Nortech Systems Inc

This management proposal requests an advisory, non-binding shareholder vote (Say-on-Pay) to approve the compensation paid to the company’s named executive officers as disclosed in the proxy. Management seeks shareholder endorsement to validate its executive pay practices designed to attract, retain, and motivate executives using a mix of cash and equity tied to corporate goals. The board and Compensation and Talent Committee recommend approval, noting that the vote is advisory but will guide future decisions; they will review significant negative votes to understand shareholder concerns. The proposal context: the company is a controlled company with related-party influence (Kunin family) and uses equity incentives and employment agreements with severance/Change-of-Control protections for named officers, potentially raising governance considerations. Passage requires more votes For than Against, and the result is non-binding; however, a material negative vote could prompt remedial changes by the Compensation Committee. The company emphasizes pay-for-performance alignment and standard governance controls but retains discretion on executive compensation structures.

Management is proposing shareholder approval of the 2026 Equity Incentive Plan, which would replace the 2017 Plan and authorize up to 250,000 shares for a wide range of awards (options, RSUs, restricted stock, SARs, performance awards, etc.). The Plan is designed to recruit and retain employees, directors and consultants through equity-linked incentives and grants the Board (or a delegated Committee) broad discretion over award terms, vesting, and administration. Key governance features include anti-repricing without shareholder approval, an annual director compensation cap, clawback provisions, and standard tax and Section 409A compliance language; however, the Plan allows for considerable Board discretion on vesting, acceleration on change-in-control, and reuse of forfeited shares, which may dilute existing shareholders. Approval is required to effectuate the successor plan and to permit awards to be granted under it; management and the Board recommend a FOR vote, arguing alignment of employee incentives with shareholder value creation. Investors should weigh dilution from the 250,000-share reserve, board discretion over awards and change-in-control provisions against the potential benefits of using equity incentives to align management and shareholder interests.