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EXECUTIVE EMPLOYMENT AGREEMENT

    THIS EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) is made the 13th day of July, 2020 (the “Effective Date”), between ADDvantage Technologies Group, Inc. (“Company”) and Reginald Jaramillo-Leal (“Executive”).  

    WHEREAS, the Company and Executive desire to memorialize the terms and conditions under which Executive will be employed by the Company in the position set forth on Exhibit A, which is attached hereto and made a part hereof;  

    NOW, THEREFORE, intending to be legally bound, the Company agrees to employ Executive, and Executive hereby agrees to be employed by the Company, upon the following terms and conditions:

1.Term of Agreement.  The Company hereby employs Executive and Executive accepts such employment, subject to all of the terms and conditions of this Agreement.  Except as otherwise expressly provided herein, the term of this Agreement and of Executive’s employment under this Agreement will commence on the Effective Date and continue in effect until Executive ceases to be employed by the Company pursuant to Section 4 (the “Term”).  
2.Duties.  Executive will hold the office and title set forth on Exhibit A and will have such duties assigned to Executive under the Bylaws of the Company, by the Board of Directors of the Company, by the chief executive officer of the Company or by the officer to whom Executive directly reports as described on Exhibit A.  Executive agrees to use his best efforts to promote the interests of the Company, and to devote his full productive time and working attention to the business and affairs of the Company.  The Company acknowledges that Executive may in the future serve on the boards of directors of businesses which do not compete with the business, present or future, conducted by the Company; provided, that, such board service by Executive does not affect or impair his obligation to devote his full productive time and working attention to the business and affairs of the Company.  
3. Compensation, Benefits and Expenses.
        3.1.    Base Salary.  Commencing on the Effective Date, the Company shall pay to Executive an annual base salary (“Annual Base Salary”) in the amount set forth on Exhibit A for all services to be rendered by Executive hereunder.  The Annual Base Salary shall be payable in accordance with the Company’s normal payroll practices for employees, and the Company shall deduct or cause to be deducted from the Annual Base Salary all taxes and amounts required by law to be withheld.  Executive’s performance and base salary will be reviewed annually by the compensation committee of the Board of Directors.  Future increases of the Annual Base Salary, if any, shall be determined by the Board of Directors of the Company in their sole and absolute discretion.

        3.2.    Stock Grants.   The Executive shall receive stock grants upon the Effective Date, as set forth in Exhibit A. 

        3.3.    Performance Bonus.  The Executive shall be eligible to receive an annual bonus with a target level at a percentage set forth in Exhibit A, based on meeting certain performance metrics and stock performance as determined in the sole and absolute discretion of the Board of Directors of the Company.  The Board of Directors may, in its sole and absolute discretion, establish a bonus plan.  There is no guarantee of a bonus in any year and under no circumstances shall a bonus be considered a required part of Executive’s annual compensation. 
        

        3.4.    Benefits.  During the Term of this Agreement, Executive shall be entitled to participate in all savings and retirement plans, health, dental, life, accident and short- and long-term disability, and policies and other programs maintained by the Company for the benefit of its full-time employees.  

        3.5.    Reimbursement of Expenses.  Executive shall be reimbursed for all reasonable out-of-pocket expenses paid to third parties incurred by Executive in connection with the performance of his duties hereunder within thirty (30) days of presentation of expense statements and vouchers and other supporting documentation and such other information as the Company may reasonably require.

        3.6.    Personal Leave.  During the Term, Executive shall be entitled to a certain amount, as set forth on Exhibit A, of paid personal time off (“PTO”) during each calendar year (pro rated for partial years) in accordance with the Company’s policies in effect from time to time.  
        
        3.7.    Car Allowance.     The Company shall pay Executive a monthly allowance in an amount as set forth on Exhibit A for vehicle related expenses.  Executive shall not be entitled to receive any other amounts related to his vehicle related expenses.

3.8.    Phone Expenses.  The Company shall pay Executive a monthly allowance in an amount as set forth on Exhibit A for a cellular phone plan.  Executive shall not be entitled to receive any other amounts related to his cellular phone or monthly cellular phone bill.

4.Termination of Employment.  
    4.1.    Events of Termination.  Executive’s employment with the Company shall cease upon:

            (i)    Executive’s death.

            (ii)    Executive’s disability, which means his incapacity due to physical or mental illness such that he is unable to perform his previously assigned duties where (1) such incapacity has been determined to exist by either (x) the Company’s disability insurance carrier or (y) by the concurring opinions of two licensed physicians (one selected by the Company and one by Executive), and (2) the Company has determined, that such incapacity will continue for such period of time of at least ninety (90) days, whether or not consecutive, in any twelve (12) month period. 

            (iii)    Termination by the Company, whether with or without Cause, upon not less than thirty (30) days’ prior written notice to the Executive.

            (iv)    Executive’s voluntary resignation, whether with or without Good Reason, or retirement upon not less than thirty (30) days’ prior written notice to the Company that Executive has resigned or retired.  

            (v)    By mutual written consent of the Company and Executive.

            (vi)    Termination by the Company or the Executive within ninety (90) days of the occurrence of a Change in Control.

        4.2.    Benefits Payable Upon Termination. 
        
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            (i)    Within thirty (30) days following the termination of Executive’s employment with the Company pursuant to any manner described in Section 4.1 hereof, the Company shall pay to Executive: (a) any Annual Base Salary earned, but unpaid, for services rendered to the Company on or prior to the date of termination, (b) any unreimbursed expenses reimbursable to Executive pursuant to Section 3.4 hereof for expenses incurred on or prior to the date of termination, and (c) any accrued and unpaid PTO pursuant to Section 3.5 hereof.

            (ii)    In the event that Executive’s employment is terminated by the Company without Cause, is terminated by the Executive for Good Reason or is terminated by the Company or the Executive under Section 4.1(vi) above, contingent upon Executive’s execution and delivery of a Release Agreement substantially in the form attached hereto as Exhibit B with such changes to such form as the Company shall reasonably request (the “Release Agreement”), the Company will pay to Executive an amount described on Exhibit A, payable in a lump sum within 30 days of termination under Section 4.1(vi) and payable over a six (6) month period in equal installments at such times as the Company routinely pays its employees in the case of termination without Cause or resignation for Good Reason (the “Severance Payments”); provided, however, that in the event of Executive’s breach of Sections 5, 6 or 7 of this Agreement then if Severance Payments are being paid through installments, the Company’s obligation to pay additional Severance Payments after the breach occurs shall terminate and be of no further force or effect and if Severance Payments have been made in a lump sum, the Executive shall be obligated to pay to the Company upon written demand that portion of the Severance Payments equal to the portion of the Non-Solicitation Period remaining at the time of the breach.  The Company shall deduct, or cause to be deducted, from the Severance Payments all taxes and amounts required by law to be withheld.  If Employee fails to execute the Release Agreement or revokes his acceptance of such release following its execution, Executive shall not be entitled to any Severance Payments.  

        (iii)    If Executive’s employment with the Company ends for any reason set forth in Section 4.1 hereof other than termination by the Company without Cause, termination by the Executive with Good Reason or termination by the Company or the Executive under Section 4.1(vi), the Company’s obligations to pay any compensation or benefits under this Agreement will cease effective on the date of termination and Executive will receive no Severance Payments.  Executive’s right to receive any other benefits will be determined under the provisions of applicable plans, programs or other coverages. 

5.Non-solicitation and Non-disparagement.
5.1.    Non-solicitation.  Executive acknowledges that in the course of his employment with the Company he will become familiar with the Company’s and Affiliated Companies’ trade secrets and with other confidential information concerning the Company and its Affiliated Companies and that his services will be of special, unique and extraordinary value to the Company and its Affiliated Companies.  Therefore, Executive agrees that during the Non-solicitation Period he shall not, singly, jointly, or as a partner, member, employee, agent, officer, director, stockholder, equity holder, lender, consultant, independent contractor, or joint venturer of any other person, or in any other capacity, directly or indirectly (i) employ, retain, engage, induce or attempt to employ, retain, engage or induce any employee, consultant or independent contractor of the Company or any Affiliated Companies to leave the employ of the Company or such Affiliated Companies, or in any way interfere with the relationship between the Company or any Affiliated Companies and any employee thereof, or (ii) induce or attempt to induce any Customer, dealer, supplier, licensee or other business relation of the Company or any Affiliated Companies to cease doing business with, or modify its business relationship with, the Company 
        
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or such Affiliated Companies, or in any way interfere with the relationship or understanding between any such Customer, dealer, supplier, licensee or business relation and the Company or any Affiliated Companies.  The Company shall have the right to assign the benefits of this Section 5 to any entity that acquires the Company’s business while the Executive is still employed by the Company and assumes the Company’s obligations to Executive, which assumption shall not release the Company.
5.2.    Non-disparagement by Executive.  Following termination, Executive and the Company agree not to make to any person, including but not limited to customers, dealers, suppliers or licensees of the Company or its Affiliated Companies, any statement that disparages the other or which reflects negatively upon the other, including but not limited to statements regarding the Company’s financial condition, the financial condition of its Affiliated Companies, its officers, directors, stockholders, employees and Affiliates, but excepting any statement required by law, or made in response to an order or subpoena of a court or government agency of competent jurisdiction.
5.3.    Enforcement.  If, at the time of enforcement of Section 5 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration and scope reasonable under such circumstances shall be substituted for the stated period or scope and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration and scope permitted by law.
    6.    Confidential Information.  Executive acknowledges that the information, observations and data obtained by him during the course of his performance under this Agreement concerning the business and affairs of the Company and its Affiliate Companies are the property of the Company and Affiliated Companies, including information concerning acquisition opportunities in or reasonably related to the Company’s or its Affiliate Companies’ business or industry of which Executive becomes aware during the Term and any Severance Period.  Therefore, Executive agrees that he will not disclose to any unauthorized person or use for his own account any of such information, observations or data without the Company’s written consent unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of Executive’s acts or omissions.  Executive agrees to deliver to the Company on the date of termination, or at any other time the Company may request in writing, all memoranda, notes, plans, records, reports and other documents (and copies thereof) relating to the business of the Company and its Affiliated Companies (including, without limitation, all acquisition prospects, lists and contact information) which he may then possess or have under his control.  This Section 6 does not apply to personal contacts Executive had prior to his employment with the Company, provided that no Company confidential information is disclosed to those contacts.
7.    Executive’s Representations and Warranties.  Executive represents and warrants that Executive is not a party to any other employment, non-competition, or other agreement or restriction which could interfere with Executive’s employment with the Company or Executive’s or the Company’s rights and obligations hereunder and that Executive’s acceptance of employment with the Company and the performance of Executive’s duties hereunder will not breach the provisions of any contract, agreement, or understanding to which Executive is party or any duty owed by Executive to any other person or organization.
    8.    Definitions.  
(i)    “Affiliated Companies” shall mean any subsidiary of the Company.
        
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(ii)    “Cause” shall mean Executive’s: (1) conviction of a felony or pleading guilty to a felony charge; (2) participation as an employee, officer or principal owner/organizer in any business engaged in activities in direct competition with Company without the consent of Company; (3) gross and willful neglect of responsibilities; (4) other offenses against Company, including without limitation theft, embezzlement, dishonesty, gross and willful violation of Company policy, or the willful release of proprietary or confidential information in a manner that would be detrimental to Company's best interest; or (5) willful material breach of this Agreement or material breach of Executive’s fiduciary duties to the Company or any of its Affiliated Companies.

(iii)    “Change in Control” shall mean any one of the following events or transactions:

(1)    Any “person” (as that term is used in Sections 13(d) and 14(d)(2) of the Exchange Act ) after the Effective Date becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly, of securities representing 50% or more of the combined voting power for election of directors of the then outstanding securities of the Company or any successor to the Company; provided, however, the following transactions shall not constitute a Change in Control hereunder (A) any acquisition of such securities by the Company, (B) any acquisition of such securities by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, (C) any acquisition of such securities by any person who, immediately before such acquisition, had beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of 20% or more of (i) the fair market value of then then outstanding securities of the Company or (ii) the combined voting power of the outstanding voting securities of the Company entitled to vote generally in the election of directors to the Board or (D) any acquisition by any person or entity, including without limitation, any corporation pursuant to a transaction which satisfies the requirements of clauses (A), (B) or (C) of this paragraph;

(2)    During any period of two consecutive years or less, individuals who at the beginning of such period constitute the Board cease for any reason (whether beginning on or after the Effective Date) to constitute at least a majority of the Board, unless the election or nomination for election of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors as of the beginning of the period;

(3)    Shareholders of the Company approve any dissolution or liquidation of the Company; or

(4)    Shareholders of the Company approve any reorganization, merger, consolidation or share exchange unless (A) the persons who were the beneficial owners of the outstanding shares of the common stock of the Company immediately before the consummation of such transaction beneficially own more than 60% of the outstanding shares of the common stock of the successor or survivor corporation in such transaction immediately following the consummation of such transaction and (B) the number of shares of the common stock of such successor or survivor corporation beneficially owned by the persons described in clause (A) immediately following the consummation of such transaction is beneficially owned by each such person in substantially the same proportion that each such person had beneficially owned shares of the Company common stock immediately before the consummation of such transaction, provided (C) the percentage described in clause (A) of this paragraph of the beneficially owned shares of the successor or survivor corporation and the number described in clause (B) of this paragraph of the beneficially owned shares of the successor or survivor corporation shall be determined exclusively by reference to the shares of the successor or survivor corporation which result from the 
        
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beneficial ownership of shares of common stock of the Company by the persons described in clause (A) of this paragraph immediately before the consummation of such transaction.  

(iv)    “Customer” shall mean any and all persons, business, or other legal entities that received goods or services provided by the Company, or that the Company marketed to for goods or services provided by the Company, within two (2) years prior to the termination of his employment with the Company.  

(v)    “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.  
(vi)    “Good Reason” shall mean: (i) a material diminution in Executive’s duties, authority or responsibilities; (ii) a reduction in Executive’s Annual Base Salary; or (iii) willful and material breach by the Company of its covenants and/or obligations under this Agreement; provided that, in each of the foregoing clauses (i) through (iii) (A) Executive provides the Company with written notice that Executive intends to terminate Executive’s employment hereunder for one of the grounds set forth in clauses (i) through (iii) within thirty (30) days of such ground occurring, (B) if such ground is capable of being cured, the Company has failed to cure such ground within a period of thirty (30) days from the date of such written notice, and (C) Executive terminates by written notice Executive’s employment within sixty-five (65) days from the date that Executive provides notice to the Company. For purposes of clarification, the above-listed conditions shall apply separately to each occurrence of Good Reason, and failure to adhere to such conditions in the event of Good Reason shall not disqualify Executive from asserting Good Reason for any subsequent occurrence of Good Reason. For purposes of this Agreement, “Good Reason” shall be interpreted in a manner, and limited to the extent necessary, so that it shall not cause adverse tax consequences for either party with respect to Section 409A of the Internal Revenue Code of 1986, as amended and any successor statute, regulation and guidance thereto. 

(vii)    “Non-solicitation Period” shall mean twelve (12) months following termination of Executive’s employment with the Company.
(viii)    “Prorated Bonus” shall mean a prorated portion of the cash bonus Executive earned in the fiscal year preceding the fiscal year in which Termination of Executive's Employment occurs (based on the number of days Executive was employed by the Company during the year of such Termination).
(ix)    “Severance Period” shall mean the time period when Executive is receiving Severance Payments from the Company under Section 4.2(ii) and Exhibit A hereof.  
9.    Notices.  All demands, notices, requests, consents and other communications required or permitted under this Agreement shall be in writing and shall be personally delivered or sent by facsimile machine (with a confirmation copy sent by one of the other methods authorized in this Section), reputable commercial overnight delivery service (including Federal Express and U.S. Postal Service overnight delivery service) or, deposited with the U.S. Postal Service mailed first class, registered or certified mail, postage prepaid, as set forth below:
If to the Company, addressed to:

ADDvantage Technologies Group, Inc.
        1430 Bradley Lane
        Carollton, TX   75007
        Facsimile: (469) 581-2545
        
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If to Executive, addressed to:

Executive’s notice address
as set forth on Exhibit A.

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

10.    Entire Agreement.  This Agreement constitutes the full and entire understanding and agreement between the parties with respect to the subject hereof and supersede all prior agreements and understandings, whether written or oral, among the parties with respect thereto.
11.    Assignment.  This Agreement, being for the personal services of Executive, shall not be assignable by him.  The provisions hereof shall inure to the benefit of, and be binding upon, the Company’s successors and assigns.  The Company may assign this Agreement and its rights, together with its obligations hereunder, in connection with any sale, transfer or other disposition of all or substantially all of its assets or business, whether by merger, consolidation or otherwise.
12.    Waivers and Amendments.  The respective rights and obligations of the Company and Executive under this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively, and either for a specified period of time or indefinitely) or amended only with the written consent of a duly authorized representative of the Company and Executive.
13.    Controlling Law and Consent to Jurisdiction.  This Agreement will be governed by and construed in accordance with the laws of the State of Oklahoma without giving effect to any choice of law or conflicting provision or rule.
14.    Equitable Remedies.  The parties hereto agree that irreparable harm would occur in the event that any of the agreements and provisions of this Agreement were not performed fully by the parties hereto in accordance with their specific terms or conditions or were otherwise breached, and that money damages are an inadequate remedy for breach of this Agreement because of the difficulty of ascertaining and quantifying the amount of damage that will be suffered by the parties hereto in the event that this Agreement is not performed in accordance with its terms or conditions or is otherwise breached.  It is accordingly hereby agreed that the parties hereto shall be entitled to an injunction or injunctions or other equitable relief to restrain, enjoin and prevent breaches of this Agreement by the other parties and to enforce specifically such terms and provisions of this Agreement (without posting a bond or other security), such remedy being in addition to and not in lieu of, any other rights and remedies to which the other parties are entitled to at law or in equity.  The Company and Executive agree that the covenants set forth in this Agreement shall be enforced to the fullest extent permitted by law.  Accordingly, if, in any judicial proceedings, a court shall determine that such covenant is unenforceable for any reason, including without limitation because it survives too long, then the parties intend that such covenant shall be deemed to cover only the maximum period of time, if applicable, and/or shall otherwise be deemed to be limited in such manner as will permit enforceability by such court.  In the event that any one or more of such covenants shall, either by itself or together with other covenants be adjudged to go beyond what is reasonable in all the circumstances for the protection of the interests of the Company, but would be adjudged reasonable if any particular covenant or covenants or parts thereof were deleted, restricted, or limited in a particular manner, then the said covenants shall apply with such deletions, restrictions, or limitations, as the case may be.  The Company and Executive further agree that the covenants set forth in 
        
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this Agreement are reasonable in all circumstances for the protection of the legitimate interests of the Company.
15.    Survival.  Sections 4-16 of this Agreement shall survive termination of this Agreement for the period of duration specified in such Section, and if no period of duration is specified, then the provision shall survive termination indefinitely.
16.    Severability; Titles and Subtitles; Gender; Singular and Plural; Counterparts; Facsimile.
(i)    In case any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby.
(ii)    The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.
(iii)    The use of any gender in this Agreement shall be deemed to include the other genders, and the use of the singular in this Agreement shall be deemed to include the plural (and vice versa), wherever appropriate.
(iv)    This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together constitute one instrument.
(v)    Counterparts of this Agreement (or applicable signature pages hereof) that are manually signed and delivered by facsimile transmission shall be deemed to constitute signed original counterparts hereof and shall bind the parties signing and delivering in such manner.

    17.    Section 409A Compliance.

        (i)    Compliance.  This Agreement shall be construed to avoid the imposition of additional taxes, interest and penalties pursuant to Section 409A of the Internal Revenue Code (“Section 409A”).  The parties acknowledge and agree that the interpretation of Section 409A and its application to the terms of this Agreement is uncertain and may be subject to change as additional guidance and interpretations become available.  In no event whatsoever shall the Company be liable for any tax, interest or penalties that may be imposed on the Executive by Section 409A or any damages for failing to comply with Section 409A; provided, however, that if the failure to comply results from the Company’s negligence or willful acts, the Company will reimburse the Executive so that, on an after-tax basis, he is in the same position he would have been in had the failure to comply not occurred.

        (ii)    Termination as a Separation From Service.  A termination of employment shall not be deemed to have occurred for purposes of this Agreement providing for the payment of any amounts or benefits that are considered nonqualified deferred compensation under Section 409A upon or following a termination of employment, unless such termination is also a “separation from service” within the meaning of Section 409A and the payment thereof prior to a “separation from service” would violate Section 409A.  For purposes of such provision in this Agreement relating to any such payments or benefits, references to “termination,” “termination of employment” or like terms shall mean “separation from service.”

        
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        (iii)    Six Month Delay for Specified Employees.  If any payment, compensation or other benefit provided to the Executive in connection with a termination of employment is determined, in whole or in part, to constitute “nonqualified deferred compensation” within the meaning of Section 409A and the Executive is a specified employee as defined in Section 409A(2)(B)(i), no part of such payments shall be paid before the earlier of (i) the day that is six months plus one day after the Executive’s date of termination and (ii) the date of Executive’s death (the “New Payment Date”).  The aggregate of any payments that otherwise would have been paid to the Executive during the period between the date of termination and the New Payment Date shall be paid to the Executive in a lump sum on such New Payment Date.  Thereafter, any payments that remain outstanding as of the day immediately following the New Payment Date shall be paid without delay over the time period originally scheduled, in accordance with the terms of this Agreement.

        (iv)    Reimbursements and In-Kind Benefits.  All reimbursements for costs and expenses under this Agreement shall be paid in no event later than the end of the calendar year following the calendar year in which the Executive incurs such expense.  With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (ii) the amount of expenses eligible for reimbursements or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year.

        (v)    Payments within Specified Number of Days.  Whenever a payment under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within such period shall be within the sole discretion of the Company.

        (vi)    Installments as Separate Payment.  If under this Agreement, an amount is paid in two or more installments, for purposes of Section 409A, each installment shall be treated as a separate payment.

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WITNESS THE DUE EXECUTION AND DELIVERY HEREOF on the date first above written. 

COMPANY:

ADDvantage Technologies Group, Inc.

By: /s/ Joseph E. Hart
Name: Joseph E. Hart
Title: CEO and President    

EXECUTIVE:

/s/ Reginald Jaramillo-Leal
Reginald Jaramillo-Leal

10
4750912.3:210412:00700 

EXHIBIT A

TERMS

						
	Position	President, Telcom Segment
	Officer to whom Executive Directly Reports	Chief Executive Officer
	Annual Base Salary	$220,000.00
	One-Time Grant	65,000 Restricted Shares with a three-year vesting period
	Performance Target Level	50% of Target in accordance with Executive Compensation Plan, can be a range of 20% to 70% based on achieving a range of 80% to 125% of Budget
	PTO	4 weeks per year
	Car Allowance	$1,000.00 per month
	Cell Phone Allowance	$150.00 per month
	Severance Payment	6 Months of Base Salary at the time of Termination, plus the Executive’s Prorated Bonus
	Executive’s Notice Address	1801 Goliad Way
Lantana, TX 76226

        
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EXHIBIT B

CONFIDENTIAL SEVERANCE AND RELEASE AGREEMENT

This Confidential Severance and Release Agreement (the “Agreement”) is made and entered into by and between Reginald Jaramillo-Leal (“Executive”) and ADDvantage Technologies Group, Inc. (the “Company”) (collectively referred to as the “Parties”).  
WITNESSETH:
WHEREAS, Executive has been employed by the Company as its Chief Financial Officer; 
WHEREAS, the Executive’s employment has been terminated; and 
WHEREAS, in accordance with and subject to Section 4.2(ii) of the Executive Employment Agreement between the Parties, in exchange for a release of claims, the Company will pay Executive severance payments in the amount and at the times specified in the Executive Employment Agreement (the “Severance Payments”).  
NOW, THEREFORE, in consideration of the premises, the mutual promises herein, and other good and valuable considerations, the receipt and sufficiency of which are hereby acknowledged, it is agreed as follows:
1.    Release.  Executive, for himself, his spouse, heirs, executors, administrators and assigns, hereby unconditionally releases and forever discharges the Company and its related entities, successors, assigns, agents, directors, officers, employees, representatives, and all persons acting by, through, under or in concert with any of them from any and all causes of action whether known or unknown, with respect to or arising out of all those claims asserted or which could have been asserted by Executive and/or arising out of, or alleged to have been suffered by him in or as a consequence of his employment, contact or relationship to date with the Company, including rights or claims arising under any agreement with the Company or under any federal, state or local laws, including, but not limited to Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991, the Equal Pay Act, the Age Discrimination in Employment Act of 1967 and the Older Worker’s Benefit Protection Act of 1990, the Civil Rights Act of 1866, as amended, the Family Medical Leave Act, the Employee Retirement Income Security Act of 1974, the Oklahoma Workers’ Compensation Act, the Fair Labor Standards Act, the Americans With Disabilities Act, as amended, the Rehabilitation Act of 1973, the Vietnam Era Veterans’ Readjustment Assistance Act, the Genetic Information Nondiscrimination Act, the Oklahoma Anti-Discrimination Act, Oklahoma public policy, and all other federal, state or local laws.  This release also applies to any claims or rights Executive may have arising out of any legal or equitable restrictions on Executive’s right not to continue an employment (or other) relationship with the Company, including any express or implied employment contracts, and to any claims Executive may have against the Company for fraudulent inducement or misrepresentation, tortious interference with business/contractual relations, defamation, wrongful termination, public policy tort, or other retaliation claims in connection with workers’ compensation or alleged “whistleblower” status or on any other basis whatsoever.  Executive does not, however, waive any rights or claims that may arise and accrue after the date this Agreement is executed by him.  Further, Executive understands and agrees that this Agreement does not cover, affect, or alter any rights that cannot, by law, be released by private agreement.  
        
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2.    Consideration.  In consideration for Executive agreeing to the terms of this Agreement, the Company shall pay or provide to Executive the Severance Payments as set forth in the Executive Employment Agreement between the Parties.  Executive agrees that he will be responsible for satisfying any tax obligation that he may have or incur with regard to the Severance Payments received from the Company.  
3.    Compliance with ADEA and OWBPA.  To comply with the Age Discrimination in Employment Act (“ADEA”) and the Older Worker’s Benefit Protection Act (“OWBPA”), the Company has advised Executive of the legal requirements of the OWBPA and fully incorporates the legal requirements by reference into this Agreement as follows:
a.    This Agreement is written in layman’s terms, and Executive understands and comprehends its terms;
b.    Executive has been advised of his right to consult an attorney to review this Agreement;
c.    Executive does not waive any rights or claims that may arise after this Agreement is executed;
d.    Executive is receiving consideration beyond anything of value to which he is already entitled; and 
e.    Executive acknowledges that he has had a reasonable period of time within which to consider this Agreement.  
Executive acknowledges that he has been given a period of twenty-one (21) calendar days during which to consider whether to enter into this Agreement.  Executive further acknowledges that he will have seven (7) calendar days from the date he signs and delivers a copy of the Agreement to the Company, during which time Executive may revoke the Agreement as to his release of claims under the ADEA and OWBPA only, by delivering a signed and dated notice of revocation to the Company.  This Agreement becomes immediately effective and enforceable as to all claims, except those arising under the ADEA and OWBPA.  This Agreement becomes effective and enforceable as to claims under the ADEA and OWBPA when the seven (7) day revocation period has expired if Executive has not delivered a written revocation to the Company before that time.  Executive acknowledges that he is giving up any rights to receive any benefits or remedial relief (such as reinstatement, back pay or front pay) as a consequence of any charge or complaint filed with the courts or any other governmental entity.  If Executive does file a charge or complaint with the court or any other governmental entity, then Executive agrees to forfeit any future benefits or payments that he may receive as enhanced severance pay and that Executive must repay the Company for any benefits or payments that he has already received as enhanced severance pay.
4.    Confidentiality.  Executive will not, unless required by law, disclose to others the terms of this Agreement, the benefits being paid under it or the fact of its payment, except that Executive may disclose this information to his attorney, accountant or other professional advisor to whom he must make the disclosure in order for them to render professional services to him.  Executive will instruct them, however, to maintain the confidentiality of this information just as he must.  
5.    Voluntary Nature of Agreement.  Executive represents and agrees that he fully understands his right to discuss all aspects of this Agreement with an attorney and that he has had adequate opportunity to seek counsel regarding the legal and binding effect of this Agreement.  Executive acknowledges that he has carefully read and fully understands all the provisions of this Agreement.  Executive further acknowledges that he is voluntarily entering into this Agreement and is not under any 
        
     13

duress or coercion whatsoever.  Executive agrees that the Company and its counsel have not made any additional promises to him, and he does not expect to receive anything more than what is reflected in this Agreement and the Executive Employment Agreement, pursuant to the conditions outlined within.  
6.    Agreement Not to be Used as Evidence.  This Agreement shall not be admissible as evidence in any proceeding except one in which a party to this Agreement seeks to enforce this Agreement or alleges this Agreement has been breached, or one in which a court or administrative agency of competent jurisdiction orders Executive or the Company to produce this Agreement.  If a court or administrative agency orders production of this Agreement or disclosure of the terms of this Agreement is sought, Executive or the Company shall immediately notify the other party of same and shall cooperate with any efforts to obtain a protective order from that court or agency preventing such production or requiring that this Agreement be produced or filed only under seal and that other parties to any such proceedings and their counsel shall not disclose the existence or terms of this Agreement for purposes not related to the proceeding in which this Agreement was ordered to be produced.
7.    Assignment; Binding Effect.  This Agreement may not be assigned by Executive.  This Agreement is binding upon and shall inure to the benefit of the Parties hereto and their respective successors, assigns, personal representatives, officers, directors, agents, attorneys, parents, subsidiaries, partners, principals, and affiliates.
8.    Controlling Law and Consent to Jurisdiction.  This Agreement will be governed by and construed in accordance with the laws of the State of Oklahoma without giving effect to any choice of law or conflicting provision or rule.
[remainder of page intentionally left blank]

        
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PLEASE READ CAREFULLY.  THIS CONFIDENTIAL SEVERANCE AND RELEASE AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.  

_________________________________            ____________________________
Reginald Jaramillo-Leal                    Date

ADDvantage Technologies Group, Inc.

By: ____________________________            ____________________________
    
Name:                                Date

Title: CEO and President
        
     15Document

    

ADDvantage Technologies Group, Inc.
RESTRICTED STOCK AWARD AGREEMENT
(Employee Version)
_____________, 202__

[Name and Address of 
Awardee]

Dear _____________:

1.    Restricted Stock Award.  ADDvantage Technologies Group, Inc., an Oklahoma corporation (the “Company”), is pleased to grant to you an aggregate of _______ shares of Common Stock, par value $0.01 per share, of the Company (the “Restricted Shares”).  This award is subject to your acceptance of and agreement to all of the applicable terms, conditions, and restrictions described in the Company’s 2015 Incentive Stock Plan, as amended (the “Plan”), and to your acceptance of and agreement to the further terms, conditions, and restrictions described in this Restricted Stock Award Agreement (this “Award Agreement”). The Prospectus for the Plan is attached hereto as Exhibit A, and a copy the Plan will be made available to you upon request. To the extent that any provision of this Award Agreement conflicts with the expressly applicable terms of the Plan, it is hereby acknowledged and agreed that those terms of the Plan shall control and, if necessary, the applicable provisions of this Award Agreement shall be hereby deemed amended so as to carry out the purpose and intent of the Plan.

2.    Possession of Certificates.  The Company shall, at its option, (i) issue a certificate or certificates for the Restricted Shares in your name and shall retain the certificate(s) for the period during which the restrictions described in Section 4(b) are in effect or (ii) issue instructions to the Company’s agent for the book entry of your ownership of the Restricted Shares in uncertificated form.  You shall execute and deliver to the Company a stock power or stock powers or power of attorney or like form, a form of which is attached hereto as Exhibit B, in blank for the Restricted Shares.  You hereby agree that the Company shall hold the certificate(s) for the Restricted Shares and the related stock power(s) and shall retain control over uncertificated Restricted Shares pursuant to the terms of this Award Agreement until such time as the restrictions described in Section 4(b) lapse as described in Section 5 or the Restricted Shares are canceled pursuant to the terms of Section 4(b).

3.    Ownership of Restricted Shares.  You shall be entitled to all the rights of absolute ownership of the Restricted Shares, including the right to vote such shares and to receive dividends therefrom if, as, and when declared by the Company’s Board of Directors, subject, however, to the terms, conditions, and restrictions described in the Plan and in this Award Agreement.

4.    Restrictions.

(a)    Your ownership of the Restricted Shares shall be subject to the restrictions set forth in subsection (b) of this Section until the Restricted Shares vest pursuant to the terms of Section 5, at which time the Restricted Shares shall be yours.

(b)    The restrictions referred to in subsection (a) of this Section are as follows:

(1)    You shall forfeit the Restricted Shares to the Company and all of your rights thereto shall terminate without any payment of consideration by the Company if your “Termination of Employment” (as defined below) occurs prior to vesting of the Restricted Shares under Section 5.  If you forfeit any Restricted Shares and your interest therein terminates pursuant to this paragraph, such Restricted Shares shall be canceled.  “Termination of Employment” 

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shall mean when such individual is no longer serving as an employee of the Company for any reason, including termination with or without cause, or resignation, with or without good reason, but shall not include a termination occurring by reason of death or Disability.

(2)    Until vesting under Section 5, you may not sell, assign, transfer, pledge, hypothecate, or otherwise dispose of the Restricted Shares.

5.    Vesting.

(a)    Subject to Section 4, your shares will vest [(i) _____ percent (____%) the Restricted Shares on the first anniversary of the date of this Agreement, (ii) _____ percent (____%) the Restricted Shares on the second anniversary of the date of this Agreement, and (iii) the balance of the Restricted Shares on the third anniversary of the date of this Agreement]1.  Restricted Shares as to which you are vested shall no longer be considered “Restricted Shares” and shall no longer be subject to the restrictions described in this Agreement, including without limitation, Section 4(b).

(b)    In addition to vesting under Section 5(a), you shall vest with respect to all the Restricted Shares at the time of the occurrence of any of the following events:

(1)    Your death or “Disability” (as defined in the Plan); or

(2)    A “Change of Control” (as defined in the Plan) of the Company.

(c)  In addition to vesting under Section 5(a) and Section 5(b), you shall vest with respect to all Restricted Shares which are scheduled to vest within one year or less after the date of your Termination of Employment unless your Termination of Employment is “for Cause”. For purposes of this Agreement “for Cause” shall mean your (1) conviction of a felony or pleading guilty to a felony charge; (2) participation as an employee, officer or principal owner/organizer in any business engaged in activities in direct competition with Company without the consent of Company; (3) gross and willful neglect of responsibilities; (4) other offenses against Company, including without limitation theft, embezzlement, dishonesty, gross and willful violation of Company policy, or the willful release of proprietary or confidential information in a manner that would be detrimental to Company's best interest; or (5) willful material breach of this Agreement or material breach of your fiduciary duties to the Company or any of its affiliated companies.

    6.    Agreement With Respect to Taxes; Share Withholding.

(a)    You agree that (1) you will pay to the Company or a Subsidiary, as the case may be, or make arrangements satisfactory to the Company or such Subsidiary regarding the payment of any foreign, federal, state, or local taxes of any kind required by law to be withheld by the Company or any of its Subsidiaries with respect to the Restricted Shares, and (2) the Company or any of its Subsidiaries shall, to the extent permitted by law, have the right to deduct from any payments of any kind otherwise due to you any foreign, federal, state, or local taxes of any kind required by law to be withheld with respect to the Restricted Shares.

(b)    With respect to withholding required upon the lapse of restrictions or upon any other taxable event arising as a result of the Restricted Shares awarded, you may elect, subject to the approval of the committee of the Board of Directors of the Company that administers the Plan, to 

1 The vesting period will vary from person to person and will be determined by the Plan Administrator.

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satisfy the withholding requirement, in whole or in part, by forfeiting and having the Company cancel Restricted Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be withheld on the transaction.  All such elections shall be irrevocable, made in writing, signed by you, and shall be subject to any restrictions or limitations that such committee, in its sole discretion, deems appropriate.  You should discuss with your tax advisor the advantages and disadvantages of making the election described in this paragraph.  

7.    Adjustment of Shares.  The number of Restricted Shares subject to this Award Agreement shall be adjusted as provided in Article 13 of the Plan.  Any shares or other securities received by you as a stock dividend on, or as a result of stock splits, combinations, exchanges of shares, reorganizations, mergers, consolidations or otherwise with respect to the Restricted Shares shall have the same terms, conditions and restrictions and bear the same legend as the Restricted Shares.

8.    Agreement With Respect to Securities Matters.  You agree that you will not sell or otherwise transfer any Restricted Shares except pursuant to an effective registration statement under the U.S. Securities Act of 1933, as amended, or pursuant to an applicable exemption from such registration.

9.    Certain Definitions.  Capitalized terms used in this Award Agreement and not otherwise defined herein shall have the respective meanings provided in the Plan.

10.     Section 83(b) Election.  Under current general tax rules, you will be taxed on the value of your Restricted Shares when the restrictions lapse in accordance with Section 4 and Section 5 of this Agreement.  You can elect instead to be taxed on the value of the Restricted Shares on the date of this award.  You should discuss with your tax advisor the possible tax advantages and disadvantages of making this so-called “Section 83(b) election”.  A copy of the election form, which must be filed with the IRS within thirty days after the grant date of your Restricted Stock, is attached to this Agreement as Exhibit C. You should talk to your tax advisor about the filing procedures and deadline.

If you accept this Restricted Stock Award and agree to the foregoing terms and conditions, please so confirm by signing and returning the duplicate copy of this Award Agreement enclosed for that purpose.

                        By:    ____________________________
                        Name: 
                        Title:     

The foregoing Restricted Stock Award is accepted by me as of the day and year first set forth above, and I hereby agree to the terms, conditions, and restrictions set forth above and in the Plan.

                                                

Exhibit A
2015 Incentive Stock Plan and Prospectus

See attached.

ADDvantage Technologies Group, Inc.
1430 Bradley Lane, Suite 196
Carrollton, Texas 75007

2015 Incentive Stock Plan
Descriptive Memorandum
(Section 10(a) Prospectus)

THIS DOCUMENT CONSTITUTES PART OF
A PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933

Dated October 1, 2020

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ADDVANTAGE TECHNOLOGIES GROUP, INC.

2015 INCENTIVE STOCK PLAN

INTRODUCTION

This Descriptive Memorandum (Section 10(a) Prospectus) constitutes part of a prospectus covering Common Stock of ADDvantage Technologies Group, Inc., an Oklahoma corporation (the “Company”), that has been registered under the Securities Act of 1933, as amended (the “Securities Act”).  A registration statement on Form S-8 (the “Initial Registration Statement”) with respect to the Company’s 2015 Incentive Stock Plan (the “Plan”) has been filed with the Securities and Exchange Commission (the “SEC”) under the Securities Act on March 26, 2015. An additional registration statement on Form S-8 (the “Second Registration Statement”) was filed with the SEC on April 17, 2020 with respect to the registration of additional securities under the Plan.  The Initial Registration Statement and the Second Registration Statement shall be collectively referred to herein as the “Registration Statement”. For further information with respect to the Company, the Plan, and the securities which are issuable under the terms of the Plan, reference is made to the Registration Statement, including the exhibits thereto.

The Company undertakes to provide without charge to each person who participates in the Plan, upon written or oral request by such person, a copy of the documents incorporated by reference in Item 3 of Part II of the Initial Registration Statement (other than exhibits to such documents), which documents are incorporated by reference into this Descriptive Memorandum as required by SEC rules.  In addition, the Company will also make available, without charge to participants (as defined below) in the Plan, copies of its annual report to shareholders for the latest fiscal year, its latest prospectus, if any, filed pursuant to Rule 424(b) containing audited financial statements that are not incorporated by reference from another filing, and all reports, proxy statements, and other communications distributed to shareholders generally.  Requests for information should be directed to Jarrod M. Watson, Chief Financial Officer, 1430 Bradley Lane, Carrollton, Texas 75007, telephone number (918) 251-9121.

GENERAL INFORMATION REGARDING THE PLAN

What is being offered under the 2015 Incentive Stock Plan?

This Descriptive Memorandum relates to shares of Common Stock, $.01 par value, of the Company, offered pursuant to the terms of the Plan.

When was the Plan adopted?

The Plan was approved by the board of directors of the Company (the “Board”) in January, 2015.  The Plan was approved by the shareholders of the Company at the Annual Meeting of Shareholders on March 4, 2015 and was effective upon such approval (the “Effective Date”). On March 18, 2020, the Shareholders approved an amendment to the Plan to increase the number of shares issuable thereunder by 1,000,000 shares. Nothing in the Plan affects any grant issued under the Preexisting Plan, as defined below, which are outstanding on the Effective Date of the Plan until such time, if any, that any share of stock subject to such grants are forfeited or grants respecting any shares of stock expire on or after the Effective Date in accordance with the terms of such grants, or such grants are cancelled. 

What is the purpose of the Plan?

The purpose of the Plan is to promote the interests of the Company by authorizing the Administrator (defined below) to grant Common Stock and other equity-based awards to key employees and directors in order (1) to attract and retain key employees and directors, (2) to provide an additional incentive to each key employee and director to work to increase  the value of the Common Stock, and (3) to provide each key employee and director with a stake in the future of the Company which corresponds to the stake of each of the Company’s shareholders.

Who administers the Plan?

The Plan is administered by a committee of the Board of Directors consisting of three (3) directors who qualify as “non-employee directors” under Rule 16b-3 of the Securities Exchange Act of 1934 and as “independent directors” under NASDAQ Rule 5605 (subject to certain exceptions under NASDAQ Rule 5605), each of whom are appointed by and serve at the pleasure of the Board of Directors.  The administrator of the Plan will be referred to herein as the “Administrator.”  Among other things, the Administrator has full discretion and the exclusive power to:

1.     Select, from eligible employees and directors, those who will participate in the Plan and make awards to such employees and directors;

2.    Determine the time that the awards are granted and any terms and conditions with respect to such awards, including but not limited to, the amount of such award, the number of shares of Common Stock to be subject to each award and the option price, if applicable, payment terms, payment methods, and the expiration date applicable to each award;

3.     Adopt, alter, and repeal rules, guidelines, and practices governing the Plan; and

4.    Resolve all questions relating to the administration of the Plan and applicable law.

From whom may I obtain information about the Plan?

Jarrod M. Watson 
Chief Financial Officer
ADDvantage Technologies Group, Inc.
1430 Bradley Lane, Suite 196 
Carrollton, Texas 75007 
(918) 251-9121

When will the Plan terminate?

The Plan will terminate on the earlier of either (a) the tenth anniversary of the effective date of the plan in which event the Plan shall continue in effect until all outstanding ISOs, Non-ISOs and SARs, have been exercised in full or are no longer exercisable, all Common Stock issued under any Stock Grants have been forfeited or have become non-forfeitable, or (b) when no shares remain reserved and available for issuance under the Plan as a result of the exercise of Options or SARs or forfeiture of Stock Grants.  The Plan may also be terminated by Board action.  Regardless of any termination of the Plan, awards already granted at the time of such termination may be exercised in accordance with their terms unless the key employee or director consents in writing to a modification of such award, there is a dissolution or liquidation of the Company, or a change in control of the Company.

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How may the Plan be amended?

Subject to certain limitations, the Plan may be amended, altered, discontinued, or terminated at any time by the Board.  Pursuant to the Plan, any such amendment, alteration, discontinuance, or termination shall not, without the consent of the holder of the award, adversely affect any awards already granted at that time.  Additionally, no such action shall be taken without shareholders’ approval if such approval is required by law or the rules of the exchange on which the shares of the Company stock are traded.

Is the Plan subject to ERISA?

The Plan is generally not subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  There is, however, a possibility that certain awards under the Plan may subject the Plan to the reporting and disclosure requirements of Part 1 of Title I of ERISA. 

The summary of the Plan provided herein is qualified in its entirety by reference to the Plan, a copy of which is filed as Exhibit 4.1 of the Registration Statement registering the shares of Common Stock offered under the terms of the Plan.

WHAT SECURITIES ARE BEING OFFERED UNDER THE PLAN?

The Plan authorizes the issuance of a maximum amount of 1,500,000 shares of Common Stock of the Company, plus the number of shares of Common Stock sufficient to satisfy grants outstanding under the Company’s 1998 Incentive Stock Plan (the “Preexisting Plan”) as of the Effective Date.  Issuance of shares of Common Stock pursuant to the Plan will come from a reservation of previously authorized but unissued shares and from shares of Common Stock which have been reacquired by the Company.  There will be no open market purchases of shares of Common Stock for distribution pursuant to the Plan.  No fractional shares will be delivered but will be rounded down to the next lower whole number.

WHO MAY PARTICIPATE IN THE PLAN?

The individuals who are eligible to participate in the Plan are:  (i) directors and (ii) employees or consultants of the Company or any subsidiary, parent or affiliate of the Company, who, in the sole discretion of the Administrator deserve a grant under the Plan.

WHAT KIND OF AWARDS MAY BE MADE UNDER THE PLAN?
    
The Plan is an incentive based plan, whereby certain awards in shares (or by reference to shares) of Common Stock of the Company may be granted to participants.  The Plan permits the granting of any or all of the following types of awards: 

(i)     stock options, including, 

         (a)    incentive stock options (“ISOs,” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”)); and 

(b)     non-qualified stock options (“Non-ISOs”); 

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(ii)     stock appreciation rights (“SARs”);and

(iii)     stock grants

Awards granted under the Plan may, in the discretion of the Administrator, be granted alone or in addition to, in tandem with or in substitution for any other award under the Plan or other plan of the Company.  

Stock Options

Generally, stock options may be exercised by the payment of cash, check, stock, promissory note, or through any cashless exercise procedure, or a combination thereof, as approved by the Administrator.  A key employee or director will not have any rights as a shareholder of the Company pending the actual delivery of the Common Stock subject to such Option.  

Incentive Stock Options (“ISOs”)

The Administrator is authorized to grant ISOs to participants.  ISOs entitle participants to purchase shares of Common Stock of the Company.  ISOs may only be granted to individuals who are employees (including those directors who are also employees) of the Company, its parent corporation, an affiliate or a subsidiary of the Company.

The exercise price of any ISO shall be determined by the Administrator but shall not be less than:

1.     The Fair Market Value of the Common Stock on the date of grant; or,

2.     One hundred ten percent (110%) of such Fair Market Value, if the ISO is granted to participants who possess more than ten percent (10%) of  the combined voting power of all classes of stock of the Company (“10% Shareholder”).

ISOs may not be exercised after the expiration of:

1.    ten (10) years after the date the ISO is granted; or, 

2.    five (5) years after the date the ISO is granted, if the participant is a 10% shareholder on the date the ISO is granted.

Non-Qualified Stock Options (“Non-ISOs”)

The Administrator is authorized to grant Non-ISOs to participants.  Non-ISOs entitle participants to purchase a specified number of shares of Common Stock of the Company at not less than the Fair Market Value of the share of Common Stock on the date the option is granted.

Non-ISO’s may not be exercised after the expiration of ten (10) years after the date the Non-ISO is granted. 

Stock Appreciation Rights (“SARs”)

The Administrator is authorized to grant SARs to participants.  SARs entitle participants to receive cash or stock in an amount equal to the excess of the Fair Market Value of a share of Common 
    6    

Stock on the exercise date over the SAR exercise price.  No key employee or director shall have any rights as a shareholder of the Company as a result of the grant of an SAR. 

SARs may be granted in conjunction with a stock option granted under the Plan.  SARs may also be granted on a stand-alone basis.

The exercise price of the SAR shall never be less than the Fair Market Value of the Common Stock on the date the SAR is granted.  An SAR may not be exercised after the expiration of ten (10) years after the date the SAR is granted.

Stock Grants

The Administrator has authority to make awards in grants of shares or the value of shares of Common Stock.  Most Stock Grants will likely be in the form of (i) stock awards as a substitute for compensation otherwise payable in cash, which are vested upon grant or (ii) restricted stock, generally consisting of shares which may not be transferred or conveyed by participants until certain restrictions established by the Administrator lapse.  Such restrictions may lapse in whole or in installments as the Administrator determines.  A participant receiving restricted stock will have all of the rights of a shareholder, including the right to vote the shares and the right to receive any cash dividends, except as otherwise provided in the Stock Grant certificate, but any stock dividend will be held subject to the same conditions that apply to the Stock Grant itself.  The recipient of a Stock Grant typically shall not be permitted to sell, assign, or otherwise transfer such restricted stock during the restriction period established by the Administrator. 

The Certificate evidencing a Stock Grant will set forth the effects of a termination.  Upon termination of employment during the restriction period for any reason other than death or disability, restricted stock will typically be forfeited, subject to such exceptions, if any, as are authorized by the Administrator.

What is “Fair Market Value”?

As used in this Descriptive Memorandum, the term “Fair Market Value” shall mean the value of the Common Stock determined as follows:

1.    The NASDAQ Official Closing Price for the applicable date; or

2.    If the NASDAQ Official Closing Price is not available for the applicable date, the NASDAQ Official Closing Price for the immediately preceding business day; or 

3.    If neither 1 nor 2 apply, the fair market value as determined by the Administrator in good faith.

Award Certificates

Awards granted under the Plan shall be evidenced by a certificate, an agreement or other writing (a  “Certificate”) that will specify the number of shares of Common Stock, SARs, or Options subject to the award and such other terms and conditions applicable to the award, but not inconsistent with the Plan, as the Administrator may deem appropriate.  

    7    

Are Awards Transferable?

Subject to certain restrictions described below, no award may be sold, assigned, transferred, pledged, or otherwise encumbered by the participant, other than by will or by the laws of descent and distribution until such Common Stock is free of any restrictions.  Thereafter, the Common Stock may be transferred subject to registration requirements under Section 11 of the Plan.  Transfer restrictions do not, however, apply to (a) transfers to the Company, (b) the designation of a beneficiary to receive benefits in the event of the death or, if the recipient of the award has died, transfers to or exercise by the beneficiary, or, in the absence of a validly designated beneficiary, transfers pursuant to a will or the laws of descent and distribution, (c) transfers pursuant to a domestic relations order, (d) if the recipient of the award has suffered a disability, permitted transfers or exercises on behalf of such recipient by his or her legal representative, or (e) the authorization by the Administrator of “cashless exercise” procedures with third parties who provide financing for the purpose of (or who otherwise facilitate) the exercise of awards consistent with applicable laws and the express authorization of the Administrator. 

Are there restrictions upon the resale of shares of Common Stock acquired under the Plan?

Participants may generally resell shares of Common Stock acquired under the Plan once such Common Stock is free of any restrictions.  Once the Common Stock is free of any restrictions, the Common Stock may be transferred subject to the registration requirements under Article 11 of the Plan.  

Change in Control

In the event of a change of control of the Company, as defined in the Plan, all outstanding awards under the Plan, regardless of any limitations or restrictions, become fully exercisable and freed of all restrictions.

DEATH, RETIREMENT, DISABILITY, OR
TERMINATION OF EMPLOYMENT OR DIRECTORSHIP
The Certificate for the Option, SAR, or Stock Grant may provide for the exercise or payment of the underlying Common Stock upon the employee’s or director’s death or disability.
What if I die, become disabled, resign, retire or am terminated as an employee or director of the Company?
The Certificate, pursuant to which the award is granted, may specify that an award is accelerated or forfeited or left unchanged if the participant dies, is disabled, resigns, retires or is terminated.  
FORFEITURES

Pursuant to the Plan, any Certificate may provide that the shares of Common Stock issued upon the exercise of any awards may be subject to restrictions constituting substantial risks of forfeiture as the Administrator may determine at the time the award is granted.

WHAT ARE THE TAX EFFECTS OF PARTICIPATION IN THE PLAN?

General

The Company believes that under current law, the following are the federal income tax consequences generally arising with respect to awards granted under the Plan.  This discussion is intended 
    8    

for the information of participants generally and is not intended as tax guidance for the circumstances of any particular participant.  The following provides only a general description of the application of federal income tax laws to certain types of awards under the Plan.  The summary does not address the effects of foreign, state, and local tax laws.  Because of the variety of awards that may be made under the Plan and the complexities of the tax laws, participants are encouraged to consult a tax advisor as to their individual circumstances.

Incentive Stock Options.    

    No taxable income is generally realized by the recipient upon the grant or exercise of an ISO.  If shares of Common Stock issued pursuant to an ISO are sold or transferred after two years from the date of grant and after one year from the date of exercise, then (i) upon sale of such shares, any amount realized in excess of the option price (the amount paid for the shares) will be taxed to the holder of the ISO as long-term capital gain, and any loss sustained will be a long-term capital loss, and (ii) the Company will not be entitled to any deduction for federal income tax purposes.  The exercise of an ISO will give rise to an item of tax preference that may result in alternative minimum tax liability for the holder of the ISO.  If shares of Common Stock acquired upon the exercise of an ISO are disposed of prior to the expiration of the two-year and one-year holding periods described above, generally (i) the holder of the ISO will realize ordinary income in the year of disposition in an amount equal to the excess, if any, of the fair market value of the shares of Common Stock at exercise (or, if less, the amount realized on a sale of such Common Stock) over the exercise price thereof, and (ii) the Company will be entitled to deduct such amount.  If an ISO is exercised at a time when it no longer qualifies for the tax treatment described above, the option is treated as a Non-ISO.  

Non-Incentive Stock Options.    

    No income is generally realized by the holder of a Non-ISO at the time the Non-ISO is granted.  Generally, (i) at exercise, ordinary income is realized by the recipient in an amount equal to the difference between the exercise price of the Non-ISO and the fair market value of the Common Stock on the date of exercise, and the Company receives a tax deduction for the same amount, and (ii) at disposition, appreciation or depreciation after the date of exercise is treated as either short-term or long-term capital gain or loss depending on how long the shares of Common Stock have been held.  Upon exercise, the holder of the Non-ISO may also be subject to other taxes, such as FICA tax, on the excess of the fair market value over the exercise price of the Non-ISO.

Other Awards.    

    The Company generally will be entitled to a tax deduction in connection with an award under the Plan in an amount equal to the ordinary income realized by the participant at the time the participant recognizes such income.  Participants typically are subject to income tax and recognize such tax at the time that an award, other than an ISO, is exercised, vests, or becomes non-forfeitable. A participant may elect under Section 83(b) of the Internal Revenue Code to be taxable on the grant-date value of restricted stock or other awards subject to vesting conditions.  Each participant should consult with his or her own tax advisor with respect to the requirements and possible advantages and disadvantages of the election.  The election does not affect the vesting conditions.

Section 409A of the Code.      

    In general, awards under the Plan are intended to be exempt from, or to comply with, the requirements of Section 409A of the Code, which governs the payment of nonqualified deferred 
    9    

compensation.  To the extent the Plan or awards under the Plan fail to comply with the requirements of Section 409A of the Code, participants may be subject to additional tax liability.

Limitations on Deductions.  
    Under Section 162(m) of the Code, the Company’s tax deduction for certain awards under the Plan may be limited to the extent that certain executive officers receive compensation in excess of $1 million a year.

Exhibit B
Stock Power

STOCK POWER

FOR VALUE RECEIVED, ___________________ (“Seller”) does hereby sell, transfer and assign unto ______________________________ (“Buyer”), _____ shares of the common stock of ADDVANTAGE TECHNOLOGIES GROUP, INC., an Oklahoma corporation (the “Corporation”), standing in the name of Seller on the books of the Corporation, represented by Certificate No. ___ and does hereby irrevocably constitute and appoint the Secretary of the Corporation, as attorney-in-fact to transfer said stock on the books of the Corporation with full power of substitution in the premises.
Dated this _____ day of _____________, 20___.

By:     ____________________________________    
                         Name: ____________________________________
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Exhibit C
Form of 83(b) Election

The attached Section 83(b) election form was prepared pursuant to Section 1.83-2 of the Treasury Regulations.  If you decide to make an election, you must do the following:
1. Fully complete, date and sign the election form as indicated. Type or print your name under the signature line on the form.
2. Within 30 days of the issuance of Common Stock by the Company to you, file the executed form with the Internal Revenue Service Center where you file your federal income tax returns.  You are strongly urged to use certified mail, return receipt requested.  You may enclose a copy of the completed form with your filing and ask the IRS to file-stamp the copy and to return it to you. You should enclose a self-addressed stamped envelope for this purpose.
3. Forward a copy of the completed election form to the Company’s office.
4. Timely file any forms or documents (if any) that may be necessary for state tax purposes.
Note that if you fail to file the completed election form with the IRS within the 30-day period discussed above, the election will be invalid, and the tax consequences will be determined as if no election were made. There is no grace period for making the election.  The Company is not responsible for the filing of your election.
Attachment

    

SECTION 83(b) ELECTION
The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, with respect to the property described below, and provides the following information in accordance with Section 1.83-2 of the Treasury Regulations:
1. The name, address and taxpayer identification number (“SSN”) of the undersigned are:
Name:                                        
Address:                                        
SSN:                                        
1. This election is made with respect to the following property: ____________________ (_______) shares of Common Stock (“Stock”) of ADDvantage Technologies Group Inc., an Oklahoma corporation (the “Company”).
2. The Stock was issued to the undersigned on ____________, 202__ (the “Grant Date”).  This election is made for calendar year 202__.
3. The Stock is subject to the following lapse restriction: forfeiture of all unvested Stock in the event of resignation or termination prior to the vesting date. 50% of the Stock will vest on the first anniversary of the Grant Date and the remaining shares of Stock will vest on the second anniversary of the Grant Date.  Vesting is accelerated in the event of death, disability or a change in control.  
4. The fair market value (determined without regard to any lapse restriction, as defined in Section 1.83-3(i) of the Treasury Regulations) at the time of issuance of Stock with respect to which this election is being made is $____ per share of Stock.
5. The undersigned did not pay any amount for the Stock.
6. The amount to include in gross income is $________________.
7. A copy of this statement has been furnished to the Company, which is the entity for which the services are performed.  

Dated: _____________, ____  
SIGNED:                        
PRINT NAME:_____________________________

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