<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
NORTECH SYSTEMS INCORPORATED
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
NORTECH SYSTEMS INCORPORATED
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 27, 1999
------------------------
TO THE SHAREHOLDERS OF NORTECH SYSTEMS INCORPORATED:
The Annual Meeting of Shareholders of Nortech Systems Incorporated (the
"Company") will be held at the Wayzata Country Club, 200 West Wayzata Boulevard,
Wayzata, Minnesota, on May 27, 1999, at 4:00 p.m., for the following purposes:
1. To consider and act upon the Board of Directors' recommendation to fix
the number of directors of the Company at four;
2. To elect a Board of Directors to serve for a one-year term and until
their successors are elected and qualify;
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only shareholders of record at the close of business on April 15, 1999, will
be entitled to notice of and to vote at the meeting or any adjournment thereof.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU EXPECT
TO BE PRESENT AT THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE MEETING, YOU
MAY REVOKE THE PROXY AND VOTE YOUR SHARES IN PERSON.
Your attention is called to the accompanying Proxy Statement.
By Order of the Board of Directors
Quentin E. Finkelson
SECRETARY
April 23, 1999
<PAGE>
NORTECH SYSTEMS INCORPORATED
---------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS, MAY 27, 1999
This Proxy Statement is furnished to shareholders of NORTECH SYSTEMS
INCORPORATED, a Minnesota corporation (the "Company"), in connection with the
solicitation on behalf of the Company's Board of Directors of proxies for use at
the annual meeting of shareholders to be held on May 27, 1999, and at any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting of Shareholders.
The address of the principal executive office of the Company is 641 East
Lake Street, Suite 244, Wayzata, Minnesota 55391. This Proxy Statement and form
of Proxy are being mailed to shareholders of the Company on April 23, 1999.
SOLICITATION AND REVOCATION OF PROXIES
The costs and expenses of solicitation of proxies will be paid by the
Company. In addition to the use of the mails, proxies may be solicited by
directors, officers and regular employees of the Company personally or by
telegraph, telephone or letter with extra compensation. The Company will
reimburse brokers and other custodians, nominees or fiduciaries for their
expenses in forwarding proxy material to principals and obtaining their proxies.
Proxies in the form enclosed are solicited on behalf of the Board of
Directors. Any shareholder giving a proxy in such form may revoke it at any time
before it is exercised. Such proxies, if received in time for voting and not
revoked, will be voted at the annual meeting in accordance with the
specification indicated thereon.
VOTING RIGHTS
Only shareholders of record of the Company's 2,416,411 shares of Common
Stock outstanding as of the close of business on April 15, 1999, will be
entitled to execute proxies or to vote. Each share of Common Stock is entitled
to one vote. A majority of the outstanding shares must be represented at the
meeting, in person or by proxy, to transact business.
1
<PAGE>
ELECTION OF DIRECTORS
The bylaws of the Company provide for a Board of Directors consisting of one
or more members, and further provide that the shareholders at each annual
meeting shall determine the number of directors. The Company's Board of
Directors recommends that the number of directors be set at four and it is
intended that the proxies accompanying this statement will be voted at the 1999
meeting to establish a Board of Directors consisting of four members. All of the
nominees are presently directors of the Company. Proxies solicited by the Board
of Directors will, unless otherwise directed, be voted for the election of the
following four nominees:
MICHAEL J. DEGEN
QUENTIN E. FINKELSON
MYRON KUNIN
RICHARD W. PERKINS
Following is information regarding the nominees:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ --- --------------------------------------------------------------
<S> <C> <C>
Michael J. Degen 54 Director
Quentin E. Finkelson 66 President and Chief Executive Officer, Secretary, and Chairman
of the Board of Directors
Myron Kunin 70 Director
Richard W. Perkins 68 Director
</TABLE>
Mr. Degen is the Managing Director, Operations, of The Toro Company, a
manufacturer of lawn mowers, snow throwers and other products. From 1995 to
1998, he was the Managing Director, Worldwide Parts, of The Toro Company. He has
been a director of the Company since May, 1998.
Mr. Finkelson has been President and Chief Executive Officer, Secretary, and
Chairman of the Board of Directors of the Company since 1990.
Mr. Kunin has served since 1983 as Chairman of the Board of Directors of
Regis Corporation, the world's largest owner, operator and franchisor of hair
and retail hair product salons. He has been a director of the Company since
1990.
Mr. Perkins has served since 1985 as President, Chief Executive Officer and
a director of Perkins Capital Management, Inc., a registered investment advisor.
He is also a director of Bio-Vascular, Inc., Children's Broadcasting
Corporation, CNS, Inc., Eagle Pacific Industries, Inc., Harmony Holdings, Inc.,
Lifecore Biomedical, Inc., Quantech Ltd. and Vital Images, Inc. He has been a
director of the Company since 1993.
DIRECTORS MEETINGS
There was one meeting of the Board of Directors during the last fiscal year.
All directors attended meetings of the Board and committees of the Board on
which such director served.
The Company does not have a standing nominating committee of the Board. The
Compensation Committee consists of Messrs. Kunin and Perkins. All four present
directors are members of the Audit Committee.
2
<PAGE>
EXECUTIVE OFFICERS
The Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ --- --------------------------------------------------------------
<S> <C> <C>
Quentin E. Finkelson 66 President, Chief Executive Officer, Secretary and Chairman of
the Board of Directors
Gregory D. Tweed 48 Executive Vice President and Chief Operating Officer
Garry M. Anderly 52 Senior Vice President, Corporate Finance and Treasurer
Peter L. Kucera 53 Vice President, Corporate Quality
Donald E. Horne 50 Vice President, Corporate Procurement
</TABLE>
Mr. Finkelson has been President and Chief Executive Officer, Secretary and
Chairman of the Board of Directors of the Company since 1990.
Mr. Tweed has been Executive Vice President and Chief Operating Officer of
the Company since May, 1996. From 1993 to May, 1996, he was Senior Vice
President and General Manager of the Company.
Mr. Anderly has been Senior Vice President, Corporate Finance and Treasurer
of the Company since May 1996. He was Vice President of Finance and
Administration from 1991 to May 1996.
Mr. Kucera has been Vice President, Corporate Quality of the Company since
1991.
Mr. Horne has been Vice President, Corporate Procurement of the Company,
since December, 1997. From 1992 to November, 1997, he was Director of Materials,
Bemidji operations.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is composed of the independent outside directors
whose names appear following this report. The Committee considers a variety of
issues in establishing compensation policies for executive officers, with the
primary basis for compensation being the financial performance of the Company.
Compensation for executive officers includes three elements: base salaries,
bonuses, and options to acquire Common Stock. Salaries are based on factors such
as the individual's level of responsibility and the amount of salary paid to
executives with similar responsibilities in comparable companies. Stock options
are designed to increase the incentive for an executive's interest in the
Company's long term success as measured by the market value of its stock.
The chief executive officer's compensation for 1998 was based on the
policies described above, with particular emphasis upon the Company's excellent
financial performance. Further, it was determined that the compensation of the
chief executive officer was comparable to compensation of chief executive
officers of comparable companies. The 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.
Base salaries for executive officers are determined by evaluating the
responsibilities of the position held and the experience and performance of the
individual. Reference is also made to the competitive marketplace for executive
talent.
Myron Kunin
Richard W. Perkins
MEMBERS OF THE COMPENSATION COMMITTEE
3
<PAGE>
SUMMARY COMPENSATION TABLE
The following table shows, for the fiscal years ended December 31, 1998,
1997 and 1996, the cash compensation paid by the Company, as well as certain
other compensation paid or accrued for those years, to the Company's chief
executive officer, and each of the other two executive officers whose total
annual compensation in 1998 exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)
- --------------------------------------------------------------------- --------- --------- --------------- -------------
<S> <C> <C> <C> <C>
Quentin E. Finkelson 1998 156,103 0 0
President/Chief Executive Officer 1997 146,550 0 50,000
Secretary, and Director 1996 130,707 0 0
Gregory D. Tweed 1998 124,200 0 0
Executive Vice President and 1997 116,600 0 20,000
Chief Operating Officer 1996 104,000 0 0
Garry Anderly 1998 109,296 0 0
Senior Vice President, 1997 102,608 0 20,000
Corporate Finance and Treasurer 1996 89,610 0 0
</TABLE>
STOCK OPTION GRANTS
OPTION GRANTS IN LAST FISCAL YEAR
No stock options were granted by the Company in fiscal 1998 to any executive
officers.
STOCK OPTION EXERCISES AND OPTION VALUES
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table contains information concerning stock options exercised
during 1998 and stock options unexercised at the end of 1998 with respect to
each of the Named Executive Officers.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS/ AT
OPTIONS/ AT FISCAL
FISCAL YEAR-END YEAR-END
(#) ($)(1)
SHARES --------------- --------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------------------ ----------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C>
Quentin E. Finkelson.................................. 0 0 75,000/50,000 27,187/0
Gregory D. Tweed...................................... 0 0 27,500/20,000 12,656/0
Garry Anderly......................................... 0 0 15,000/20,000 8,437/0
</TABLE>
- ------------------------
(1) Value of unexercised in-the-money options is determined by multiplying the
difference between the exercise price per share and $3.4375, the closing
price per share on December 31, 1998, by the number of shares subject to
such options.
4
<PAGE>
DIRECTOR COMPENSATION
Mr. Degen, who is not an employee of the Company, received an option to
purchase 5,000 shares of the Company's Common Stock at an exercise price of
$5.00 per share.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the officers
and directors of the Company, and persons who own more than 10% of a registered
class of the Company's equity securities, to file reports of ownership and
changes in ownership with the Commission. Such officers, directors and
shareholders are required by the Commission's regulations to furnish the Company
with copies of all reports. To the knowledge of the Company, based solely on a
review of copies of reports filed with a Commission during the fiscal year ended
December 31, 1998, all applicable Section 16(a) filing requirements were
complied with.
COMPARATIVE STOCK PRICE PERFORMANCE
The graph below compares total shareholder return on the Company's Common
Stock for the last five fiscal years with the total return on Waters
Instruments, Inc. (a peer issuer) and the NASDAQ Composite Index for the same
periods. The graph assumes $100 invested on December 31, 1993.
NORTECH SYSTEMS INCORPORATED
COMPARATIVE STOCK PRICE PERFORMANCE
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
YEAR NORTECH WATERS INSTRUMENTS NASDAQ COMPOSITE
<S> <C> <C> <C>
1993 $100 $100 $100
1994 $75 $77 $97
1995 $176 $235 $135
1996 $117 $252 $166
1997 $108 $303 $202
1998 $76 $303 $334
</TABLE>
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997 1998
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Nortech 100 75 176 117 108 76
Waters Instruments 100 77 235 252 303 303
NASDAQ Composite 100 97 135 166 202 334
</TABLE>
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 1, 1999, 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 by each executive officer identified in the Summary Compensation
Table, and by all executive officers and directors as a group. The parties
listed in the table have the voting and investment powers with respect to the
shares indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED(1) CLASS
- -------------------------------------------------------------------------------- -------------------- -------------
<S> <C> <C>
Myron Kunin .................................................................... 1,087,145 42.4%
7201 Metro Boulevard
Edina, MN 55439
Quentin E. Finkelson............................................................ 192,643 7.5%
Richard W. Perkins.............................................................. 23,000 *
Gregory D. Tweed................................................................ 27,500 1.0%
Garry M. Anderly................................................................ 19,000 *
Michael J. Degen................................................................ 2,500 *
All executive officers and directors as a group (eight persons)................. 1,359,788(2) 53.0%
</TABLE>
- ------------------------
(1) Includes 75,000, 27,500, 19,000, 11,000, 5,000 and 2,500 shares subject to
options exercisable within sixty (60) days granted to Messrs. Finkelson,
Tweed, Anderly, Perkins, Kunin and Degan, respectively, pursuant to the
Company's stock option plan.
(2) Includes 148,000 shares subject to options within sixty (60) days.
* Less than one percent (1%).
The Company will mail its annual report for the year 1998 on or about April
23, 1999, to all shareholders of the Company of record on April 15, 1999.
INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Larson, Allen, Weishair & Co., LLP, as
independent accountants of the Company for 1999. Larson, Allen, Weishair & Co.,
LLP, has performed this function for the Company since 1991. Members of the firm
will be available at the annual meeting of shareholders to answer questions and
to make a statement if they desire to do so.
QUORUM AND VOTE REQUIRED
The presence in person 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 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.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder for the annual shareholders' meeting in May,
2000, must be received by the secretary of the Company at 641 East Lake Street,
Suite 244, Wayzata, Minnesota 55391, not later than the close of business on
November 20, 1999.
6
<PAGE>
Proposals received by that date will be included in the 2000 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.
OTHER BUSINESS
The management does not know of any business other than the hereinbefore set
forth that may be presented for action at the annual meeting of shareholders. If
any other matters are properly presented at the meeting for action, the persons
named in the accompanying proxy will vote upon them in accordance with their
best judgment.
By Order of the Board of Directors
QUENTIN E. FINKELSON
SECRETARY
Minneapolis, Minnesota
April 23, 1999
7
<PAGE>
NORTECH SYSTEMS INCORPORATED
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 27, 1999
The undersigned hereby appoints Quentin E. Finkelson and Garry Anderly and
either of them, proxies for the undersigned, with full power of substitution, to
represent the undersigned and to vote all of the shares of the Common Stock of
Nortech Systems Incorporated (the Company) which the undersigned is entitled to
vote at the annual meeting of shareholders of the Company to be held on May 27,
1999, and at any and all adjournments thereof.
<TABLE>
<S> <C> <C> <C>
1. To fix the number of directors of the Company at four.
/ / FOR / / AGAINST / / ABSTAIN
2. Election of directors.
NOMINEES: Michael J. Degen, Quentin E. Finkelson, Myron Kunin, Richard W.
Perkins.
</TABLE>
<TABLE>
<S> <C>
/ / FOR all nominees above, except vote / / WITHHOLD AUTHORITY to vote for
withheld from individual nominees all nominees listed above
</TABLE>
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
3. In their discretion, on such other matters as may properly come before the
meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS and will be
voted as directed herein. If no direction is given, this proxy will be voted FOR
all the nominees listed in paragraph 2.
(CONTINUED, AND TO BE COMPLETED AND SIGNED ON THE REVERSE SIDE)
<PAGE>
DATED ____________________ , 1999
__________________________________
(SIGNATURE OF SHAREHOLDERS)
__________________________________
(SIGNATURE OF SHAREHOLDERS)
WHERE STOCK IS REGISTERED JOINTLY
IN THE NAMES OF TWO OR MORE
PERSONS ALL SHOULD SIGN.
SIGNATURE(S) SHOULD CORRESPOND
EXACTLY WITH THE NAME(S) AS SHOWN
ABOVE. PLEASE SIGN AND DATE AND
RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. NO POSTAGE NEED BE
AFFIXED IF MAILED IN THE UNITED
STATES.
