Document:

exhibit10_1.htm

OPERATING AGREEMENT

 

 

YKTG SOLUTIONS, LLC

 

 

A Maryland Limited Liability Company

 

 

This Operating Agreement (the "Agreement") is made effective as of February 28, 2016, by and among and those Persons (the “Members”) identified in Exhibit A.

 

WHEREAS, YKTG, LLC, a Pennsylvania limited liability company (f/k/a Young Kinsley Technology Group, LLC) (“YKTG”) is an MBE diversity company and has been awarded a contract with Sprint/United Management Company; and

WHEREAS, YKTG requires funding to perform such contract; and

WHEREAS, ADDvantage Technologies Group, Inc. (“ATG”) is a publically traded company and is willing to provide funding for the project; and

WHEREAS, YKTG and ATG have agreed to form a special purpose entity for the purpose of performing such contract with the Sprint/United Management Company on the terms and conditions set forth in this Agreement, including without limitation the Exhibits attached hereto;

 

NOW THEREFORE, in consideration of the mutual covenants and conditions herein, the Members agree as follows:

 

ARTICLE I

 

ORGANIZATION

 

1.1 Formation and Qualification. The Members have formed a limited liability company (the “Company”) under the Maryland Limited Liability Company Act (the "Act") by filing Articles of Organization with the State of Maryland.  The Master Construction Services Agreement between Sprint/United Management Company and the Company (the “MCSA”) dated as of June 3, 2013, as amended, as supplemented by the WiMAX Deconstruction Work Order dated as of October 2, 2015, as amended, between the Company and Sprint/United Management Company (the “Work Order” and collectively with the MCSA, the “Sprint Contract”) provides contracting opportunities to small and disadvantaged businesses and the terms of this Agreement shall not be inconsistent with the Sprint Contract’s purpose.

 

1.2 Governing Law. This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of Maryland, including the Act as amended from time to time, without regard to Maryland’s conflicts of laws principles. The rights and liabilities of the Members shall be determined pursuant to the Act and this Agreement. To the extent that any provision of this Agreement is inconsistent with any provision of the Act, this Agreement shall govern to the extent permitted by the Act.

  

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1.3 Name. The name of the Company shall be “YKTG Solutions, LLC.” The business of the Company may be conducted under that name or, on compliance with applicable laws, any other name that the Members shall unanimously approve. The Members on behalf of the Company shall file any certificates, articles, fictitious business name statements and the like, and any amendments and supplements thereto, as the Members consider appropriate or advisable.

 

1.4 Term. The term of the Company commenced on the filing of the Articles of Organization and shall exist until the Company is dissolved and its affairs wound up.

 

1.5 Office and Agent. The principal office of the Company shall be at such place or places of business within or without the State of Maryland as the Members may determine. The Company shall continuously maintain a registered agent in the State of Maryland and the State of Maryland as required by the Act.

 

1.6 Limited Purpose.  The Company is formed for the exclusive purpose of performing the Sprint Contract and shall engage in no business other than the performance of its obligations under the Sprint Contract.

 

ARTICLE II

 

MEMBERSHIP INTERTESTS, CAPITAL CONTRIBUTIONS, VOTING AND MANAGEMENT

 

2.1 Initial Members; Initial Capital Contributions. The initial Members of the Company are the Members who are identified in Exhibit A.  The initial capital contributions of the Members are set forth on Exhibit A-1 of this agreement.  Any capital contributions in addition to those set forth on Exhibit A-1 shall require the approval of all the Members.

 

2.2 Classification of Membership Interests. The Company shall issue voting membership interests to the Members. The Members shall have the right to vote upon all matters upon which Members have the right to vote under the Act or under this Agreement, in proportion to their respective Percentage Voting Interest ("Percentage Voting Interest") in the Company.

 

2.3 Percentage Ownership and Voting Interests. A Member’s Ownership Interest (“Ownership Interest”) is the total of his interests in the Company, together with all of the rights, as a Member of the Company, that arise from such interests.  The Members shall have the initial Ownership, Percentage Ownership and Percentage Voting Interests in the Company that are identified in Exhibit A, immediately following the making of the capital contributions set forth therein.

 

2.4 Management by Members. Except as otherwise provided in this Agreement, including without limitation the Exhibits hereto, the Members shall manage the Company and shall have the right to vote, in their capacity as Member-Managers, upon all matters upon which Members or managers have the right to vote under the Act or under this Agreement, in proportion to their respective Percentage Voting Interests in the Company. Members need not identify whether they are acting in their capacity as Members or Member-Managers when they act.

  

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2.5 Voting. Except as otherwise provided or permitted by this Agreement including without limitation the Exhibits hereto, Members shall in all cases, in their capacity as Members or Member-Managers of the Company, act collectively, and, unless otherwise specified or permitted by this Agreement including without limitation under the Exhibits hereto, by majority vote.  Except as otherwise provided or permitted by this Agreement including without limitation the Exhibits hereto, no Voting Member acting individually, in his capacity as a Member or Member-Manager of the Company, shall have any power or authority to sign for, bind or act on behalf of the Company in any way, to pledge the Company's credit, or to render the Company liable for any purpose.

 

2.6 Liability of Members. All debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member.

 

2.7 New Members. The Members may issue additional membership interests and thereby admit a new Member or Members, as the case may be, to the Company, only if such new Member (i) is approved unanimously by the Members; (ii) delivers to the Company his required capital contribution; (iii) agrees in writing to be bound by the terms of this Agreement by becoming a party hereto; and (iv) delivers such additional documentation as the Members shall reasonably require to so admit such new Member to the Company.

 

Upon the admission of a new Member or Members, as the case may be, to the Company, the capital accounts of Members, and the calculations that are based on the capital accounts, shall be adjusted appropriately.

 

ARTICLE III

 

DUTIES OF MEMBERS

 

3.1 Duties of the Members.  This Company is formed for the expressed purpose of providing goods and services to Sprint United Management Company (“Sprint”), an American telecommunications holding company that provides wireless services and is a major global Internet carrier, pursuant to the terms and conditions of the Sprint Contract.  As such, the Members agree to the delineated Scope of Duties and compensation and other matters provided in Exhibit B of this Agreement, attached hereto and incorporated herein.  Each Member shall perform their duties to the Company and to each other diligently, in good faith and with due care.

 

ARTICLE IV

 

MANNER OF ACTING

 

4.1 Officers and Agents of the Company. The Members may authorize any Member or Members of the Company, or other individuals or entities, whether or not a Member, to take action on behalf of the Company, as the Members deem appropriate.

 

(a)  Officers.  The Company shall have such individuals as officers (“Officers”) as may be elected, appointed and/or chosen pursuant to the terms herein.  The Officers of the Company shall consist of a Chief Executive Officer, President, a Secretary, or such 

  

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other Officer of the Company as may be elected, appointed and/or chosen by the  Members.  The President, Secretary, and any additional Officers shall be appointed by the Chief Executive Officer.  One person may hold, and perform the duties of, any two or more such offices.  All Officers other than the Chief Executive Officer may be removed, with or without cause, at any time by the Chief Executive Officer.

 

(b)  No Officer shall have any rights or powers beyond the rights and powers to such Officer in this Agreement.  The Chief Executive Officer, Treasurer, and Secretary shall have the following duties and responsibilities:

 

(i)           Chief Executive Officer.  The Chief Executive Officer (the “CEO”) shall be the chief executive officer of the Company and shall have authority to operate the Business of the Company to the fullest extent subject to the provisions of this Agreement, including without limitation the Exhibits hereto.  He or she shall perform the customary duties, responsibilities, functions and authority of the Chief Executive Officer, including presiding at meetings of the Members.  He or she shall from time to time report to the Members all matters within his or her knowledge that the interest of the Company may require to be brought to its notice.

 

(ii)           President.  The President shall have general supervision, direction and control of the business.  He or she shall have the general powers and duties of management usually vested in the office of President of a corporation and such other powers and duties as prescribed by the CEO.

 

(iii)           Secretary.  The Secretary of the Company (“the Secretary”) shall attend all meetings of the Members and record all votes and the minutes of all proceedings in a book to be kept for that purpose and shall perform like duties for any committee when required.  He or she shall give, or cause to be given, notice of all meetings of the Members.  The Secretary shall exercise such powers and perform such duties as generally pertain or are necessarily incident to his or her office, and he or she shall perform such other duties as may be assigned to him or her from time to time by the CEO.

 

(c)           The individuals listed below shall serve in the following offices until resignation or removal or replacement by the Members:

 

Name                                           Office

 

Roscoe C. Young                      CEO and President

 

Andrew Woods                         Vice President/Secty

 

Scott Francis                              Treasurer

4.2 Meetings of Members.  The Members shall meet at such times and places as determined by the Chief Executive Officer.  The Company may hold meetings, whether regular or special, either within or without the State of Maryland.  At its meetings, the Company shall transact business in such order as may be determined from time to time by resolution of the Chief Executive Officer.  All decisions of the Members shall be made 

  

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at duly called meetings of the Members at which a quorum is present or by a written consent in lieu of meeting signed by all Members.

 

4.3 Notice of Meetings.

 

(a)           Regular Meetings.  In the event that a meeting of the Members is called, written notice stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called shall be delivered not less than five nor more than sixty business days before the date of the meeting unless otherwise provided, either personally or by mail, by or at the direction of the Members calling the meeting, to each Voting Member. Notice of a meeting need not be given to any Voting Member who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such Voting Member.

 

(b)           Special Meetings.  Special meetings of the Company may be called by the Chief Executive Officer or by any Member on at least forty-eight (48) hours’ notice to each Member.  Such notice need not state the purpose or purposes of, or the business to be transacted at, such meeting, except as may otherwise be required by law or provided for in this Agreement.

 

4.4 Record Date. For the purpose of determining Members entitled to notice of or to vote at any meeting of Members or any adjournment thereof, the date on which notice of the meeting is provided shall be the record date for such determination of the Members. When a determination of Members has been made as provided in this Section, such determination shall apply to any adjournment thereof.

 

4.5 Quorum. Members holding at least 67% of the Percentage Voting Interest in the Company represented in person, by telephonic participation, or by proxy, shall constitute a quorum at any meeting of Members. In the absence of a quorum at any such meeting, a majority of the Members so represented may adjourn the meeting from time to time for a period not to exceed sixty days without further notice. However, if the adjournment is for more than sixty days, or if after the adjournment a new record date is fixed for another meeting, a notice of the adjourned meeting shall be given to each Voting Member.  The Members present at a duly organized meeting may continue to transact business only as previously provided on the agenda until adjournment, notwithstanding the withdrawal during such meeting of that number of Members whose absence would cause less than a quorum.

 

4.6 Voting. If a quorum is present, a majority vote of the Members so represented shall be the act of the Members or Member-Managers, unless the vote of a lesser proportion or number is otherwise required by the Act, by the Certificate or by this Agreement, including without limitation the Exhibits hereto.

 

ARTICLE V

 

ALLOCATIONS AND DISTRIBUTIONS

 

5.1 Allocations of Profits and Losses. Profits and losses, after deducting guaranteed payments and fees, shall be allocated among the Members in proportion to 

  

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their Percentage Ownership Interests. Any special allocations necessary to comply with the requirements set forth in Internal Revenue Code Section 704 and the corresponding Regulations, including, without limitation, the qualified income offset and minimum gain chargeback provisions contained therein, shall be made if the Members deem these actions to be appropriate.

 

5.2 Distributions. Distributions to Members shall be made of available funds after payment of all current fees and expenses, including loan payments, and in compliance with Exhibit B hereto.  Subject to applicable law and any limitations elsewhere in this Agreement, the Members shall make distributions of cash on a quarterly basis, subject to approval of the Members, and available funds.  Except as otherwise provided in this Agreement, all distributions shall be made to all of the Members, in proportion to their Percentage Ownership Interests.

 

All such distributions shall be made only to the Members who, according to the books and records of the Company, are the holders of record on the actual date of distribution. The Members may base a determination that a distribution of cash may be made on a balance sheet, profit and loss statement, cash flow statement of the Company or other relevant information. Neither the Company nor the Members shall incur any liability for making distributions.

 

5.3 Form of Distribution. No Member has the right to demand and receive any distribution from the Company in any form other than money. No Member may be compelled to accept from the Company a distribution of any asset in kind in lieu of a proportionate distribution of money being made to other Members except on the dissolution and winding up of the Company.

 

ARTICLE VI

 

TRANSFER AND ASSIGNMENT OF INTERESTS

 

6.1 Resignation of Membership and Return of Capital. No Member may voluntarily resign his membership in the Company, and no Member shall be entitled to any return of capital from the company, except upon the written consent of all of the other Members.

 

6.2 Restrictions on Transfer.  Except for ATG’s pledge of its Ownership Interest to its principal secured lender under its primary credit facility which pledge is excluded from the restrictions of this Section 6.2, until January 1, 2019, no Member shall sell, pledge, assign or otherwise transfer, with or without consideration, any part or all of his Ownership Interest in the Company to any other person or entity (a “Transferee”), without first offering (the “Offer”) that portion of his or her Ownership Interest in the Company subject to the contemplated transfer (the “Offered Interest”) first to the Company, and secondly, to the other Members, at the purchase price (hereinafter referred to as the “Transfer Purchase Price”) and in the manner as prescribed in the Offer.

 

The Offering Member shall make the Offer first to the Company by written notice (hereinafter referred to as the “Offering Notice”). Within twenty (20) days (the “Company Offer Period”) after receipt by the Company of the Offering Notice, the Company shall notify the Offering Member in writing (the “Company Notice”), whether 

  

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or not the Company shall accept the Offer and shall purchase all but not less than all of the Offered Interest. If the Company accepts the Offer to purchase the Offered Interest, the Company Notice shall fix a closing date not more than twenty-five (25) days (the “Company Closing Date”) after the expiration of the Company Offer Period.

 

In the event the Company decides not to accept the Offer, the Offering Member or the Company, at his or her or its election, shall, by written notice (the “Remaining Member Notice”) given within that period (the “Member Offer Period”) terminating ten (10) days after the expiration of the Company Offer Period, make the Offer of the Offered Interest to the other Members, each of whom shall then have a period of twenty-five (25) days (the “Member Acceptance Period”) after the expiration of the Member Offer Period within which to notify in writing the Offering Member whether or not he or she intends to purchase all but not less than all of the Offered Interest. If two (2) or more Members of the Company desire to accept the Offer to purchase the Offered Interest, then, in the absence of an agreement between them, such Members shall have the right to purchase the Offered Interest in proportion to their respective relative Percentage Voting Interests. If the other Members intend to accept the Offer and to purchase the Offered Interest, the written notice required to be given by them shall fix a closing date not more than sixty (60) days after the expiration of the Member Acceptance Period (hereinafter referred to as the “Member Closing Date”).

 

The aggregate dollar amount of the Transfer Purchase Price, which shall be set by the Offering Member, shall be payable in cash on the Company Closing Date or on the Member Closing Date, as the case may be, unless the Company or the purchasing Members shall elect by written notice that is delivered to the Offering Member, prior to or on the Company Closing Date or the Member Closing Date, as the case may be, to purchase such Offered Interest in four (4) equal annual install­ments, with the first installment being due on the Closing Date.

 

If the Company or the other Members fail to accept the Offer or, if the Offer is accepted by the Company or the other Members and the Company or the other Members fail to purchase all of the Offered Interest at the Transfer Purchase Price within the time and in the manner specified, then the Offering Member shall be free, for a period (hereinafter referred to as the “Free Transfer Period”) of ninety (90) days from the occurrence of such failure, to transfer the Offered Interest to a Transferee selected by the Offering Member on terms set forth in the Offer; provided, however, that if all of the other Members other than the Offering Member do not approve of the proposed transfer by unanimous written consent, the Transferee of the Offered Interest shall have no right to become a Member or to participate in the management of the business and affairs of the Company as a Member or Manager, and shall only have the rights of an Assignee and be entitled to receive the share of profits and the return of capital to which the Offering Member would otherwise have been entitled. A Transferee shall be admitted as a Member of the Company, and as a result of which he or she shall become a substituted Member, with the rights that are consistent with the Membership Interest that was transferred, only if such new Member (i) is approved unanimously by the Members; (ii) delivers to the Company his required capital contribution (if any); (iii) agrees in writing to be bound by the terms of this Agreement by becoming a party hereto.

  

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If the Offering Member shall not transfer the Offered Interest within the Free Transfer Period, his or her right to transfer the Offered Interest free of the foregoing restrictions shall thereupon cease and terminate.  After January 1, 2019, a Member shall be free to transfer all or any portion of his or her Ownership Interest to any person upon giving notice to the Members but without the requirement of making an offer first to the Company and then to the other Members in accordance with the above provision.

 

6.3 Involuntary Transfer of a Membership Interest. A creditor’s charging order or lien on a Member’s Membership Interest, bankruptcy of a Member, or other involuntary transfer of Member’s Membership Interest, shall constitute a material breach of this Agreement by such Member. The creditor, transferee or other claimant, shall only have the rights of an Assignee, and shall have no right to become a Member, or to participate in the management of the business and affairs of the Company as a Member or Manager under any circumstances, and shall be entitled only to receive the share of profits and losses, and the return of capital, to which the Member would otherwise have been entitled. The Members, including a Voting Member whose interest is the subject of the charging order, lien, bankruptcy, or involuntary transfer, may unanimously elect, by written notice that is provided to the creditor, transferee or other claimant, at any time, to purchase all or any part of Membership Interest that was the subject of the creditor’s charging order, lien, bankruptcy, or other involuntary transfer, at a price that is equal to one-half (1/2) of the book value of such interest, adjusted for profits and losses to the date of purchase. The Members agree that such valuation is a good-faith attempt at fixing the value of the interest, after taking into account that the interest does not include all of the rights of a Member or Manager, and after deducting damages that are due to the material breach of this Agreement.

 

ARTICLE VII

 

ACCOUNTING, RECORDS AND REPORTING

 

7.1 Books and Records. The Company shall maintain complete and accurate accounts in proper books of all transactions of or on behalf of the Company and shall enter or cause to be entered therein a full and accurate account of all transactions on behalf of the Company. The Company's books and accounting records shall be kept in accordance with such accounting principles (which shall be consistently applied throughout each accounting period) as the Members may determine to be convenient and advisable. The Company shall maintain at its principal office all of the following:

 

A current list of the full name and last known business or residence address of each Member in the Company set forth in alphabetical order, together with, for each Member, the Ownership Interest, Percentage Ownership Interest and Percentage Voting Interests; a copy of the Certificate and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which the Certificate or any amendments thereto have been executed; copies of the Company's federal, state and local income tax or information returns and reports, if any, for the six most 

  

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recent taxable years; a copy of this Agreement and any and all amendments hereto together with executed copies of any powers of attorney pursuant to which this Agreement or any amendments thereto have been executed; copies of the financial statements of the Company, if any, for the six most recent Fiscal Years; the Company's books and records as they relate to the internal affairs of the Company for at least the current and past four Fiscal Years (and a Fiscal Year shall be the calendar year); true and full information regarding the status of the business and financial condition of the Company; and true and full information regarding the amount of cash and a description and statement of the agreed value of any other property or services contributed by each Member and which each Member has agreed to contribute in the future, and the date on which each became a Member.

 

7.2 Inspection of Books and Records; Other Information. Each Member has the right, on reasonable request for purposes reasonably related to the interest of the person as a Member, to: (a) inspect and copy during normal business hours any of the Company's records described in Section 7.1; and (b) obtain from the Company promptly after their becoming available a copy of the Company's federal, state and local income tax or information returns for each Fiscal Year.  The Company shall provide a Member with such information concerning the Company and its business as a Member shall reasonably request.  Officers of the Company shall make themselves available to discuss the business and affairs of the Company with a Member as reasonably requested.

 

7.3 Accountings. As soon as is reasonably practicable after the close of each Fiscal Year but in any event within two months after the end of the Fiscal Year, , the Company shall make or cause to be made a full and accurate accounting of the affairs of the Company as of the close of that Fiscal Year and shall prepare or cause to be prepared a balance sheet as of the end of such Fiscal Year, a profit and loss statement for that Fiscal Year and a statement of Members' equity showing the respective Capital Accounts of the Members as of the close of such Fiscal Year and the distributions, if any, to Members during such Fiscal Year, and any other statements and information necessary for a complete and fair presentation of the financial condition of the Company, all of which the Company shall furnish to each Member. The Company shall prepare and furnish to each Member monthly financial statements similar to those set forth in the preceding sentence but for the preceding calendar month.  In addition, the Company shall furnish to each Member information regarding the Company necessary for such Member to complete such Member's federal and state income tax returns. The Company shall also furnish a copy of the Company's tax returns to any Member requesting the same. On such accounting being made, profits and losses during such Fiscal Year shall be ascertained and credited or debited, as the case may be, in the books of account of the Company to the respective Members as herein provided.

 

7.4 Filings. The Company, shall cause the income tax returns for the Company to be prepared and timely filed with the appropriate authorities. The Company shall also cause to be prepared and timely filed with appropriate federal and state regulatory and administrative bodies amendments to, or restatements of, the Certificate and all reports required to be filed by the Company with those entities under the Act or other then current applicable laws, rules, and regulations. If the Company is required by the Act to execute or file any document and fails, after demand, to do so within a reasonable period of time or refuses to do so, any Member may prepare, execute and file that document with the Maryland Secretary of State.

  

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7.5 Bank Accounts. Funds of the Company must be deposited in the Company’s name in one or more bank accounts in accordance with the Exhibits hereto.

 

7.6 Tax Matters Partner. ATG shall serve as the Company’s Tax Matters Partner at any time or times. The Members shall from time to time cause the Company to make such tax elections as they deem to be in the interests of the Company and the Members generally. The Tax Matters Partner, as defined in Internal Revenue Code Section 6231, shall represent the Company (at the Company's expense) in connection with all examinations of the Company's affairs by tax authorities, including resulting judicial and administrative proceedings, and shall expend the Company funds for professional services and costs associated therewith.

 

ARTICLE VIII

 

DISSOLUTION AND WINDING UP

 

8.1 Dissolution. The Company shall be dissolved upon the first to occur of: (a) six (6) months after the final performance of the Sprint Contract and the final payment by Sprint under the Sprint Contract; or (b) the unanimous approval of the Members.

 

8.2 Winding Up. On the occurrence of an event specified in Section 8.1, the Company shall continue solely for the purpose of winding up its affairs in an orderly manner, liquidating its assets and satisfying the claims of its creditors. The Members shall be responsible for overseeing the winding up and liquidation of Company, shall take full account of the assets and liabilities of Company, shall cause such assets to be sold or distributed, and shall cause the proceeds therefrom, to the extent sufficient therefore, to be applied and distributed as provided in this Agreement. The Members shall give written notice of the commencement of winding up by mail to all known creditors and claimants whose addresses appear on the records of the Company. The Members shall be entitled to reasonable compensation for such services.

 

8.3 Distributions in Kind. Any noncash assets distributed to the Members shall first be valued at their fair market value to determine the profit or loss that would have resulted if such assets were sold for such value. Such profit or loss shall then be allocated pursuant to this Agreement, and the Members' Capital Accounts shall be adjusted to reflect such allocations. The amount distributed and charged against the Capital Account of each Member receiving an interest in a distributed asset shall be the fair market value of such interest (net of any liability secured by such asset that such Member assumes or takes subject to). The fair market value of such asset shall be determined by the Members, or if any Voting Member objects, by an independent appraiser (and any such appraiser must be recognized as an expert in valuing the type of asset involved) selected by Members holding a majority of the Percentage Voting Interest.

 

8.4 Order of Payment of Liabilities on Dissolution. After a determination that all known debts and liabilities of the Company in the process of winding up, including, without limitation, debts and liabilities to Members who are creditors of the Company, have been paid or adequately provided for, the remaining assets shall be distributed to the Members in proportion to their positive Capital Account balances, after taking into 

  

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account profit and loss allocations for the Company's taxable year during which liquidation occurs.

 

8.5 Adequacy of Payment. The payment of a debt or liability, whether the whereabouts of the creditor is known or unknown, shall have been adequately provided for if payment thereof shall have been assumed or guaranteed in good faith by one or more financially responsible Persons or by the United States government or any agency thereof, and the provision, including the financial responsibility of the Person, was determined in good faith and with reasonable care by the Members to be adequate at the time of any distribution of the assets pursuant to this Section. This Section shall not prescribe the exclusive means of making adequate provision for debts and liabilities.

 

8.6 Compliance with Regulations. All payments to the Members on the winding up and dissolution of Company shall be strictly in accordance with the positive capital account balance limitation and other requirements of Regulations Section 1.704-1(b)(2)(ii)(d), as the Members deem appropriate.

 

8.7 Limitations on Payments Made in Dissolution. Except as otherwise specifically provided in this Agreement, each Member shall only be entitled to look solely to the assets of the Company for the return of such Member's positive Capital Account balance and shall have no recourse for such Member's Capital Contribution or share of profits (on dissolution or otherwise) against any other Member.

 

8.8 Certificate of Cancellation. The Members conducting the winding up of the affairs of the Company shall cause to be filed in the office of, and on a form prescribed by the Maryland Secretary of State, a certificate of cancellation of the Certificate on the completion of the winding up of the affairs of the Company.

 

ARTICLE IX

 

EXCULPATION AND INDEMNIFICATION

 

9.1 Exculpation of Members. No Member shall be liable to the Company or to the other Members for damages or otherwise with respect to any actions taken or not taken in good faith and reasonably believed by such Member to be in or not opposed to the best interests of the Company, except to the extent any related loss results from fraud, gross negligence or willful or wanton misconduct on the part of such Member or the  breach of any obligation under this Agreement or of the fiduciary duties owed to the Company or the other Members by such Member.

 

9.2 Indemnification by Company. The Company shall indemnify, hold harmless and defend the Members, in their capacity as Members or Managers, from and against any loss, expense, damage or injury suffered or sustained by them by reason of any acts or omissions arising out of their activities on behalf of the Company or in furtherance of the interests of the Company, including but not limited to any judgment, award, settlement, reasonable attorneys' fees and other costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim, if the acts or omissions were not performed or omitted fraudulently or as a result of gross negligence or willful misconduct by the indemnified party or in breach of the indemnified party’s obligations under this Agreement. Reasonable expenses incurred by the indemnified 

  

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party in connection with any such proceeding relating to the foregoing matters may be paid or reimbursed by the Company in advance of the final disposition of such proceeding upon receipt by the Company of (i) written affirmation by the Person requesting indemnification of its good-faith belief that it has met the standard of conduct necessary for indemnification by the Company and (ii) a written undertaking by or on behalf of such Person to repay such amount if it shall ultimately be determined by a court of competent jurisdiction that such Person has not met such standard of conduct, which undertaking shall be an unlimited general obligation of the indemnified party but need not be secured.

 

9.3 Indemnification by the Members. Each Member hereby agrees to indemnify and defend the Company, the other Members and each of their respective employees, agents, partners, members, shareholders, officers and directors and hold them harmless from and against any and all claims, liabilities, damages, costs and expenses (including, without limitation, court costs and attorneys' fees and expenses) suffered or incurred on account of or arising out of any breach of this Agreement.

 

9.4 Insurance. The Company shall have the power to purchase and maintain insurance on behalf of any Person who is or was a Member or an agent of the Company against any liability asserted against such Person and incurred by such Person in any such capacity, or arising out of such Person's status as a Member or an agent of the Company, whether or not the Company would have the power to indemnify such Person against such liability under Section 9.2 or under applicable law.

 

ARTICLE X

 

OWNERSHIP

 

10.1 Ownership of Intellectual Property.  Notwithstanding any other provision of this  Agreement, all ownership rights with respect to the intellectual property of the Organization, including, but not necessarily limited to, all designs, patents, trademarks, copyrights, trade secrets, data definitions, data bases, standards, guidelines, schemas, diagrams, software, programs, designs, e-mail addresses, telephone numbers, facsimiles, and other technology and information developed in connection with the Company’s Purpose (“Intellectual Property”) shall be owned by the Company and shall be considered assets of the Company. Such ownership rights may be transferred or assigned only upon the approval of, and compliance with, the conditions imposed by Members holding at least sixty-three percent (63%) of the outstanding Ownership Interests.

 

10.2 Member Intellectual Property.  Each Member warrants that any Intellectual Property produced by that Member for the Company and incorporated in any form into the Company's Purpose is not subject to any claim of ownership by any other party.  Each Member further warrants that any rights in Intellectual Property developed in connection with the Company's Purpose either now held or later acquired by that Member shall be perpetually licensed to the Company or its successors or assigns without any royalty, fee, or credit to the Member’s Capital Account.

  

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10.3 Intellectual Property Generated for the Company.  The Company shall endeavor to obtain from any party generating Intellectual Property for the Company an agreement that such generated Intellectual Property shall, to the extent possible, be assigned or otherwise transferred to the Company.

 

ARTICLE XI

 

This Article XI is intentionally left blank.

 

ARTICLE XII

 

DISPUTE RESOLUTION

 

12.1 Disputes Among Members. The Members agree that in the event of any dispute or disagreement solely between or among any of them arising out of, relating to or in connection with this Agreement or the Company or its organization, formation, business or management ("Member Dispute"), the Members shall use their best efforts to resolve any dispute arising out of or in connection with this Agreement by good-faith negotiation and mutual agreement. The Members shall meet at a mutually convenient time and place to attempt to resolve any such dispute.

 

However, in the event that the Members are unable to resolve any Member Dispute, such parties shall first attempt to settle such dispute through a non-binding mediation proceeding. In the event any party to such mediation proceeding is not satisfied with the results thereof, then any unresolved disputes may be finally settled by judicial proceedings unless the disputing Members agree to an arbitration proceeding. In no event shall the results of any mediation proceeding be admissible in any arbitration or judicial proceeding.

 

12.2 Mediation. Mediation proceedings shall be conducted in accordance with the Commercial Mediation Rules of the American Arbitration Association (the "AAA") in effect on the date the notice of mediation was served, other than as specifically modified herein, and shall be non-binding on the parties thereto.

 

ARTICLE XIII

 

MISCELLANEOUS

 

 

13.1 Notices. Except as otherwise expressly provided herein, any notice, consent, authorization or other communication to be given hereunder shall be in writing and shall be deemed duly given and received when delivered personally, when transmitted by facsimile if receipt is acknowledged by the addressee, one business day after being deposited for next-day delivery with a nationally recognized overnight delivery service, or three business days after being mailed by first class mail, charges and postage prepaid, properly addressed to the party to receive such notice at the address set forth in the Company’s records.

 

13.2 Severability. If any provision of this Agreement, or the application of such provision to any Person or circumstance, shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement, or the application of such provision to Persons or circumstances other than those to which it is held to be invalid or unenforceable, shall not be affected thereby.

  

13

  

 

13.3 Binding Effect.  This Agreement shall bind and inure to the benefit of the parties and their respective Successors.

 

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

 

13.5 Entire Agreement. This Agreement contains the entire agreement of the parties and supersedes all prior or contemporaneous written or oral negotiations, correspondence, understandings and agreements between or among the parties, regarding the subject matter hereof.

 

13.6 Further Assurances. Each Member shall provide such further information with respect to the Member as the Company may reasonably request, and shall execute such other and further certificates, instruments and other documents, as may be necessary and proper to implement, complete and perfect the transactions contemplated by this Agreement.

 

13.7 Headings; Gender; Number; References. The headings of the Sections hereof are solely for convenience of reference and are not part of this Agreement. As used herein, each gender includes each other gender, the singular includes the plural and vice versa, as the context may require. All references to Sections and subsections are intended to refer to Sections and subsections of this Agreement, except as otherwise indicated.

 

13.8 Parties in Interest. Except as expressly provided in the Act, nothing in this Agreement shall confer any rights or remedies under or by reason of this Agreement on any Persons other than the Members and their respective Successors nor shall anything in this Agreement relieve or discharge the obligation or liability of any third Person to any party to this Agreement, nor shall any provision give any third Person any right of subrogation or action over or against any party to this Agreement.

 

13.9 Amendments; Waivers. All amendments to this Agreement, and any waiver of any provision of this Agreement, shall be in writing and signed by all of the Members to the agreement at the time of the amendment.

 

13.10 Remedies Cumulative. Subject to Article XII, remedies under this Agreement are cumulative and shall not exclude any other remedies to which any Member may be lawfully entitled.

 

13.11 Authority. Each Member represents and warrants to the Company and the other Member that this Agreement constitutes a legal, valid and binding agreement of such Member, enforceable against the Member in accordance with its terms. The Member is empowered and duly authorized to enter into this Agreement under every applicable governing document, partnership agreement, operating agreement, trust instrument, pension plan, charter, certificate of incorporation, bylaw provision or the like; and that the Person, if any, signing this Agreement on behalf of the Member is empowered and duly authorized to do so by the governing document, operating agreement, trust instrument, pension plan, charter, certificate of incorporation, bylaw provision, board of directors or stockholder resolution or the like.

  

14

  

 

13.12  Expenses.  The Company shall bear all reasonable fees and expenses actually incurred by the Members in connection with the formation of the Company.  This shall include the legal fees and expenses of outside counsel to the Members but shall not include any allocation for the efforts of employees of the Members or their affiliates.  This obligation shall also include the fees and expenses incurred by the Members in connection with a proposed factoring arrangement which the Members previously considered for funding purposes.  Each Member shall provide the Company and the other Members with reasonable documentation of any fees and expenses for which such Member seeks reimbursement from the Company pursuant to this provision.

 

IN WITNESS WHEREOF, this Limited Liability Company Operating Agreement has been duly executed by or on behalf of the parties hereto as of the date first above written.

 

 

 

  

15

  

YKTG, LLC

By:       /s/Roscoe Young, II                                      

    Roscoe C. Young, II

            Chief Executive Officer

ADDvantage Technologies Group, Inc.

By:  /s/Scott Francis                                              

            Scott Francis

    Vice President and Chief Financial Officer

  

16

  

EXHIBIT A

TO YKTG SOLUTIONS OPERATING AGREEMENT

MEMBERS AND CAPITAL

                      Initial                                                                   Member

Name and Address                                                                        Capital                                                         Ownership

of Each Initial Member                                                                         Contribution**                                                                Interest*

YKTG, LLC                                                                      $5,100.00                                                    51.0%

23 Laurelwood Drive

Bernardsville, NJ 07924

ADDvantage Technologies Group, Inc.                                                 $4,900.00                                                    49.0%

1221 East Houston St.

Broken Arrow, OK 74012

____________________

*Also the Members’ Percentage Voting Interest and the Members’ Percentage Ownership Interest.

** Further detail regarding the Members initial capital contributions is set forth on Exhibit A-1 hereto.

  

17

  

EXHIBIT A-1

INITIAL CAPITAL CONTRIBUTIONS

YKTG, LLC

Initial Capital Contribution.  The initial capital contribution of YKTG to the Company shall be $5,100 consisting of (a) $_____ cash and (b) an assignment to the Company (the “Assignment”) of (i) YKTG’s rights and obligations under the Work Order, (ii) the Accounts (as defined below) and (iii) the benefit of those provisions of the MCSA which are necessary for Sprint and the Company to exercise their rights and perform their obligations to each other under the Work Order.   As used herein, the term “Accounts” shall mean (i) all accounts, accounts receivable, rights to payment, contract rights, general intangibles, chattel papers, instruments, documents and all forms of obligations owing or to be owed to “Supplier” (as such term is used in the Work Order) now or at any time in the future arising from or out of the performance of services by Supplier under the Work Order and the MCSA, and (ii) all proceeds of the foregoing.  It is the intention of the Members that the Company shall succeed to all of the rights and obligations of YKTG under the MCSA with respect to the Work Order, and to that end YKTG shall promptly take all action, and shall take all action reasonably requested by ATG, necessary to cause the Company to become an approved vendor of Sprint and to become a party to the MCSA or another master construction services agreement with Sprint as soon as possible but in any event no later than April 30, 2016.

Invoices and Supporting Documentation.  YKTG agrees to place a notice (in form and content acceptable to ATG on behalf of the Company) on each invoice related to an Account that the amounts owed thereon have been sold and assigned to, and are payable only to, the Company.  YKTG further agrees to take all necessary steps so that payments and remittance information related to the Accounts are directed to ATG on behalf of the Company.  All invoices will be promptly mailed or otherwise transmitted by YKTG to Sprint on a prompt and timely basis in compliance with the terms of the Sprint Contract.  YKTG shall deliver to ATG on behalf of the Company copies of all invoices and supporting documentation simultaneously with the delivery of the same to Sprint.

Remittances.  Any checks, cash, notes or other documents or instruments, proceeds or property received with respect to the Accounts shall be the property of the Company and shall be held by YKTG in trust for the Company, separate from YKTG's other property, and immediately turned over to ATG on behalf of the Company with proper endorsements.  ATG on behalf of the Company may endorse YKTG's name on any such check, draft, instrument or document.

Collecting Accounts.  As owner of the Accounts, the Company (acting as directed by ATG) has the right to: (a) bring suit, or otherwise enforce collection, in the name of itself and YKTG; (b) modify the terms of payment; and (c) settle, compromise or release, in whole or in part, any amounts owing in respect of the Accounts.  YKTG shall cooperate 

  

18

  

in any manner requested by ATG on behalf of the Company in assisting the Company in collecting the Accounts, including without limitation, bringing suit in YKTG’s name to collect the Accounts for the benefit of the Company.

Assigned Accounts.  YKTG represents and warrants to the Company that YKTG has title to all the Accounts and has the legal right to sell, assign, transfer and set over the same to the Company and that each Account is and shall be (a) based upon a bona fide sale and provision of services made by YKTG in the ordinary course of YKTG's business under the Sprint Contract; (b) based upon services which have been received and accepted by Sprint without dispute or claim of any kind;  (c) free and clear of any offset, deduction, counterclaim, or any other claim or dispute (real or claimed), including, without limitation, claims or disputes as to price, terms, quantity or quality and claims of release from liability or because of any act of God, or a public enemy, or war, or because of the requirements of law or of rules, orders or regulations having the force of law; and (d) except for ATG's security interest therein, free and clear of any security interests, liens or encumbrances thereon and shall remain so at all times in the future.

Information; Books and Records.  YKTG shall furnish ATG on behalf of the Company with such information concerning YKTG's business affairs and financial condition as ATG may reasonably request from time to time, including financial statements as of the end of each fiscal year.  YKTG shall, at the request of ATG on behalf of the Company, keep ATG fully apprised of all aspects of the performance of services under the Work Order and of the status of its business relationship with Sprint.  YKTG agrees to maintain books and records concerning the Accounts in accordance with good business practices.  Upon reasonable request, YKTG agrees to make such books and records available to ATG on behalf of the Company for examination and copying.

Change in Control.  YKTG shall immediately notify ATG of any change in control of the ownership of YKTG.

Litigation.  YKTG represents and warrants to the Company that there are no proceedings either pending or threatened in respect of YKTG or its business, and that YKTG is not subject to any judgment, order, writ, injunction or decree of any court, governmental agency or arbitration tribunal in respect of its business or the Accounts.

Customer Claims and Charge Backs.  YKTG shall immediately notify ATG on behalf of the Company in each instance of any request for extension of time to pay, credit or adjustment or any dispute or claim relating to any Account or the services provided under the Sprint Contract tending in any way to diminish the sum certain payable thereon.  To the extent that YKTG believes any Sprint invoice should be adjusted for any reason, no such adjustment shall be made without the prior consent of ATG on behalf of the Company.

Cooperation. YKTG agrees to authorize and execute such instruments and financing statements as may be required or permitted by any law in connection with the 

  

19

  

transactions contemplated hereby and to cooperate with ATG in the filing or recording and renewal thereof, and YKTG hereby authorizes ATG on behalf of the Company (and appoints any person whom ATG designates as its attorney with power) to sign YKTG's or the Company’s name on any such instrument and on financing statements under the Uniform Commercial Code.

No Pledge or Sale of Receivables.  YKTG shall not sell or assign, negotiate, pledge or grant any security interest in any of its accounts or receivables to anyone other than the Company or ATG.

Indemnification.  YKTG hereby agrees to indemnify and hold the Company and its members (other than YKTG), subsidiaries, affiliates, employees, attorneys and agents (each, an "Indemnified Person"), harmless from and against any and all suits, actions, proceedings, claims, damages, losses, liabilities and expenses of any kind or nature whatsoever (including attorneys' fees and disbursements and other costs of investigation or defense, including those incurred upon any appeal) which may be instituted or asserted against or incurred by any such Indemnified Person as the result of (i) any damage, claim or loss of any type arising directly or indirectly in connection with the services performed or to be performed by under the Sprint Contract prior to February ____, 2016, (ii) any misrepresentation by YKTG or any breach by YKTG of its obligations under this Agreement, and (iii) any actions or failures to act with respect to any of the foregoing, except to the extent that any such indemnified liability is finally determined by a court of competent jurisdiction to have resulted solely from such Indemnified Person's gross negligence or willful misconduct.  NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO YKTG OR TO ANY OTHER PERSON FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF ANY FINANCIAL ACCOMMODATION HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER.

Bank Accounts.  YKTG covenants that it shall not set up any bank accounts or receive any money on the Accounts or any cash or other consideration from Sprint related to services performed under the Work Order without accounting for the same to ATG on behalf of the Company, it being the intention of the parties that the Company, rather than YKTG, shall receive all consideration paid by Sprint with respect to the services performed under the Work Order.

ATG to Make Decisions.  All decisions to be made by the Company with respect to the Accounts, the Work Order, the Assignment and the performance of YKTG’s obligations and liabilities with respect to the Assignment, including without limitation commencing and conducting a suit against YKTG with respect to the Assignment, shall be made on behalf of the Company solely by ATG.

  

20

  

Interim Period.  Until such time as the Company becomes an approved vendor of Sprint (the “Interim Period”), the Work Order cannot be formally assigned to the Company as per Sprint policy.  Accordingly,  YKTG shall upon execution of this Agreement assign to the Company only the Accounts, which assignment shall be approved by Sprint, and shall enter into a project management agreement with the Company.  YKTG and the Company shall cooperate to give the Company the benefits and the burdens of the Work Order during the Interim Period, and YKTG shall, at such time as the Company becomes an approved vendor of Sprint, assign to the Company all of its right, title and interest under the Work Order as  contemplated above, and shall obtain Sprint’s consent to such assignment.

ATG

Initial Capital Contribution.  The initial capital contribution of ATG to the Company shall be $4,900, consisting of (a) $___ cash and (b) ATG’s guaranty of the Company’s obligations to its bonding company.

  

21

  

EXHIBIT B

	
1.  

	
Company Bank Accounts.     The Company shall have three bank accounts (the “Depository Account”, the “Operating Account” and the “YKTG Fee Account”):

 

	
·  

	
Depository Account –This account shall be controlled by ATG.  It will be the account into which all Sprint payments and any other revenues generated by the Company is deposited.  ATG will be the exclusive signor on this account.

 

	
·  

	
Operating Account – This account shall be jointly controlled by YKTG and ATG and shall require two signors for disbursements (one each by YKTG and ATG).  This account will make all vendor, subcontractor and PMO structure payments as described below.

 

	
·  

	
YKTG Fee Account – This account shall be jointly controlled by YKTG and ATG but shall only require one signor for disbursements.  Deposited into this account will be YKTG’s 8% fee.

 

	
·  

	
ATG shall approve all of the bank accounts of the Company and all of the bank accounts of YKTG.

 

 

	
2.  

	
PMO Structure Funding.  The following discusses the procedures to be followed by the Members for the funding of the Company’s  payroll, contractor costs and other actual G&A expenses (“PMO Structure”).

 

	
·  

	
Every two weeks YKTG shall submit a funding request to ATG for the PMO Structure to cover payroll, contractor costs and other actual G&A expenses.  Funding requests shall contain such information as ATG shall request.

 

	
·  

	
ATG will review funding requests for accuracy and approval.  YKTG shall respond to any questions posed by ATG regarding the funding requests.

 

	
·  

	
Once approved, ATG will wire funds to the Operating Account either from the Depository Account or, if there are not funds available from the Depository Account and the applicable conditions of the ATG Credit Facility are met, from the ATG bank account in the form of a loan.

 

	
·  

	
Once funds are received into the Operating Account, YKTG shall prepare disbursements for payroll (ACH deduction from operating account) and third party payments.

 

	
·  

	
ACH payments and wire transfers – YKTG shall create an online ACH disbursement request from the Operating Account  or other appropriate request for wire transfers from the Operating Account which ATG shall review and approve electronically.

 

	
·  

	
Checks – YKTG shall prepare the checks and sign the checks then send to ATG for review, approval and second signature; then ATG will mail the checks to the appropriate payee.

 

 

	
3.  

	
Subcontractor Payments.  The following discusses the procedures to be followed by the Members for the funding of payments to subcontractors of the Company (“Subcontractor Payments”).

 

	
·  

	
Each month, YKTG shall submit a funding request to ATG for Subcontractor Payments related to invoices that have been approved by Sprint and submitted to Sprint.  Such funding requests shall contain such information as ATG shall request.

 

  

22

  

	
·  

	
ATG will review funding requests for accuracy and approval.  YKTG shall respond to any questions posed by ATG regarding the funding requests.

 

	
·  

	
Once approved, ATG will wire funds to the Operating Account either from the Depository Account or, if there are not funds available from the Depository Account and the applicable conditions of the ATG Credit Facility are met, from an ATG bank account in the form of a loan.

 

	
·  

	
Once funds are received into the Operating Account, YKTG will prepare the ACH funding request online in the Operating Account or other appropriate request for wire transfers from the Operating Account which ATG shall review and approve electronically.

 

 

	
4.  

	
Sprint Receivable Invoice and Collections.  The following discusses the procedures to be followed by the Members for the submission of invoices to Sprint and collections.

 

	
·  

	
Once subcontractors are complete at a site and appropriate sign-offs have been obtained, YKTG shall submit the proposed invoice to Sprint for approval as per the terms of the applicable contractual provisions with Sprint.

 

	
·  

	
Upon Sprint approval, YKTG shall then bill Sprint the approved invoices on net 60 terms.

 

	
·  

	
Sprint shall remit payment at 60 days to the Depository Account.

 

	
·  

	
ATG will be first point of contact with Sprint for collection issues; YKTG and the Company agree to assist in collection efforts.

 

	
·  

	
ATG will obtain credit insurance for Sprint receivables; as per the terms of such insurance, receivables must be collected within 120 days; if not so collected, YKTG shall cause the Company to cease work and no more billings will be incurred in order ensure that ATG’s credit insurance claim remains valid.

 

 

	
5.  

	
ATG Fee.  The Company shall pay a fee to ATG (the “ATG Fee”) equal to 12% of the revenues received by the Company from Sprint and any other sources.

 

	
·  

	
The ATG Fee shall be compensation to ATG for providing a guarantee to the Company’s bonding company and for providing the services to the Company described in the Exhibits and in the other provisions of the Agreement.  The Members acknowledge that the Company could not obtain the required bonds without the ATG guarantee and that ATG would not provide such guarantee without receiving this fee.

 

	
·  

	
The ATG Fee shall be reduced by interest the Company pays to ATG under the ATG Credit Facility.

 

	
·  

	
The ATG Fee shall be paid to ATG from the Depository Account upon collection of the individual Sprint Receivables.

 

 

	
6.  

	
YKTG Fee .  The Company shall pay a fee to YKTG (the “YKTG Fee”) equal to 8% of the revenues received by the Company from Sprint and any other sources.

 

	
·  

	
The YKTG Fee shall be compensation to YKTG for providing services to the Company described in this Exhibit B and in the other provisions of the Agreement.

 

  

23

  

	
·  

	
The YKTG Fee shall be paid to the YKTG Fee Account from excess funds in the Depository Account after the ATG Fee, PMO Structure Funding and Subcontractor Funding requests are satisfied as well as principal and interest payments under the ATG Loan.

 

	
·  

	
It is intended that the funds in the YKTG Fee Account shall remain there until dissolution and winding up of the Company; provided, that, YKTG may make withdrawals from the YKTG Fee Account upon after giving at least one week prior notification to ATG, including the amount to be withdrawn and the reason for the withdrawal.

 

 

	
7.  

	
ATG Credit Facility.  ATG shall provide a line of credit to the Company (the “ATG Credit Facility”).

 

	
·  

	
ATG will provide a line of credit to the Company which shall be subject to the terms and conditions set forth in the loan documentation between ATG and the Company.

 

	
·  

	
The purpose of the ATG Credit Facility shall be to provide funding to the Company’s Operating Account in order to cover shortfalls in the Depository Account.

 

	
·  

	
The ATG Credit Facility shall be secured by all the assets of the Company and of YKTG, including all the Company and YKTG bank accounts, and shall be guaranteed by YKTG and the individual members of YKTG.

 

	
·  

	
Interest under the ATG Credit Facility shall be payable monthly.  Principal prepayments of the ATG Credit Facility shall be priority payments and shall be made at any time determined appropriate by ATG but it is generally intended that, in the ordinary course of business, principal prepayments shall be made after the ATG Fee, PMO Structure Funding and Subcontractor Funding requests are satisfied.

 

 

	
8.  

	
Excess Funds.  The following discusses the disposition to be made of excess funds.

 

	
·  

	
Once the Sprint project is completed and all payments have been satisfied, including without limitation the ATG Credit Facility, the ATG Fee and the YKTG Fee, any excess funds remaining in the Depository Account and the Operating Account will be disbursed to the  Members in accordance with their respective Ownership Interests.

 

 

	
9.  

	
Other Member Duties.  The Members shall have the additional duties set forth below:

 

	
·  

	
YKTG shall operate the day to day business operations of the Company.  Unless otherwise provided in the Agreement, including the Exhibits to the Agreement, YKTG shall perform on behalf of the Company the obligations of the Company set forth in the Agreement.

 

	
·  

	
ATG shall review the accounting information of the Company and may in its discretion retain others, such as ATG’s outside accounting firm, at Company expense, to review, audit or otherwise assist with the Company’s financial records and statements.

 

  

24exhibit10_2.htm

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) is entered into on this 28th day of February, 2016, by and between YKTG SOLUTIONS, LLC, a Maryland limited liability company (the “Borrower”), YKTG, LLC, a Pennsylvania limited liability company (“Borrower Parent”) and ADDVANTAGE TECHNOLOGIES GROUP, INC., an Oklahoma corporation (the “Lender”).

 

RECITALS:

 

	
A.  

	
Borrower desires to borrow funds for the purpose of financing working capital needs in connection with the performance of its obligations to the Sprint/United Management Company (“Sprint”) under that certain Master Construction Services Agreement (the “MCSA”) between Sprint and Borrower Parent dated as of June 3, 2013, as amended, as supplemented by that certain WiMAX Deconstruction Work Order dated as of October 2, 2015, as amended (the “Work Order” and collectively with the MCSA, the “Sprint Contract”) for the decommissioning of certain Sprint telecommunications facilities (the “Project”); and

 

	
B.  

	
Borrower has requested that Lender provide it with a loan facility for such purposes, and Lender is willing to provide such a facility to Borrower upon the terms and subject to the conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the mutual promises herein contained and for other valuable consideration, Borrower and Lender hereby agree as follows:

 

	
1.  

	
Recitals.  The recitals set forth hereinabove are hereby incorporated herein by this reference with the same force and effect as if fully set forth.

 

	
2.  

	
Definitions.

 

	
(a)  

	
The terms as used herein, shall be construed and controlled by the following definitions (such terms to be equally applicable to both singular and plural forms of the terms defined):

 

	
(i)  

	
“Account Control Agreements” shall mean account control agreements to be entered into by Borrower, Borrower Parent and Lender and each bank in which the Borrower and Borrower Parent have bank accounts, which agreements shall be in a form satisfactory to Lender and shall perfect Lender’s security interest in such bank accounts.

 

	
(ii)  

	
“Advance” shall have the meaning set forth in Section 7 of this Agreement.

 

	
(iii)  

	
“Code” shall mean the Uniform Commercial Code, as the same may from time to time be in effect in the State of Oklahoma.

 

	
(iv)  

	
“Collateral” shall mean all of the assets and rights of Borrower and Borrower Parent, whether now existing or hereafter created or acquired, including, but not limited to, the following:  all Accounts; Chattel Paper; Deposit Accounts; Documents; Equipment; Fixtures; General Intangibles; Inventory; Investment Property; Instruments, intellectual property, trademarks, trademark applications,

 

  

  

  

	
  

	
patents, patent applications, computer hardware and software, molds, drawings, designs, parts, goodwill, Goods and all Proceeds and products of any and all of the foregoing.

 

	
(v)  

	
“Event of Default” shall have the meaning set forth in Section 11 of this Agreement.

 

	
(vi)  

	
“Guaranties” shall have the meaning set forth in Section 5 of this Agreement.

 

	
(vii)  

	
“Guarantors” shall mean Borrower Parent, Roscoe Young, Trenton Young and Andrew Woods.

 

	
(viii)  

	
“Indebtedness” shall have the meaning set forth in Section 5 of this Agreement.

 

	
(ix)  

	
“Loan” shall have the meaning set forth in Section 3 of this Agreement.

 

	
(x)  

	
“Loan Documents” shall mean this Agreement, the Note, the Account Control Agreements and the Guaranties and all other documents or instruments pertaining to the Loan.

 

	
(xi)  

	
“Loan Period” shall mean the period of time from the date of this Agreement to December 31, 2016, subject to earlier termination upon the occurrence of an Event of Default.

 

	
(xii)  

	
“Material Adverse Event” shall mean any event, occurrence, fact, condition or changes that is, or could reasonably be expected to become, individually or in the aggregate, materially adverse to (a) the business, results of operations, condition (financial or otherwise) or assets of the Borrower, or (b) the ability of the Borrower to repay the Loan in accordance with the terms of this Agreement, including without limitation the termination prior to completion of the Sprint Contract or of any purchase order issued under the Sprint Contract and the failure of Borrower to become an approved Sprint vendor prior to April 31, 2016.

 

	
(xiii)  

	
“Note” shall have the meaning set forth in Section 4 of this Agreement.

 

	
(xiv)  

	
“PMO Structure” shall mean Borrower’s payroll, contractor costs and G&A expenses.

 

	
(xv)  

	
“Request for Advance” shall have the meaning set forth in Section 7 of this Agreement.

 

	
(xvi)  

	
“Sprint” shall have the meaning set forth in the Recitals.

 

	
(xvii)  

	
“Sprint Contract” shall have the meaning set forth in the Recitals.

 

	
(xviii)  

	
“Subcontractors” shall mean those persons with which Borrower or Borrower Parent contracts for the performance of Borrower’s or Borrower Parent’s obligations under the Sprint Contract.

 

	
(b)  

	
The following terms shall have the meanings set forth in the Code (such terms to be equally applicable to both singular and plural forms of the terms defined):  (i) “Accounts,” (ii) “Chattel Paper,” (iii) “Deposit Account”, (iv) “Document,” (v) “Equipment,” (vi)

  

2

  

	
  

	
“Fixtures,” (vii) “General Intangible,” (viii) “Inventory,” (ix) “Investment Property,” (x) “Instrument” (xi) “Goods” and (xii) “Proceeds.”

 

	
3.  

	
Lending Agreement.  Subject to the terms hereinafter set forth, during the Loan Period, Lender agrees to lend to Borrower, and the Borrower agrees to borrow from the Lender, a sum not to exceed FOUR MILLION DOLLARS ($4,000,000) (the “Loan”) to be used by the Borrower for the purpose of performing the Sprint Contract.  Funds borrowed under this Loan Agreement may be re-borrowed subject to compliance with the terms and conditions hereof.  The proceeds of the Loan may also be used for the purpose of paying amounts due under the Loan and for other purposes herein described.  The sites to be decommissioned under the Project are referred to herein as the “Sites”.

 

	
4.  

	
Borrower’s Note.  The Loan shall be evidenced by a Promissory Note in the principal amount of FOUR MILLION DOLLARS ($4,000,000) (the “Note”), of even date herewith, the form of which is attached hereto as Exhibit A and the terms of which are incorporated herein.

 

	
5.  

	
Collateral Security.  The Borrower and the Borrower Parent each hereby grant to Lender a first priority lien and security interest in and to the Collateral to secure the performance of all covenants and agreements contained in this Agreement and in the other Loan Documents and the timely payment of the Note and any other obligations or indebtedness from Borrower to Lender, whether presently existing or incurred hereafter, and in the case of the Borrower Parent, to also secure the Guaranty of the Borrower Parent (collectively, the “Indebtedness”).  In addition to this Agreement, the grant of the security interest as set forth herein shall also be evidenced by the Account Control Agreements.  The individual Guarantors shall each guarantee payment of a portion of the Loan based on their relative membership interest in Borrower Parent pursuant to guaranty agreements of even date herewith, and the Borrower Parent shall guarantee payment of the entire Loan (collectively, the “Guaranties”).

 

	
6.  

	
Representations, Warranties, Covenants and Agreements.  The Borrower and the Borrower Parent each covenant, represent and warrant to and agree with Lender as follows:

 

	
(a)  

	
This Agreement constitutes and shall at all times constitute, the only lien on the Collateral.  Borrower and Borrower Parent are the absolute owners of the Collateral, free and clear of any and all claims or liens in favor of others, with full right to pledge, sell, assign, transfer and create a security interest therein.  Borrower and the Borrower Parent each agree that it will, at its expense, forever warrant and, at Lender’s request, defend the Collateral from any and all claims and demands of any other person and that it will not grant, create or permit to exist any lien upon, or security interest in, the Collateral in favor of any other person.

 

	
(b)  

	
Borrower and Borrower Parent each covenant and agree that it shall not sell, transfer, lease or otherwise dispose of any of the Collateral, and shall not modify or amend any of the Accounts, without obtaining Lender’s prior written consent to such sale, transfer, lease, other disposition, modification or amendment.

 

	
(c)  

	
Borrower and Borrower Parent each covenant and agree that it shall not move any item of Equipment from the state in which it is now located, locate at a new place of business, remove from a place of business, change its name or state of incorporation or establish 

 

  

3

  

	
 

	

a new chief executive office without giving the Lender not less than thirty (30) days’ prior written notice of the same.

 

	
(d)  

	
The performance of Borrower’s and Borrower Parent’s obligations under the Sprint Contract shall at all times comply with all laws, rules, ordinances, regulations, covenants, conditions, restrictions, orders and decrees of any governmental authority or court applicable to Borrower, Borrower Parent or the Project.  Borrower and Borrower Parent shall pay all fees or charges of any kind in connection therewith.

 

	
(e)  

	
Borrower and Borrower Parent shall keep and maintain at all times at their respective addresses stated in this Agreement, or such other place as Lender may approve in writing, complete and accurate books of accounts and records adequate to reflect correctly the results of their respective business operations and copies of all written contracts and other instruments which affect the Project.  Such books, records, contracts, leases, and other instruments shall be subject to examination and inspection at any reasonable time by Lender.

 

	
(f)  

	
Borrower and Borrower Parent shall defend, at their own cost and expense, indemnify and hold Lender harmless from, any proceeding or claim in any way relating to the Sprint Contract, the Project or the Loan.

 

	
(g)  

	
Borrower and Borrower Parent, upon the request of Lender, shall execute, acknowledge, deliver, and record such further instruments and do such further acts as may be necessary, desirable, or proper to carry out the purposes of this Agreement or the other Loan Documents and to subject to the liens and security interests created by this Agreement and the other Loan Documents, all of the assets and rights of Borrower and Borrower Parent.

 

	
(h)  

	
Borrower and Borrower Parent each grant Lender authority to file such UCC financing statements as Lender shall deem appropriate to perfect the security interest granted to Lender and all amendments, supplements, continuation statements, extensions, and substitutions thereof to be filed at such times, in such manner and in such places as shall cause Lender to perfect and maintain a first and prior security interest and lien in all the Collateral.  Borrower and Borrower Parent shall pay all such recording, filing, re-recording, and refiling fees, title insurance premiums, and other charges.

 

	
(i)  

	
Borrower and Borrower Parent each warrant and represent to Lender that the proceeds of the Note will be used solely for the Project, and in no way will the proceeds be used for personal, family or household purposes.

 

	
(j)  

	
The Borrower and the Borrower Parent shall perform their obligations under the Sprint Contract, and shall cause the Subcontractors to perform their respective obligations under the Sprint Contract, in compliance with the terms of the Sprint Contract, and shall not breach, nor permit the Subcontractors to breach, the terms of the Sprint Contract.  Borrower and Borrower Parent shall not amend any provision of the Sprint Contract without Lender’s prior approval.

 

	
(k)  

	
Neither Borrower nor Borrower Parent shall establish a bank account unless Lender is notified of such bank account and an Account Control Agreement is entered into with respect to such bank account.

  

4

  

	
(l)  

	
 All covenants, representations and warranties made herein shall survive the making of the Loan hereunder and the delivery of the Note and the other Loan Documents until complete repayment of the Indebtedness.  Each request by Borrower for an advance hereunder shall constitute an affirmation that the foregoing covenants, representations and warranties remain true and correct as of the date of such request.  All obligations of Borrower and Borrower Parent under this Agreement are joint and several.

 

	
7.  

	
Conditions Precedent to All Advances.  Lender’s obligation to make any advances to Borrower under this Agreement (an “Advance”) shall be subject to compliance with the following:

 

	
(a)  

	
Purpose.  Any Advances shall be used for the purposes of (i) funding the PMO Structure, (ii) funding required payments to the Subcontractors, (iii) making payments due under the Note, (iv) reimbursing Lender for expenses incurred pursuant to this Agreement or (v) paying other costs which are incidental or related to the costs of completing or financing the Project.

 

	
(b)  

	
Request Advance.  For any Advance, the Borrower shall deliver to the Lender a request for advance in form satisfactory to the Lender (a “Request for Advance”), stating the amount of disbursement requested, at least three (3) business days before the requested date of disbursement.  Each Request for Advance shall be signed by the Borrower, and shall, as applicable, be accompanied by billing statements, vouchers and invoices as requested by Lender.  In each Request for Advance, Borrower will expressly warrant that there is no default under the Sprint Contract, the Accounts, this Agreement, the other Loan Documents or the Borrower’s agreements with the Subcontractors.

 

	
(c)  

	
Information.  Each Request for Advance shall be accompanied by:

 

	
(i)  

	
proof, satisfactory to the Lender, that all invoices for labor and materials have been paid, except those contained in the current Request for Advance; and

 

	
(ii)  

	
certification by Borrower or Borrower Parent as to such other matters as Lender shall request.

 

All of the above information shall be obtained and submitted to the Lender at the Borrower’s expense.

 

	
(d)  

	
Project Contracts.  Borrower and Borrower Parent shall provide the Lender with a listing of each contractor or subcontractor relating to the Project, and upon written request of Lender, Borrower and Borrower Parent will provide a collateral assignment to the Lender of any of such contracts and any payment and performance bonds covering the same as may be required by Lender.

 

	
(e)  

	
Lender’s Inspection.  If, for any reason, the Lender deems it necessary to cause the Project to be examined by a representative of Lender prior to making any advance, it shall have a reasonable time but not less than five (5) days within which to do so, and the Lender shall not be required to make any advance until such examination has been made, at the Borrower’s and the Borrower Parent’s expense.

 

  

5

  

	
8.  

	
Conditions Precedent to Initial Advance.  In addition to satisfaction of the conditions precedent set forth in Section 7, Lender’s obligation to make the initial advance under this Agreement shall be subject to compliance with the following:

 

	
(a)  

	
Loan Documents.  Each of the Loan Documents shall be duly authorized, executed by all the parties thereto and delivered to Lender.

 

	
(b)  

	
Filing of Financing Statements.  The financing statements related to the Loan Documents shall be filed in the appropriate governmental offices.

 

	
9.  

	
Termination of Advances.  At the option of the Lender, Advances shall not be made unless (i) this Agreement, the Note and the other Loan Documents are in full force and effect, (ii) all of the conditions precedent specified in Section 7 and Section 8 hereof shall have been satisfied or waived in writing by Lender, and (iii) an Event of Default does not exist under the terms of this Agreement or any of the other Loan Documents.

 

	
10.  

	
Continuing Liability.  Borrower and Borrower Parent each hereby expressly agree that, anything herein to the contrary notwithstanding, it shall remain liable under each contract, agreement and instrument it assigns to Lender hereunder to observe and perform all the conditions and obligations it is required to observe and perform thereunder, and covenants and agrees to observe and perform all the conditions and obligations, all in accordance with and pursuant to the terms and provisions thereof.  Lender shall have no obligation or liability under any such contract, agreement or instrument, or the Accounts, by reason of or arising out of this Agreement, or the assignment thereof to Lender, or Lender’s receipt of any payment relating to any such contract, agreement or instrument, or the Accounts pursuant hereto.  Lender shall not be required or obligated, in any manner, to: (i) perform or fulfill any of Borrower’s or Borrower Parent’s obligations thereunder or pursuant thereto; (ii) make any payment or any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any such contract, agreement or instrument, or the Accounts; or (iii) present or file any claim, or take any action to collect or enforce any performance or the payment of any amounts, which it may have been assigned or to which it may be entitled at any time or times.

 

	
11.  

	
Event of Default.  The term “Event of Default” as used herein shall mean the occurrence or happening, at any time and from time to time, of any of the following:

 

	
(a)  

	
Failure to Pay Indebtedness.  Any of the Indebtedness is not paid when due, whether by acceleration or otherwise.

 

	
(b)  

	
Nonperformance of Covenants.  Any covenant in this Agreement or any of the other Loan Documents is not fully and timely performed and Borrower and Borrower Parent fail to fully cure such written non-performance within ten (10) days of receiving written notice of the same from Lender.

 

	
(c)  

	
False Representation.  Any statement, representation or warranty in this Agreement or any of the other Loan Documents, any financial statement, or any other writing delivered to Lender in connection with the Indebtedness is false, misleading, or erroneous in any material respect.

 

	
(d)  

	
Bankruptcy, Insolvency, Dissolution or Death.  The Borrower, any Guarantor or Sprint:

 

  

6

  

	
(i)  

	
does not pay its debts as they become due (except those debts that are reasonably disputed in good faith) or admits in writing its inability to pay its debts or makes a general assignment for the benefit of creditors; or

 

	
(ii)  

	
commences any case, proceeding, or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution, or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization, or relief of debtors; or

 

	
(iii)  

	
in any involuntary case, proceeding, or other action commenced against it which seeks reorganization, arrangement, adjustment, liquidation, dissolution, or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization, or relief of debtors, fails to obtain a dismissal of such case, proceeding or other action within sixty (60) days of its commencement, or converts the case from one chapter of the Federal Bankruptcy Code to another chapter, or  is the subject of an order for relief; or

 

	
(iv)  

	
conceals, removes, or permits to be concealed or removed, any part of its property, with intent to hinder, delay, or defraud its creditors or any of them, or makes or suffers a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance, or similar law; or makes any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or suffers or permits, while insolvent, any creditor to obtain a lien upon any of its property through legal proceedings which is not vacated within sixty (60) days from the date thereof; or

 

	
(v)  

	
has a trustee, receiver, custodian, or other similar official appointed for or take possession of all or any part of the Project or any other of its property or has any court take jurisdiction of any other of its property which remains undismissed for a period of sixty (60) days (except where a shorter period is specified in the immediately following subparagraph (vi)); or

 

	
(vi)  

	
fails to have discharged within a period of ten (10) days any attachment, sequestration, or similar writ levied upon any property of such person; or

 

	
(vii)  

	
fails to pay immediately any final money judgment against such person; or

 

	
(viii)  

	
dissolves or dies.

 

	
(e)  

	
Governmental Requirements.  The issuance of any order, decree or judgment pursuant to any judicial or administrative proceedings declaring that the Project is in violation of any law, ordinance, rule or regulation of any agency, department, commission, board, bureau or other governmental authority.

 

	
(f)  

	
Discontinuance of Project.  The discontinuance of work on the Project, for any reason, for a period in excess of fourteen (14) days, except in the event of fire, strike, acts of God or other delays not within the control of Borrower, in which events the discontinuance shall not be longer than sixty (60) days.

 

	
(g)  

	
Default by Borrower Parent.  A breach by Borrower Parent of its obligations under the Borrower’s operating agreement.

 

  

7

  

	
(h)  

	
Sprint Contract.  There is a default under the Sprint Contract by Sprint, Borrower, Borrower Parent or a Subcontractor.

 

	
(i)  

	
Material Adverse Event.  The occurrence of a Material Adverse Event.

 

	
12.  

	
Remedies.  Upon the occurrence of any Event of Default and upon completion or termination of the Project, the Lender may, at its option, cease making Advances under this Agreement and in addition, may, at its option:

 

	
(a)  

	
Acceleration of Note.  Declare the Note to be immediately due and payable whereupon the Note shall become forthwith due and payable without presentment, demand, protest or further notice of any kind, and the Lender shall be entitled to proceed simultaneously or selectively and successively to enforce its rights under the Note, this Agreement and any of the other Loan Documents, or any one or all of them.  Nothing contained herein shall limit Lender’s rights and remedies available under applicable laws.

 

	
(b)  

	
Selective Enforcement.  In the event the Lender shall elect to selectively and successively enforce its rights under any of the Loan Documents, such action shall not be deemed a waiver or discharge of any other lien, encumbrance or security instrument securing payment of the Note until such time as the Lender shall have been paid in full all sums advanced under the Note.  The foreclosure of any lien provided pursuant to this Agreement without the simultaneous foreclosure of all such liens shall not merge the liens granted which are not foreclosed with any interest which the Lender might obtain as a result of such selective and successive foreclosure.

 

	
13.  

	
Miscellaneous.  It is further agreed as follows:

 

	
(a)  

	
Fees and Expenses.  The Borrower agrees to pay all fees, expenses and charges in respect to the Loan contemplated by this Agreement, including, without limiting the generality thereof, the following:

 

	
(i)  

	
legal fees and expenses related to the preparation of the Loan Document and the closing of the Loan;

 

	
(ii)  

	
filing fees;

 

	
(iii)  

	
other fees and expenses involved in the closing of the Loan; and

 

	
(iv)  

	
out of pocket fees and expenses incurred in the administration of the Loan or in collecting amounts due under the Loan, including legal fees and expenses.

 

If suit is brought to collect amounts due under this Agreement, the prevailing party in such suit shall be entitled to recover its reasonable attorneys’ fees, court costs and other legal expenses incurred in such lawsuit.

 

	
(b)  

	
Notices.  Any notices or other communications required or permitted hereunder or under any of the other Loan Documents must be in writing to be effective.  Notices shall be delivered to the parties as set forth below and shall be deemed to be received by addressee (i) upon receipt, refusal or as of the first attempted date of delivery, if mailed first class certified mail, return receipt requested, (ii) the first (1st) business day following the day on which such notice is delivered by a reputable overnight delivery service, or 

  

8

  

	
 

	
(iii) the day facsimile transmission is confirmed after transmission of such notice by facsimile.

 

 

	
  

	
If to Borrower or

	
YKTG, LLC and YKTG Solutions, LLC

	
  

	
Borrower Parent:

	
23 Laurelwood Drive

	
  

	
Bernardsville, NJ 07924

	
  

	
Attention:  Andrew Woods

	
  

	
Fax #:  800-748-9150

 

	
  

	
If to Lender:

	
ADDvantage Technologies Group, Inc.

	
  

	
1221 East Houston St.

	
  

	
Broken Arrow, OK 74012

	
  

	
Attention:  Scott Francis

	
  

	
Fax #:  (918) 251-0792

	
(c)  

	
Amendment and Waiver.  This Agreement may not be amended or modified in any way, except by an instrument in writing executed by all parties hereto; provided, however, Lender may, in writing: (i) extend the time for performance of any of the obligations of Borrower or Borrower Parent, (ii) waive any default by Borrower or Borrower Parent, and (iii) waive the satisfaction of any condition that is precedent to the performance of Lender’s obligations under this Agreement.  In the event of a waiver of any Event of Default by Lender, such specific Event of Default shall be deemed to have been cured and not continuing, but no such waiver shall extend to any subsequent or other default or impair any consequence of such subsequent or other default.

 

	
(d)  

	
Non-Waiver; Cumulative Remedies.  No failure on the part of Lender to exercise and no delay in exercising any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by the Lender of any right hereunder preclude any other or further right of exercise thereof.  The remedies herein provided are cumulative and not alternative.

 

	
(e)  

	
Assignment.  Neither this Agreement, nor the proceeds of the Loan, shall be assignable in whole or in part by Borrower or Borrower Parent without the prior written consent of Lender.  Lender shall have the right to assign its interest in this Agreement without Borrower's or Borrower Parent’s consent to an affiliate of Lender or to a purchaser of Lender's interest in the Borrower.

 

	
(f)  

	
Applicable Law.  This Agreement, and the rights, obligations, and duties of the parties arising from or relating in any way to the subject matter of this Agreement, whether arising in contract or tort, shall be governed, construed, and enforced in accordance with the laws of the State of Oklahoma without regard to choice of law principles.  ANY ACTION, SUIT OR PROCEEDING ARISING FROM OR RELATING IN ANY WAY TO THE SUBJECT MATTER OF THIS AGREEMENT, WHETHER ARISING IN CONTRACT OR TORT, SHALL BE BROUGHT EXCLUSIVELY IN THE OKLAHOMA STATE COURTS OF COMPETENT JURISDICTION SITTING IN TULSA COUNTY, OKLAHOMA OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA.  THE PARTIES HEREBY IRREVOCABLY WAIVE ANY OBJECTIONS WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE PERSONAL JURISDICTION OR VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURTS, AND HEREBY FURTHER IRREVOCABLY WAIVE ANY 

  

9

  

	
 

	
CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.  THE PARTIES HEREBY FURTHER IRREVOCABLY WAIVE ANY RIGHT TO A JURY TRIAL IN ANY ACTION ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.

 

	
(g)  

	
Descriptive Headings.  The descriptive headings of the paragraphs of this Agreement are for convenience only and shall not be used in the construction of the terms hereof.

 

	
(h)  

	
Integrated Agreement.  This Agreement constitutes the entire agreement between the parties hereto, and there are no agreements, understandings, warranties or representations between the parties regarding the interim financing of the Project other than those set forth herein.

 

	
(i)  

	
Time of Essence.  Time is of the essence of this Agreement.

 

	
(j)  

	
Binding Effect.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, legal representatives and assigns.

 

	
(k)  

	
Third Party Beneficiary.  Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto and their respective successors and assigns, any rights or remedies under or by reason of this Agreement.

 

	
(l)  

	
Right to Defend.  Lender shall have the right, but not the obligation, at Borrower’s and Borrower Parent’s expense, to commence, to appear in or to defend any action or proceeding (initiated by a third party against Borrower or Borrower Parent) purporting to affect the rights or duties of the parties hereunder and in connection therewith pay out of the funds of the Loan all necessary expenses, including fees of counsel, if Borrower or Borrower Parent fails to so commence, appear in or defend any such action or proceeding with counsel satisfactory to Lender.

 

	
(m)  

	
Lender’s Performance of Borrower’s Obligations.  If Borrower or Borrower Parent fails to perform or comply with any of its agreements contained herein, under the Loan or any Note or in any contract, agreement or instrument included in the Collateral, and Lender, as provided for by the terms of this Agreement, shall perform or comply, or otherwise cause performance or compliance, with such agreement, the expenses of which Lender incurs in connection with such performance or compliance, together with interest thereon at fifteen percent (15%), shall be payable by Borrower and Borrower Parent to Lender on demand and until paid such payment shall constitute obligations secured hereby.  Lender shall have the right to pay off any lien, security interest or other encumbrance on the Collateral, regardless of whether the obligations secured by such lien, security interest or other encumbrance are due and owing, and such amount shall constitute obligations secured hereby.

 

	
(n)  

	
Partial Invalidity.  If any provision of this Agreement or the application hereof to any party or circumstance shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person or circumstance, other than those as to which it is determined invalid or unenforceable, shall not be affected thereby and each provision of this Agreement shall be valid and shall be enforced to the fullest extent permitted by law.

 

[SIGNATURES ON FOLLOWING PAGE]

 

  

10

  

IN WITNESS WHEREOF, Borrower, Borrower Parent and Lender have executed this Agreement as of the day and year first above written.

 

BORROWER:

 

YKTG SOLUTIONS, LLC

By:               /s/Roscoe Young, II                              

Name:         Roscoe Young, II

Title:           President and Chief Executive Officer

 

BORROWER PARENT:

 

YKTG, LLC

 

 

By:              /s/Roscoe Young, II                              

Name:         Roscoe Young, II

Title:           President and Chief Executive Officer

 

LENDER:

 

ADDVANTAGE TECHNOLOGIES GROUP, INC.

By:              /s/Scott Francis                                         

Name:         Scott Francis

Title:           Vice President and Chief Financial Officer

  

11

  

EXHIBIT A

 

Form of Promissory Note

February ____, 2016                                                                                                                                $4,000,000

FOR VALUE RECEIVED, the undersigned, YKTG Solutions, LLC, a Maryland limited liability company (“Maker”), hereby promises to pay to the order of ADDvantage Technologies Group, Inc., an Oklahoma corporation (“Lender”), its successors and assigns, any and all advances as may be made from time to time by the Lender to Maker pursuant to the terms of that certain Loan and Security Agreement between Maker and Lender of even date herewith (the “Loan Agreement”).  The amount of the advances, the date of advances as well as a record of any repayments shall be as reflected in the books and records of Lender.  The outstanding principal amount of the Note, not to exceed $4,000,000 at any time, shall bear interest on the unpaid principal amount hereof from time to time outstanding at the rate of twelve percent (12%) per annum calculated on the basis of the actual number of days elapsed, computed on a 365-day year.

 

Payments of accrued interest shall be made to Lender monthly on or before the 10th day of each calendar month.  Principal payments shall be due and payable on maturity of the Note on February 10, 2018, or at such earlier time as maturity of the Note is accelerated pursuant to the terms of the Loan Agreement.

 

The Lender may disburse the principal of this Note to Maker in one or more advances from time to time pursuant to the terms of the Loan Agreement.  It is contemplated that by reason of prepayments hereon there may be times when no indebtedness is owing hereunder; but notwithstanding such occurrences, this Note shall remain valid and shall be in full force and effect subsequent to each such occurrence.

 

The Maker shall have the right, without penalty or fee, to prepay the whole or any part of the principal sum hereof and interest hereunder, provided that no partial prepayment shall affect the obligation to continue to pay the principal and interest required hereunder until the entire indebtedness has been paid and provided further that all accrued interest shall be first paid before any prepayment of principal shall be permitted.

 

The Maker and all others now or hereafter liable for payment of the indebtedness evidenced by this Note hereby severally waive demand, presentment for payment, diligence in collection, notice of dishonor or nonpayment, protest and notice of protest and other notice, and agree and consent that the time for its payment may be extended or this Note renewed from time to time by the holder hereof, without notice and that after such extension, extensions or renewals, each of them shall remain bound for the payment hereof, notwithstanding such extension or extensions.

No invalid provision hereof shall affect or impair any other provision of this Note.  This Note shall be effective as of the date first above written, which the parties agree is the date from which the debt evidenced hereby is owed.  This Note shall be governed by and construed in accordance with the applicable laws of the State of Oklahoma.

If suit is brought to collect amounts due under this Note, the prevailing party in such suit shall be entitled to recover its reasonable attorneys’ fees, court costs and other legal expenses incurred in such lawsuit.

“Maker”

YKTG SOLUTIONS, LLC

By:            ____________________________

Name:   Roscoe Young, II

Title:     President and Chief Executive Officer

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