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 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.fabrication enterprises. 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 plus 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. In 2020, Mr. McManus began working with Mr. Kunin on Concepht, a health care oriented incubator. Concepht provides consulting to start-up businesses in the medical device industry. 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.  Mr. McManus is a 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. MilerMiller 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 an affiliate of 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

Dan Sachs. Dan Sachs is a founder of Respicardia, Inc. (formerly Cardiac Concepts) and Mainstay Medical Inc. He has been Director of the Innovation Fellows Program within the Institute for Engineering in Medicine at the University of Minnesota since April of 2020. Before that, he held the roles of Co-Director and Associate Director within the Innovation Fellows Program. He was a director of Mainstay Medical from 2016 to February of 2021. He served as a director of Amphora Medical from April 2013 through April 2019. He is also CEO of Simba Therapeutics, LLC, a medical start-up company. He was previously a venture capital investor with Investor Growth Capital and Spray Venture Partners, for which he was the founding investor in CoTherix (CTRX, formerly Exhale Therapeutics), Neuronetics (STIM), and other private companies. He served on the Board of Directors of Neuronetics, Inc., CoTherix, and CHF Solutions. He previously served as Instructor in Medicine on the faculty of Harvard Medical School in the Division of Emergency Medicine. Mr. Sachs earned BA and MD degrees from the University of Michigan, and an MBA from Harvard Business School.

Philip I. Smith. Phil Smith has been managing director of Duff & Phelps, an investment banking firm that provides valuation, corporate finance and other services since 2017.  Mr. Smith provides services in the area of healthcare mergers and acquisitions advisory and is based in Minneapolis. Mr. Smith has more than 25 years of healthcare experience as a mergers and acquisitions investment banker and executive operating officer. He has expertise in assisting public and private companies as well as private equity firms. Prior to joining Duff & Phelps, Phil was a Managing Director with BMO Capital Markets (formerly Greene Holcomb and Fisher) where he focused on healthcare mergers and acquisitions. Before that, he was a member of the medical device investment banking team at Piper Jaffray in Minneapolis. Early in his career, Phil served as an executive officer for a number of medical technology companies, including DGIMED Ortho, Vital Images, Thermonix and Image-Guided Neurologics. He has also served on the board of directors of Delta Dental of Minnesota, MGC Diagnostics (formerly Angeion Corp) and Intricon Corp. Mr. Smith received an MBA from the Saint Paul Chamber Orchestra (SPCO).Wharton School of the University of Pennsylvania and a B.S. in electrical engineering from the University of Florida.

Stacy A. Kruse. Ms. Kruse currently serves as the Chief Operating & Financial Officer at Portico Benefit Services, an organization that provides proprietary & self-insured retirement, health, disability and life benefits to rostered ministers and lay leaders of the Evangelical Lutheran Church in America. She has held the Chief Operating Officer position since 2011 and the Chief Financial Officer since 2008. Prior to Portico, Ms. Kruse served as the Chief Financial Officer of Wilsons the Leather Experts, a national publicly traded retail chain and in a various financial leadership positions prior to her appointment as Chief Financial Officer. Prior to Wilsons, Ms. Kruse held financial leadership positions at US Bank and Carlson Marketing Group.

DIRECTORS MEETINGS

There were seventwelve meetings of the Board of Directors during the last fiscal year. All directors attended all the meetings of the Board of Directors, either in person or telephonically. The Board of Directors took action by written consent on fivethree 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 20192020 annual meeting were in attendance.attendance at that meeting.

COMMITTEES

The Board of Directors has established a Nominating and Corporate Governance Committee, a Compensation and Talent Committee, and an Audit Committee and a Science and Technology Committee.  TheAs of March 9, 2021, the members of the Nominating and Corporate Governance Committee arewere Ms. Iverson, Mr. McManusRosenstone and Mr. Rosenstone. TheMcManus, the members of the Compensation and Talent Committee arewere Ms. Iverson, Mr. Rosenstone and Mr. McManus, the members of the Audit Committee were Ms. Iverson, Mr. Rosenstone and Mr. McManus and the members of the Science and Technology Committee were Ms. Iverson, Mr. Rosenstone.Rosenstone, Mr. McManus, Mr. Kunin and Mr. Miller. The current members of the Audit Committee are Ms. Iverson, Mr. McManusRosenstone, Mr. Smith and Mr. Rosenstone.Sachs.

In the last fiscal year the Audit Committee met four times, the Compensation and Talent Committee met four times and took action by written consent on two occasions, the Nominating and Corporate Governance Committee met four times and the Science and Technology Committee met five 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., McManus Rosenstone, Mr. Smith, Mr. Sachs, and Mr. RosenstoneMs. Kruse 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. Company

In evaluating2020, Mr. Miller’s independence,McManus recently began working with Mr. Kunin on Concepht, a health care oriented incubator. Concepht provides consulting to start-up businesses in the medical device industry. Mr. McManus is currently paid $12,000 per month from Concepht, which is currently funded by Mr. Kunin. The Board has considered his employment agreement with the Company, described under “Employment Agreements” and has determined that he wasMcManus is not an independent effective Januarydirector.

The Company is a “controlled company” as defined by Nasdaq as more than 50% of the voting power of the Company is held by members of the Kunin family or entities owned and controlled by the Kunin family. Therefore, the Company is not required to comply with certain Nasdaq rules requiring listed companies to have a majority of independent directors on its board, as well as an independent compensation committee and nominating committee. If Proposal 1 2019is successful, the Company will have seven directors, four of whom are independent, and, therefore he resigned fromas a result, the Company’sBoard will continue to be comprised of a majority of independent directors. The Audit Committee on such date. Mr. Miller resigned from theis and will continue be comprised exclusively of independent directors. The Compensation and Talent Committee and the Nominating and Corporate Governance Committee when he was appointed Chief Executive Officer and Presidentwill be comprised three directors, two of the Company on February 27, 2019.whom are independent.

Further, theThe Board has determined that Ms. Iverson, isMr. Smith are each 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 related 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.

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 as a member of the Board of Directors. 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

Mr. Jones joined the Company in January 2018, and has held the positionNovember of 2020 as Senior Vice President and Chief Financial Officer since her hiring. Ms. Beck's employment agreement withof the Company is effective until January 8, 2021,Company. Prior to that, Mr. owned and will automatically unless either party gives 90 days' written notice that such party will not renew the agreement. Ms. Beck was formerly vice presentoperated Jones & Jones Consulting LLC from 2019 to November of 2020 through which he provided finance and controller for MOCON, Inc., a publicly traded provider of measurement instruments andaccounting consulting services to middle market clients. Prior to that, Mr. Jones was employed at Spectrum Brands (NYSE: SPB) from 20132005 to 2017. 

      Ms. Grange joined the Company in September 20192018, most recently as the Company’s Senior Vice President, of Human Resources. Ms. Grange's employment agreement with the CompanyCorporate Controller responsible for Accounting, Financial Shared Services, and Financial Planning & Analysis. Spectrum Brands 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.a $4 billion consumer products company operating four business segments: Hardware & Home Improvement, Home & Garden, Global Pet Supplies, Home Appliances / Personal Care.

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 renew unless either party gives 90ninety 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 Senior Vice President of Global Operations.

Mr. Steichen has been Chief Marketing andSenior Vice President of Sales Officer since January 2012.September 2019.  Mr. Steichen's employment agreement with the Company is effective until September 30, 2020, and will automatically unless either party gives 90ninety 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.

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).

The duties and responsibilities of the Committee are 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 CEO; 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 most recent stockholder Say on PaySay-on-Pay Vote; (c) Review and make 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 PaySay-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 Board and its committees and recommend changes in compensation to the Board; (d) Review talent acquisition and workforce development plans, activities, and metrics needed to realize the goals and objectives in the Company’s strategic plan. Review talent transitions, vacancies, and projected talent needs. Discuss the development of the Company’s top talent. Review Company succession plans; and (e) Review diversity, inclusion, and climate plans and metrics.

The base compensation for each the current and former Chief Executive Officer for 20192020 was established under an employment agreements.agreement.  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.

Compensation and Talent Committee Interlocks and Insider Participation

The Compensation and Talent Committee had no interlocks.

EXECUTIVE COMPENSATION

20192020 Summary Compensation Table

The table below shows the compensation of the Company’s Chief Executive Officer, former Chief Executive Officer and each of the other two most highly compensated executive officers for services to the Company in 20192020 and 2018.2019.

The following table sets forth as of December 31, 2019,2020, the outstanding grants of equity appreciation rights, including the grant dates, base dates, redemption dates and number of units granted to each of the named executive officers (“NEOs”).

The value of the aggregate outstanding equity appreciation awards to this individual as of December 31, 2019,2020, was $0.$108,000.

OUTSTANDINGEQUITYAND STOCK AWARDSAWARDS AT 20192020FISCALYEAREND

Employment Agreements

All of theThe Company’s employees are employed at will and do not have employment agreements that guarantee them any particular base salary, annual incentive cash compensation or any other compensation or benefits, except as described below for Mr. Miller, Ms. Beck,Mr. Jones, Mr. Steichen and Mr. Lindeen.

Jay D. Miller.Miller. The Company entered into an Employment Agreement with Jay D. Miller (the “Miller Agreement”) as the Company’s President and Chief Executive Officer effective February 27, 2019. The original term of the Miller Agreement continues untilwas through February 26, 2021 and may bewas extended for an additional one year period by mutual consent of the parties. Under the Miller Agreement, Mr. Miller is entitled to receive an annual salary equivalent to $400,000 during the first year of the Miller Agreement’s term, subject to increase by the Board of Directors thereafter.$415,000. Mr. Miller is eligible for bonus compensation (the “Miller 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, of which 50% is guaranteed to Mr. Miller for the 2019 calendar year.plan.

Upon the effective date of the Miller Agreement, and pursuant thereto, the Company granted Mr. Miller (i) 100,000 equity appreciation rights under the Company’s Restated Equity Appreciation Rights Plan and (ii) a 125,000 share non-qualified stock option under the Company’s 2017 Stock Incentive Plan that will vest annually in five installments and (iii) 25,000 restricted shares of the Company’s stock that vest on the effective date. The stock option has an exercise price equal to the fair market value of the Company’s Common Stock on the grant date and expires on March 1, 2029.

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

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.

Constance Christopher D. JonesBeck. The. Mr. Jones joined the Company entered intoin November of 2020 as Senior Vice President and Chief Financial Officer and at that time signed an Employment Agreementemployment agreement with Constance Beck on January 8, 2018, as amended on September 9, 2019 (the “Beckthe Company (“Jones Agreement”). The initial term of the BeckJones Agreement was 24 months, which has automatically renewedcontinues until November 2, 2021 and will continue to automatically renew for successive one-year renewal terms unless notification from either party occurs.notifies the other party in writing at least ninety days prior to expiration. Under the BeckJones Agreement, Ms. Beck's initialMr. Jones is entitled to receive an annual salary was $200,000 during the first year of the Beck Agreement’s term$250,000 and is subjecteligible to increaseparticipate in the Board of Director’s (the “Board”) sole discretion or decreased with Ms. Beck’s consent. Ms. BeckCompany’s benefit plans. Mr. Jones 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%45% of base salary under the bonus plan, which may be increased at the discretion of the Board.plan.

Upon entering into the BeckJones Agreement, and pursuant thereto, the Company granted Ms. BeckMr. Jones a 20,00025,000 share non-qualified stock option under the Company’s 2017 Stock Incentive Plan that will vest annually in threefive equal installments. Ms. Beck’sThe stock option has an exercise price of $3.77equal $4.82 per share, equal to the fair market value of the Company’s Common Stockcommon stock on the grant date, and expires on January 8, 2028.November 4, 2030.

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

Under the BeckJones Agreement, if Ms. Beck’sMr. Jones’s employment is terminated by the Company without Cause (as defined in the BeckJones Agreement) or by Ms. BeckMr. Jones for Good Reason (as defined in the BeckEmployment Agreement), so long as shehe has signed and has not revoked a release agreement, shehe will be entitled to receive severance comprised of (i) herhis base salary in effect at time of termination for nine months and (ii) certain benefits set forth in the Jones Agreement.

If Mr. Jones’s employment is terminated within 12 months after a Change of Control (as defined in the Jones 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 BeckJones Agreement or (b) twelvenine months and (ii) the earned Bonus Payment, prorated for the year in which her employment is terminated through her employment termination date.

If Ms. Beck’s employment is terminated within 12 months after a Change of Control (as definedcertain benefits set forth 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.Jones Agreement.

John Lindeen.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, 2020,2021, which will automatically renewrenews 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,$225,000, 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.

Curtis Steichen. The Company entered into an Employment Agreement with Curtis Steichen on September 11, 2019 (the “Steichen Agreement”). The term of the Steichen Agreement continues until September 30, 2021 and automatically renews for successive one-year renewal terms unless notification from either party occurs. Under the Steichen Agreement, Mr. Steichen is entitled to receive an annual salary of $192,500, the annual salary may be increased in the Board’s sole discretion or decreased with Mr. Steichen’s consent. Mr. Steichen 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 60% of base salary under the bonus plan.

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

Under the Steichen Agreement, if Mr. Steichen’s employment is terminated by the Company without Cause (as defined in the Steichen Agreement) or by Mr. Steichen for Good Reason (as defined in the Steichen 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 nine months and (ii) certain benefits set forth in the Steichen Agreement.

If Mr. Steichen’s employment is terminated within 12 months after a Change of Control (as defined in the Steichen Agreement) by the Company without Cause or by Mr. Steichen 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 Steichen Agreement or (b) nine months and (ii) certain benefits set forth in the Steichen 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 or recommends to the Board for its approval 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:

Potential Payments Upon Termination oror Change-In-Control

The terms of the employment agreements for the Company’s Named Executive Officers provide for severance payments in the event of termination of employment, including upon a change of control or retirement. Such agreements also provide for acceleration of vesting of stock options and equity appreciation awards in certain events. See “Employment Agreements” above.

2019

2020 Director Compensation

The aggregate number of stock option awards outstanding on December 31, 2019,2020, for each of the above-named directors are as follows:

___________________

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

The Company has established a Nominating and Corporate Governance Committee of the Board of Directors.  The Nominating and Corporate Governance Committee advises the Board concerning appropriate composition of the Board and its committees, identifies and recommends qualified individuals, and oversees corporate governance guidelines applicable to the Company.  All the members of this Committee are independent as determined by the Board with reference to the NASDAQ rules.

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'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:

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.

SCIENCE AND TECHNOLOGY COMMITTEE

The Science and Technology Committee is composed of the directors whose names appear below. The Committee oversees the Company’s overall strategic direction and investment in research and development, intellectual property, digital solutions, technological and scientific initiatives, and new technology-driven products, services and lines of business. The Committee works with management to identify and review specific technology, science and innovation matters that could have a significant impact on the Company’s business operations, performance, growth, competitive position and technology risk. 

The duties and responsibilities of the Committee are to: (a) review the Company’s technology and innovation strategy and approach and its impact on the Company’s growth, competitive position, current and future core business capabilities, including production quality, operations, systems security and automation, (b) assist the board in its oversight of the Company’s investments in science, technology and digital initiatives, (c) review science and technology trends that could significantly affect the Company and the industries in which it operates, (d) review and advise the Board and management on the Company’s overall intellectual property and related investment strategy, (e) coordinate with Company management, the board and other committees to ensure that each has received the information necessary to fulfill duties and responsibilities with respect to oversight of technology risk.

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, 2019.2020. The Audit Committee has also discussed the audited consolidated financial statements with Baker Tilly Virchow Krause,US, LLP and affiliates (“Baker Tilly”), who served as our independent auditor for the 20192020 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.

Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended December 31, 2019.2020.

The members of the Audit Committee are “independent” as determined by the Board with reference to the rules of the Securities and Exchange Commission and the NASDAQ listing standards.

PROPOSAL 2
APPROVAL OF ADVISORY VOTE ON COMPENSATION OF
NAMED EXECUTIVE OFFICERS

We are providing shareholders with the opportunity to vote at the virtual annual meeting on the following advisory resolution regarding the compensation of our NEOs as described in this Proxy Statement (commonly referred to as “Say-on-Pay”):

“RESOLVED, that the shareholders of Nortech Systems Incorporated approve, on an advisory basis, the compensation paid to the Company's NEOs as disclosed in the compensation tables and narrative discussion contained in the ‘Executive Compensation’ section in this Proxy Statement.”

Our executive compensation programs are based on our belief that attracting, retaining and motivating talented executives is critical to the maintenance of our competitive advantage in the electronic contract manufacturing industry and to the achievement of the business goals set by the Board of Directors. Accordingly, our executive compensation programs are designed to reward executives for achievement of our pre-determined financial and business goals, while also aligning our executives’ interests with those of our shareholders. We believe that we best achieve these goals by providing our executives with a mix of compensation elements that incorporate cash and equity, as well as short-term and long-term components, and that are tied to our business goals.

This advisory vote will not affect any compensation already paid or awarded to our NEOs and will not be binding on the Board of Directors or the Compensation and Talent Committee. However, the Compensation and Talent Committee will review and carefully consider the outcome of the vote. If there are a significant number of negative votes, the Compensation and Talent Committee will seek to understand the concerns that influenced the vote and consider them in making future executive compensation decisions.

Upon recommendation of the Compensation and Talent Committee of the Board, the Board unanimously recommends a vote FOR the approval of the compensation of our NEOs. 

PROPOSAL3
RATIFICATION OF THE APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board and management of the Company are committed to the quality, integrity and transparency of the Company’s financial reports. In accordance with the duties set forth in its written charter, the Audit Committee of the Company’s Board has appointed Baker Tilly as the Company’s independent registered public accounting firm for the 20202021 fiscal year.

A representative of Baker Tilly is expected to attend this year’s Annual Meeting, will be available to respond to appropriate questions from shareholders and will have the opportunity to make a statement if he or she desires to do so.

Fees Billed to Company by ItsIts Independent Registered Public Accounting Firm

For the 20192020 and 20182019 fiscal years, Baker Tilly served as the Company’s independent auditor. The following table presents fees for professional audit services, tax services and other services rendered by Baker Tilly and affiliates during fiscal years 20192020 and 2018,2019, respectively:

(1)     Audit fees include fees for the annual audit, interim reviews of the quarterly and regulatory filings. Includes fees for statutory audits related to our Mexico and China operations of $15,830 and $23,820 for 2019 and 2018, respectively.

The Audit Committee of the Board of Directors has reviewed the services provided by Baker Tilly during fiscal years 20192020 and 2018,2019, respectively, and the fees billed for such services. After consideration, the Audit Committee has determined that the receipt of these fees by the auditors is compatible with the provision of independent audit services. The Audit Committee discussed these services and fees with the auditors and Company management to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the Securities and Exchange Commission to implement the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants.

Pre-Approval Policy

The Audit Committee has established a policy for pre-approving the services provided by the Company’s independent registered public accounting firm in accordance with the auditor independence rules of the Securities and Exchange Commission. This policy requires the review and pre-approval by the Audit Committee of all audit and permissible non-audit services provided by the independent registered public accounting firm and an annual review of the financial plan for audit fees.  All services performed by our independent registered public accounting firm during the fiscal years ended December 31, 2019,2020 and 20182019 were pre-approved in accordance with the written charter.

The Board unanimously recommends a vote FOR the ratification of Baker Tilly Virchow Krause, LLP as the independent registered public accounting firm of the Company for fiscal 2020.2021.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth as of March 18, 2020,25, 2021, 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.

*Less than 1%

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 iswas controlled by certain members of the Kunin family group that beneficially owns a majorityuntil October of the Company’s outstanding stock, as described in footnote (7) under “Security Ownership of Certain Beneficial Owners and Management.”2020. David Kunin, our Chairman, iswas one of the controlling shareholders of PCI. In connection with these transactions, theThe Company has made payments to PCI of $126,100$32,000 in 20192020 and $11,500$131,000 in 2018. The Company expects to continue to purchase products and services from PCI.2019. The Company believes that these transactions are on terms comparable to those that the Company could reasonably expect in an arm'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.

Related-PartyMr. Kunin is an investor in Abilitech Medical, Inc. Mr. Kunin also was a consultant to Abilitech, which relationship ended on March 1, 2021. As a consultant to Abilitech, Mr. Kunin earned $16,000 from Abilitech. In 2020, Abilitech paid the Company $1,095,128 and in 2019, Abilitech paid the Company $537,198. The Company believes that transactions with Abilitech are on terms comparable to those that the Company could reasonably expect in an arm's length transaction with an unrelated third party. The transactions between the Company and Abilitech have been approved by the Audit Committee as described under “Related-Party Transactions Policy” below.

Related-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, Ryan P. McManusPhilip Smith, Dan Sachs and Steven J. Rosenstone.Rosenstone considering current Company policies governing related party transactions.

COMPLIANCE WITH SECTION16(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 basedBased 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, 2018,2020, 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.basis, except that Mr. Rosenstone purchased 500 of the Company’s shares on November 19, 2020 and 500 of the Company’s shares on November 20, 2020 and filed a related Form 4 late on December 7, 2020.

ANNUAL REPORT ON FORM 10-K

The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019,2020, 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.

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS

The Notice of Annual Meeting, Proxy Statement, and the Company’sCompany’s Annual Report on Form10-K are available at www.proxypush/www.proxypush/nsys.

QUORUM AND VOTE REQUIRED

The presence online 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. If you are a shareholder of record, you may vote electronically until the polls are closed at the virtual annual shareholders' meeting. If you are a shareholder of record and you decide to vote electronically, please follow the directions on your proxy card.

If you are a shareholder of record, you may also vote during the virtual annual shareholders' meeting via http://web.lumiagm.com/263948272,www.proxypush.com/NSYS , 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, 12 or 16 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 20212022 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 November 27, 2020.2021. Proposals received by that date will be included in the 20212022 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 20212022 annual meeting, notices must be received on or before February 17, 2021.2022.

A shareholder may nominate a director for election at the annual meeting or may present at the annual 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 the proxy statement was released to shareholders in connection with the prior year’s annual meeting. For the 20212022 annual meeting, director nominations must be received on or before November 27, 2020.2021. Shareholder proposals that are received by the Company after that date may not be presented in any manner at the 20212022 annual meeting.

If the date of our 20212022 annual meeting is advanced more than 30 calendar days prior to or delayed by more than 30 calendar days after the anniversary of the 20202021 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 20212022 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 20212022 annual meeting will be held.

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.

23

---