Document:

Exhibit 10.1

  

   

  

   LOAN AGREEMENT

    THIS LOAN AGREEMENT is made and entered into this 10th day of March, 2020, by and

      between ADDVANTAGE TECHNOLOGIES GROUP, INC., an Oklahoma corporation (the

      "Borrower"), and VAST BANK, N.A. (the "Lender").

    RECITALS

    A. The Borrower has requested that the Lender make a term loan to the Borrower in

      the principal amount of $3,474,600.

      B. The Lender is willing to make the requested loan, but only upon the terms and

      conditions set forth herein.

      NOW, THEREFORE, in consideration of the above recitals and other good and valuable

      consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as

      follows:

    ARTICLE I

      DEFINITIONS

    1.1 Certain Terms. Unless the context otherwise requires, the following terms used

      herein shall be construed and controlled by the following definitions:

      "Affiliate" means, with respect to any Person, any other Person who has a relationship with

      such Person whereby either such other Person directly or indirectly controls, is controlled by or is

      under common control with the other, or holds or beneficially owns 10% or more of the equity

      interest in the other or 10% or more of any class of voting securities of the other. For purposes of

      this definition, a Person has "control" over another Person if such Person has the ability to exercise

      a controlling influence over the management and policies of the other Person.

      "Agreement" (and such terms as "herein," "hereof," "hereto," "hereby," "hereunder" and

      the like) means this Loan Agreement, together with all exhibits and schedules attached hereto.

      "Anti-Corruption Laws" means all Laws of any jurisdiction applicable to the Borrower or

      any of its Affiliates from time to time concerning or relating to bribery or corruption, including

      the United States Foreign Corrupt Practices Act of 1977, as amended, or any similar Law in any

      applicable jurisdiction.

      "Borrower" is defined in the introductory paragraph of this Agreement.

      "Business Day" means any day, other than a Saturday, Sunday or legal holiday for

      commercial banks under the laws of the State of Oklahoma, on which the Lender is open for

      substantially all of its normal banking functions.

      "Capitalized Lease Obligations" of a Person means the amount of the obligations of such

      Person under capital leases which should be recorded as a liability of such Person in accordance

      with GAAP.

    

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  "Charter Documents" means (i) the certificate of incorporation of the Borrower filed with

      the Oklahoma secretary of state on September 19, 1989 (ii) the bylaws of the Borrower dated as

      of September 19, 1989 and (iii) any other internal governance documents of the Borrower, as any

      of the foregoing may be amended, modified or restated from time to time (subject, however, to the

      provisions of Section 5.11).

      "Chymiak" means David E. Chymiak.

      "Chymiak Guaranty" means that certain Guaranty and Covenant Agreement dated as of

      June 30, 2019, made by Chymiak in favor of the Borrower.

      "Chymiak Pledge" means that certain [Pledge Agreement] dated as of June 30, 2019, made

      by Chymiak in favor of the Borrower.

      "Closing" means the date and time, as specified in Section 7.1, on which the Loan

      Documents are delivered by the parties and the Loan is advanced to the Borrower.

      "Collateral" means (i) the Personal Property Collateral, (iii) all of the Borrower's rights in

      and to the Leveling 8 Mortgages and the Leveling 8 Note, (iv) all of the Borrower's rights in and

      to the Chymiak Guaranty and the Chymiak Pledge, and (v) any other Property in which the Lender

      is granted a Lien to secure repayment of the Indebtedness (or any portion thereof) pursuant to the

      terms of any of the Loan Documents.

      "Collateral Documents" is defined in Section 2.11.

      "Debt" means any liability, indebtedness or obligation which, in accordance with GAAP,

      should be recorded as a liability of such Person.

      "Default" means the existence or occurrence of any event or circumstance which, but for

      the giving of notice or the passage of time, or both, would constitute an Event of Default.

      "Default Rate" means, for any period following the occurrence of a Default, a per annum

      rate of interest that is 4% higher than the interest rate that would otherwise be in effect if such

      Default had not occurred.

      "Distribution" means, as to any Person, any dividend or other distribution (whether in cash,

      securities or other property) with respect to any shares of common stock or other equity interests

      in such Person, or any payment (whether in cash, securities or other property), including any

      sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition,

      cancellation or termination of any such equity interest in such Person or any option, warrant or

      other right to acquire any equity interest in such Person.

    "EBITDA" means, with reference to any period of time, net income (or loss) of a Person

      for such period, plus, to the extent deducted from revenues in determining net income, (i) interest

      expense, (ii) expense for income taxes paid or accrued, (iii) depreciation and (iv) amortization.

    "Environmental Laws" means any and all Federal, state, local, foreign and other applicable

      statutes, Laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions,

    

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  grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the

      protection of the environment or the release of any materials into the environment, including those

      related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

      "Environmental Liability" means any liability, contingent or otherwise (including any

      liability for damages, costs of environmental remediation, fines, penalties or indemnities) of the

      Borrower directly or indirectly resulting from or based upon (a) violation of any Environmental

      Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any

      Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release of any Hazardous

      Materials into the environment or (e) any contract, agreement or other consensual arrangement

      pursuant to which liability is assumed or imposed with respect to any of the foregoing.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as amended and

      as in effect from time to time.

      "Event of Default" means the occurrence or existence of any of the events or circumstances

      specified in Article VIII of this Agreement.

      "Fixed Charge Coverage Ratio" means for any period of determination, the ratio of

      (i) EBITDA of the Borrower for the then most recently ended four fiscal quarters, to (ii) the current

      maturities of all Funded Debt of the Borrower (other than current maturities of the Loan) for the

      next ensuing four fiscal quarters, plus interest expense of the Borrower (other than interest on the

      Loan) during the then most recently ended four fiscal quarters.

      "Funded Debt" means, as to any Person, without duplication, (i) Debt of such Person for

      money borrowed, (ii) Debt of such Person which represents seller financing of the unpaid purchase

      price of goods or services (if incurred for such purpose in lieu of borrowing money or using

      available funds to pay such amount) and which is payable over a term of more than six months (or

      which permits such Person, at its option, to defer payment for more than six months), (iii) Debt of

      such Person evidenced by a promissory note, bond, debenture or other like obligation to pay

      money, and (iv) Capitalized Lease Obligations of such Person.

      "GAAP" means generally accepted accounting principles in the United States applicable to

      commercial entities as set forth in the U.S. GAAP Accounting Standards Codification issued by

      the Financial Accounting Standards Board or such other principles as may be approved by a

      significant segment of the accounting profession in the United States, that are applicable to the

      circumstances as of the date of determination, consistently applied.

      "Governmental Authority" means any court or any administrative or governmental

      department, commission, board, bureau, authority, agency or body of any governmental entity,

      whether national, federal, state, county, city, municipal or otherwise.

      "Governmental Requirements" means all laws, orders, decrees, ordinances, rules and

      regulations of any Governmental Authority.

      "Guarantee Obligation" means, as to any Person (the "guaranteeing person"), any

      obligation, including a reimbursement, counterindemnity or similar obligation, of the guaranteeing

    

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  Person that guarantees or in effect guarantees, or which is given to induce the creation of a separate

      obligation by another Person (including any bank under any letter of credit) that guarantees or in

      effect guarantees, any indebtedness, leases, dividends or other obligations (the "primary

      obligations") of any other third Person (the "primary obligor") in any manner, whether directly or

      indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to

      purchase any such primary obligation or any property constituting direct or indirect security

      therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary

      obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise

      to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities

      or services primarily for the purpose of assuring the owner of any such primary obligation of the

      ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to

      assure or hold harmless the owner of any such primary obligation against loss in respect thereof;

      provided, however, that the term Guarantee Obligation shall not include endorsements of

      instruments for deposit or collection in the ordinary course of business.

      "Hazardous Materials" means all explosive or radioactive substances or wastes and all

      hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum

      distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas,

      infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to

      any Environmental Law.

      "Indebtedness" means and includes all liabilities, obligations or indebtedness of the

      Borrower to the Lender of every kind and description, now existing or hereafter incurred, direct or

      indirect, absolute or contingent, due or to become due, matured or unmatured, and whether or not

      of the same or a similar class or character as the Loan and whether or not contemplated by the

      Lender or the Borrower, together with future advances and all extensions and renewals, and

      including (i) all liabilities, obligations and indebtedness of the Borrower to the Lender arising out

      of or related to this Agreement, the Loan, the Note or any other of the Loan Documents, and (ii)

      all liabilities, obligations and indebtedness of the Borrower to the Lender or any of its Affiliates in

      respect of any Treasury Management Agreement.

      "Laws" means and includes laws, statutes, rules, regulations, ordinances and codes of any

      Governmental Authority.

      "Lender" is defined in the introductory paragraph of this Agreement.

      "Leveling 8" means Leveling 8 Inc., an Oklahoma corporation.

      "Leveling 8 Mortgages" means (i) that certain Mortgage with Power of Sale, Assignment

      of Leases and Rents, Security Agreement and Fixture Filing filed on July 8, 2019 in the Pettis

      County, Missouri Recorder of Deeds, between David Chymiak, LLC, as Mortgagor, and the

      Borrower, as Mortgagee, (ii) that certain Mortgage with Power of Sale, Assignment of Leases and

      Rents, Security Agreement and Fixture Filing filed on July 9, 2019 in the Bucks County,

      Pennsylvania Recorder of Deeds, between David Chymiak, LLC, as Mortgagor, and the Borrower,

      as Mortgagee and (iii) that certain Mortgage with Power of Sale, Assignment of Leases and Rents,

      Security Agreement and Fixture Filing filed on July 8, 2019 in the Tulsa County, Oklahoma

    

   

  

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  County Clerk Office, between David Chymiak, LLC, as Mortgagor, and the Borrower, as

      Mortgagee.

      "Leveling 8 Note" means that certain $6,375,000 Promissory Note dated as of June 30,

      2019, made by Leveling 8 in favor of the Borrower.

      "Leveling 8 Obligations" means all liabilities, obligations and indebtedness, of every kind

      and description and howsoever created, arising or evidenced, whether direct or indirect, absolute

      or contingent, now existing or hereafter arising, and whether joint, several, or joint and several, of

      Leveling 8 to the Borrower, including the liabilities, obligations and indebtedness of Leveling 8

      arising under or evidenced by the Leveling 8 Note.

      "Lien" means any mortgage, pledge, lien, tax lien, security interest, assignment, charge,

      restriction, claim or other encumbrance, whether statutory, consensual or otherwise, which is

      granted, created or suffered to exist by the Borrower on any of its Properties.

      "Loan" is defined in Section 2.1.

    "Loan Documents" means this Agreement, the Note, the Collateral Documents, and all

      other security agreements, pledge agreements, deeds of trust, assignments, financing statements,

      stock powers, agreements and documents executed or issued or to be executed or issued pursuant

      to this Agreement or in connection with the Loan or the grant, creation, perfection or continuation

      of the Liens to be granted to the Lender in and to the Collateral pursuant to this Agreement.

      "Material Adverse Effect" means (a) a material adverse change in, or a material adverse

      effect upon, the operations, business, properties, liabilities (actual or contingent), condition

      (financial or otherwise) or prospects of the Borrower; (b) a material impairment of the ability of

      the Borrower to perform its obligations under any of the Loan Documents to which it is a party;

      or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against

      the Borrower of any Loan Document.

      "Note" means the promissory note to be made, executed and delivered by the Borrower

      pursuant to Section 2.4 in order to evidence the Loan.

      "PATRIOT Act" means the USA PATRIOT Act of 2001, 31 U.S.C. Section 5318.

      "Permit" means any permit, certificate, consent, franchise, concession, license,

      authorization, approval, filing, registration or notification from or with any Governmental

      Authority or other Person.

      "Permitted Liens" is defined in Section 5.1.

      "Person" means and includes any individual, sole proprietorship, corporation, partnership

      (whether general, limited, limited liability or special), joint venture, limited liability company,

      institution, trust, association, organization (whether or not a legal entity), or Governmental

      Authority.

    

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  "Personal Property Collateral" means all inventory, accounts, cash and accounts

      receivable, whether now owned and existing or hereafter acquired or arising, together with all

      accessions thereto, substitutions and replacements therefor, and all proceeds of any of the

      foregoing.

      "Property" means any asset or property, whether real, personal or mixed, tangible or

      intangible, which is now or at any time hereafter owned, operated or leased by the Borrower.

      "Related Parties" means, with respect to any Person, such Person's Affiliates and the

      shareholders, members, partners, directors, officers, employees, agents and advisors of such

      Person and of such Person's Affiliates.

      "Sanctioned Country" means, at any time, a country, region or territory which is itself the

      subject or target of any Sanctions.

      "Sanctioned Person" means, at any time, (a) any Person listed in any Sanctions-related list

      of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department

      of the Treasury, the U.S. Department of State, or by the United Nations Security Council, the

      European Union or any European Union member state, (b) any Person operating, organized or

      resident in a Sanctioned Country, or (c) any Person owned or controlled by any such Person or

      Persons described in the foregoing clauses (a) or (b).

      "Sanctions" means all economic or financial sanctions or trade embargoes imposed,

      administered or enforced from time to time by (a) the U.S. government, including those

      administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or

      the U.S. Department of State, or (b) the United Nations Security Council, the European Union,

      any European Union member state or Her Majesty’s Treasury of the United Kingdom.

      "Security Agreement" means the Security Agreement to be executed and delivered by the

      Borrower pursuant to Section 2.11(a).

      "Solvent" or "Solvency" means, with respect to any Person as of a particular date, that on

      such date (a) such Person is able to pay its debts and other liabilities, contingent obligations and

      other commitments as they mature in the ordinary course of business, (b) such Person does not

      intend to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to

      pay as such debts and liabilities mature in their ordinary course, (c) such Person is not engaged in

      a business or a transaction, and is not about to engage in a business or a transaction, for which such

      Person's property would constitute unreasonably small capital after giving due consideration to the

      prevailing practice in the industry in which such Person is engaged or is to engage, (d) the fair

      value of the property of such Person is greater than the total amount of liabilities, including,

      without limitation, contingent liabilities, of such Person and (e) the present fair salable value of

      the assets of such Person is not less than the amount that will be required to pay the probable

      liability of such Person on its debts as they become absolute and matured. In computing the

      amount of contingent liabilities at any time, it is intended that such liabilities will be computed at

      the amount which, in light of all the facts and circumstances existing at such time, represents the

      amount that can reasonably be expected to become an actual or matured liability.

    

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  "Transfer" means and includes any form of sale, transfer, conveyance, lease or other

      disposition of a Property, whether through a single transaction or a series of related transactions.

      "Treasury Management Agreement" means any agreement governing the provision of

      treasury or cash management services, including deposit accounts, funds transfer, automated

      clearinghouse, zero balance accounts, returned check concentration, controlled disbursement,

      lockbox, account reconciliation and reporting and trade finance services.

      "UCC" means the Uniform Commercial Code as adopted and in effect in the State of

      Oklahoma or any other applicable jurisdiction.

      1.2 Accounting Terms and Calculations. Accounting and financial terms used herein

      and not otherwise defined with respect to the Borrower's financial statements and financial position

      have the meanings assigned to them pursuant to GAAP. All financial calculations required to be

      made hereunder with respect to the Borrower shall be made in accordance with GAAP (except as

      otherwise expressly provided herein).

      1.3 Terms Defined in UCC. Unless the context otherwise requires, terms used herein

      that are defined in the UCC (such as the terms "accounts," "equipment," "fixtures," "general

      intangibles," "inventory" and "proceeds") have the respective meanings set forth therein.

      1.4 Construction. The following rules of construction shall apply, unless the context

      otherwise requires: (i) all terms defined herein in the singular shall include the plural, as the context

      requires, and vice-versa; (ii) the descriptive headings of the Articles and Sections of this

      Agreement are inserted for convenience only and shall not be used in the construction of the

      content of this Agreement; (iii) the term "or" is not exclusive; (iv) the term "including" (or any

      form thereof) shall not be limiting or exclusive; and (v) all references to any of the Loan

      Documents include any and all modifications, amendments or supplements thereto and any and all

      renewals and extensions thereof.

    

   

    

  ARTICLE II

      TERMS OF THE LOAN

    2.1 Amount of Loan. Subject to the terms and conditions of this Agreement and the

      other Loan Documents, and in reliance upon the representations and warranties contained herein

      and therein, the Lender agrees to make a $3,474,600 term loan to the Borrower (the "Loan") at

      Closing.

      2.2 Use of Proceeds. The proceeds of the Loan shall be used by the Borrower for

      general working capital purposes.

      2.3 Disbursement. Subject to the Borrower's satisfaction of all applicable conditions

      precedent as set forth in this Agreement, the Loan will be made to the Borrower at Closing.

      2.4 Note. To evidence the Loan, the Borrower will make, execute and deliver the Note

      to the Lender at the Closing. Notwithstanding the principal amount stated on the face of the Note,

      the actual principal amount due from the Borrower on account of the Note will be the sum of all

      advances actually made pursuant to the Loan, less all principal payments actually received by the

    

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  Lender in collected funds. The advances made by the Lender and the principal payments received

      from the Borrower under the Loan will be recorded by the Lender in its books and records, and

      the unpaid principal balance so recorded will be considered presumptive evidence of the principal

      amount owing on the Note, absent manifest error.

      2.5 Interest.

      2.5.1. Contract Rate. The unpaid principal amount from time to time outstanding

      under the Note shall bear interest at a fixed rate equal to 6.00% per annum.

      2.5.2. Post-Default Interest. Upon the occurrence of any Event of Default and

      continuing thereafter until cured to the satisfaction of the Lender, the unpaid principal

      amount outstanding under the Note will bear interest at the Default Rate.

      2.5.3. Computation of Interest. Interest on the Note shall be computed on the basis

      of a year consisting of 360 days and for the actual number of days elapsed.

      2.6 Required Payments.

      2.6.1. Semi-Annual Payments. The Note will be payable as to principal and

      interest as follows:

      Due Date Amount

      June 30, 2020 $700,000

      December 31, 2020 $700,000

      June 30, 2021 $700,000

      December 31, 2021 $470,000

      June 30, 2022 $470,000

      December 31, 2022 $434,000

      2.6.2. Maturity. The entire unpaid principal balance of the Note (which the

      Borrower acknowledges will be a balloon payment), together with all unpaid interest

      accrued thereon, will be due and payable on December 31, 2022.

      2.7 Optional Prepayment. At any time and from time to time, the Borrower may prepay

      the outstanding principal balance of the Note, in whole or in part; provided, however, that any such

      prepayment must be accompanied by payment of all unpaid interest accrued on the principal

      amount being prepaid. Amounts prepaid on the Note may not be re-borrowed.

      2.8 Making of Payments. All payments, including prepayments, of principal of, or

      interest on, the Note shall be made to the Lender by wire transfer on or before 2:00 p.m. on the

      date due, in immediately available funds. Whenever a payment is due on a day other than a

    

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  Business Day, the due date shall be extended to the next succeeding Business Day and interest (if

      any) shall accrue during such extension.

      2.9 Maximum Lawful Interest Rate. It is not the intention of the Lender or the

      Borrower to violate the laws of any applicable jurisdiction relating to usury or other restrictions

      on the maximum lawful interest rate. The Loan Documents and all other agreements between the

      Borrower and the Lender, whether now existing or hereafter arising and whether written or oral,

      are hereby limited so that in no event shall the interest paid or agreed to be paid to the Lender for

      the use, forbearance or detention of money loaned, or for the payment or performance of any

      covenant or obligation contained herein or in any other Loan Document, exceed the maximum

      amount permissible under applicable law. If from any such circumstances the Lender should ever

      receive anything of value deemed interest under applicable law which would exceed interest at the

      highest lawful rate, such excessive interest shall be applied to the reduction of the principal amount

      owing hereunder, and not to the payment of interest, or if such excessive interest exceeds any

      unpaid balance of principal, such excess shall be refunded to the Borrower. All sums paid or

      agreed to be paid to the Lender for the use, forbearance or detention of monies advanced under the

      Loan shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread

      throughout the full term of the Indebtedness until payment in full so that the rate of interest on

      account of the Indebtedness is uniform throughout the term thereof. This Section 2.9 shall control

      every other provision of the Loan Documents and all other agreements between the Lender and

      the Borrower.

      2.10 Collateral. To secure the prompt payment of the Indebtedness and the performance

      of all the covenants and agreements contained in this Agreement and the other Loan Documents,

      the Borrower will grant and maintain in favor of the Lender a valid and perfected first priority lien

      and security interest in and to the Collateral, subject only to Permitted Liens.

      2.11 Collateral Documents. In order to provide the Lender with perfected liens, security

      interests and assignments in, to and of the Collateral, the Borrower will execute and deliver the

      following collateral documents (collectively, the "Collateral Documents") to the Lender (or cause

      to be executed and delivered to the Lender), on or before the Closing Date, each in form and

      substance satisfactory to the Lender:

      (a) the Security Agreement; and

    
    	(b) 

            2.14.4).	the Leveling 8 Mortgage Assignments (as defined in Section

    2.12 Late Fee. To the extent any principal and interest due under any Loan Document

      is not paid within 15 calendar days of the due date therefore, and, to the extent that the following

      described fee is deemed to constitute interest, subject to Section 2.9, in addition to any interest or

      other fees and charges due hereunder or under the applicable Loan Document, the Borrower shall

      pay a late fee equal to 5% of the amount of the payment that was to have been made. The Borrower

      agrees that the charges set forth herein are reasonable compensation to Lender for the acceptance

      and handling of such late payments.

    

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  2.13 Additional Documentation. The Borrower, at its expense, will promptly and

      diligently take all action necessary to maintain and preserve the security interests and mortgage

      liens granted in the Collateral and either will cause to be timely filed, together with the payment

      of all necessary filing fees and taxes, such UCC financing and continuation statements in such

      offices of public record, or will cause to be promptly delivered to the Lender such statements,

      instruments, assignments, documents or papers, as may be necessary, to keep the security interest

      granted to the Lender continuously perfected in the Collateral.

      2.14 Leveling 8 Mortgage and Leveling 8 Note.

      2.14.1. The Leveling 8 Obligations shall be postponed and subordinated in right of

      payment, lien and enforcement to the prior payment in full, of all amounts included in or

      payable under the Indebtedness. Until such time as the Indebtedness has been irrevocably

      repaid in full, no payments shall be made by or on behalf of Leveling 8 or accepted by the

      Borrower upon or in respect of any Leveling 8 Obligations (whether for principal, interest

      or otherwise), unless such payment is specifically authorized to be made by the terms of

      Section 2.14.2.

      2.14.2. Notwithstanding the provisions of subsection 2.14.1 above, the following

      payments may be made by Leveling 8 and accepted by the Borrower as long as, in each

      instance, no Default or Event of Default has occurred and is continuing at the time any

      such payment is proposed to be made:

      (1) Payments of semiannual interest accrued on the Leveling 8 Note at the rate

      of interest stated in the Leveling 8 Note; and

      (2) Payments of semiannual principal on the Leveling 8 Note as scheduled in

      the Leveling 8 Note.

      In the event that, notwithstanding the foregoing, any payment shall be received by the

      Borrower contrary to the provisions of this Section 2.14.2, such payment shall be held by

      the Borrower in trust for the benefit of the Lender and shall immediately be paid over or

      delivered to the Lender.

      The Borrower shall direct Leveling 8 to make each semiannual payment required by

    Section 2.6.1 directly to the Lender, and the Borrower agrees that the amount of each

      semiannual payment required to be paid by Leveling 8 to the Borrower under the Leveling

      8 Note shall be reduced by the amount of each direct payment made by Leveling 8 to the

      Lender pursuant to this sentence. The Lender shall apply such funds upon receipt to the

      amounts owed under Section 2.6.1.

      2.14.3. Until such time as the Indebtedness has been irrevocably repaid in full, the

      Borrower agrees to not accelerate the Leveling 8 Note or foreclose or enforce the Leveling

      8 Mortgage. In the event that, notwithstanding the foregoing provisions, any proceeds or

      distribution of assets or securities of Leveling 8, of any kind or character, whether in cash,

      property or securities, shall be received by the Borrower before the Indebtedness has been

      paid in full, such proceeds or distribution shall be received and held in trust for the benefit

    

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  of the Lender and shall immediately be paid over or delivered to the Lender for application

      to the payment of the Indebtedness remaining unpaid until all such Indebtedness has been

      paid in full, after giving effect to any concurrent payment, distribution or provision therefor

      to or for the Lender.

      2.14.4. The Borrower shall execute and deliver to the Lender assignments to the

      Lender of the Leveling 8 Mortgages at Closing (the "Leveling 8 Mortgage Assignments").

      The Lender agrees that it will not file the Leveling 8 Mortgage Assignments in the real

    

  property records unless and until the occurrence of an Event of Default.

    

   

    

  ARTICLE III

      REPRESENTATIONS AND WARRANTIES

    In addition to all other representations and warranties in this Agreement, the Borrower

      represents and warrants to the Lender as follows:

      3.1 Existence; Compliance with Law. The Borrower (i) is duly organized or formed, as

      applicable, validly existing and (if relevant) in good standing under the laws of the jurisdiction of

      its incorporation, (ii) has the corporate power and authority and the legal right, to own and operate

      its property and assets, to lease the property and assets it leases and causes to be operated by lessee,

      and to conduct the business in which it is currently engaged under the Governmental Requirements

      of each jurisdiction in which it owns, leases and/or operates its property or assets, (iii) (if relevant)

      is duly qualified as a foreign corporation and is in good standing under the laws of each jurisdiction

      where its ownership, lease or operation of property or assets or the conduct of its business requires

      such qualification, (iv) is in material compliance with its applicable Charter Documents, and (v)

      is in compliance with all Governmental Requirements, except to the extent that the failure to

      comply therewith could not, individually or in the aggregate, reasonably be expected to have a

      Material Adverse Effect.

      3.2 Entity Power; Authorization; Enforceable Obligations. The Borrower has the

      power and authority, and the legal right, to make, deliver and perform the Loan Documents and to

      borrow hereunder, and has taken all necessary corporate or other action to authorize the execution,

      delivery and performance of the Loan Documents and to authorize the borrowings on the terms

      and conditions of this Agreement and the other Loan Documents. No consent or authorization of,

      filing with, notice to or other act by or in respect of, any Governmental Authority or any other

      Person is required in connection with the borrowings hereunder or the execution, delivery,

      performance, validity or enforceability of this Agreement or any of the other Loan Documents,

      except consents, authorizations, filings and notices which have been obtained or made and are in

      full force and effect. Each Loan Document has been duly executed and delivered on behalf of the

      Borrower. This Agreement constitutes, and each other Loan Document upon execution will

      constitute, a legal, valid and binding obligation of the Borrower, enforceable against the Borrower

      in accordance with its terms, except as enforceability may be limited by applicable bankruptcy,

      insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’

      rights generally and by general equitable principles (whether enforcement is sought by proceedings

      in equity or at law).

    

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  3.3 No Legal Bar. The execution, delivery and performance of this Agreement, the

      other Loan Documents, the borrowings hereunder and the use of the proceeds thereof will not

      violate any Governmental Requirement or any contractual or other obligation of the Borrower and

      will not result in, or require, the creation or imposition of any Lien on the Borrower’s assets,

      properties or revenues pursuant to any Governmental Requirement or any such contractual or other

      obligation (other than the Liens created by the Loan Documents). No Governmental Requirement

      or contractual or other obligation applicable to the Borrower or the Borrower’s properties or assets

      could reasonably be expected to have a Material Adverse Effect. No performance of a contractual

      or other obligation by the Borrower, either unconditionally or upon the happening of an event,

      would result in the creation of a Lien (other than a Permitted Lien) on the property, assets or

      revenues of the Borrower.

      3.4 Licenses, Permits, Etc. The Borrower possesses all licenses, permits, consents,

      approvals, franchises and intellectual property (or otherwise possesses the right to use such

      intellectual property without violation of the rights of any other Person) which are necessary for

      the Borrower to own its assets and properties, except for those licenses, permits, consents,

      approvals, franchises and intellectual property the failure of which to possess could not reasonably

      be expected to have a Material Adverse Effect. The Borrower is not in violation in any material

      respect of the terms under which it possesses any licenses, permits, consents, approvals, franchises

      and intellectual property owned by the Borrower or the right to use such licenses, permits,

      consents, approvals, franchises and intellectual property.

      3.5 Compliance. No consent or approval of any Governmental Authority or any other

      Person is required as a condition to the validity or performance of any Loan Document, and the

      Borrower is in compliance with all Governmental Requirements to which the Borrower is subject.

      3.6 Contractual Default. The Borrower is not in default under or with respect to any of

      its contractual obligations in any respect that could reasonably be expected to have a Material

      Adverse Effect.

      3.7 Litigation. There is no litigation, investigation or proceeding of or before any

      arbitrator, mediator or any Governmental Authority or, to the Borrower’s knowledge, threatened

      by or against the Borrower or against any of the Borrower’s assets, properties or revenues (a) with

      respect to any of the Loan Documents or any of the transactions contemplated hereby, or (b) that

      could reasonably be expected to have a Material Adverse Effect.

      3.8 No Conflicting Agreements. There is no provision of any existing agreement,

      mortgage, indenture, instrument, document or contract binding on the Borrower or affecting any

      property or asset of the Borrower, which would conflict with or in any way prevent the execution,

      delivery or carrying out of the terms of this Agreement and the other Loan Documents.

      3.9 Insurance. All policies of insurance of any kind or nature of the Borrower,

      including policies of fire, theft, product liability, public liability, property damage, other casualty,

      employee fidelity, workers’ compensation and employee health and welfare insurance, if and as

      applicable, are in full force and effect as of the date of this Agreement and are of a nature and

      provide such coverage as is customarily carried by businesses of the size and character of the

    

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  Borrower. The Borrower has not been refused insurance for any material coverage for which it has

      applied or has had any policy of insurance terminated (other than at the Borrower’s request).

      3.10 Taxes. The Borrower has timely filed (or caused to be timely filed) all federal, state

      and other tax returns, reports and statements (collectively, “Tax Returns”) that are required to be

      filed by the Borrower with the appropriate Governmental Authorities in all jurisdictions in which

      such Tax Returns are required to be filed; all such Tax Returns are true and correct in all material

      respects; the Borrower has timely paid, prior to the date on which any fine, penalty, interest, late

      charge or loss may be added thereto for non-payment thereof, all taxes shown to be due and payable

      on said Tax Returns or on any assessments made against the Borrower or any of the Borrower’s

      properties or assets, and all other taxes, fees or other charges imposed on the Borrower or any of

      the Borrower’s properties or assets by or otherwise due and payable to any Governmental

      Authority (other than any for which the amount or validity of which are currently being contested

      in good faith by appropriate proceedings); and no tax Lien has been filed against the property or

      assets of the Borrower, and, to the Borrower’s knowledge, no claim is being asserted, with respect

      to any such tax, fee or other charge. No Tax Return is under audit or examination by any

      Governmental Authority and no notice of such an audit or examination or any assertion of any

      claim for taxes has been given or made by any Governmental Authority. Proper and accurate

      amounts have been withheld by the Borrower (if and to the extent any such withholdings are so

      required) for all periods in full and complete compliance with the tax, social security, health care

      and unemployment withholding provisions of applicable Governmental Requirements, and such

      withholdings (if any) have been timely paid to the respective Governmental Authorities. The

      Borrower (i) does not intend to treat the Loan or any other transaction contemplated hereby as

      being a “reportable transaction” (within the meaning of Treasury Regulation 1.6011-4), and (ii) is

      not aware of any facts or events that would result in such treatment.

      3.11 No Default. No Default or Event of Default has occurred and is continuing.

      3.12 Adverse Circumstances. Neither the business nor any property or asset of the

      Borrower is presently affected by any fire, explosion, accident, strike, lockout, or other dispute,

      embargo, act of God, act of public enemy or terrorism, or similar event or circumstance, nor has

      any other event or circumstance relating to the Borrower's business, affairs, properties or assets

      occurred, any of which could have a Material Adverse Effect.

      3.13 Accuracy of Information. To the Borrower's knowledge, after due inquiry, all

      factual information furnished to Lender in connection with this Agreement and the other Loan

      Documents is and will be true, accurate and complete in all material respects on the date as of

      which such information is delivered to Lender and is not and will not be incomplete by the

      omission of any material fact necessary to make such information not misleading, provided that,

      with respect to projected financial information, the Borrower only represents that such information

      was prepared in good faith based upon assumptions believed to be reasonable at the time.

      3.14 Environmental. To the Borrower’s knowledge, after due inquiry, the conduct of

      the Borrower's business operations and the condition of the Borrower's properties or assets owned,

      operated or managed by the Borrower does not, and the condition of the Borrower's properties or

      assets which are operated or managed by others does not, violate any Environmental Law or any

      other Governmental Requirement relating primarily to the environment, Hazardous Materials, or

    

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  health and safety. The Borrower has not received notice of, nor are there presently existing, any

      judicial, administrative, arbitral or other proceeding (including any notice of violation or alleged

      violation) under or relating to any Environmental Law or any environmental permit to which the

      Borrower is, or to the Borrower’s knowledge, will be, named as a party that is pending or, to the

      Borrower’s knowledge, threatened. The Borrower has not received any written request for

      information, or been notified that the Borrower is a potentially responsible party under or relating

      to any Environmental Law, or with respect to any Hazardous Materials or matters of environmental

      concern. The Borrower has not entered into or agreed to any consent decree, order, or settlement

      or other agreement or undertaking, and the Borrower is not subject to any judgment, decree, or

      order or other agreement, in any judicial, administrative, arbitral or other forum for dispute

      resolution, relating to compliance with or liability under any Environmental Law or any other

      Governmental Requirement relating primarily to the environment or Hazardous Materials. The

      Borrower has not assumed or retained, by contract, operation of law or otherwise, any liabilities

      of any kind, fixed or contingent, known or unknown, under any Environmental Law or with respect

      to any Hazardous Materials or matters of environmental concern.

      3.15 Compliance With Laws. The Borrower is presently in compliance in all material

      respects with all applicable Governmental Requirements to which the Borrower, or any of the

      Borrower's assets or properties, is subject (except where the failure to so comply could not

      reasonably be expected to have a Material Adverse Effect), provided that this warranty is made to

      the Borrower's knowledge with respect to the Borrower's assets or properties which are operated

      or managed by other Persons.

      3.16 Solvency; Compliance with Financial Covenants. The Borrower is, and after giving

      effect to the incurrence of all Indebtedness being incurred in connection herewith will be and will

      continue to be, Solvent.

      3.17 Margin Regulations; Investment Company Act.

      3.17.1. No part of the proceeds of any Loan will be used for buying or “carrying”

      any “margin stock” within the respective meanings of each of the quoted terms under

      Regulation U (as defined within the applicable Governmental Requirements promulgated

      by the applicable Governmental Authorities from time to time) as now and from time to

      time hereafter in effect or for any purpose that violates the provisions of any Governmental

      Authority. If requested by Lender, the Borrower will furnish to Lender a statement to the

      foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as

      applicable, referred to in Regulation U.

      3.17.2. The Borrower is not an “investment company”, or a company “controlled”

      by an “investment company”, within the meaning of the Investment Company Act of 1940,

      as amended. The Borrower is not subject to regulation under any Governmental

      Requirement which limits its ability to incur Indebtedness, other than Regulation X (as

      defined within the applicable Governmental Requirements promulgated by the applicable

      Governmental Authorities from time to time).

      3.17.3. The Borrower and each of its respective Affiliates are in compliance, in all

      material respects, with the Patriot Act. None of the proceeds of the Loan will be used,

    

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  directly or indirectly, (a) for the purpose of making any payments to any governmental

      official or employee, political party, official of a political party, candidate for political

      office, or anyone else acting in an official capacity, or otherwise in furtherance of an offer,

      payment, promise to pay, or authorization of the payment or giving of money, or anything

      else of value, to any Person, in any instance in violation of any Anti-Corruption Laws, (b)

      for the purpose of funding, financing or facilitating any activities, business or transaction

      of or with any Sanctioned Person or in any Sanctioned Country, or (c) in any manner that

      would result in the violation of any Sanctions applicable to the Borrower. Neither the

      Borrower, nor any Affiliate of the Borrower: (a) is a Sanctioned Person; (b) owns assets in

      a Sanctioned Person; or (c) derives any of its operating income from investments in, or

      transactions with Sanctioned Persons.

      3.18 Financial Condition. The Borrower does not have any Guarantee Obligations,

      unusual or long-term commitments, or other liabilities as of the date of this Agreement.

      3.19 ERISA. The Borrower does not maintain any employee pension or other defined

      benefit plan or trust for the benefit of its employees which is subject to Title IV of ERISA.

      3.20 Continuation of Representations and Warranties. All representations and

      warranties made under this Agreement shall be deemed to be made at and as of the date of Closing

      and each date of funding of a Loan, and in all instances shall be true and correct in all material

      respects and not misleading.

    

   

    

  ARTICLE IV

      AFFIRMATIVE COVENANTS

    Until the Indebtedness has been paid and satisfied in full, and unless Lender shall otherwise

      consent in writing, the Borrower agrees to perform or cause to be performed the following:

      4.1 Financial Statements.

      4.1.1. Annual Borrower Statements. Within 90 days after the close of each fiscal

      year, the Borrower will furnish to the Lender a copy of the Borrower’s audited annual

      financial statements for such fiscal year, containing at least a balance sheet as of the close

      of such fiscal year and statement of income for such fiscal year, setting forth in each case

      in comparative form the figures for the previous fiscal year, all in reasonable detail,

      prepared in accordance with GAAP.

      4.1.2. Quarterly Borrower Statements. Within 45 days after the close of each

      quarter of each fiscal year (except with respect to the fourth quarter of each fiscal year),

      the Borrower will furnish to the Lender copies of the Borrower's unaudited company

      prepared quarterly financial statements, each prepared in the same manner as the financial

      statements referred to in Section 4.1.1, and containing at least a balance sheet as of the

      close of such quarter and statement of income for such quarter and for the period from the

      beginning of such fiscal year to the close of such quarter.

      4.1.3. Compliance Certificates. Each set of annual or quarterly financial

      statements furnished by the Borrower to the Lender pursuant to Sections 4.1.1 and 4.1.2

    

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      shall be accompanied by a completed Compliance Certificate, signed by the chief executive

      officer or chief financial officer of the Borrower, (i) stating that such officer, after due

      inquiry, has no knowledge of the occurrence of a Default or an Event of Default and that,

      to the knowledge of such officer, after due inquiry, the Borrower have complied with the

      terms of the Loan Documents to which each is a party in all material respects, or, in the

      event such officer has knowledge of a Default or an Event of Default or that any of the

      terms of the Loan Documents has not been complied with in all material respects, the nature

      of such Default or Event of Default or non-compliance will be specified in such

      Compliance Certificate together with any steps being taken by the Borrower to correct such

      Default or Event of Default or non-compliance, and (ii) demonstrating the Borrower's

      compliance with the financial covenant set forth in Article VI.

      4.2 Notifications.

      4.2.1. Litigation. The Borrower will promptly furnish the Lender with notice of

      any litigation involving the Borrower where the amount sued for or the value of the

      Property involved (after taking into account any amount which is fully covered by

      insurance) is in excess of $200,000, or which, if the outcome were adverse to the Borrower,

      could reasonably be expected to materially adversely affect the financial condition,

      business or operations of the Borrower.

      4.2.2. Liens. The Borrower will notify the Lender of the existence or asserted

      existence of any Liens (other than Permitted Liens) on any Properties of the Borrower,

      promptly upon the Borrower's obtaining knowledge thereof.

      4.2.3. Default. The Borrower will notify the Lender as soon as practicable, but in

      any event within ten (10) days after the Borrower knows or has reason to know that any of

      the following has occurred: (i) any Default or Event of Default, or (ii) any material change

      in the accounting practices and procedures of the Borrower, including a change in the fiscal

      year of the Borrower.

      4.3 Accounting Procedures. The Borrower will maintain adequate and accurate books

      and records of account in accordance with GAAP. The Lender will, upon reasonable request, have

      the right to examine and copy the books and records of the Borrower and to meet with the Borrower

      to discuss its business affairs, finances and accounts.

      4.4 Permits. The Borrower will obtain and maintain in effect all Permits which are (i)

      material to its business, Properties, operations or condition, financial or otherwise, and/or (ii)

      necessary for it to carry on its business as contemplated to be conducted.

      4.5 Existence. The Borrower will maintain its existence as a corporation and will

      remain in good standing under the laws of the State of Oklahoma.

      4.6 Maintenance of Properties. The Borrower will maintain (or cause to be maintained)

      all of its Properties in good and workable condition, repair and appearance and will protect the

      same from deterioration, other than normal wear and tear, at all times.

    

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  4.7 Compliance with Laws. The Borrower will comply in all material respects with all

      Laws to which it is subject or by which its Properties are bound or affected, including all Laws

      pertaining to its business and operations, except to the extent that any of the foregoing are being

      diligently contested in good faith by appropriate legal proceedings and against which there are

      established reserves in accordance with sound business practices and GAAP.

      4.8 Taxes; Other Liens. The Borrower will pay (or cause to be paid) prior to

      delinquency all taxes, assessments, governmental charges or levies, and all claims for labor,

      materials, supplies, rent and other obligations which, if unpaid, might become a Lien against any

      of its Property, excluding only liabilities being diligently contested in good faith by appropriate

      legal proceedings and against which there are established reserves in accordance with sound

      business practices and GAAP.

      4.9 Further Assurances. The Borrower will, from time to time, promptly cure any

      defects or omissions in the execution and delivery of this Agreement or any of the other Loan

      Documents signed pursuant to this Agreement, including the execution and delivery of additional

      documents reasonably requested by the Lender in order to carry out and give effect to the

      provisions of this Agreement and the other Loan Documents.

      4.10 Performance of Obligations. The Borrower (i) will pay the Note according to the

      reading, tenor and effect thereof, and (ii) will do and perform every act and discharge all of the

      obligations provided to be performed and discharged under this Agreement and all other Loan

      Documents to which it is a party at the time or times and in the manner therein specified.

      4.11 Maintenance of Insurance.

      4.11.1. Required Insurance. The Borrower will maintain, or cause to be maintained

      in full force and effect (i) casualty insurance on all real and personal property on an allrisks basis (including the perils of flood and quake) covering the lesser of the amount of

      the Loan or the repair and replacement cost of all such Property, (ii) insurance coverage

      for public liability insurance in amounts and with deductibles acceptable to the Lender, and

      (iii) such other insurance coverage in such amounts and with respect to such risks as the

      Lender may reasonably request. All such insurance shall be provided by financially sound

      and reputable insurance companies not Affiliates of the Borrower and having a minimum

      A.M. Best rating of A, size category VII. On or prior to the Closing Date, and at all times

      thereafter, the Borrower will cause the Lender to be named as an additional insured,

      assignee and loss payee (which shall include, as applicable, identification as mortgagee),

      as applicable, on each insurance policy required to be maintained pursuant to this Section

      4.11.1 pursuant to endorsements in form and content acceptable to the Lender. The

      Borrower will deliver to the Lender (i) on or before the Closing Date, a certificate from the

      Borrower’s insurance broker dated such date showing the amount of coverage as of such

      date, and that such policies will include effective waivers (whether under the terms of any

      such policy or otherwise) by the insurer of all claims for insurance premiums against all

      loss payees and additional insureds and all rights of subrogation against all loss payees and

      additional insureds, and that if all or any part of such policy is canceled, terminated or

      expires, the insurer will forthwith give notice thereof to each additional insured, assignee

      and loss payee and that no cancellation, reduction in amount or material change in coverage

    

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  thereof shall be effective until at least thirty (30) days after receipt by each additional

      insured, assignee and loss payee of written notice thereof, (ii) on an annual basis, and upon

      the request of the Lender from time to time full information as to the insurance carried, (iii)

      within five days of receipt of notice from any insurer, a copy of any notice of cancellation,

      nonrenewal or material change in coverage from that existing on the date of this

      Agreement, and (iv) immediately, notice of any cancellation or nonrenewal of coverage by

      the Borrower. In the event the Borrower fails to provide the Lender with evidence of the

      insurance coverage required by this Agreement, the Lender may purchase insurance at the

      Borrower’s expense. The coverage purchased by the Lender may, but need not, protect the

      Borrower’s interests. The Borrower may later cancel any insurance purchased by the

      Lender, but only after providing the Lender with evidence that Borrower has obtained

      insurance as required by this Agreement. If Lender purchases insurance, to the fullest

      extent provided by law, the Borrower will be responsible for the costs of that insurance,

      including interest and other charges imposed by the Lender in connection with the

      placement of the insurance, until the effective date of the cancellation or expiration of the

      insurance. The costs of the insurance may be added to the Indebtedness. The Borrower

      acknowledges that the costs of insurance purchased by the Lender may be more than the

      cost of insurance that the Borrower would be able to obtain on their own.

      4.11.2. Compliance With Insurance Conditions. The Borrower shall not bring or

      keep any article on its properties, or cause or knowingly allow any condition to exist, if the

      presence of such article or the occurrence of such condition could reasonably cause the

      invalidation of any insurance required by Section 4.11.1 or would otherwise be prohibited

    

  by the terms thereof.

    

   

    

  ARTICLE V

      NEGATIVE COVENANTS

    Until the Indebtedness has been paid and satisfied in full, and unless the Lender shall

      otherwise consent in writing, the Borrower will not perform or permit to be performed any of the

      following acts:

      5.1 Creation of Liens. The Borrower will not create, assume or suffer to exist any Lien

      on any portion of the Collateral or on any of its other Properties, whether now owned or hereafter

      acquired, except for the following (collectively, "Permitted Liens"):

      (a) deposits to secure payment of worker's compensation,

      unemployment insurance and other similar benefits;

      (b) Liens for property taxes not yet delinquent or are being diligently

      contested in good faith by appropriate legal proceedings and against which there

      are established reserves in accordance with sound business practices and GAAP;

      (c) statutory Liens against which there are established adequate reserves

      and which (i) are being contested in good faith by appropriate legal proceedings or

      (ii) arise in the ordinary course of business and secure obligations which are not yet

      due and not in default;

    

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  (d) Liens of judgments, execution, attachment or similar process which

      will not result or have not yet resulted in the occurrence of an Event of Default as

      set forth in Article VIII of this Agreement;

      (e) other encumbrances approved in advance in writing by the Lender;

      and

      (f) Liens in favor of the Lender.

      5.2 Restrictions on Debt. The Borrower will not create, incur, assume or suffer to exist

      any Debt, other than:

      (a) Indebtedness under the Loan Documents;

      (b) trade accounts payable incurred in the ordinary course of business

      which are not past due or in default;

      (c) other Debt owing to the Lender; and

      (d) Debt arising after the Closing in the event the Borrower elects to pay

      annual insurance premiums on a deferred basis.

      5.3 Restrictions on Guarantee Obligations. The Borrower will not create, incur or suffer

      to exist any Guarantee Obligations.

      5.4 Sale of Assets. The Borrower will not Transfer, whether pursuant to a single

      transaction or a series of transactions, all or any portion of its Property (or any interest therein) or

      any other material Property owned by it. Notwithstanding the foregoing, the Borrower may (i) sell

      inventory and collect its accounts receivable in the ordinary course of business, (ii) Transfer

      personal property or fixtures which, in the reasonable judgment of the Borrower, have become

      obsolete or unfit for use or which are no longer useful in the Borrower’s operations, on the

      condition that the Borrower shall replace such personal property or fixtures by, or substitute for

      the same, other personal property or fixtures (not necessarily of the same character) owned by the

      Borrower, which shall (A) be of at least equal value to the personal property or fixtures disposed

      of, and (B) perform a function or serve a purpose the same as, similar to or related to that of the

      personal property or fixtures disposed of; and (iii) grant Permitted Liens.

      5.5 Changes in Structure. The Borrower will not: (i) merge or consolidate with any

      Person (or enter into any merger or consolidation agreement or plan), or permit any such merger

      or consolidation with it; or (ii) liquidate, wind-up or dissolve (or take or permit any action to

      liquidate, wind-up or dissolve).

      5.6 Limitations on Distributions. Except as otherwise provided herein, and if no Default

      or Event of Default has occurred and is continuing, the Borrower may make Distributions,

      provided, however, that no such Distribution would cause the Borrower to be in default of any

      covenant contained herein or in the Loan Documents.

    

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  5.7 Restrictions on Loans. The Borrower will not make any loan, advance or other

      extension of credit, directly or indirectly, to or for the benefit of any other Person.

      5.8 Transactions With Affiliates. Except as contemplated by this Agreement, the

      Borrower will not (i) enter into any other transaction, including the purchase, sale or exchange of

      property, with any Affiliate, or (ii) make any payments to any Affiliate for services performed or

      equipment or materials provided, except to reimburse such Affiliate for its actual cost of

      performing such services or providing such equipment or materials, which actual cost shall not, in

      any event, exceed the amount that would be charged by a non-Affiliate under a bona fide, arm'slength contract for performance of such services or provision of such equipment and materials.

      5.9 Creation of Plans Under ERISA. The Borrower will not establish or become

      obligated to make contributions with respect to any employee pension plan or other defined benefit

      plan or trust for the benefit of its employees which is subject to Title IV of ERISA.

      5.10 Sale-Leaseback Transactions. The Borrower will not make or permit the

      occurrence of any sale, transfer or disposition of any of its real or personal Property followed by

      its leasing or rental of such Property, or any portion thereof, as lessee.

      5.11 Modification of Documents. The Borrower will not participate in, enter into, suffer

      or permit any material amendment, modification, restatement, cancellation or termination of any

      of its Charter Documents.

    

   

    

  ARTICLE VI

      FINANCIAL COVENANT

    Until the Indebtedness has been paid and satisfied in full, and unless the Lender shall

      otherwise consent in writing, the Borrower will not:

      6.1 Fixed Charge Coverage Ratio. Permit the Fixed Charge Coverage Ratio calculated

      as of each September 30, beginning September 30, 2020, to be less than 1.25 to one (1.25:1.00).

    

   

    

  ARTICLE VII

      CONDITIONS PRECEDENT; ADMINISTRATION OF LOAN

    7.1 Closing. The Closing will take place at the offices of the Lender in Tulsa

      Oklahoma, on March __, 2020, or at such other place or date as the parties shall mutually agree,

    provided that all conditions to the Closing set forth in Section 7.2 have been satisfied.

      7.2 Conditions to Closing. The commitment of the Lender to establish the Loan is

      subject to the Borrower's satisfaction of the following conditions precedent at or as of the Closing:

      7.2.1. Loan Documents. This Agreement and all other Loan Documents shall have

      been duly and validly authorized, executed, acknowledged (where appropriate) and

      delivered to the Lender by the appropriate parties thereto, all in form and substance

      satisfactory to the Lender.

    

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  7.2.2. Perfection. All actions and filings shall have been made or taken as are

      necessary to create and perfect the liens, security interests and assignments contemplated

      by Section 2.11, including the filing and recording of appropriate UCC financing

      statements and fixture filings.

      7.2.3. Existence and Authority. The Borrower shall have provided or caused to be

      provided to the Lender the following documents, each in form and substance satisfactory

      to the Lender and its counsel:

      (a) a true and correct copy of the certificate of formation of the

      Borrower, including all amendments thereto, certified by the Oklahoma Secretary

      of State;

      (b) true and correct copy of the operating agreement of the Borrower,

      including all amendments thereto, certified by the secretary or other authorized

      officer of the Borrower;

      (c) a good standing certificate issued by the Oklahoma Secretary of

      State not more than thirty (30) days prior to the Closing, certifying as to the due

      formation, valid existence and good standing of the Borrower;

      (d) true and correct copies of the resolutions or approvals adopted by

      the Borrower, duly authorizing the borrowings contemplated hereunder and the

      execution, delivery and performance of the Loan Documents to which the Borrower

      is a party;

      (e) a certificate executed by a manager, or by the president or the

      secretary, of the Borrower stating the names of the officers authorized to execute

      and deliver the Loan Documents on behalf of the Borrower and containing

      specimen signatures of such officers; and

      (f) any other information requested by the Lender at least three days

      prior to the Closing in order to verify the identity of the Borrower, as required by

      Section 326 of the PATRIOT Act.

      7.2.4. Insurance. The Lender shall have received copies of insurance policies, or

      binders or certificates of insurance, in form and substance satisfactory to the Lender,

      evidencing that the Borrower has obtained and is maintaining the minimum insurance

      coverages required by this Agreement and the Loan Documents, together with all required

      endorsements of such policies.

      7.2.5. UCC Searches. The Lender shall have received certified responses to UCC

      lien search requests reflecting that there are no effective UCC financing statements on file

      in any filing offices in the State of Oklahoma naming the Borrower as debtor, other than

      financing statements relating to Permitted Liens.

      7.2.6. Loan Fee. The Lender shall have received a loan fee from the Borrower

      equal to $17,373.

    

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  7.2.7. Closing Certificate. The Lender shall have received a certificate signed by

      a manager of the Borrower, certifying that, to the best of his or her knowledge, after due

      investigation, all representations and warranties of the Borrower contained in this

      Agreement and the other Loan Documents are true and correct as in all material respects

      as of the Closing, that no Default or Event of Default exists as of the Closing, and that all

      of the conditions specified in this Section 7.2 have been satisfied.

    

   

    

  ARTICLE VIII

      EVENTS OF DEFAULT

    8.1 Events of Default. The occurrence of any of the following events or existence of

      any of the following circumstances, unless waived in writing by the Lender, shall constitute a

      "Default" and if not remedied within any applicable cure period shall constitute an "Event of

      Default":

      8.1.1. Nonpayment. If the Borrower shall fail to pay any installment of principal

      or interest on the Loan when due (whether at the stated due date, upon maturity, upon

      acceleration or otherwise).

      8.1.2. Other Nonpayment. If the Borrower shall fail to pay or reimburse when due

      any other amount payable by the Borrower to the Lender under this Agreement or any other

      Loan Document and such failure shall continue for a period of 10 days after the Lender

      gives notice of such failure to the Borrower.

      8.1.3. Representations and Warranties. If any representation, statement,

      certificate, schedule or report made or furnished to the Lender by or on behalf of the

      Borrower shall prove to have been false or erroneous in any material respect as of the date

      on which such warranty or representation was made.

      8.1.4. Breach of Covenants. If the Borrower fails to perform or observe any term,

      covenant or agreement contained in (a) Article IV and such failure continues unremedied

      for more than twenty (20) days after the Lender gives notice of such failure to the Borrower,

      provided, however, that if such default cannot be fully remedied within such 20-day period,

      but can reasonably be expected to be fully remedied, such default shall not constitute an

      Event of Default if the Borrower shall promptly upon receipt of such notice commence the

      curing of such default and shall thereafter diligently prosecute and complete the same

      within ninety (90) days of receipt of written notice from the Lender or such longer period

      of time as the Lender in its sole discretion may agree, or (b) Article V or Article VI.

      8.1.5. Default Under Loan Documents. If a material default shall be made in the

      due observance or performance by the Borrower of any of the covenants or agreements

      contained in any other Loan Document to which it is a party, and such default shall continue

      unremedied beyond the expiration of any grace period expressly provided in the applicable

      Loan Document, or if any "event of default" shall occur under the Note or any of the other

      Loan Documents pursuant to the terms thereof and such event of default shall continue

      beyond the expiration of any applicable cure period.

    

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  8.1.6. Insolvency. If the Borrower shall (i) apply for or consent to the appointment

      of a custodian, receiver, trustee or liquidator for itself or its Property, (ii) admit in writing

      the inability to pay, or generally fail to pay, its debts as they become due, (iii) make a

      general assignment for the benefit of creditors, (iv) commence any proceeding relating to

      the bankruptcy, reorganization, liquidation, receivership, conservatorship, insolvency,

      readjustment of debt, dissolution or liquidation, or if company action is taken for the

      purpose of effecting any of the foregoing, (v) suffer any such appointment or

      commencement of a proceeding as described in clause (i) or (iv) of this Section 8.1.6,

      which appointment or proceeding is not terminated or discharged within ninety (90) days,

      or (vi) become insolvent.

      8.1.7. Judgments. If Borrower shall have entered against it by any court a final

      judgment or judgments for the payment of money in an aggregate amount (exclusive of

      any portion covered by insurance) in excess of $200,000 and such judgment(s) shall remain

      undischarged for a period of 45 consecutive days (unless stayed on appeal), or if any legal

      action shall be taken by a judgment creditor to attach or levy upon any Properties of the

      Borrower to enforce any such judgment.

      8.1.8. Default on Other Funded Debt. If Borrower shall fail to pay any principal

      or interest on any Funded Debt in excess of $100,000 as and when the same shall become

      due and payable and such default shall continue beyond the expiration of any applicable

      grace period expressly provided, or if any default or event of default shall occur under the

      terms of any agreement or other document which would entitle the holder or holders thereof

      to accelerate the maturity thereof.

      8.1.9. Material Contracts. If the Borrower shall default in the payment or

      performance of its obligations, duties, covenants or agreements under the terms of any

      agreement or contract that is material to its affairs, financial or otherwise, and such default

      shall continue beyond the expiration of any applicable grace period expressly provided

      (unless such default is being disputed by appropriate legal proceedings and adequate

      reserves therefor have been established on the Borrower's books and records).

      8.1.10. Unenforceability. If this Agreement or any other Loan Document shall for

      any reason cease to be a valid, binding and enforceable obligation of the Borrower or any

      other party thereto, or if any of the Loan Documents shall cease to create a valid and

      perfected, first priority Lien (subject only to Permitted Liens) on the Collateral covered

      thereby.

      8.1.11. Leveling 8 Mortgage; Leveling 8 Note. If a default or event of default

      occurs under a Leveling 8 Mortgage or the Leveling 8 Note.

      8.2 Acceleration of Indebtedness. If any Event of Default specified in Section 8.1.6

    shall occur, all obligations of the Lender hereunder, including any obligation to make further

      advances under the Loan, will automatically terminate, and the Loan and all other outstanding

      Indebtedness will become immediately due and payable, without notice or demand. If any other

      Event of Default shall occur and be continuing, the Lender may, at its option, without notice or

      demand, terminate its obligations hereunder, including any obligation to make further advances

    

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  under the Loan, and declare the Loan and all other outstanding Indebtedness to be immediately

      due and payable, whereupon the same shall become forthwith due and payable.

      8.3 Exercise of Remedies. Upon the occurrence and during the continuation of any

      Event of Default, the Lender shall be entitled to exercise all rights and remedies available to it

      under the Loan Documents and applicable Law, through judicial action or otherwise, including:

      (i) commencing one or more actions against the Borrower and reducing the claims of the Lender

      to judgment; and (ii) foreclosing, realizing upon or otherwise enforcing the Lender's rights in and

      Liens on the Collateral.

      8.4 Selective Enforcement. In the event Lender elects to selectively and successively

      enforce its rights under this Agreement or any one or more of the other Loan Documents, or against

      any portion of the Collateral, such action shall not be deemed a waiver or discharge of any other

      right, lien or encumbrance until such time as the Lender shall have been paid in full all

      Indebtedness of the Borrower to the Lender.

      8.5 Waiver of Default. The Lender may, by an instrument in writing signed by the

      Lender, waive any Event of Default and any of the consequences of such Event of Default, and, in

      such event, the Lender and all other parties hereto shall be restored to their respective former

      positions, rights and obligations hereunder. Any Event of Default so waived shall for all purposes

      of this Agreement be deemed to have been cured and not to be continuing; but no such waiver

      shall extend to any subsequent or other Event of Default or impair any consequence of such

      subsequent or other Event of Default.

      8.6 Deposits; Setoff. Regardless of the adequacy of any other collateral held by Lender,

      any deposits or other sums credited by or due from the Lender to the Borrower shall at all times

      constitute collateral security for the Indebtedness, and may be set off against the Loan in any

      manner the Lender shall choose and any and all liabilities, direct or indirect, absolute or contingent,

      due or to become due, now existing or hereafter arising to the Lender. The rights granted by this

      section shall be in addition to the rights of the Lender under any statutory banker's lien or the

      common law right of set-off.

      8.7 Application of Payments. From and during the continuation of any Event of

      Default, any monies or property received by the Lender pursuant to this Agreement or any other

      Loan Document or the exercise of any rights or remedies under any Loan Document or other

      agreement which secures any of the Indebtedness, shall be applied in the following order:

      First, to payment of that portion of the Indebtedness constituting fees, indemnities,

      expenses and other amounts (including fees, charges and disbursements of counsel to the

      Lender) payable to the Lender in its capacity as such;

      Second, to payment of that portion of the Indebtedness constituting accrued and

      unpaid interest on the Loan;

      Third, to payment of that portion of the Indebtedness constituting unpaid principal

      of the Loan and to payment of amounts due under any Treasury Management Agreement

      between the Borrower and the Lender, or any Affiliate of the Lender; and

    

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  Last, the balance, if any, after all of the Indebtedness has been indefeasibly paid in

      full, to the Borrower or to such other Persons who may be lawfully entitled to receive such

      excess.

    

   

    

  ARTICLE IX

      EXPENSES AND INDEMNITY

    9.1 Costs and Expenses. The Borrower shall pay (i) all reasonable out-of-pocket

      expenses incurred by the Lender (including the reasonable fees, charges and disbursements of

      counsel for the Lender), in connection with the preparation, negotiation, execution, delivery and

      administration of this Agreement and the other Loan Documents or any amendments,

      modifications or waivers of the provisions hereof or thereof (whether or not the transactions

      contemplated hereby or thereby shall be consummated), and including without limitation all

      recording and filing fees, recording costs, examinations of and certifications as to public records,

      title insurance premiums, survey costs, expenses to clear title, appraisal fees and costs of required

      environmental assessments, and (ii) all out-of-pocket expenses incurred by the Lender (including

      the fees, charges and disbursements of any counsel for the Lender) in connection with the

      enforcement or protection of its rights (A) in connection with this Agreement and the other Loan

      Documents, including its rights under this Section 9.1, or (B) in connection with the Loan,

      including all such out-of-pocket expenses incurred during any workout, restructuring or

      negotiations in respect of the Loan.

      9.2 Indemnification by Borrower. The Borrower shall indemnify the Lender and the

      Lender's Related Parties of any of the foregoing Persons (each such Person being called an

      "Indemnitee") against, and hold each Indemnitee harmless from, any and all losses, claims,

      damages, liabilities and related expenses (including the fees, charges and disbursements of any

      counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by

      any third party or by the Borrower arising out of, in connection with, or as a result of (i) the

      execution or delivery of this Agreement, any other Loan Document or any agreement or instrument

      contemplated hereby or thereby, the performance by the parties hereto of their respective

      obligations hereunder or thereunder, the administration of this Agreement and the other Loan

      Documents or the consummation of the transactions contemplated hereby or thereby, (ii) the Loan

      or the use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release

      of Hazardous Materials on or from any property owned or operated by the Borrower, or any

      Environmental Liability related in any way to the Borrower, or (iv) any actual or prospective claim,

      litigation, investigation or proceeding relating to any of the foregoing, whether based on contract,

      tort or any other theory, whether brought by a third party or by the Borrower, and regardless of

      whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any

      Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related

      expenses (x) are determined by a court of competent jurisdiction by final and nonappealable

      judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or

      (y) result from a claim brought by the Borrower against an Indemnitee for breach in bad faith of

      such Indemnitee's obligations hereunder or under any other Loan Document, if the Borrower has

      obtained a final and nonappealable judgment in its favor on such claim as determined by a court

      of competent jurisdiction.

      9.3 Waiver of Consequential Damages, Etc. To the fullest extent permitted by

    

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  applicable Law, the Borrower shall not assert, and the Borrower hereby waives, any claim against

      any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages

      (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this

      Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the

      transactions contemplated hereby or thereby, or the use of the proceeds of the Loan. No Indemnitee

      referred to in Section 9.2 above shall be liable for any damages arising from the use by unintended

      recipients of any information or other materials distributed by it through telecommunications,

      electronic or other information transmission systems in connection with this Agreement or the

      other Loan Documents or the transactions contemplated hereby or thereby.

      9.4 Expenses Following Default. Upon the occurrence of an Event of Default, the

      Borrower will from time to time, within thirty (30) days after a request made by the Lender,

      reimburse the Lender for all amounts expended, advanced or incurred by the Lender to satisfy any

      obligation of the Borrower under this Agreement or any other Loan Documents, or to collect upon

      the Note or any of the Indebtedness, or to enforce the rights of Lender under this Agreement and

      any other Loan Documents, which amounts will include all court costs, bonds, reasonable

      attorneys' fees and expenses, reasonable fees of auditors and accountants, and investigation

      expenses reasonably incurred by the Lender in connection with any such matters, together with

      interest at the applicable Default Rate on each such amount from the date the same is due and

      payable to the Lender until the date it is repaid to the Lender. All amounts advanced in connection

      herewith shall be secured by the Collateral.

      9.5 Payments. All amounts due under Article IX shall be payable not later than thirty

      (30) days after demand therefor.

      9.6 Survival. The agreements in Article IX shall survive the replacement of the Lender,

      and the repayment, satisfaction or discharge of all of the other Obligations.

    

   

    

  ARTICLE X

      MISCELLANEOUS PROVISIONS

    The parties further agree as follows:

      10.1 Participating Lender. In the event the Lender shall determine at any time or from

      time to time to sell one or more participation interests in the Loan to one or more other financial

      institutions or other lenders, the Borrower agrees that, subject to the terms of the agreements of

      participation, each participating lender will be entitled to rely on the terms of this Agreement and

      the other Loan Documents as fully as if such participating lender had been named as the holder of

      the Note and a party to this Agreement and the other Loan Documents. Any costs or expenses

      incurred by the Lender in negotiating, preparing or entering into any such participation agreement

      shall be paid by the Lender.

      10.2 Cumulative Remedies. No failure on the part of the Lender to exercise and no delay

      in exercising any right or remedy under this Agreement and the documents signed pursuant to this

      Agreement shall operate as a waiver thereof, nor shall any single or partial exercise by Lender of

      any right thereunder preclude any other or further right of exercise thereof or the exercise of any

      other right. The remedies herein provided are cumulative and not alternative.

    

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  10.3 [Reserved.]

      10.4 Notices. All notices, requests and demands required or authorized hereunder shall

      be given in writing and served in person, delivered by certified mail, return receipt requested,

      delivered by nationally recognized overnight courier, or transmitted by telefacsimile (fax),

    

  addressed as follows:

    
    	Borrower: 	Addvantage Technologies Group, Inc.

              Attn: Scott Francis

    1221 E Houston

      Broken Arrow, OK 74012

    
    	With a copy to: 	Leveling 8, Inc.

              Attn: David E Chymiak

    21553 E Apache St

      Catoosa, OK 74015

    
    	Lender: 	Vast Bank, N.A.

              Attn: Lauren Smith

    110 N Elgin STE 500

      Tulsa, OK 74120

      Lauren.Smith@Vast.Bank

    
    	With a copy to: 	Jason B. Coutant

              Conner & Winters, LLP

    4000 One Williams Center

      Tulsa, Oklahoma 74172-0148

      Fax: (918) 586-8682

      or at such other address as either party hereto shall designate for such purpose in a notice to the

      other party hereto. Notices served in person or via overnight courier shall be effective and deemed

      given when delivered, notices sent by certified mail shall be effective and deemed given five

      Business Days after being deposited in the U.S. mail, postage prepaid, and notices transmitted by

      telefacsimile will be deemed given when sent if between the hours of 8 a.m. and 5 p.m. of the

      recipient’s time zone (and if not, it shall be deemed given on the next Business Day), as indicated

      by the sender's written confirmation of transmission.

      10.1 APPLICABLE LAW. THE OBLIGATIONS EVIDENCED BY THE TERM

      NOTE WAS NEGOTIATED, EXECUTED, DELIVERED AND CONTRACTED IN TULSA,

      OKLAHOMA, AND THIS AGREEMENT AND ALL LOAN DOCUMENTS SIGNED

      PURSUANT TO THIS AGREEMENT SHALL BE DEEMED TO BE CONTRACTS MADE

      UNDER THE LAWS OF THE STATE OF OKLAHOMA AND SHALL BE CONSTRUED IN

      ACCORDANCE WITH THE LAWS OF THE STATE OF OKLAHOMA.

      10.2 Not A Joint Venture. Nothing in this Agreement shall be construed to constitute

      the Lender as a joint venturer with the Borrower or to constitute a partnership.

    

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  10.3 Binding Effect. This Agreement and the Loan Documents shall be binding on, and

      shall inure to the benefit of, the parties hereto and their respective successors and assigns; provided,

    however, that without the prior, written consent of the Lender, the Borrower shall not assign or

      transfer any of its interest, rights or obligations arising out of or relating to this Agreement or any

      other Loan Documents.

      10.4 Survival of Representations and Warranties. All representations and warranties

      made herein will survive the delivery of this Agreement and the making of any advances under the

      Loan.

      10.5 Exhibits and Schedules. All exhibits and schedules attached to this Agreement are

      incorporated herein for all purposes, and shall be considered a part of this Agreement.

      10.6 Severability. In the event any one or more of the provisions contained in this

      Agreement or any other Loan Document shall, for any reason, be held to be invalid, illegal or

      unenforceable in any respect and in any jurisdiction, (i) such invalidity, illegality or

      unenforceability shall not affect any other provision thereof, (ii) the remaining provisions shall

      remain in full force and effect, (iii) such invalid, illegal or unenforceable provision shall not be

      affected in any other jurisdiction, and (iv) there shall be added to the affected document a

      provision, to be prepared by the Lender and its counsel, as similar as possible to the invalid, illegal

      or unenforceable provision but so as to be valid, legal and enforceable.

      10.7 Entire Agreement; Conflicting Provisions. This Agreement and the Loan

      Documents referred to herein constitute the entire agreement of the parties hereto with respect to

      the Loan and all matters arising out of or related thereto. In the event of any conflict between or

      among the provisions of this Agreement and the provisions of any other Loan Documents, the

      provisions of this Agreement shall control.

      10.8 Waivers. No act, delay, omission or course of dealing between or among the parties

      hereto will constitute a waiver of their respective rights or remedies under this Agreement or the

      documents signed pursuant to this Agreement. No waiver, change, modification or discharge of

      any of the rights and duties of the parties hereto will be effective unless contained in a written

      instrument signed by the party sought to be bound.

      10.9 SUBMISSION TO JURISDICTION. ALL ACTIONS OR PROCEEDINGS WITH

      RESPECT TO THIS AGREEMENT MAY BE INSTITUTED IN ANY STATE OR FEDERAL

      COURT SITTING IN TULSA, OKLAHOMA, AS THE LENDER MAY ELECT, AND BY

      EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER

      IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE NONEXCLUSIVE

      JURISDICTION (BOTH SUBJECT MATTER AND PERSON) OF EACH SUCH COURT.

      10.10 PATRIOT Act Notification. The Lender hereby notifies the Borrower that pursuant

      to the requirements of the PATRIOT Act, it is required to obtain, verify and record information

      that identifies the Borrower, which information includes the name and address of the Borrower

      and other information that will allow the Lender to identify the Borrower in accordance with the

      PATRIOT Act.

    

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  10.11 WAIVER OF JURY TRIAL. EACH OF BORROWER AND LENDER

      HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN

      ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE

      LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND

      AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE

      A COURT AND NOT BEFORE A JURY. EACH OF BORROWER AND LENDER

      ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER

      INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN

      ENTERING INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS,

      AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR

      RELATED FUTURE DEALINGS. EACH OF BORROWER AND LENDER WARRANTS

      AND REPRESENTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING

      THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY

      AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

    10.12 Counterparts. This Agreement may be executed in counterparts (and by different

      parties hereto in different counterparts), each of which shall constitute an original, but all of which

      when taken together shall constitute a single contract. Delivery of an executed counterpart of a

      signature page of this Agreement by telecopy or electronic (pdf) means shall be effective as

      delivery of a manually executed counterpart of this Agreement.

    

  [signatures on following page]

    
    

    

    29

    

  

  
    
      

  

  

    IN WITNESS WHEREOF, the Lender and the Borrower have caused this Agreement to

      be duly executed, effective as of the date first above written.

      "Borrower": ADDVANTAGE TECHNOLOGIES GROUP,

      INC.

    By: /s/ Joseph E. Hart

      Name: Joseph E. Hart

      Title: CEO

      "Lender": VAST BANK, N.A.

    By: /s/ Lauren N. Smith

      Name: Lauren N. Smith

      Title: Vice President

    

    

    
      
        

    

     Acknowledgement

      The undersigned, David E. Chymiak, Leveling 8 Inc. and David Chymiak LLC, each (i)

        acknowledge receipt of drafts of the Loan Agreement between Vast Bank, N.A. and Addvantage

        Technologies, Inc. and the other Loan Documents, (ii) agree to the conditions of Section 2.14 of

        such Loan Agreement, including without limitation the condition that payments on the Leveling 8

        Note be made directly to Vast Bank, N.A. until and through the December 31, 2022 payment, and

        (iii) that a part of the Collateral securing the Loan from Vast Bank, N.A. to Addvantage

        Technologies, Inc. is all of Addvantage Technologies, Inc.'s rights in and to the Leveling 8

        Mortgages, the Leveling 8 Note, the Chymiak Guaranty and the Chymiak Pledge. Capitalized

        terms not defined in this acknowledgement are hereby assigned the meanings ascribed to them in

      

    the Loan Agreement.

      

     

        

    /s/ David E. Chymiak

      David E. Chymiak

      LEVELING 8 INC.

      By: /s/ David E. Chymiak

        Name: David E. Chymiak

        Title: President

      DAVID CHYMIAK LLC

      By: /s/ David E. Chymiak

        Name: David E. Chymiak

        Title: Sole MemberExhibit

Exhibit 4(a)

May 14, 2020

Company Order and Officers’ Certificate
3.70% Senior Notes, Series Z, due 2050

The Bank of New York Mellon Trust Company, N.A., as Trustee
2 North LaSalle Street
Chicago, Illinois 60602

Ladies and Gentlemen:

Pursuant to Article Two of the Indenture, dated as of January 1, 1998 (as it may be amended or supplemented, the “Indenture”), from Appalachian Power Company (the “Company”) to The Bank of New York Mellon Trust Company, N.A., as successor to The Bank of New York, as trustee (the “Trustee”), and the Board Resolutions dated October 28, 2019, copies of which certified by the Secretary or an Assistant Secretary of the Company are being delivered herewith under Section 2.01 of the Indenture, and unless otherwise provided in a subsequent Company Order pursuant to Section 2.04 of the Indenture,

		
	1.
	The Company’s 3.70% Senior Notes, Series Z, due 2050 (the “Notes”) are hereby established.  The Notes shall be in substantially the form attached hereto as Exhibit 1. 

		
	2.
	The terms and characteristics of the Notes shall be as follows (the numbered clauses set forth below corresponding to the numbered subsections of Section 2.01 of the Indenture, with terms used and not defined herein having the meanings specified in the Indenture):

(i)    The aggregate principal amount of Notes which may be authenticated and delivered under the Indenture shall be limited to $500,000,000 for the Notes, except as contemplated in Section 2.01(i) of the Indenture and except that such principal amount may be increased from time to time; all Notes need not be issued at the same time and the series may be reopened at any time, without the consent of any securityholder, for issuance of additional Notes, which Notes will have the same interest rate, maturity and other terms as those initially issued (other than the date of issuance, the issue price and, in some circumstances, the initial interest accrual date and the initial interest payment date);

(ii)    The date on which the principal of the Notes shall be payable shall be May 1, 2050;

(iii)    Interest shall accrue from the date of authentication of the Notes; the Interest Payment Dates on which such interest will be payable shall be May 1 and November 1, and the Regular Record Date for the determination of holders to whom interest is payable on any such Interest Payment Date shall be the April 15 or October 15, respectively; provided that the first Interest Payment Date shall be November 1, 2020 and interest payable on the Stated Maturity Date of the Notes or any Redemption Date shall be paid to the Person to whom principal shall be paid;

(iv)    The interest rate at which the Notes shall bear interest shall be 3.70% per annum;

(v)    The Notes may be redeemed by the Company at its option, in whole at any time or in part from time to time, upon not less than thirty but not more than sixty days’ prior notice (either by mail or in compliance with the applicable procedures of DTC).  At any time prior to November 1, 2049 (six months prior to the maturity date (the “Par Call Date”)), the Company may redeem the Notes either as a whole or in part at a redemption price (calculated by the Independent Investment Banker) equal to the greater of (1) 100% of the principal amount of the Notes  being redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes being redeemed that would be due if such Notes matured on the Par Call Date (excluding the portion of any such interest accrued to but excluding the date of  redemption), discounted (for purposes of determining present value) to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus 40 basis points, plus, in each case, accrued and unpaid interest thereon to but excluding the date of redemption.

At any time on or after the Par Call Date the Company may redeem the Notes in whole or in part at 100% of the principal amount of the Notes being redeemed, plus accrued and unpaid interest thereon to but excluding the date of redemption.

“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term (“remaining life”) of the Notes (assuming, for this purpose, that the Notes matured on the Par Call Date) that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining life of the Notes.

“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (2) if the Company obtains fewer than four of such Reference Treasury Dealer Quotations, the average of all such quotations.

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company and notified by the Company to the Trustee.

“Reference Treasury Dealer” means a primary U.S. Government securities dealer or dealers selected by the Company and notified by the Company to the Trustee.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Company and notified to the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Company and the Trustee by such Reference Treasury Dealer at or before 3:30 p.m., New York City time, on the third Business Day preceding such redemption date.
    
“Treasury Rate” means, with respect to any redemption, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated by the Independent Investment Banker using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

(vi)     (a) the Notes  shall be issued in the form of a Global Note; (b) the Depositary for the Global Note shall be The Depository Trust Company; and (c) the procedures with respect to transfer and exchange of Global Notes shall be as set forth in the form of the Note attached hereto;

2

(vii)    the title of the Notes shall be “3.70% Senior Notes, Series Z, due 2050”;

		
	(viii)
	the forms of the Notes shall be as set forth in Paragraph 1, above;

		
	(ix)
	not applicable;

		
	(x)
	the Notes may be subject to a Periodic Offering;

		
	(xi)
	not applicable;

		
	(xii)
	not applicable;

		
	(xiii)
	not applicable;

(xiv)    the Notes shall be issuable in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof;

		
	(xv)
	not applicable;

		
	(xvi)
	the Notes shall not be issued as Discount Securities;

(xvii)    not applicable;

		
	(xviii)
	not applicable; 

(xix)    Limitations on Liens:

So long as any of the Notes are outstanding, the Company will not create or suffer to be created or to exist any mortgage, pledge, security interest, or other lien (collectively, “Liens”) on any of the Company’s utility properties or tangible assets now owned or hereafter acquired to secure any indebtedness for borrowed money (“Secured Debt”), without providing that such Notes will be similarly secured.  This restriction does not apply to the Company’s subsidiaries, nor will it prevent any of them from creating or permitting to exist Liens on their property or assets to secure any Secured Debt.  In addition, this restriction does not prevent the creation or existence of:

		
	•
	Liens on property existing at the time of acquisition or construction of such property (or created within one year after completion of such acquisition or construction), whether by purchase, merger, construction or otherwise, or to secure the payment of all or any part of the purchase price or construction cost thereof, including the extension of any Liens to repairs, renewals, replacements substitutions, betterments, additions, extensions and improvements then or thereafter made on the property subject thereto; 

		
	•
	Financing of the Company’s accounts receivable for electric service; 

		
	•
	Any extensions, renewals or replacements (or successive extensions, renewals or replacements), in whole or in part, of liens permitted by the foregoing clauses; and

		
	•
	The pledge of any bonds or other securities at any time issued under any of the Secured Debt permitted by the above clauses.

3

In addition to the permitted issuances above, Secured Debt not otherwise so permitted may be issued in an amount that does not exceed 15% of Net Tangible Assets as defined below.  

“Net Tangible Assets” means the total of all assets (including revaluations thereof as a result of commercial appraisals, price level restatement or otherwise) appearing on the Company’s balance sheet, net of applicable reserves and deductions, but excluding goodwill, trade names, trademarks, patents, unamortized debt discount and all other like intangible assets (which term shall not be construed to include such revaluations), less the aggregate of the Company’s current liabilities appearing on such balance sheet.  For purposes of this definition, the Company's balance sheet does not include assets and liabilities of the Company’s subsidiaries.

This restriction also will not apply to or prevent the creation or existence of leases made, or existing on property acquired, in the ordinary course of business; and

(xx)    Certain Tax Information.

In order to comply with applicable tax laws (inclusive of rules, regulations and interpretations promulgated by competent authorities) related to the Indenture, this Company Order and Officers’ Certificate and the Notes in effect from time to time (“Applicable Law”) that a foreign financial institution, issuer, trustee, paying agent or other party is or has agreed to be subject to, the Company agrees (i) to provide to the Trustee sufficient information about the parties and/or transactions (including any modification to the terms of such transactions) so the Trustee can determine whether it has tax related obligations under Applicable Law and (ii) that the Trustee shall be entitled to make any withholding or deduction from payments to the extent necessary to comply with Applicable Law for which the Trustee shall not have any liability.

		
	3.
	You are hereby requested to authenticate $500,000,000 aggregate principal amount of 3.70% Senior Notes, Series Z, due 2050 executed by the Company and delivered to you concurrently with this Company Order and Officers’ Certificate, in the manner provided by the Indenture.

		
	4.
	You are hereby requested to hold the Notes as custodian for DTC in accordance with the Blanket Issuer Letter of Representations dated June 24, 2004, from the Company to DTC.

		
	5.
	Concurrently with this Company Order and Officers’ Certificate, an Opinion of Counsel under Sections 2.04 and 13.06 of the Indenture is being delivered to you.

		
	6.
	The undersigned, Julia A. Sloat and William E. Johnson, the Treasurer and Assistant Secretary, respectively, of the Company do hereby certify that:

		
	(i)
	The form and terms of the Notes have been established in conformity with the provisions of the Indenture;

		
	(ii)
	We have read the relevant portions of the Indenture, including without limitation the conditions precedent provided for therein relating to the action proposed to be taken by the Trustee as requested in this Company Order and Officers’ Certificate, and the definitions in the Indenture relating thereto;

		
	(iii)
	We have read the Board Resolutions of the Company and the Opinion of Counsel referred to above;

4

		
	(iv)
	We have conferred with other officers of the Company, have examined such records of the Company and have made such other investigation as we deemed relevant for purposes of this certificate;

		
	(v)
	In our opinion, we have made such examination or investigation as is necessary to enable us to express an informed opinion as to whether or not such conditions have been complied with; and 

		
	(vi)
	On the basis of the foregoing, we are of the opinion that all conditions precedent provided for in the Indenture relating to the action proposed to be taken by the Trustee as requested herein have been complied with.

5

Kindly acknowledge receipt of this Company Order and Officers’ Certificate, including the documents listed herein, and confirm the arrangements set forth herein by signing and returning the copy of this document attached hereto.

Very truly yours,

APPALACHIAN POWER COMPANY

	
			
	By:
	 
	/s/ Julia A. Sloat

	 
	 
	Julia A. Sloat

	 
	 
	Treasurer

	 
	 
	 

	 
	 
	 

	And:
	 
	/s/ William E. Johnson

	 
	 
	William E. Johnson

	 
	 
	Assistant Secretary

	 
	 
	 

	 
	 
	 

	Acknowledged by Trustee:

	 
	 
	 

	 
	 
	 

	By:
	 
	/s/ Valere Boyd

	 
	 
	Authorized Signatory

	 
	 
	 

6

Exhibit 1

Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any certificate to be issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.  Except as otherwise provided in Section 2.11 of the Indenture, this Security may be transferred, in whole but not in part, only to another nominee of the Depository or to a successor Depository or to a nominee of such successor Depository.

No.   R-1

APPALACHIAN POWER COMPANY
3.70% Senior Notes, Series Z, due 2050

	
				
	CUSIP: 037735 CY1
	Original Issue Date:  May 14, 2020

	 
	 
	 
	 

	Stated Maturity:  May 1, 2050
	Interest Rate:  3.70%

	 
	 
	 
	 

	Principal Amount:  $500,000,000
	 

	 
	 
	 
	 

	Redeemable:
	Yes  þ
	No  o
	 

	In Whole:
	Yes  þ
	No  o
	 

	In Part:    
	Yes  þ
	No  o
	 

APPALACHIAN POWER COMPANY, a corporation duly organized and existing under the laws of the Commonwealth of Virginia (herein referred to as the “Company”, which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO. or registered assigns, the Principal Amount specified above on the Stated Maturity specified above, and to pay interest on said Principal Amount from the Original Issue Date specified above or from the most recent interest payment date (each such date, an “Interest Payment Date”) to which interest has been paid or duly provided for, semi-annually in arrears on May 1 and November 1 in each year, commencing on November 1, 2020, at the Interest Rate per annum specified above, until the Principal Amount shall have been paid or duly provided for.  Interest shall be computed on the basis of a 360-day year of twelve 30-day months.

The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date, as provided in the Indenture, as hereinafter defined, shall be paid to the Person in whose name this Note (or one or more Predecessor Securities) shall have been registered at the close of business on the Regular Record Date with respect to such Interest Payment Date, which shall be the April 15 or October 15 (whether or not a Business Day) prior to such Interest Payment Date, provided that interest payable on the Stated Maturity or any redemption date shall be paid to the Person to whom principal is paid.  Any such interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and shall be paid as provided in said Indenture.

If any Interest Payment Date, any redemption date or Stated Maturity is not a Business Day, then payment of the amounts due on this Note on such date will be made on the next succeeding Business Day, 

and no interest shall accrue on such amounts for the period from and after such Interest Payment Date, redemption date or Stated Maturity, as the case may be, with the same force and effect as if made on such date. The principal of (and premium, if any) and the interest on this Note shall be payable at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, New York, in any coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest (other than interest payable on the Stated Maturity or any redemption date) may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Security Register.

This Note is one of a duly authorized series of Notes of the Company (herein sometimes referred to as the “Notes”), specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture dated as of January 1, 1998 duly executed and delivered between the Company and The Bank of New York Mellon Trust Company, N.A., a national banking association formed under the laws of the United States, as successor to The Bank of New York, as Trustee (herein referred to as the “Trustee”) (such Indenture, as originally executed and delivered and as thereafter supplemented and amended being hereinafter referred to as the “Indenture”), to which Indenture and all indentures supplemental thereto or Company Orders reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Notes.  By the terms of the Indenture, the Notes are issuable in series which may vary as to amount, date of maturity, rate of interest and in other respects as in the Indenture provided.  This Note is one of the series of Notes designated on the face hereof.

The Notes may be redeemed by the Company at its option, in whole at any time or in part from time to time, upon not less than thirty but not more than sixty days’ prior notice (either by mail or in compliance with the applicable procedures of DTC).
 
At any time prior to November 1, 2049 (six months prior to the maturity date (the “Par Call Date”)), the Company may redeem this Note either as a whole or in part at a redemption price (calculated by the Independent Investment Banker) equal to the greater of (1) 100% of the principal amount of the Notes  being redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes being redeemed that would be due if such Notes matured on the Par Call Date (excluding the portion of any such interest accrued to but excluding the date of  redemption), discounted (for purposes of determining present value) to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus 40 basis points, plus, in each case, accrued and unpaid interest thereon to but excluding the date of redemption.

At any time on or after the Par Call Date the Company may redeem this Note in whole or in part at 100% of the principal amount of the Notes being redeemed, plus accrued and unpaid interest thereon to but excluding the date of redemption.
    
“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term (“remaining life”) of the Notes (assuming, for this purpose, that the Notes being redeemed matured on the Par Call Date) that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining life of the Notes.

“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (2) if the Company obtains fewer than four of such Reference Treasury Dealer Quotations, the average of all such quotations.

2

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company and notified by the Company to the Trustee.

“Reference Treasury Dealer” means a primary U.S. Government securities dealer or dealers selected by the Company and notified by the Company to the Trustee.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Company and notified to the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Company and the Trustee by such Reference Treasury Dealer at or before 3:30 p.m., New York City time, on the third Business Day preceding such redemption date.
    
“Treasury Rate” means, with respect to any redemption, the rate per annum equal to the semi-annual equivalent yield to maturity of the Comparable Treasury Issue, calculated by the Independent Investment Banker using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

The Company shall not be required to (i) issue, exchange or register the transfer of any Notes during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of less than all the outstanding Notes of the same series and ending at the close of business on the day of such mailing, nor (ii) register the transfer of or exchange of any Notes of any series or portions thereof called for redemption.  This Global Note is exchangeable for Notes in definitive registered form only under certain limited circumstances set forth in the Indenture.

In the event of redemption of this Note in part only, a new Note or Notes of this series, of like tenor, for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the surrender of this Note.

In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Notes may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture.

The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Note upon compliance by the Company with certain conditions set forth therein.
    
As described in the Company Order and Officers’ Certificate, the Company is subject to a covenant regarding making certain tax information available to the Trustee and, so long as this Note is outstanding, the Company is subject to a limitation on Liens, in each case as described therein.

The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Notes; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Notes of any series, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, or reduce the amount of the principal of a Discount Security that would be due and payable upon a declaration of acceleration of the maturity thereof 

3

pursuant to the Indenture, without the consent of the holder of each Note then outstanding and affected; (ii) reduce the aforesaid percentage of Notes, the holders of which are required to consent to any such supplemental indenture, or reduce the percentage of Notes, the holders of which are required to waive any default and its consequences, without the consent of the holder of each Note then outstanding and affected thereby; or (iii) modify any provision of Section 6.01(c) of the Indenture (except to increase the percentage of principal amount of securities required to rescind and annul any declaration of amounts due and payable under the Notes), without the consent of the holder of each Note then outstanding and affected thereby.  The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Notes of all series at the time outstanding affected thereby, on behalf of the Holders of the Notes of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or premium, if any, or interest on any of the Notes of such series.  Any such consent or waiver by the registered Holder of this Note (unless revoked as pro-vided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Note and of any Note issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Note.

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Note at the time and place and at the rate and in the money herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, this Note is transferable by the registered holder hereof on the Security Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company as may be designated by the Company accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered Holder hereof or his or her attorney duly authorized in writing, and thereupon one or more new Notes of authorized denominations and for the same aggregate principal amount and series will be issued to the designated transferee or transferees.  No service charge will be made for any such transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto.

Prior to due presentment for registration of transfer of this Note, the Company, the Trustee, any paying agent and any Security Registrar may deem and treat the registered Holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Security Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Security Registrar shall be affected by any notice to the contrary.

No recourse shall be had for the payment of the principal of or the interest on this Note, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released.

The Notes of this series are issuable only in registered form without coupons in denominations of $2,000 and any integral multiples of $1,000 in excess thereof.  As provided in the Indenture and subject to 

4

certain limitations, Notes of this series are exchangeable for a like aggregate principal amount of Notes of this series of the same authorized denomination, as requested by the Holder surrendering the same.

All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

This Note shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee.

    

5

IN WITNESS WHEREOF, the Company has caused this Instrument to be executed.

APPALACHIAN POWER COMPANY

	
		
	By:
	 

	 
	Julia A. Sloat

	 
	Treasurer

                    
Attest:

	
		
	By:
	 

	 
	William E. Johnson

	 
	Assistant Secretary

    

6

CERTIFICATE OF AUTHENTICATION

This is one of the Notes of the series of Notes designated in accordance with, and referred to in, the within‐mentioned Indenture.

Dated: 

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

	
		
	By:
	 

	 
	Authorized Signatory

7

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

(PLEASE INSERT SOCIAL SECURITY OR OTHER
 IDENTIFYING NUMBER OF ASSIGNEE)

_______________________________________

________________________________________________________________

________________________________________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
________________________________________________________________
ASSIGNEE) the within Note and all rights thereunder, hereby
________________________________________________________________
irrevocably constituting and appointing such person attorney to 
________________________________________________________________
transfer such Note on the books of the Issuer, with full
________________________________________________________________
power of substitution in the premises.

Dated:________________________        _________________________

		
	NOTICE:
	The signature to this assignment must correspond with the name as written upon the face of the within Note in every particular, without alteration or enlargement or any change whatever and NOTICE:  Signature(s) must be guaranteed by a financial institution that is a member of the Securities Transfer Agents Medallion Program (“STAMP”), the Stock Exchange Medallion Program (“SEMP”) or the New York Stock Exchange, Inc. Medallion Signature Program (“MSP”).

8

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