Exhibit 10.3

TERM NOTE

 

    Manchester, New Hampshire $6,500,000.00 U.S.   March 30, 2007

FOR VALUE RECEIVED, the undersigned, MICRONETICS, INC., a Delaware corporation
with an executive office at 26 Hampshire Drive, Hudson, New Hampshire 03051 (the
“Borrower”), hereby promises to pay to the order of 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”), at such office, or such other place or places as the holder hereof may
designate in writing from time to time hereafter, in lawful currency of the
United States of America and in immediately available funds, the principal sum
of SIX MILLION FIVE HUNDRED THOUSAND and 00/100 DOLLARS ($6,500,000.00),
pursuant and subject to the terms, conditions, and limitations of this Note and
the Commercial Loan Agreement dated of even date among the Borrower, the
Guarantors, and the Bank, as the same may be amended and/or restated from time
to time hereafter ( the “Loan Agreement”), together with interest thereon, all
as provided in the Loan Agreement and herein below. All payments shall be made
without counterclaim or setoff, and free and clear of, and without any deduction
or withholding for, any taxes or other payments.

The Borrower’s “Debit Balance” (sometimes hereinafter referred to as the “Loan”)
shall mean the debit balance in an account on the books of the Bank, maintained
in the form of a ledger card, computer records or otherwise in accordance with
the Bank’s customary practice and appropriate accounting procedures wherein
there shall be recorded the date and the principal amount advanced by the Bank
to the Borrower hereunder, each principal payment made by the Borrower to the
Bank hereunder, and all other appropriate debits and credits. The Bank shall
render to the Borrower a statement of account with respect thereto on a monthly
basis. The statement shall be considered correct and accepted by the Borrower,
unless Borrower notifies the Bank to the contrary within thirty (30) days after
the date of mailing.

The holder of this Note is entitled to all of the benefits and rights, and is
subject to all of the obligations, of the Bank under the Loan Agreement.
However, neither this reference to the Loan Agreement nor any provision thereof
shall impair the absolute and unconditional obligation of the Borrower to pay
the principal and interest of this Note as herein provided. Terms not otherwise
defined herein shall have the meanings ascribed to them in the Loan Agreement.
This Note is identified in the Loan Agreement as the “Term Note”.

This Note evidences the Borrower’s continuing obligation to pay the Debit
Balance (identified as the “Term Loan” in the Loan Agreement), plus interest and
any other applicable charges as determined from time to time.

Borrower shall repay to holder of this Note the principal amount hereof in
twenty (20) consecutive quarterly installments each in the amount of Three
Hundred Twenty Five Thousand and 00/100 Dollars ($325,000.00). Each such
quarterly installment shall be due and payable by

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Citizens/Micronetics – Term Note

 

Borrower to the holder of this Note on or before the first Business Day of each
January, April, July, and October hereafter until the Debit Balance is paid in
full. Interest hereon shall accrue and be paid until the Debit Balance is paid
in full at such interest rates and at such times, and pursuant to such
calculations, as are specified in the Loan Agreement, the terms of which are
hereby incorporated herein by reference. The entire remaining principal balance
evidenced by this Note, together with all accrued and unpaid interest hereon and
other charges related hereto, shall be due and payable on March 30, 2012.

Upon and after the occurrence of any Event of Default, this Term Note may, as
provided in the Loan Agreement, and without demand, notice or legal process of
any kind, be declared, and immediately shall become, due and payable in full.

Time is of the essence under this Term Note. Demand, presentment, protest and
notice of nonpayment and protest are hereby waived by Borrower.

The payment and performance of the obligations contained herein and in the other
Loan Documents are secured by a security interest in all of Borrower’s and
Guarantors’ assets and property interests granted to the Bank pursuant to the
Security Agreement and other Loan Documents.

Borrower hereby grants to Bank, a continuing lien, security interest and right
of setoff as security for all liabilities and obligations to Bank, whether now
existing or hereafter arising, upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of Citizens
Financial Group and its successors and assigns or in transit to any of them. At
any time after the occurrence of a Default (subject to any applicable cure
period) or Event of Default, without demand or notice (any such notice being
expressly waived by Borrower), Bank may setoff the same or any part thereof and
apply the same to any liability or obligation of Borrower even though unmatured
and regardless of the adequacy of any other collateral securing the Loan. ANY
AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT
TO ANY OTHER COLLATERAL WHICH SECURES THE LOAN, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

No delay or omission on the part of the holder in exercising any right,
privilege or remedy shall impair such right, privilege or remedy or be construed
as a waiver thereof or of any other right, privilege or remedy. No waiver of any
right, privilege or remedy or any amendment to this Note shall be effective
unless made in writing and signed by the holder. Under no circumstances shall an
effective waiver of any right, privilege or remedy on any one occasion
constitute or be construed as a bar to the exercise of or a waiver of such
right, privilege or remedy on any future occasion.

The acceptance by the holder hereof of any payment after any default hereunder
shall not operate to extend the time of payment of any amount then remaining
unpaid hereunder or

 

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Citizens/Micronetics – Term Note

 

constitute a waiver of any rights of the holder hereof under this Note.

All rights and remedies of the holder, whether granted herein or otherwise,
shall be cumulative and may be exercised singularly or concurrently.

This Note and the provisions hereof shall be binding upon the Borrower and the
Borrower’s successors, legal representatives and assigns and shall inure to the
benefit of the Bank and the Bank’s successors, legal representatives and
assigns.

The word “holder” as used herein shall mean the payee or endorsee of this Note
who is in possession of it, or the bearer, if this Note is at the time payable
to the bearer.

Upon receipt of an affidavit of an officer of Bank as to the loss, theft,
destruction or mutilation of this Note, and, in the case of any such loss,
theft, destruction or mutilation, upon cancellation of this Note, Borrower will
issue in lieu hereof, a replacement note in the same principal amount hereof and
otherwise of like tenor.

This Note may not be amended, changed or modified in any respect except by a
written document which has been executed by each party. This Note constitutes a
New Hampshire contract to be governed by the laws of such state and to be paid
and performed therein.

BORROWER AND BANK (BY ACCEPTANCE OF THIS NOTE) 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 NOTE 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 BANK 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, BORROWER 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. BORROWER CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF BANK HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT BANK WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR BANK TO
ACCEPT THIS NOTE AND MAKE THE LOAN.

 

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Citizens/Micronetics – Term Note

 

Executed and delivered the day and year first above written.

 

        BORROWER:     MICRONETICS, INC.

 

    By:  

/s/ David Robbins

Witness       David Robbins, President

 

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