Approval of Amendment to 2017 Stock Incentive Plan Increasing the shares reserved for issuance from 350,000 to 400,000.  The approval of the proposed amendment to the 2017 Stock Incentive Plan requires the affirmative vote of a majority of the votes cast at the meeting by shareholders who are present and entitled to vote on the matter. An abstention by a shareholder with respect to this proposal will have the same effect as a vote “Against” the proposal.

Appointment of Independent Auditor.  The ratification of the appointment of Baker Tilly Virchow Krause, LLP as the Company’s independent registered public accounting firm for fiscal 20192020 requires the affirmative vote of a majority of the votes cast at the meeting by shareholders who are present and entitled to vote on the matter.

Routine Versus Non-Routine Matters.  Brokers can vote on their customers’ behalf on “routine” proposals such as PROPOSAL 4,3, the ratification of appointment of Baker Tilly Virchow Krause, LLP as the Company’s independent registered public accounting firm.  Brokers cannot vote on their customers’ behalf on “non-routine” proposals such as PROPOSAL 1, the election of directors and PROPOSAL 2, the advisory vote on executive compensation and PROPOSAL 3, the amendment of the 2017 Stock Incentive Plan.compensation. Because brokers require their customers’ direction to vote on such non-routine matters, it is critical that shareholders provide their brokers with voting instructions.

Effect of Broker Non-Votes.  If you hold your shares in street name and do not provide voting instructions to your bank, broker or other custodian, your shares will not be voted on PROPOSAL 1 PROPOSAL 2 or PROPOSAL 32 which are proposals on which your broker does not have or does not exercise discretionary authority to vote (a “broker non-vote”), such as may be the case with other non-routine matters for which you do not provide voting instructions. A broker non-vote on any of the proposals presented at the virtual annual meeting will have no effect on the outcome of the proposal.

PROPOSAL 1

ELECTION OF DIRECTORS

The Board of Directors currently consists of sixfive members. The Board has nominated the five individuals below to be elected at the meeting. All of the nominees are presently directors of the Company. Michael J. Kennedy will not standand are standing for re-election. Proxies solicited by the Board will, unless otherwise directed, be voted for the election of the following eightfive nominees:

Kathleen P. Iverson

David B. Kunin

Ryan P. McManus

Jay D.Miller

Jay D. Miller

Steven J. Rosenstone

Following is information regarding the nominees:

Kathleen P. Iverson. Ms. Iverson currently serves as a director for Marten Transport (MRTN) which operates as a temperature-sensitive truckload carrier for shippers in the U.S., Canada and Mexico. Ms. Iverson retired in March 2016 from CEO (consulting) of Black Hills IP, a provider of IP, paralegal and trademark services since October 2014. Ms. Iverson previously served on the board of directors of MOCON Inc., which develops, manufactures and markets measurement, analytical and monitoring products for the barrier packaging, food and pharmaceutical markets until MOCON was sold. She previously served as a director of Speed Commerce, Inc., a provider of end-to-end e-commerce services from 2008 until 2014. Ms. Iverson served as President and CEO of CyberOptics Corporation, a designer and manufacturer of optical process control sensors and measurement inspection systems used in the electronic assembly and semiconductor industries, from January 2003 until her retirement in January 2014. Ms. Iverson held a variety of positions with CyberOptics beginning in 1998; she was a director from May 1998 through January 2014, and she was Chairman of the Board

4

from August 2009 through January 2014. Ms. Iverson brings to our Board her experience and knowledge from her executive and board positions and strong experience in the electronics manufacturing industry.

David B. Kunin. Mr. Kunin is currently the chief executive officer of Beautopia LLC, a beauty products manufacturing business, since 1998. From 1997 until October 2011 he served as a director of Regis Corporation, the world’s largest owner and franchisor of hair salons. He spent ten years in sales and senior management positions for computer companies, contract manufacturing and printed circuit board fabrication. He serves as president of a family holding company, Curtis Squire, Inc., the owner of 49% of the Company’s outstanding common stock. Mr. Kunin has been a director of the Company since May 2014 and has been the Company’s Chairman of the Board since May 2015. Mr. Kunin brings to our Board his experience in the contract manufacturing and printed circuit board businesses as well as his twenty years’ business perspective, including as a director of large publicly traded businesses.

Ryan P. McManus.  Mr. McManus is a recognized as a global leader in the field of digital business strategy.  He is the founder and CEO of techtonic.io where he works with startups, growth firms and large corporations on digital strategy and transformation topics including new ventures, growth, product development and innovation. From 2015 to 2018, he was Senior Vice President of Partnerships at EVRYTHNG, a Smart Products IoT Platform company. McManus was with Accenture Strategy from 2010 to 2015 and during that time he founded Accenture’s Digital Business Strategy practice and also served as Accenture Strategy’s chief operating officer and a leader in the firm’s Corporate Strategy, M&A and International Expansion practices.  After starting out in 1995 in Chicago with Andersen, in 2002 he joined PriceWaterhouseCoopers as Director of Strategy and Operations and then in 2009 formed RPM Global Advisors delivering strategy, product development and international growth services before joining Accenture.  He has worked with large and small companies on digital business, new venture, and global strategies across industrial, technology, financial services, pharma, health, professional services, retail, and government sectors.  He is the author of several publications and a frequent presenter at summits, forums and institutions in the field of digital and business strategy.  Mr. McManus brings to our Board his experience and knowledge as a global leader in business strategy.  He has beenMr. McManus is a director since 2016.member of the board of directors of the New York chapter of the National Association of Corporate Directors (NACD).

Jay D. Miller. Mr. Miller has been a Director of the Company since May 2018 and the Company’s President and Chief Executive Officer since February 27, 2019.  Mr. Miler is also a member of the board of directors of icometrix (Leuven, Belgium), and the acting chairman of the board for NXC Imaging (Minneapolis, MN), a medical imaging distribution company, a position he has held since 2016.  Mr. Miller also serves as an advisor for Nous Imaging, Inc. (St. Louis, MO). None of these companies is on the boardan affiliate of NerveVision (Toronto, Canada), which develops medical software products.Nortech Systems. From August 2013 to February 2016, he was president, chief executive officer and member of the board of IMRIS, which designs image-guided surgical solutions, and was previously chief operating officer since 2012. In May 2015, IMRIS filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code.  Mr. Miller was chief executive officer at the time of the bankruptcy filing, guided the company through the restructuring process and remained chief executive officer for a period of time after IMRIS, Inc. emerged successfully from bankruptcy.  Prior to 2012, Mr. Miller was the CEO of Zonare, Inc and Vital Images, Inc. in the medical imaging and visualization industry. Early in his career Mr. Miller worked for Siemens Medical Systems (now Siemens Healthineers) and GE Medical Systems (now GE Healthcare). He has also advised and served on the boards of directors of numerous companies in the healthcare industry. Mr. Miller brings to our Board broad experience in the healthcare industry and knowledge of governance and public company compliance.

Steven J. Rosenstone.  Rosenstone.Dr. Rosenstone was the Chancellor of the Minnesota State Colleges and Universities from 2011 until his retirement in 2017. Previously he was Vice President of Scholarly and Cultural Affairs at the University of Minnesota from 2007 to 2011 and Dean of the College of Liberal Arts of the University of Minnesota from 1996 to 2007. He was earlier on the faculty at Yale University and the University of Michigan. He has served on numerous boards and commissions including the Minnesota Business Partnership and the Governor’s Workforce Development Board, and he is a member of the American Academy of Arts and Sciences. He twice traveled to the People’s Republic of China on behalf of the University of Minnesota and in 2016 was a member of Governor Mark Dayton’s trade mission to Mexico. Dr. Rosenstone brings to our Board his broad academic background, leadership skills, knowledge of research universities and technical colleges, workforce development, and the culture and markets of China and Mexico. Dr. Rosenstone is a member of the board of directors of the Saint Paul Chamber Orchestra (SPCO).

5

DIRECTORS MEETINGS

There were sixseven meetings of the Board of Directors during the last fiscal year. All directors acting that year attended all the meetings of the Board and committees of the Board on which such director served,Directors, either in person or telephonically. The Board of Directors took action by written consent on one occasion.five occasions. 

We encourage Board members to attend the virtual annual meeting of shareholders.  All the Company directors serving on the Board of Directors at the time of the Company’s 20182019 annual meeting were in attendance.

COMMITTEES

The Board of Directors has established a Nominating and Corporate Governance Committee, a Compensation and Talent Committee, and an Audit Committee.  The members of the Nominating and Corporate Governance Committee are Ms. Iverson, Mr. McManus and Mr. Rosenstone. The members of the Compensation and Talent Committee are Ms. Iverson, Mr. Kennedy, Mr. McManus and Mr. Rosenstone. The members of the Audit Committee are Ms. Iverson, Mr. McManus Mr. Rosenstone and Mr. Kennedy.Rosenstone.

In the last fiscal year the Audit Committee met four times, the Compensation and Talent Committee met four times, and the Nominating and Corporate Governance Committee met four times.  All committee members attended all the meetings of the committees of the Board on which such committee member served, either in person or telephonically. The charters of all committees are posted on the Company’s website at www.nortechsys.com.

DIRECTOR INDEPENDENCE

The Board of Directors has determined that Ms. Iverson, Mr.  Kennedy, Mr,, McManus and Mr. Rosenstone are independent directors in accordance with the NASDAQ rules. Mr. Miller was an independent director until January 1, 2019, when he became Interim President of the Company. In evaluating Mr. Miller’s independence, the Board has considered his employment agreement with the Company, described under “Employment Agreements” and has determined that he was not independent, effective January 1, 2019 and therefore he resigned from the Company’s Audit Committee on such date.date. Mr. Miller resigned from the Compensation and Talent Committee and the Nominating and Corporate Governance Committee when he was appointed Chief Executive Officer and President of the Company on February 27, 2019.

Further, the Board has determined that Ms. Iverson is an “audit committee financial expert” as defined by applicable regulations of the Securities and Exchange Commission.

BOARD LEADERSHIP STRUCTURE

The Board has determined that the positions of Chairman of the Board and Chief Executive Officer should be held by different persons.  The Board believes that this leadership structure has enhanced the Board’s oversight of, and independence from, the Company’s management and the Board’s ability to carry out its roles and responsibilities on behalf of the shareholders.

RISK OVERSIGHT

Management and the Company’s outside counsel discuss risks, both during Board meetings and in direct discussions with Board members.  These discussions identify Company risks which are prioritized and assigned to the appropriate Board committee or the full Board for oversight.  Internal control and financial risks are overseen by the Audit Committee; compensation risks are overseen by the Compensation and Talent Committee; CEO succession planning is overseen by the Nominating and Corporate Governance Committee; and compliance risks are typically overseen by the full Board.  Management regularly reports on each such risk to the relevant committee or the Board, and material risks identified by a relevant committee are then presented to the full Board.  The Company’s risk management program as a whole is reviewed annually at a meeting of the Board.  Additional review or reporting on Company risks is conducted as needed or as requested by the Board or committee.

6

EXECUTIVE OFFICERS

The Executive Officers of the Company as of the mailing date of this proxy statement are as follows:

Mr. Miller joined the Company in May 2018 onas a member of the Board of Directors andDirectors. He was appointed Interim President in January 2019 and then President & Chief Executive Officer in February 2019. Mr. Miller’s full biography can be found within Proposal 1.

Ms. Beck joined the Company in January 2018, and has held the position of Vice President and Chief Financial Officer since her hiring. Ms. Beck's employment agreement with the Company is effective until January 8, 2021, and will automatically unless either party gives 90 days' written notice that such party will not renew the agreement. Ms. Beck was formerly vice present of finance and controller for MOCON, Inc., a publicly traded provider of measurement instruments and services, from 2013 to 2017.

      Ms. Grange joined the Company in September 2019 as the Company’s Senior Vice President of Human Resources. Ms. Grange's employment agreement with the Company is effective until September 30, 2020, and will automatically unless either party gives 90 days' written notice that such party will not renew the agreement. Ms. Grange was formerly vice president of human resources for Thomson Reuters legal division from 2012 to 2019.

Mr. Lindeen joined the Company in 2013 as the Company’s Industrial Market Lead. Mr. Lindeen's employment agreement with the Company is effective until September 30, 2020, and will automatically unless either party gives 90 days' written notice that such party will not renew the agreement. He has held various positions since joining the Company and as of January 2019, is the Sr.Senior Vice President of Global Operations.

Mr. Steichen has been Chief Marketing and Sales Officer since January 2012.  Mr. Steichen's employment agreement with the Company is effective until September 30, 2020, and will automatically unless either party gives 90 days' written notice that such party will not renew the agreement. He has held senior marketing and operational positions with the Company since May 2005.

Executive Cash Compensation

The Company sets base salaries for the named executive officers at a level that is believed to enable the Company to hire and retain them in a competitive environment and to reward satisfactory individual performance and level of contribution to the Company’s overall business objectives.  The Compensation and Talent Committee reviews base salaries for the Company’s named executive officers each year and generally approves increases for the following year in December or as soon as practicable thereafter.

In addition to base compensation, the Company provides the named executive officer an opportunity for annual performance-based bonus compensation to motivate achievement of Company-related performance goals.   The performance-based bonus typically has been tied to a combination of achievement of certain financial goals and pre-established individual goals, subject to adjustments approved by the Compensation and Talent Committee.  Annual incentives are paid following approval by the Compensation and Talent Committee in the year following the achievement of the goals.

The target cash compensation for named executive officers for fiscal 2019 is as follows:

COMPENSATION AND TALENT COMMITTEE

The Compensation and Talent Committee is composed of the independent outside directors whose names appear below.  The Committee has a charter which is available on the Company’s website (www.nortechsys.com)(www.nortechsys.com).

The duties and responsibilities of the Committee determinesare to: (a) Oversee the Company's executive officers' compensation structure, policies and programs, and assess whether the Company's compensation structure establishes appropriate incentives for such executive officers. Make recommendations to the Board with respect to the Company's incentive-compensation and equity-based compensation plans; (b) Review and approve annually the corporate goals and objectives applicable to the compensation of the Chief Executive OfficerCEO; evaluate at least annually the CEO’s performance in light of those goals and objectives, and determine and approve the CEO’s compensation level based on this evaluation, considering the results of the Companymost recent stockholder Say on Pay Vote; (c) Review and recommendsmake recommendations to the board of directors regarding the compensation of all other executive officers. In evaluating and making recommendations regarding executive officer compensation, the Committee considers the results of the most recent Say on Pay Vote. Review, and approve and, when appropriate, recommend to the Board for approval, incentive compensation plans and equity-based plans. Review annually the compensation of directors for service on the other executive officers. Compensation for executive officers includes three elements: base salaries, performance-based bonuses, equity based compensation.  Salaries are based on factors such asBoard and its committees and recommend changes in compensation to the individual’s level of responsibilityBoard; (d) Review talent acquisition and the amount of salary paidworkforce development plans, activities, and metrics needed to executives with similar responsibilities in comparable companies.  Performance-based bonuses are awarded based on a combination ofrealize the executive’s success in meeting certain pre-established individual goals and the Company’s performance in meeting certain financial goals.  All equity-based compensation is designed to increase the incentive for an executive’s interestobjectives in the Company’s success as measured bystrategic plan. Review talent transitions, vacancies, and projected talent needs. Discuss the market value of its stock or other financial-related measures and to align the interests of the executives with thosedevelopment of the Company’s shareholders.top talent. Review Company succession plans; and (e) Review diversity, inclusion, and climate plans and metrics.

The Chief Executive Officer’s base compensation for 2018each the current and former Chief Executive Officer for 2019 was established under an amended and restated employment agreement executed on May 15, 2017.agreements.  It was determined that the total compensation of each the current and the former Chief Executive Officer was comparable to compensation of chief executive officers of comparable companies.  The base compensation of the other executive officers was set at the level necessary to attract and retain executives performing the functions being performed by such executives.

EXECUTIVE COMPENSATIONCompensation and Talent Committee Interlocks and Insider Participation

The Compensation and Talent Committee had no interlocks.

EXECUTIVE COMPENSATION

20182019 Summary Compensation Table

The table below shows the compensation of the Company’s Chief Executive Officer, former Chief FinancialExecutive Officer and each of the other two most highly compensated executive officers for services to the Company in 20182019 and 2017.

statements for the fiscal year ended December 31, 2018 for a discussion of the assumptions made in calculating the grant date fair value in accordance with FASB ASC Topic 718.  None of the option awards are subject to performance conditions.

(2)   Represents amounts earned on redeemed units under the Equity Appreciation Rights Plan.  Under this Plan, the Company may award equity appreciation rights units to employees or directors that give the holder the right to receive a cash payment equal to the appreciation in book value per share of Common Stock from the designated base date to the redemption date.  The units are subject to redemption by the Company 36 months after the designated base date.  Additional information regarding the grants of equity appreciation rights to the named executive officers is included below these footnotes.  This column would also include cash bonus amounts accrued under the Company’s Annual Incentive Compensation Plan; however, there were no such amounts accrued in 2018 or 2017.

(3)   Represents amounts accrued under the Executive Life Insurance Plan for executive officers. Pursuant to this Plan, the Company has paid a bonus to each officer equal to 15% of the officer’s base annual salary, as well as an additional bonus to cover federal and state income taxes incurred by the officer with respect to the 15% bonus. The officers are required to purchase life insurance and retain ownership of the life insurance policy once it is purchased. The Plan provides a five-year vesting schedule in which the officers vest in their bonus at a rate of 20% each year. Should an officer terminate employment prior to the fifth year of vesting, that officer must reimburse the Company for any unvested amounts. This plan was terminated as of December 31, 2017.

(4)   Mr. Mahmood was the Company’s Chief Operating Officer until his resignation on October 5, 2018.

GRANTS OF PLAN-BASED AWARDS - 2018 (1)

Under the Miller Agreement, if Mr. Miller’s employment is terminated by the Company without Cause (as defined in the Miller Agreement) or by Mr. Miller for Good Reason (as defined in the Miller Agreement), so long as he has signed and has not revoked a release agreement, he will be entitled to receive severance comprised of (i) his base salary in effect at time of termination for the longer of (a) the remainder of the term of the Miller Agreement or (b) twelve months, (ii) the earned Miller Bonus Payment for the prorated bonus earned through the last day worked, (iii) if such termination occurs after the first anniversary of the Effective Date of the Miller Agreement , the vesting of his stock options and equity appreciation rights units, and (iv) certain benefits set forth in the Miller Agreement.

If Mr. Miller’s employment is terminated within 12 months after a Change of Control (as defined in the Miller Agreement) by the Company without Cause, so long as he has signed and has not revoked a release agreement, he will be entitled to receive severance comprised of (i) his base salary in effect at time of termination for the longer of (a) the remainder of the term of the Miller Agreement or (b) twelve months, (ii) the maximum payable Miller Bonus Payment for the year in which he is terminated, for the portion of such fiscal year through the date of termination, (iii) the vesting of his stock options and equity appreciation rights units, and (iv) certain benefits set forth in the Miller Agreement.

Richard G. Wasielewski.  The Company entered into an Amended and Restated Employment Agreement with Richard Wasielewski, the Company’s Chief Executive Officer, on May 15, 2017, which was amended on December 19, 2018 to extend the term until May 15, 2019 at which time Mr. Wasielewski will retire (the “Wasielewski Agreement”).  Under the CEO Agreement, Mr. Wasielewski is entitled to receive an annual salary of $300,000.  Mr. Wasielewski is eligible for bonus compensation (the “Wasielewski Bonus Payment”), based upon his satisfaction of specific criteria to be determined for each calendar year by the Company’s Compensation and Talent Committee, with a stated payout percentage of up to 50% of base salary under the bonus plan.

Upon entering into the Wasielewski Agreement, and pursuant thereto, the Company granted Mr. Wasielewski a 75,000 share non-qualified stock option under the Company’s 2017 Stock Incentive Plan that will vest upon retirement. The stock option expires on May 15, 2027.

The Wasielewski Agreement has customary non-competition, non-solicitation and confidentiality provisions.

The Wasielewski Agreement contains customary severance provisions.

Constance Beck. The Company entered into an Employment Agreement with Constance Beck on January 8, 2018, as amended on September 9, 2019 (the “Beck Agreement”). The initial term of the Beck Agreement iswas 24 months, but it may be extendedwhich has automatically renewed and will continue to automatically renew for an additional one year period by mutual consent of the parties.successive one-year renewal terms unless notification from either party occurs. Under the Beck Agreement, Ms. Beck is entitled to receive anBeck's initial annual salary ofwas $200,000 during the first year of the Beck Agreement’s term the annual salary may thereafter be increasedand is subject to increase in the Board of Director’s (the “Board”) sole discretion or decreased with Ms. Beck’s consent. Ms. Beck is eligible for bonus compensation (the “Bonus Payment”) based upon her satisfaction of specific criteria to be determined for each calendar year by the Company’s Compensation and Talent Committee, with a stated payout percentage of up to 35% of base salary under the bonus plan. Forplan, which may be increased at the bonus plan year of 2018, Ms. Beck was guaranteed 50%discretion of the bonus for which she was eligible ($35,000).Board.

Upon entering into the Beck Agreement, and pursuant thereto, the Company granted Ms. Beck a 20,000 share non-qualified stock option under the Company’s 2017 Stock Incentive Plan that will vest annually in three equal installments. Ms. Beck’s stock option has an exercise price of $3.77 per share, equal to the fair market value of the Company’s Common Stock on the grant date and expires on January 8, 2028.

The Beck Agreement has customary non-competition, non-solicitation and confidentiality provisions.

Under the Beck Agreement, if Ms. Beck’s employment is terminated by the Company without Cause (as defined in the Beck Agreement) or by Ms. Beck for Good Reason (as defined in the Beck Agreement), so long as she has signed and has not revoked a release agreement, she will be entitled to receive severance comprised of (i) her base salary in effect at time of termination for the longer of (a) the remainder of the term of the Beck Agreement or (b) twelve months and (ii) the earned Bonus Payment, prorated for the year in which her employment is terminated through her employment termination date.

11

If Ms. Beck’s employment is terminated within 12 months after a Change of Control (as defined in the Beck Agreement) by the Company without Cause or by Ms. Beck for Good Reason, so long as she has signed and has not revoked a release agreement, she will be entitled to receive severance comprised of (i) her base salary in effect at time of termination for the longer of (a) the remainder of the term of the Beck Agreement or (b) eighteen months, (ii) the maximum payable Bonus Payment for the year in which she is terminated, prorated for the portion of such year through the date of termination and (iii) the vesting of her stock options and the continuation of certain benefits.

John Lindeen. The Company entered into an Employment Agreement with John Lindeen on September 10, 2019 (the “Lindeen Agreement”). The initial term of the Lindeen Agreement continues until September 30, 2020, which will automatically renew for successive one-year renewal terms unless notification from either party occurs. Under the Lindeen Agreement, Mr. Lindeen is entitled to receive an annual salary of $211,750, the annual salary may thereafter be increased in the Board’s sole discretion or decreased with Mr. Lindeen’s consent. Mr. Lindeen is eligible for Bonus Payment based upon his satisfaction of specific criteria to be determined for each calendar year by the Company’s Compensation and Talent Committee, with a stated payout percentage of up to 40% of base salary under the bonus plan.

The Lindeen Agreement has customary non-competition, non-solicitation and confidentiality provisions.

Under the Lindeen Agreement, if Mr. Lindeen’s employment is terminated by the Company without Cause (as defined in the Lindeen Agreement) or by Mr. Lindeen for Good Reason (as defined in the Lindeen Agreement), so long as he has signed and has not revoked a release agreement, he will be entitled to receive severance comprised of (i) his base salary in effect at time of termination for the longer of (a) the remainder of the term of the Lindeen Agreement or (b) nine months and (ii) certain benefits set forth in the Lindeen Agreement.

If Mr. Lindeen’s employment is terminated within 12 months after a Change of Control (as defined in the Lindeen Agreement) by the Company without Cause or by Mr. Lindeen for Good Reason, so long as he has signed and has not revoked a release agreement, he will be entitled to receive severance comprised of (i) his base salary in effect at time of termination for the longer of (a) the remainder of the term of the Lindeen Agreement or (b) nine months and (ii) certain benefits set forth in the Lindeen Agreement.

Named Executive Officer Cash Compensation

The Company sets base salaries for the named executive officers at a level that is believed to enable the Company to hire and retain them in a competitive environment and to reward satisfactory individual performance and level of contribution to the Company’s overall business objectives. The Compensation and Talent Committee reviews base salaries for the Company’s named executive officers each year and generally approves increases for the following year in December or as soon as practicable thereafter.

In addition to base compensation, the Company provides the named executive officer an opportunity for annual performance-based bonus compensation to motivate achievement of Company-related performance goals. The performance-based bonus typically has been tied to a combination of achievement of certain financial goals and pre-established individual goals, subject to adjustments approved by the Compensation and Talent Committee. Annual incentives are paid following approval by the Compensation and Talent Committee in the year following the achievement of the goals.

The target cash compensation for named executive officers for fiscal 2020 is as follows:

The following table provides information regarding each option granted to outside directors during 2018 which vest annually over five years and expire May 8, 2028.

Shareholder Nominees

The Committee has adopted a policy of considering director candidates recommended by shareholders. Any shareholder desiring to submit such a recommendation should transmit the candidate’s name and qualifications in a letter addressed to:

Nominating and Corporate Governance Committee
Nortech Systems Incorporated
7550 Meridian Circle N., Suite 150
Maple Grove, MN 55369

Director Qualifications

The Company’s directors play a critical role in overseeing the management of the Company and its strategic direction.  The goals of the Committee are to identify and elect highly skilled and qualified directors who will be effective executing the Board’s oversight and fiduciary responsibilities on behalf of shareholders, contribute to the Company’sCompany's success through their expertise and diversity of thought and experience, and continue the high levels of collaboration and the healthy culture amongst the Board and management.

Qualifications for candidates are based on various criteria, such as broad business and professional skills and experiences as management or directors of other companies.  Director candidates are expected to have the necessary time available to perform their duties and responsibilities to the Company.

The Nominating and Corporate Governance Committee and the Board of Directors have established minimum requirements for attracting qualified director candidates as follows: at least 10 years of relevant business experience, ability to read and understand financial statements, no conflict of interest with the Company, and meet the Company’s Code of Business Conduct and Ethics.  The Nominating and Corporate Governance Committee and the Board of Directors retain the right to modify these minimum requirements from time to time.

The Nominating and Corporate Governance Committee and the Board of Directors seek directors with diversity of skills and experiences.  To determine whether the Board has the appropriate diversity or a new member could improve the diversity the following issues are considered:

To determine whether the Board has the appropriate skills, experience and diversity, the following skills and experiences are considered:

·                  Prior public, advisory, private or non-profit board experience: including a track record of business leadership and demonstrable grasp of modern board practice and principles, the ability to guide, facilitate and empower the debate of critical issues, leveraging all Board members’ skills and knowledge to achieve a consensus and deliver results.

·                  Senior executive experience relevant to Nortech’s business:  an outstanding track record as a business leader, preferably as CEO or President; an independent thinker with appropriate stature and style, experience dealing broad shareholder groups; a track record of driving growth for complex, high performance businesses; global expertise/knowledge of key international markets.

·                  Personal traits and characteristics:  high ethical standards and integrity; willing to act on and be accountable for Board decisions; ability to provide wise, thoughtful counsel on a range of issues; have a history of achievements that reflect high standards for themselves and others; will be

14

committed to driving success of the Company; able to take tough positions while being a team player; commitment to active engagement in a new Board role; availability of time to serve.

·                  Diversity in perspective, experience base, geography, age and background; candidates should be representative of customers and employees that Nortech has now and those Nortech is seeking in the future.

·                  Ability and willingness to introduce organizations and individuals of strategic interest to Nortech and to facilitate such relationships.

Identifying and Evaluating Nominees for Directors

The Nominating and Corporate Governance Committee uses a variety of methods for identifying and evaluating qualified nominees for directors. The Committee periodically assesses the appropriate size and needs of the Board and whether any vacancies are anticipated.  If vacancies are anticipated or if the Committee determines that the number of directors should be increased, the Committee considers possible director candidates and follows the director qualification guidelines.  Candidates may come to the Committee’s attention through present Board members, shareholders or other persons.  After an initial review process, candidates will be evaluated by the Committee and the Committee’s recommendations will then be transmitted to the entire Board.  Assessment of candidates will include a variety of issues, including diversity, skills and experience in the categories identified above.

SECURITY HOLDERS COMMUNICATIONS WITH THE BOARD

Shareholders may send communications to the Company’s Board of Directors, or to any individual Board member, by means of a letter to such individual Board member or the entire Board addressed to:

Board of Directors (or named Board member)
Nortech Systems Incorporated
7550 Meridian Circle N., Suite 150
Maple Grove, Minnesota 55369

If a shareholder is unsure as to which category the concern relates, the security holder may communicate it to any one of the independent directors in care of Chief Financial Officer at the address of our principal executive offices listed above. All shareholder communications sent in care of our Chief Financial Officer will be forwarded promptly to the applicable director(s).

REPORT OF AUDIT COMMITTEE

The Board of Directors of the Company has adopted a charter for the Audit Committee. The charter charges the Audit Committee with the responsibility for, among other things, reviewing the Company’s audited consolidated financial statements and the financial reporting process. The Company’s management is responsible for the Company’s internal controls and the financial reporting process, including the system of internal controls.  The Company’s independent registered public accounting firm is responsible for expressing an opinion on the conformity of the Company’s audited consolidated financial statements with generally accepted U.S. accounting principles.

In carrying out their responsibility, the Audit Committee has reviewed and discussed with management the Company’s audited consolidated financial statements as of and for the year ended December 31, 2018.2019. The Audit Committee has also discussed the audited consolidated financial statements with Baker Tilly Virchow Krause, LLP and affiliates (“Baker Tilly”), who served as our independent auditor for the 20172019 fiscal year, including the matters required to be discussed by Public Company Accounting Oversight Board Auditing Standard No. 1301, “Communications with Audit Committees,” and received the written disclosures and the letter from Baker Tilly required by Rule 3526 of the Public Company Accounting Oversight Board, “Communications With Audit Committees Concerning Independence”, and has discussed with Baker Tilly their independence. The Audit Committee has also considered whether Baker Tilly provided non-audit services during the last fiscal year which could impact their independence. No such services were provided by Baker Tilly.

15

firm during the fiscal years ended December 31, 2018,2019, and 20172018 were pre-approved in accordance with the written charter.

 

The Board unanimously recommends a vote FOR the ratification of Baker Tilly Virchow Krause, LLPas the independent registered public accounting firm of the Company for fiscal 2019.2020.

  

16

---

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth as of March 25, 2019,18, 2020, the ownership of Common Stock of the Company by each shareholder who is known by the Company to own beneficially more than 5% of the outstanding shares of the Company, by each director and director nominee and by each executive officer identified in the Summary Compensation Table, and by all executive officers, directors and nominees as a group. The parties listed in the table have the voting and investment powers with respect to the shares indicated.

 

Name of Beneficial Owner		Number of  Shares  Beneficially  Owned (1)		Percent of Class			Number of  Shares  Beneficially  Owned (1)		Percent of Class
Kathleen P. Iverson		600		*			1,200		*
Michael J. Kennedy		600		*
David B. Kunin		34,320		1.3	%		38,139		1.4	%
Ryan P. McManus		600		*			1,200		*
Jay D. Miller		8,100		0.3	%		58,700		2.2	%
Steven J. Rosenstone		600		*			1,200		*
Richard G. Wasielewski		126,474		4.7	%
Constance Beck		6,666		*			13,334		*
John Lindeen		4,000		*			9,000		*
All executive officers, directors and nominees as a group		181,960	(2)	6.8	%		122,773	(2)	4.5	%
Group consisting of: Curtis Squire, Inc.(3), Anita Kunin and David B. Kunin 7201 Metro Blvd., Edina MN 55439		1,427,655		53.2	%
Group consisting of: Curtis Squire, Inc.(3), Anita Kunin, David B. Kunin, William Kunin and Andrew Kunin 7777 Golden Triangle Drive, Eden Prairie MN 55344							1,431,474		53.8	%

 

---

*Less than 1%

 

(1)            Includes the following number of shares issuable upon exercise of stock options exercisable within 60 days of April 1, 2019: Ms. Iverson 600 shares, Mr. Kennedy 600 shares, Mr. Kunin 600 shares, Mr. Miller 8,100 shares, Mr. Rosenstone 600 shares, Mr. Wasielewski 100,000 shares, Ms. Beck 6,666 shares and Mr. Lindeen 4,000

(1)

Includes the following number of shares issuable upon exercise of stock options exercisable within 60 days of March 18, 2020: Ms. Iverson 1,200 shares, Mr. Kunin 1,200 shares, Mr. McManus 1,200, Mr. Miller 33,700 shares, Mr. Rosenstone 1,200 shares, Ms. Beck 13,334 shares and Mr. Lindeen 9,000 shares.

 

(2)	(2)Does not include Mr. Kunin’s beneficial ownership of shares held by Curtis Squire, Inc., as described in note (3).

 

(3)            Curtis Squire, Inc. a corporation controlled by the family of the late Myron Kunin, owns 1,344,066 shares.  Anita Kunin owns 49,269 shares individually. Voting control in the Company’s shares held by Curtis Squire, Inc. is shared by Curtis Squire’s board of directors, whose members are Anita Kunin, David B. Kunin, James Timothy Kunin, Andrew Kunin and William Kunin. Anita Kunin is David B. Kunin’s mother, and David B. Kunin is a member of the Company’s Board of Directors.

Curtis Squire, Inc. a corporation controlled by the family of the late Myron Kunin, owns 1,300,066 shares. David B. Kunin is a member of the Company’s Board of Directors. David B. Kunin owns 36,939 shares individually and 1,200 shares issuable upon exercise of stock options exercisable within 60 days of March 18, 2020. David B. Kunin’s mother, Anita Kunin, owns 49,269 shares individually. David B. Kunin’s brothers, William Kunin and Andrew Kunin each own 22,000 shares individually. Voting control in the Company’s shares held by Curtis Squire, Inc. is shared by Curtis Squire’s board of directors, whose members are Anita Kunin, David B. Kunin, James Timothy Kunin, Andrew Kunin and William Kunin.

 

19

---

17

---

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE

 

Related-PartyRelated-Party Transactions

 

The Company has purchased certain products and services from Printed Circuits, Inc. (“PCI”), which is controlled by certain members of the Kunin family group that beneficially owns a majority of the Company’s outstanding stock, as described in footnote (7) under “Security Ownership of Certain Beneficial Owners and Management.” David Kunin, our Chairman, is one of the controlling shareholders of PCI. In connection with these transactions, the Company has made payments to PCI of $126,100 in 2019 and $11,500 in 2018 and $24,000 in 2017.2018. The Company expects to continue to purchase products and services from PCI. The Company believes that these transactions are on terms comparable to those that the Company could reasonably expect in an arm’sarm's length transaction with an unrelated third party. The transactions between the Company and PCI have been approved by the Audit Committee as described under “Related-Party Transactions Policy” below.

 

The Company entered into a Consulting Agreement with CrossCourt Group, LLC, which is owned and managed by William Murray, an independent director of the Company, on February 22, 2018, which expired in May 2018.  In connection with these transactions, the Company has made payments to CrossCourt Group, LLC of $68,000 in 2018. The Agreement includes customary non-solicitation and confidentiality provisions.

In October 2016, the Company entered into a consulting agreement with Marabek, a limited liability company that is majority owned and managed by Matt Mahmood. On May 15, 2017, Mr. Mahmood became Chief Operating Officer of the Company and resigned on October 5, 2018. Marabek no longer provides consulting services to the Company. The Company made total payments to Marabek of $50,000 in 2018 and $97,203 in 2017.

Related-PartyRelated-Party Transaction Policy

 

In all cases, we abide by applicable state corporate law when approving all transactions, including transactions involving officers, directors or affiliates. Our policy is to have any related-party transactions (i.e., transactions involving a director, an officer or an affiliate of the Company) be approved by our Audit Committee, which is currently comprised of Kathleen P. Iverson, Michael J. Kennedy, Ryan P. McManus and Steven J. Rosenstone.

 

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s officers and directors, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership of such securities with the Securities and Exchange Commission. Officers, directors and greater than ten percent stockholders are required by Securities and Exchange Commission regulations to furnish the Company with copies of all Section 16(a) forms they file. With the exception of this filing, and based solely on review of the copies of Forms 3 and 4 and amendments thereto furnished to the Company during the fiscal year ended December 31, 2018, and Forms 5 and amendments thereto furnished to the Company with respect to such fiscal year, or written representations that no Forms 5 were required, the Company believes that all filing requirements of its officers, directors and greater than ten percent beneficial owners under Section 16(a) were completed on a timely basis.

 

ANNUAL REPORT ON FORM 10-K

 

The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2019, is available on the Company’s website at www.nortechsys.com. You will not receive a printed copy of the Company’s Annual Report on Form 10-K unless you specially request one. Upon such request, the Company will provide without charge a paper copy of the Annual Report, including the financial statements and financial statement schedules. Please direct such written requests to Investor Relations, at 7550 Meridian Circle N., Suite 150, Maple Grove, Minnesota 55369.

 

20

---

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS

 

The Notice of Annual Meeting, Proxy Statement, and the Company’s Annual Report on Form 10-K are available at www.proxypush.com/www.proxypush/nsys.

QUORUM AND VOTE REQUIRED

 

The presence in persononline or by proxy of the holders of a majority of the voting power of the shares of Common Stock issued, outstanding and entitled to vote at a meeting for the transaction of business is required to constitute a quorum. The election of each director will be decided by plurality votes. As a result, any shares not voted for a director (whether by withholding authority, broker non-vote or otherwise) have no impact on the election of directors except to the extent the failure to vote for an individual, results in another individual receiving a larger number of votes. If your shares are held by a broker or nominee, you should contact such holder to determine if you may vote your shares electronically and, if so, the method and deadline for voting electronically. The deadline for votingIf you are a shareholder of record, you may vote electronically is 11:59 p.m. (ET) on May 9, 2019, for all holders — registered or beneficial.until the polls are closed at the virtual annual shareholders' meeting. If your sharesyou are held directlya shareholder of record and you decide to vote electronically, please follow the directions on your proxy card.

 

18

---

If you are a shareholder of record, you may also vote during the virtual annual shareholders' meeting via http://web.lumiagm.com/263948272, which is available from your smartphone, tablet or computer.  You will need the latest version of Chrome, Safari, Internet Explorer 11, Edge or Firefox.  To participate in the virtual annual meeting as a shareholder of record, select ‘I have a Control Number’.  If you are a visitor, select ‘General Access’.  As a shareholder of record, you will then be required to enter your 11 digit control number which is located in the upper right hand corner of the notice card.  The meeting code is NORTECH2020 (case sensitive).  As a visitor, you will be prompted to complete first name, last name and email address.

SHAREHOLDER PROPOSALS

 

Proposals by shareholders (other than director nominations) that are submitted for inclusion in our proxy statement for our 20202021 annual shareholders’ meeting must follow the procedures set forth in Rule 14a-8 under the Securities Exchange Act of 1934. To be timely under Rule 14a-8, a shareholder proposal must be received by the secretary of the Company at 7550 Meridian Circle N., Suite 150, Maple Grove, Minnesota 55369, by December 3, 2019.November 27, 2020. Proposals received by that date will be included in the 20202021 proxy statement if the proposals are proper for consideration at an annual meeting and are required for inclusion in the proxy statement by, and conform to, the rules of the Securities and Exchange Commission.

 

As set forth in Rule 14a-4(c)(1) under the Securities Exchange Act of 1934, if a shareholder does not submit a proposal for inclusion in our proxy statement but does wish to propose an item of business to be considered at an annual shareholders’ meeting (other than director nominations), that shareholder must deliver notice of the proposal at our principal executive offices at least 45 calendar days prior to the first anniversary of the date on which we first mailed proxy materials for the preceding year’s annual meeting. For our 20202021 annual meeting, notices must be received on or before February 15, 2020.17, 2021.

 

A shareholder may nominate a director for election at the annual meeting or may present fromat the floorannual meeting a proposal that is not included in the proxy statement if proper written notice is received by the secretary of the Company at its principal offices in Maple Grove, Minnesota, at least 120 days in advance of the date of the proxy statement forwas released to shareholders in connection with the prior year’s annual meeting. For the 20202021 annual meeting, director nominations must be received on or before December 3, 2019.November 27, 2020. Shareholder proposals that are received by the Company after that date may not be presented in any manner at the 20202021 annual meeting.

 

If the date of our 20202021 annual meeting is advanced more than 30 calendar days prior to or delayed by more than 30 calendar days after the anniversary of the 20192020 annual meeting, timely notice of shareholder proposals and shareholder nominations for directors may be delivered to or mailed and received at our principal executive offices not later than the close of business on the 10th calendar day following the earlier of the date that we mail notice to our shareholders that the 20202021 annual meeting will be held or the date on which we issue a press release, file a periodic report with the Securities and Exchange Commission or otherwise publicly disseminated notice that the 20202021 annual meeting will be held.

 

21

---

19

---

 

OTHER MATTERS

 

The management does not know of any other matters that may be presented for consideration at the virtual annual meeting of shareholders. If any other matters are properly presented at the meeting, the persons named in the accompanying proxy will vote upon them in accordance with their best judgment. For ten days prior to the meeting, a complete list of the shareholders entitled to vote at the virtual meeting will be available for examination by any shareholder for any purpose germane to the meeting during ordinary business hours at our headquarters.

 

		By Order of the Board of Directors
		Constance M. Beck
		Secretary
Minneapolis, Minnesota
April 1, 2019March 27, 2020

 

22

---

Nortech Systems Incorporated Shareowner Services P.O. Box 64945 St. Paul, MN 55164-0945 Vote by Internet, Telephone or Mail 24 Hours a Day, 7 Days a Week Your phone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. : INTERNET/MOBILE – www.proxypush.com/nsys Use the Internet to vote your proxy until 12:00 p.m. (CT) on May 9, 2019. Scan code below for mobile voting. ( PHONE – 1-866-883-3382 Use a touch-tone telephone to vote your proxy until 11:59 p.m. (CT) on May 9, 2019. MAIL – Mark, sign and date your proxy card and return it in the postage-paid envelope provided. * If you vote your proxy by Internet or by Telephone, you do NOT need to mail back your Proxy Card. The Board of Directors Recommends a Vote FOR Items 1 through 4. 1. Election of directors: 01 Kathleen P. Iverson 02 David B. Kunin 03 Ryan P. McManus 04 Jay D. Miller 05 Steven J. Rosenstone Vote FOR all nominees (except as marked) Vote WITHHELD from all nominees (Instructions: To withhold authority to vote for any indicated nominee, write the number(s) of the nominee(s) in the box provided to the right.) 2. To approve, on an advisory, the compensation of our named executive officers 3. To approve an amendment to the 2017 Stock Incentive Plan increasing the shares of Common Stock reserved for issuance from 350,000 to 400,000 4. To ratify the appointment of Baker Tilly Virchow Krause, LLP as the independent registered public accounting firm of the Company for fiscal 2019 For Against Abstain For Against Abstain For Against Abstain THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED AS THE BOARD RECOMMENDS. Date Address Change? Mark box, sign, and indicate changes below: Signature(s) in Box Please sign exactly as your name(s) appears on Proxy. If held in joint tenancy, all persons should sign. Trustees, adminis-trators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the Proxy.

---

 

Nortech Systems Incorporated ANNUAL MEETING OF STOCKHOLDERS Friday, May 10, 2019 3:00pm CDT 7550 Meridian Circle N. Suite 150 Maple Grove, MN 55369 or https://web.lumiagm.com/?fromurl=232337670 Nortech Systems Incorporated 7550 Meridian Circle N., Suite 150 Maple Grove, MN 55369 proxy This proxy is solicited by the Board of Directors for use at the Annual Meeting on May 10, 2019. The shares of stock you hold in your account or in a dividend reinvestment account will be voted as you specify on the reverse side. If no choice is specified, the proxy will be voted “FOR” Items 1 through 4. By signing the proxy, you revoke all prior proxies and appoint Constance M. Beck and Jay D. Miller, and each of them with full power of substitution, to vote your shares on the matters shown on the reverse side and any other matters which may come before the Annual Meeting and all adjournments. See reverse for voting instructions.