COMMERCIAL LOAN AGREEMENT

Exhibit 10.1

COMMERCIAL LOAN AGREEMENT

THIS COMMERCIAL LOAN AGREEMENT, together with the Schedules hereto , (collectively, the “Agreement”), is made as of the 30 ^th day of March, 2007, by and between MICRONETICS, INC., a Delaware corporation with an executive office at 26 Hampshire Drive, Hudson, New Hampshire 03051 (the “Borrower”); MICROWAVE & VIDEO SYSTEMS, INC., a Connecticut corporation with an executive office at 160B Shelton Road, Monroe, Connecticut 06468, ENON MICROWAVE, INC., MICROWAVE CONCEPTS, INC., and STEALTH MICROWAVE, INC., each a Delaware corporation, and all with an executive office at 26 Hampshire Drive, Hudson, New Hampshire 03051 (individually, a “Guarantor”, and collectively, the “Guarantors”); and CITIZENS BANK NEW HAMPSHIRE, a guaranty savings bank chartered under the laws of the State of New Hampshire with a place of business at 875 Elm Street, Manchester, New Hampshire 03101 (the “Bank”).

PREAMBLE:

The Bank has agreed, at the Borrower’s and Guarantors’ request, to extend to the Borrower certain credit facilities which shall consist of a revolving line of credit loan in the principal amount of up to $5,000,000 (the “Revolving Line of Credit Loan”) and a term loan in the principal amount of $6,500,000 (the “Term Loan”, which together with the Revolving Line of Credit Loan, and any other loans or credit facilities extended to Borrower by Bank under this Agreement are, individually, a “Loan” and, collectively, the “Loans”). All of the Loans, together with any and all other debts, liabilities and obligations of Borrower to the Bank; any and all obligations arising under any foreign exchange contracts, interest rate swap, cap, floor or hedging agreements, or similar agreements of Borrower with the Bank or any affiliate of the Bank; any and all obligations of the Borrower to the Bank arising under any credit cards issued by the Bank to the Borrower; any and all obligations of the Borrower to the Bank arising out of or in connection with any Automated Clearing House (“ACH”) Agreements relating to the processing of ACH transactions’ and any and all fees, expenses, charges and other amounts owing by or chargeable to the Borrower under all such contracts, agreements, and credit cards, direct or indirect, absolute or contingent, now existing or hereafter arising, are hereinafter sometimes collectively referred to as the “Obligations”. Each Loan is or shall be evidenced by a promissory note (individually, a “Note” and collectively, the “Notes”) and secured by security interests in all of the properties and assets of the Borrower and the Guarantors pursuant to one or more security agreements of near or even date between Borrower, Guarantors, and the Bank (collectively, the “Security Agreement”).

In connection with the Loans and other Obligations, the Borrower and the Guarantors may execute certain other documents, assignments, certificates and agreements, all of which are, together with this Agreement, Notes, the Security Agreement, and as all of the same may be hereafter amended, modified, revised, renewed, restated, extended, or replaced, sometimes collectively referred to herein as the “Loan Documents” and individually as a “Loan Document”. Each Loan, whether now existing or hereafter arising, is made upon and subject to the terms and conditions set forth in the Note evidencing such Loan, the Security Agreement, the other Loan Documents, and this Agreement.

Commercial Loan Agreement – Micronetics, Inc.

The terms, conditions, representations, warranties, and covenants set forth in this Agreement are in addition to, and not in limitation of, the terms, conditions, representations, warranties, and covenants set forth in the other Loan Documents. In the event of any conflict between the terms, conditions, representations, warranties, and covenants contained in this Agreement and any of the other Loan Documents, the terms, conditions, representations, warranties, or covenants set forth herein shall control. Capitalized terms not defined within the text of this Agreement are defined in Schedule A attached hereto and made a part hereof.

IN CONSIDERATION OF the Loans made or to be made by Bank to the Borrower, and of all other Obligations of the Borrower to the Bank, Borrower, Guarantors, and Bank hereby agree as follows:

I. REVOLVING LINE OF CREDIT LOAN. The Revolving Line of Credit Loan shall be made available by the Bank to the Borrower pursuant and subject to the terms and conditions set forth in this Agreement, and all advances and readvances thereunder shall be evidenced by the Borrower’s revolving credit note of even date in the principal amount of $5,000,000 (as such Note may be amended, restated or replaced, the “Revolving Credit Note”).

A. Revolver Expiration Date . Pending an Event of Default, the Bank shall extend the Revolving Line of Credit Loan to Borrower for the period from the date hereof through and until March 30, 2010 (the “Revolver Expiration Date”). THE ENTIRE AMOUNT OF OUTSTANDING PRINCIPAL, ACCRUED INTEREST AND OTHER CHARGES PAYABLE UNDER THE REVOLVING LINE OF CREDIT LOAN SHALL BE DUE AND PAYABLE BY BORROWER ON THE REVOLVER EXPIRATION DATE. BORROWER ACKNOWLEDGES AND AGREES THAT THE BANK HAS NO OBLIGATION OR COMMITMENT TO RENEW THE REVOLVING LINE OF CREDIT LOAN ON THE REVOLVER EXPIRATION DATE.

B. Maximum Available Amount . The maximum amount available to the Borrower from time to time under the Revolving Line of Credit Loan (the “Maximum Available Amount”) shall be $5,000,000.

C. Advances . The Revolving Line of Credit Loan shall be disbursed, advanced, readvanced, and repaid as provided in this Agreement and in accordance with the Bank’s customary loan account management procedures. The Bank shall be under no obligation to make any advance (automatic or otherwise) at any time or times during which a Default or an Event of Default has occurred or exists under this Agreement or the Loan Documents. At the time of each advance and readvance under the Revolving Line of Credit Loan (each such advance or readvance an “Advance” or “Revolving Credit Advance”), the Borrower shall immediately become indebted to the Bank for the amount thereof. Each such Advance or readvance may be credited by the Bank to any operating account of Borrower with the Bank, or be paid to Borrower.

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Commercial Loan Agreement – Micronetics, Inc.

D. Interest . Borrower shall pay interest on the outstanding principal balance under the Revolving Line of Credit Loan in accordance with the provisions of Section III below and the Revolving Credit Note.

E. Purposes. Borrower shall use proceeds of the Revolving Line of Credit Loan solely for purposes of funding working capital and capital expenditures of Borrower in the ordinary course of business and funding Permitted Acquisitions.

II. TERM LOAN. The Term Loan in the principal amount of $6,500,000 shall be made by the Bank to the Borrower upon and subject to the terms and conditions set forth in the Term Note evidencing the Term Loan of even date in the principal amount of $6,500,000 (as such Note may be amended, restated or replaced, the “Term Note”), the other Loan Documents and this Agreement. Proceeds of the Term Loan shall be used by Borrower solely for purposes of refinancing existing indebtedness of Borrower with TD Banknorth and general corporate purposes of the Borrower. The Term Loan shall be repaid as set forth in the Term Note and this Agreement. Borrower shall pay interest on the outstanding principal balance of the Term Loan in accordance with the provisions of Section III below and the Term Note.

III. INTEREST, LATE CHARGES, AND PREPAYMENT PROVISIONS. The following provisions shall apply to the Revolving Line of Credit Loan and the Term Loan:

A. Certain Definitions Relating To Interest Rates .

1. Advance . The term “Advance” means either a LIBOR Advance or Prime Rate Advance, as the case may be.

2. Applicable Margin . The term “Applicable Margin” means the annual percentage rate to be added to LIBOR to determine the LIBOR Rate under this Agreement. Initially, the Applicable Margin shall be 1.80% per annum. The Applicable Margin will be adjusted (up or down) on a quarterly basis as determined by Borrower’s Total Funded Debt to EBITDA ratio. Adjustments in the Applicable Margin will be determined by reference to the following grid:

Within forty-five (45) days of the end of each Fiscal Quarter of Borrower (provided that Borrower shall have ninety (90) days after the end of each Fiscal Year), Borrower shall (a) deliver to BANK its Financial Statements covering such Fiscal Quarter (which shall be management prepared financial statements for purposes hereof), (b) deliver to BANK the quarterly financial covenant compliance certificate of Borrower, and (c) certify to Bank the then Total Funded Debt to EBITDA ratio of Borrower and Borrower's determination of Applicable Margin therefrom on such form as the Bank may from time to time specify. Borrower shall also

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Commercial Loan Agreement – Micronetics, Inc.

provide to the Bank such other reasonable information as Bank may request of Borrower to verify its determination of the Applicable Margin. As of the tenth (10 ^th ) Business Day after the Borrower's delivery of all of the above-referenced items to the Bank, the Bank shall notify Borrower of its determination of the Applicable Margin. The new Applicable Margin as so determined by the BANK shall be effective as to all then outstanding LIBOR Advances and all new LIBOR Advances thereafter made, and such new Applicable Margin shall remain in effect through the next date upon which the determination of a new Applicable Margin becomes effective in accordance with the above provisions. Notwithstanding the foregoing, upon any Event of Default, the Applicable Margin shall be 2.25%.

3. Authorized Representative . The term “Authorized Representative” shall mean the President, Controller or Chief Financial Officer of Borrower.

4. Banking Day . The term “Banking Day” shall mean any day other than a Saturday, Sunday or day which shall be in the State of New Hampshire a legal holiday or day on which banking institutions are required or authorized to close.

5. Business Day; Same Calendar Month . The term “Business Day” means any Banking Day and, with respect to determining or selecting the LIBOR Rate, any London Banking Day. If any day on which a payment is due is not a Business Day, then the payment shall be due on the next day following which is a Business Day, unless, with respect to a LIBOR Advance, the effect would be to make the payment due in the next calendar month, in which event such payment shall be due on the next preceding day which is a Business Day. Further, if there is no corresponding day for a payment in the given calendar month (i.e., there is no “February 30 ^th ”), the payment shall be due on the last Business Day of the calendar month.

6. Dollars . The term “Dollars” or “$” means lawful money of the United States.

7. Interest Payment Date . The term “Interest Payment Date” means (a) as to any Prime Rate Advance, the first Business Day of each January, April, July, and October while such Advance is outstanding, (b) as to any LIBOR Advance, the last day of the applicable LIBOR Period, provided that if the applicable Interest Period exceeds three (3) months, the Interest Payment date shall be the last day of each third (3 ^rd ) month of such Interest Period; provided further , that, in addition to the foregoing, each of (x) the date upon which all commitments to make Advances under the Revolving Line of Credit Loan have been terminated and the Loans have been paid in full and (y) the date of Maturity applicable to a particular Loan shall be deemed to be an Interest Payment Date with respect to any interest which is then accrued respecting such Loans.

8. Interest Period .

(A) The term “Interest Period” means with respect to each LIBOR Advance a period of one (1), two (2), three (3), or (6) consecutive months, in each case subject to availability, as selected, or deemed selected, by Borrower at least three (3) Business Days prior to an Advance, or if an Advance is already outstanding, at least three (3) Business Days prior to the end of the current Interest Period. Each such Interest Period shall commence on the Business Day so

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Commercial Loan Agreement – Micronetics, Inc.

selected, or deemed selected, by Borrower and shall end on the numerically corresponding day in the first, second, third or sixth month thereafter, as applicable. Provided , however : (i) if there is no such numerically corresponding day (i.e., there is no “February 30 ^th ”), such Interest Period shall end on the last Business Day of the applicable month, (ii) if the last day of such an Interest Period would otherwise occur on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day; but (iii) if such extension would otherwise cause such last day to occur in a new calendar month, then such last day shall occur on the next preceding Business Day.

(B) The term “Interest Period” shall mean with respect to each Prime Rate Advance consecutive periods of one (1) day each.

(C) If the last day of an Interest Period would otherwise occur on a day which is not a Business Day, such last day shall be extended to the next succeeding Business Day, except as provided above in clause (A) relative to a LIBOR Advance.

9. LIBOR . The term “LIBOR” means, with respect to any LIBOR Advance, the interest rate per annum (rounded upward, if necessary, to the nearest one hundred-thousandth of a percentage point) equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as selected by the Bank from time to time) at approximately 11:00 a.m. London time two (2) London Banking Days before the commencement of the applicable Interest Period, for U.S. Dollar deposits (for delivery on the first day of such interest period) with a term equivalent to such Interest Period. If such rate is not available at such time for any reason, then the rate for that Interest Period will be determined by such alternate method as reasonably selected by the Bank. In the event that the Board of Governors of the Federal Reserve System shall impose a Reserve Percentage (as defined below) with respect to LIBOR deposits of the Bank, then for any period during which such Reserve Percentage shall apply, LIBOR shall be equal to the amount determined above divided by an amount equal to 1 minus the Reserve Percentage. “Reserve Percentage” shall mean the maximum aggregate reserve requirement (including all basic, supplemental, marginal and other reserves) which is imposed on member banks of the Federal Reserve System against “Euro-currency Liabilities” as defined in Regulation D (or any successor regulation).

10. LIBOR Advance . The term “LIBOR Advance” means any principal outstanding under a Loan which bears interest based on LIBOR.

11. LIBOR Rate . The term “LIBOR Rate” means the per annum rate equal to LIBOR plus the Applicable Margin.

12. London Banking Day . The term “London Banking Day” means any day on which dealings in deposits in Dollars are transacted in the London interbank market.

13. Maturity . The term “Maturity” means, (i) for the Revolving Line of Credit Loan, the Revolver Expiration Date, (ii) for the Term Loan, March 30, 2012, or (iii) for all Loans, the

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Commercial Loan Agreement – Micronetics, Inc.

maturity upon acceleration of the Loans, if the Loans have been accelerated by Bank following the occurrence of an Event of Default.

14. Prime Rate . The term “Prime Rate” means the variable per annum rate of interest so designated from time to time by Bank as its prime rate. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate being charged to any customer. Changes in the rate of interest resulting from changes in the Prime Rate shall take place immediately without notice or demand of any kind.

15. Prime Rate Advance . The term “Prime Rate Advance” means any principal amount outstanding under a Loan which bears interest based on the Prime Rate.

B. Interest Rates and Late Charges .

1. Applicable Interest Rates; Payment . Advances and outstanding principal under the Revolving Line of Credit Loan and Term Loan shall bear interest, as selected by Borrower as herein provided, at either the Prime Rate or LIBOR Rate. Interest on each Advance or Loan shall be due and payable on each Interest Payment Date applicable to such Advance or Loan.

2. Selection of Interest Rate . Except as hereinafter provided, Borrower shall select through an Authorized Representative, and thereafter may change the selection of, the applicable interest rate, from the alternatives provided herein, for a Loan by giving Bank a Notice of Rate Selection: (i) prior to each Advance, (ii) prior to the end of each Interest Period applicable to a LIBOR Advance or (iii) on any Business Day on which Borrower desires to convert an outstanding Prime Rate Advance to a LIBOR Advance. The selection of an interest rate for a particular Advance or Loan shall be limited to those rates specifically made available for such Advance or Loan pursuant to this Agreement.

3. Notice . A “Notice of Rate Selection” shall be a written notice, given by cable, tested telex, telecopier (with authorized signature), or by telephone if immediately confirmed by such a written notice, from an Authorized Representative of Borrower which: (i) is irrevocable; (ii) is received by Bank not later than 10:00 o'clock A.M. Eastern Time: (a) if a LIBOR Rate is selected, at least three (3) Business Days prior to the first day of the Interest Period to which such selection is to apply, or (b) if the Prime Rate is selected, on the first day of the Interest Period to which it applies; and (iii) as to each selected interest rate option, sets forth the aggregate principal amount(s) to which such interest rate option(s) shall apply and the Interest Period(s) applicable to each LIBOR Advance.

4. If No Notice . If Borrower fails to select an interest rate option in accordance with the foregoing prior to a new Advance, or if a LIBOR Advance is selected for a new Advance but is not available, such new Advance made shall be deemed to be a Prime Rate Advance. On the other hand, if the Borrower fails to convert an existing LIBOR Advance to a Prime Rate Advance or to a LIBOR Advance with a different Interest Period at least three (3) days prior to the last day of the applicable Interest Period of an outstanding LIBOR Advance, on the last day of the applicable Interest Period the outstanding principal amount of the LIBOR Advance shall be renewed as a LIBOR Advance having an Interest Period of the same duration.

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Commercial Loan Agreement – Micronetics, Inc.

5. Telephonic Notice . Without any way limiting Borrower's obligation to confirm in writing any telephonic notice, Bank may act without liability upon the basis of telephonic notice believed by Bank in good faith to be from Borrower prior to receipt of written confirmation. In each case Borrower hereby waives the right to dispute Bank's record of the terms of such telephonic Notice of Rate Selection in the absence of manifest error.

6. Limits On Options; Maximum Number of LIBOR Advances . With respect to the Revolving Line of Credit Loan, each LIBOR Advance shall be in a minimum amount of $250,000, and in increments of $100,000 above such amount At no time shall there be outstanding a total of more than five (5) LIBOR Advances at any time under the Revolving Line of Credit Loan. With respect to the Term Loan, Borrower may only select the LIBOR Rate to apply to all of then outstanding principal under the Term Loan and may only select an Interest Period of ninety (90) days. Borrower shall not be entitled to select a LIBOR Advance, and no LIBOR Advance shall be deemed selected, after the occurrence of an Event of Default.

7. Extension of Interest Payment Date . If any payment on any Loan becomes due and payable on a day which is not a Business Day, the due date of the payment will be extended to the next succeeding Business Day (except as set forth in the definition of Interest Period), and with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

8. Computation of Interest . All computations of interest with respect to LIBOR Advances shall be made by the Bank on the basis of a three hundred and sixty (360) day year, in each case for the actual number of days occurring in the period for which such interest is payable. All computations of interest with respect to Prime Rate Advances shall be made by the Bank on the basis of an actual three hundred and sixty-five/sixty (365/366) day year, as the case may be. Each determination by Bank of an interest rate hereunder shall be conclusive, absent manifest error.

9. Default Rate . Upon the occurrence of an Event of Default (whether or not Bank has accelerated payment of a Note), or upon demand (if a Note evidences a demand obligation), or after maturity or after a judgment has been rendered on a Note, Borrower’s right to select pricing options shall cease and the unpaid principal of each Loan or Advance shall, at the Bank’s option, bear interest at a rate which is two percent (2%) per annum above the Prime Rate (“Default Rate”).

10. Late Charges . Borrower shall pay with respect to any Loan, upon billing therefor, a “Late Charge” equal to five percent (5%) of the amount of any payment of principal, other than principal due at Maturity, interest, or both, which is not paid within ten (10) days of the due date thereof. Late charges are: (a) payable in addition to, and not in limitation of, the Default Rate, (b) intended to compensate Bank for administrative and processing costs incident to late payments, (c) are not interest, and (d) shall not be subject to refund or rebate or credited against any other amount due.

C. Prepayment Provisions .

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Commercial Loan Agreement – Micronetics, Inc.

1. Mandatory Prepayments .

(i) If at any time the outstanding principal balance of the Revolving Line of Credit Loan exceeds the Maximum Available Amount, Borrower shall immediately repay the aggregate outstanding amount to the extent required to eliminate such excess.

(ii) Immediately upon receipt by the Borrower of the net proceeds resulting from any of (a) an asset disposition (other than an asset disposition in the ordinary course of business), (b) an insured loss of properties or assets (provided that Borrower has not submitted to Bank a proposal for use of such proceeds for the repair or replacement of the assets subject to such loss and uses such proceeds within 180 days of the receipt thereof to repair or replace such properties or assets with equivalent properties or assets to be used in the ordinary course of Borrower’s business), or (c) the issuance by Borrower of its equity securities in an equity financing, Borrower shall prepay the Loans within three (3) Business Days of receipt of such net proceeds in an amount equal to such net proceeds. For purpose of the foregoing, “net proceeds” means the proceeds resulting from such transaction or event described in clauses (a), (b) or (c) less (A) commissions and other reasonable and customary transaction costs, fees and expenses properly attributable to such transaction and payable by Borrower in connection therewith (in each case, paid to non-Affiliates), (B) transfer taxes, (C) amounts payable to holders of senior Liens (to the extent such Liens constitute Permitted Encumbrances hereunder), if any, and (D) an appropriate reserve for income taxes in accordance with GAAP in connection therewith. Any such prepayment shall be applied in accordance with subsection C. 1. (iii) below.

(iii) Any prepayments made by Borrower pursuant to subsection C. 1. (ii) above shall be applied as follows: first , to fees and reimbursable expenses of Bank then due and payable pursuant to any of the Loan Documents; second , to interest then due and payable on the Revolving Line of Credit Loan; third , to interest then due and payable on the Term Loan; fourth , to the principal balance of the Revolving Line of Credit Loan outstanding until the same shall have been repaid in full and the Maximum Available Amount shall be permanently reduced by the amount so prepaid; and fifth , to the principal balance of the Term Loan outstanding in reverse order of maturity until the same shall have been repaid in full. Any partial prepayment of principal under the Term Loan shall first be applied to any installment of principal then due and then be applied to the principal due in the reverse order of maturity, and no such partial prepayment shall relieve Borrower of the obligation to pay each subsequent installment of principal when due.

(iv) Nothing in this Section C. 1. shall be construed to constitute Bank’s consent to any transaction referred to in subsection C. 1. (ii) above which is not permitted by other provisions of this Agreement or the other Loan Documents.

(v) In the event of any prepayment pursuant to the Section C. 1. of any LIBOR Advance, Borrower shall compensate Bank in accordance with the provisions of Sections C. 2., 3., and 4. below with respect to the prepayment of such LIBOR Advance.

2. Voluntary Prepayment .

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Commercial Loan Agreement – Micronetics, Inc.

(i) Borrower may voluntarily prepay a LIBOR Advance in whole or in part at any time, upon at least three (3) Business Days' prior written notice to Bank (which notice shall be irrevocable). In such event, Borrower shall pay to Bank, upon request of Bank, such amounts as shall be sufficient (in the reasonable opinion of Bank) to compensate it for any loss, cost or expense incurred as a result of (i) any payment of a LIBOR Advance on a date other than the last day of the Interest Period for such Loan; (ii) any failure by Borrower to borrow a LIBOR Advance on the date specified by Borrower’s written notice; and (iii) any failure by Borrower to pay a LIBOR Advance on the date for payment specified in Borrower’s written notice. Without limiting the foregoing Borrower shall pay to Bank a Yield Maintenance Fee determined as provided below respecting any prepayment of a LIBOR Advance.

(ii) Borrower may voluntarily prepay a Prime Rate Advance in whole or in part at any time without prior written notice and without payment of a prepayment fee or penalty.

3. Calculation of Yield Maintenance Fee .

(i) The Yield Maintenance Fee shall be calculated based on the remainder of the applicable Interest Period all in accordance with the following: The current rate for United States Treasury securities (bills on a discounted basis shall be converted to a bond equivalent) with a maturity date closest to the last day of the current Interest Period, shall be subtracted from the applicable Revolving Rate in effect at the time of prepayment. If the result is zero or a negative number, there shall be no yield maintenance fee. If the result is a positive number, then the resulting percentage shall be multiplied by the amount of the principal balance being prepaid. The resulting amount shall be divided by 360 and multiplied by the number of days remaining in the Interest Period during which the prepayment is made. Said amount shall be reduced to present value calculated by using the above referenced United States Treasury securities rate and the number of days remaining in the current Interest Period. The resulting amount shall be the yield maintenance fee due to Bank upon the prepayment of the LIBOR Advance. If Bank elects to declare any Loan to be immediately due and payable, then the Yield Maintenance Fee with respect to the outstanding LIBOR Advances thereunder shall become due and payable in the same manner as though Borrower had exercised such right of prepayment.

(ii) The Yield Maintenance Fee shall be payable in respect of all prepayments of principal whether mandatory, voluntary or involuntary including, without limitation, prepayments made upon acceleration of the Loan, or application of insurance or eminent domain proceeds.

4. Make Whole Provision . Borrower shall pay to Bank, immediately upon request and notwithstanding contrary provisions contained in any of the Loan Documents, such amounts as shall, in the conclusive judgment of Bank (in the absence of manifest error), compensate Bank for the loss, cost or expense which it may reasonably incur as a result of (i) any payment or prepayment, under any circumstances whatsoever, whether mandatory, voluntary or involuntary, of all or any portion of a LIBOR Advance on a date other than the last day of the applicable Interest Period of a LIBOR Advance, (ii) the conversion, for any reason whatsoever, whether

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Commercial Loan Agreement – Micronetics, Inc.

mandatory, voluntary or involuntary, of any LIBOR Advance to a Prime Rate Advance on a date other than the last day of the applicable Interest Period, (iii) the failure of all or a portion of a Loan Advance which was to have borne interest at the LIBOR Rate pursuant to the request of Borrower to be made under the Loan Agreement (except as a result of a failure by Bank to fulfill Bank's obligations to fund), or (iv) the failure of Borrower to borrow in accordance with any request submitted by it for a LIBOR Advance. Such amounts payable by Borrower shall be equal to any administrative costs actually incurred, plus any amounts required to compensate for any loss, cost or expense incurred by reason of the liquidation or re-employment of deposits or other funds acquired by Bank to fund or maintain a LIBOR Advance plus, in any event, but without duplication, a Yield Maintenance Fee.

D. Additional Provisions Related to Interest Rate .

1. Increased Costs . If, due to any one or more of: (i) the introduction of any applicable law or regulation or any change (other than any change by way of imposition or increase of reserve requirements already referred to in the above definition of LIBOR) in the interpretation or application by any authority charged with the interpretation or application thereof of any law or regulation; or (ii) the compliance with any guideline or request from any governmental central bank or other (whether or not having the force of law), there shall be an increase in the cost to Bank of agreeing to make or making, funding or maintaining LIBOR Advances, including without limitation changes which affect or would affect the amount of capital or reserves required or expected to be maintained by Bank, with respect to all or any portion of any Loan, or any corporation controlling Bank, on account thereof, then Borrower from time to time shall, upon written demand by Bank, pay Bank additional amounts sufficient to indemnify Bank against the increased cost. A certificate as to the amount of the increased cost and the reason therefor submitted to Borrower by Bank, in the absence of manifest error, shall be conclusive and binding for all purposes.

2. Illegality . Notwithstanding any other provision of this Agreement or the applicable Note, if the introduction of or change in or in the interpretation of any law, treaty, statute, regulation or interpretation thereof shall make it unlawful, or any central bank or government authority shall assert by directive, guideline or otherwise, that it is unlawful, for Bank to make or maintain LIBOR Advances or to continue to fund or maintain the LIBOR Advances then, on written notice thereof and demand by Bank to Borrower, (a) the obligation of Bank to make LIBOR Advances and to continue any LIBOR Advances shall terminate and (b) all principal outstanding under any Note shall bear interest at the Prime Rate.

3. Additional LIBOR Conditions . The selection by Borrower of a LIBOR Rate and the maintenance of LIBOR Advances at such rate shall be subject to the following additional terms and conditions:

(i) Availability . If, before or after Borrower has selected to take or maintain a LIBOR Advance, Bank notifies Borrower that:

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(ii) Payments Net of Taxes . All payments and prepayments of principal and interest under each Note shall be made net of any taxes and costs resulting from having principal outstanding at or computed with reference to LIBOR. Without limiting the generality of the preceding obligation, illustrations of such taxes and costs are taxes, or the withholding of amounts for taxes, of any nature whatsoever including income, excise, interest equalization taxes (other than United States or state income taxes) as well as all levies, imposts, duties or fees whether now in existence or which become in effect as the result of a change in or promulgation of any treaty, statute, regulations, or interpretation thereof or any directive guideline or otherwise by a central bank or fiscal authority (whether or not having the force of law) or a change in the basis of, or the time of payment of, such taxes and other amounts resulting therefrom.

4. Prime Rate Advances . Each Prime Rate Advance shall continue as a Prime Rate Advance until paid in full, unless sooner converted, in whole or in part, to a LIBOR Advance, subject to the limitations and conditions set forth in this Agreement and the applicable Note.

5. Conversion of Other Advances . At the end of each applicable Interest Period, the applicable LIBOR Advance shall remain a LIBOR Advance having an Interest Period of the same duration as the immediately preceding Interest Period unless Borrower selects another option in accordance with the provisions of this Agreement and the applicable Note.

IV. GUARANTY. Each Guarantor, jointly and severally, hereby unconditionally guaranties to the Bank the prompt payment and performance of (a) all Loans and other Obligations, direct or indirect, matured or unmatured, primary or secondary, certain or contingent, of the Borrower arising under or in connection with this Agreement (including without limitation, costs and expenses incurred by the Bank in attempting to collect or enforce any of the foregoing), accrued in each case to the date of payment, and (b) the performance of all other agreements, covenants and conditions of the Borrower with respect thereto set forth in this Agreement and all other Loan Documents. The responsibilities and obligations of the Borrower to the Bank described in the preceding sentence are hereinafter referred to collectively as the “Guaranteed Obligations.” The guaranty pursuant to this Section IV is an absolute, unconditional and continuing guaranty of the full and punctual payment and performance by the Borrower of the Guaranteed Obligations and not of collectability of the Guaranteed Obligations, and is in no way conditioned upon any requirement that the Bank first attempt to collect any of the Guaranteed Obligations from the Borrower or resort to any security or other means of obtaining payment of any of the Guaranteed Obligations which the Bank now has or may acquire after the date hereof, or upon any other contingency whatsoever. Upon any default by the Borrower in the full and punctual payment and performance of the Guaranteed Obligations, the liabilities and obligations of the Guarantors hereunder shall, at the option of the Bank, become

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Commercial Loan Agreement – Micronetics, Inc.

forthwith due and payable to the Bank without demand or notice of any nature, all of which are expressly waived by the Guarantors. Payments by each Guarantor under this Section IV may be required by the Bank on any number of occasions. Each Guarantor waives presentment, demand, protest, notice of acceptance, notice of Guaranteed Obligations incurred and all other notices of any kind, all defenses which may be available by virtue of any valuation, stay, moratorium law or other similar law now or hereafter in effect, any right to require the marshaling of assets of the Borrower, and all suretyship defenses generally. Without limiting the generality of the foregoing, each Guarantor agrees to the provisions of any instrument evidencing, securing or otherwise executed in connection with any Guaranteed Obligations and agrees that the obligations of the Guarantors hereunder shall not be released or discharged, in whole or in part, or otherwise affected by any rescissions, waivers, amendments or modifications of any of the terms or provisions of any agreement evidencing securing or otherwise executed in connection with any Guaranteed Obligation. Until the payment and performance in full of all Guaranteed