Microwave Filter Company, Inc.
6743 Kinne Street
East Syracuse, New York 13057
Notice of Annual Meeting Of Shareholders
To the Shareholders of Microwave Filter Company, Inc.:
At the direction of the Board of Directors of Microwave Filter
Company, Inc., a New York corporation (the "Company"), notice is hereby given
that the Annual meeting of Shareholders of the Company (the "Meeting") will be
held at 10:00 a.m. on Thursday, April 9, 1998 at the Holiday Inn, Carrier
Circle, East Syracuse, New York 13057 for the purpose of voting on the
following matters:
Proposal 1. The election of 3 directors to hold office until
the Annual Meeting of the Shareholders at which their term expires or until
their successors have been duly elected.
Proposal 2. To approve the Microwave Filter Company, Inc.
1998 Incentive Stock Plan.
Proposal 3. The ratification of Coopers & Lybrand L.L.P. as
the Company's independent auditors for the fiscal year ending September 30,
1998.
The Board of Directors has fixed the close of business on February 17,
1998 as the record date for the determination of shareholders entitled to
notice of and to vote at the Meeting, or any adjournments thereof.
By order of the Board of Directors
Louis S. Misenti
Chairman of the Board
Dated: March 13, 1998
Syracuse, New York
YOUR VOTE IS IMPORTANT. YOU ARE THEREFORE REQUESTED TO SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, EVEN IF YOU EXPECT TO BE PRESENT AT
THE MEETING. YOU MAY WITHDRAW YOUR PROXY AT ANY TIME PRIOR TO THE MEETING, OR
IF YOU DO ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AT THAT TIME AND
VOTE IN PERSON IF YOU WISH.
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MICROWAVE FILTER COMPANY, INC.
Proxy Statement for Annual Meeting of Shareholders
General
The enclosed Proxy is solicited on behalf of the Board of Directors of
Microwave Filter Company, Inc. (the "Company") for use at the Company's Annual
Meeting of Shareholders (the "Annual Meeting") to be held on Thursday, April
9, 1998 at 10:00 a.m. local time or at any adjournment or postponement
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Shareholders. The Annual Meeting will be held at the
Holiday Inn, Carrier Circle, East Syracuse, New York 13057.
The Company's principal executive offices are located at 6743 Kinne
Street, East Syracuse, New York 13057. The telephone number at that address
is (315) 438-4700.
These proxy solicitation materials and the Annual Report to
Shareholders were first mailed on or about March 13, 1998 to all shareholders
entitled to vote at the Annual Meeting.
Record Date and Shares Outstanding
Shareholders of record at the close of business on February 17, 1998
are entitled to notice of, and to vote at, the Annual Meeting. At the record
date 3,549,566 shares of the Company's common stock were issued, outstanding
and entitled to vote at the Annual Meeting.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person.
Voting and Solicitation
Every shareholder voting for the election for Directors and on the
other matters presented in this proxy is entitled to one vote for each share
held of record on the record date. Directors are elected by a plurality of
the votes cast at the meeting. Abstentions count for the purpose of
determining a quorum. Broker non-votes do not count for the purpose of
determining a quorum. Abstentions will not count as a vote for proposals 1,
2 and 3. Broker non-votes will count as a vote for proposals 1, 2 and 3.
The cost of this solicitation will be borne by the Company. The
Company has retained Regan & Associates to assist in the solicitation of
proxies at a fee of $8,000 (which includes expenses.) In addition, the Company
may reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies also may be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone or by telegram.
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Deadline for Receipt of Shareholder Proposals
Proposals of shareholders which are intended to be presented by such
shareholders at the Company's 1999 Annual Meeting must be received by the
Secretary of the Company at the Company's principal executive offices no later
than November 2, 1998 in order to be included in the proxy soliciting material
relating to that meeting.
Board Meetings and Committees
The Board of Directors held a total of five meetings during the fiscal
year ending September 30, 1997. No Director attended fewer than 75% of all
such meetings of the Board of Directors and of the Committees, if any, on
which such Directors served.
The Company's Finance and Audit Committee currently consists of
Sidney Chong, Chair, Daniel Galbally, Frank S. Markovich and Robert R.
Andrews. The Finance and Audit Committee reviews and approves the scope of
the audit performed by the Company's independent auditors as well as the
Company's accounting principles and internal accounting controls. The Finance
and Audit Committee held three meetings during fiscal year 1997.
The Company's Compensation Committee currently consists of Trudi B.
Artini, Chair, Sidney Chong, David B. Robinson, M.D., and Daniel Galbally.
The Compensation Committee reviews compensation and benefits for the Company's
executives. The Compensation Committee held three meetings during fiscal year
1997.
The Company's Nominating Committee currently consists of David B.
Robinson, M.D., Chair, Trudi B. Artini, Carl F. Fahrenkrug, P.E., Milo
Peterson and Frank S. Markovich. The Nominating Committee will consider
nominees for the Board of Directors recommended by shareholders if such
recommendations are in writing and are mailed to the Secretary of the Company
at the Company's principal executive office. The Nominating Committee did not
hold any meetings during fiscal year 1997.
The Company also has a standing Executive Committee.
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Compensation of Directors
The Company pays Directors' fees to each Director who is not an
employee of the Company (currently seven persons). During fiscal year 1997,
outside Directors received fees of $300 per Board meeting and $200 per
Committee meeting, with the exception of the Executive Committee whose members
receive $300 per meeting. The Company also reimburses Directors for
reasonable expenses incurred in attending meetings. During fiscal 1997, the
Company paid Louis S. Misenti $10,000 in compensation (which was taken in
stock) for his services as Chairman of the Board of Directors. In
addition, the Company paid Louis S. Misenti $15,150 during fiscal 1997 for
consulting services. Outside Directors have the option of receiving their
compensation for meetings in the form of restricted shares of the Company's
common stock. For this purpose, shares are valued at 85% of the mean between
the bid and asked price of the stock at the beginning of each quarter.
During fiscal 1997, 15,186 shares were issued to Directors in lieu of
Directors' fees:
Number of Shares
Director Issued In Lieu of Directors' Fees
Trudi B. Artini 930
Sidney Chong 1,653
Frank S. Markovich 1,033
Louis S. Misenti 11,570
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Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding
beneficial ownership of the Company's common stock as of February 17, 1998 (i)
by each person who is known by the Company to own beneficially more than 5% of
the Company's common stock, (ii) each Director of the Company and (iii) all
Directors and Executive Officers as a group.
Directors, Officers Shares Beneficially Owned
5% Shareholders Number Percent
Carl F. Fahrenkrug * 377,066 10.6%
and Rita Fahrenkrug
8365 Indian Hill Road
Manlius, NY 13104
Louis S. Misenti * 356,894 10.1%
140 Clearview Road
Dewitt, NY 13214
Milo Peterson * 168,570 4.7%
Trudi B. Artini * 108,815 3.1%
David B. Robinson, M.D.* 116,332 3.3%
Frank S. Markovich * 4,508 **
Daniel Galbally * 1,489 **
Sidney Chong * 8,635 **
Robert R. Andrews * 1,214 **
All Directors and Executive
Officers as a group (ten persons) 1,174,431 33.1%
*Directors of the Company.
**Denotes less than one percent of class.
Frederick A. Dix 244,007 6.9%
and Margorie Dix
209 Watson Road
N. Syracuse, NY 13212
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EXECUTIVE COMPENSATION AND OTHER MATTERS
Executive Compensation
The following table sets forth the annual and long-term compensation
of the Company's Chief Executive Officer for services to the Company during
the three fiscal years ended September 30, 1997.
Annual Compensation
Salary Bonus
Name and Principal Position Year $ $
Carl F. Fahrenkrug 1997 117,882 -
President and CEO 1996 104,229 10,000
1995 91,775 -
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee was or is an officer or
employee of the Company or any of its subsidiaries.
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Executive Officers and Directors and persons who own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes of ownership with the Securities and Exchange Commission
and the National Association of Securities Dealers, Inc. Such Officers,
Directors and 10% shareholders are also required by SEC Rules to furnish the
Company with copies of all Section 16(a) forms that they file. Based solely on
its review of copies of such reports received by it, the Company believes that
during the fiscal year ended September 30, 1997, all such filing requirements
were complied with in a timely fashion.
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PROPOSAL ONE
ELECTION OF DIRECTORS
Nominees
Three Directors (Class II) are to be elected at the Annual Meeting.
Unless otherwise instructed, the proxy holders will vote the proxies received
by them for the three nominees named below, all of whom are presently
Directors of the Company. In the event that any nominee is unable or declines
to serve as a Director at the time of the Annual Meeting, the proxies will be
voted for any nominee who shall be designated by the present Board of
Directors to fill the vacancy. A term of office for each person elected as a
Director will continue to the Annual Meeting of Shareholders at which their
term expires or until his or her successor has been elected and qualified. It
is not expected that any nominee will be unable or will decline to serve as a
Director.
The name of and certain information regarding each nominee is set
forth below.
Director Principal Occupation
ROBERT R. ANDREWS Mr. Andrews is the president and Principal shareholder
Age 56 of Morse Manufacturing Co., Inc., East Syracuse, N.Y.
Director since 1992 which produces specialized material handling
equipment and has served in that capacity since prior
to 1985. He received a B.A. degree from Arkansas
University and has served as Vice President and a
Director of the Manufacturers Association of Central
New York, President of the Citizens Foundation, a
Trustee of DeWitt Community Church, a Director of
the Salvation Army and Chairman of the Business and
Industry Council of Onondaga Community College.
SIDNEY K. CHONG Mr. Chong is Manager of Corporate Accounting for
Age 56 Carrols Corp. in Syracuse. Prior to joining Carrols
Director since 1995 Corp., he was a Senior Accountant with Price
Waterhouse and Co. in New York City. Mr. Chong has
a Bachelor of Science degree in accounting from
California State University.
LOUIS S. MISENTI President and Principal shareholder of SCI Corp.,
Age 70 Syracuse, New York since 1984. SCI manufactures
Director since 1976 polishing compounds for the automobile and
silverware industries. Mr. Misenti is also the
managing partner of North Pines Golf Course, Cicero,
New York which was founded in 1970. He was elected
Chairman of the Board of Directors of MFC on March
27, 1993.
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PROPOSAL TWO
ADOPTION OF THE 1998 INCENTIVE STOCK PLAN
The Board of Directors is proposing for shareholder approval the Microwave
Filter Company, Inc. 1998 Incentive Stock Plan (the "1998 Plan"). The
following is a brief summary of the 1998 Plan proposed by the Board of
Directors, which the Corporation believes is a fair and complete summary of
the Option Plan. This summary is qualified in its entirety by reference to the
terms of the Option Plan set forth as Exhibit A.
Description of the 1998 Plan
The purpose of the 1998 Plan is to promote the interests of the Company by
attracting and retaining outstanding individuals as directors, officers and
other key employees , by encouraging and enabling such persons to acquire
financial interests in the Company through the acquisition of the Company's
Common Stock and by providing performance incentives to such persons.
Under the 1998 Plan, the Company may grant incentive stock options ("ISOs"),
non-qualified stock options ("NQSOs") and stock appreciation rights.
Any options or stock appreciation rights which are canceled or are
not exercised within the exercise period may again be granted under the 1998
Plan. The 1998 Plan reserves 150,000 shares for issuance, of which 35,000
shares may be issued pursuant to options granted to Non-Employee Directors and
115,000 shares may be issued pursuant to options granted to other eligible
individuals. As of December 31, 1997, the market value of the securities
reserved for issuance under the 1998 Plan was approximately $159,000.
The 1998 Plan shall be administered by the Board of Directors of the Company.
The Board of Directors shall determine to whom (within the class of eligible
persons) the options and stock appreciation rights will be granted,
the number of shares to be subject to each option, the duration
of each option or stock appreciation right, the time during which an
option or stock appreciation right may be exercised and, for the most part,
other terms and conditions of the options and stock appreciation rights.
The Board of Directors is not required to formulate similar terms and
conditions of options and stock appreciation rights for all recipients.
The Board of Directors may establish any rules and regulations it
deems necessary to administer the 1998 Plan.
Participation in the 1998 Plan is limited to directors, officers, and
employees of the Company and its affiliates. As of December 31, 1997,
approximately 7 directors, 3 officers, and 72 employees, who were not also
officers were eligible to participate in the 1998 Plan.
The exercise price of ISOs and NQSOs granted under the 1998 Plan will be
100% of the fair market value of the Common Stock on the date of the grant
of such ISOs and NQSOs. The aggregate fair market value of the ISOs first
exercisable by a recipient in any calendar year may not exceed $100,000.
Common Stock delivered to a recipient upon the exercise of a stock
appreciation right will be valued at its fair market value on the date the
right is exercised.
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At the time of exercise of an option, the recipient must either deliver stock
appreciation rights, if any, or pay to the Company the full purchase price of
the shares in cash or, upon prior approval by the Board of Directors, by
delivery to the Company of shares owned by the recipient, the fair market
value of which equals the purchase price of the shares pursuant to the option
being exercised. Stock appreciation rights may be exercised only in
conjunction with the surrender of options granted by the Company, whether
pursuant to the 1998 Plan or otherwise. The exercise of a stock appreciation
right entities the holder to receive from the Company an amount equal to the
excess of the fair market value of the shares to which the surrendered options
pertain over the aggregate exercise price of such options. Unless otherwise
determined by the Board of Directors, neither options nor rights under the
1998 Plan will be transferable otherwise than by will or the laws of descent
and distribution.
Options granted under the 1998 Plan may not have exercise periods exceeding
ten years from the date of grant. Recipients may exercise portions of their
options. A stock appreciation right may be exercised only as long as the
option to which it relates is exercisable. Any option or stock appreciation
right granted under the 1998 Plan to a recipient subject to Section 16 of the
Exchange Act may be exercised only after six months from the date of its
grant.
The 1998 Plan will terminate on April 10, 2008. After termination of the
1998 Plan, no grants may be effected; however, previously made grants will
remain outstanding in accordance with their terms and conditions and the terms
and conditions of the 1998 Plan.
The 1998 Plan may be amended by the Board of Directors of the Company without
the approval of the shareholders, provided that no action will be taken
without the approval of the shareholders to increase the aggregate number of
shares of Common Stock subject to the 1998 Plan, materially increase the ben-
efits accruing to the recipients or any class of recipients under the 1998
Plan or materially modify the requirements as to eligibility for
participation in the 1998 Plan. Notwithstanding the foregoing, the Board of
Directors may make any other amendments, and may, at any time and in its sole
discretion, declare any or all options and rights outstanding under the 1998
Plan to be exercisable.
It is the intent of this plan not to be covered by ERISA.
The adoption of the 1998 plan is contingent upon the approval of
shareholders and the filing of all appropriate government forms.
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Federal Income Tax Consequences Under the 1998 Plan
The following is a brief description of the federal income tax consequences of
stock options and stock appreciation rights which may be granted under the
1998 Plan under present tax laws.
Incentive Stock Options. There will be no federal income tax consequences to
either the participant or the Company upon the grant of an ISO. The
participant will not have to recognize any income upon the exercise of an ISO,
and the Company will not be allowed any deduction, as long as the participant
does not dispose of the shares within two years from the date the ISO was
granted or within one year from the date the shares were transferred to the
participant (the "holding period requirement"). Upon a sale of the shares
after the holding period requirement is satisfied, the participant will
recognize a long-term capital gain (or loss) measured by the excess (or
deficit) of the amount realized from such sale over the option price of such
shares, but no deduction will be allowed to the Company. If a participant
disposes of shares before the holding period requirement is satisfied, the
participant will recognize ordinary income in the year of disposition, and
the Company will be entitled to a corresponding deduction, in an amount equal
to the lesser of (a) the excess of the fair market value of the shares on the
date of exercise over the option price of the shares or (b) the excess of the
amount realized from such disposition over the option price of the shares.
Where shares are sold before the holding period requirement is satisfied, the
participant will also recognize a capital gain to the extent that the amount
realized from the disposition of the shares exceeded the fair market value of
the shares on the date of exercise.
A participant may under certain circumstances be permitted to pay all or a
portion of the option price of an ISO by delivering Common Stock of the
Company. If the Common Stock delivered by a participant as payment of the
option price was acquired through a prior exercise of an ISO or an option
granted under an employee stock purchase plan, and if the holding period
requirement applicable to such Common Stock has not yet been met, the delivery
of such Common Stock to the Company could be treated as a taxable sale or
disposition of such stock. In general, where a participant pays the option
price of an ISO by delivering Common Stock of the Company, the participant
will have a zero tax basis in the shares received that are in excess of the
number of shares of Common Stock delivered in payment of the option price.
For alternative minimum tax purposes, regardless of whether the participant
satisfies the holding period requirement, the excess of the fair market value
of the shares on the exercise date over the option price will be treated as a
positive adjustment to the participant's alternative minimum taxable income
for the year the ISO is exercised. If the shares are disposed of in the year
the ISO was exercised, however, the positive adjustment taken into account for
alternative minimum tax purposes will not exceed the gain realized on such
sale. Exercise of an ISO may thus result in liability for alternative minimum
tax.
Non- qualified Stock Options. There will be no federal income tax
consequences to either the participant or the Company upon the grant of a
NQSO. Upon the exercise of an NQSO, the participant will recognize ordinary
compensation income in an amount equal to the excess of the fair market value
of each share on the date of exercise over the option price, and the Company
will be entitled to a federal income tax deduction of the same amount.
If a participant pays the option price of a NQSO by surrendering Common Stock
held by the participant, then, to the extent the shares received upon exercise
of the option do not exceed the number of shares delivered, the participant
will be treated as making a tax-free exchange of stock and the new shares
received will have the same tax basis and holding period requirement as the
shares given up. In such case, the participant will recognize ordinary
compensation income in an amount equal to the fair market value of the shares
received in excess of the shares delivered in payment of the option price. The
basis of such additional shares will equal their fair market value on the date
the option was exercised.
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Stock Appreciation Rights. There will be no federal income tax consequences
to either the participant or the Company upon the grant of a stock
appreciation right or during the period that the unexercised right remains
outstanding. Upon the exercise of a stock appreciation right, the fair market
value of the shares issued or transferred and the amount of cash paid, if any,
by the Company to the participant will be taxable to the participant as
ordinary income, and the Company will be entitled to a corresponding
deduction.
The affirmative vote of a majority of the votes cast by shareholders present
in person or by proxy and entitled to vote at the meeting is required for the
adoption of the 1998 Plan. The Board of Directors recommends a vote FOR the
approval of the 1998 Plan.
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PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On the recommendation of the Audit and Finance Committee, the Board of
Directors has appointed Coopers & Lybrand L.L.P., independent certified public
accountants, to audit the Company's financial statements for the fiscal year
ending September 30, 1998 and recommends that shareholders vote for
ratification of such appointment.
Coopers & Lybrand has audited the Company's financial statements since
the fiscal year ended September 30, 1992. A representative is expected to be
present at the Annual Meeting, will have an opportunity to make a statement if
they desire to do so and are expected to be available to respond to
appropriate questions.
The Board of Directors unanimously recommends a vote "FOR" the
ratification of the appointment of Coopers & Lybrand L.L.P. as independent
auditors.
Other Matters
The Company knows of no other matters to be submitted at the meeting.
If any other matters properly come before the meeting, it is the intention of
the persons named in the enclosed proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: March 13, 1998
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EXHIBIT A
1998 INCENTIVE STOCK PLAN
1. Purpose
The purpose of the Microwave Filter Company, Inc. 1998 Incentive
Stock Plan (the "Plan") is to promote the interests of Microwave Filter
Company, Inc. (the "Company") by attracting and retaining outstanding
individuals as directors, officers and other key employees , by encouraging
and enabling such persons to acquire financial interests in the Company
through the acquisition of shares of the Company's Common Stock, and by
providing performance incentives to such persons.
Under the Plan, the Company may grant (i) stock options that qualify
as "incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), (ii) nonqualified
stock options that do not constitute ISOs ("NSOs") (ISOs and NSOs are together
the "Options") and (iii) stock appreciation rights ("Rights").
2. Term
The Plan shall be effective as of April 9, 1998, and it shall remain
in effect until, and shall terminate on, April 10, 2008. After termination of
the Plan, no grants may be effected hereunder, but previously made grants
shall remain outstanding in accordance with their terms and conditions and the
terms and conditions of the Plan.
3. Administration
The Plan shall be administered by the Board of Directors of the
Company. The Board of Directors shall determine the directors, officers and
key employees of the Company and its "Affiliates" (as defined in Section 5
hereof) to whom, and the time or times at which, Options and Rights
will be granted, the number of shares to be subject to each Option,
the duration of each Option or Right, the time or times during
which an Option or Right may be exercised, and other terms and conditions of
the grant of Options and Rights under the Plan. The terms and
conditions of Options and Rights need not be the same for all
recipients thereof under the Plan ("Recipients") nor for all Options and
Rights granted under the Plan.
The Board of Directors may, subject to the provisions of the Plan,
establish such rules and regulations as it deems necessary or advisable for
the proper administration of the Plan, and may make determinations and take
such other action in connection with or in relation to the Plan as it deems
necessary or advisable.
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4. Stock Subject to the Plan
A maximum of 150,000 shares of the Company's $.10 par value Common
Stock (the "Shares") shall be issuable or transferable by the Company under
the Plan, of which 35,000 shares may be issued pursuant to options granted to
Non-Employee Directors and 115,000 shares may be issued pursuant to options
granted to other eligible individuals. The Shares issued or transferred
pursuant to the Plan shall be made available from authorized and unissued
Common Stock of the Company or from the Company's treasury Shares. Such
maximum number of Shares shall be subject to adjustment in accordance with
Section 9 hereof.
Shares subject to an unexercised portion of any Option or Right that
expires or is cancelled, terminated, or, except as provided in the following
sentence, surrendered for any reason may again become subject to Options
or Rights granted under the Plan. Upon surrender, in connection
with the exercise of a Right, of an Option (or a stock option granted under
any other plan hereafter adopted by the Company), the number of Shares subject
to the surrendered Option (or other stock option) shall be charged against the
maximum number of Shares issuable or transferable under the Plan (or such
other stock option plan), and such number of Shares shall not be issuable or
transferable under the Plan (or such other plan) thereafter. The surrender, in
connection with the exercise of a Right, of any stock option issued other than
pursuant to a stock option plan shall not result in a charge against the
maximum number of Shares issuable or transferable under the Plan or any other
stock option plan.
5. Eligibility
NSOs and Rights may be granted to the directors, officers
and employees of the Company and its Affiliates. The term "Affiliates"
shall mean any corporation or other business organization in
which the Company owns, directly or indirectly, 25 percent or more of the
voting stock or capital at the time of the granting of the Option or Right.
ISOs may be granted to the employees of the Company and the employees
of its Affiliates that are corporations and are at least 50 percent
owned, directly or indirectly, by the Company. Any ISO held by a Recipient who
is an employee of an Affiliate that ceases to be 50 percent owed by the
Company will become an NSO three months after the date that the Company's
ownership of the Affiliate falls below 50 percent. If the Company's ownership
of an Affiliate falls below 25 percent, any Recipient who is an employee
of such Affiliate (except one who also is employed or retained by
the Company or another Affiliate) will be considered terminated for purposes
of Section 6d hereof on the date that the Company's ownership of the Affiliate
falls below 25 percent.
6. Grants of Options
Except as otherwise expressly provided herein, Options granted
pursuant to the Plan shall be subject to the following terms and conditions:
a. Option Price. The price of a Share purchased upon the
exercise of a particular ISO or NSO (the "Option Price") shall be 100 percent
of the Fair Market Value (as defined in Section 8 hereof) of a Share on the
date of grant of such ISO or NSO.
b. Payment. Unless otherwise determined by the Board of
Directors, the Option Price shall be paid in full at the time of exercise.
Payment may be in cash or, with the prior approval of and upon conditions
established by the Board of Directors, by delivery of Shares owned by the
Recipient. If payment is made by the delivery of Shares, the value of the
Shares delivered shall be the Fair Market Value of such Shares on the date of
exercise of the respective Option.
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c. Exercise Period. The Board of Directors shall determine the period during
which an Option may be exercised; provided, however, that for any Option, such
period shall not exceed ten years from the date of grant of such Option. An
Option granted to a Recipient who is subject to Section 16 of the Exchange
Act, may be exercised only after six months from the date of its grant.
d. Effects of Termination of Employment, Retirement, Disability and Death.
The effects of the termination of employment or the retirement, "Disability"
(as defined below) or death of a Recipient on the exercisability of ISOs held
by such Recipient shall be determined by the Board of Directors in accordance
with Section 6f(iii) hereof. Except as otherwise determined by the Board of
Directors in its discretion:
(i) If a Recipient's employment (or service as an officer or
director) is terminated due to retirement or Disability, or if the Recipient
should die while employed (or while serving as an officer or director), the
right of the Recipient or his or her successor in interest to exercise any NSO
then held by such Recipient (to the extent exercisable at such time) shall
terminate upon the earlier of the end of the original term of the NSO or one
year after the date of such retirement, disability or death.
(ii) If the Recipient should die within one year after
termination of employment (or service as an officer or director) due to
retirement or Disability, the right of his or her successor in interest to
exercise any NSO held by the Recipient at the time of his or her death (to the
extent exercisable at such time) shall terminate upon the later of one year
after the date of such retirement or Disability or six months after the date
of such Recipient's death, but not later than the end of the original term of
the NSO.
(iii) If any Recipient's employment (or service as an
officer or director) is terminated for any reason other than retirement,
Disability or death, the right of such Recipient to exercise any NSO then held
by such Recipient (to the extent exercisable at the time of termination of
employment) shall terminate upon the earlier of the end of the original term
of such NSO or three months after the Recipient's last day of employment (or
service as an officer or director) for the Company and its Affiliates.
(iv) If such Recipient should die within three months after
termination of employment for any reason other than retirement or Disability,
the right of his or her successor in interest to exercise any NSO held by the
Recipient at the time of his or her death (to the extent exercisable at such
time) shall terminate upon the earlier of the end of the original term of such
NSO or three months after the date of such Recipient's death. Notwithstanding
the foregoing, no Option held by any employee, officer or director shall be
exercisable after termination of such employee, officer or director for
"cause," as such term is defined by the Board of Directors in its discretion.
The term "Disability" shall mean "permanent and total disability," as such is
defined in Section 22(e)(3) of the Code.
Whether military, governmental or eleemosynary service or other leave
of absence will constitute termination of employment (or services as an
officer or director) for the purposes of this Section 6d shall be determined
in each case by the Board of Directors in its sole discretion.
e. Other Terms and Conditions. Options may contain such other provisions, not
inconsistent with the provisions of the Plan, as the Board of Directors shall
determine appropriate from time to time.
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f. Grant of ISOs.
(i) The Board of Directors, with respect to each
grant of an Option, shall determine whether such Option shall be an ISO, and,
upon determining that an Option shall be an ISO, shall designate it as such in
the written instrument evidencing such Option. If the written instrument
evidencing an Option does not contain a designation that it is an ISO, it
shall not be an ISO.
(ii) The aggregate Fair Market Value (determined in
each instance on the date on which an ISO is granted) of the Shares with
respect to which ISOs are first exercisable by any Recipient in any calendar
year shall not exceed $100,000. Should any Affiliate of the Company adopt a
stock option plan under which options constituting incentive stock options (as
defined in Section 422 of the Code) are granted to any Recipient, then the
Fair Market Value of the Shares for which, and the times at which, such
incentive stock options will be exercisable shall be taken into account in
determining the value of the Shares for which such Recipient's ISOs granted
under the Plan are first exercisable in any year.
(iii) The Board of Directors will determine, at the
time of granting an ISO, the terms and conditions to which such ISO shall be
subject for the purpose of compliance with the requirements of the Code, and
such terms and conditions shall be set forth in the agreement provided for in
Section 13 hereof evidencing the grant of such ISO.
7. Grants of Rights
The Board of Directors may, at any time, grant to any holder of an
Option outstanding under the Plan or any other outstanding stock option
granted by the Company the right to surrender such Option or other stock
option (to the extent such Option or other stock option is otherwise
exercisable) and to receive from the Company an amount equal to the excess, if
any, of the Fair Market Value of the Shares with respect to which such Option
or other stock option is surrendered on the date of such surrender over the
Option Price of the Option or other stock option surrendered. No ISO may be
surrendered in connection with the exercise of a Right unless the Fair Market
Value of a Share at the time of such surrender is greater than the Option
Price for such ISO.
Payment by the Company of the amount payable upon the exercise of a
Right may be made by the delivery of Shares or cash or any combination of
Shares and cash, as determined in the sole discretion of the Board of
Directors from time to time. No fractional Shares shall be issued as payment
in respect of a Right. The Board of Directors may provide for the elimination
of fractional Shares without adjustment, or for the payment of the value of
such fractional Shares in cash. Shares delivered to a Recipient upon the
exercise of a Right shall be valued at their Fair Market Value on the date the
Right is exercised.
The Board of Directors may limit the period or periods during which
Rights may be exercised and may provide such other terms and conditions (which
need not be the same with respect to all Recipients or Rights) under which
Rights may he granted or exercised. A Right may be exercised only as long as
the Option or other stock option to which it relates is exercisable. A Right
granted to a Recipient who is subject to Section 16 of the Exchange Act may be
exercised only after six months from the date of grant.
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8. Fair Market Value
"Fair Market Value" for all purposes under the Plan shall mean the
average of the high and low prices of Shares, as reported in The Wall Street
Journal, on the NASDAQ (or a similar consolidated transactions report for the
exchange or other market on which the Shares are then trading, if not the
NASDAQ) for the relevant date, or if no sales of Shares were made on such
exchange on such date, the average of the high and low prices of Shares as
reported in such composite transaction report for the preceding day on which
sales of Shares were made on such exchange. If the Shares are not listed on a
national securities exchange at the time Fair Market Value is to be
determined, then Fair Market Value shall be determined by the Board of
Directors in good faith pursuant to such method as the Board of Directors
deems appropriate and equitable. Under no circumstances shall the Fair Market
Value of a Share be less than its par value.
9. Adjustments and Reorganization
The Board of Directors may make such adjustments as it deems
appropriate in the event of changes that impact upon the price or status of
the Shares, provided that any such actions are consistently and equitably
applicable to all affected Recipients, and further provided, however, that the
Board of Directors shall not change the aggregate number of Shares subject to
the Plan, except in accordance with the following paragraph.
In the event of any stock dividend, stock split, combination or
exchange of shares, merger, consolidation, spin-off or other similar
transaction or any other change affecting the capital structure of the
Company, such adjustments, if any, as the Board of Directors in its discretion
may deem appropriate to reflect such change shall be made with respect to (i)
the aggregate number of Shares that may be issued under the Plan; (ii) the
number of Shares subject to Options and Rights under the Plan;
and (iii) the Option Prices for Options outstanding under the Plan.
10. Amendments, Modifications and Termination of the Plan
The Board of Directors may terminate, suspend or amend the Plan as
the Board of Directors deems appropriate, in whole or in part, without the
approval of the stockholders of the Company; provided, however, that no action
shall be taken without the approval of the stockholders of the Company to
increase the aggregate number of Shares subject to the Plan, materially
increase the benefits accruing to the Recipients or any class of Recipients
under the Plan, or materially modify the requirements as to eligibility for
participation in the Plan. Notwithstanding the foregoing, the Board of
Directors may make amendments applicable or inapplicable only to persons who
are subject to Section 16 of the Exchange Act, and the Board of Directors may,
at any time, declare any or all Options and Rights then outstanding under the
Plan to be exercisable, whether or not such Options or Rights are then
otherwise exercisable.
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No amendment or termination of the Plan shall in any manner adversely
affect any Option or Right theretofore granted without the consent of the
Recipient thereof.
11. Tax Withholding
The Company shall have the right to deduct from any amount payable or
Shares deliverable under the Plan an amount sufficient to cover
withholding required by law for any federal, state or local taxes or to take
such other action as may be necessary to satisfy any such withholding
obligations. The Board of Directors may permit Shares to be used to satisfy
required tax withholding and such Shares shall be valued at their Fair Market
Value as of the date of the applicable payment or delivery.
12. Unfunded Plan
Unless otherwise determined by the Board of Directors, the Plan shall
be unfunded and shall not create (or be construed to create) a trust or a
separate fund or funds. The Plan shall not establish any fiduciary
relationship between the Company and any Recipient or other person. To the
extent any person holds any right by virtue of a grant under the Plan, such
right (unless otherwise determined by the Board of Directors) shall be no
greater than the right of an unsecured general creditor of the Company.
13. Grant Agreements
Grants under the Plan shall be evidenced by agreements approved by
the Board of Directors that set forth the terms, conditions and limitations
applicable to such grants. The Board of Directors need not require the
execution of any such agreement, and acceptance of any grant by the Recipient
thereof will constitute agreement to the terms of such grant.
14. Replacement of Options and Rights
The Board of Directors, from time to time, may determine that one or
more Recipients or the holders of stock options under any other stock option
plan hereafter adopted by the Company may or must surrender for cancellation
any unexercised outstanding Option or other stock option and related Right in
order to receive from the Company in exchange therefor Options for such number
of Shares as may be designated by the Board of Directors.
15. Nontransferability of Options and Rights
No Option or Right shall be transferable otherwise than by will or by
the laws of descent and distribution. During the lifetime of a Recipient,
Options and Rights granted to such Recipient shall be exercisable only by such
Recipient personally or by his or her legal representative.
16. Rights as a Stockholder
No Recipient nor any transferee of a Recipient pursuant to Section 12
hereof shall have any right as a stockholder with respect to any Shares
covered by any Option or Right until such Recipient or transferee shall have
become the holder of record of such Shares.
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17. Future Rights
No person shall have any claim or right to be granted any Option or
Right under the Plan, and no Recipient of such a grant shall have any right
by reason of such grant to continued employment by the Company or any
Affiliate.
18. ERISA
It is the intent of this Plan not to be covered by ERISA.
19. Governing Law
The Plan and all determinations made and actions taken pursuant
thereto shall be governed by the laws of the State of New York and construed
in accordance therewith.
<PAGE>
PROXY
This proxy Is Solicited by The Board of Directors of Microwave Filter
Company, Inc.
Proxy for 1998 Annual Meeting of Shareholders
The undersigned hereby appoints Louis S. Misenti and Carl F. Fahrenkrug
proxies of the undersigned, with full power of substitution, to vote shares
of common stock of the Company which the undersigned is entitled to vote at
the 1998 Annual Meeting of the Shareholders to be held on Thursday, April
9, 1998 at 10:00 a.m. and any adjournments thereof as follows:
(1) ELECTION OF DIRECTORS
Instructions: To vote for all nominees, place an X in box number 1.
To withhold authority to vote for any individual nominee, place an X in
box number 2, and draw a line through his/her name in the list below.
1. ___ For All Nominees
2. ___ For All Nominees Except Those With A Line Through Their Name
Robert R. Andrews Sidney K. Chong Louis S. Misenti
(2) Proposal to approve the Microwave Filter Company, Inc. 1998 Incentive
Stock Plan.
The Board of Directors recommends a vote FOR this proposal.
FOR ___ AGAINST ___ ABSTAIN ___
(3) Proposal to ratify the appointment of Coopers & Lybrand L.L.P. as the
Company's independent auditors for the fiscal year ending September 30, 1998.
The Board of Directors recommends a vote FOR this proposal.
FOR ___ AGAINST ___ ABSTAIN ___
In their discretion, the proxies are authorized to vote upon other matters
properly coming before the meeting or any adjournments thereof.
This proxy will be voted as directed by the undersigned. IF NO DIRECTION IS
GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSAL (1), (2) and (3).
NOTE: Please date and sign exactly as your name or names appear below and
return in the enclosed postage paid envelope.
When signing as an Attorney, Executor, Trustee, Guardian or Officer of a
Corporation, please give title as such.
_______________________ _________
Signature Date
_______________________ _________
Signature if held jointly Date
IMPORTANT: To assist the Company in planning the Annual Meeting please check
the following:
I plan to attend the Annual Meeting _____
I do not plan to attend the Annual Meeting _____
