APA OPTICS, INC.
2950 N.E. 84th Lane
Blaine, Minnesota 55449
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD AUGUST 19, 1998
SOLICITATION AND REVOCATION OF PROXIES
The accompanying Proxy is solicited by the Board of
Directors of APA Optics, Inc. (the "Company") in connection with
the 1998 Annual Meeting of the Shareholders of the Company, to be
held on August 19, 1998, at 3:30 p.m. Minneapolis time, at the
Sheraton Minneapolis Metrodome, 1300 Industrial Boulevard,
Minneapolis, Minnesota 55431 and any adjournments thereof. This
Proxy Statement is first being mailed to shareholders on or about
July 21, 1998.
A person giving the enclosed Proxy has the power to revoke
it at any time before the convening of the Annual Meeting.
Revocations of proxy will be honored if received at the offices
of the Company, addressed to the attention of Anil K. Jain, on or
before August 18, 1998. In addition, on the day of the meeting,
prior to the convening thereof, revocations may be delivered to
the tellers who will be seated at the door of the meeting hall.
Unless revoked in the manner set forth above, all properly
executed Proxies will be voted as specified. Proxies that are
signed but that lack any specification will, subject to the
following, be voted FOR all nominees for director as listed
herein. If any other matters properly come before the Annual
Meeting, or if any of the persons named to serve as directors
should decline or be unable to serve, the persons named in the
Proxy will vote the same in accordance with their discretion. If
a shareholder abstains from voting as to any matter, then the
shares held by such shareholder shall be deemed present at the
meeting for purposes of determining a quorum and for purposes of
calculating the vote with respect to such matter, but shall not
be deemed to have been voted in favor of such matter.
Abstentions, therefore, as to any proposal will have the same
effect as votes against such proposal. If a broker turns in a
"non-vote" Proxy, indicating a lack of voting instruction by the
beneficial holder of the shares and a lack of discretionary
authority on the part of the broker to vote on a particular
matter, then the shares covered by such non-vote Proxy shall be
deemed present at the meeting for purposes of determining a
quorum but shall not be deemed to be represented at the meeting
for purposes of calculating the vote required for approval of
such matter.
Expenses in connection with the solicitation of proxies will
be paid by the Company. Proxies are being solicited primarily by
mail, but officers, directors, and other employees of the Company
may also solicit proxies by telephone, telegraph, or personal
calls. No extra compensation will be paid by the Company for
such solicitation. The Company may reimburse brokers, banks, and
other nominees holding shares for others for the cost of
forwarding proxy materials to, and obtaining proxies from, their
principals.
VOTING RIGHTS
Only shareholders of record at the close of business on June
26, 1998, are entitled to notice of and to vote at the meeting or
any adjournment thereof. As of that date, there were issued and
outstanding 8,512,274 shares of Common Stock of the Company, the
only class of securities of the Company entitled to vote at the
meeting. Each shareholder of record is entitled to one vote for
each share registered in the shareholder's name as of the record
date. The Articles of Incorporation of the Company do not grant
the shareholders the right to vote cumulatively for the election
of directors. No shareholder will have appraisal rights or
similar dissenter's rights as a result of any matters expected to
be voted on at the meeting. The presence in person or by proxy
of holders of a majority of the shares of Common Stock entitled
to vote at the Annual Meeting will constitute a quorum for the
transaction of business.
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of
June 26, 1998, with respect to the stock ownership of all persons
known by the Company to be beneficial owners of more than five
percent of its outstanding shares of Common Stock, each director,
the Named Executive Officers, and all directors and executive
officers of the Company as a group:
Name and Address of Number of Shares Percent of
Beneficial Owner Beneficially Outstanding
Owned Shares
Anil K. Jain 1,664,002(l) 19.5%
2950 N.E. 84th Lane
Blaine, Minnesota
55449
Kenneth A. Olsen 839,332(2) 9.9%
2950 N.E. 84th Lane
Blaine, Minnesota
55449
Herman Lee 776,000 9.1%
Route 1, Box 55
Borup, Minnesota 56519
Lincoln Hudson 25,500(3) *
Gregory J. Von Wald 5,000(4) *
All directors and
executive officers
as a group (5 2,533,834(l)( 29.7%
persons) 2(3)(4)
* Less than 1%.
(1)Includes 5,250 shares held by Dr. Jain as custodian for minor
relatives. Dr. Jain disclaims beneficial ownership of such
shares.
(2)Includes 19,332 shares held in trusts for Anil K. Jain's
children, of which Mr. Olsen serves as trustee. Mr. Olsen
disclaims beneficial ownership of such shares.
(3) Includes 10,000 shares Mr. Hudson may acquire upon exercise
of currently exercisable options and options that become
exercisable within sixty days of the record date.
(4) Includes 5,000 shares Mr. Von Wald may acquire upon exercise
of options that become exercisable within sixty days of the
record date.
ITEM NO. 1
ELECTION OF DIRECTORS
Management has nominated the individuals listed below for
election as directors, each to serve until the next Annual
Meeting of the Shareholders and until his successor is elected
and qualified or until his earlier resignation or removal.
Unless instructed not to vote for the election of directors
or not to vote for any specific nominee, the proxies will vote to
elect the listed nominees. If any of the nominees are not
candidates for election at the meeting, which is not currently
anticipated, the proxies may vote for such other persons as they,
in their discretion, may determine.
The following information is provided with respect to the
nominees for directors:
Name Age Director Since
Anil K. Jain 52 1979
Kenneth A. Olsen 54 1980
Lincoln Hudson 74 1988
Gregory J. Von Wald 48 1997
Anil K. Jain has been president and treasurer of the Company
since 1979, Chairman of the Board since 1987, and chief executive
officer since 1988. Dr. Jain is a past director and former
chairman of Minnesota Project Innovation, Inc., a nonprofit
corporation.
Kenneth A. Olsen has been secretary of the Company since
1983 and vice president since 1992. Mr. Olsen manages the
Company's optics fabrication operations. Prior to joining the
Company in 1979, Mr. Olsen had been employed at 3M since 1966.
Lincoln Hudson currently provides management consultant
services. He served as a consultant to the Company for planning,
engineering, and marketing from 1987 to 1992. Prior to his
retirement in 1987, Mr. Hudson had served in several management
positions for various divisions of Honeywell, Inc., Minneapolis,
Minnesota.
Gregory J. Von Wald has been General Manager of Tel Serv
Telecommunications, Inc., Aberdeen, South Dakota, a firm
providing telecommunications equipment and related services,
since 1992. He is serving on the Board as a representative of
the Aberdeen Development Council, one of the funding sources for
the Company's Aberdeen, South Dakota, manufacturing facility.
Mr. Von Wald retired from the U.S. Marine Corps in 1991 as a
Lieutenant Colonel.
Board Meetings. The Board of Directors held four meetings
during fiscal 1998, all of which were attended by all directors
then serving. The directors also acted once by a consent in
writing without a meeting.
Committees. The members of the audit committee are Gregory
J. Von Wald (chairman), Lincoln Hudson, and Anil K. Jain. The
committee is responsible for meeting with the Company's
independent public accountants to discuss the annual audit and
related accounting and financial matters. The committee,
appointed in February 1998, held no meetings in fiscal 1998. The
compensation committee, which consists of Messrs. Hudson, Von
Wald and Olsen, met two times during fiscal 1998 to consider the
compensation of the executive officers.
Compensation of Directors. Each of the directors who is not
also an employee of the Company is paid a quarterly director's
fee of $500 and reasonable expenses for attending Board meetings.
The Company paid a total of $2,800 in directors' fees for
services rendered during fiscal 1998.
Under the terms of the Company's Stock Option Plan for
Nonemployee Directors, each director who is not otherwise an
employee of the Company receives annually on the first business
day following the annual shareholders' meeting or, if earlier, on
September 1, an option to purchase 5,000 shares of Common Stock.
The exercise price for such option is based on the fair market
value of the stock on the date of grant. Each option becomes
exercisable on the earlier of the date of the next annual
shareholders' meeting or one year from the date of grant and is
exercisable for a period of four years thereafter. During fiscal
1998, two options to purchase 5,000 shares at $5.725 per share
were awarded pursuant to the plan. During fiscal 1998, one
director exercised options to purchase 6,000 shares, realizing
aggregate net value (market value less exercise price) of
approximately $18,219.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth
certain information regarding compensation paid during each of
the Company's last three fiscal years to the Company's chief
executive officer, the only executive officer whose total annual
compensation in fiscal 1998 (based on salary and bonus) exceeded
$100,000 (the "Named Executive Officer").
Name and Fiscal Annual Compensat All Other
ion
Principal Positions Year Salary Bonus(1 Compensation
)
Anil K. Jain 1998 $131,190
$9,204 -0-
President and 1997 124,926
Chief 1,445 -0-
Executive Officer 1996 120,464 $39,965
(1) Bonus paid for services in prior fiscal year.
Stock Options. No options were granted to or exercised by
the Named Executive Officer in fiscal 1998, and no options were
outstanding at the close of fiscal 1998.
Change Of Control Arrangement. The Company has entered into
agreements with Anil K. Jain providing for certain benefits in
the event of a change in control of the Company. An agreement
regarding employment/compensation provides that if, following a
change in control (as defined in the agreement), Dr. Jain's
employment is terminated within 36 months other than for "cause"
(as defined) or as a result of his retirement, disability, or
death, or Dr. Jain terminates his employment for "good reason"
(as defined) he is to receive a lump sum payment equal to two and
one-half times his annualized includable compensation for the
base period (as defined in Section 280G(d) of the Internal
Revenue Code of 1986, as amended). "Good reason" includes
certain changes in Dr. Jain's duties, responsibilities, status,
salary, benefits, and other similar terms of his employment made
without his consent. A "change in control" for purposes of the
agreement includes a consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation,
any sale, lease, exchange, or transfer of all or substantially
all of the assets of the Company, approval by the shareholders of
any plan or proposal for liquidation or dissolution of the
Company, the acquisition by any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended) of beneficial ownership of 30% or more of the
Company's outstanding common stock, or a change in the board of
directors of the Company occurs such that during any period of
two consecutive years, individuals who at the beginning of such
period constituted the entire Board of Directors cease for any
reason to constitute a majority thereof (with certain
exceptions).
In addition, the Company has entered into an agreement with
Dr. Jain providing that upon the occurrence of a change in
control, in conjunction with a change in Dr. Jain's current
position, other than by voluntary resignation, Dr. Jain will have
the option to request the Company to purchase from him a number
of shares equal to up to 4% of the shares of common stock
outstanding immediately prior to the change in control at a price
per share equal to highest per share price paid in connection
with the change in control event or the highest price paid in the
public market within the twelve months preceding Dr. Jain's
exercise of the option. This option is effective for a period of
twelve months after the change in control.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Sublease for Company Facility. Effective December 1, 1984,
the Company entered into a sublease for its office and
manufacturing space with Jain-Olsen Properties, a partnership
consisting of Anil K. Jain and Kenneth A. Olsen, who are
officers, directors, and principal shareholders of the Company.
The sublease expired in fiscal 1995, and the Company exercised
the option to extend the sublease for an additional five years.
Certain terms of this lease are set forth in Note 9 of Notes to
Financial Statements included in the 1998 Annual Report, which is
being distributed with this Proxy Statement. The Company made
lease payments of $118,000 to Jain-Olsen Properties during each
of fiscal 1998 and 1997 and is obligated to make payments in
fiscal 1999 of $116,000. The Company believes the lease terms to
be at least as favorable to the Company as could have been
received from an unrelated third party.
Key Man Insurance. The Company maintains key man insurance
in the amount of $2,000,000 on the life of Anil K. Jain and in
the amount of $500,000 on the life of Kenneth A. Olsen, both of
whom are directors and officers of the Company. Up to $500,000
of the proceeds of each policy is intended to be used to purchase
shares of the Company's Common Stock owned by the insured at the
request of the personal representative of the insured's estate.
The per share price for the repurchase of the Company's Common
Stock will be the fair market value of the Common Stock, based on
the average of the bid and ask prices as of the date of the event
triggering the repurchase.
Split Dollar Insurance. In November 1989, the Company
adopted a split dollar life insurance plan (the "1989 Plan") for
the benefit of its president, Anil K. Jain. Under the terms of
the 1989 Plan the Company pays the annual premiums on a $5
million insurance policy (the "Policy") on the lives of Dr. Jain
and his spouse. The Policy is a whole life, joint and survivor
policy, on which all premiums are paid by the Company and income
is imputed to Dr. Jain in an amount equal to the term rate for
his insurance as established by the insurer.
The Policy is owned by the Jain Children's Irrevocable Trust
dated November 28, 1989 (the "Trust"). The 1989 Plan is designed
so that the Company will recover all premium payments and
advances made by it on account of the Policy held by the Trust.
The Company's interest in the premium payments and advances made
with respect to the Policy is secured by a collateral assignment
of the Policy. Upon the death of the last to die of Dr. Jain and
his spouse, the Company will be reimbursed from the insurance
proceeds paid to the Trust in an amount equal to the total
premiums and advances made by the Company with respect to the
Policy. In the event the trustee of the Trust surrenders the
Policy for its cash surrender value at some date in the future,
the Company will be reimbursed for the premiums it has paid on
the Policy.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3, 4 and 5 and
amendments thereto furnished to the Company and any written
representations that no Forms 5 were required, the Company
believes that all reports required to be filed by its officers,
directors, and greater than 10% beneficial shareholders under
Section 16(a) of the Exchange Act were timely filed, except that
a Form 3 report of initial ownership of Gregory Von Wald, a
director, was filed late.
MISCELLANEOUS
The Board of Directors is not aware that any matter, other
than those described in the Notice, will be presented for action
at the Meeting. If, however, other matters do properly come
before the Meeting, it is the intention of the persons named in
the Proxy to vote the proxied shares in accordance with their
best judgment on such matters.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP, independent auditors, audited the
financial statements of the Company for the fiscal year ended
March 31, 1998. The Company anticipates that Ernst & Young LLP
will be retained as the Company's independent auditors for fiscal
1999. Representatives of Ernst & Young LLP are expected to be
present at the Annual Meeting and will have the opportunity to
make a statement, if they desire to do so, and would be available
to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
All shareholder proposals intended to be presented at the
1999 Annual Shareholders' Meeting must be received by the Company
at its offices on or before March 23, 1999.
ADDITIONAL INFORMATION
A copy of the Company's Report to Shareholders for the
fiscal year ended March 31, 1998, accompanies this Notice of
Annual Meeting and Proxy Statement.
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL
REPORT ON FORM 10-KSB (EXCLUSIVE OF EXHIBITS) FOR THE FISCAL YEAR
ENDED MARCH 31, 1998, TO EACH PERSON WHO IS A SHAREHOLDER OF THE
COMPANY AS OF JUNE 26, 1998, UPON RECEIPT OF A WRITTEN REQUEST
FOR SUCH REPORT. SUCH REQUESTS SHOULD BE SENT TO:
APA OPTICS, INC.
Attention: Secretary
2950 N.E. 84th Lane
Blaine, Minnesota 55449
By Order of the Board of
Directors
Kenneth A. Olsen
Secretary
July 21, 1998
APA OPTICS, INC.
PROXY
ANNUAL MEETING OF SHAREHOLDERS - AUGUST 19, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Anil K. Jain and Kenneth A.
Olsen, or either of them, proxies or proxy, with full power of
substitution, to vote all shares of Common Stock of APA Optics,
Inc. (the "Company") which the undersigned is entitled to vote at
the 1998 Annual Meeting of Shareholders to be held at Sheraton
Minneapolis Metrodome, 1300 Industrial Boulevard, Minneapolis,
Minnesota 55431, August 19, 1998, at 3:30 p.m., Central Daylight
Time, and at any adjournment thereof, as directed below with
respect to the proposals set forth below, all as more fully
described in the Proxy Statement, and upon any other matter that
may properly come before the meeting or any adjournment thereof.
1. ELECTION OF DIRECTORS:
FOR all nominees listed WITHHOLD AUTHORITY to vote for
below (except as marked to all
nominees listed below
the contrary below)
Anil K. Jain, Kenneth A. Olsen, Lincoln Hudson and
Gregory J. Von Wald
(INSTRUCTION: To withhold authority for any individual
nominee, write that nominee's name in the space provided
below.)
___________________________________________________________
2. Upon such other matters as may properly come before the
meeting.
The power to vote granted by this Proxy may be exercised by Anil
K. Jain and Kenneth A. Olsen, jointly or singly, or their
substitute(s), who are present and acting at said Annual Meeting
or any adjournment of said Annual Meeting. The undersigned
hereby revokes any and all prior proxies given by the undersigned
to vote at this Annual Meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SHAREHOLDERS'
INSTRUCTIONS. IF THE SHAREHOLDER(S) WHO EXECUTE THIS PROXY DO
NOT WITHHOLD THEIR VOTES FOR THE ELECTION OF DIRECTORS, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE PROPOSED DIRECTORS.
It is urgent that each shareholder complete, date, sign, and mail
this Proxy as soon as possible. Your vote is important!
Dated and Signed
________________, 1998
______________________________
_______
Signature of Shareholder(s)
______________________________
_______
Signature of Shareholder(s)
Please sign as your name(s) appears above. When signing as
attorney, executor, administrator, trustee, guardian,
authorized officer of a corporation, or partner of a
partnership, please give your title as such.
PLEASE DO NOT FORGET TO DATE THIS PROXY.
APA OPTICS, INC.
2950 N.E. 84th Lane
Blaine, Minnesota 55449
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO OUR SHAREHOLDERS:
Please take notice that the 1998 Annual Meeting of the
Shareholders of APA Optics, Inc., a Minnesota corporation (the
"Company"), will be held at the Sheraton Minneapolis Metrodome,
1300 Industrial Boulevard, Minneapolis, Minnesota 55431, on
August 19, 1998, at 3:30 p.m., Central Daylight Time, to consider
and vote upon the following matters:
1. Election of four directors of the Company.
2. Such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors of the Company has fixed the close of
business on June 26, 1998, as the record date for the
determination of shareholders entitled to notice of and to vote
at the Annual Meeting. The transfer books of the Company will
not be closed.
Shareholders who do not expect to be present personally at
the Annual Meeting are urged to complete, date, sign, and return
the accompanying Proxy in the enclosed, self-addressed envelope.
The Board of Directors of the Company sincerely hopes, however,
that all shareholders who can attend the Annual Meeting will do
so.
It is important that your shares be represented and voted at
the Annual Meeting. You should, therefore, return your Proxy at
your earliest convenience.
BY ORDER OF THE BOARD OF DIRECTORS
Kenneth A. Olsen
Secretary
July 21, 1998
195678/1 2
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant x
Filed by a party other
than the registrant
Check the appropriate box:
Preliminary proxy statement
x Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule
14a-11(c) or Rule 14a-12
APA OPTICS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of filing fees (Check the appropriate box):
x No fee required
Fee computed on table below per Exchange Act Rules 14a-
6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
________________________________________________________________
____________________
(2) Aggregate number of securities to which transaction
applies:
________________________________________________________________
____________________
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11 (set
forth the amount on which the filing fee is calculated and state
how it was determined):
________________________________________________________________
____________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________
____________________
(5) Total fee paid:
________________________________________________________________
____________________
Fee paid previously with preliminary materials
Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. identify the
previous filing by registration statement number, or the form or
schedule, and the date of filing.
(1) Amount previously paid:
________________________________________________________________
____________________
(2) Form, Schedule or Registration Statement No.:
________________________________________________________________
____________________
(3) Filing Party:
________________________________________________________________
____________________
(4) Date Filed:
________________________________________________________________
____________________
