of this Note and includes, without limitation, any
      Guarantor, and (ii) any signatory to a Loan Document.

     

    Deposit
      Accounts.
      So long
      as credit is available hereunder or until all principal of and interest on
      this
      Note 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. 

     

    Set
      Off. The
      Borrower grants to the Lender a continuing lien on and security interest in
      any
      and all deposits or other sums at any time credited by or due from the Lender
      (or any of its banking or lending affiliates, or any bank acting as a
      participant under any loan arrangement between the Lender and the Borrower,
      or
      any third party acting on the Lender's behalf (collectively, the "Lender
      Affiliates")) to the Borrower and any cash, securities, instruments or other
      property of the Borrower in the possession of the Lender or any Lender
      Affiliate, whether for safekeeping or otherwise, or in transit to or from the
      Lender or any Lender Affiliate (regardless of the reason the Lender or Lender
      Affiliate had received the same or whether the Lender or Lender Affiliate has
      conditionally released the same) as security for the full and punctual payment
      and performance of all of the liabilities and obligations of the Borrower to
      the
      Lender or any Lender Affiliate and such deposits and other sums may be applied
      or set off against such liabilities and obligations of the Borrower to the
      Lender or any Lender Affiliate at any time, whether or not such are then due,
      whether or not demand has been made and whether or not other collateral is
      then
      available to the Lender or any Lender Affiliate.

     

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

     

    1.
      If
      (a) the interest hereon or any commitment or other fee shall not be paid in
      full punctually when due and payable or within three days thereafter, or
      (b) the principal hereof shall not be paid in full punctually when due and
      payable. 

     

    2.
      If
      Borrower or any Obligor fails to perform or observe any covenant or agreement
      (other than as referred to in (1) above) contained in this Note 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.

     

    3.
      If any
      representation, warranty or statement made in or pursuant to this Note or any
      Loan Document or any other material information furnished by Borrower or any
      Obligor to Lender or any other holder of this Note, shall be false or erroneous.
      

     

    4.
      If (a)
      any material provision, in the sole opinion of Lender, of this Note or 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 this Note or 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. 

     

    5.
      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.
      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.
      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. 

     

    8.
      There
      shall have occurred 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 Note or any of the other
      Loan Documents or the rights and remedies of Lender hereunder or
      thereunder.

     

    9.
      If
      Lender,
      for
      any
      reason in good faith and supported with reasonable documentation, deems itself
      insecure with respect to repayment of this Note. 

     

    10.
      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. 

     

    Remedies
      upon Default.
      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:

     

    1.
      Declare all of the Borrower’s obligations to Lender under this Note immediately
      due and payable, whereupon all unpaid principal, interest and fees in respect
      of
      this Note, together with all of Lender’s costs, expenses and attorneys’ fees
      related thereto, under the terms of this Note or otherwise, shall be immediately
      due and payable; 

     

    2.
      Terminate any commitment to make advances under this Note;

     

    3.
      Exercise any and all rights and remedies available to Lender under any
      applicable law;

     

    4.
      Exercise any and all rights and remedies granted to Lender under the terms
      of
      this Note and any of the other Loan Documents; and/or

     

    5.
      Set
      off the unpaid balance hereunder against any debt owing to Borrower by the
      Lender or by any Lender Affiliate.

     

    Governing
      Law.
      This
      Note shall be construed under the laws of the State of New York and any
      applicable federal laws. Time is of the essence in the payment of this Note.
      All
      grace periods in this Note and all other Loan Documents shall run concurrently.
      

     

    Notices.
      All
      notices, requests, demands and 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 Note, or if to Lender,
      mailed or delivered to it, addressed to the address of Lender specified on
      the
      front page of this Note. 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 or receipt, except that notices from Borrower to Lender pursuant
      to
      any of the provisions hereof shall not be effective until received by Lender.
      

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    Binding
      Effect.
      This
      Note shall be binding upon the Borrower and upon Borrower’s respective heirs,
      successors, assigns and legal representatives, and shall inure to the benefit
      of
      the Lender and its successors, endorsees and assigns.

     

    Amendments.
       Any
      amendment hereof must be in writing and signed by the party against whom
      enforcement is sought. Unenforceability of any provision hereof shall not affect
      the enforceability of any other provision. A
      photographic or other reproduction of this Note may be made by the Lender,
      and
      any such reproduction shall be admissible in evidence with the same effect
      as
      the original itself in any judicial or administrative proceeding, whether or
      not
      the original is in existence.

     

    Indemnification.
      In
      consideration of this loan, Borrower hereby releases and discharges Lender
      and its
      affiliates and their shareholders, directors, officers, employees, agents and
      attorneys (collectively “Related Parties”) from any and all claims, demands,
      liability and causes of action whatsoever, now known or unknown, arising out
      of
      or any way related to any of the Borrower’s obligations hereunder or under the
      Loan Documents. Borrower shall indemnify, defend and hold harmless the
Lender
      and the
      Related Parties against any claim brought or threatened against the Lender
      by the
      Borrower, any guarantor or endorser hereof, or any other person on account
      of
Lender’s
      relationship with the Borrower or any guarantor or endorser hereof.

     

    No
      Waiver.
      None of
      the following will be a course of dealing, estoppel, waiver, or implied
      amendment on which any party to this Note or any Loan Document may rely: (1)
Lender’s
      acceptance of one or more late or partial payments; (2) Lender’s
      forbearance from exercising any right or remedy under this Note, or any document
      providing security for or guaranty of repayment of this Note; or (3)
Lender’s
      forbearance from exercising any right or remedy under this Note or any Loan
      Document on any one or more occasions. Lender’s
      exercise of any rights or remedies or a part of a right or remedy on one or
      more
      occasions shall not preclude Lender
      from
      exercising the right or remedy at any other time. Lender’s
      rights
      and remedies under this Note, the Loan Documents, and the law and in equity
      are
      cumulative to, but independent of, each other. 

     

    Costs,
      Expenses, Fees and Taxes. Borrower
      agrees to pay on demand all reasonable costs and expenses of Lender, 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 of the Loan
      Documents, including but not limited to Breakage Costs, and (e) all costs and
      expenses, including reasonable attorneys’ fees, in connection with the
      determination of Lender’s lien priority in any collateral securing this Note, or
      the restructuring or enforcement of this Note or any 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
      Waivers. Borrower
      waives presentment, demand, notice, protest, and all other demands and notices
      in connection with delivery, acceptance, performance, default, or enforcement
      of
      this Note. 

     

    Jurisdiction.
      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 Note, 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. 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.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    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 NOTE OR ANY OTHER
      INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH
      OR THE TRANSACTIONS RELATED THERETO. 

     

    Borrower:
      ANAREN,
      INC.

    

    
      	
              By:

              Name:

              Title:

            	
              s/s Lawrence A. Sala

              Lawrence A. Sala

              President, CEO &
Chairman

            

      	 	 

      	Address:	
              6635
                Kirkville Road

              E. Syracuse, NY
                13057

            

    

     

    
      
         

      

      
        9Unassociated Document

     

    
      

      Exhibit
        10.1

      

      EL
        CAPITAN PRECIOUS METALS, INC.

      2005
        STOCK INCENTIVE PLAN

      

       

      1.    Purpose.
        The
        purpose of the 2005 Stock Incentive Plan (the “Plan”) of El Capitan Precious
        Metals, Inc. (the “Company”) is to increase stockholder value and to advance the
        interests of the Company by furnishing a variety of economic incentives
        (“Incentives'”) designed to attract, retain and motivate employees, certain key
        consultants and directors of the Company. Incentives may consist of
        opportunities to purchase or receive shares of Common Stock, $0.01 par value
        per
        share, of the Company (“Common Stock”) on terms determined under this
        Plan.

       

      2.    Administration.
        The
        Plan shall be administered by the board of directors of the Company (the
“Board
        of Directors”) or by a stock option or compensation committee (the “Committee”)
        of the Board of Directors. The Committee shall consist of not less than two
        directors of the Company and shall be appointed from time to time by the
        Board
        of Directors. Each member of the Committee shall be (i) a “non-employee
        director” within the meaning of Rule 16b-3 of the Securities
        Exchange Act of 1934 (including the regulations promulgated thereunder, the
        “1934 Act”)
        (a
“Non-Employee Director”), and
        (ii)
        shall be an “outside director” within the meaning of Section 162(m) under the
        Internal Revenue Code of 1986, as amended (the “Code”) and the regulations
        promulgated thereunder. The Committee shall have complete authority to award
        Incentives under the Plan, to interpret the Plan, and to make any other
        determination which it believes necessary and advisable for the proper
        administration of the Plan. The Committee’s decisions and matters relating to
        the Plan shall be final and conclusive on the Company and its participants.
        If
        at any time there is no stock option or compensation committee, the term
        “Committee”, as used in the Plan, shall refer to the Board of
        Directors.

       

      3.    Eligible
        Participants.
        Officers of the Company, employees of the Company or its subsidiaries, members
        of the Board of Directors, and consultants or other independent contractors
        who
        provide services to the Company or its subsidiaries shall be eligible to
        receive
        Incentives under the Plan when designated by the Committee. Participants
        may be
        designated individually or by groups or categories (for example, by pay grade)
        as the Committee deems appropriate. Participation by officers of the Company
        or
        its subsidiaries and any performance objectives relating to such officers
        must
        be approved by the Committee. Participation by others and any performance
        objectives relating to others may be approved by groups or categories (for
        example, by pay grade) and authority to designate participants who are not
        officers and to set or modify such targets may be delegated.

       

      4.    Types
        of Incentives.
        Incentives under the Plan may be granted in any one or a combination of the
        following forms: (a) incentive stock options and non-statutory stock options
        (section 6); (b) stock appreciation rights (“SARs”) (section 7); (c) stock
        awards (section 8); (d) restricted stock (section 8); and (e) performance
        shares
        (section 9).

       

      5.    Shares
        Subject to the Plan.

       

      5.1.    Number
        of Shares.
        Subject
        to adjustment as provided in Section 10.6, the number of shares of Common
        Stock
        which may be issued under the Plan shall not exceed 16,000,000 shares of
        Common
        Stock. Shares of Common Stock that are issued under the Plan or are subject
        to
        outstanding Incentives will be applied to reduce the maximum number of shares
        of
        Common Stock remaining available for issuance under the Plan.

       

      5.2.    Cancellation.
        To the
        extent that cash in lieu of shares of Common Stock is delivered upon the
        exercise of an SAR pursuant to Section 7.4, the Company shall be deemed,
        for
        purposes of applying the limitation on the number of shares, to have issued
        the
        greater of the number of shares of Common Stock which it was entitled to
        issue
        upon such exercise or on the exercise of any related option. In the event
        that a
        stock option or SAR granted hereunder expires or is terminated or canceled
        unexercised as to any shares of Common Stock, such shares may again be issued
        under the Plan either pursuant to stock options, SARs or otherwise. In the
        event
        that shares of Common Stock are issued as restricted stock or pursuant to
        a
        stock award and thereafter are forfeited or reacquired by the Company pursuant
        to rights reserved upon issuance thereof, such forfeited and reacquired shares
        may again be issued under the Plan, either as restricted stock, pursuant
        to
        stock awards or otherwise. The Committee may also determine to cancel, and
        agree
        to the cancellation of, stock options in order to make a participant eligible
        for the grant of a stock option at a lower price than the option to be canceled.
        

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      5.3.    Type
        of Common Stock.
        Common
        Stock issued under the Plan in connection with stock options, SARs, performance
        shares, restricted stock or stock awards, may be authorized and unissued
        shares
        or treasury stock, as designated by the Committee.

       

      6.    Stock
        Options.
        A stock
        option is a right to purchase shares of Common Stock from the Company. Each
        stock option granted by the Committee under this Plan shall be subject to
        the
        following terms and conditions:

       

      6.1.    Price.
        The
        option price per share shall be determined by the Committee, subject to
        adjustment under Section 10.6.

       

      6.2.    Number.
        The
        number of shares of Common Stock subject to the option shall be determined
        by
        the Committee, subject to adjustment as provided in Section 10.6. The number
        of
        shares of Common Stock subject to a stock option shall be reduced in the
        same
        proportion that the holder thereof exercises a SAR if any SAR is granted
        in
        conjunction with or related to the stock option. Notwithstanding the foregoing,
        no person shall receive grants of Stock Options under the Plan that exceed
        2,000,000 shares during any one fiscal year of the Company. 

       

      6.3.    Duration
        and Time for Exercise.
        Subject
        to earlier termination as provided in Section 10.4, the term of each stock
        option shall be determined by the Committee but shall not exceed ten years
        and
        one day from the date of grant. Each stock option shall become exercisable
        at
        such time or times during its term as shall be determined by the Committee
        at
        the time of grant. The Committee may accelerate the exercisability of any
        stock
        option. Subject to the foregoing and with the approval of the Committee,
        all or
        any part of the shares of Common Stock with respect to which the right to
        purchase has accrued may be purchased by the Company at the time of such
        accrual
        or at any time or times thereafter during the term of the option at such
        price
        and on such terms as the Company and the optionee shall mutually agree;
provided,
        however,
        that any
        shares so repurchased shall not be available for re-issuance under the
        Plan.

       

      6.4.    Manner
        of Exercise.
        A stock
        option may be exercised, in whole or in part, by giving written notice to
        the
        Company, specifying the number of shares of Common Stock to be purchased
        and
        accompanied by the full purchase price for such shares. The option price
        shall
        be payable (a) in United States dollars upon exercise of the option and may
        be
        paid by cash, uncertified or certified check or bank draft; (b) at the
        discretion of the Committee, by delivery of shares of Common Stock in payment
        of
        all or any part of the option price, which shares shall be valued for this
        purpose at the Fair Market Value on the date such option is exercised; or
        (c) at
        the discretion of the Committee, by instructing the Company to withhold from
        the
        shares of Common Stock issuable upon exercise of the stock option shares
        of
        Common Stock in payment of all or any part of the exercise price and/or any
        related withholding tax obligations, which shares shall be valued for this
        purpose at the Fair Market Value or in such other manner as may be authorized
        from time to time by the Committee. The shares of Common Stock delivered
        by the
        participant pursuant to Section 6.4(b) must have been held by the participant
        for a period of not less than six months prior to the exercise of the option,
        unless otherwise determined by the Committee. Prior to the issuance of shares
        of
        Common Stock upon the exercise of a stock option, a participant shall have
        no
        rights as a stockholder.

       

      6.5.    Incentive
        Stock Options.
        Notwithstanding anything in the Plan to the contrary, the following additional
        provisions shall apply to the grant of stock options which are intended to
        qualify as Incentive Stock Options (as such term is defined in Section 422
        of
        the Code):

       

       (a)    The
        aggregate Fair Market Value (determined as of the time the option is granted)
        of
        the shares of Common Stock with respect to which Incentive Stock Options
        are
        exercisable for the first time by any participant during any calendar year
        (under all of the Company’s plans) shall not exceed $100,000. The determination
        will be made by taking incentive stock options into account in the order
        in
        which they were granted. If such excess only applies to a portion of an
        Incentive Stock Option, the Committee, in its discretion, will designate
        which
        shares will be treated as shares to be acquired upon exercise of an Incentive
        Stock Option.

       

      (b)    Any
        Incentive Stock Option certificate authorized under the Plan shall contain
        such
        other provisions as the Committee shall deem advisable, but shall in all
        events
        be consistent with and contain all provisions required in order to qualify
        the
        options as Incentive Stock Options.

       

      (c)    All
        Incentive Stock Options must be granted within ten years from the earlier
        of the
        date on which this Plan was adopted by Board of Directors.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (d)    Unless
        sooner exercised, all Incentive Stock Options shall expire no later than
        10
        years after the date of grant.

       

      (e)    The
        option price for Incentive Stock Options shall be not less than the Fair
        Market
        Value of the Common Stock subject to the option on the date of
        grant.

       

      (f)    If
        Incentive Stock Options are granted to any participant who, at the time such
        option is granted, would own (within the meaning of Section 422 of the Code)
        stock possessing more than 10% of the total combined voting power of all
        classes
        of stock of the employer corporation or of its parent or subsidiary corporation,
        (i) the option price for such Incentive Stock Options shall be not less than
        110% of the Fair Market Value of the Common Stock subject to the option on
        the
        date of grant and (ii) such Incentive Stock Options shall expire no later
        than
        five years after the date of grant.

       

      7.    Stock
        Appreciation Rights.
        An SAR
        is a right to receive, without payment to the Company, a number of shares
        of
        Common Stock, cash or any combination thereof, the amount of which is determined
        pursuant to the formula set forth in Section 7.4. An SAR may be granted (a)
        with
        respect to any stock option granted under this Plan, either concurrently
        with
        the grant of such stock option or at such later time as determined by the
        Committee (as to all or any portion of the shares of Common Stock subject
        to the
        stock option), or (b) alone, without reference to any related stock option.
        Each
        SAR granted by the Committee under this Plan shall be subject to the following
        terms and conditions:

       

      7.1.    Number.
        Each
        SAR granted to any participant shall relate to such number of shares of Common
        Stock as shall be determined by the Committee, subject to adjustment as provided
        in Section 10.6. In the case of an SAR granted with respect to a stock option,
        the number of shares of Common Stock to which the SAR pertains shall be reduced
        in the same proportion that the holder of the option exercises the related
        stock
        option.

       

      7.2.    Duration.
        Subject
        to earlier termination as provided in Section 10.4, the term of each SAR
        shall
        be determined by the Committee but shall not exceed ten years and one day
        from
        the date of grant. Unless otherwise provided by the Committee, each SAR shall
        become exercisable at such time or times, to such extent and upon such
        conditions as the stock option, if any, to which it relates is exercisable.
        The
        Committee may in its discretion accelerate the exercisability of any
        SAR.

       

      7.3.    Exercise.
        An SAR
        may be exercised, in whole or in part, by giving written notice to the Company,
        specifying the number of SARs which the holder wishes to exercise. Upon receipt
        of such written notice, the Company shall, within 90 days thereafter, deliver
        to
        the exercising holder certificates for the shares of Common Stock or cash
        or
        both, as determined by the Committee, to which the holder is entitled pursuant
        to Section 7.4.

       

      7.4.    Payment.
        Subject
        to the right of the Committee to deliver cash in lieu of shares of Common
        Stock
        (which, as it pertains to officers and directors of the Company, shall comply
        with all requirements of the 1934 Act), the number of shares of Common Stock
        which shall be issuable upon the exercise of an SAR shall be determined by
        dividing:

       

      (a)    the
        number of shares of Common Stock as to which the SAR is exercised multiplied
        by
        the amount of the appreciation in such shares (for this purpose, the
“appreciation” shall be the amount by which the Fair Market Value of the shares
        of Common Stock subject to the SAR on the exercise date exceeds (1) in the
        case
        of an SAR related to a stock option, the purchase price of the shares of
        Common
        Stock under the stock option or (2) in the case of an SAR granted alone,
        without
        reference to a related stock option, an amount which shall be determined
        by the
        Committee at the time of grant, subject to adjustment under Section 10.6);
        by

       

      (b)    the
        Fair
        Market Value of a share of Common Stock on the exercise date.

       

      In
        lieu
        of issuing shares of Common Stock upon the exercise of a SAR, the Committee
        may
        elect to pay the holder of the SAR cash equal to the Fair Market Value on
        the
        exercise date of any or all of the shares which would otherwise be issuable.
        No
        fractional shares of Common Stock shall be issued upon the exercise of an
        SAR;
        instead, the holder of the SAR shall be entitled to receive a cash adjustment
        equal to the same fraction of the Fair Market Value of a share of Common
        Stock
        on the exercise date or to purchase the portion necessary to make a whole
        share
        at its Fair Market Value on the date of exercise.

       

      8.    Stock
        Awards and Restricted Stock.
        A stock
        award consists of the transfer by the Company to a participant of shares
        of
        Common Stock, without other payment therefor, as additional compensation
        for
        services to the Company. A share of restricted stock consists of shares of
        Common Stock which are sold or transferred by the Company to a participant
        at a
        price determined by the Committee (which price shall be at least equal to
        the
        minimum price required by applicable law for the issuance of a share of Common
        Stock) and subject to restrictions on their sale or other transfer by the
        participant. The transfer of Common Stock pursuant to stock awards and the
        transfer and sale of restricted stock shall be subject to the following terms
        and conditions:

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      8.1.    Number
        of Shares.
        The
        number of shares to be transferred or sold by the Company to a participant
        pursuant to a stock award or as restricted stock shall be determined by the
        Committee.

       

      8.2.    Sale
        Price.
        The
        Committee shall determine the price, if any, at which shares of restricted
        stock
        shall be sold to a participant, which may vary from time to time and among
        participants and which may be below the Fair Market Value of such shares
        of
        Common Stock at the date of sale.

       

      8.3.    Restrictions.
        All
        shares of restricted stock transferred or sold hereunder shall be subject
        to
        such restrictions as the Committee may determine, including, without limitation
        any or all of the following:

       

      (a)    a
        prohibition against the sale, transfer, pledge or other encumbrance of the
        shares of restricted stock, such prohibition to lapse at such time or times
        as
        the Committee shall determine (whether in annual or more frequent installments,
        at the time of the death, disability or retirement of the holder of such
        shares,
        or otherwise);

       

      (b)    a
        requirement that the holder of shares of restricted stock forfeit, or (in
        the
        case of shares sold to a participant) resell back to the Company at his or
        her
        cost, all or a part of such shares in the event of termination of his or
        her
        employment or consulting engagement during any period in which such shares
        are
        subject to restrictions;

       

      (c)    such
        other conditions or restrictions as the Committee may deem
        advisable.

       

      8.4.    Escrow.
        In
        order to enforce the restrictions imposed by the Committee pursuant to Section
        8.3, the participant receiving restricted stock shall enter into an agreement
        with the Company setting forth the conditions of the grant. Shares of restricted
        stock shall be registered in the name of the participant and deposited, together
        with a stock power endorsed in blank, with the Company. Each such certificate
        shall bear a legend in substantially the following form:

       

      The
        transferability of this certificate and the shares of Common Stock represented
        by it are subject to the terms and conditions (including conditions of
        forfeiture) contained in the 2005 Stock Incentive Plan of El Capitan Precious
        Metals, Inc. (the “Company”), and an agreement entered into between the
        registered owner and the Company. A copy of the Plan and the agreement is
        on
        file in the office of the secretary of the Company.

       

      8.5.    End
        of
        Restrictions.
        Subject
        to Section 10.5, at the end of any time period during which the shares of
        restricted stock are subject to forfeiture and restrictions on transfer,
        such
        shares will be delivered free of all restrictions to the participant or to
        the
        participant's legal representative, beneficiary or heir.

       

      8.6.    Stockholder.
        Subject
        to the terms and conditions of the Plan, each participant receiving restricted
        stock shall have all the rights of a stockholder with respect to shares of
        stock
        during any period in which such shares are subject to forfeiture and
        restrictions on transfer, including without limitation, the right to vote
        such
        shares. Dividends paid in cash or property other than Common Stock with respect
        to shares of restricted stock shall be paid to the participant
        currently.

       

      9.    Performance
        Shares.
        A
        performance share consists of an award which shall be paid in shares of Common
        Stock, as described below. The grant of performance share shall be subject
        to
        such terms and conditions as the Committee deems appropriate, including the
        following:

       

      9.1.    Performance
        Objectives.
        Each
        performance share will be subject to performance objectives for the Company
        or
        one of its operating units to be achieved by the end of a specified period.
        The
        number of performance shares granted shall be determined by the Committee
        and
        may be subject to such terms and conditions, as the Committee shall determine.
        If the performance objectives are achieved, each participant will be paid
        in
        shares of Common Stock or cash. If such objectives are not met, each grant
        of
        performance shares may provide for lesser payments in accordance with formulas
        established in the award.

       

      9.2.    Not
        Stockholder.
        The
        grant of performance shares to a participant shall not create any rights
        in such
        participant as a stockholder of the Company, until the payment of shares
        of
        Common Stock with respect to an award.

       

      9.3.    No
        Adjustments.
        No
        adjustment shall be made in performance shares granted on account of cash
        dividends which may be paid or other rights which may be issued to the holders
        of Common Stock prior to the end of any period for which performance objectives
        were established.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      9.4.    Expiration
        of Performance Share.
        If any
        participant's employment or consulting engagement with the Company is terminated
        for any reason other than normal retirement, death or disability prior to
        the
        achievement of the participant's stated performance objectives, all the
        participant's rights on the performance shares shall expire and terminate
        unless
        otherwise determined by the Committee. In the event of termination of employment
        or consulting by reason of death, disability, or normal retirement, the
        Committee, in its own discretion may determine what portions, if any, of
        the
        performance shares should be paid to the participant.

       

      10.    General.

       

      10.1.    Effective
        Date.
        The
        Plan will become effective upon its approval by the Board of Directors.

       

      10.2.    Duration.
        The
        Plan shall remain in effect until all Incentives granted under the Plan have
        either been satisfied by the issuance of shares of Common Stock or the payment
        of cash or been terminated under the terms of the Plan and all restrictions
        imposed on shares of Common Stock in connection with their issuance under
        the
        Plan have lapsed. No Incentives may be granted under the Plan after the tenth
        anniversary of the date the Plan is approved by the Board of
        Directors.

       

      10.3.    Non-transferability
        of Incentives.
        No
        stock option, SAR, restricted stock or performance award may be transferred,
        pledged or assigned by the holder thereof (except, in the event of the holder's
        death, by will or the laws of descent and distribution to the limited extent
        provided in the Plan or the Incentive), or pursuant to a qualified domestic
        relations order as defined by the Code or Title I of the Employee Retirement
        Income Security Act, or the rules thereunder, and the Company shall not be
        required to recognize any attempted assignment of such rights by any
        participant. Notwithstanding the preceding sentence, stock options may be
        transferred by the holder thereof to Employee’s spouse, children, grandchildren
        or parents (collectively, the “Family Members”), to trusts for the benefit of
        Family Members, to partnerships or limited liability companies in which Family
        Members are the only partners or shareholders, or to entities exempt from
        federal income taxation pursuant to Section 501(c)(3) of the Internal Revenue
        Code of 1986, as amended. During a participant’s lifetime, a stock option may be
        exercised only by him or her, by his or her guardian or legal representative
        or
        by the transferees permitted by the preceding sentence.

       

      10.4.    Effect
        of Termination or Death.
        In the
        event that a participant ceases to be an employee of or consultant to the
        Company for any reason, including death or disability, any Incentives may
        be
        exercised or shall expire at such times as may be determined by the
        Committee.

       

      10.5.    Additional
        Condition.
        Notwithstanding anything in this Plan to the contrary: (a) the Company may,
        if
        it shall determine it necessary or desirable for any reason, at the time
        of
        award of any Incentive or the issuance of any shares of Common Stock pursuant
        to
        any Incentive, require the recipient of the Incentive, as a condition to
        the
        receipt thereof or to the receipt of shares of Common Stock issued pursuant
        thereto, to deliver to the Company a written representation of present intention
        to acquire the Incentive or the shares of Common Stock issued pursuant thereto
        for his or her own account for investment and not for distribution; and (b)
        if
        at any time the Company further determines, in its sole discretion, that
        the
        listing, registration or qualification (or any updating of any such document)
        of
        any Incentive or the shares of Common Stock issuable pursuant thereto is
        necessary on any securities exchange or under any federal or state securities
        or
        blue sky law, or that the consent or approval of any governmental regulatory
        body is necessary or desirable as a condition of, or in connection with the
        award of any Incentive, the issuance of shares of Common Stock pursuant thereto,
        or the removal of any restrictions imposed on such shares, such Incentive
        shall
        not be awarded or such shares of Common Stock shall not be issued or such
        restrictions shall not be removed, as the case may be, in whole or in part,
        unless such listing, registration, qualification, consent or approval shall
        have
        been effected or obtained free of any conditions not acceptable to the
        Company.

       

      10.6.    Adjustment.
        In the
        event of any recapitalization, stock dividend, stock split, combination of
        shares or other change in the Common Stock, the number of shares of Common
        Stock
        then subject to the Plan, including shares subject to restrictions, options
        or
        achievements of performance shares, shall be adjusted in proportion to the
        change in outstanding shares of Common Stock. In the event of any such
        adjustments, the purchase price of any option, the performance objectives
        of any
        Incentive, and the shares of Common Stock issuable pursuant to any Incentive
        shall be adjusted as and to the extent appropriate, in the discretion of
        the
        Committee, to provide participants with the same relative rights before and
        after such adjustment.

       

      10.7.    Incentive
        Plans and Agreements.
        Except
        in the case of stock awards, the terms of each Incentive shall be stated
        in a
        plan or agreement approved by the Committee. The Committee may also determine
        to
        enter into agreements with holders of options to reclassify or convert certain
        outstanding options, within the terms of the Plan, as Incentive Stock Options
        or
        as non-statutory stock options and in order to eliminate SARs with respect
        to
        all or part of such options and any other previously issued
        options.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      10.8.    Withholding.

       

      (a)    The
        Company shall have the right to withhold from any payments made under the
        Plan
        or to collect as a condition of payment, any taxes required by law to be
        withheld. At any time when a participant is required to pay to the Company
        an
        amount required to be withheld under applicable income tax laws in connection
        with a distribution of Common Stock or upon exercise of an option or SAR,
        the
        participant may satisfy this obligation in whole or in part by electing (the
        “Election”) to have the Company withhold from the distribution shares of Common
        Stock having a value up to the minimum amount of withholding taxes required
        to
        be collected on the transaction. The value of the shares to be withheld shall
        be
        based on the Fair Market Value of the Common Stock on the date that the amount
        of tax to be withheld shall be determined (“Tax Date”).

       

      (b)    Each
        Election must be made prior to the Tax Date. The Committee may disapprove
        of any
        Election, may suspend or terminate the right to make Elections, or may provide
        with respect to any Incentive that the right to make Elections shall not
        apply
        to such Incentive. An Election is irrevocable.

       

      10.9.    No
        Continued Employment, Engagement or Right to Corporate Assets.
        No
        participant under the Plan shall have any right, because of his or her
        participation, to continue in the employ of the Company for any period of
        time
        or to any right to continue his or her present or any other rate of
        compensation. Nothing contained in the Plan shall be construed as giving
        an
        employee, a consultant, such persons' beneficiaries or any other person any
        equity or interests of any kind in the assets of the Company or creating
        a trust
        of any kind or a fiduciary relationship of any kind between the Company and
        any
        such person.

       

      10.10.    Deferral
        Permitted.
        Payment
        of cash or distribution of any shares of Common Stock to which a participant
        is
        entitled under any Incentive shall be made as provided in the Incentive.
        Payment
        may be deferred at the option of the participant if provided in the
        Incentive.

       

      10.11.    Amendment
        of the Plan.
        The
        Board may amend, suspend or discontinue the Plan at any time; provided, however,
        that no amendments to the Plan will be effective without approval of the
        shareholders of the Company if shareholder approval of the amendment is then
        required pursuant to Section 422 of the Code or the rules of any stock exchange
        or Nasdaq or similar regulatory body.

       

      10.12.    Sale,
        Merger, Exchange or Liquidation.
        Unless
        otherwise provided in the agreement for an Incentive, in the event of an
        acquisition of the Company through the sale of substantially all of the
        Company's assets or through a merger, exchange, reorganization or liquidation
        of
        the Company or a similar event as determined by the Committee (collectively
        a
“transaction”), the Committee shall be authorized, in its sole discretion, to
        take any and all action it deems equitable under the circumstances, including
        but not limited to any one or more of the following:

      

      (1)
         providing
        that the Plan and all Incentives shall terminate and the holders of (i) all
        outstanding vested options shall receive, in lieu of any shares of Common
        Stock
        they would be entitled to receive under such options, such stock, securities
        or
        assets, including cash, as would have been paid to such participants if their
        options had been exercised and such participant had received Common Stock
        immediately prior to such transaction (with appropriate adjustment for the
        exercise price, if any), (ii) performance shares and/or SARs that entitle
        the participant to receive Common Stock shall receive, in lieu of any shares
        of
        Common Stock each participant was entitled to receive as of the date of the
        transaction pursuant to the terms of such Incentive, if any, such stock,
        securities or assets, including cash, as would have been paid to such
        participant if such Common Stock had been issued to and held by the participant
        immediately prior to such transaction, and (iii) any Incentive under this
        Agreement which does not entitle the participant to receive Common Stock
        shall
        be equitably treated as determined by the Committee. 

      

      (2)
        providing that participants holding outstanding vested Common Stock based
        Incentives shall receive, with respect to each share of Common Stock issuable
        pursuant to such Incentives as of the effective date of any such transaction,
        at
        the determination of the Committee, cash, securities or other property, or
        any
        combination thereof, in an amount equal to the excess, if any, of the Fair
        Market Value of such Common Stock on a date within ten days prior to the
        effective date of such transaction over the option price or other amount
        owed by
        a participant, if any, and that such Incentives shall be cancelled, including
        the cancellation without consideration of all options that have an exercise
        price below the per share value of the consideration received by the Company
        in
        the transaction. 

      

      (3)
        providing that the Plan (or replacement plan) shall continue with respect
        to
        Incentives not cancelled or terminated as of the effective date of such
        transaction and provide to participants holding such Incentives the right
        to
        earn their respective Incentives on a substantially equivalent basis (taking
        into account the transaction and the number of shares or other equity issued
        by
        such successor entity) with respect to the equity of the entity succeeding
        the
        Company by reason of such transaction.

      

      (4)
        providing that all unvested, unearned or restricted Incentives, including
        but
        not limited to restricted stock for which restrictions have not lapsed as
        of the
        effective date of such transaction, shall be void and deemed terminated,
        or, in
        the alternative, for the acceleration or waiver of any vesting, earning or
        restrictions on any Incentive.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      The
        Board
        may restrict the rights of participants or the applicability of this
        Section 10.12 to the extent necessary to comply with Section 16(b) of the
        Securities Exchange Act of 1934, the Internal Revenue Code or any other
        applicable law or regulation. The grant of an Incentive award pursuant to
        the
        Plan shall not limit in any way the right or power of the Company to make
        adjustments, reclassifications, reorganizations or changes of its capital
        or
        business structure or to merge, exchange or consolidate or to dissolve,
        liquidate, sell or transfer all or any part of its business or assets.

      

      10.13.    Definition
        of Fair Market Value.
        For
        purposes of this Plan, the “Fair Market Value” of a share of Common Stock at a
        specified date shall, unless otherwise expressly provided in this Plan, be
        the
        amount which the Committee or the Board of Directors determines in good faith
        to
        be 100% of the fair market value of such a share as of the date in question;
        provided, however, that notwithstanding the foregoing, if such shares are
        listed
        on a U.S. securities exchange or are quoted on the Nasdaq National Market
        or
        Nasdaq Small-Cap Market (“Nasdaq”), then Fair Market Value shall be determined
        by reference to the last sale price of a share of Common Stock on such U.S.
        securities exchange or Nasdaq on the applicable date. If such U.S. securities
        exchange or Nasdaq is closed for trading on such date, or if the Common Stock
        does not trade on such date, then the last sale price used shall be the one
        on
        the date the Common Stock last traded on such U.S. securities exchange or
        Nasdaq.

      

       

      Approved
        by the Board of Directors on July 30, 2008

       

      
        
          
          

        

        
          7

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