Exhibit 10.4

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (the “Agreement”), made this 30th day of March, 2007, is
by and among 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 the
Borrower and each Guarantor are sometimes referred to individually as “Debtor”),
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 “Secured Party”). Any reference to “Debtor”
herein shall be deemed to refer to each Debtor individually.

WITNESSETH:

WHEREAS, pursuant to the Commercial Loan Agreement of near or even date herewith
(the “Loan Agreement”), Secured Party has extended in favor of Borrower, certain
credit facilities consisting of a Revolving Line of Credit Loan in the principal
amount of up to $5,000,000 and a Term Loan in the principal amount of $6,500,000
(collectively, the “Loans”), all as set forth and described in the Loan
Agreement; and

WHEREAS, pursuant to the Loan Agreement, each of Guarantors has unconditionally
guaranteed the full payment and performance of the Obligations of the Borrower;

WHEREAS, the obligation of the Secured Party to make the Loans to the Borrower
is subject to the condition, among others, that the Borrower and each of the
Guarantors shall execute and deliver this Agreement and grant the security
interests hereinafter described. Terms not otherwise defined herein shall have
the meanings ascribed to them in the Loan Agreement.

NOW, THEREFORE, in consideration of the willingness of the Secured Party to make
the Loans to the Borrower, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:

1. Security Interest. As security for the Secured Obligations described in
Section 2 hereof, Debtor hereby grants to the Secured Party a first priority
security interest in and lien on all of the property and assets of the Debtor,
including, but not limited to the property and assets of the types described
below (hereinafter referred to collectively as the “Collateral”):

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(a) All goods, including equipment, machinery, office equipment, furniture, and
motor vehicles, along with all other parts, tools, trade-ins, repairs,
accessories, accessions, modifications, and replacements, whether now owned or
subsequently acquired, constructed, or attached or added to, or placed in, the
foregoing (collectively, the “Equipment”);

(b) All inventory, wherever located, including goods, merchandise, motor
vehicles, and other personal property, held for sale, licensing, rental, or
lease, or furnished or to be furnished under a contract of service, or
constituting raw materials, work in process or materials used or consumed in the
Debtor’s business, or consigned to others or held by others for return to the
Debtor, whether now owned or subsequently acquired or manufactured and wherever
located (collectively, the “Inventory”);

(c) All accounts and accounts receivable, including, without limitation,
accounts, contracts, contract rights, license fees, royalties, chattel paper,
instruments, rents, deposits, general intangibles, and any other obligations of
any kind whether now existing or hereafter arising out of or in connection with
the sale, licensing, rental, or lease of goods, motor vehicles, or intangibles,
the rendering of services, or the granting of licenses, and all rights now or
hereafter existing in and to all security agreements, notes, leases, licenses,
franchises, supply agreements, and other contracts securing or otherwise
relating to any such accounts, contracts, contract rights, chattel paper,
instruments, rents, deposits, general intangibles, or obligations (any and all
such accounts, contracts, contract rights, chattel paper, instruments, rents,
deposits, general intangibles, and obligations being the “Receivables”, and any
and all such security agreements, notes, leases, licenses, franchises, supply
agreements, and other contracts being the “Related Contracts”);

(d) All general intangibles, including, but not limited to, corporate names,
trade names, trademarks, trade secrets, copyrights, patents (issued and
pending), inventions, licenses (subject to the provisions of each license or
license agreement or as otherwise permitted under the provisions of Article 9 of
the Uniform Commercial Code as adopted by the State of New Hampshire), books and
records, customer lists, blue prints and plans, computer programs, tapes and
related electronic data, processing software, and all corporate ledgers;

(e) All investment property, including, but not limited to, securities, whether
certificated or uncertificated; securities entitlement; securities accounts;
commodity contracts; and commodity accounts;

(f) Any and all additions, accessions, substitutions or replacements to or for
any of the foregoing;

 

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(g) Any and all products and proceeds of any or all of the foregoing, including,
without limitation, cash, cash equivalents, tax refunds and the proceeds of
insurance policies providing coverage against the loss or destruction of or
damage to any of the Collateral, or any indemnity, warranty, or guarantee
payable by reason of loss or damage to or otherwise with respect to any of the
Collateral (whether or not the Secured Party is the loss payee thereof);

(h) All of the Debtor’s after-acquired property of the kinds and types described
in paragraphs (a)—(g) herein;

(i) All records and data relating to any of the property described above,
whether in the form of a writing, photograph, microfilm, microfiche, or
electronic media, together with all of the Debtor’s right, title, and interest
in and to all computer software required to utilize, create, maintain and
process any of such records or data or electronic media; and

also in (1) all checks, money, securities, bank accounts, deposit accounts, and
other accounts in the possession of or held by the Secured Party whether in the
name of the Debtor or in the name of the Secured Party, and (2) all other
property in which a security interest is granted by the Debtor to the Secured
Party pursuant to this Agreement. Notwithstanding the foregoing grant of
security interests in the corporate names, trade names, trademarks, trade
secrets, copyrights, patents (issued and pending), inventions, and licenses of
Debtor pursuant to this Agreement, the Secured Party’s rights and the Debtor’s
obligations with respect to the Secured Party’s security interests in such
corporate names, trade names, trademarks, trade secrets, copyrights, patents
(issued and pending), inventions, and licenses of Debtor shall be governed by
the terms and conditions of a certain Security Agreement (Intellectual Property)
of even date herewith by Debtor in favor of Secured Party.

2. Secured Obligations. The security interests hereby granted shall secure all
of the following (the “Secured Obligations”):

(a) Borrower’s payment of the aggregate principal sums outstanding from time to
time under the Loans, together with interest, fees, and other charges thereon as
provided in the Loan Agreement and the Notes evidencing the Loans;

(b) The Borrower’s and each Guarantor’s payment or performance of its
obligations under the Loan Agreement and under the other Loan Documents (as
defined, described and identified in the Loan Agreement, hereinafter the “Loan
Documents”), as the same may be amended, modified, extended, renewed, replaced
or restated;

 

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(c) The payment of all other sums with interest and charges thereon advanced in
accordance herewith to protect the validity, security, and priority of this
Agreement, the Loan Agreement, or the Loan Documents;

(d) Any and all obligations of the Borrower arising under any letter of credit,
foreign exchange contracts, interest rate swap, cap, floor or hedging
agreements, interest rate protection products, or similar agreements with the
Secured Party or any affiliate of the Secured Party; any and all obligations of
the Borrower to the Secured Party arising under any credit cards issued by the
Secured Party to the Borrower; and any and all obligations of the Borrower to
the Secured Party out of or in connection with any Automated Clearing House
(“ACH”) Agreements relating to the processing of ACH transactions, together with
all fees, expenses, charges and other amounts owing by or chargeable to the
Borrower under all such contracts, agreements, and credit cards; and

(e) Any and all other indebtedness of Borrower and each Guarantor to Secured
Party of every kind and description, direct or indirect, absolute or contingent,
due or to become due, regardless of how they arose, now existing or hereafter
arising.

3. Warranties and Representations of the Debtor. Debtor hereby makes the
following representations and warranties which shall survive the execution and
delivery of this Agreement as long as any Secured Obligation remains
outstanding:

(a) All representations and warranties made in the Loan Agreement and the Loan
Documents relating to the Debtor and the Collateral are true, accurate and
complete in all material respects as of the date hereof;

(b) The Debtor is and has been for the previous four (4) month period organized
under the laws of the state first set forth above and its executive offices and
the office where its books and records are kept and are to be kept concerning
the Receivables, Related Contracts and other Collateral are at the address first
set forth above; and the Debtor currently has no other places of business except
those set forth on Schedule I hereto and for the previous four (4) month period
Debtor has had no other places of business except those set forth on Schedule I
hereto;

(c) Other than as set forth on Schedule I, the Debtor conducts business only
under and through the corporate, business and trade names first set forth above;

 

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(d) No material authorization, approval or other action by, and no notice to or
filing with, any governmental authority or other person is required either
(i) for the grant by the Debtor of the security interests granted hereby or for
the execution, delivery or performance of this Agreement by the Debtor, or
(ii) for the perfection of or the exercise by the Secured Party of its
respective rights and remedies hereunder, except the filing of financing
statements or as previously obtained;

(e) The Debtor has good and marketable title to all of the Collateral pledged by
it hereunder, free and clear of any liens, security interests, encumbrances or
interests or claims of any other person or entity, except for the security
interests of the third parties as disclosed on Schedule II attached hereto
(collectively, the “Permitted Encumbrances”), which Permitted Encumbrances shall
be subject and subordinate to the security interests of the Secured Party
hereunder, and there are no sums owed with respect to the Collateral other than
as disclosed on the Debtor’s financial statements most recently delivered to the
Secured Party;

(f) Upon the filing of UCC-1 financing statements being delivered at or prior to
the execution hereof, the Secured Party will have a valid, perfected, first
priority security interest in all of the Collateral which may be perfected by
filing of financing statements (subject only to the Permitted Encumbrances);

(g) Schedule III attached hereto sets forth the description and location of all
Collateral of a value greater than $50,000 not located at the Debtor’s principal
place of business or at the locations listed on Schedule I, and

(h) Except as set forth on Schedule II, no effective financing statements or
other similar instrument in effect covering all or any part of the Collateral is
on file in any recording office where financing statement relating to the Debtor
are required to be filed, except as may have been filed in favor of Secured
Party relating to this Agreement or prior agreements with the Secured Party.

4. Authorization to File Financing Statements. The Debtor hereby irrevocably
authorizes the Secured Party at any time and from time to time to file in any
Uniform Commercial Code jurisdiction any initial financing statements and
amendments thereto that (a) indicate the Collateral (i) as all assets of the
Debtor or words of similar effect, regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article 9 of the Uniform
Commercial Code of the State of Debtor’s organization or such jurisdiction, or
(ii) as being of an equal or lesser scope or with greater detail than that
provided in the preceding clause, and (b) contain any other information required
by Part 5 of Article 9 of the Uniform Commercial Code of the State of Debtor’s
organization for the sufficiency or filing office acceptance of any financing
statement or amendment, including (i) whether the Debtor is an organization, the
type

 

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of organization and any organization identification number issued to the Debtor
and, (ii) in the case of a financing statement filed as a fixture filing or
indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral relates. The
Debtor agrees to furnish any such information to the Secured Party promptly upon
request.

5. Representations and Warranties Concerning Debtor’s Legal Status. The Debtor
represents and warrants to the Secured Party as follows: (a) the Debtor’s exact
legal name is that indicated on the Perfection Certificate executed by Debtor in
conjunction with execution of this Agreement (“Perfection Certificate”) and on
the signature page thereof executed and delivered in conjunction with this
Agreement, (b) the Debtor is an organization of the type and organized in the
jurisdiction set forth in the Perfection Certificate, (c) the Debtor’s state of
organization is as set forth in the Perfection Certificate and the Perfection
Certificate accurately sets forth the Debtor’s organizational identification
number or accurately states that the Debtor has none, (d) the Perfection
Certificate accurately sets forth the Debtor’s place of business or, if more
than one, its chief executive office as well as the Debtor’s mailing address if
different and (e) all other information set forth on the Perfection Certificate
pertaining to the Company is accurate and complete.

6. Affirmative Covenants of the Debtor.

(a) The Debtor shall promptly notify and provide the Secured Party with a
complete description of the opening of any new places of business containing
Collateral of a value of greater than $50,000.00, or, any change in its legal
name or place of incorporation, or any other act which would affect the
financing statements filed by the Secured Party;

(b) Upon the request of Secured Party, the Debtor shall take all steps that are
reasonably necessary or prudent to protect the security interests of the Secured
Party in the Collateral;

(c) The Debtor shall defend the Collateral against the claims and demands of all
persons which would have a Material Adverse Effect (as herein after defined);

(d) The Debtor shall comply, in all material respects, with all governmental
regulations applicable to the Collateral or any part thereof or to the operation
of the Debtor’s business except where failure to comply would not cause a
Material Adverse Effect; provided, however, that the Debtor may contest any
governmental regulation in any reasonable manner which shall not in the
reasonable opinion of the Secured Party materially and adversely affect the
Secured Party’s rights or the first priority of its security interest in the
Collateral (subject to Permitted Encumbrances);

 

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(e) The Debtor shall pay promptly when due, all taxes, assessments and
governmental charges or levies imposed upon the Collateral or in respect of its
income or profits therefrom, except that no such amounts need be paid if (i) the
validity thereof is being contested in good faith by appropriate proceedings,
and (ii) such amounts are adequately reserved against in accordance with the
generally accepted accounting principles;

(f) The Debtor shall cause the Equipment to be maintained and preserved in
reasonably good repair and working order, normal wear and tear excepted, and
shall make all repairs, replacements, additions, and other improvements
reasonably necessary to maintain the Equipment in such good condition, subject
to obsolescence;

(g) The Debtor shall maintain Inventory reasonably sufficient to meet the needs
of its business;

(h) The Debtor shall, with respect to any Collateral which consists of trucks,
automobiles, or other motor vehicles, or any other Collateral required to be
titled, deliver all titles thereto to the Secured Party to be held by the
Secured Party and Debtor shall make, execute, and deliver any and all
applications, and take such other action to assure that the Secured Party is
listed of record as the first priority and sole lienholder on all title
certificates;.

(i) Debtor shall keep materially accurate and complete records listing and
describing the Collateral, and when requested by Secured Party, Debtor shall
give Secured Party information regarding the Collateral and setting forth the
total value of the Inventory, the total value of the Equipment, the amount of
the Receivables designating how many days the Receivables are from the date of
invoice, the face value of any instruments, and any other information Secured
Party may reasonably request. Secured Party shall have the right, at any time
(but at reasonable intervals) during normal business hours and upon prior
notice, to inspect the Collateral and to audit and make copies of any records or
other writings which relate to the Collateral or the general financial condition
of Debtor;

(j) The Debtor shall advise the Secured Party promptly, in reasonable detail,
(i) of any lien, security interest, encumbrance, or claim made or asserted
against any of the Collateral in an amount in excess of $50,000.00, except for
Permitted Encumbrances, (ii) of any material loss or depreciation in the value
of the Collateral taken as a whole, and (iii) of the occurrence of any other
Material Adverse Effect on the aggregate value, enforceability or collectibility
of the Collateral;

 

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(k) The Debtor shall upon the request of the Secured Party give, execute,
deliver and file or record in the proper governmental offices, any instrument,
paper or document, including, but not limited to, one or more financing
statements under the Uniform Commercial Code, reasonably satisfactory to the
Secured Party, or take any action which the Secured Party reasonably may request
in order to create, preserve, perfect, extend, continue, modify, terminate or
otherwise effect any security interest granted pursuant hereto, or to enable the
Secured Party to exercise or enforce any of its rights hereunder; and

(l) The Debtor shall keep, and stamp or otherwise mark, any of its documents,
instruments and chattel paper and its books and records relating to any of the
Collateral in such manner as the Secured Party may reasonably require.

For purposes of this Agreement, “Material Adverse Effect” shall mean a material
adverse effect on (a) the business, assets, operations or financial or other
condition of Debtor on a consolidated basis, (b) Debtor’s ability to pay any of
the Loans or any of the other Obligations in accordance with the terms of the
Loan Agreement, (c) the Collateral, taken as a whole, or the security interests
of the Secured Party in the Collateral, taken as a whole, or the priority of
such security interests, or (d) Secured Party’s rights and remedies under this
Agreement and the other Loan Documents.

7. Negative Covenants of the Debtor. Except as otherwise provided in the Loan
Agreement or in this Agreement, without the prior written consent of the Secured
Party, the Debtor shall not:

(a) Transfer, sell or assign any of the Collateral other than in the ordinary
course of business or as otherwise permitted in the Loan Agreement;

(b) Allow or permit any other security interest or lien to attach to any of the
Collateral other than the Permitted Encumbrances;

(c) File, authorize, or permit to be filed in any jurisdiction any financing
statement relating to any of the Collateral unless the Secured Party is named as
sole secured party or to the extent relating to the Permitted Encumbrances;

(d) Permit any of the Collateral to be levied upon under any legal process;

(e) Permit anything to be done that materially impairs the value of any of the
Collateral taken as a whole; or

 

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(f) Use the Collateral in material violation of any law or in any manner
inconsistent with any policy of insurance thereon, except where such use would
not materially impair the value of the Collateral taken as whole.

8. Fixtures. It is the intention of the parties hereto that none of the
Collateral shall become fixtures. Without limiting the generality of the
foregoing, the Debtor will, if requested by the Secured Party, use reasonable
efforts to obtain waivers of lien, in form satisfactory to the Secured Party,
from each mortgagee or lessor of real property (other than the Secured Party) on
which any material amount of the Collateral is or is to be located.

9. Insurance. Debtor shall, at its own expense, maintain insurance covering the
Collateral against such risks, with such insurers, in such form, and in such
amounts as is customary in Debtor’s type of business. All casualty insurance
policies shall be payable in the event of loss to Secured Party to the extent of
its interest. All insurance policies shall provide for the insurer to endeavor
to give Secured Party thirty (30) days’ written notice to Secured Party of
cancellation and for notice to Secured Party of any claims paid thereunder.
Copies of all insurance policies shall be furnished to Secured Party upon its
request. Secured Party is hereby appointed as attorney irrevocable to take any
or all of the following actions: to collect return premiums, dividends and other
amounts due on any casualty insurance policy and the proceeds of such insurance,
to settle any claims with the insurers in the event of loss or damage to
Collateral, to endorse settlement drafts and to cancel, assign, or surrender any
insurance policies. If any return premiums, dividends, other amounts or proceeds
are paid to Secured Party under such policies, Secured Party may, at Secured
Party’s option, take either or both of the following actions: (i) apply such
return premiums, dividends, other amounts and proceeds in whole or in part to
the payment or satisfaction of any of the Secured Obligations in whatever order
Secured Party determines; or (ii) pay over such return premiums, dividends,
other amounts and proceeds in whole or in part to Debtor for the purpose of
repairing or replacing the Collateral destroyed or damaged, any return premiums,
dividends, other amounts and proceeds so paid over by Secured Party to be
secured by this Agreement.

 

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10. Receivables. After the occurrence of a Default (subject to any applicable
cure period) or Event of Default, Debtor agrees that Secured Party may
communicate with account debtors in order to verify the existence, amount, and
terms of any Receivables. After the occurrence of a Default (subject to any
applicable cure period) or Event of Default, Secured Party may notify account
debtors of the security interests established herein and require that payments
on Receivables be made directly to Secured Party, and upon the request of
Secured Party, Debtor shall notify account debtors and indicate on all billings
that payments and returns are to be made directly to Secured Party. In
furtherance of the foregoing, Debtor hereby appoints Secured Party attorney
irrevocable with full power to collect, compromise, endorse, sell, or otherwise
deal with the Receivables or proceeds thereof and, subject to the rights of any
third parties, to perform the terms of any contract in order to create
Receivables in Secured Party’s name or in the name of Debtor. This Agreement may
be, but need not be, supplemented by separate assignments of Receivables and
contract rights and, if such assignments are given, the rights and security
interests given thereby shall be in addition to and not in limitation of the
rights and security interests granted by this Agreement.

11. Events of Default. The following events shall be deemed “Events of Default”
hereunder:

(a) An Event of Default under the Loan Agreement or any of the Loan Documents;

(b) Debtor fails to observe or perform any covenant, warranty, or agreement
required to be observed or performed by it under this Agreement and such failure
is not cured in accordance with the cure provisions set forth in the Loan
Agreement;

(c) Debtor shall be in default under any obligation undertaken by Debtor which
default has a Material Adverse Effect on the ability of the Debtor to make
payments of its Secured Obligations or on the adequacy of the Collateral taken
as a whole as security for the Secured Obligations; or

(d) Uninsured loss, theft, damage, or destruction of any substantial portion of
any of the Collateral which has a Material Adverse Effect on the ability of the
Debtor to make payments of its Secured Obligations or on the adequacy of the
Collateral taken as a whole as security for the Secured Obligations.

12. Rights and Remedies of Secured Party on Default. Upon the occurrence of any
Event of Default, Secured Party shall have, by way of example and not of
limitation of any other rights available under applicable law, the following
rights and remedies:

 

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(a) Secured Party may declare the Secured Obligations, or any of them, to be
immediately due and payable without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived;

(b) In addition to all other rights and remedies contained in this Agreement,
the Loan Agreement, and in the Loan Documents, Secured Party may exercise the
rights and remedies accorded Secured Party by the Uniform Commercial Code or by
any other applicable law, all of which rights and remedies shall be cumulative
and non-exclusive to the extent permitted by law;

(c) Secured Party shall have the right to enter and/or remain upon the Premises
of Debtor, or any other place or places where any of the Collateral is located
and kept, without any obligation to pay rent to Debtor or others, and remove
Collateral therefrom to the premises of the Secured Party or any agent of
Secured Party for such time as Secured Party may desire in order to maintain,
collect, sell and/or prepare the Collateral for sale, liquidation or collection;

(d) Secured Party may require the Debtor at Debtor’s cost to assemble the
Collateral and make it available to Secured Party at a place reasonably
designated by Secured Party;

(e) Secured Party may take possession of and use and operate the Collateral in
the manner and for the purposes as set forth in Section 13 hereinbelow;

(f) Secured Party may sell, lease, or otherwise dispose of the Collateral as set
forth in Section 14 hereinbelow;

(g) Secured Party shall have the right to set-off, without notice to the Debtor,
any and all deposits or other sums at any time or times credited or due from
Secured Party to Debtor, whether in a special account (other than those
established for, or for the benefit of, third parties) or other account or
represented by a certificate of deposit (whether or not matured); which deposit
and other sums shall at all times constitute additional security for the Secured
Obligations;

(h) Secured Party may perform any warranty, covenant or agreement which Debtor
has failed to perform under this Agreement; and

(i) Secured Party may take any other action which Secured Party deems reasonably
necessary or desirable to protect the Collateral or the security interests
granted herein.

 

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13. Rights of Secured Party to Use and Operate Collateral. Upon the occurrence
and during the continuance of any Event of Default, the Secured Party shall have
the right and power to take possession of all or any part of the Collateral, and
to exclude the Debtor and all persons claiming under the Debtor wholly or partly
therefrom, and thereafter to hold, store, and/or use, operate, manage and
control the same. Upon any such taking of possession, the Secured Party may,
from time to time, at the expense of the Debtor, make all such repairs,
replacements, alterations, additions and improvements to and of the Collateral
as the Secured Party may reasonably deem proper. In any such case, subject as
aforesaid, the Secured Party shall have the right to manage and control the
Collateral and to carry on the business and to exercise all rights and powers of
the Debtor in respect thereto as the Secured Party shall deem best, including
the right to enter into any and all such agreements with respect to the leasing
and/or operation of the Collateral or any part thereof as the Secured Party may
see fit; and the Secured Party shall be entitled to collect and receive all
rents, issues, profits, fees, revenues and other income of the same and every
part thereof. Such rents, issues, profits, fees, revenues and other income shall
be applied to pay the reasonable expenses of holding and operating the
Collateral and of conducting the business thereof, and of all maintenance,
repairs, replacements, alterations, additions and improvements, and to make all
payments which the Secured Party may be required or may elect to make, if any,
for taxes, assessments, insurance and other charges upon the Collateral or any
part thereof, and all other payments which the Secured Party may be required or
authorized to make under any provision of this Agreement (including reasonable
legal costs and attorneys’ fees). The remainder of such rents, issues, profits,
fees, revenues and other income shall be applied to the payment of the Secured
Obligations in such order of priority as the Secured Party may determine in its
sole discretion and any surplus shall be returned to the Debtor. Without
limiting the generality of the foregoing, upon the occurrence and during the
continuance of an Event of Default the Secured Party shall have the right to
apply for and have a receiver appointed by a court of competent jurisdiction in
any action taken by the Secured Party to enforce its rights and remedies
hereunder in order to manage, protect and preserve the Collateral and continue
the operation of the business of the Debtor and to collect all revenues and
profits thereof and apply the same to the payment of all expenses and other
charges of such receivership including the compensation of the receiver and to
the payment of the Secured Obligations as aforesaid until a sale or other
disposition of such Collateral shall be finally made and consummated.

14. Rights of Secured Party to Sell Collateral. Upon (10) days prior written
notice by registered or certified mail by Secured Party to Debtor at the address
of the Debtor set forth above (or at such other address or addresses as the
Debtor shall specify in writing by like notice to the Secured Party) of the time
and place of any intended disposition of Collateral, then Secured Party shall
have the right and power to sell, assign, lease, or otherwise dispose of the
Collateral from any business premises of the Debtor, either at public auction or
private sale, by liquidation sale or other disposition, or as if the sale was
being made in the ordinary course of Debtor’s business, with or without notice
to the public that the said sale or disposition is for the benefit of the
Secured Party; provided, however, that if the Collateral is perishable or
threatens to

 

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decline speedily in value or is of a type customarily sold on a recognized
market, then Secured Party shall have the right and power to dispose of the
Collateral without prior notice to Debtor and Debtor expressly waives any rights
to prior notice under such circumstances. The notices described above shall be
deemed to meet any requirement hereunder or under any applicable law (including
the Uniform Commercial Code) that reasonable notification be given of the time
and place of such sale or other disposition. After deducting all reasonable
costs and expenses of collection, storage, custody, sale or other disposition
and delivery (including reasonable legal costs and attorneys’ fees) and all
other reasonable charges against the Collateral, the residue of the proceeds of
any such sale or disposition shall be applied to the payment of the Secured
Obligations in such order of priority as the Secured Party may determine in its
sole discretion and any surplus shall be returned to the Debtor. In the event
the proceeds of any sale, lease or other disposition of the Collateral hereunder
are insufficient to pay all of the Secured Obligations in full, the Debtor will
be liable for the deficiency, together with interest thereon at the maximum rate
provided in the Loan Agreement and the cost and expenses of collection of such
deficiency, including, without limitation, reasonable fees of attorneys,
experts, and agents, expenses and disbursements.

15. Attorney-in-Fact. The Secured Party is hereby appointed the
attorney-in-fact, with full power of substitution, of the Debtor for the purpose
of carrying out the provisions of this Agreement and taking any action and
executing any instruments (including, without limitation, financing or
continuation statements, conveyances, assignments, and transfers) which the
Secured Party may reasonably deem necessary or advisable to accomplish the
purposes hereof, which appointment as attorney-in-fact is coupled with an
interest and is irrevocable. The Debtor shall indemnify and hold harmless the
Secured Party from and against any liability or damage which it may incur in the
exercise and performance, in good faith, of the Secured Party’s powers and
duties as such attorney-in-fact, except for any liability or damage resulting
from Secured Party’ gross negligence or willful misconduct.

 

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16. Waiver, etc. The Debtor hereby waives presentment, demand, notice, protest
and, except as is otherwise provided herein, all other demands and notices in
connection with this Agreement or the enforcement of the Secured Party’s rights
hereunder or in connection with any Secured Obligations or any Collateral. The
Debtor further consents to and waives notice of the granting of renewals,
extensions of time for payment or other indulgences to the Debtor, or subject to
applicable law to any account debtor in respect of any Receivable, or to
substitution, release or surrender of any Collateral, addition or release of
persons primarily or secondarily liable on any Secured Obligation or on any
Receivable or other Collateral, or the acceptance of partial payments on any
Secured Obligation or on any account receivable or other Collateral and/or the
settlement or compromise thereof. No delay or omission on the part of the
Secured Party in exercising any right hereunder shall operate as a waiver of
such right or of any other right hereunder. Any waiver of any such right on any
one occasion shall not be construed as a bar to or waiver of any such right on
any such future occasion. Notwithstanding any other provision of this Agreement
or any of the other Loan Documents to the contrary, an Event of Default under
this Agreement or any of the other Loan Documents, shall be deemed continuing
until such time as such Event of Default is waived by the Secured Party in
writing.

17. Termination; Assignments, etc. This Agreement and the security interest in
the Collateral created hereby shall terminate when all of the Secured
Obligations have been paid, performed, and finally discharged in full, and all
commitment of the Secured Party with respect thereto have terminated. If any of
the Collateral shall be sold, transferred or otherwise disposed of by the Debtor
in a transaction permitted by the Loan Agreement, or if the Debtor requests that
the Secured Party release, or subordinate its security interest in, any
Collateral to the extent (but only to the extent) necessary to permit the
consummation of any other transaction not prohibited by any Loan Document, then
the Secured Party, at the request and sole expense of the Debtor, shall execute
and deliver to the Debtor all releases or other documents reasonably necessary
or desirable for the release of the security interests created hereby on such
Collateral. In the event of a sale or assignment by the Secured Party of all or
any of the Secured Obligations held by it, such Secured Party may assign or
transfer its rights and interests under this Agreement in whole or in part to
the purchaser or purchasers of such Secured Obligations, whereupon such
purchaser or purchasers shall become vested with all of the powers, rights, and
obligations of such Secured Party hereunder, and such Secured Party shall
thereafter be forever released and fully discharged from any liability or
responsibility hereunder, with respect to the rights and interests so assigned.

18. Notices. All notices, requests, demands and other communications provided
for hereunder shall be in writing (including telegraphic communication) and
shall be either mailed by certified mail, return receipt requested, or delivered
by overnight courier service, to the applicable party at the addresses first set
forth above, or, as to each party, at such other address as shall be designated
by such parties in a written notice to the other party complying as to delivery
with the terms of this Section. All such notices, requests, demands and other
communication shall be effective on the date of first attempted delivery.

 

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Citizens Bank New Hampshire Security Agreement – Micronetics et al.

 

19. Miscellaneous.

(a) The powers conferred on the Secured Party hereunder are solely to protect
its interest in the Collateral and shall not impose any duty upon it to exercise
any such powers. Except for the safe custody of any Collateral in its possession
and the accounting for monies actually received by it hereunder, the Secured
Party shall not have any duty as to any Collateral or as to the taking of any
necessary steps to preserve any right of it or of the Debtor against other
parties pertaining to any Collateral, except to the extent specifically required
under applicable law;

(b) No provision hereof shall be amended except by a writing signed by the
Secured Party and the Debtor;

(c) Any provision of this Agreement which is prohibited or unenforceable shall
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof;

(d) This Agreement shall be binding upon and shall inure to the benefit of the
successors and assigns of the Secured Party and the Debtor;

(e) No delay, failure to enforce, or single or partial exercise on the part of
the Secured Party in connection with any of its rights hereunder shall
constitute an estoppel or waiver thereof, or preclude other or further exercises
or enforcement thereof and no waiver of any default hereunder shall be a waiver
of any subsequent default;

(f) All of the terms, conditions, representations, warranties, covenants, and
agreements set forth herein shall apply to, be binding upon, and be deemed to be
made by each Debtor, jointly, severally, separately, and individually; and

(g) This Agreement shall be governed as to its validity, interpretation and
effect in accordance with the laws of the State of New Hampshire; provided,
however, that to the extent otherwise provided under the Uniform Commercial
Code, the laws of the jurisdiction where Debtor is located under the Uniform
Commercial Code shall govern perfection, the effect of perfection and
non-perfection, and the priority of security interests in the Collateral.

 

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Citizens Bank New Hampshire Security Agreement – Micronetics et al.

 

SECURED PARTY AND DEBTOR MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED
HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE
OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF SECURED PARTY RELATING TO THE
ADMINISTRATION OF THE LOAN OR ENFORCEMENT OF THE LOAN DOCUMENTS, AND AGREE THAT
NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY
LAW, EACH OF SECURED PARTY AND DEBTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. DEBTOR CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF SECURED
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SECURED PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR SECURED PARTY TO ACCEPT THIS AGREEMENT AND
MAKE THE LOANS.

[SIGNATURE PAGE FOLLOWS]

 

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Citizens Bank New Hampshire Security Agreement – Micronetics et al.

 

IN WITNESS WHEREOF, the undersigned have set their hands and seals and enter
into this Agreement all as of the day and year first above written.

 

    DEBTOR     MICRONETICS, INC.

 

    By:  

/s/ David Robbins

Witness       David Robbins, President     MICROWAVE & VIDEO SYSTEMS, INC.

 

    By:  

/s/ David Robbins

Witness       David Robbins, President     ENON MICROWAVE, INC.

 

    By:  

/s/ David Robbins

Witness       David Robbins, President     MICROWAVE CONCEPTS, INC.

 

    By:  

/s/ David Robbins

Witness       David Robbins, President     STEALTH MICROWAVE, INC.

 

    By:  

/s/ David Roggins

Witness       David Robbins, Vice President

 

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Citizens Bank New Hampshire Security Agreement – Micronetics et al.

 

    SECURED PARTY     CITIZENS BANK NEW HAMPSHIRE

 

    By:  

/s/ Timothy J. Whitaker

Witness       Timothy J. Whitaker, Senior Vice President

 

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