The following table provides information at September 30, 20182019 with respect to compensation plans under which our equity securities are authorized for issuance.

All of the members of our current Board of Directors are included as Nominees to be elected at the annual meeting.  The directors will be elected for one-year terms expiring at the next annual meeting.  Our bylaws provide that our Board shall consist of not less than one nor more than nine directors, as determined from time to time by board resolution.  Our Board has established the number of directors for the 20192020 fiscal year to be six.

Vote Required.  The fivesix nominees receiving the highest number of votes will be elected.  Votes withheld for a nominee will not be counted.  You get one vote for each of your shares of common stock for each of the directorships.

Nominations.  At the annual meeting, we will nominate as directors the persons named in this proxy statement.  Although we do not know of any reason why one of these nominees might not be able to serve, our Board of Directors will propose a substitute nominee if any nominee is unavailable for election.

General Information About the Nominees.  All of the nominees are currently directors of ADDvantage.  Each has agreed to be named in this proxy statement and to serve as director if elected.  The ages listed for the nominees are as of July 15, 2019.January 22, 2020.

The following information, including principal occupation or employment for the past five or more years and a summary of each individual’s experience, qualifications, attributes or skills that have led to the conclusion

Joseph E Hart, 68,69, was appointed as our President and Chief Executive Officer in October 2018.  Mr. Hart served in this capacity on an interim basis beginning in July 2018.  Prior to joining the Company, from November 2015 to March of 2018, Mr. Hart was the CEO of Aero Communications, Inc., which is a company that performs installation, maintenance, and network design and construction for the telecommunications industry.  From 2006 – 2014, Mr. Hart served as the Executive Vice President of Network Infrastructure Services and Operations for Goodman Networks, Inc., a provider of end-to-end network infrastructure, professional services and field deployment to the wireless telecommunications and satellite television industry.  For the previous 20 years, Mr. Hart served in various executive leadership positions for AT&T and other various telecommunication and wireless companies.  Mr. Hart holds a master’s of science degree in systems management from the University of Southern California and bachelor of business administration degree from Baldwin-Wallace College.  Mr. Hart’s extensive management experience in operations and corporate strategy in the telecommunications industry allows him to provide significant input to our Board of Directors.

Thomas J. Franz, 60,61, is currently head of TJ Franz & Associates, a firm specializing in profitability and contract CFO consulting for small and medium sized businesses, which he founded in 2003.    For the 10 years prior, he served as Chief Financial Officer for several businesses and served in a Chief Operating Officer role as well.  From 1983 to 1993 Mr. Franz held several public accounting roles for clients in the banking, government, venture capital, not for profit and financial services industries.  Mr. Franz is a certified public accountant with a bachelor of business administration degree from Oklahoma State University where he also received a masters degree in accounting.  Mr. Franz’s background in business leadership, corporate strategy and financial and operating expertise allows him to provide significant input to our Board of Directors.

James C. McGill, 75,76, was appointed as our Company’s Chairman of the Board on October 7, 2018. Mr. McGill is currently the President of McGill Resources, which is a venture capital investment company, and has served in that capacity since 1987.  In 2015, Mr. McGill formed and owns Ediche, LLC, an importer of women’s clothing from South America to the United States.  He also served in various executive leadership and board of director positions of MacroSolve, Inc., which was a high technology company focused on wireless data collection, from 2002 – 2013.  In addition, he is a board member of numerous organizations in the Tulsa, Oklahoma area, and over the last 40 years he has served on numerous public company boards and has served as chief executive officer of several corporations.  Mr. McGill served on the MacroSolve audit committee for two years and on The IT Group, Inc. audit committee for 12 years as a member and eight years as its chairman. During his career, Mr. McGill has received 25 U.S. and foreign patents in the field of pollution control and has extensive experience in helping to develop early-stage and emerging companies. 

John Shelnutt, 57, is currently Vice President of Blue Danube Systems, a start-up company that designs intelligent wireless access solutions using cloud-based analytics and machine learning to deliver high definition active antenna systems technology to the wireless industry.  Prior to May 2017 when he joined Blue Danube Systems, Mr. Shelnutt served in various executive capacities at Cisco from 2011 – 2016 including leading their mobility division with global responsibility for all of the mobile product offerings of the company and managing one of their largest global customers.  Prior to that, Mr. Shelnutt spent 12 years in various executive leadership roles at Alcatel including the startup of their global DSL division and managing their United States mobility division.  Mr. Shelnutt has also served on various boards within the telecommunications industry including the QuEST Forum, ATIS, Broadband Forum and was an advisor to Tech Titans of Dallas, Texas and the City of New York Public Schools Technology group.  Mr. Shelnutt’s extensive experience in the telecommunications industry and background in business leadership and corporate strategy will allow him to provide significant input to our Board of Directors.

David W. Sparkman, 62, is currently Chief Financial Officer of Oklahoma Capital Bank.  Prior to that, he was the President of the financial consulting firm, Ulysses Enterprises, in which he also served in 2009-2010.  Until the sale of the companies in October 2016, he was the Chief Financial Officer for a group of oil field service companies:  Acid Specialists, LLC; Frac Specialists, LLC; and Cement Specialists, LLC.  Mr. Sparkman served in that capacity beginning in September 2014, and prior to joining this group full-time in this capacity, he provided accounting and financial consulting services to these companies starting in April 2014.  From 2010 to 2011, Mr. Sparkman was the CFO for Great White Energy Services until this company was acquired by Archer Well Company in 2011, and then served as the North America Director of Finance for Archer Well Company until 2013.  Mr. Sparkman also spent 12 years with Dollar Thrifty Automotive Group serving in various accounting and finance-related senior management positions.  Mr. Sparkman is a certified public accountant (inactive) and holds a bachelor of business administration degree in accounting from the University of Arkansas where he graduated Cum Laude.  Mr. Sparkman’s background in business leadership, corporate strategy and financial and operating expertise allows him to provide significant input to our Board of Directors.

Board Independence.  The Board of Directors has determined that Messrs. Franz, McGill, Shelnutt and Sparkman have no relationship with us that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that such individuals are independent under the rules and listing standards of The NASDAQ Stock Market (“NASDAQ”) and the rules of the Securities and Exchange Commission implemented pursuant to the Sarbanes-Oxley Act of 2002.

Board Leadership Structure.  The Board of Directors does not have a current requirement that the roles of Chief Executive Officer and Chairman of the Board be either combined or separated, because the Board of Directors believes it is in our best interest to make this determination based on our current position and direction and the constitution of the Board of Directors and management team.  The Board of Directors evaluates whether the roles of Chief Executive Officer and Chairman of the Board should be combined or separated.  The Board of Directors has determined that having the positions of Chairman and Chief Executive

Oversight of Risk Management.  It is management’s responsibility to manage our enterprise risks on a day-to-day basis.  The Board of Directors is responsible for risk oversight by focusing on our overall risk management strategy and the steps management is taking to manage our risk.

While the Board of Directors as a whole maintains the ultimate oversight responsibility, the Board of Directors has delegated certain risk management oversight responsibilities to its various committees.  The Audit Committee reviews and discusses our major financial risk exposures and the steps management has taken to identify, monitor, and control such risks.  The Compensation Committee is responsible for overseeing risks related to our compensation programs, including structuring and reviewing our executive compensation programs, considering whether such programs are in line with our strategic objectives and incentivizing appropriate risk-taking.  The Corporate Governance and Nominating Committee is tasked with risks associated with corporate governance and compliance.

Committees of the Board.  The Board of Directors has three standing committees:  the Audit Committee, the Compensation Committee, and the Corporate Governance and Nominating Committee.  The Board formed a special committee, the Strategic Direction Committee, in fiscal year 2018 for the purpose of negotiating and approving or disapproving the possible sale of the Cable Television segment of the Company to Mr. David Chymiak or his affiliate.  Upon the closing of the sale of the Cable Television segment effective as of June 30, 2019, the Strategic Direction Committee was dissolved.  The Board formed a committee, the Strategy and Corporate Planning Committee, in fiscal year 2019 following the sale of the Cable Television segment.  The following section describes the functions and membership of each committee and the number of times it met during our fiscal year ended September 30, 2018.2019.

The functions and members of the Audit Committee are set forth below.  The members of the Audit Committee are David W. Sparkman (Chairman), Thomas J. Franz and James C. McGill.  Each of the committee members is “independent” as defined under the rules and listing standards of the NASDAQ Stock Market (“NASDAQ”) and the rules of the Securities and Exchange Commission implemented pursuant to the Sarbanes-Oxley Act of 2002.  The Audit Committee met four times during fiscal year 2018.2019.  All of the meetings were held prior to the reporting of our quarterly financial results.

In connection with its function to oversee and monitor our financial reporting process, the Audit Committee has done the following:

The SEC has adopted rules pursuant to the provisions of the Sarbanes-Oxley Act requiring audit committees to include an “audit committee financial expert,” defined as a person who has the following attributes:

The current members of the Compensation Committee are Thomas J. Franz (Chairman), James C. McGill (Chairman), David E. Chymiak, and David W. Sparkman.John M. Shelnutt.  The Compensation Committee met fourthree times during fiscal 2018.2019.  The functions of the Compensation Committee are set forth below.

The Compensation Committee of our Board of Directors is currently comprised of three 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,  each member is antwo members qualify as  “independent director”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) and satisfies.

Our Board of Directors has determined that it is in the requirementsbest interest of the Company that David E. Chymiak serve on the Compensation Committee, although he is not an “outside director”independent director as defined by Section 162(m)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 Internal Revenue Code.

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), David W. Sparkman, and James C. McGill.McGill, and John M. Shelnutt.  The Committee met one time during fiscal year 2018.2019.  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.

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.

Our Board held seveneleven meetings during fiscal year 2018.2019.  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. Sparkman.  Written correspondence to Mr. Sparkman may be delivered to our executive offices, 1221 East Houston, Broken Arrow, Oklahoma, 74012.1430 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.

Tulsat, as tenant, will be responsible for most ongoing expenses related to the facility, including property tax, insurance and maintenance.

In March 2019, the Company sold its Sedalia, Missouri building to David Chymiak LLC for a cash purchase price of $1,350,000.  In connection with the sale, Comtech Services, which is one of the subsidiaries contained in the Cable TV segment, entered into a ten-year lease with David Chymiak LLC for $128,250 per year, paid in equal monthly installments.  Comtech Services, as tenant, will be responsible for most ongoing expenses related to the facility, including property tax, insurance and maintenance.

In June 2019, the Company sold its Warminster, Pennsylvania building to David Chymiak LLC for a cash purchase price of $725,000.  In connection with the sale, NCS Industries, which is one of the subsidiaries contained in the Cable TV segment, entered into a ten-year lease with David Chymiak LLC for $68,875 per year, paid in equal monthly installments.  NCS Industries, as tenant, will be responsible for most ongoing expenses related to the facility, including property tax, insurance and maintenance.

Each of the real estate transactions described above were approved by the Strategic Direction Committee and

In December 2018, the Company entered into an agreement for the sale of our Cable TV segment business to Leveling 8, Inc., a company controlled by David Chymiak, for $10.3 million.  This agreement was approved by the Company’s Strategic Direction Committee and Board of Directors.  The sale was subject to shareholder approval, and in April 2019, the Company distributed a proxy statement to its shareholders for a special meeting of shareholders on May 29, 2019.  The shareholders approved the sale at the special meeting, and the Company then closed the transaction effective as of June 30, 2019.

The $10.3 million purchase price consisted of $3.9 million of cash at closing (subject to working capital adjustments), less the $2.1 million of cash proceeds from the sale of the Sedalia, Missouri and Warminster, Pennsylvania facilities already received and a $6.4 million promissory note to be paid in semi-annual installments over five years with an interest rate of 6.0%.  The sale of the facility in Broken Arrow, Oklahoma for $5.0 million was completed prior to entering into the sale agreement, and therefore was not an adjustment to the overall purchase price.

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.

On December 4, 2019, the Compensation Committee setunanimously approved the number2020 Executive Compensation Plan (the “2020 Executive Compensation Plan”), as described in detail below, and recommended to the Board of company performance targets, subjectDirectors, who adopted and approved the 2020 Executive Plan as described.  The 2020 Executive Compensation Plan is designed to revision atachieve the discretionCompany’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 Compensation Committee,following elements:  a base salary component, an annual cash bonus plan with both performance-based and discretionary components, and equity-based awards under the Company’s 2015 Incentive Stock Plan primarily in the form of restricted stock grants. The goal is 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% -have approximately 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 his first year of employment.executives’

The following table reflects the outstanding stock options held by the named executive officers of the Company as of September 30, 2018.2019.  The named executive officers do have restricted stock (see the Restricted Stock Awards listed in the Summary Compensation Table on page 15)18), and none of the stock options reported in the table are subject to performance-related conditions.

 

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, 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.