Senior Management Incentive Plan


    

      ADDvantage
        Technologies Group, Inc.

      


      Incentive
        Compensation Plan - 

      Senior
        Management

      


      Section
        I

      Plan
        Objectives

      


      This
        incentive compensation plan has been established to accomplish several important
        objectives:

      


      	·  	
              Improve
                company profitability and performance.

            


      


      	·  	
              Provide
                participants with an incentive to contribute at the highest level
                in
                growing company profits.

            


      


      	·  	
              Provide
                significant incentive opportunities to plan participants, in line
                with
                demonstrated results.

            


      


      	·  	
              Enable
                the company to attract, motivate and retain high-caliber
                talent.

            


      


      


      Section
        II

      Plan
        Participants

      


      Participation
        in this incentive compensation plan will be limited to those individuals
        in
        positions to have direct and significant influence on company performance
        and
        profitability.

      


      Initially,
        participation in this plan will be limited to the following key
        personnel:

      


      ·  Chairman
        of the Board

      ·  President/CEO

      ·  Executive
        Vice President, COO

      ·  Vice
        President, Finance (CFO)

      


      Other
        participants may be included in the plan, subject to approval by the
        Compensation Committee of the Board of Directors. 

      


      


      Section
        III

      Basic
        Plan Provisions

      


      1. Awards
        under this incentive plan will be based on actual earnings before interest
        and
        taxes (EBIT) in relation to established performance targets.

      



      
        
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      2. Annually,
        a Target for EBIT will be established. The Target will be based on the following
        basic formula:

      


      Previous
        Year’s Sales

      x 1.05 

      = Sales
        Threshold

      x 16.0%
        ROS*  

      = EBIT
        Target

      


      For
        example, if sales in FY-06 were $52.5 million, then the EBIT Target would
        be set
        as follows:

      


      $52.5
        mil. x 1.05 = $55.1 mil. x 16.0% = $8.82 mil.

      


      3. The
        primary basis for determining incentive awards will be actual EBIT in relation
        to the EBIT Target. The following schedule will be used in determining incentive
        awards:

      


      %
        Target CEO
         COO  CFO

                 (%
        Salary) (%
        Salary) 
        (%
        Salary)

      


      105%
        15%
        11.25%
        7.5% 

      110%20%
        15.0%
        10.0%

      115%25%
        18.8%12.5%

      120%30%
        22.5%15.0%

      125%35%
        26.3%17.5%

      130%
        40%
        30.0%20.0%

      135%
        45%
        33.8%22.5%

      140%
        50%
        37.5%25.0%

      145+%
        55%
        41.3%27.5%

      


      4. The
        incentive award as a percentage of salary for the Chairman will be the same
        as
        for the President/CEO. For example, if the company earns 110% of Target,
        then
        the Chairman and President/CEO will earn a 20% incentive award, as a percentage
        of annual salary, and the COO will earn 15% and the CFO will earn a 10%
        incentive award.

      


      



      
        
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      Section
        IV

      Payment
        of Incentive Awards

      


      Incentive
        awards under this plan will be paid following the close of the fiscal year,
        once
        audited financial statements are available. Normally, incentive awards will
        be
        paid no later than December of the following fiscal year. 

      


      The
        following guidelines will be observed in determining and paying incentive
        awards
        to plan participants:

      


      	·  	
              Incentive
                awards will be calculated as a percentage of the actual base salary
                paid
                to the participant during the year in which the award is
                earned.

            


      	·  	
              The
                participant’s performance must be assessed as at least “meets
                expectations” or no incentive award will be earned or
                paid.

            


      	·  	
              The
                participant must be employed by the company at the time the award
                is paid
                in order to be eligible for payment.

            


      	·  	
              The
                payment of incentive awards may not cause the company to earn less
                in
                net
                income
                than a 10% return on sales.

            


      	·  	
              All
                incentive awards will be approved by the Compensation Committee of
                the
                Board of Directors.

            


      


      


      Section
        V

      Plan
        Administration 

      


      This
        incentive compensation plan will be administered by the Compensation Committee
        of the Board of Directors. No member of the Compensation Committee will be
        a
        participant in this plan.

      


      The
        Compensation Committee will exercise the following responsibilities in the
        administration of this plan:

      


      	·  	
              Adopting
                the plan and approving its provisions.

            


      	·  	
              Revising
                the performance targets in the plan and the associated incentive
                opportunities available to participants. 

            


      	·  	
              Monitoring
                and evaluating performance in relation to established performance
                targets.

            


      	·  	
              Monitoring
                the plan, in relation to its objectives, and revising or discontinuing
                it
                as appropriate.

            


      	·  	
              Approving
                incentive awards to participants.

            


      


      This
        incentive plan may be modified or discontinued, at any time, without advance
        notice to participants. Moreover, this incentive plan does not represent
        an
        employment contract nor a commitment by the company to the employment of
        any
        plan participant for a specified term.

      


      *
        * * * *
        * *

      Villareal
        & Associates

      February
        - 2007

      


      


      

        

        
          *
            EBIDTA
            as a percentage of annual sales.