•Approves compensation and benefits of our non-employee Board of Directors; and
•Performs the other functions listed in the Charter of the Compensation Committee, a current copy of which may be found on our website at www.addvantagetechnologies.com.
• | Performs the other functions listed in the Charter of the Compensation Committee, a current copy of which may be found on our website at www.addvantagetechnologies.com.
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Composition and Delegation
The Compensation Committee of our Board of Directors is currently comprised of threefour directors who are not officers. All functions of the Compensation Committee are to be performed by the Committee members and are not authorized to be delegated outside of the Committee. Under currently applicable rules, twothree members qualify as “independent directors” as defined under Rule 5605(a)(2) of NASDAQ and each member is a “non-employee director” (within the meaning of Rule 16b-3(b)(3) of the Securities Exchange Act of 1934).
Our Board of Directors has determined that it is in the best interest of the Company that David E. Chymiak serve on the Compensation Committee, although he is not an independent director as defined under Rule 5605(a)(2) of NASDAQ. David E. Chymiak does not meet the definition under NASDAQ Rule 5605(a)(2) because he was an employee of the Company within the last three years. The Board of Directors determined that it is in the best interest of the Company for Mr. Chymiak to serve as a member of the Compensation Committee because as the largest shareholder of the Company, his input on the committee should protect the interests of the shareholders of the Company.
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
The current members of the Corporate Governance and Nominating Committee are John Shelnutt (Chairman), Timothy S. Harden, and James C. McGill. The Committee met two times during fiscal year 2021. The functions and members of the Corporate Governance and Nominating Committee are set forth below.
The current members of the Corporate Governance and Nominating Committee are Thomas J. Franz (Chairman), James C. McGill, and John M. Shelnutt. The Committee met one time during fiscal year 2019. In fiscal year 2019, Joseph E. Hart, the President and CEO of the Company, recommended that the Corporate Governance and Nominating Committee consider John Shelnutt as a Board member. The Committee considered Mr. Shelnutt and recommended that he be appointed to the Board. In July 2019, the Board appointed Mr. Shelnutt as a director in order to fill a Board vacancy.
Functions
•Provides oversight of the governance of the Board of Directors;
•Makes recommendations to the Board as a whole concerning board size and composition;
•Identifies individuals qualified to become Board members;
•Selects or recommends that the Board select the director nomineestonominees to stand for election at the annual meeting of shareholders;
•Recommends to the Board nominees for the positions of Chairman of the Board, chairmen of the various committees of the Board, and members of the various committees of the Board; and
• | Performs other functions listed in the Charter of the Corporate Governance and Nominating Committee, a current copy of which may be found on our website at www.addvantagetechnologies.com.
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•Performs other functions listed in the Charter of the Corporate Governance and Nominating Committee, a current copy of which may be found on our website at www.addvantagetechnologies.com.
The Corporate Governance and Nominating Committee is comprised of three directors who are not officers. Under currently applicable rules, each member is an “independent director” as defined under the NASDAQ rules as well as under rules adopted by the SEC pursuant to the Sarbanes-Oxley Act of 2002.
The Corporate Governance and Nominating Committee’s criteria and process for identifying and evaluating the candidates that it selects, or recommends to the full Board for selection, as director nominees, are: (i) regular review of composition and size of the Board; (ii) review of qualifications of candidates properly recommended or nominated by any qualifying shareholder; (iii) evaluation of the performance of the Board and qualification of members of the Board eligible for re-election: and (iv) consideration of the suitability of each candidate, including current members of the Board, in light of the size and composition of the Board. After such review and consideration, the Corporate Governance and Nominating Committee will recommend a slate of director nominees.
While the Corporate Governance and Nominating Committee has not established specific minimum requirements for director candidates, other than they be at least 21 years of age, the Committee believes that candidates and nominees must reflect a board that is comprised of directors who: (i) are predominantly independent; (ii) are of high integrity; (iii) have qualifications that will increase overall board effectiveness; and (iv) meet other requirements as may be required by applicable rules, such as financial literacy or financial expertise with respect to Audit Committee members. The Committee does not have a
formal policy regarding the consideration of diversity in identifying director nominees, but the Committee does consider, among other things, a director nominee’s potential contribution to the diversity of background and experience of our Board of Directors, including with respect to age, gender, international background, race and specialized experience.
The Corporate Governance and Nominating Committee has adopted a policy with regard to the consideration of director candidates recommended by shareholders. The Corporate Governance and Nominating Committee will consider director candidates recommended by any shareholder holding 10,000 shares of our common stock for at least 12 months prior to the date of submission of the recommendation or nomination. Additionally, a recommending shareholder shall submit a written statement in support of the candidate, particularly within the context of the criteria for board membership, including issues of character, judgment, age, independence, expertise, corporate experience, other commitments and the like, personal references, and a written indication by the candidate of his or her willingness to serve, if elected, and evidence of the recommending person’s ownership of our stock sufficient to meet the stock ownership requirements described above.
STRATEGIC DIRECTION
STRATEGY AND CORPORATE PLANNING COMMITTEE
The functions andcurrent members of the Strategic DirectionStrategy and Corporate Planning Committee are set forth below. The members of the Strategic Direction Committee wereTimothy S. Harden (Chairman), Joseph E. Hart, James C. McGill, (Chairman),John M. Shelnutt, David W. Sparkman and Thomas J. Franz.David E. Chymiak. The Committee met three times during fiscal year 2019.
Functions
Negotiate and approve or disapprove a transaction with David E. Chymiak or his affiliate for the sale of the Cable TV segment of the Company; and
Consider strategic options for the Company.
Upon the sale of the Cable Television segment to Leveling 8, which closed effective as of June 30, 2019, this Committee was dissolved.
STRATEGY AND CORPORATE PLANNING COMMITTEE
2021. The functions and members of the Strategy and Corporate Planning Committee are set forth below. The current members of the Strategy and Corporate Planning Committee are John M. Shelnutt (Chairman), Joseph E. Hart, and James C. McGill. The Committee was established in September 2019 and will begin meeting in fiscal year 2020.
Functions
•the development of the Company’s short-term and long-term strategic Plan;
plan;
•oversees the execution of the Company’s strategic Plan;
plan;
•help develop new and enhance existing relationships with Customers;
customers;
•assists with business development and internal expansion efforts;
•pursuing Mergermerger and Acquisitionacquisition opportunities; and
•the development of a Working Capital Strategyworking capital strategy and Capital-Raise Plancapital-raise plan to achieve the above.
BOARD MEETINGS
Our Board held elevenfour meetings during fiscal year 2019.2021. Each director attended all of the meetings of the Board and the committees on which he served.
Shareholder Communication with the Board of Directors and Committees
Communication with the Board of Directors or any of the Committees should be directed to the attention of David W.Mr. Sparkman. Written correspondence to Mr. Sparkman may be delivered to our executive offices, 1430 Bradley Lane, Carrollton, Texas, 75007. All shareholder communications directed to Mr. Sparkman will be promptly forwarded to him. All Board members are encouraged, but not required, to attend our annual meeting. Last year, all of our Board members (board members at the date of the meeting) attended our annual meeting.
CODE OF ETHICS
We have adopted a Code of Business Conduct and Ethics which is applicable to all of our directors, officers and employees. A copy of our Code of Business Conduct and Ethics is posted on our website at www.addvantagetechnologies.com. We intend to satisfy the disclosure requirements, including those of Item 406 of Regulation S-K, regarding certain amendments to, or waivers from, provisions of our Code of Business Conduct and Ethics by posting such information on our website.
HEDGING TRANSACTIONS BY INSIDERS
The Company has an Insider Trading Policy, which may be found on our Company’s website at www.addvantagetechnologies.com. Among other transactions, this policy prohibits corporate insiders (e.g. directors, officers, employees) from engaging in hedging transactions with respect to Company stock. “Hedging transactions” may be understood generally as transactions which lock in the value of stock in exchange for giving up rights to future stock appreciation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In fiscal year 2019, there have been several related partyReview, Approval or Ratification of Transactions with Related Persons.The Company is not aware of any transaction that was required to be reported in its filings with the SEC where such policies and procedures either did not require review or were not followed. The Company's Audit Committee Charter, which is available on the Corporate Governance page of our website, www.addvantagetechnologies.com, provide that the Company shall conduct an appropriate review of all transactions with Mr. David Chymiak or affiliates owned by him as follows:
Real Estate Transactions
In October 2018, the Company sold its Broken Arrow, Oklahoma facility to David Chymiak LLCrelated persons for a cash purchase pricepotential conflict of $5,000,000. This sale closed in November 2018. In connection with the sale of the Broken Arrow, Oklahoma facility, Tulsat, which is one of the subsidiaries contained in the Cable TV segment, entered into a ten-year lease with Mr. Chymiak for $528,000 per year, paid in equal monthly installments.
As part of the sale agreement, Mr. Chymiak personally guaranteed the promissory note due to the Company and pledged certain assets (directly and indirectly owned) to secure the payment of the promissory note, including substantially all of Mr. Chymiak’s Company common stock. Mr. Chymiak also entered into a standstill agreementany transactions with the Company underin which he is limited in taking action with respect to the Companydirector or its management forexecutive officer, or any member of his or her immediate family, has a period of three years after the closing of the cable sale.direct or indirect material interest.
DELINQUENT SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE16(A) REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than 10% of our common stock to report their initial ownership of our common stock and any subsequent changes in that ownership to the SEC and to furnish us with a copy of each of these reports. SEC regulations impose specific due dates for these reports and we are required to disclose in this proxy statement any failure to file by these dates during fiscal year 2019.2021.
BasedTo our knowledge, based solely on the review of the copies of these reports furnished to us and written representations that no other reports were required, during and with respect to the fiscal year ended September 30, 2019,2021, we believe that these persons have complied with all applicable filing requirements.requirements with the exception of the Form 4 reports of Messrs. Hart, Chymiak, McGill, Harden, Shelnutt, and Sparkman. The Company is currently conducting a review with its officers and directors of all transactions subject to Section 16 reporting requirements in order to cure any remaining delinquencies.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
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| COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS |
Compensation of Directors
WeA revised director compensation plan was approved by the shareholders at last year's annual meeting and was effective April 1, 2020. Prior to this plan, we paid our non-employee directors $500 per quarter and $750 for each board meeting and $375 for each committee meeting or telephonic board or committee meeting the director attended. The chairman of the Audit Committee receivesreceived an additional $375 per meeting, and the chairmen of the Compensation and Governance and Nominating Committees receivereceived an additional $150 per meeting. In addition, allThe new director compensation plan compensates each director, with the exception of Messrs. McGill and Chymiak, $20,000 per year and the Chairman of the Audit Committee $30,000. Mr. McGill will receive $25,000 annually in cash paid in monthly installments per his agreement with the Company, and Mr. Chymiak will be compensated pursuant to the previous plan.
All directors are eligible to receive awards of restricted shares, which are subject to a 12-month holding period, or options to purchase shares of our common stock each year after the annual shareholders meeting. ThesePrior to 2020, these annual awards generally total $10,000 towere for $15,000 and have ranged between 1,000 and 11,450 shares.of restricted stock. Annual stock grants are made to directors under our 2015 Incentive Stock Plan and no grants were made in 2019 because there were insufficient shares in the 2015 Incentive Stock Plan. If Proposal #3 isSince the shareholders approved by shareholders, we will make thoseadditional shares to be added to the 2015 Incentive Stock Plan, the directors were awarded their 2019 grant of $15,000 of restricted stock grantsin fiscal year 2020.
As part of the revised director compensation plan, each director, with the exception of Messrs. McGill and Chymiak, is to be awarded $50,000 of restricted stock upon each election to the directors, effective asboard, which would be subject to a holding period equal to their board term. Mr. McGill is to receive $50,000 of restricted stock each October, subject to a twelve month holding period, per his agreement with the dateCompany. Mr. Chymiak is to receive $15,000 of restricted stock upon his election to the grants should have been made in 2019.board, which would be subject to a holding period equal to his board term.
We reimburse all directors for out-of-pocket expenses incurred by them in connection with their service on our Board and any Board committee. The following table reflects the total compensation earned by each non-employee director during the last fiscal year:
Fiscal Year 20192021 Director Compensation
| Name | | Fees Earned or Paid in Cash | | | Restricted Stock Awards | | | Total Compensation | |
| Thomas J. Franz (1) (2) (3) (4) | | $ | 15,350 | | | $ | - | (5)
| | $ | 15,350 | |
| David E. Chymiak (7) | | $ | 3,500 | (7) | | $ | - | (5)
| | $ | 3,500 | |
| James C. McGill (1) (2) (3) (4) (6) | | $ | 75,000 | (6) | | $ | 15,000 | (5) | | $ | 90,000 | |
John M. Shelnutt
| | $ | 4,250 | (6) | | $ | - | (5)
| | $ | 4,50 | |
| David W. Sparkman (1) (2) (3) (4) | | $ | 15,500 | | | $ | -
| (5)
| | $ | 15,500 | |
(1) | Member of the Audit Committee. |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Fees Earned or Paid in Cash | | | Restricted Stock Awards (1) (2) | | | Total Compensation |
| James C. McGill (3) | | $ | 25,000 | | | | $ | 50,220 | | | | $ | 75,220 | |
| David E. Chymiak | | 20,000 | | | | 17,664 | | | | 37,664 | |
| Thomas J. Franz | | 20,000 | | | | — | | | | 20,000 | |
| Timothy S. Harden | | 20,000 | | | | 58,884 | | | | 78,884 | |
| John M. Shelnutt | | 20,000 | | | | 58,884 | | | | 78,884 | |
| David W. Sparkman | | 30,000 | | | | 58,884 | | | | 88,884 | |
| | | | | | | | | |
| (1) | The fair value of the stock awards are amortized over the 12-month holding period to compensation expense in the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K. The fair value of the stock award was based on the closing market price of the stock on the date of grant. |
| (2) | The directors received their fiscal 2021 awards in November, 2021, with a total fair value of $244,536 as of the original dates of the awards. |
| (3) | James C. McGill and the Company entered into an amended Letter Agreement on July 16, 2020, which amended his previous agreement dated October 8, 2018. This amended agreement provides that, for serving as Chairman of the Board, Mr. McGill will receive annual compensation in the form of $25,000 in cash and $50,000 in shares of stock, which will vest vest over a 12-month period. Mr. McGill's fiscal 2020 award was received in October, 2020. |
(2) | Member of the Corporate Governance and Nominating Committee. |
(3) | Member of the Compensation Committee. |
(4) | Member of the Strategic Direction Committee. |
(5) | The directors are normally granted $15,000 of restricted stock in March each fiscal year. However, there were not enough shares available under the 2015 Incentive Stock Plan to grant the directors in March 2019. The fair value of the stock awards are amortized over the 12-month holding period to compensation
expense in the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K. The fair value of the stock award was based on the closing market price of the stock on the date of grant.
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(6) | James C. McGill and the Company entered into a Letter Agreement on October 8, 2018, which provides that Mr. McGill will receive annual compensation in the form of $75,000 cash and $75,000 in shares of restricted stock for serving as Chairman of the Board. The shares will be delivered 20% per year over five years.
Mr. McGill received his first $15,000 of restricted stock on October 8, 2018, but he has not yet received his $15,000 of restricted stock on October 8, 2019 as the Company does not have enough stock under the 2015 Incentive Stock Plan. If Proposal #3 is approved, the shares owed to Mr. McGill will be granted to him
effective as of October 8, 2019.
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(7) | David Chymiak’s director compensation represents his compensation when he was no longer Chief Technology Officer in July 2019 through September 2019. |
SUMMARY COMPENSATION TABLE
The following table reflects theinformation relates to compensation of the named executive officers (“NEOs”) ofpaid by the Company for the fiscal years ended September 30, 20192021 and 2018.2020 to the Company’s Chief Executive Officer, Chief Financial Officer and the next most highly compensated executive officer of the Company:
| | | | | | | | | | |
| | | | | | | | | | | | | | | |
Name and Principal Position
| | Year
| | Salary
| | Bonus
|
| Restricted Stock Awards (1) | | Option Awards (2) | | Non-Equity Incentive Plan Compensation
| | All Other Compensation (3) | | Total Compensation
| |
| Joseph E. Hart | Principal Executive Officer (4) | |
| 2019 2018
| | $ $
| 303,846 57,692
| | $ $
| (9) –
|
| $ $
| 15,000
| | $ $
| 84,000 –
| | $ $ | ‒ –
| | $ $ | 28,192 962
| | $
$
| 416,038 73,654
| |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Kevin D. Brown | Principal Financial Officer (5) (6) | | | 2019 2018
| | $
$
| 123,538 ‒
| | $ $
| (9) – |
| $ $
| ‒ ‒
| | $ $
| 32,175 –
| | $
$ | | | $ $ | 53,677 ‒
| | $
$
| 209,390 ‒
| |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Colby J. Empey | President of the Wireless Segment (7) | | | 2019 2018
| | $ $
| 165,000 ‒
| | $ $
| (9) – |
| $ $
| ‒ ‒
| | $ $
| 32,175 –
| | $ $ | ‒ – | | $ $ | 13,135 ‒
| | $
$
| 210,310 ‒
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Scott A. Francis | Vice President, Chief Accounting Officer and Secretary | | | 2019 2018
| | $ $
| 182,885 175,000
| | $ $
| (9) – |
| | 15,000
| | $ $
| 11,220 –
| | $ $ | ‒ –
| | $ $ | 15,144 12,350
| | $
$
| 209,249 202,350
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Donald E. Kinison | President of the Telco Segment | | | 2019 2018
| | $ $
| 210,769 180,000
| | $ $
| (9) – |
| $ $
| ‒ ‒
| | $ $
| 18,700 ‒
| | $ $ | ‒ –
| | $ $ | 16,538 13,375
| | $
$
| 246,007 263,375
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| David L. Humphrey | Former President and Chief Executive Officer (8) | | | 2019 2018
| | $ $
| - 429,763
| | $ $
| ‒ -
|
| $ $
| ‒ 15,000
| | $ $
| - ‒
| | $ $ | ‒ –
| | $ $ | - 13,310
| | $
$
| - 458,073
| |
(1) | The amounts shown are director and Company officer compensation and represent the total fair value of the stock award of 11,450 shares on the date of the grant to directors for fiscal 2018. The fair value of the stock awards is amortized over the 12-month holding period to compensation expense in the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the years ended September 30, 2019 and 2018 for stock awards. The fair value of the stock awards was based on the closing market prices of the stock on the dates of the grants. |
(2) | The amounts shown represent expenses recognized in the Consolidated Financial Statements contained in the Company’s Annual Report on Form 10-K for the year ended September 30, 2019 for stock option awards. There were no forfeitures of stock options in fiscal 2019. All assumptions utilized to calculate the expense amounts shown above are set forth in Note 11 of the Notes to Consolidated Financial Statements for the year ended September 30, 2019. |
(3) | Represents amounts paid by the Company on behalf of an officer for matching contributions to the Company’s qualified 401(k) plan plus an auto allowance received during the year. |
(4) | The salary of Mr. Hart for fiscal year 2018 is from his date of hire on July 2, 2018. The restricted stock award reflected in fiscal year 2018 represents restricted stock granted to Mr. Hart as a member of the Company’s Board of Directors. |
(5) | On March 1, 2019, the Company hired Mr. Brown as the Chief Financial Officer. Therefore, the salary for fiscal year 2019 is from his date of hire of March 1, 2019. |
(6) | Mr. Brown was paid $40,500 as a contractor by the Company from December 31, 2018 through February 28, 2019 which is included in all other compensation. |
(7) | On March 1, 2019, the Company named Mr. Empey as the President of the Wireless Segment. Mr. Empey transitioned as an employee to the Company from the Fulton Technologies, Inc. acquisition on January 4, 2019. Therefore, the salary for fiscal year 2019 is from his date of hire of January 4, 2019. |
(8) | On July 2, 2018, Mr. Humphrey resigned as the Company’s President and Chief Executive Officer as well as from the Company’s Board of Directors. The salary of Mr. Humphrey for fiscal year 2018 is through his resignation date of July 2, 2018 and reflects his severance payment of $180,243. |
(9) | 2019 bonuses have been earned, but not yet paid. The 2019 bonuses have been earned as follows: Mr. Hart, $105,000; Mr. Brown, $66,000; Mr. Empey, $55,000; Mr. Francis, $36,000; and Mr. Kinison, $55,000. |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Non-Equity | | | | |
| | | | | | | | | Stock | | Option | | Incentive Plan | | All Other | | Total |
| Name and Principal Position | | Year | | Salary | | Bonus | | Awards | | Awards | | Compensation | | Compensation | | Compensation |
| | | | | ($) | | ($)(1) | | ($) (2) | | ($) | | ($) | | ($)(3) | | ($) |
| Joseph E. Hart | | 2021 | | $ | 300,000 | | | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 26,419 | | | $ | 326,418 | |
| Principal Executive Officer | | 2020 | | 290,769 | | | 105,000 | | | 87,898 | | | — | | | — | | | 25,173 | | | 508,840 | |
| | | | | | | | | | | | | | | | | |
| Michael A. Rutledge | | 2021 | | 15,050 | | | — | | | — | | | — | | | — | | | — | | | 15,050 | |
| Chief Financial Officer (4) | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Scott A. Francis | | 2021 | | 108,632 | | | — | | | 222,858 | | | — | | | — | | | 94,660 | | | 426,150 | |
| Chief Accounting Officer (5) | | 2020 | | 174,462 | | | 36,000 | | | 50,988 | | | — | | | — | | | 10,000 | | | 271,450 | |
| | | | | | | | | | | | | | | | | |
| Jimmy Taylor | | 2021 | | 235,383 | | | — | | | 78,325 | | | — | | | — | | | 14,116 | | | 327,824 | |
| President, Wireless Segment (6) | | 2020 | | 41,538 | | | — | | | 170,300 | | | — | | | — | | | 1,846 | | | 213,684 | |
| | | | | | | | | | | | | | | | | |
| (1) | | Bonus amounts paid in 2020 represent amounts earned in 2019. There were no executive bonuses awarded in 2020 or 2021. |
| (2) | | The amounts shown are Company officer compensation and represent the total fair value of the stock awards shares on the date of the grant to officers for fiscal years 2021 and 2020. The fair value of the stock awards is amortized over the vesting period to compensation expense in the Consolidated Statements of Operations contained in this Annual Report on Form 10-K. The fair value of the stock awards was based on the closing market prices of the stock on the dates of the grants. The actual value that an executive officer will realize upon vesting of performance or time-based awards will depend upon the market price of the Company’s stock on the vesting date, so there is no assurance that the value realized by an executive officer will be at or near the value of the market price of the Company’s stock on the grant date. |
| (3) | | Represents amounts paid by the Company on behalf of an officer for matching contributions to the Company’s qualified 401(k) plan, group term life, and auto allowance received during the year. Mr. Francis's other compensation includes severance payments. |
| (4) | | Mr. Rutledge's salary for 2021 represents his prorated annual salary of $250,000 as per the terms of his employment agreement from his September 2021 start date. |
| (5) | | Mr. Francis was the Vice President and Chief Accounting Officer of the Company until his departure in March 2021. Mr. Francis served as the interim Chief Accounting Officer through August 2021 as an independent contractor. |
| (6) | | Mr. Taylor's salary for 2020 represents his prorated annual salary of $240,000 as per the terms of his employment agreement from his July 2020 start date. Mr. Taylor retired in July, 2022. |
| |
Potential Payments Upon Termination or Change of Control
We have entered into employment/severance agreements with Mr. Hart Mr. Brown, Mr. Empey, Mr. Francis, and Mr. Kinison.Rutledge. These agreements are designed to promote stability, continuity and focus for key members of leadership during periods of uncertainty that may be created by change of control situations. Additionally, the use of such agreements is a competitive practice that enhances our ability to attract and retain leadership talent.
Under theseThese agreements have no stated term but provide for the payment of severance benefits will occur in most situations where the employee is terminated without cause or is terminated or resigns in connection with a Change in Control of the Company. Mr. Hart, in this event, will be paid the amount of his annual base salary immediately preceding the termination without cause or Change of Control. For the other executives, theyMr. Rutledge will be paid the amount of 50% of theirhis annual base salary immediately preceding the termination without cause or Change of Control. Most executive equity awards which are subject to vesting provide for accelerated vesting upon the occurrence of a change in control.
“Change of Control” as used in these agreements has a fairly customary definition designed to reflect that a fundamental change in beneficial ownership or control of the Company has occurred. Specifically, the agreements incorporate the term a “change of control event”, as defined in United States Treasury
Regulations (“Regulations”) promulgated under section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) that results from an event in which a person comes to be the owner, directly or indirectly, of 50% or more of outstanding voting securities of the Company or its parent company or the transfer or disposition of all or substantially all of the assets of the Company, its parent or their successor or a person, acquires, directly or indirectly, the voting power to elect a majority of the members of the Board of the Company or its parent (other than in the normal course) or any other similar transaction or series of related transactions.
Senior Management Incentive Compensation Plan
Historically, bonusesCompany executives have received in the past equity and non-equity (cash bonus) incentive compensation. Incentive equity compensation has been awarded based on meeting specified performance metrics; however, in 2019, the Company went through a number of significant changes that disrupted the use of traditional performance-based metrics, including the sale of the Company’s Cable Segment, the acquisition of Fulton, a services-based business, and substantial management and organizational changes in the Telco Segment. In lightform of these significant changes and accomplishments, the Compensation Committee recommended to and the Board of Directors approved the award of discretionary bonuses based generally on success in meeting these restructuring challenges.
In fiscal year 2018, the Compensation Committee set the number of company performance targets, subject to revision at the discretion of the Compensation Committee, to three within the guidelines of the existing plan. All three of the targets were based on financial targets for our operating segments and had a bonus pool potential ranging from 5% - 50% of the salaries of the named executive officers except for Mr. Don Kinison. The overall bonus pool was capped at a maximum of 50% and would be allocated as follows: David Humphrey – 40%, David Chymiak – 32% and Scott Francis – 28%. Mr. Kinison, who was hired in May 2017, was on a guaranteed commission arrangement for fiscal year 2018.
2020 Executive Compensation Plan
On December 4, 2019, the Compensation Committee unanimously approved the 2020 Executive Compensation Plan (the “2020 Executive Compensation Plan”), as described in detail below, and recommended to the Board of Directors, who adopted and approved the 2020 Executive Plan as described. The 2020 Executive Compensation Plan is designed to achieve the Company’s goal of attracting, developing and retaining global business leaders who can drive financial and strategic growth objectives that are intended to build long-term shareholder value. The 2020 Executive Compensation Plan framework includes the following elements: a base salary component, an annual cash bonus plan with both performance-based and discretionary components, and equity-based awardsrestricted stock or stock options granted under the Company’s 2015 Incentive Stock Plan primarily in the formPlan. Cash bonuses have historically been granted as a result of restricted stock grants. The goal is to have approximately 50% of the executives’meeting specified performance metrics.
performance award to be paid in cashFor fiscal years 2021 and 50% in equity to ensure both a short- and long-term view of the Company.
Base Salaries
Base salaries of the Company’s executive officers are established by reference to average base salaries paid to executives in similar positions with similar responsibilities using information supplied by compensation surveys, reports, and research of similarly-sized companies and other sources. The Compensation Committee reviewed and considered reports generated by the NACD Director Compensation Blue Ribbon Commission and the Pearl-Meyer Director Compensation Board when making recommendations to increase Director Compensation, as contemplated by Proposal #4 in this Proxy Statement. Base salaries are generally reviewed annually with the results of each fiscal year and adjustments are made effective as of January 1 following the fiscal year. From time to time, however, promotions and other events require adjustments at other points in the year. While emphasis is placed on measurable financial factors, when it determines base salaries, the Committee also considers factors such as development and execution of strategic plans, changes in areas of responsibility, potential for assuming greater responsibility and the development and management of employees. The Committee does not, however, assign specific weights to these various quantitative and qualitative factors in reaching its decisions.
The following table shows the base salary to be paid to each Named Executive Officer (“NEO”) for Fiscal Year 2020:
Named Executive | Title | Fiscal Year 2020,
Base Salary
|
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Joseph E Hart | CEO | $ 300,000 |
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Kevin Brown | CFO | $ 240,000 |
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Don Kinison | President – Telco Segment | $ 220,000 |
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Colby Empey | President – Wireless Segment | $ 220,000 |
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Scott Francis | Chief Accounting Officer | $ 180,000 |
Annual Bonus Plan
Bonuses are to be paid under this annual bonus plan to NEOs and other senior executives following the end of each fiscal year based on achievement in relation to objective financial goals set at the beginning of each fiscal year. These bonuses are intended to provide senior executives with an opportunity to receive additional cash compensation upon attainment of pre-established performance goals.
At the beginning of each fiscal year, the Committee determines what objective performance measures it will use to assess performance by the Company overall anddid not meet the threshold performance goals approved by each business unit. In addition, the Committee assigns a percentage weight to the various measures that are applied when determining the total bonus to be paid to each executive. The Committee concurrently determines specific goals for each of these performance measures. Most performance measures for business unit performance have three goals to which achievement is compared, defined as “threshold,” “target” and “maximum,” with “target” goals generally being equal to the Company’s budget for that performance measure.
Cash Bonus Compensation of Named Executive Officers
The potential fiscal year 2020 bonuses for the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer will be based on overall Company consolidated performance. Each business unit leader will typically be paid a bonus based on the performance of the business unit he/she manages. A weighting may be applied to overall Company consolidated performance and/or minimum performance triggers may be set to ensure the Company has adequate cash flow and consolidated results. Whether and to what extent bonus compensation is paid to them is determined following the end of the fiscal year. With respect to these measures, the Compensation Committee will compare annual resultsand as a result no bonuses were awarded to goals, and a bonus will be paid if annual performance is generally at least 80% of the target goal for that performance measure.
Concurrent with determining and assigning weightexecutive officers related to the various performance measures,2021 and the goals against which achievement is measured, the Committee determines a “threshold”, “target” and “maximum” bonus opportunity that may be earned by each executive as a percentage of their base salary if actual performance exceeds applicable threshold performance goals. In2020 fiscal year 2020, the “target” annual bonus opportunity for the Senior Executives ranges from 40% to 70% of their respective base salaries, and their respective “maximum” bonus opportunity are approximately 60% to 100% of their respective target bonus opportunity if actual achievement equals or exceeds maximum performance goals.years.
Cash Bonus Targets Pursuant to the Fiscal Year 2020 Annual Bonus Plan
The table below presents the bonus opportunity under the Annual Bonus Plan for the five NEOs as a percentage of their respective base salaries upon achievement of “target” goals for each performance measure (weighted as indicated above), the dollar value of the opportunity at target achievement, and the actual amount paid in cash to the NEOs based on actual achievement in relation to goals for performance measures under the Company’s fiscal year 2020 Annual Bonus Plan.
Named Executive (1) | Title | Fiscal Year 2020 Base Salary | Bonus Opportunity as % of 2020 Base Salary at 100% “Target” Achievement | Dollar Value of Bonus Opportunity at “Target” Achievement |
| | | | | |
| Joseph E. Hart | CEO | $300,000 | 70% | $210,000 |
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| Kevin Brown | CFO | $240,000 | 50% | $120,000 |
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| Don Kinison | President – Telco Segment | $220,000 | 50% | $110,000 |
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| Colby Empey | President – Wireless Segment | $220,000 | 50% | $110,000 |
| | | | | |
| Scott Francis | Chief Accounting Officer | $180,000 | 50% | $72,000 |
(1) In 2019, the Company entered into employment agreements with each NEO. The agreements provide for a base salary and bonus percentage. Actual bonuses will be paid as approved by the Board of Directors based on annual results. In addition, the agreement entitles each NEO to a severance benefit which is described in this Proxy Statement in the section captioned “Potential Payments Upon Termination/Change in Control.
Annual Cash Bonus Plan at Threshold, Target and Maximum Levels:
| Named Executive | Title | Fiscal Year 2020 Base Salary | Bonus Opportunity as % of 2020 Base Salary at 80% “Threshold” Achievement | Dollar Value of Bonus Opportunity at “Threshold” Achievement | Bonus Opportunity as % of 2020 Base Salary at 100% “Target” Achievement | Dollar Value of Bonus Opportunity at “Target” Achievement | Bonus Opportunity as % of 2020 Base Salary at 125% “Maximum” Achievement | Dollar Value of Bonus Opportunity at “Maximum” Achievement |
| | | | | | | | | |
| Joseph E. Hart | CEO | $300,000 | 30% | $90,000 | 70% | $210,000 | 100% | $300,000 |
| | | | | | | | | |
| Kevin Brown | CFO | $240,000 | 20% | $48,000 | 50% | $120,000 | 70% | $168,000 |
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| Don Kinison | President – Telco Segment | $220,000 | 20% | $44,000 | 50% | $110,000 | 70% | $154,000 |
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| Colby Empey | President – Wireless Segment | $220,000 | 20% | $44,000 | 50% | $110,000 | 70% | $154,000 |
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| Scott Francis | Chief Accounting Officer | $180,000 | 20% | $36,000 | 50% | $90,000 | 60% | $108,000 |
Discretionary Bonuses
The Committee and the Board believe the most appropriate approach to paying annual bonus compensation is one in which executives are measured against predetermined objective performance measures and performance goals. However, from time to time, in limited and extraordinary circumstances, the Committee and the Board also believe, it is in the best interest of the Company and its shareholders to pay discretionary bonuses to Management based on strong performance outside of the stated Targets.
Overview of Long-Term Incentive Compensation
Senior Executives are given the opportunity to receive long-term incentive compensation allowing them to participate in the company’s success / equity through the granting of Restricted Stock Awards (“RSAs”) under the 2015 Incentive Stock Plan (assuming shareholders vote to amend the 2015 Incentive Stock Plan to add additional shares):
RSAs will be time-vested annually over a three-year period beginning one year after each award is made. RSA’s will allow the executives to own and participate in the company’s equity performance over time.
RSAs are granted in addition to the NEO’s annual cash performance bonus in order to balance both the short-term and long-term goals of the Company. The three-year vesting of the RSAs help the Company retain key executives, as they must remain with the company for the RSAs to vest.
The number of shares granted to each NEO annually is determined by dividing each NEOs LTI Target (or other amount as determined by the compensation committee) by the current share price on the grant date of the RSA. The committee can choose to defer or postpone the issuance of RSAs based on Company or NEO’s performance and is subject to the availability of shares.
The grant date and amount will be determined by the committee each year based on Company and Individual Performance, with the goal of issuing shares after the Compensation Committee’s review of the Annual financials and determination of each Executive’s award.
2021 Target RSA Example if Share Price is $3.50 per Share (Based on 2020 Performance)
Named Executive
| Title | | Salary | | | Target as % of Salary
| | | Target LTI Target Bonus Amount
| | | 2021 Grant # of Shares (assumes $3.50 Share Price
| |
Joseph E. Hart
| CEO | | $ | 300,000 | | | | 70 | % | | $ | 210,000 | | | | 60,000 | |
Kevin Brown
| CFO | | $ | 240,000 | | | | 50 | % | | $ | 120,000 | | | | 34,286 | |
Don Kinison
| President - Telco Segment
| | $ | 220,000 | | | | 50 | % | | $ | 110,000 | | | | 31,429 | |
Colby Empey
| President - Wireless Segment
| | $ | 220,000 | | | | 50 | % | | $ | 110,000 | | | | 31,429 | |
Scott Francis
| Chief Accounting Officer
| | $ | 180,000 | | | | 50 | % | | $ | 90,000 | | | | 25,714 | |
Other Compensation
In addition to participating in Company-wide plans providing health, dental and life insurance on the same basis as all our other U.S.-based employees, our Senior Executives receive other compensation in various forms, primarily the following:
An annual matching contribution of up to 5% of each executive’s personal contribution to the Company’s 401(k) Plan up to the first 5% of the personal contribution.
A company provided car or car allowance
Other forms of compensation as dictated by the needs of the business.
The Compensation Committee, as part of the 2020 Executive Compensation Planning Process also approved a director compensation plan which is described in Proposal #4 of this Proxy Statement.
Outstanding Equity Awards at September 30, 20192021
The named executive officers of the Company did not have any unvested stock option awards as of September 30, 2021.
The following tablesets forth reflects the outstandingnumber of shares of unvested restricted stock options held by theawards of our named executive officers of the Company as of September 30, 2019. The named executive officers do have restricted stock (see the Restricted Stock Awards listed in the Summary Compensation Table on page 18), and none of the stock options reported in the table are subject to performance-related conditions.2021:
| Named Executive Officer | | Number of Securities Underlying Options which are Exercisable | | | Number of Securities Underlying Options which are Unexercisable | | | Option Exercise Price | | Option Expiration Date |
| Joseph E. Hart | | | 200,000 | | | | – | | | $ | 1.36 | | 9/13/2028 |
| Kevin D. Brown (1) | | ‒ | | | | 75,000 | | | $ | 1.31 | | 3/31/2029 |
| Colby J. Empey (1) | | ‒ | | | | 75,000 | | | $ | 1.31 | | 3/31/2029 |
| Scott A. Francis | | | 50,000 | | | | – | | | $ | 2.45 | | 4/2/2022 |
| | | | 50,000 | | | ‒ | | | $ | 3.21 | | 4/3/2024 |
| | | ‒ | | | | 30,000 | | | $ | 1.28 | | 12/27/2028 |
| Donald E. Kinison | | | 33,334 | | | | 16,666 | | | $ | 1.79 | | 5/2/2027 |
| | | ‒ | | | | 50,000 | | | $ | 1.28 | | 12/27/2028 |
(1) | Mr. Brown and Mr. Empey are each owed an additional 25,000 options at a $1.31 option exercise price per the terms of an outstanding option agreement. These shares will be awarded assuming shareholders vote to amend the 2015 Incentive | | | | |
| Name | Unvested Restricted Stock Plan to add additional shares. |
| Joseph E. Hart | — | |
| Michael A. Rutledge | 92,857 | |
| Reginald Jaramillo | 43,333 | |
| Jimmy Taylor | 32,500 | |
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PROPOSAL NO. 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
Our Audit Committee has selected the accounting firm of HoganTaylor LLP as our independent registered public accounting firm to examine our financial statements for the fiscal year ending September 30, 2020.2022.
Representatives from HoganTaylor will attend the Annual Meeting to answer appropriate questions and make statements if they desire.
Recommendation of the Board of Directors:
The Board of Directors recommends a vote FOR the ratification of the appointment of HoganTaylor.
PRINCIPAL ACCOUNTING FEES AND SERVICES
HoganTaylor LLP audited our consolidated financial statements for the fiscal years ended September 30, 20192021 and 2018.2020. Our Audit Committee considered whether the provisions for the tax services and other services by HoganTaylor were compatible with maintaining their independence and determined that they were.
Fees Incurred by the Company for Services Performed by Audit Firms
The following table shows the fees incurred for the years ended September 30, 20192021 and 20182020 for professional services provided by HoganTaylor for the audits of our annual financial statements as well as other professional services.
| | | 2019 | | | 2018 | |
Audit Fees(1) | | $ | 141,300 | | | $ | 126,500 | |
Audit-Related Fees(2) | | | 76,953 | | | | 1,000 | |
Tax Fees(3) | | | 37,250 | | | | 33,045 | |
All Other Fees | | ‒ | | | | 925 | |
Total | | $ | 255,503 | | | $ | 161,470 | |
1) | Audit Fees represent fees for professional services provided in connection with the audit of our annual financial statements and review of our quarterly financial statements and audit services provided in connection with the issuance of comfort letters, consents, and assistance with review of documents filed with the SEC. |
| | | | | | | | | | | |
| 2021 | | 2020 |
Audit Fees(1) | $ | 129,000 | | | $ | 131,150 | |
Audit-Related Fees(2) | 7,500 | | | — | |
Tax Fees(3) | 25,006 | | | 27,250 | |
| | | |
| Total | $ | 161,506 | | | $ | 158,400 | |
2) | Audit-Related Fees represent reimbursements of travel and other costs associated with audit services. For 2019, these fees also include audit work performed for Fulton Technologies, Inc. and travel-related expenses associated with this work as part of the due diligence process in connection with the asset acquisition of Fulton Technologies, Inc. |
3) | Tax Fees represent fees for annual tax return preparation and research of tax related matters. |
(1) Audit Fees represent fees for professional services provided in connection with the audit of our annual financial statements and review of our quarterly financial statements and audit services provided in connection with the issuance of comfort letters, consents, and assistance with review of documents filed with the SEC.
(2) Audit-Related Fees represent services in connection with special reports, accounting consultations, and due diligence procedures.
(3) Tax Fees represent fees for annual tax return preparation and research of tax related matters.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor
Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm. During the year, the Audit Committee approved all of the services performed by the independent registered public accounting firm. The fees billed for these services approximated 100% of the pre-approved amounts.
Before engagement of the independent registered public accounting firm for the next year’s audit, management will submit a list of services and related fees expected to be rendered during that year within each of the following four categories of services to the Audit Committee for approval:
1.Audit services include audit work performed on the financial statements, internal control over financial reporting, as well as work that generally only the independent registered public accounting firm can reasonably be expected to provide, including comfort letters, statutory audits, and discussions surrounding the proper application of financial accounting and/or reporting standards.
2.Audit-Related services are for assurance and related services that are traditionally performed by the independent registered public accounting firm, including due diligence related to mergers and acquisitions and special procedures required to meet certain regulatory requirements.
3.Tax services include all services, except those services specifically related to the audit of the financial statements, performed by the independent registered public accounting firm’s tax personnel, including tax analysis; assisting with coordination of execution of tax related activities, primarily in the area of
corporate development; supporting other tax related regulatory requirements; and tax compliance and reporting.
4.Other Fees are those associated with services not captured in the other categories. We generally do not request such services from the independent registered public accounting firm other than the annual audit of our Defined Contribution Plan.
1. | Audit services include audit work performed on the financial statements, internal control over financial reporting, as well as work that generally only the independent registered public accounting firm can reasonably be expected to provide, including comfort letters, statutory audits, and discussions surrounding the proper application of financial accounting and/or reporting standards.
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2. | Audit-Related services are for assurance and related services that are traditionally performed by the independent registered public accounting firm, including due diligence related to mergers and acquisitions and special procedures required to meet certain regulatory requirements.
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3. | Tax services include all services, except those services specifically related to the audit of the financial statements, performed by the independent registered public accounting firm’s tax personnel, including tax analysis; assisting with coordination of execution of tax related activities, primarily in the area of corporate development; supporting other tax related regulatory requirements; and tax compliance and reporting.
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4.
| Other Fees are those associated with services not captured in the other categories. We generally do not request such services from the independent registered public accounting firm other than the annual audit of our Defined Contribution Plan.
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Before engagement, the Audit Committee pre-approves the independent registered public accounting firm’s services within each category. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval categories. In those instances, the Audit Committee requires specific pre-approval before engaging the independent registered public accounting firm.
The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
APPROVAL OF OUR PROPOSED AMENDMENT TO
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PROPOSAL NO. 3
APPROVAL OF OUR PROPOSED AMENDMENT TO
2015 INCENTIVE STOCK PLAN |
The Board of Directors is requesting that the shareholders approve the proposed amendment (the “Amendment”) to the ADDvantage Technologies Group, Inc. 2015 Incentive Stock Plan. In January 2015, the Board of Directors adopted the 2015 Incentive Stock Plan to attract and retain key employees and directors, to provide an additional incentive to each key employee and director, to work to increase the value of the Company’s stock, and to provide each key employee and director with a stake in the future of the Company. The 2015 Incentive Stock Plan was approved and adopted on March 4, 2015 at the Annual Meeting of the shareholders. The Amendment to the 2015 Incentive Stock Plan will increase the number of shares of common stock reserved for issuance under the Incentive Stock Plan from 500,0001,500,000 shares to 1,500,0002,500,000 shares of common stock.
On December 4, 2019,August 10, 2022, the Board of Directors unanimously approved the Amendment, subject to approval by the Company’s shareholders at the Annual Meeting. In order for the Amendment of the 2015 Incentive Stock Plan to take effect, it must be approved by the Company’s shareholders. If this Amendment is not approved by the Company’s shareholders, the 2015 Incentive Stock Plan will continue to operate according to its terms. However, almost all of the shares originally reserved to the 2015 Incentive Stock Plan have been issued. Accordingly, unless the shareholders approve the Amendment, the Company will not be able to offer equity incentive compensation to its key employees and directors.
The Board of Directors believes that it is in the best interests of the Company and its shareholders to provide for an Amendment to the 2015 Incentive Stock Plan to continue to attract and retain key employees and directors, to provide additional incentive to each key employee and director, to work to increase the value of the Company’s stock, and to provide each key employee and director with a stake in the future of the Company.
Reasons for the Proposed AmendmentsAmendment
The Company will utilize the increased number of shares of common stock to attract and retain key employees and directors and to ensure that management maintains a reasonable level of equity as the Company grows and uses equity to raise capital and engage in other opportunistic business ventures,
should the opportunity arise. Almost all of the shares originally reserved to the 2015 Incentive Stock Plan have been issued. Therefore, the approval of the Amendment is necessary in order for the Company to be able to offer equity incentive compensation to key employees and directors in the future.
Vote Required
Approval of Proposal No. 3 requires the affirmative vote of a majority of the shares cast at the Annual Meeting. Broker non-votes are counted towards a quorum but will have no effect on the outcome of the vote for this Proposal No. 3.
Recommendation of the Board of Directors:
The Board of Directors recommends a vote FOR the approval of the amendment to the 2015 Incentive Stock Plan.
PROPOSAL TO APPROVE DIRECTOR COMPENSATION PLAN
On December 4, 2019, the Compensation Committee unanimously approved and recommended to the Board of Directors, who also approved a revised director compensation plan, as part of the 2020 Executive Compensation Plan. The Director Compensation Plan, if approved, will be effective as of April 1, 2020. If the director compensation plan is not approved by the Company’s shareholders, director compensation will continue forward at substantially current rates. If approved by the shareholders, our non-employee directors will receive compensation in the manner set forth below.
Proposed Director Compensation
| Name | | Fees Earned or Paid in Cash | | | Restricted Stock Awards (4)
| | | Total Compensation | |
| Thomas J. Franz | | $ | 20,000 | | | $ | 50,000 | | | $ | 70,000 | |
| David E. Chymiak | | $ | 20,000 | | | $ | 50,000 | | | $ | 70,000 | |
| James C. McGill, Nonexecutive Chairman (1) | | $ | 25,000 | | | $ | 50,000 | | | $ | 75,000 | |
John M. Shelnutt (2)
| | $ | 20,000 | | | $ | 50,000 | | | $ | 70,000 | |
David W. Sparkman (3)
| | $ | 30,000 | | | $ | 50,000 | | | $ | 80,000 | |
(1) | James C. McGill and the Company entered into a Letter Agreement on October 8, 2018, which provides that Mr. McGill will receive annual compensation in the form of $75,000 cash and $75,000 in shares of restricted stock for serving as Chairman of the Board. The shares will be delivered 20% per year over five years.
Mr. McGill received his first $15,000 of restricted stock on October 8, 2018, but he has not yet received his $15,000 of restricted stock on October 8, 2019 as the Company does not have enough stock under the 2015 Incentive Stock Plan. If Proposal #3 is approved, the shares owed to Mr. McGill will be granted to him
effective as of October 8, 2019.
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(2) | In addition to the annual compensation to be paid to Mr. Shelnutt in 2020 as set forth in the table above, and subject to the approval of Proposal No. 3, Mr. Shelnutt will be awarded a one-time Restricted Stock Award in the amount of 50,000 shares, vesting in equal increments over a three year period. This one-time award
is being granted to Mr. Shelnutt because of his recent addition to the Board of Directors. The purpose of this one-time award is to attract and retain quality leadership. Further, the award to Mr. Shelnutt will immediately align his individual interests with the short-term and long-term interests of the shareholders.
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(3) | Mr. Sparkman will receive a cash payment $30,000, by reason of his service as Chairman of the Audit Committee.
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(4) | The RSAs made under the proposed director compensation plan vest after one year
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Reasons for Changes to Director Compensation.
Based on the review of similarly-situated companies, the Board believes that current director compensation is substantially below that of its peer group. The Board of Directors believes that the increase in director compensation reflected in the director compensation plan is necessary in order to bring director compensation more in line with that of similarly-situated companies and to allow the Company to retain and attract qualified directors. It is also designed and proposed to bring director compensation more in line with peer groups in the microcap space. Of 298 microcap companies surveyed in the report generated by the Pearl-Meyer Director Compensation Board, the median director compensation was $120,000 per year in 2018. Median director compensation was $66,000 in 2005. The Compensation Committee is recommending an increase from approximately $30,000 to $70,000 to close the gap on competitive director compensation. The committee also recommends putting a higher percentage of director compensation in equity in order to more closely align the Board of Directors with shareholder interests.
Vote Required
Approval of Proposal No. 4 requires the affirmative vote of a majority of the shares not held by directors and employees of the Company. Accordingly, broker non-votes and abstentions will have the same effect as a vote Against Proposal No. 4.
Recommendation of the Board of Directors:
The Board of Directors recommends a vote FOR the approval of the 2020 Director Compensation Plan.
ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
We believe executive compensation is an important matter for our shareholders. A fundamental principle of our executive compensation philosophy and practice continues to be pay for performance. An executive officer’s compensation package is comprised of two components: (i) a base salary, which reflects individual performance and expertise, and (ii) incentive awards, tied to the achievement of certain performance goals that the Compensation Committee establishes from time to time. We believe that this type of compensation program is consistent with our strategy, competitive practice, sound corporate governance principles, and shareholder interests and concerns. We urge you to read the “Compensation of Directors and Executive Officers” and “2020 Executive Compensation Plan” sections of this Proxy Statement for additional details on our executive compensation.
In accordance with the requirements of Section 14A of the Exchange Act of 1934, as amended (the “Exchange Act”) and the related rules of the SEC, we are including in this proxy statement a separate proposal, commonly known as a “say-on-pay” proposal, which gives you as a shareholder the opportunity to endorse or not endorse our executive pay practices by voting for or against the resolution below. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the principles, policies and practices described in this Proxy Statement. As an advisory vote, the result will not be binding on the Company, the Board of Directors or the Compensation Committee, although our Compensation Committee will consider the outcome of the vote when evaluating our compensation principles, design and practices. The Company currently holds its say-on-pay vote every three years. Shareholders have an opportunity to cast an advisory vote on the frequency of say-on-pay votes at least every six years. As currently scheduled, the next say-on-pay vote would take place in 2023, and the next advisory vote on the frequency of say-on-pay votes will be in 2026.
If you abstain from voting on this matter, your abstention will have the effect of a vote against the proposal. If you hold your shares through a broker and you do not instruct the broker how to vote on this proposal, your broker does not have authority to vote your shares. Where no instructions are indicated, properly executed and unrevoked proxies will be voted “FOR” the approval of the compensation of the Company’s named executive officers, as disclosed in this Proxy Statement.
Recommendation of the Board of Directors:
The Board of Directors endorses our executive compensation program, as disclosed in this Proxy Statement, and recommends that our shareholders vote in favor of the following resolution:
“RESOLVED, that the compensation of the Company’s named executive officers as disclosed in the Company’s proxy statement for the Company’s 2020 Annual Meeting, pursuant to Item 402(m) through (q) of Regulation S-K, including the compensation tables and narrative discussion, be, and hereby is, APPROVED.”
ADVISORY VOTE ON FREQUENCY OF
EXECUTIVE COMPENSATION VOTE
As discussed above in Proposal No. 5, executive compensation is an important matter for our shareholders. Companies are required to provide a separate shareholder advisory vote once every six years to determine whether the shareholders’ say-on-pay vote should occur every year, every two years or every three years. As an advisory vote, this proposal is non-binding on us. Our Board of Directors could, if it concluded it was in our best interests to do so, choose not to follow or implement the outcome of the advisory vote. However, we expect that our Board of Directors will consider the outcome of the vote when determining how often to hold a shareholder advisory vote on our executive compensation.
Our executive compensation program is not complex and, largely due to our size, we have only five members of our executive management team. Accordingly, our Board of Directors has concluded that holding an advisory vote on executive compensation every three years should be sufficient to permit shareholders to express their opinions while, at the same time, minimizing the administrative costs of such votes.
Shareholders are not voting to approve or disapprove the recommendation of the Board that the say-on-pay vote be held every two years, but, rather, to express their own preference. The Company will take into consideration the shareholder vote on each of the alternatives set forth in the proxy card with respect to this Proposal.
Recommendation of the Board of Directors:
Our Board of Directors unanimously recommends that you vote that the shareholder vote on executive compensation to be held every “3 YEARS”. Proxies received will be so voted unless shareholders vote otherwise via the Internet or by telephone or specify otherwise in their completed and returned proxy cards.
SHAREHOLDER PROPOSALS FOR 2021 ANNUAL MEETING
If you want to include a shareholder proposal in the proxy statement for the 20212023 annual meeting, it must be delivered to our executive offices, 1430 Bradley Lane, Suite 196, Carrollton, Texas, 75007, on or before October 1, 2020.2022. In addition, if you wish to present a proposal at the 20202023 annual meeting that will not be included in our proxy statement and you fail to notify us by December 15, 2020,2022, then the proxies solicited by our Board for the 20212023 annual meeting will include discretionary authority to vote on your proposal in the event that it is properly brought before the meeting.
At the date of mailing of this proxy statement, we are not aware of any business to be presented at the annual meeting other than the proposal discussed above. If other proposals are properly brought before the meeting, any proxies returned to us will be voted as the proxyholder sees fit.
Only one annual report and proxy statement are being delivered to multiple shareholders who share one address, unless we have received instructions to the contrary. We will promptly provide a separate copy of the annual report and proxy statement to a shareholder at a shared address to which single copies were delivered upon request sent in writing to ADDvantage Technologies Group, Inc., c/o Shareholder Relations, 1430 Bradley Lane, Suite 196, Carrollton, Texas, 75007, or by calling (918) 251-9121. If you wish to receive a separate annual report and proxy statement in the future, or if you currently receive multiple copies of the annual report and proxy statement and wish to request delivery of only single copies, you may notify us at the same address or phone number.
You can obtain a copy of our Annual Report on Form 10-K for the year ended September 30, 20192021 at no charge by sending your request in writing to ADDvantage Technologies Group, Inc., c/o Scott A. Francis, Vice President, Chief Accounting Officer & Secretary,Michael Rutledge, 1430 Bradley Lane, Suite 196, Carrollton, Texas, 75007. This document and other information may also be accessed from our website at www.addvantagetechnologies.com.
Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting To Be Held on March 18, 2020September 23, 2022
Our proxy statement, our form of proxy, our annual report on Form 10-K and shareholder letter are available at http://materials.proxyvote.com/006743.www.proxyvote.com.
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PROXY ADDVANTAGE TECHNOLOGIES GROUP, INC. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS |
The undersigned hereby appoints Joseph E. Hart, as proxy, with the power to appoint his substitute, and hereby authorizes him to represent and to vote, as designated below, all the shares of Common Stock of ADDvantage Technologies Group, Inc. (the “Company”) held of record by the undersigned on July 25, 2022 at the Annual Meeting of Shareholders of the Company to be held at 9:00 am CST on September 23, 2022, at the corporate office of ADDvantage Technologies Group, Inc., 1430 Bradley Lane, Suite 196, Carrollton, TX 75007, and at any and all adjournments or postponements thereof.
1. Election of directors.
•FOR all nominees listed below (except as indicated to the contrary below and subject to the discretion of the proxy as provided herein).
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| David E. Chymiak | Timothy S. Harden | Joseph E. Hart and Kevin D. Brown, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated below, all the shares of Common Stock of ADDvantage Technologies Group, Inc. (the “Company”) held of record by the undersigned on January 22, 2020 at the Annual Meeting of Shareholders of the Company to be held at 9:00 am CST on March 18, 2020, at the corporate office of ADDvantage Technologies Group, Inc., 1430 Bradley Lane, Carrollton, TX 75007, and at any and all adjournments or postponements thereof. |
| James C. McGill | John M. Shelnutt | David W. Sparkman |
WITHHOLD AUTHORITY to vote for all the nominees above. Instructions: To withhold authority for any individual nominee or nominees, write their name(s) here:________________________________________
2. Proposal to ratify the appointment of HoganTaylor as our independent registered public accounting firm for fiscal 2022.
FOR AGAINST ABSTAIN
3. Proposal to approve an amendment to the Company's 2015 Incentive Stock Plan increasing the authorized number of shares of common stock under the plan by 1,000,000 shares.
FOR AGAINST ABSTAIN
Note: In his discretion, the Proxy is authorized to vote upon such other business as may properly come before the meeting.
This Proxy when properly executed will be voted at the Annual Meeting or any adjournments or postponements thereof as directed herein by the undersigned shareholder. If no specifications are made, this Proxy will be voted For Proposals 1, 2 and 3. This Proxy is revocable at any time before it is exercised.
IMPORTANT: Please date this and sign this Proxy exactly as name appears to the left. If shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person.
Dated: , 2022
Signature(s)
Signature(s)
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES
| FOR all nominees listed below (except as indicated to the contrary below and subject to the discretion of the proxy as provided herein). |
David E. Chymiak | Thomas J. Franz | Joseph E. Hart |
James C. McGill | John M. Shelnutt | David W. Sparkman |
| WITHHOLD AUTHORITY to vote for all the nominees above. |
Instructions: To withhold authority for any individual nominee or nominees, write their name(s) here:
2. | Proposal to ratify the appointment of HoganTaylor as our independent registered public accounting firm for fiscal 2020.
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FOR AGAINST ABSTAIN
3. | Proposal to approve an amendment to the Company’s 2015 Incentive Stock Plan increasing the authorized number of shares of common stock under the plan by 1,000,000 shares.
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FOR AGAINST ABSTAIN
4. Proposal to approve director compensation plan.
FOR AGAINST ABSTAIN
5. Proposal to approve, on an advisory basis, the compensation of our named executive officers.
FOR AGAINST ABSTAIN
6. | Proposal to approve, on an advisory basis, the frequency of seeking approval for our executive office compensation.
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1 YEAR | 2 YEARS | 3 YEARS ABSTAIN |
7. | In his discretion, the Proxy is authorized to vote upon such other business as may properly come before the meeting.
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This Proxy when properly executed will be voted at the Annual Meeting or any adjournments or postponements thereof as directed herein by the undersigned shareholder. If no specifications are made, this Proxy will be voted For Proposals 1, 2, 3, 4 and 5, and 3 YEARS for Proposal 6. This Proxy is revocable at any time before it is exercised.
IMPORTANT: Please date this and sign this Proxy exactly as name appears to the left. If shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person.
Dated: , 2020
Signature(s)
Signature(s)
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
