Document:

ex10-3.htm

Exhibit 10.3

 

May 5, 2010

Term Loan

 

AMENDMENT NO. 2 TO

CREDIT AGREEMENT

This Amendment No. 2 to Credit Agreement (this “Amendment”), dated effective as of April 2, 2012, is entered into by and among the borrowing entities identified on Schedule 1 attached hereto (jointly and severally, “Borrower”), DIVERSIFIED RESTAURANT HOLDINGS, INC., a Nevada corporation, acting as “Borrowing Agent” for Borrower, and RBS CITIZENS, N.A., a national banking association, and its successors and assigns (“Lender”).

Capitalized terms used but not defined in this Amendment shall have the meanings assigned to such terms in the Credit Agreement (as defined below).

Recitals

A.           The parties entered into a loan transaction under the terms and conditions set forth in that certain Credit Agreement dated May 5, 2010, as amended by that certain Amendment No. 1 to Credit Agreement dated June 7, 2011, by and among Borrower and Lender (the “Credit Agreement”) and the other Loan Documents (as such term is defined in the Credit Agreement);

B.           In connection with the Credit Agreement and the Loan Documents, Borrower desires to refinance the outstanding amount due under the Credit Agreement as well as pay off outstanding seller and shareholder notes; and

C.           Lender and each Borrower have agreed to further amend the Credit Agreement to amend certain definitions in the Credit Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Amendment agree as follows:

1.           Amendments.

(a)            Sections 1(a) and 1(b) of the Credit Agreement are hereby deleted in their entirety and replaced with the following:

“(a)           Amount of Loan.  Subject to the terms and conditions set forth in this Agreement, Lender shall make a loan to Borrower in the maximum principal amount of Sixteen Million and no/100 Dollars ($16,000,000.00 (the “Loan”), the proceeds of which shall be disbursed by Lender to Borrower on the Closing Date.  Borrower’s obligation to repay the Loan shall be evidenced by a promissory note substantially in the form attached hereto as Exhibit B (the “Note”), with a maturity date of April 2, 2019 (the “Maturity Date”).

 

(b)           Payments.  Borrower shall pay eighty-four (84) principal payments in the amount of One Hundred Ninety Thousand Four Hundred Seventy-Six and 19/100 Dollars ($190,476.19) plus accrued interest, payable on or before the 2nd day of each month, with the outstanding principal sum and all accrued and unpaid interest on the Loan to be paid in full on the Maturity Date.  Borrower hereby authorizes Lender to automatically deduct from RBS Citizens, NA deposit account #450549176 of Borrower the amount of any payment due hereunder or under the Note, including payments of interest, principal, and other sums.  If the funds in the account are insufficient to cover any payment due to Lender, Lender will not be obligated to advance funds to cover the payment.  Failure of Lender to charge any account or to give any notice shall not affect the obligation of Borrower to pay all amounts due hereunder or under the Note.”

 

  

  

  

 

(b)           A new Section 1(d) shall be added to the Credit Agreement to read as follows:

 

“(d)           LIBOR Rate Interest.

 

(i)  Interest on the outstanding principal amount of the Loan, when classified as a LIBOR Rate Loan, shall accrue during each LIBOR Interest Period at a rate per annum equal to the sum of the Adjusted LIBOR Rate for such LIBOR Interest Period plus the LIBOR Rate Margin and shall be due and payable on each Interest Payment Date and on the Maturity Date, and shall be due and payable on each Interest Payment Date and on the Maturity Date, with monthly principal payments in the amount as set forth in a written payment schedule provided by Lender to Borrower.  Interest shall be calculated for the actual number of days elapsed on the basis of a 360-day year, including the first date of the applicable period to, but not including, the date of repayment.

 

(ii)  Automatic Rollover of LIBOR Rate Loan.  Upon the expiration of a LIBOR Interest Period, the LIBOR Rate Loan shall automatically be continued as a LIBOR Rate Loan at the then applicable Adjusted LIBOR Rate and in an amount equal to the principal amount of the expiring LIBOR Rate Loan less any Principal Repayment Amount made by Borrower; provided, however, that no portion of the outstanding principal amount of a LIBOR Rate Loan may be continued as a LIBOR Rate Loan when any Event of Default has occurred and is continuing.  If any Event of Default has occurred and is continuing (if Lender does not otherwise elect to exercise any right to accelerate the Loan hereunder), the LIBOR Rate Loan shall automatically be continued as a Prime Rate Loan on the first day of the next Interest Period.

 

(iii)  Additional LIBOR Rate Terms Affecting the Loan.  Additional LIBOR Rate terms affecting the Loan are set forth on Schedule 1(d)(iii) attached hereto and made a part hereof.  Capitalized terms used and not defined in Schedule 1(d)(iii) shall have the meanings given to those terms in Section 10 of this Agreement.”

 

(c)           Current Section 1(d) of the Credit Agreement is hereby deleted in its entirety and shall be renumbered and replaced with the following:

 

“(e)           Use of Proceeds.  Borrower shall use the proceeds of the Loan to (a) refinance the existing $6,000,000 development line of credit loan that converted into three (3) separate term loans in the original principal amounts of $1,676,000, $2,900,000 and $1,424,000 pursuant to that certain Development Line of Credit Agreement dated May 5, 2010, by and among Borrower, Borrowing Agent and Lender, as amended from time to time, (b) refinance the existing $9,000,000 term loan pursuant to the Credit Agreement, (c) pay off a seller note, (d) pay off shareholder notes and (e) pay swap breakage fees.  No amount advanced under the Note shall be used for personal, family, or household purposes.”

 

  

  

  

 

(d)           Current Section 1(e) of the Credit Agreement is hereby renumbered as Section 1(f).

 

(e)           Section 9(a) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

 

“(a)           For each Property that is secured by a mortgage or similar document, Borrower has provided to Lender copies of appraisals, surveys, environmental reports, and title commitments and policies relating to such Property in form acceptable to Lender in its sole discretion.”

 

(f)           Section 9(h) of the Credit Agreement is hereby deleted in its entirety and replaced with the following:

“(h)           Governing Law.  This Agreement will be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts, without reference to principles of conflicts of law.”

 

(g)           The following definitions in Section 10 of the Credit Agreement are hereby deleted in their entirety and replaced with the following:

“Debt Service Coverage Ratio” means for the period in question, on a consolidated basis for Borrower and all Affiliates, the calculation described as a ratio of (i) (a) EBITDA, plus (b) pre-opening costs, less (c) cash taxes, less (d) maintenance capital expenditures ($10,000 per store), less (e) distributions divided by (ii) Interest Expense and Principal Payments of the Indebtedness.  For purposes of this calculation, “Interest Expense and Principal Payments of the Indebtedness” shall include payments under all loan arrangements between Borrower and all Affiliates and its members/shareholders, whether now existing or hereafter arising and whether or not reflected on Borrower’s internal financial statements.

“Florida Entities” shall include Buckeye Group, LLC, Buckeye Group II, LLC, MCA Enterprises Brandon, Inc., AMC North Port, Inc., AMC Riverview, Inc., AMC Ft. Myers, Inc., AMC Lakeland, Inc. and any future entities affiliated with Borrower organized or conducting business in the State of Florida.

 

“Lease Adjusted Leverage Ratio” as of any date means the ratio of (a) the sum of (i) Funded Debt, adjusted for New Unit Development and (ii) Third Party Rent for the twelve (12) month period ending on such date multiplied by eight (8), divided by (b) the sum of (i) EBITDA, plus (ii) pre-opening costs, plus (iii) Third Party Rent for the twelve (12) month period ending on such date.

 

  

  

  

 

	“LIBOR Margin” means:	 
	 	 
	
If the Lease Adjusted Leverage Ratio is greater than or equal to 5.00

	
3.4%

	 	 
	
If the Lease Adjusted Leverage Ratio is greater than or equal to 4.50 but less than 5.00

	
3.1%

	 	 
	
If the Lease Adjusted Leverage Ratio is greater than or equal to 4.00 but less than 4.50

	
2.75%

	 	 
	
If the Lease Adjusted Leverage Ratio is less than 4.00

	
2.5%

 

(h)           The following definitions are hereby added to Section 10 of the Credit Agreement:

“Adjusted LIBOR Rate” means, relative to a LIBOR Rate Loan, a rate per annum determined by dividing (x) the LIBOR Rate for such LIBOR Interest Period by (y) a percentage equal to one hundred percent (100%) minus the LIBOR Reserve Percentage.

“Business Day” means:

(a)           any day which is neither a Saturday or Sunday nor a legal holiday on which commercial banks are authorized or required to be closed in Boston, Massachusetts;

(b)           when such term is used to describe a day on which a borrowing, payment, prepayment or repayment is to be made in respect of a LIBOR Rate Loan, any day which is (i) neither a Saturday or Sunday nor a legal holiday on which commercial banks are authorized or required to be closed in New York City, and (ii) a London Banking Day; and

(c)           when such term is used to describe a day on which an interest rate determination is to be made in respect of a LIBOR Rate Loan, any day which is a London Banking Day.

 

“Hedging Obligations” means, with respect to Borrower, all liabilities of Borrower to Lender or any other Person under a Hedge Agreement.

“Interest Payment Date” means the last Business Day of each LIBOR Interest Period or, in the case of Prime Rate Loans, any day on which a payment of principal is due hereunder.

“LIBOR Interest Period” means, in the case of a LIBOR Rate Loan:

(i)           initially, the period beginning on (and including) the Closing Date and ending on May 2, 2012 with respect to the Loan (the “Stub Period”); and

 

  

  

  

 

(ii)           then, each period commencing on (and including) the last day of the applicable Stub Period and ending on (but excluding) the day which numerically corresponds to such date one month thereafter (or, if such month has no numerically corresponding day, the last Business Day of such month); and

 

(iii)           thereafter, each period commencing on the last day of the next preceding LIBOR Interest Period and ending one month thereafter;

 

provided, however, that

 

(a)           if Borrower has or may incur Hedging Obligations with Lender in connection with the Loan, the LIBOR Interest Period shall be of the same duration as the relevant period set under the applicable Hedge Agreement;

 

(b)           if such LIBOR Interest Period would otherwise end on a day which is not a Business Day, such LIBOR Interest Period shall end on the next following Business Day unless such day falls in the next calendar month, in which case such LIBOR Interest Period shall end on the first preceding Business Day; and

 

(c)           no LIBOR Interest Period may end later than the termination of this Agreement.

 

“LIBOR Rate Loan” means the Loan for the period(s) when the rate of interest applicable to the Loan is calculated by reference to the LIBOR Rate in the manner set forth herein.

“LIBOR Reserve Percentage” means, relative to any day of any LIBOR Interest Period, the maximum aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) under any regulations of the Board of Governors of the Federal Reserve System (the “Board”) or other governmental authority having jurisdiction with respect thereto as issued from time to time and then applicable to assets or liabilities consisting of “Eurocurrency Liabilities”, as currently defined in Regulation D of the Board, having a term approximately equal or comparable to such Interest Period.

“New Unit Development” shall mean, with respect to a new unit (new restaurant location open for less than 12 months), an amount equal to the product of (a) 1.00 minus a fraction, the numerator of which is the number of months such new unit has been in operation and the denominator of which is 12, times (b) the amount of the Funded Debt for such new unit.

 

(i)           Exhibit A, Exhibit B and Exhibit C of the Credit Agreement are hereby deleted in their entirety and replaced with Exhibit A, Exhibit B and Exhibit C attached hereto.

 

  

  

  

 

(j)           Schedule 1, Schedule 2 and Schedule 3 of the Credit Agreement are hereby deleted in their entirety and replaced with Schedule 1, Schedule 2 and Schedule 3 attached hereto.

 

(k)           The new Schedule 1(d)(iii) attached hereto is hereby added to the Credit Agreement.

 

3.           Representations and Warranties.  Each Borrower represents and warrants that:

(a)           this Amendment has been duly authorized, executed and delivered on behalf of Borrower, and this Amendment, together with each of the Loan Documents constitutes the valid and legally binding agreement of Borrower, enforceable in accordance with its terms, except as enforceability thereof may be limited by bankruptcy, insolvency, reorganization or moratorium or other similar law relating to creditors’ rights and by general equitable principles which may limit the right to obtain equitable remedies (regardless of whether such enforceability is considered in a proceeding in equity or at law);

 

(b)           the representations and warranties by each Borrower contained in the Loan Documents are true, correct and complete in all material respects on and as of the date hereof as though made on and as of the date hereof, except to the extent such representations and warranties relate solely to an earlier date; and

 

(c)           no Event of Default exists under the Loan Documents.

 

4.           Ratification.  Except as modified by this Amendment, the terms and conditions of the Credit Agreement remain unchanged and in full force and effect.  The Credit Agreement, the Loan Documents and all terms thereof and obligations of Borrower thereunder shall remain in full force and effect and are hereby ratified and confirmed.  Lender hereby preserves all of its rights against Borrower, and Borrower hereby agrees that all such rights are ratified for the benefit of Lender.  Nothing in this Amendment releases any right, claim, lien, security interest or entitlement of Lender created by or contained in the Credit Agreement or any Loan Document nor is Borrower or any other Person released from any covenant, warranty or obligation created by or contained therein.

5.           Entire Agreement.  This Amendment, together with the Loan Documents, integrates all previous oral or written agreements, if any, between the parties regarding the subject matter hereof and, together with the Loan Documents, constitutes the complete and exclusive agreement between the parties regarding the subject matter hereof.  The parties expressly agree that usage of trade and course of dealing evidence may not be used to contradict, explain, supplement, or in any way affect this Amendment and that no extrinsic evidence may be offered to resolve an ambiguity in this Amendment or to introduce an ambiguity into this Amendment.  This Amendment shall not create a course of dealing between the parties.

6.           Counterparts.  This Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Amendment.

[Remainder of page intentionally left blank.]

  

  

  

 

IN WITNESS WHEREOF, the Lender and each Borrower has caused this Amendment to be executed and delivered by an authorized officer as of the date first above written.

LENDER:

RBS CITIZENS, N.A.,

a national banking association

 

	By: 	 /s/      Christopher J. Wickles	 	 	 	 
	Name:	Christopher J. Wickles	 	 	 	 
	Title: 	Sr. Vice President	 	 	 	 

[Signatures continue on next page.]

 

  

  

  

 

BORROWER:

FLYER ENTERPRISES, INC.

ANKER, INC.

TMA ENTERPRISES OF NOVI, INC.

AMC GRAND BLANC, INC.

AMC PETOSKEY, INC.

AMC TROY, INC.

AMC FLINT, INC.

AMC PORT HURON, INC.

AMC CHESTERFIELD, INC.

AMC MARQUETTE, INC.

MCA ENTERPRISES BRANDON, INC.

AMC NORTH PORT, INC.

AMC RIVERVIEW, INC.

BERKLEY BURGERS, INC.

TROY BURGERS, INC.

ANN ARBOR BURGERS, INC.

AMC TRAVERSE CITY, INC.

BRIGHTON BURGERS, INC.

CASCADE BURGERS REAL ESTATE, INC.

CASCADE BURGERS, INC.

EAST LANSING BURGERS, INC.

BEARCAT ENTERPRISES, INC.

each, a Michigan corporation

TMA ENTERPRISES OF FERNDALE, LLC,

AMC WARREN, LLC,

BUCKEYE GROUP, LLC,

BUCKEYE GROUP II, LLC,

each, a Michigan limited liability company

AMC LAKELAND, INC.

AMC SARASOTA, INC.

AMC FT. MYERS, INC.

each, a Florida corporation

 

	By: 	 /s/     David G. Burke	 	 	 	 
	Name:	David G. Burke	 	 	 	 
	Title: 	Chief Financial Officer	 	 	 	 

 

BORROWING AGENT:

DIVERSIFIED RESTAURANT HOLDINGS, INC.,

a Nevada corporation

	By: 	 /s/     David G. Burke	 	 	 	 
	Name:	David G. Burke	 	 	 	 
	Title: 	Chief Financial Officer	 	 	 	 

  

  

  

 

Entity Guarantors:

Each of the undersigned guarantors (each, a “Guarantor”) hereby acknowledges and agrees to the terms of this Amendment, reaffirms that certain Guaranty from such Guarantor to Lender in connection with the Loan Documents, and agrees that such Guaranty shall continue unchanged and in full force and effect to guarantee the payment and performance of the obligations of Borrower to Lender under the Loan Documents, as the same may be further extended, restated, amended or otherwise modified from time to time.

Diversified Restaurant Holdings, Inc.,

a Nevada corporation

 

AMC Group, Inc.

AMC Wings, Inc.

AMC Burgers, Inc.

Bagger Dave’s Franchising Corporation

each, a Michigan corporation

	By: 	 /s/     David G. Burke	 	 	 	 
	Name:	David G. Burke	 	 	 	 
	Title: 	Chief Financial Officer	 	 	 	 

Individual Guarantor:

The undersigned guarantor (“Guarantor”) hereby acknowledges and agrees to the terms of this Amendment, reaffirms that certain Personal Guaranty from Guarantor to Lender in connection with the Loan Documents, and agrees that such Personal Guaranty shall continue unchanged and in full force and effect to guarantee the payment and performance of the obligations of Borrower to Lender under the Loan Documents, as amended of even date herewith, as the same may be further extended, restated, amended or otherwise modified from time to time.

	 /s/    Michael Ansley	 
	T. Michael Ansley	 

 

  

  

  

Exhibit A

 

	
  

	
n

	
Flyer Enterprises, Inc.

	
  

	
n

	
Anker, Inc.

	
  

	
n

	
TMA Enterprises of Novi, Inc.

	
  

	
n

	
AMC Grand Blanc, Inc.

	
  

	
n

	
AMC Petoskey, Inc.

	
  

	
n

	
AMC Troy, Inc.

	
  

	
n

	
AMC Flint, Inc.

	
  

	
n

	
AMC Port Huron, Inc.

	
  

	
n

	
AMC Chesterfield, Inc.

	
  

	
n

	
AMC Marquette, Inc.

	
  

	
n

	
MCA Enterprises Brandon, Inc.

	
  

	
n

	
AMC North Port, Inc.

	
  

	
n

	
AMC Riverview, Inc.

	
  

	
n

	
Berkley Burgers, Inc.

	
  

	
n

	
Troy Burgers, Inc.

	
  

	
n

	
Ann Arbor Burgers, Inc.

	
  

	
n

	
AMC Traverse City, Inc.

	
  

	
n

	
Brighton Burgers, Inc.

	
  

	
n

	
Cascade Burgers Real Estate, Inc.

	
  

	
n

	
Cascade Burgers, Inc.

	
  

	
n

	
East Lansing Burgers, Inc.

	
  

	
n

	
Bearcat Enterprises, Inc.

	
  

	
n

	
TMA Enterprises of Ferndale, LLC

	
  

	
n

	
AMC Warren, LLC

	
  

	
n

	
Buckeye Group, LLC

	
  

	
n

	
Buckeye Group II, LLC

	
  

	
n

	
AMC Lakeland, Inc.

	
  

	
n

	
AMC Sarasota, Inc.

	
  

	
n

	
AMC Ft. Myers, Inc.

 

  

  

  

 

Exhibit B

FORM OF NOTE

 

	$16,000,000.00	April 2, 2012

 

FOR VALUE RECEIVED, the borrowing entities identified on Exhibit A attached hereto (jointly and severally, the “Borrower”), promise to pay to the order of RBS Citizens, N.A., a national banking association (the “Lender”), the principal sum of Sixteen Million and no/100 Dollars ($16,000,000.00) or such lesser amount that is the aggregate unpaid principal amount of the Loan made by Lender to Borrower pursuant to Article 1 of the Credit Agreement (as hereinafter defined), in immediately available funds at the office of Lender, 28 State Street, Boston, MA 02109, together with interest on the unpaid principal amount hereof at the rates and on the dates set forth in the Credit Agreement.

 

Lender is hereby authorized to record based on the loan payment schedule attached hereto, or to otherwise record in accordance with its usual practice (including, without limitation in Lender’s electronic data processing system), the date and amount of each advance and the date and amount of each interest and principal payment hereunder.

 

This Note is issued pursuant to, and is entitled to the benefits of, the Credit Agreement dated May 10, 2010, as amended by that certain Amendment No. 1 to Credit Agreement dated June 7, 2011 and that certain Amendment No. 2 to Credit Agreement dated of even date herewith (which, as it may be further amended or modified and in effect from time to time, is herein called the “Credit Agreement”), between Borrower and Lender, to which Credit Agreement reference is hereby made for a statement of the terms and conditions governing this Note, including the terms and conditions under which this Note may be prepaid or its maturity date accelerated.  Capitalized terms used herein and not otherwise defined herein are used with the meanings attributed to them in the Credit Agreement.

 

FLYER ENTERPRISES, INC.

ANKER, INC.

TMA ENTERPRISES OF NOVI, INC.

AMC GRAND BLANC, INC.

AMC PETOSKEY, INC.

AMC TROY, INC.

AMC FLINT, INC.

AMC PORT HURON, INC.

AMC CHESTERFIELD, INC.

AMC MARQUETTE, INC.

MCA ENTERPRISES BRANDON, INC.

AMC NORTH PORT, INC.

AMC RIVERVIEW, INC.

BERKLEY BURGERS, INC.

TROY BURGERS, INC.

ANN ARBOR BURGERS, INC.

AMC TRAVERSE CITY, INC.

BRIGHTON BURGERS, INC.

CASCADE BURGERS REAL ESTATE, INC.

CASCADE BURGERS, INC.

EAST LANSING BURGERS, INC.

BEARCAT ENTERPRISES, INC.

each, a Michigan corporation

 

  

  

  

TMA ENTERPRISES OF FERNDALE, LLC,

AMC WARREN, LLC,

BUCKEYE GROUP, LLC,

BUCKEYE GROUP II, LLC,

each, a Michigan limited liability company

AMC LAKELAND, INC.

AMC SARASOTA, INC.

AMC FT. MYERS, INC.

each, a Florida corporation

By:_______[DO NOT SIGN]________________

Name:                      David G. Burke

Title:           Chief Financial Officer

STATE OF __________________

COUNTY OF ________________

Acknowledged by David G. Burke, the Chief Financial Officer of Flyer Enterprises, Inc., Anker, Inc., TMA Enterprises of Novi, Inc., AMC Grand Blanc, Inc., AMC Petoskey, Inc., AMC Troy, Inc., AMC Flint, Inc., AMC Port Huron, Inc., AMC Chesterfield, Inc., AMC Marquette, Inc., MCA Enterprises Brandon, Inc., AMC North Port, Inc., AMC Riverview, Inc., Berkley Burgers, Inc., Ann Arbor Burgers, Inc., Troy Burgers, Inc., AMC Traverse City, Inc., Brighton Burgers, Inc., Cascade Burgers Real Estate, Inc., Cascade Burgers, Inc., East Lansing Burgers, Inc., Bearcat Enterprises, Inc., AMC Lakeland, Inc., AMC Sarasota, Inc., AMC Ft. Myers, Inc., Diversified Restaurant Holdings, Inc., and as the Manager of TMA Enterprises of Ferndale, LLC, AMC Warren, LLC, Buckeye Group, LLC and Buckeye Group II, LLC, before me on the _______ day of March, 2012.

Signature_________________________________

Printed name______________________________

Notary public, State of Michigan, County of ______

My commission expires______________________

Acting in the County of ______________________

 

  

  

  

 

Exhibit A to Note

	
  

	
n

	
Flyer Enterprises, Inc.

	
  

	
n

	
Anker, Inc.

	
  

	
n

	
TMA Enterprises of Novi, Inc.

	
  

	
n

	
AMC Grand Blanc, Inc.

	
  

	
n

	
AMC Petoskey, Inc.

	
  

	
n

	
AMC Troy, Inc.

	
  

	
n

	
AMC Flint, Inc.

	
  

	
n

	
AMC Port Huron, Inc.

	
  

	
n

	
AMC Chesterfield, Inc.

	
  

	
n

	
AMC Marquette, Inc.

	
  

	
n

	
MCA Enterprises Brandon, Inc.

	
  

	
n

	
AMC North Port, Inc.

	
  

	
n

	
AMC Riverview, Inc.

	
  

	
n

	
Berkley Burgers, Inc.

	
  

	
n

	
Troy Burgers, Inc.

	
  

	
n

	
Ann Arbor Burgers, Inc.

	
  

	
n

	
AMC Traverse City, Inc.

	
  

	
n

	
Brighton Burgers, Inc.

	
  

	
n

	
Cascade Burgers Real Estate, Inc.

	
  

	
n

	
Cascade Burgers, Inc.

	
  

	
n

	
East Lansing Burgers, Inc.

	
  

	
n

	
Bearcat Enterprises, Inc.

	
  

	
n

	
TMA Enterprises of Ferndale, LLC

	
  

	
n

	
AMC Warren, LLC

	
  

	
n

	
Buckeye Group, LLC

	
  

	
n

	
Buckeye Group II, LLC

	
  

	
n

	
AMC Lakeland, Inc.

	
  

	
n

	
AMC Sarasota, Inc.

	
  

	
n

	
AMC Ft. Myers, Inc.

 

  

  

  

 

 

  

  

  

 

Exhibit C

FORM OF

COMPLIANCE CERTIFICATE

This certificate is given by ________________, the ______________ of _____________ (“Borrower”) pursuant to Section 4 of the Credit Agreement dated May 5, 2010 by and between Borrower and RBS Citizens, N.A. (as may be amended from time to time, the “Credit Agreement”).  Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

The undersigned hereby certifies to Lender as follows:

	
  

	
(a)

	
All representations and warranties of Borrower in the Loan Documents are true and correct in all material respects as of the date hereof.

	
  

	
(b)

	
Borrower is in compliance in all material respects with all of its obligations, duties and covenants under the Loan Documents.

	
  

	
(c)

	
No event has occurred which, with the passage of time and/or the giving of notice, would constitute an Event of Default under the Loan Documents.

	
  

	
(d)

	
Since the Closing Date, no event has occurred that has had or could reasonably be expected to have a Material Adverse Effect on Borrower, the Business, the Guarantor or the Property.

	
  

	
(e)

	
Borrower is in compliance with the covenants contained in Section 6 of the Credit Agreement as demonstrated by the calculation of such covenants below. In calculating the covenants below, the Debt Service Coverage Ratio and the Lease Adjusted Leverage Ratio will be modified so that calculation of such ratios will not include results from Businesses open for a period of less than twelve (12) months.  In addition all figures for Businesses in their second (2nd) year of operation will be adjusted so that such figures are tested on annualized basis rather than a trailing twelve (12) month basis.

 

  

  

  

DEFINITIONS

Debt Service Covenant:

Borrower shall cause to be maintained as of the end of each fiscal quarter a Debt Service Coverage Ratio for the trailing twelve (12) month period of greater than or equal to 1.20 to 1.0.

Lease Adjusted Leverage Ratio Covenant (quarterly basis):

Borrower shall not cause the Lease Adjusted Leverage Ratio of Borrower on a consolidated basis to be greater than the Applicable Ratio, said ratio to be tested on a quarterly basis for the trailing twelve (12) month period.  “Applicable Ratio” shall mean 5.75:1.00 for calculations made on or before December 31, 2010; 5.50:1.00 for calculations made on or before December 31, 2011; and 5.00:1.00 for calculations made thereafter.

 

  

  

  

 

CALCULATIONS

 

Debt Service Coverage Ratio

 

	(a)  EBITDA (on a consolidated basis, net of extraordinary gains and losses, calculated on a trailing twelve (12) month period)  	 
	 	 
	(b)  PLUS:  pre-opening costs	 
	 	 
	(c)  LESS: cash taxes  	 
	 	 
	(d)  LESS: maintenance capital expenditures ($10,000 per store per year open more than 12 months)  	 
	 	 
	(e)  LESS: distributions   	 
	 	 
	 	 
	(A)  Subtotal (a) plus (b) minus (c) minus (d) minus (e)   	 
	 	 
	 	 
	(B) Interest Expense and Principal Payments of Indebtedness   	 
	 	 
	 	 
	 	 
	Debt Service Coverage Ratio:  (A) divided by (B)   	 

 

Maximum Lease Adjusted Leverage Ratio

	(1) Total Funded Debt, adjusted for New Unit Development (including pro rata advances under the DLOC Loan Inter-Affiliate Loans and Real Estate debt)     	 
	 	 
	(2) Third Party Rent for the twelve (12) month period ending on such date multiplied by eight (8)   	 
	 	 
	(A) Subtotal (1) plus (2)   	 
	 	 
	(B) EBITDAR = EBITDA + Third Party Rent for the twelve (12) month period ending on such date 	 
	 	 
	Maximum Lease Adjusted Leverage Ratio:  (A) divided by (B)      	 

 

 

	 	 	 	 	 
	Date: 	 	 	 	, 
	 	 	 	a 	 	 
	 	 	 	 	 	 
	 	 	 	
By: 

	 	 
	 	 	 	Name: 	 	 
	 	 	 	Title: 	 	 
	 	 	 	 	 	 

 

 

 

 

 

Schedule 1

 

FRANCHISE AGREEMENTS

 

	
Franchisee

	
Location

	
Effective Date

	
Initial

 Term

	
Renewal 

Terms

	
Flyer Enterprises, Inc.

	
44671 Mount Road

Sterling Heights, MI 48314

 

	
Jan. 29, 2009

	
5

	
5

	
Anker, Inc.

	
3190 West Silver Lake Road

Fenton, MI 48430

 

	
Oct. 10, 2000

	
10

	
10

	
TMA Enterprises of Novi, Inc.

	
44375 12 Mile Road

Novi, MI 48375

 

	
Oct. 23, 2001

	
10

	
10

	
AMC Grand Blanc, Inc.

	
5251 Trillium Circle Avenue #102

Grand Blanc, MI 48439

 

	
March 26, 2007

	
20

	
10, 5

	
AMC Petoskey, Inc.

	
2180 Anderson Road, Suite 110

Petoskey, MI 49770

 

	
June 11, 2007

	
20

	
10, 5

	
AMC Troy, Inc.

	
1873 East Big Beaver Road

Troy, MI 48083

 

	
Nov. 5, 2007

	
20

	
10, 5

	
AMC Flint, Inc.

	
G-3192 South Linden Road

Flint, MI 48507

 

	
July 7, 2008

	
20

	
10, 5

	
AMC Port Huron, Inc.

	
4355 24th Avenue, Suite 1

Port Huron, MI 48059

 

	
July 7, 2008

	
20

	
10, 5

	
AMC Chesterfield, Inc.

	
51364 Gratiot Avenue

Chesterfield Township, MI 48051

 

	
Oct. 20, 2009

	
20

	
10, 5

	
AMC Marquette, Inc.

	
2492 US Highway 41 West

Marquette, MI 49855

 

	
Oct. 20, 2009

	
20

	
10, 5

	
MCA Enterprises Brandon, Inc.

	
2055 Badlands Drive

Brandon, FL 33511

 

	
July 18, 2003

	
20

	
10, 5

	
AMC North Port, Inc.

	
4301 Aiden Lane

North Port, FL 34287

 

	
Sept. 28, 2006

	
20

	
10, 5

	
AMC Riverview, Inc.

	
10607 Big Bend Road

Riverview, FL 33579

 

	
Sept. 28, 2006

	
20

	
10, 5

	
Berkley Burgers, Inc.

	
2972 Coolidge Highway

Berkley, MI  48072

 

	
NONE

	  	  
	
Troy Burgers, Inc.

	
26062 Novi Road

Novi, MI  48375

 

	
NONE

	  	  
	
Ann Arbor Burgers, Inc.

	
859 W. Eisenhower Parkway

Ann Arbor, MI  48103

 

	
NONE

	  	  

 

  

  

  

 

	
Franchisee

	
Location

	
Effective Date

	
Initial 

Term

	
Renewal 

Terms

	
AMC Traverse City, Inc.

	
3480 South Airport Road West

Garfield township, MI  49684

 

	  	  	  
	
Brighton Burgers, Inc.

	
110 East Grand River

Brighton, MI  48116

 

	
NONE

	  	  
	
Cascade Burgers Real Estate, Inc.

 

	  	
NONE

	  	  
	
Cascade Burgers, Inc.

 

	  	
NONE

	  	  
	
East Lansing Burgers, Inc.

 

	  	  	  	  
	
Bearcat Enterprises, Inc.

 

	  	  	  	  
	
TMA Enterprises of Ferndale, LLC

	
280 West Nine Mile Road

Ferndale, MI 48220

 

	
Sept. 29, 2004

	
15

	
10, 5

	
AMC Warren, LLC

	
29287 Mound Road

Warren, MI 48092

 

	
Feb. 13, 2006

	
20

	
10, 5

	
Buckeye Group, LLC

	
13416 Boyette Road

Lithia, FL

 

	
Oct. 18, 2004

	
15

	
10, 5

	
Buckeye Group II, LLC

	
4067 Clark Road

Sarasota, FL 34238

 

	
July 8, 2005

	
20

	
10, 5

	
AMC Lakeland, Inc.

 

	  	  	  	  
	
AMC Sarasota, Inc.

 

	  	  	  	  
	
AMC Ft. Myers, Inc.

	
9390 Dynasty Dr., #101

Ft. Myers, FL  33905

 

	  	  	  

 

  

  

  

 

Schedule 1(d)(iii)

 

ADDITIONAL TERMS AFFECTING LIBOR RATE LOAN

1.           Voluntary Prepayment of the LIBOR Rate Loan.  When classified as a LIBOR Rate Loan, the Loan may be prepaid upon the terms and conditions set forth herein.  Borrower acknowledges that additional obligations may be associated with any such prepayment under the terms and conditions of any applicable Hedging Contracts.  Borrower shall give Lender, no later than 10:00 a.m., New York City time, at least four (4) Business Days notice of any proposed prepayment of the LIBOR Rate Loan, specifying the proposed date of payment and the principal amount to be paid.  Each partial prepayment of the principal amount of the LIBOR Rate Loan shall be in an integral multiple of $10,000 and accompanied by the payment of all charges outstanding on the LIBOR Rate Loan (including the LIBOR Breakage Fee) and of all accrued interest on the principal repaid to the date of payment.

2.           LIBOR Breakage Fee.  Upon any prepayment of a LIBOR Rate Loan on any day that is not the last day of the relevant Interest Period (regardless of the source of such prepayment and whether voluntary, by acceleration or otherwise), Borrower shall pay an amount (“LIBOR Breakage Fee”), as calculated by Lender, equal to the amount of any losses, expenses and liabilities (including without limitation any loss of margin and anticipated profits) that Lender may sustain as a result of such default or payment.  Borrower understands, agrees and acknowledges that:  (i) Lender does not have any obligation to purchase, sell and/or match funds in connection with the use of the LIBOR Rate as a basis for calculating the rate of interest on a LIBOR Rate Loan, (ii) the LIBOR Rate may be used merely as a reference in determining such rate, and (iii) Borrower has accepted the LIBOR Rate as a reasonable and fair basis for calculating the LIBOR Breakage Fee and other funding losses incurred by Lender.  Borrower further agrees to pay the LIBOR Breakage Fee and other funding losses, if any, whether or not Lender elects to purchase, sell and/or match funds.

3.           LIBOR Rate Lending Unlawful.  If Lender shall determine (which determination shall, upon notice thereof to Borrower be conclusive and binding on Borrower) that the introduction of or any change in or in the interpretation of any law, rule, regulation or guideline, (whether or not having the force of law) makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for Lender to make, continue or maintain the Loan as, or to convert the Loan into, a LIBOR Rate Loan, then any such LIBOR Rate Loan shall, upon such determination, forthwith be suspended until Lender shall notify Borrower that the circumstances causing such suspension no longer exist, and all LIBOR Rate Loans of such type shall automatically convert into Prime Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law and assertion.

4.           Increased Costs.  If, on or after the date hereof, the adoption of any applicable law, rule or regulation or guideline (whether or not having the force of law), or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by Lender with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency:

 

	 	(a)	
shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System of the United States) against assets of, deposits with or for the account of, or credit extended by, Lender or shall impose on Lender or on the London interbank market any other condition affecting the LIBOR Rate Loan or its obligation to make the LIBOR Rate Loan; or

 

  

  

  

 

	 	
(b)

	
shall impose on Lender any other condition affecting the LIBOR Rate Loan or its obligation to make the LIBOR Rate Loan,

 

and the result of any of the foregoing is to increase the cost to Lender of making or maintaining the Loan as a LIBOR Rate Loan, or to reduce the amount of any sum received or receivable by Lender under this Agreement with respect thereto, by an amount deemed by Lender to be material, then, within fifteen (15) days after demand by Lender, Borrower shall pay to Lender such additional amount or amounts as will compensate Lender for such increased cost or reduction.

 

5.           Increased Capital Costs.  If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request (whether or not having the force of law) of any court, central bank, regulator or other governmental authority affects or would affect the amount of capital required or expected to be maintained by Lender, or person controlling Lender, and Lender determines (in its sole and absolute discretion) that the rate of return on its or such controlling person’s capital as a consequence of its commitments or the Loan made by Lender is reduced to a level below that which Lender or such controlling person could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by Lender to Borrower, Borrower shall immediately pay directly to Lender additional amounts sufficient to compensate Lender or such controlling person for such reduction in rate of return.  A statement of Lender as to any such additional amount or amounts (including calculations thereof in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on Borrower.  In determining such amount, Lender may use any method of averaging and attribution that it (in its sole and absolute discretion) shall deem applicable.

 

6.           Taxes.  All payments by Borrower of principal of, and interest on, the LIBOR Rate Loan and all other amounts payable hereunder shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or measured by Lender’s net income or receipts (such non-excluded items being called “Taxes”).  In the event that any withholding or deduction from any payment to be made by Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then Borrower will

 

	 	
(a)

	
pay directly to the relevant authority the full amount required to be so withheld or deducted;

 

	 	
(b)

	
promptly forward to Lender an official receipt or other documentation satisfactory to Lender evidencing such payment to such authority; and

 

	 	
(c)

	
pay to Lender such additional amount or amounts as is necessary to ensure that the net amount actually received by Lender will equal the full amount Lender would have received had no such withholding or deduction been required.

 

Moreover, if any Taxes are directly asserted against Lender with respect to any payment received by Lender hereunder, Lender may pay such Taxes and Borrower will promptly pay such additional amount (including any penalties, interest or expenses) as is necessary in order that the net amount received by Lender after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount Lender would have received had not such Taxes been asserted.

 

  

  

  

 

If Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to Lender the required receipts or other required documentary evidence, Borrower shall indemnify Lender for any incremental Taxes, interest or penalties that may become payable by Lender as a result of any such failure.

 

7.           Unavailability of LIBOR Rate.  In the event that Borrower shall have requested a LIBOR Rate Loan and Lender, in its sole discretion, shall have determined that U.S. dollar deposits in the relevant amount and for the relevant LIBOR Interest Period are not available to Lender in the London interbank market; or by reason of circumstances affecting Lender in the London interbank market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate applicable to the relevant LIBOR Interest Period; or the LIBOR Rate no longer adequately and fairly reflects Lender’s cost of funding loans, upon notice from Lender to Borrower the obligations of Lender under this Agreement to make or continue any loans as, or to convert any loans into, LIBOR Rate Loans of such duration shall forthwith be suspended until Lender shall notify Borrower that the circumstances causing such suspension no longer exist.

 

  

  

  

 

Schedule 2

 

LEASE AGREEMENTS

 

	
Tenant

	
Location

	
Landlord

	
Approx. Expire Date (without exercise of options)

	
Flyer Enterprises, Inc.

	
44671 Mound Rd.

Sterling Heights, MI 48314

 

	
AIG Baker Sterling Heights, LLC

 

	
December 2009

	
Anker, Inc

	
3190 Silver Lake Rd.

Fenton, MI 48430

 

	
Terra Management Company

 

	
March 2011

	
TMA Enterprises of Novi, Inc

	
44375 Twelve Mile Rd.

Novi, MI 48377

 

	
PLC Novi West Development, LLC

 

	
April 2014

	
AMC Grand Blanc, Inc.

	
8251 Trillium Circle Ave.

Suite 102

Grand Blanc, MI 48439

 

	
Trillim Circle, LLC

	
January/February 2018

	
AMC Petoskey, Inc.

	
2180 Anderson Rd.

Ste. 110

Petoskey, MI 49770

 

	
Petoskey Investment Group, LLC

	
August/September 2018

	
AMC Troy, Inc.

	
1873 E. Big Beaver Rd.

Troy, MI 48083

 

	
Troy Sports Center LLC

	
March, 2018

	
AMC Flint, Inc.

	
G-3192 South Linden Road

Flint, MI 48507

 

	
Ramco-Gershenson Properties, L.P.

 

	
January/February 2019

	
AMC Port Huron, Inc.

	
4355 24th Avenue

Ste. 1

Port Huron, MI 48059

 

	
Walter Sparling and Mary L. Sparling

	
August/September 2018

	
AMC Chesterfield, Inc.

	
51364 Gratiot Avenue

Chesterfield, MI  48501

 

	
Chesterfield Development Company, LLC

 

	
____ 2020

	
AMC Marquette, Inc

	
2492 U.S. Highway 41 West

Marquette, MI

 

	
Centrup Hospitality, LLC

	
_____ 2025

	
MCA Enterprises Brandon, Inc.

	
2055 Badlands Drive

Brandon, FL 33511

 

	
Florida Wings Group, LLC

	
August/September 2024

	
AMC North Port, Inc.

	
4301 Aidan Lane

North Port, FL 34287

 

	
North Port Gateway, LLC

	
June/July/August 2016

	
AMC Riverview, Inc

	
10607 Big Bend Rd.

Riverview, FL 33579

 

	
Shoppes of Southbay, LLC

	
August/September/October 2016

	
Berkley Burgers, Inc.

	
2972 Coolidge Highway

Berkley, MI 48072

 

	
TM Apple Co., LLC

	
January/February 2023

	
Troy Burgers, Inc.

	
26062 Novi Road

Novi, MI  48375

 

	
Novi Town Center Investors, LLC

	
April/May 2020

 

  

  

  

 

	
Ann Arbor Burgers, Inc.

	
859 W. Eisenhower Parkway

Ann Arbor, MI 48103

 

	
8600 Associates Limited Partnership

 

	
April/May 2018

	
AMC Traverse City, Inc.

 

	
3480 South Airport Road West

Garfield Township, MI  49684

	  	  
	
Brighton Burgers, Inc.

 

	
110 East Grand River

Brighton, MI  48116

	  	  
	
Cascade Burgers Real Estate, Inc.

 

	  	
NONE

	
NONE

	
Cascade Burgers, Inc.

 

	  	  	  
	
East Lansing Burgers, Inc.

 

	  	  	  
	
Bearcat Enterprises, Inc.

 

	  	  	  
	
TMA Enterprises of Ferndale, LLC

 

	
280 W. Nine Mile Rd.

Ferndale, MI 48220

	
Basco Enterprises, Inc.

	
December 2014

	
AMC Warren, LLC

	
29287 Mound Rd.

Warren, MI 48092

 

	
Grand/Sakwa Warren Commercial Parcel D LLC

 

	
April/May 2016

	
Buckeye Group, LLC

	
13416 Boyette Rd.

Riverview, FL 33569

 

	
River Springs, LLC

	
February, 2017

	
Buckeye Group II, LLC

	
4067 Clark Rd

Sarasota, FL 34238

 

	
Bullseye Properties, Inc.

	
June/July 2015

	
AMC Lakeland, Inc.

 

	  	  	  
	
AMC Sarasota, Inc.

 

	  	  	  
	
AMC Ft. Myers, Inc.

 

	
9390 Dynasty Dr., #101

Ft. Myers, FL  33905

	  	  

 

  

  

  

 

Schedule 3

 

PROPERTIES

 

	
Flyer Enterprises, Inc.  #3065

	
44671 Mound Rd.

	  	
Sterling Heights, MI 48314

 

	
Anker, Inc.  #3101

	
3190 Silver Lake Rd.

	  	
Fenton, MI 48430

 

	
TMA Enterprises of Novi, Inc.  #3130

	
44375 Twelve Mile Rd.

	  	
Novi, MI 48377

 

	
AMC Grand Blanc, Inc.  #3383

	
8251 Trillium Circle Ave.

	  	
Suite 102

	  	
Grand Blanc, MI 48439

 

	
AMC Petoskey, Inc.  #3360

	
2180 Anderson Rd., Ste. 110

	  	
Petoskey, MI 49770

 

	
AMC Troy, Inc.  #3407

	
1873 E. Big Beaver Rd.

	  	
Troy, MI 48083

 

	
AMC Flint, Inc. #3441

	
G-3192 South Linden Road

	  	
Flint, MI 48507

 

	
AMC Port Huron, Inc. #3442

	
4355 24th Avenue, Ste. 1

	  	
Port Huron, MI 48059

 

	
AMC Chesterfield, Inc. # 3505

	
51364 Gratiot Avenue

	  	
Chesterfield, MI  48501

 

	
AMC Marquette, Inc. # 3508

	
2492 U.S. Highway 41 West

	  	
Marquette, MI

 

	
MCA Enterprises Brandon, Inc.  #3189

	
2055 Badlands Drive

	  	
Brandon, FL 33511

 

	
AMC North Port, Inc. #3341

	
4301 Aidan Lane

	  	
North Port, FL 34287

 

	
AMC Riverview, Inc.  #3345

	
10607 Big Bend Rd.

	  	
Riverview, FL 33579

 

	
Berkley Burgers, Inc.

	
2972 Coolidge Highway

	  	
Berkley, MI 48072

 

	
Troy Burgers, Inc.

	
26062 Novi Road

	
 

	
Novi, MI  48375

 

	
Ann Arbor Burgers, Inc.

	
859 W. Eisenhower Parkway

	  	
Ann Arbor, MI 48103

 

	
AMC Traverse City, Inc.

	
3480 South Airport Road West

	  	
Garfield Township, MI  49684

 

  

  

  

 

	
Brighton Burgers, Inc.

	
110 East Grand River

	  	
Brighton, MI  48116

 

	
Cascade Burgers Real Estate, Inc.

	  
	  	  
	
Cascade Burgers, Inc.

	  
	  	  
	
East Lansing Burgers, Inc.

	  
	  	  
	
Bearcat Enterprises, Inc.

	  
	  	  
	
TMA Enterprises of Ferndale, LLC  #3239

	
280 W. Nine Mile Rd.

	  	
Ferndale, MI 48220

 

	  	  
	
AMC Warren, LLC  #3312

	
29287 Mound Rd.

	  	
Warren, MI 48092

 

	
Buckeye Group, LLC  #3254

	
13416 Boyette Rd.

	  	
Riverview, FL 33569

 

	
Buckeye Group II, LLC  #3269

	
4067 Clark Rd.

	  	
Sarasota, FL 34238

 

	
AMC Lakeland, Inc.

	  
	  	  
	
AMC Sarasota, Inc.

	  
	  	  
	
AMC Ft. Myers, Inc.

	
9390 Dynasty Dr., #101

	  	
Ft. Myers, FL  33905employment_agreement.htm

 

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into effective as of the 2nd day of April, 2012, by and between ADDvantage Technologies Group, Inc., an Oklahoma corporation (the “Company”), and David H. Humphrey (“Executive”).

WHEREAS, the Company desires to obtain the services of the Executive in the manner hereinafter specified in its business, thereby retaining for the Company the benefit of the Executive’s business knowledge and experience, and also to make provisions for the payment of reasonable and proper compensation to the Executive for such services; and

WHEREAS, the Executive is willing to be employed by the Company and to perform the duties incident to such employment upon the terms and subject to the conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties hereto agree as follows:

1.           Employment and Duties.  The Company hereby employs Executive, and Executive hereby agrees to serve, on the terms and conditions described herein.  Executive shall be the President and Chief Executive Officer of the Company with such duties assigned to Executive under the Bylaws of the Company and by the Board of Directors of the Company.  Executive shall report to the Board of Directors.  Executive further agrees to use his best efforts to promote the interests of the Company, and to devote his full time and working attention to the business and affairs of the Company.

2.           Term of Employment.  This Agreement is effective upon the execution hereof and will continue in effect until terminated pursuant to Section 5 (the “Term”).

3.           Compensation.

(a)           Base Salary.  As compensation for services here­under and in consideration of Executive’s agreements set forth in Section 4 hereof, during the Term the Company shall pay Executive an initial annual salary of $200,000, which shall be payable in appropriate installments to conform with the Company’s normal pay practices, including regular payroll dates, appropriate proration and standard employee deductions such as income tax withholding and social security.  The Base Salary may be reviewed periodically by the compensation committee of the Board of Directors of the Company. Future increases, if any, shall be determined by the Board of Directors of the Company and shall be entirely discretionary without the necessity of an amendment hereto.

(b)           Benefits.  The Executive shall be entitled to participate in any and all such additional benefits as are enjoyed from time to time by other employees, including senior executive employees, in accordance with the established practices and policies of the Company or the terms of applicable benefit plans, as the Company may in its absolute discretion create from time to time. The Executive shall be entitled to perquisites offered to senior executives of the Company. The Company reserves the right to alter, amend or terminate all such benefits and perquisites at any time with or without notice. Nothing 

 

  

1

  

herein shall preclude the Company from amending, modifying or terminating any employee benefit plans or perquisites at any time, without prior notice.

(d)           Travel Expenses.  Executive shall be entitled to reimbursement of his actual and reasonable out-of-pocket expenses incurred in connection with out-of-town travel conducted by Executive at the Company’s request and in accordance with the Company’s policy.  Such expenses shall be limited to ordinary and necessary items, and shall be substantiated by vouchers, receipts or similar documentation.  In the event that Executive uses his personal automobile for business purposes, the Company shall reimburse Executive for any such documented mileage incurred at the then effective Standard Mileage Rate (as defined annually by the Internal Revenue Service).

(e)           Vacation and Sick Leave.  Executive shall be entitled to vacation and sick leave in accordance with the Company’s policies; provided, however, that notwithstanding anything in the Company’s policies to the contrary, Executive shall receive at least three (3) weeks paid vacation per calendar year.

(f)           Incentive Compensation.  For services rendered by the Executive in the course of the employment hereunder and depending on the achievement of business goals, the Executive may be eligible to receive an annual variable, at-risk payment (the “Bonus”) as defined in the ADDvantage Senior Management Incentive Compensation Plan. For the period between the date hereof to the end of the Company’s current fiscal year, the Executive’s target Bonus will be prorated from April 2, 2012 to September 30, 2012. At all times, the Bonus, including any future increases, shall be determined by the Board and shall be entirely discretionary without the necessity of an amendment hereto. There is no guarantee of a Bonus in any particular year and under no circumstances is the Bonus to be considered part of the Executive’s Base Salary.

(g)           Stock Option.   Executive shall be granted an option to purchase up to 200,000 shares of the common stock of the Company granted pursuant to the Company’s 1998 Incentive Stock Plan, as amended, and that certain Non-Qualified Stock Option Agreement of even date herewith.

    

(h)           Clawback Provisions. Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid or payable to Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation, order or stock exchange listing requirement, will be subject to such deductions and clawback (recovery) as may be required to be made pursuant to law, government regulation, order, stock exchange listing requirement (or any policy of the Company adopted pursuant to any such law, government regulation, order or stock exchange listing requirement). Executive specifically authorizes the Company to withhold from his future wages any amounts that may become due under this provision. This Section 3(h) shall survive the termination of this Agreement for a period of three (3) years.”

 

	
  

	
4.

	
Confidentiality; Covenant Non-Solicitation; Non-Disparagement.

(a)           Non-Disclosure.  Executive hereby agrees that at all times, both during his 

 

  

2

  

employment and after his termination, he will:

i.           maintain the confidentiality of all Confidential Information (as defined below) and not copy or otherwise reproduce, publish, sell, use, make any commercial use of, exploit, disclose, divulge, demonstrate or make possible the reverse engineering and/or reverse compilation of any Confidential Information of the Company or any of its Affiliates (as defined below), or any part or parts thereof, directly or indirectly to any person or entity (other than the Company or any of its Affiliates or designees), except (A) at the request and authorization of the Company, (B) to the extent necessary to comply with the law or the valid final order of a court or governmental agency of competent jurisdiction, in which event Executive shall notify the Company as promptly as practicable (and, if possible, prior to making any disclosure) and shall seek confidential treatment of such information, or (C) in order to properly carry out Executive’s duties to the Company hereunder in the normal course of business; and

ii.           assign, and hereby does assign, to the Company any and all rights which the Executive might otherwise claim in and to any Confidential Information and to all granted or applications for letters patent or copyrights therefor in all countries where the business of the Company is carried on or conducted by the Company or any of its Affiliates, and shall promptly deliver to the Company such written instruments and cooperate and do such other acts as may be necessary in the opinion of the Company to preserve the Company’s rights in and to the Confidential Information against forfeiture, abandonment or loss and to obtain and maintain letters patent or copyrights and to vest the entire right and title thereto exclusively in the Company.

As used in this Agreement, the term “Affiliate” shall mean and include any other corporation, partnership or other entity or enterprise which, directly or indirectly, is controlled by, controls, or is under common control with, the Company.  For the purposes of the preceding sentence, the word “control” (including the terms “controlling,” “controlled by” and “under common control with”) shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities or partnership interest or by contracts.

Executive further agrees and acknowledges that such Confidential Information, as between the Company and Executive, shall be deemed and at all times remain and constitute the exclusive property of the Company, whether or not patentable or copyrightable, that the Company has reserved and does hereby reserve all rights in and to the same for all purposes and to take all necessary and appropriate precautions to avoid the unauthorized disclosure of any Confidential Information.

In the event Executive’s employment with the Company terminates for any reason, Executive shall, upon request by the Company, promptly return to the Company all property of the Company and its Affiliates in his possession or under his direct or indirect control, including, without limitation, all Confidential Information and all equipment, notebooks and materials, reports, notes, contracts, memoranda, documents and data of the Company or any of its Affiliates or constituting or relating to the 

 

  

3

  

Confidential Information (and any and all copies thereof) whether typed, printed, written or on any source of computer media.

(b)           Confidential Information.  For purposes of this Agreement, the term “Confidential Information” shall mean and include but shall not be limited to any and all knowledge, information or data, whether written or oral, and if written, howsoever produced or reproduced, whether or not denoted or marked confidential, which is the proprietary information of the Company or any of its subsidiaries or other Affiliates relating to the business affairs, assets and operations of the Company (whether or not a trade secret), including, without limitation:

i.           all research, designs, developments, know-how, computer programs, algorithms, models, software or programming, summaries, reports, drawings, charts, specifications, descriptions, routines, processes, inventions, discoveries, trade secrets, methods, improvements, adaptations, and similar proprietary concepts and ideas and related documentation;

ii.           the terms of this Agreement, and of any other agreement or contract between the Company and Executive to the extent required by any such other agreement or contract (subject to the Company’s reporting obligations under the Federal and State securities laws and regulations);

iii.           any information concerning or belonging to the Company’s customers or the existing and contemplated projects or programs of the Company and its customers to the extent such information has been obtained as a result of Executive’s role as an employee, manager or officer of the Company;

iv.           any methods of operation, programming plans, marketing plans, techniques, technical plans, strategic plans, distribution plans, transmission plans, production plans, finances, budgets, salary information, sources of supply and materials and costs, discount and pricing practices, contractual arrangements and negotiations; and

v.           any other information of similar or dissimilar nature that the Company designates as Confidential Information (whether or not owned or developed by the Company) and/or that is proprietary to or within the unique knowledge of the Company (whether or not discovered, originated or developed in whole or in part by the Executive),

and which is used or developed by the Company or any of its Affiliates at any time during the period of Executive’s employment by the Company, as well as any financial information regarding the Company or any of its Affiliates which was disclosed to or learned by Executive during such period; provided, however, Confidential Information does not include information which becomes freely and generally available to the public through no fault or wrongful act of Executive.

(c)           Non-Solicitation.  Executive hereby agrees that during the Term and thereafter for a period of one year following the date on which Executive is no longer 

 

  

4

  

employed by the Company, he will not, directly or indirectly, on Executive’s own behalf or on the behalf of any Business Entity:

(i)           solicit the employment of any individual who is then currently or, was, within 90 days of any solicitation for employment, an employee of the Company or interfere with the relationship between the Company and an employee of the Company;

 

(ii)          induce an established customer of the Company existing at any time during the Term (a “Customer”) to cancel any order previously placed with the Company.; and

(iii)         solicit from any Customer of the Company the sale of any goods, services, combination of goods and services or any other business opportunity which is competitive to its business or to the relationship between the Company and the Customer.

For the purpose of this Section 4(c), the term “Business Entity” shall mean any person, partnership, corporation, or other business entity that is in competition or intends to be in competition, or as a result of or following Executive’s employment with such business entity intends to be in competition, with any business carried on by the Company prior to the date hereof or hereafter conducted by the Company during the Term in any county of any state in the United States or any other country or nation where business is then carried on or conducted (directly or indirectly) by the Company.  The Company shall provide notice to Executive of any activity or pursuit which it claims is in violation of any provision of this Agreement, setting forth with reasonable specificity the basis of such claim.

(d)           Non-Disparagement.  During the Term and for a period of two (2) years thereafter, Executive will not knowingly and materially disparage, criticize, or otherwise make any derogatory statements regarding the Company or any of its Affiliates.  During the Term and for a period of two (2) years thereafter, the Company will not knowingly and materially disparage, criticize, or otherwise make any derogatory statements regarding Executive.  Notwithstanding the foregoing, nothing contained in this Agreement will be deemed to restrict Executive, the Company or any of the Company’s current or former officers and/or directors from (1) providing information to any governmental or regulatory agency (or in any way limit the content of any such information) to the extent they are requested or required to provide such information pursuant to applicable law or regulation or (2) enforcing his or its rights pursuant to this Agreement.

(e)           Injunctive Relief.  Executive acknowledges that the Company’s remedy at law for any breach of the provisions of this Section 4 is and will be insufficient and inadequate and that the Company shall be entitled to equitable relief, including by way of temporary restraining order, temporary injunction, and permanent injunction, in addition to any remedies the Company may have at law.  If either party files suit to enforce or to enjoin the enforcement of any of the provisions of this Section 4, the Company shall be entitled to recover, in addition to all other damages or remedies provided for herein, all of 

 

  

5

  

its costs incurred in prosecuting or defending such suit, including reasonable attorneys’ fees, if the Company prevails in such suit.

(f)           Severability.  The parties hereto agree that the duration and area for which the covenant not to compete set forth in Section 4(c) above is to be effective are reasonable.  In the event that any court determines that the time period and/or the area are unreasonable and that such covenant is to that extent unenforceable, the parties hereto agree that the covenant shall remain in full force and effect for the greatest time period and in the greatest area that would not render it unenforceable.  The parties intend that this covenant shall be deemed to be a series of separate covenants, one for each and every county within the United States of America or in any other country or nation where business is then carried on or conducted (directly or indirectly) by the Company.  In the event that any court determines that the requirement that Executive assign a certain class or classes of Confidential Information to the Company is unreasonable and that such covenant is to that extent unenforceable, the parties hereto expressly agree that the covenant shall be interpreted to not apply to any Confidential Information which falls into such a class or classes.

(g)           Ownership of Ideas.  In addition to any other restrictions hereunder, Executive shall not furnish at any time during the Term to any other entity, person or persons any proposal or idea previously submitted to the Company or any of its Affiliates by Executive or developed by Executive during the Term hereof, whether or not such proposal or idea was adopted by or in any way utilized by the Company or any such Affiliates, except after compliance with the Company’s policy on conflicts of interest.  Executive hereby grants and assigns the Company all rights (including, without limitation, any copyright or patent) in the results and proceeds of all of Executive’s services hereunder performed within the scope of Executive’s employment.  All such services shall be subject in all respect to the reasonable supervision, control and direction of the President.

(h)           Disclosure of Ideas.  The Executive will disclose to the Company all ideas and business plans developed by him during the Term which arise in connection with the services performed by him for the Company, and which relate to the business of the Company or its Affiliates, including without limitation any process, operation, or improvement which may be patentable or copyrightable.  Executive agrees that such property will be the property of the Company and that he shall at the Company's request and expense do whatever is necessary to secure the rights thereto by a patent, copyright or otherwise to the Company.

(i)           Further Assurances.  Executive will, during the Term, execute and deliver any further agreements or certifications as the Company may reasonably request provided that such agreements and certifications are consistent with Executive’s rights and privileges hereunder.

5.           Termination.  The Term and any and all other rights of Executive under this Agreement or otherwise as an employee of the Company will terminate (except as otherwise provided in this Section 5): (i) upon the death of the Executive, (ii) upon the Disability (as defined in Section 5(a)(i)) of Executive immediately upon notice from either party to the other, (iii) For Cause (as defined in Section 5(a)(ii)) immediately upon notice from the Company to 

 

  

6

  

Executive or at such later time as the notice may specify, (iv) upon not less than 30 days’ prior notice from Executive of his resignation or notice from the Company of the termination of the Executive without cause.

(a)           Definitions. The following terms as used in this Section 5 shall have the definitions set forth below:

i.            Definition of “Disability”.  For purposes of this Section 5, Executive will be deemed to have a “Disability” if, for physical or mental reasons, Executive is unable to perform the essential functions of Executive’s duties under this Agreement for 90 consecutive days, or 180 days during any twelve-month period, as determined in accordance with this Section 5(a)(i).  The disability of Executive will be determined by a medical doctor selected by written agreement of the Company and Executive upon the request of either party by notice to the other.  If the Company and Executive cannot agree on the selection of a medical doctor, each of them will select a medical doctor and the two medical doctors will select a third medical doctor who will determine whether Executive has a disability.  The determination of the medical doctor selected under this Section 5(a)(i) will be binding on both parties. Executive must submit to a reasonable number of examinations by the medical doctor making the determination of disability under this Section 5(a)(i), and Executive hereby authorizes the disclosure and release to the Company of such determination and all supporting medical records.  If Executive is not legally competent, Executive’s legal guardian or duly authorized attorney-in-fact will act in Executive’s stead, under this Section 5(a)(i), for the purposes of submitting the Executive to the examinations, and providing the authorization of disclosure, required under this Section 5(a)(i).

ii.           Definition of “For Cause”.                                           For purposes of this Section 5, the phrase "For Cause" means and includes one or more of the following:

(a)           conviction of a felony or pleading guilty to a felony charge;

(b)           participation as an employee, officer or principal owner/organizer in any business engaged in activities in direct competition with Company without the consent of Company;

(c)           gross and willful neglect of responsibilities as Chief Executive Officer; or

(d)           other offenses against Company, including without limitation theft, embezzlement, dishonesty, gross and willful violation of Company policy, or the release of proprietary or confidential information in a manner that would be detrimental to Company's best interest.

iii.           Definition of “Change of Control”.  For purposes of this Section 5, the term "Change in Control" means a “change of control event”, as such term is defined in United States Treasury Regulations (“Regulations”) promulgated under section 409A of the Internal Revenue Code of 1986, as amended (“Section 

 

  

7

  

409A”), that results from the occurrence of any of the following events:

 

(a)           any individual, corporation, limited liability company, partnership, group (other than Chymiak family members), association or other entity or "person," as such term is defined in Section 14(d) of the Securities Exchange Act of 1934, as amended (a "Person"), is or becomes the "beneficial owner," as defined in Rule 13d-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, directly or indirectly, of 50% or more of outstanding securities of Company having the right to vote at elections of directors;

(b)           Company is party to a merger or consolidation, or series of related transactions, which results in the voting securities of Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the combined voting power of the voting securities of Company or such surviving entity outstanding immediately after such merger or consolidation;

(c)           the lease, sale, exchange, transfer or other disposition of all or substantially all of the assets of the Company;

(d)           any Person, together with any of its affiliates, acquires, directly or indirectly, the voting power to elect a majority of the members of the Board of Company (other than the acquisition and voting of proxies by management of Company to elect members to the Board of Directors in the normal course at an annual meeting of shareholders that is not, directly or indirectly, in connection with, or for the purpose of, effecting a "change of control);" or

(e)           any transaction or series of related transactions that has the substantial effect of any one or more of the foregoing.

iv.           Definition of Good Reason.  "Good Reason" means the occurrence of any of the following conditions, without Executive's informed written consent:

(a)           a substantial diminution in Executive's position, responsibilities, duties or compensation after a Change in Control as measured against Executive's position, responsibilities, duties and compensation immediately prior to a Change of Control; or

(b)           Company's requiring Executive to be based at any office or location more than 35 miles from the office where Executive was employed immediately preceding the Change of Control, so long as the condition identified also constitutes “good reason” under the Regulations.

 

  

8

  

v.           Definition of “Severance Payment”.  means the payment to be made to Executive pursuant to Section 5(b)(ii) or (iii) hereof, which shall be equal to the total of (a) the amount of the three (in the case of a termination pursuant to Section 5(b)(ii)) or six (in the case of a termination pursuant to Section 5(b)(iii)), months’ monthly compensation being paid by Company to Executive immediately preceding the effective date of (x) termination of employment (in the case of a termination pursuant to Section 5(b)(ii)) or (y) Change in Control.  For purposes of this definition, the term “monthly compensation” shall mean (1) the monthly Base Salary plus (2) the total amount of the Bonuses paid to Executive over the prior two years by the Company divided by the lesser of 24 or the number of completed months since the commencement of his employment.  For these purposes, monthly compensation shall not include the amounts of any matching payments made by the Company to Executive’s account in the Company’s 401(k) Plan with respect to such either the Base Salary or Bonuses.

(b)           Termination Pay.  Effective upon the termination of this Agreement, the Company will be obligated to pay Executive (or, in the event of his death, his designated beneficiary as defined below) only such compensation as is provided in this Section 5(b), and in lieu of all other amounts and in settlement and complete release of all claims Executive may have against the Company.  For purposes of this Section 5(b), Executive’s designated beneficiary will be such individual beneficiary or trust, located at such address, as Executive may designate by notice to the Company from time to time or, if Executive fails to give notice to the Company of such a beneficiary, Executive’s estate.  Notwithstanding the preceding sentence, the Company will have no duty, in any circumstances, to attempt to open an estate on behalf of Executive, to determine whether any beneficiary designated by Executive is alive or to ascertain the address of any such beneficiary, to determine the existence of any trust, to determine whether any person or entity purporting to act as Executive’s personal representative (or the trustee of a trust established by the Executive) is duly authorized to act in that capacity, or to locate or attempt to locate any beneficiary, personal representative, or trustee.

i.           Death, Disability, Voluntary Termination by Executive without Good Reason or Termination by the Company for Cause.  In the event Executive’s employment is terminated by reason of (a) his Death or Disability,  (b) his voluntarily termination other than for Good Reason, or (c) the Company’s termination of Executive’s employment For Cause, Executive will be entitled to receive his Base Salary only through the date such termination is effective.  Upon the Disability of Executive, Executive will be entitled to the benefits of any group disability or other insurance plan of the Company to the extent Executive has been accepted for coverage thereunder and is entitled to any benefits pursuant to the express provisions of such plans.

ii.           Other Termination.  If Executive’s employment with the Company is terminated other than as contemplated under Section 5(b)(i) above or Section 5(b)(iii) below, the Company will pay Executive the applicable Severance Payment over a period of three months commencing on the 60th day following the first regular payroll date following the date of termination.  If Executive’s employment with the Company is terminated pursuant to Section 5(b)(iii) below, the Company will pay Executive the applicable Severance Payment in a lump sum 

 

  

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made within 30 days of such termination of employment.

iii.           Change of Control.    If there is a Change of Control of the Company and:

	
A.  

	
Executive's employment with the Company has been terminated by the Company for any reason other than Cause, death or Disability in anticipation of the Change of Control or within 12 months following the consummation of the Change of Control and such termination constitutes a “separation from service” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”); or

	
B.  

	
Within 12 months following the consummation of the Change of Control, Executive resigns his employment with the Company for Good Reason effective no later than 90 days following the occurrence of the condition giving rise to Good Reason (with not less than 60 days' prior notice to the Company of such resignation and the Company has not cured the Good Reason within 10 days of receipt of such notice);

Executive will be entitled to receive the applicable Severance Payment, which shall be made in a lump sum within 30 days of such termination of employment.

iv.           Benefits.  Except as required by law or as otherwise provided herein, the Executive will be entitled to accrued Benefits pursuant to such plans only as provided in such plans.  Upon a termination of Executive, the Company shall maintain and pay for the Benefits only in accordance with Company policy then in effect.

 

(c)           Conditions to Receipt of Severance Payment.  The receipt of any Severance Payment or continued Benefits pursuant to Section 5 will be subject to Executive signing and not revoking a release of claims agreement in substantially the form attached as Exhibit A, but with any appropriate reasonable modifications, reflecting changes in applicable law, as is necessary to provide the Company with the protection it would have if the release of claims were executed as of the date of this Agreement.  No Severance Payment or continued Benefits will be paid or provided until the release of claims agreement becomes effective.  Executive shall have up to thirty (30) days following Executive’s termination of employment to consider and deliver such executed separation and release of claims agreement to the Company.  The Company agrees that it will execute and deliver to Executive said separation and release of claims agreement no later than eight (8) days after it receives a copy of such agreement executed by Executive.  Company agrees that it will be bound by such separation and release of claims agreement and that same will become effective from and after the effective date thereof, even if Company fails or refuses to execute and deliver same to Executive.  The receipt of any Severance Payment or continued Benefits pursuant to Section 5 will also be subject to Executive complying with the requirements of Section 4.

6.           Notices. For the purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have 

 

  

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been duly given when personally delivered, when transmitted by telecopy with receipt confirmed, or one day after delivery to an overnight air courier guaranteeing next day delivery, addressed as follows:

If to Executive:                      David H. Humphrey

11519 S. Hudson Ave.

Tulsa, OK 74137

Fax No. (918) ________________

If to the Company:               ADDvantage Technologies Group, Inc

1221 East Houston

Broken Arrow, OK 74012

Fax No. (918) 251-1138

Attention: Chairman of the Compensation Committee of the Board of Directors

or to such other address as any party may have furnished to the others in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

7.  Other Agreements.  Executive warrants to the Company that he has no obligations inconsistent herewith, that the execution and performance of this Agreement by him will not constitute a breach of any other Agreement by which he is bound, and that he does not possess any trade secret or confidential information related to the business of the Company which he is prohibited from disclosing to the Company or using for its benefit.  Executive shall not enter into any agreement, either written or oral, in conflict with this agreement.

8. Successors and Assigns.  This Agreement is personal and non-assignable by Executive.  It shall inure to the benefit of any corporation or other entity with which the Company shall merge or consolidate or to which the Company shall lease or sell all or substantially all of its assets and may be assigned by the Company to any Affiliate of the Company or to any corporation or entity with which such Affiliate shall merge or consolidate or which shall lease or acquire all or substantially all of the assets of such Affiliate; provided that as a condition to such sale of assets or merger, the purchaser or surviving company, as the case may be, shall have assumed the obligations of the Company under this Agreement.

 

9.  Code Section 409A.

(a) The parties intend this Agreement to comply with or be excepted from the requirements of Section 409A of the Code and the Department of Treasury Regulations and other interpretive guidance issued thereunder (“Section 409A”).

(b) Notwithstanding anything in the Agreement to the contrary, the payment (or commencement of a series of payments) under the Agreement of any nonqualified deferred compensation (within the meaning of Section 409A) upon a termination of employment shall be delayed until such time as Executive has also undergone a Separation from Service, at which time such nonqualified deferred compensation (calculated as of the date of Executive’s termination of employment under this Agreement) shall be paid (or commence to be paid) to Executive on the schedule set forth 

 

  

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in this Agreement as if Executive had undergone such termination of employment (under the same circumstances) on the date of his ultimate “separation from service.”

 

(c) To the extent that the Agreement provides for any payments of nonqualified deferred compensation (within the meaning of Section 409A) to be made in installments (including, without limitation, any Severance Payments), each such installment shall be deemed to be a separate and distinct payment for purposes of Section 409A.

 

(d) To the extent that any right to reimbursement of expenses under the Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A), (i) any such expense reimbursement shall be made by the Company no later than the last day of the taxable year following the taxable year in which such expense was incurred by Executive, (ii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit and (iii) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year.

 

(e) Notwithstanding anything herein to the contrary, if Executive is deemed at the time of his Separation from Service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the termination benefits to which Executive is entitled under this Agreement (after taking into account all exclusions applicable to such termination benefits under Section 409A, including, without limitation, exclusions for separate installment payments and exclusions under Section 1.409A-1(b)(9)(iii) of the Department of Treasury Regulations) is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, any such payment of nonqualified deferred compensation (within the meaning of Section 409A) that is otherwise required to be made under the Agreement to the Executive upon Executive’s Separation from Service shall be delayed for such period of time as may be necessary to meet the requirements of Section 409A(a)(2)(B)(i) of the Code (the “Delay Period”).  On the first business day following the expiration of the Delay Period, Executive shall be paid, in a single cash lump sum, an amount equal to the aggregate amount of all payments delayed pursuant to the preceding sentence, and any remaining payments not so delayed shall continue to be paid pursuant to the payment schedule set forth herein.

 

(f) To the extent any payments of nonqualified deferred compensation (within the meaning of Section 409A) due under the Agreement as a result of Executive’s termination of employment are subject to Executive’s execution and delivery of a release of claims as contemplated by Section 5(c) above, such amounts shall commence to be paid on the first payroll date following the 60th day following the date of Executive’s Separation from Service; provided that Executive has executed and not revoked such release prior to such 60th day and any applicable revocation period has expired.

 

(g) To the extent that any amount of nonqualified deferred compensation (within the meaning of Section 409A) payable pursuant to the Agreement becomes subject to set-off, 

 

  

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counterclaim, or recoupment of amounts owed by Executive to the Company or any of its affiliates, and to the extent such amount so subject to set-off, counterclaim, or recoupment is payable in installments, such set-off, counterclaim, or recoupment shall not modify the amount or the applicable payment date of any installment, and to the extent an obligation cannot be satisfied by reduction of a single installment payment, any portion not satisfied shall remain an outstanding obligation of Executive and shall be applied to the next installment only at such time the installment is otherwise payable pursuant to the specified payment schedule.

 

(h) Notwithstanding any provision of the Agreement to the contrary, in the event that the Company determines that any amounts payable pursuant to this Agreement will be immediately taxable to Executive under Section 409A, the Company reserves the right (without any obligation to do so or to indemnify Executive for failure to do so) to (i) adopt such amendments to this Agreement and appropriate policies and procedures, including amendments and policies with retroactive effect, that the Company determines to be necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or tax consequences for the Company or the Executive and/or (ii) take such other actions as the Company determines to be necessary or appropriate to exempt the amounts payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the imposition of taxes or penalties on Executive under Section 409A.  In no event whatsoever shall the Company or any of its affiliates be liable for any additional tax, interest, or penalties that may be imposed on Executive by Section 409A or any damages for failing to comply with Section 409A, other than for withholding obligations or other obligations applicable to employers, if any, under Section 409A.

10. Miscellaneous.  The language of this Agreement and all parts hereof shall in all cases be construed as a whole, according to its fair meaning, and not strictly for or against either party hereto.  No waiver of any provision hereof by any party hereto shall be binding unless such waiver shall be evidenced by a writing signed by such party.  This Agreement may not be modified in any manner except by instruments in writing signed by both parties hereto.  If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue in full force without being impaired or invalidated in any way.  The headings of the various Sections in this Agreement are solely for the purpose of convenience and shall not be relied upon in construing any provision hereof.  This Agreement shall be governed and construed in accordance with the laws of the State of Oklahoma without regard to any conflicts of law principles.  This Agreement may be executed in counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument.

11.           Executive Acknowledgment.  Executive acknowledges (a) that he has consulted with or has had the opportunity to consult with independent counsel of his own choice concerning this Agreement and has been advised to do so by the Company, and (b) that he has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment.

 

  

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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of the day and year first above written.

	
  

	
Company:

	
ADDVANTAGE TECHNOLOGIES GROUP, INC.

By:           /s/ Ken Chymiak                                                                

Name:      Ken Chymiak

Title:        Chairman of the Board

Executive:

/s/ David Humphrey 

David L. Humphrey

 

  

14

  

EXHIBIT A

 

RELEASE OF CLAIMS AGREEMENT

 

 

	
1.  

	
In consideration for the payment of the severance described in the Employment Agreement by and between ____________ (the “Executive’) and ___________________ (the “Company”) (the “Employment Agreement”), dated as of _______, 20__ (the “Employment Agreement”), the Executive for himself, and for his heirs, administrators, representatives, executors, successors and assigns (collectively “Releasers”) does hereby irrevocably and unconditionally release, acquit and forever discharge the Company, its subsidiaries, affiliates and divisions and their respective, current and former, trustees, officers, directors, partners, shareholders, agents, employees, consultants, independent contractors and representatives, including without limitation all persons acting by, through under or in concert with any of them (collectively, “Releasees”), and each of them from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, remedies, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys’ fees and costs) of any nature whatsoever, known or unknown, whether in law or equity and whether arising under federal, state or local law and in particular including any claim for discrimination based upon race, color, ethnicity, sex, age (including the Age Discrimination in Employment Act of 1967), national origin, religion, disability, or any other unlawful criterion or circumstance, which the Executive and Releasers had, now have, or may have in the future against each or any of the Releasees (collectively “Executive/Releaser Actions”) from the beginning of the world until the date hereof.  This release also includes, but is not limited to, a release by Executive of any claims for breach of contract, mental pain, suffering and anguish, emotional upset, impairment of economic opportunities, unlawful interference with employment rights, defamation, intentional or negligent infliction of emotional distress, fraud, wrongful termination, wrongful discharge in violation of public policy, breach of any express or implied covenant of good faith and fair dealing, that the Company has dealt with Executive unfairly or in bad faith, and all other common law contract and tort claims.  Executive is not waiving any rights or claims that may arise after this Release is signed by Executive.

 

	
2.  

	
The Executive acknowledges that: (i) this entire Release is written in a manner calculated to be understood by him; (ii) he has been advised to consult with an attorney before executing this Release; (iii) he was given a period of twenty-one days within which to consider this Release; and (iv) to the extent he executes this Release before the expiration of the twenty-one day period, he does so knowingly and voluntarily and only after consulting his attorney. The Executive shall have the right to cancel and revoke this Release by delivering notice to the Company pursuant to the notice provision of Section 6 of the Employment Agreement prior to the expiration of the seven-day period following the date hereof, and the severance benefits under the Employment Agreement shall not become effective, and no payments or benefits shall be made or provided thereunder, until the day after the expiration of such seven-day period (the “Revocation Date”). Upon such revocation, this Release and the severance provisions of the Employment Agreement shall be null and void and of no further force or effect.

 

	
3.  

	
Notwithstanding anything herein to the contrary, the sole matters to which the Release does not apply are: (i) the Executive’s rights to indemnification (whether arising under applicable law, the Company’s articles of organization or operating agreement, , indemnification agreement or otherwise)  and directors and officers liability insurance coverage to which he was entitled immediately prior to ___with regard to his service as an employee of the Company; (ii) the Executive’s rights under any tax-qualified pension or claims for accrued vested benefits or rights under any other employee benefit plan, policy or arrangement (whether tax-qualified or not) maintained by the Company or under COBRA; and (iii) the Executive’s rights under Section 5 of the Employment Agreement (which are subject to Section 5(c) of the Employment Agreement) which are intended to survive termination of employment, (iv) the Executive’s rights under Sections 3 and 5 of the Employment Agreement which are intended to survive termination of employment.

 

	
4.  

	
This Release is the complete understanding between the Executive and the Company in respect of the subject matter of this Release and supersedes all prior agreements relating to the same subject matter. The Executive has not relied upon any representations, promises or agreements of any kind except those set forth herein in signing this Release.

 

	
5.  

	
In the event that any provision of this Release should be held to be invalid or unenforceable, each and all of the other provisions of this Release shall remain in full force and effect. If any provision of this Release is found to be invalid or unenforceable, such provision shall be modified as necessary to permit this Release to be upheld and enforced to the maximum extent permitted by law.

 

	
6.  

	
This Release shall be governed by and construed in accordance with the laws of the State of Oklahoma, without reference to principles of conflict of laws.

 

	
7.  

	
The parties agree that any and all disputes arising out of, or relating to, the terms of this Agreement, their interpretation, and any of the matters herein released, shall be subject to binding arbitration in Oklahoma before the American Arbitration Association under its National Rules for the Resolution of Employment Disputes.  The Parties agree that the prevailing party in any arbitration shall be entitled to injunctive relief in any court of competent jurisdiction to enforce the arbitration award.  The Parties agree that the prevailing party in any arbitration shall be awarded its reasonable attorneys’ fees and costs.  The parties hereby agree to waive their right to have any dispute between them resolved in a court of law by a judge or jury.  This section shall not prevent either party from seeking injunctive relief (or any other provisional remedy) from any court having jurisdiction over the Parties and the subject matter of their dispute relating to Executive’s obligations under this Agreement and the agreements incorporated herein by reference.

 

	
8.  

	
This Release inures to the benefit of the Company and its successors and assigns.

 

Signature page follows.

 

  

  

  

IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

 

 

______________________________________.

 

Dated:  _______________                                                                By

[NAME]

[TITLE]

 

Dated:  ________________                                                                

_____________________________

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