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<SEC-DOCUMENT>0000912057-00-015673.txt : 20000403
<SEC-HEADER>0000912057-00-015673.hdr.sgml : 20000403
ACCESSION NUMBER:		0000912057-00-015673
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20000511
FILED AS OF DATE:		20000331

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			NORTECH SYSTEMS INC
		CENTRAL INDEX KEY:			0000722313
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTRONIC COMPONENTS, NEC [3679]
		IRS NUMBER:				411681094
		STATE OF INCORPORATION:			MN
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DEF 14A
		SEC ACT:		
		SEC FILE NUMBER:	000-13257
		FILM NUMBER:		591361

	BUSINESS ADDRESS:	
		STREET 1:		641 EAST LAKE ST
		STREET 2:		SUITE 234
		CITY:			WAYZATA
		STATE:			MN
		ZIP:			55391
		BUSINESS PHONE:		6124734102

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DSC NORTECH INC
		DATE OF NAME CHANGE:	19901217

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DIGIGRAPHIC SYSTEMS CORP
		DATE OF NAME CHANGE:	19881113
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<DESCRIPTION>DEF14A,PROXY CARD
<TEXT>

<HTML>
<HEAD>
<TITLE> Prepared by MERRILL CORPORATION www.edgaradvantage.com
</TITLE>
</HEAD>
<BODY BGCOLOR="#FFFFFF" LINK=BLUE  VLINK=PURPLE>
<FONT SIZE=3 ><A HREF="#00STP1860_1">QuickLinks</A></FONT>
<font size=3> -- Click here to rapidly navigate through this document</font>
<P ALIGN="CENTER"><FONT SIZE=5><B>Nortech Systems Incorporated</B></FONT></P>

<HR NOSHADE WIDTH="120">
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><B>NOTICE OF ANNUAL MEETING OF SHAREHOLDERS<BR>
To be Held May&nbsp;11, 2000</B></FONT></P>

<HR NOSHADE WIDTH="120">
<BR>

<P><FONT SIZE=2>TO THE SHAREHOLDERS OF NORTECH SYSTEMS INCORPORATED:</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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&nbsp;11, 2000, at 4:00&nbsp;p.m., for the following purposes:</FONT></P>

<UL>
<DL compact>
<DT><FONT SIZE=2>1.</FONT></DT><DD><FONT SIZE=2>To
consider and act upon the Board of Directors' recommendation to fix the number of directors of the Company at four;
<BR><BR></FONT></DD><DT><FONT SIZE=2>2.</FONT></DT><DD><FONT SIZE=2>To
elect a Board of Directors to serve for a one-year term and until their successors are elected and qualify;
<BR><BR></FONT></DD><DT><FONT SIZE=2>3.</FONT></DT><DD><FONT SIZE=2>To
transact such other business as may properly come before the meeting or any adjournment thereof.</FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Only
shareholders of record at the close of business on April&nbsp;5, 2000, will be entitled to notice of and to vote at the meeting or any adjournment thereof.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>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.</B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Your
attention is called to the accompanying Proxy Statement.</FONT></P>

<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>

<P><FONT SIZE=2>By
Order of the Board of Directors</FONT></P>

<P><FONT SIZE=2>Quentin
E. Finkelson<BR></FONT> <FONT SIZE=2><I>Secretary</I></FONT></P>

</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>

<P><FONT SIZE=2>April&nbsp;10, 2000</FONT></P>

<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<H2><FONT SIZE=2> </FONT></H2>
<P ALIGN="CENTER"><FONT SIZE=5><B>Nortech Systems Incorporated</B></FONT></P>

<HR NOSHADE WIDTH="120">
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><B>PROXY STATEMENT</B></FONT></P>

<HR NOSHADE WIDTH="120">
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><B><A NAME="dg1860_annual_meeting_of_shareholders,_may_11,_2000"> </A>
ANNUAL MEETING OF SHAREHOLDERS, MAY 11, 2000  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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&nbsp;11, 2000, and at any adjournment thereof, for the purposes set forth in
the accompanying Notice of Annual Meeting of Shareholders.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
address of the principal executive office of the Company is 641 East Lake Street, Suite&nbsp;244, Wayzata, Minnesota 55391. This Proxy Statement and form of Proxy are being
mailed to shareholders of the Company on April&nbsp;10, 2000.</FONT></P>

<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1860_solicitation_and_revocation_of_proxies"> </A></FONT> <FONT SIZE=2><B>SOLICITATION AND REVOCATION OF PROXIES  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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.</FONT></P>

<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1860_voting_rights"> </A></FONT> <FONT SIZE=2><B>VOTING RIGHTS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Only shareholders of record of the Company's 2,353,859 shares of Common Stock outstanding as of the close of business on April&nbsp;5, 2000, 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.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>1</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=2,EFW="2009723",CP="NORTECH SYSTEMS INCORPORATED",DN="1",CHK=561207,FOLIO=1,FILE='DISK018:[00STP0.00STP1860]DG1860A.;11',USER='CMATTI',CD='31-MAR-2000;14:04 -->
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1860_election_of_directors"> </A></FONT> <FONT SIZE=2><B>ELECTION OF DIRECTORS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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 2000 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:</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>MICHAEL J. DEGEN<BR>
QUENTIN E. FINKELSON<BR>
MYRON KUNIN<BR>
RICHARD W. PERKINS</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Following is information regarding the nominees:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="64%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="24%" ALIGN="CENTER"><FONT SIZE=1><B>Name</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Age</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="64%" ALIGN="CENTER"><FONT SIZE=1><B>Position</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>Michael J. Degen</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>55</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Director, Operations</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>Quentin E. Finkelson</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>67</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>President and Chief Executive Officer, Secretary, and Chairman of the Board of Directors</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>Myron Kunin</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>71</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="24%"><FONT SIZE=2>Richard W. Perkins</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>69</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Director</FONT></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;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.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Finkelson
has been President and Chief Executive Officer, Secretary, and Chairman of the Board of Directors of the Company since 1990.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;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.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Perkins
has served since 1985 as President, Chief Executive Officer and a director of Perkins Capital Management,&nbsp;Inc., a registered investment advisor. He is also a
director of Bio-Vascular,&nbsp;Inc., iNTELEFILM Corporation, CNS, Inc., Eagle Pacific Industries,&nbsp;Inc., Harmony Holdings,&nbsp;Inc., Lifecore Biomedical,&nbsp;Inc., Quantech Ltd. and
Vital Images,&nbsp;Inc. He has been a director of the Company since 1993.</FONT></P>

<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1860_directors_meetings"> </A></FONT> <FONT SIZE=2><B>DIRECTORS MEETINGS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
Company does not have a standing nominating committee of the Board. The Compensation Committee consists of Messrs.&nbsp;Kunin and Perkins. All four present directors are members
of the Audit Committee.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1860_executive_officers"> </A></FONT> <FONT SIZE=2><B>EXECUTIVE OFFICERS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Executive Officers of the Company are as follows:</FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="64%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="24%" ALIGN="CENTER"><FONT SIZE=1><B>Name</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Age</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="64%" ALIGN="CENTER"><FONT SIZE=1><B>Position</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>Quentin E. Finkelson</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>67</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>President, Chief Executive Officer, Secretary and Chairman of the Board of Directors</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>Gregory D. Tweed</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>49</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Executive Vice President and Chief Operating Officer</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>Patrick J. Gilligan</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>59</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Executive Vice President, Technology and Business Development</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>Garry M. Anderly</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>53</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Senior Vice President, Corporate Finance and Treasurer</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>Peter L. Kucera</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>54</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Vice President, Corporate Quality</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2>Donald E. Horne</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>51</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="64%"><FONT SIZE=2>Vice President, Corporate Procurement</FONT></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Finkelson has been President and Chief Executive Officer, Secretary and Chairman of the Board of Directors of the Company since 1990.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;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.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Gilligan
has been Executive Vice President, Technology and Business Development of the Company, since May, 1999. From 1991 through April, 1999, he was President of Nord
Photo Engineering Company.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Anderly
has been Senior Vice President, Corporate Finance and Treasurer of the Company since May,&nbsp;1996. He was Vice President of Finance and Administration from 1991
to May,&nbsp;1996.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Kucera
has been Vice President, Corporate Quality of the Company since 1991.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;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.</FONT></P>

<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1860_report_on_executive_compensation"> </A></FONT> <FONT SIZE=2><B>REPORT ON EXECUTIVE COMPENSATION  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
chief executive officer's compensation for 1999 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.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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.</FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
Committee decided not to grant any bonuses or stock options to its executive officers in 1999.</FONT></P>

<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>

<P><FONT SIZE=2>Myron
Kunin<BR>
Richard W. Perkins<BR></FONT> <FONT SIZE=2><I>Members of the Compensation Committee</I></FONT></P>

</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

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<H2><FONT SIZE=2> </FONT></H2>
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1860_summary_compensation_table"> </A></FONT> <FONT SIZE=2><B>SUMMARY COMPENSATION TABLE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following table shows, for the fiscal years ended December&nbsp;31, 1999, 1998 and 1997, 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 1999 exceeded $100,000.</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="53%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Long-Term<BR>
Compensation<BR>
Awards</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="53%" ALIGN="CENTER"><FONT SIZE=1><B>Name and Principal Position</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>Year</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Salary($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Bonus($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Options(#)</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>Quentin E. Finkelson</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>150,320</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>President/Chief Executive Officer</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>156,103</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>Secretary, and Director</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1997</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>146,550</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>50,000</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;<BR>
Gregory D. Tweed</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
127,722</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
0</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>Executive Vice President and</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>124,200</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>Chief Operating Officer</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1997</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>116,600</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>20,000</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>&nbsp;<BR>
Garry M. Anderly</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
1999</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
105,248</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
0</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>Senior Vice President,</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1998</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>109,296</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="53%"><FONT SIZE=2>Corporate Finance and Treasurer</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>1997</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>102,608</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>20,000</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1860_stock_option_grants"> </A></FONT> <FONT SIZE=2><B>STOCK OPTION GRANTS  </B></FONT></P>

<P><FONT SIZE=2><B>Option Grants in Last Fiscal Year</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No stock options were granted by the Company in fiscal 1999 to any executive officers.</FONT></P>

<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1860_stock_option_exercises_and_option_values"> </A></FONT> <FONT SIZE=2><B>STOCK OPTION EXERCISES AND OPTION VALUES  </B></FONT></P>


<P><FONT SIZE=2><B>Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following table contains information concerning stock options exercised during 1999 and stock options unexercised at the end of 1999 with respect to each
of the Named Executive Officers.</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="91%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Number of<BR>
Unexercised<BR>
Options/ at<BR>
Fiscal Year-End<BR>
(#)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Value of<BR>
Unexercised<BR>
In-the-Money<BR>
Options/ at<BR>
Fiscal Year-End<BR>
($)(1)</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="39%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="12%" ALIGN="CENTER"><FONT SIZE=1><B>Shares<BR>
Acquired on<BR>
Exercise(#)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Value<BR>
Realized($)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Exercisable/<BR>
Unexercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="15%" ALIGN="CENTER"><FONT SIZE=1><B>Exercisable/<BR>
Unexercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>Quentin E. Finkelson</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>85,000/40,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>7,500/0</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>Gregory D. Tweed</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>31,500/16,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>2,813/0</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="39%"><FONT SIZE=2>Garry Anderly</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>0</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>21,000/14,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=2>1,875/0</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<HR NOSHADE ALIGN=LEFT WIDTH="120">
<BR>
<DL compact>
<DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Value
of unexercised in-the-money options is determined by multiplying the difference between the exercise price per share and $2.125, the closing price per share on
December&nbsp;31, 1999, by the number of shares subject to such options.</FONT></DD></DL>
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1860_director_compensation"> </A></FONT> <FONT SIZE=2><B>DIRECTOR COMPENSATION  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The directors received no compensation for their services as directors during the last fiscal year.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=1,SEQ=5,EFW="2009723",CP="NORTECH SYSTEMS INCORPORATED",DN="1",CHK=834408,FOLIO=4,FILE='DISK018:[00STP0.00STP1860]DI1860A.;8',USER='CMATTI',CD='31-MAR-2000;14:00 -->
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1860_section_16(a)_beneficia__di102044"> </A></FONT> <FONT SIZE=2><B>SECTION 16(a)&nbsp;BENEFICIAL OWNERSHIP REPORTING COMPLIANCE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Section 16(a)&nbsp;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&nbsp;31, 1999, all applicable Section 16(a)&nbsp;filing requirements were complied with.</FONT></P>

<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1860_comparative_stock_price_performance"> </A></FONT> <FONT SIZE=2><B>COMPARATIVE STOCK PRICE PERFORMANCE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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,&nbsp;Inc. (a peer issuer) and the NASDAQ Composite Index for the same periods. The graph assumes $100 invested on December&nbsp;31, 1994.</FONT></P>

<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1860_nortech_systems_incorporated_c__nor02675"> </A></FONT> <FONT SIZE=2><B>Nortech Systems Incorporated<BR> Comparative Stock Price Performance  </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<CENTER><TABLE WIDTH="73%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="48%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>1994</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>1995</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>1996</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>1997</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>1998</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="6%" ALIGN="CENTER"><FONT SIZE=1><B>1999</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>Nortech</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>235</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>156</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>144</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>102</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>63</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>Waters Instruments</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>304</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>325</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>392</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>392</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>363</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="48%"><FONT SIZE=2>NASDAQ Composite</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>100</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>141</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>174</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>213</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>300</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="6%" ALIGN="RIGHT"><FONT SIZE=2>556</FONT></TD>
</TR>
</TABLE></CENTER>
<!-- end of user-specified TAGGED TABLE -->
<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>


<P><FONT SIZE=2><HR
NOSHADE></FONT></P>

<!-- ZEQ.=2,SEQ=6,EFW="2009723",CP="NORTECH SYSTEMS INCORPORATED",DN="1",CHK=991294,FOLIO=5,FILE='DISK018:[00STP0.00STP1860]DI1860A.;8',USER='CMATTI',CD='31-MAR-2000;14:00 -->
<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1860_security_ownership_of_certain___sec02525"> </A></FONT> <FONT SIZE=2><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth as of April&nbsp;1, 2000, 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.</FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="86%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="62%" ALIGN="LEFT"><FONT SIZE=1><B>Name of Beneficial Owner<BR></B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="21%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Shares<BR>
Beneficially Owned(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Percent of<BR>
Class</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>Myron Kunin<BR>
7201 Metro Boulevard<BR>
Edina, MN 55439</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>1,087,145</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>40.1</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;<BR>
Quentin E. Finkelson</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
214,643</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
7.9</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;<BR>
Richard W. Perkins</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
23,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;<BR>
Gregory D. Tweed</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
35,500</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
1.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;<BR>
Garry M. Anderly</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
25,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;<BR>
Michael J. Degen</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
5,000</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="CENTER"><FONT SIZE=2>&nbsp;<BR>
*</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="62%"><FONT SIZE=2>&nbsp;<BR>
All executive officers and directors as a group (nine persons)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
1,390,288</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;<BR>(2)</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;<BR>
51.3</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;<BR>%</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->
<HR NOSHADE ALIGN=LEFT WIDTH="120">
<DL compact>
<DT><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Includes
95,000, 35,000, 25,000, 11,000, 5,000 and 5,000 shares subject to options exercisable within sixty (60) days granted to Messrs.&nbsp;Finkelson, Tweed, Anderly, Perkins,
Kunin and Degen, respectively, pursuant to the Company's stock option plan.
<BR><BR></FONT></DD><DT><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Includes
178,500 shares subject to options within sixty (60) days.
<BR><BR></FONT></DD><DT><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>Less
than one percent (1%).</FONT></DD></DL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The
Company will mail its annual report for the year 1999 on or about April 10, 2000, to all shareholders of the Company of record on April&nbsp;5, 2000.</FONT></P>

<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1860_independent_accountants"> </A></FONT> <FONT SIZE=2><B>INDEPENDENT ACCOUNTANTS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has appointed Larson, Allen, Weishair&nbsp;&amp; Co., LLP, as independent accountants of the Company for 2000. Larson, Allen,
Weishair&nbsp;&amp; 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.</FONT></P>

<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1860_quorum_and_vote_required"> </A></FONT> <FONT SIZE=2><B>QUORUM AND VOTE REQUIRED  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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.</FONT></P>

<BR>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1860_shareholder_proposals"> </A></FONT> <FONT SIZE=2><B>SHAREHOLDER PROPOSALS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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&nbsp;244, Wayzata, Minnesota 55391, not later than the close of business on November&nbsp;10, 2000.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Proposals
received by that date will be included in the 2001 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.</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="di1860_other_business"> </A></FONT> <FONT SIZE=2><B>OTHER BUSINESS  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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.</FONT></P>

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<P><FONT SIZE=2>By
Order of the Board of Directors</FONT></P>

<P><FONT SIZE=2>QUENTIN
E. FINKELSON<BR></FONT> <FONT SIZE=2><I>Secretary</I></FONT></P>

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<P><FONT SIZE=2>Minneapolis, Minnesota<BR>
April&nbsp;10, 2000</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>NORTECH SYSTEMS INCORPORATED<BR></B></FONT><FONT SIZE=1><B>PROXY FOR ANNUAL MEETING OF SHAREHOLDERS, MAY 11, 2000</B></FONT></P>

<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;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&nbsp;11, 2000, and at any and all adjournments thereof.</FONT></P>

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<TD WIDTH="2%"><FONT SIZE=1>1.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="96%" COLSPAN=5><FONT SIZE=1>To fix the number of directors of the Company at four.</FONT></TD>
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<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="96%" COLSPAN=5 ALIGN="CENTER"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;/&nbsp;/&nbsp;FOR&nbsp;&nbsp;&nbsp;&nbsp;/&nbsp;/&nbsp;AGAINST&nbsp;&nbsp;&nbsp;&nbsp;/&nbsp;/&nbsp;ABSTAIN&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
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<TD WIDTH="2%"><FONT SIZE=1>2.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="23%"><FONT SIZE=1>Election of directors.</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="33%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="6%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="30%"><FONT SIZE=1>&nbsp;</FONT></TD>
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<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="96%" COLSPAN=5><FONT SIZE=1>NOMINEES:&nbsp;Michael&nbsp;J. Degen, Quentin&nbsp;E. Finkelson, Myron Kunin, Richard&nbsp;W. Perkins.<BR></FONT>
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<TD WIDTH="49%"><FONT SIZE=1>/&nbsp;/&nbsp;FOR all nominees above, except vote<BR>
withheld from individual nominees</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="49%"><FONT SIZE=1>/&nbsp;/&nbsp;WITHHOLD AUTHORITY to vote for<BR>
all nominees listed above<BR></FONT>
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<TD WIDTH="96%" COLSPAN=5><FONT SIZE=1><B>To withhold authority to vote for any individual nominee strike a line through the nominee's name in the list above.</B></FONT></TD>
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<TD WIDTH="2%"><FONT SIZE=1>3.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="96%" COLSPAN=5><FONT SIZE=1>In their discretion, on such other matters as may properly come before the meeting.<BR></FONT>
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<P><FONT SIZE=1>&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=1><B>THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS</B></FONT><FONT SIZE=1> 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.</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1><B>(Continued, and TO BE COMPLETED AND SIGNED on the reverse side)</B></FONT></P>

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<P><FONT SIZE=1><I>Dated&nbsp;&nbsp;<U> </U>&nbsp;, 2000</I></FONT></P>

<P><FONT SIZE=1><I><U> </U></I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1><I>(Signature of Shareholders)</I></FONT></P>

<P><FONT SIZE=1><I><U> </U></I></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1><I>(Signature of Shareholders)</I></FONT></P>

<P><FONT SIZE=1><I>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.</I></FONT></P>

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<BR>
<H2><FONT SIZE=2><A NAME="00STP1860_1">QuickLinks</A></FONT></H2>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#dg1860_annual_meeting_of_shareholders,_may_11,_2000">ANNUAL MEETING OF SHAREHOLDERS, MAY 11, 2000</A></FONT><BR>
<FONT SIZE=2><A HREF="#dg1860_solicitation_and_revocation_of_proxies">SOLICITATION AND REVOCATION OF PROXIES</A></FONT><BR>
<FONT SIZE=2><A HREF="#dg1860_voting_rights">VOTING RIGHTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#dg1860_election_of_directors">ELECTION OF DIRECTORS</A></FONT><BR>
<FONT SIZE=2><A HREF="#dg1860_directors_meetings">DIRECTORS MEETINGS</A></FONT><BR>
<FONT SIZE=2><A HREF="#dg1860_executive_officers">EXECUTIVE OFFICERS</A></FONT><BR>
<FONT SIZE=2><A HREF="#dg1860_report_on_executive_compensation">REPORT ON EXECUTIVE COMPENSATION</A></FONT><BR>
<!-- TOC_END -->
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#di1860_summary_compensation_table">SUMMARY COMPENSATION TABLE</A></FONT><BR>
<FONT SIZE=2><A HREF="#di1860_stock_option_grants">STOCK OPTION GRANTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#di1860_stock_option_exercises_and_option_values">STOCK OPTION EXERCISES AND OPTION VALUES</A></FONT><BR>
<FONT SIZE=2><A HREF="#di1860_director_compensation">DIRECTOR COMPENSATION</A></FONT><BR>
<FONT SIZE=2><A HREF="#di1860_section_16(a)_beneficia__di102044">SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE</A></FONT><BR>
<FONT SIZE=2><A HREF="#di1860_comparative_stock_price_performance">COMPARATIVE STOCK PRICE PERFORMANCE</A></FONT><BR>
<FONT SIZE=2><A HREF="#di1860_nortech_systems_incorporated_c__nor02675">Nortech Systems Incorporated Comparative Stock Price Performance</A></FONT><BR>
<FONT SIZE=2><A HREF="#di1860_security_ownership_of_certain___sec02525">SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</A></FONT><BR>
<FONT SIZE=2><A HREF="#di1860_independent_accountants">INDEPENDENT ACCOUNTANTS</A></FONT><BR>
<FONT SIZE=2><A HREF="#di1860_quorum_and_vote_required">QUORUM AND VOTE REQUIRED</A></FONT><BR>
<FONT SIZE=2><A HREF="#di1860_shareholder_proposals">SHAREHOLDER PROPOSALS</A></FONT><BR>
<FONT SIZE=2><A HREF="#di1860_other_business">OTHER BUSINESS</A></FONT><BR>
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